FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 0-14314
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 47-0695511
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street, Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 444-1630
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
<PAGE> -i-
Part I. Financial Information
Item 1. Financial Statements
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, 1997 Dec. 31, 1996
-------------- --------------
<S> <C> <C>
Assets
Cash and temporary cash investments, at cost which
approximates market value (Note 4) $ 1,390,065 $ 1,379,560
Investment in tax-exempt mortgage bonds, at estimated fair value (Note 5) 66,026,000 66,026,000
Interest receivable 529,840 598,173
Other assets 29,434 10,721
-------------- --------------
$ 67,975,339 $ 68,014,454
============== ==============
Liabilities and Partners' Capital
Liabilities
Accounts payable (Note 6) $ 118,777 $ 253,869
Distribution payable (Note 3) 453,597 453,597
-------------- --------------
572,374 707,466
-------------- --------------
Partners' Capital
General Partner 9,474 8,515
Beneficial Unit Certificate Holders
($6.75 per BUC in 1997 and $6.74 in 1996) 67,393,491 67,298,473
-------------- --------------
67,402,965 67,306,988
-------------- --------------
$ 67,975,339 $ 68,014,454
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the
Quarter Ended Quarter Ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Income
Mortgage bond investment income $ 1,598,730 $ 1,648,968
Interest income on temporary cash investments 11,090 10,434
Contingent interest income (Note 5) 42,890 27,763
-------------- --------------
1,652,710 1,687,165
Expenses
General and administrative expenses (Note 6) 185,545 167,165
-------------- --------------
Net income $ 1,467,165 $ 1,520,000
============== ==============
Net income allocated to:
General Partner $ 24,965 $ 21,863
BUC Holders 1,442,200 1,498,137
-------------- --------------
$ 1,467,165 $ 1,520,000
============== ==============
Net income per BUC $ .14 $ .15
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> -1-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE QUARTER ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Beneficial Unit
General Certificate
Partner Holders Total
-------------- --------------- --------------
<S> <C> <C> <C>
Partners' Capital (excluding net unrealized holding losses)
Balance at December 31, 1996 $ 8,515 $ 77,898,473 $ 77,906,988
Net income 24,965 1,442,200 1,467,165
Cash distributions paid or accrued (Note 3)
Income (24,006) (1,347,182) (1,371,188)
-------------- --------------- --------------
9,474 77,993,491 78,002,965
-------------- --------------- --------------
Net unrealized holding losses
Balance at December 31, 1996 and March 31, 1997 - (10,600,000) (10,600,000)
-------------- --------------- --------------
Balance at March 31, 1997 $ 9,474 $ 67,393,491 $ 67,402,965
============== =============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the
Quarter Ended Quarter Ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,467,165 $ 1,520,000
Adjustments to reconcile net income to net cash
from operating activities
Decrease in interest receivable 68,333 34,048
Increase in other assets (18,713) (20,462)
Decrease in accounts payable (135,092) (75,997)
-------------- --------------
Net cash provided by operating activities 1,381,693 1,457,589
Cash flow used in financing activity
Distributions paid (1,371,188) (1,367,520)
-------------- --------------
Net increase in cash and temporary cash investments 10,505 90,069
Cash and temporary cash investments at beginning of period 1,379,560 1,103,805
-------------- --------------
Cash and temporary cash investments at end of period $ 1,390,065 $ 1,193,874
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> -2-
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1. Organization
America First Tax Exempt Mortgage Fund Limited Partnership (the Partnership)
was formed on November 11, 1985, under the Delaware Revised Uniform Limited
Partnership Act for the purpose of acquiring a portfolio of federally
tax-exempt mortgage bonds collateralized by income-producing real estate
consisting of multifamily residential apartments. The Partnership will
terminate on December 31, 2015, unless terminated earlier under the provisions
of the Partnership Agreement. The General Partner of the Partnership is
America First Capital Associates Limited Partnership Two (AFCA 2).
2. Summary of Significant Accounting Policies
A)Financial Statement Presentation
The financial statements of the Partnership are prepared without audit on
the accrual basis of accounting in accordance with generally accepted
accounting principles. The financial statements should be read in
conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1996. In the opinion of management, all normal and recurring
adjustments necessary to present fairly the financial position at
March 31, 1997, and results of operations for all periods presented
have been made.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
B)Investment in Tax-Exempt Mortgage Bonds
Investment securities are classified as held-to-maturity, available-for-
sale or trading. Investments classified as available-for-sale are reported
at fair value with any unrealized gains or losses excluded from earnings
and reflected as a separate component of partners' capital. Subsequent
increases and decreases in the net unrealized gain/loss on available-for-
sale securities are reflected as adjustments to the carrying value of the
portfolio and adjustments to the component of partners' capital. The
Partnership does not have investment securities classified as held-to-
maturity or trading. The carrying value of tax-exempt mortgage bonds is
periodically reviewed and adjusted when there are significant changes in
the estimated net realizable value of the underlying collateral.
Accrual of mortgage bond investment income is excluded from income, when,
in the opinion of management, collection of related interest is doubtful.
This interest is recognized as income when it is received.
C)Income Taxes
No provision has been made for income taxes since the Beneficial Unit
Certificate (BUC) Holders are required to report their share of the
Partnership's taxable income for federal and state income tax purposes.
D)Temporary Cash Investments
Temporary cash investments are invested in federally tax-exempt securities
purchased with an original maturity of three months or less.
E)Net Income per BUC
Net income per BUC has been calculated based on the number of BUCs
outstanding (9,979,128) for all periods presented.
<PAGE> -3-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
3. Partnership Income, Expenses and Cash Distributions
The Partnership Agreement contains provisions for the distribution of Net
Interest Income and Net Residual Proceeds and for the allocation of income and
expenses for tax purposes among AFCA 2 and BUC Holders.
Cash distributions included in the financial statements represent the actual
cash distributions made during each period and the cash distributions accrued
at the end of each period.
4. Partnership Reserve Account
The Partnership maintains a reserve account which totaled $1,376,866 at
March 31, 1997. The reserve account was established to maintain working
capital for the Partnership and is available to supplement distributions to
BUC Holders or for any other contingencies related to the ownership of the
mortgage bonds and the operation of the Partnership.
5. Investment in Tax-Exempt Mortgage Bonds
Descriptions of the tax-exempt mortgage bonds owned by the Partnership at
March 31, 1997, are as follows:
<TABLE>
Base
Number Maturity Interest Carrying
Property Name Location of Units Date Rate1 Amount
- ------------------------ ----------------- -------- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Performing:
Shoals Crossing Atlanta, GA 176 12/01/09 8.5% $ 4,500,000
Arama Apartments Miami, FL 293 07/01/10 8.5% 12,100,000
Woodbridge Apts. of
Bloomington III Bloomington, IN 280 12/01/15 8.5% 12,600,000
--------------
29,200,000
--------------
Nonperforming:2
Ashley Pointe at
Eagle Crest Evansville, IN 150 12/01/15 8.5% 6,700,000
Woodbridge Apts. of
Louisville II Louisville, KY 190 12/01/15 8.5% 8,976,000
Northwoods Lake
Apartments Duluth, GA 492 12/01/06 8.5% 25,250,000
Ashley Square Des Moines, IA 144 12/01/09 8.5% 6,500,000
--------------
47,426,000
--------------
76,626,000
Unrealized holding losses (10,600,000)
--------------
Balance at March 31, 1997 (at estimated fair value) $ 66,026,000
==============
</TABLE>
1 In addition to the base interest rates shown, the bonds bear additional
contingent interest as defined in each revenue note which, when combined with
the base interest, is limited to a cumulative, noncompounded amount not greater
than 16% per annum. The Partnership received additional contingent interest
from Arama Apartments of $42,890 during 1997.
2 Nonperforming bonds are bonds which are not fully current as to interest
payments. The amount of foregone interest on nonperforming bonds for 1997 was
$56,716.
<PAGE> -4-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
6. Transactions with Related Parties
Substantially all of the Partnership's general and administrative expenses are
paid by AFCA 2 or an affiliate and are reimbursed by the Partnership. The
amount of such expenses reimbursed to AFCA 2 during 1997 was $246,639. The
reimbursed expenses are presented on a cash basis and do not reflect accruals
made at quarter end.
AFCA 2 received from property owners administrative fees of $91,957 during
1997. Since these fees are not Partnership expenses, they have not been
reflected in the accompanying financial statements.
AFCA 2 is entitled to an administrative fee from the Partnership in the event
the Partnership becomes the equity owner of a property by reason of
foreclosure. AFCA 2 was not entitled to any administrative fees from the
Partnership during 1997. AFCA 2 was entitled to receive approximately $359,000
in administrative fees from the Partnership for the year ended December 31,
1989. The payment of these fees, which has been deferred by AFCA 2, is
contingent upon, and will be paid only out of future profits realized by the
Partnership from the disposition of any Partnership assets. This amount will
be recorded as an expense by the Partnership when it is probable that these
fees will be paid.
An affiliate of AFCA 2 was retained to provide property management services
for Ashley Square, Northwoods Lake Apartments and Ashley Pointe at Eagle Crest
(beginning in July 1996). The fees for services provided represent the lower
of (i) costs incurred in providing management of the property, or
(ii) customary fees for such services determined on a competitive basis, and
amounted to $68,029 in 1997.
<PAGE> -5-
Item 2.
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Liquidity and Capital Resources
The Partnership originally acquired 14 tax-exempt mortgage bonds, the proceeds
of which were used to provide construction and/or permanent financing for 14
multifamily housing properties. The Partnership subsequently acquired seven
of the properties (Acquired Properties) through foreclosure or deed in lieu of
foreclosure of the tax-exempt mortgage bonds collateralized thereby. The
Acquired Properties were transferred to America First REIT, Inc. on June 1,
1993. At March 31, 1997, the Partnership continued to hold seven
tax-exempt mortgage bonds with a carrying value (at estimated fair value) of
$66,026,000.
The following table shows the various occupancy levels of the properties
financed by the Partnership at March 31, 1997.
<TABLE>
Number Percentage
Number of Units of Units
Property Name Location of Units Occupied Occupied
- ------------------------------------- ------------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Woodbridge Apts. of Bloomington III Bloomington, IN 280 254 91%
Ashley Pointe at Eagle Crest Evansville, IN 150 147 98%
Woodbridge Apts. of Louisville II Louisville, KY 190 173 91%
Northwoods Lake Apartments Duluth, GA 492 460 93%
Shoals Crossing Atlanta, GA 176 164 93%
Ashley Square Des Moines, IA 144 144 100%
Arama Apartments Miami, FL 293 285 97%
-------------- -------------- --------------
1,725 1,627 94%
============== ============== ==============
</TABLE>
The principal amounts of the tax-exempt mortgage bonds do not amortize over
their terms. The tax-exempt mortgage bonds provide for the payment of base
interest at a fixed rate. In addition, the Partnership may earn contingent
interest based on a participation in the net cash flow and net sale or
refinancing proceeds from the real estate collateralizing the tax-exempt
mortgage bonds. The interest payments received on the tax-exempt mortgage
bonds and interest on temporary cash investments represent the principal
sources of the Partnership's income and distributable cash. The Partnership
may draw on the reserve to pay operating expenses or to supplement cash
distributions to Beneficial Unit Certificate (BUC) Holders.
During the quarter ended March 31, 1997, a net amount of undistributed income
totaling $95,977 was placed in reserves. The total amount held in reserves at
March 31, 1997, was $1,376,866. Future distributions to BUC Holders will
depend upon the amount of base and contingent interest received on the
mortgage bonds, the size of the reserves established by the Partnership and
the extent to which withdrawals are made from reserves.
The Partnership believes that cash provided by operating activities and, if
necessary, withdrawals from the Partnership's reserves will be adequate to
meet its short-term and long-term liquidity requirements, including the
payments of distributions to BUC Holders. Under the terms of the Partnership
Agreement, the Partnership has the authority to enter into short- and
long-term debt financing arrangements; however, the Partnership currently does
not anticipate entering into such arrangements. The Partnership is not
authorized to issue additional BUCs to meet short-term and long-term liquidity
requirements.
<PAGE> -6-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Distributions
Cash distributions paid or accrued per BUC were as follows:
<TABLE>
For the For the
Quarter Ended Quarter Ended
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Regular monthly distributions
Income $ .1350 $ .1350
============== ==============
Distributions
Paid out of current and prior undistributed cash flow $ .1350 $ .1350
============== ==============
</TABLE>
Asset Quality
It is the policy of the Partnership to make a periodic review of the real
estate collateralizing the Partnership's mortgage bonds in order to adjust,
when necessary, the carrying value of the mortgage bonds. Adjustments are
made to the carrying value when there are significant changes in the estimated
net realizable value of the underlying collateral. Internal property
valuations and reviews performed during the three months ended March 31, 1997,
indicated that the mortgage bonds recorded on the balance sheet at March 31,
1997, required no adjustments to their current carrying amounts.
The overall status of the Partnership's mortgage bonds has generally remained
constant since December 31, 1996.
Results of Operations
The table below compares the results of operations for each period shown.
<TABLE>
For the For the Increase
Quarter Ended Quarter Ended (Decrease)
March 31, 1997 March 31, 1996 From 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Mortgage bond investment income $ 1,598,730 $ 1,648,968 $ (50,238)
Interest income on temporary cash investments 11,090 10,434 656
Contingent interest income 42,890 27,763 15,127
-------------- -------------- --------------
1,652,710 1,687,165 (34,455)
General and administrative expenses 185,545 167,165 18,380
-------------- -------------- --------------
Net income $ 1,467,165 $ 1,520,000 $ (52,835)
============== ============== ==============
</TABLE>
The decrease in mortgage bond investment income for the quarter ended March
31, 1997, compared to the quarter ended March 31, 1996, is attributable to
decreased cash flow from properties collateralizing the tax-exempt mortgage
bonds. Mortgage bond investment income earned from Woodbridge Apartments of
Bloomington III was approximately $49,000 lower for the quarter ended March
31, 1997, compared to the same period in 1996. Because the mortgage bond on
such property was brought fully current as to interest payments during the
fourth quarter of 1996, the Partnership no longer earns more base interest than
the current base interest due on the mortgage bond if the property generates
net cash flow in excess of the current base interest. Also contributing to the
decrease in mortgage bond investment income for the quarter ended March 31,
1997 compared to the same period in 1996, was a decrease of approximately
$32,000 in mortgage bond investment income earned from Northwoods Lake
Apartments. This decrease is primarily due to a weakening of the Atlanta
rental market attributable in part to the end of the Olympic Games. The
decreases due to Woodbridge Apartments of Blooomington III and Northwoods
Lake Apartments were partially offset by increases in income earned of
approximately $13,000 from Ashley Pointe at Eagle Crest, $10,000 from
Woodbridge Apartments of Louisville II, and $8,000 from Ashley Square.
<PAGE> -7-
The increase in contingent interest income is attributable to an increase in
net operating income generated by the Arama Apartments primarily due to an
increase in rental rates. The increase in interest income on temporary cash
investments is attributable to an increase in the amount of undistributed
income held in reserves. General and administrative expenses increased
primarily as a result of increases in salaries and related expenses.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4(a) Agreement of Limited Partnership dated November 11, 1985
(incorporated herein by reference to Form 10-K dated
December 31, 1986 filed pursuant to Section 13 or 15(d) of
the Securities Act of 1934 by America First Tax Exempt
Mortgage Fund Limited Partnership (Commission File
No. 0-14314)).
4(b) Form of Certificate of Beneficial Unit Certificate
(incorporated herein by reference to Form S-11
Registration Statement filed August 30, 1985 with the
Securities and Exchange Commission by America First Tax
Exempt Mortgage Fund Limited Partnership (Commission File
No. 2-99997)).
(b) Form 8-K
The registrant did not file a report on Form 8-K during the
quarter for which this report is filed.
<PAGE> -8-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 12, 1997 AMERICA FIRST TAX EXEMPT MORTGAGE
FUND LIMITED PARTNERSHIP
By America First Capital
Associates Limited
Partnership Two, General
Partner of the Registrant
By America First Companies L.L.C.,
General Partner of America First
Capital Associates Limited
Partnership Two
By /s/ Michael Thesing
Michael Thesing
Vice President
and Principal Financial
Officer
<PAGE> -9-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,390,065
<SECURITIES> 0
<RECEIVABLES> 529,840
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,919,905
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 67,975,339
<CURRENT-LIABILITIES> 572,374
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 67,402,965
<TOTAL-LIABILITY-AND-EQUITY> 67,975,339
<SALES> 0
<TOTAL-REVENUES> 1,652,710
<CGS> 0
<TOTAL-COSTS> 185,545
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,467,165
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,467,165
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
