<PAGE>
This is an electronic confirming copy of the Form 10-K for SUMMIT TAX EXEMPT
BOND FUND, L.P., filed on 4/18/95 pursuant to a temporary hardship exemption
as specified by Rule 201 of Regulation S-T.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1994
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 1-9373
SUMMIT TAX EXEMPT BOND FUND, L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3323104
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, N.Y. 10022
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Beneficial Unit Certificates American Stock Exchange
- ----------------------------------------- ----------------------------------
Securities registered pursuant to Section 12(g) of the Act:
None
- -------------------------------------------------------------------------------
(Title of class)
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 CK No _
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [CK]
Aggregate market value of BUC$ held by unaffiliated BUC$holders of the
Registrant as of April 12, 1995 was $73,837,828.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Annual Report to BUC$holders for the year ended December 31,
1994 is incorporated by reference into Parts I, II and IV of this Annual Report
on Form 10-K.
Agreement of Limited Partnership, dated February 19, 1986, included as part
of the Registration Statement filed with the Securities and Exchange Commission
on December 24, 1985 pursuant to Rule 424(b) of the Securities Act of 1933, is
incorporated by reference into Part IV of this Annual Report on Form 10-K.
Index to exhibits can be found on pages 13 to 15
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
TABLE OF CONTENTS
PART I PAGE
Item 1 Business.......................................... 3
Item 2 Properties........................................ 8
Item 3 Legal Proceedings................................. 8
Item 4 Submission of Matters to a Vote of BUC$holders.... 8
PART II
Item 5 Market for the Registrant's BUC$ and Related
BUC$holder Matters.............................. 8
Item 6 Selected Financial Data........................... 9
Item 7 Management's Discussion and Analysis of Financial
Condition and Results
of Operations................................... 9
Item 8 Financial Statements and Supplementary Data....... 9
Item 9 Changes in and Disagreements with Accountants on
Accounting and
Financial Disclosure............................ 9
PART III
Item 10 Directors and Executive Officers of the
Registrant...................................... 9
Item 11 Executive Compensation............................ 11
Item 12 Security Ownership of Certain Beneficial Owners
and Management.................................. 12
Item 13 Certain Relationships and Related Transactions.... 12
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K
Financial Statements and Financial Statement
Schedules....................................... 13
Exhibits.......................................... 13
Reports on Form 8-K............................... 15
SIGNATURES....................................................... 18
2
<PAGE>
PART I
Item 1. Business
General
Summit Tax Exempt Bond Fund, L.P. (the ``Registrant''), a Delaware limited
partnership, was formed on December 18, 1985 and will terminate on December 31,
2020 unless terminated sooner under the provisions of the Agreement of Limited
Partnership (the ``Partnership Agreement''). The Registrant was formed to invest
in tax-exempt participating first mortgage revenue bonds (``First Mortgage
Bonds'' or ``FMBs'') issued by various state or local governments or their
agencies or authorities. These investments were made with proceeds from the
initial sale of 7,906,234 Beneficial Unit Certificates (``BUC$''). The FMBs are
secured by participating first mortgage loans (``Mortgage Loans'') on
multi-family residential apartment properties (``Properties'') developed by
unaffiliated developers. The Properties are garden apartment projects
diversified nationwide. The Registrant's fiscal year for book and tax purposes
ends on December 31.
The Registrant is engaged solely in the business of investing in FMBs;
therefore, presentation of industry segment information is not applicable.
General Partners
The general partners of the Registrant are Prudential-Bache Properties, Inc.
(``PBP'') and Related Tax Exempt Bond Associates, Inc. (the ``Related General
Partner'') (collectively, the ``General Partners''). Related BUC$ Associates,
Inc. (the ``Assignor Limited Partner''), which acquired and holds limited
partnership interests on behalf of those persons who purchase BUC$, has assigned
to those persons substantially all of its rights and interest in and under such
limited partnership interests. The Related General Partner and the Assignor
Limited Partner are under similar ownership.
Competition
The General Partners and/or their affiliates have formed, and may continue to
form, various entities to engage in businesses which may be competitive with the
Registrant.
The Registrant's business is affected by competition to the extent that the
underlying Properties from which it derives interest and, ultimately, principal
payments, may be subject to competition relating to rental rates and amenities
from comparable neighboring properties.
Structure of First Mortgage Bonds
The principal and interest payments on each FMB are payable only from the
cash flows, including proceeds in the event of a sale, from the Properties
underlying the FMBs. None of these FMBs constitute a general obligation of any
state or local government, agency or authority. The FMBs are secured by the
Mortgage Loans on the underlying Properties and the structure of each Mortgage
Loan mirrors the structure of the corresponding FMB.
Unless otherwise modified, the principal of the FMBs will not be amortized
during their respective terms (which range from 17 to 24 years) and will be
required to be repaid in lump sum ``balloon'' payments at the expiration of the
respective terms or at such earlier times as the Registrant may require pursuant
to the terms of the bond documents. The Registrant has a right to require
redemption of the FMBs approximately twelve years after their issuance. The
Registrant anticipates holding the FMBs for approximately 12 to 15 years from
the date of issuance; however, it can and may elect to hold until maturity.
In addition to the stated base interest rates ranging from 5.23% to 8.5% per
annum, each of the FMBs which have not been modified provides for ``contingent
interest'' consisting of (a) an amount equal to 50% to 100% of net property cash
flow and 50% to 100% of net sale or refinancing proceeds until the borrower has
paid, during the post-construction period, annually compounded interest at a
rate ranging from 8.875% to 9.34% on a cumulative basis, and thereafter (b) an
amount equal to 25% to 50% of the remaining net property cash flow and 25% to
50% of remaining net sale or refinancing proceeds until the borrower has paid
interest at a simple annual rate of 16% over the term of the FMB. Both the
stated and contingent
3
<PAGE>
<PAGE>
interest are exempt from federal income taxation. The Registrant has not
received any contingent interest to date.
In order to protect the tax-exempt status of the FMBs, the owners of the
Properties are required to enter into certain agreements to own, manage and
operate such Properties in accordance with the requirements of the Internal
Revenue Code.
Bond Modifications/Forbearance Agreements
The following table lists the FMBs that the Registrant owns, together with
the occupancy and current rental rates of the underlying properties:
<TABLE>
<CAPTION>
Average Minimum
Face Final Stated Interest Pay Rate Occupancy No. of
Closing Amount of Completion Interest Rate Paid December February Rental Rental
Property Date Bond Date Rate* in 1994* 1994 12, 1995 Rates Units
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
The Mansion, 5/13/86 $ 19,450,000 12/87 5.23% 5.47% 5.23% 92.5% $ 405-675 550
Independence, Mo
Martin's Creek, 5/20/86 7,300,000 5/86 8.25 7.00 7.00(A) 95.5 415-595 197
Summerville, SC
East Ridge, Mt. 5/20/86 8,700,000 5/86 8.25 7.00 7.00(A) 94.9 460-690 200
Pleasant, SC
High Pointe Club, 7/29/86 8,900,000 4/91 8.50 6.07 5.95(B) 96.7 510-670 240
Harrisburg, Pa
Cypress Run, 8/14/86 15,402,428 6/88 8.50 6.07 7.52(B) 97.5 405-795 408
Tampa, Fl
Thomas Lake, 9/2/86 12,975,000 2/88 8.50 8.27 7.50(A) 99.5 599-999 216
Eagan, Mn
North Glen, 9/30/86 12,400,000 12/87 8.50 6.00 6.00(A) 96.5 480-745 284
Atlanta, Ga
Greenway Manor, 10/9/86 12,850,000 12/87 8.50 7.83 8.23(B) 99.0 430-530 312
St. Louis, Mo
Clarendon Hills, 12/8/86 17,600,000 7/89 5.52 5.47 5.52 97.5 775-1,300 285
Hayward, Ca
Cedar Creek, 12/29/86 8,100,000 2/88 8.50 7.55 6.60(B) 98.0 445-755 250
McKinney, Tx
Sunset Terrace, 2/12/87 10,350,000 2/87 8.00 7.40 7.50(A) 89.6 450-650 184
Lancaster, Ca
------------
$134,027,428
------------
------------
* The rate paid represents the interest recorded by the Registrant while the stated rate represents the
coupon rate of the FMB.
(A) The minimum pay rates on the FMBs are scheduled to increase to the stated interest rate over the
remaining terms of the FMBs.
(B) The minimum pay rate is the current cash flow of the property.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A provision for loss on impairment of assets of $1,350,000 was recorded
during the year ended December 31, 1994 to record the estimated impairment of
FMBs based upon an analysis of estimated cash flows from the individual
properties securing the FMBs.
On April 1, 1994, Mansion Apartment Project Investors, Inc. (``MAPI''), an
affiliate of the Related General Partner who replaced the original developer of
The Mansion property, sold the ownership interest in the property to an
unrelated third party for $700,000 in cash and the assumption of the obligation
under the Registrant's $19,450,000 FMB as well as a $400,000 second mortgage
note payable to a lender affiliated with the Related General Partner taken by
assignment from the seller. Notwithstanding the assumption of the FMB, the
General Partners agreed to forbear on the Registrant's rights and remedies in
declaring an interest payment default under the FMB loan documents provided the
new borrower made minimum monthly interest payments to the Registrant equal to
approximately $81,000 per month (5% per annum) together with payments to a
replacement reserve escrow account of approximately $4,500 per month and
complied with all other covenants and obligations.
Effective October 18, 1994, The Mansion FMB was modified. The modification
provides for a base pay rate of 5.23%. In addition, the contingent interest
feature has been changed. Under the modified FMB, an additional .386% per year
(primary contingent interest) is due and payable from 100% of cash flow above
the base pay rate. If not paid, the difference between the minimum pay rate and
the primary contingent interest rate is deferred and is payable from future cash
flow and sale or refinancing proceeds. Remaining cash flow and sale or
refinancing proceeds, if any, are paid to the Registrant in an amount equal to
35% of net cash flow until the borrower receives a 12.5% cumulative return on
its investment together with the return of the initial investment. Then, the
Registrant is entitled to 50% of remaining cash flow and net sale or refinancing
proceeds until the owner has paid interest at a cumulative annual rate of 16%.
Notwithstanding The Mansion owner's obligation to pay amounts due as primary
contingent interest, the Registrant has agreed, until 1998, the obligation to
pay such amounts will be considered satisfied subject to those amounts being
contributed by The Mansion's owner toward certain designated repairs to the
property. The Mansion's owner will nevertheless be obligated to pay amounts due
from remaining cash flow if available above the primary contingent interest
rate.
4
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<PAGE>
As a result of the cash equity investment, The Mansion (which had previously
been classified in the financial statements as an Asset Held for Sale) was
reinstated as an FMB. The net cash proceeds from the sale of approximately
$105,000 (net of a $400,000 escrow for certain repairs, a $50,000 second
mortgage note principal payment, and closing costs), paid to the Registrant to
reduce accrued and unpaid interest, was recorded by the Registrant as deferred
income and is being amortized as interest income over the remaining life of The
Mansion FMB. The balance of the deferred income relating to The Mansion FMB was
approximately $101,000 at December 31, 1994. All other accrued and unpaid
interest on The Mansion FMB which previously had been reserved for financial
statement purposes was forgiven.
In June 1992, the Registrant made a $320,000 second mortgage loan to the
owner of the property underlying the Cypress Run FMB for the payment of 1991
property taxes. This loan required monthly interest only payments at a rate of
8.5% per annum with the principal due on July 1, 1994. Interest payments on the
loan as well as the FMB were current through June 1994; however, due to
bankruptcy, the loan remains outstanding and the borrower has been notified of
the default (see below for discussion of borrower's bankruptcy filing). An
allowance for possible loss was recorded for this loan in 1993.
As a result of the failure to pay 1992 and 1993 real estate taxes, the
Registrant initiated steps to enforce its rights and remedies on the Cypress Run
property in July 1994. These remedies include acceleration of the loan and a
$350,000 draw on an irrevocable letter of credit issued on behalf of the owner
of Cypress Run as security relating to obligations under the Rental Performance
Agreement. Pursuant to the terms of the bond documents, approximately $348,000
of the proceeds received from the draw on the letter of credit has been recorded
as a reduction of the FMB with the balance applied as interest. In response, on
July 15, 1994, the owner of the property filed for bankruptcy under Chapter 11
of the United States Bankruptcy Code and continued to operate the property as a
debtor-in-possession. The bankruptcy filing operated as a stay against the
enforcement of the Registrant's remedies which include foreclosure. At the
initial hearing, the court consented, among other things, to allow the
Registrant to receive the monthly net cash flow generated by the property as its
debt service payments for at least the initial 120 days of the proceedings.
On November 10, 1994, an Order Modifying Stay together with a Settlement
Stipulation was entered by the Court which granted the Registrant relief from
the Automatic Stay. This order became effective on March 31, 1995 unless a sale
of the property, subject to the Registrant's approval, was closed beforehand.
The Registrant continues to receive the monthly net cash flow generated by the
property.
On March 31, 1995, pursuant to the Court Order, ownership of the Cypress Run
property was transferred to an affiliate of the Related General Partner. The
affiliate has not made an equity investment in the underlying property; however,
it will assume the day-to-day responsibilities and obligations of operating the
property.
Due to the failure to pay 1990 and 1991 property taxes and interest from
March to August 1992, the Registrant instituted foreclosure proceedings against
Greenway Manor. On July 20, 1992, the Greenway partnership filed for bankruptcy
under Chapter 11 of the United States Bankruptcy Code. Pursuant to a 1992 court
order, the receiver paid the Registrant the cash flow remaining after paying
past due taxes, property operating costs and escrowing for 1992 taxes. On June
30, 1993, the court dismissed the bankruptcy proceeding at which time the owner
of the property and obligor under the FMB agreed to transfer the deed-in-lieu of
foreclosure to an affiliate of the Related General Partner.
For several properties collateralizing FMBs (High Pointe Club, securing an
$8,900,000 FMB; Greenway Manor, securing a $12,850,000 FMB and Cedar Creek,
securing an $8,100,000 FMB) the original owners of the underlying properties and
obligors of the FMBs were replaced by affiliates of the Related General Partner
who have not made equity investments in the underlying properties. These
entities have assumed the day-to-day responsibilities and obligations of
operating the underlying properties. Buyers are being sought who would make
equity investments in the underlying properties and assume the nonrecourse
obligations for the FMBs. Although these properties are not producing sufficient
cash flow to fully service the debt, the
5
<PAGE>
<PAGE>
Registrant has no present intention to declare a default on these FMBs. These
FMBs are classified as ``Assets Held for Sale'' in the financial statements in
the Registrant's Annual Report.
On May 31, 1992, Clarendon Hills Investors Inc. (``CHI''), an affiliate of
the Related General Partner who had replaced the developer of the Clarendon
Hills property, sold its ownership interest in the property to an unrelated
third party (the ``Purchaser'') for $26,200,000. The Purchaser paid $2,000,000
in cash, assumed the $17,600,000 obligation of the Registrant's FMB and issued
to CHI a $6,600,000 promissory note which in turn, was assigned to the
Registrant. The $6,600,000 promissory note bears interest at the rate of 8.0%
per annum payable in equal monthly installments until December 2003 at which
time the entire unpaid principal and interest will be due and payable. The
$1,441,209 in net cash proceeds of the sale (net of certain closing costs), paid
by CHI to the Registrant to reduce accrued and unpaid interest, was recorded by
the Registrant as deferred income and is being amortized as interest income from
FMBs over the remaining life of the Clarendon Hills FMB. The balance of the
deferred income relating to the Clarendon Hills FMB was approximately $1,117,000
at December 31, 1994.
In connection with the sale of the Clarendon Hills property by CHI, the FMB
collateralized by the property was modified to provide for, among other things:
the discharge of all accrued and unpaid interest relating to a previous owner
(which for financial statement purposes had been fully reserved); a reduction of
the base interest rate to 5.52% per annum on the $17,600,000 FMB; and a further
reduction of the base interest during the first four years from closing of an
amount equal to 50% of the increase in property taxes (if any) over the fiscal
1992 property tax bill resulting solely from this sale (limited to $35,000 per
annum). In addition, the contingent interest feature was modified to assign
annual cash flow as follows: (1) to pay the Registrant its 5.52% base rate on
the FMB and to pay the 8.0% interest owed on the promissory note; (2) to assign
the Purchaser the next $220,000 representing return on its investment; and then
(3) to pay the Registrant 65% of cash flow until the Registrant receives an
interest rate equal to 8.25% per annum on $24,200,000 ($17,600,000 FMB and
$6,600,000 promissory note) for each respective year on a non-cumulative basis.
Any remaining cash flow is then shared 65% by the Purchaser and 35% by the
Registrant.
The FMBs for the East Ridge and Martin's Creek properties were modified in
1990 when the equity interest in the properties and the related obligations of
the FMBs were sold by an affiliate of the Related General Partner to an
unrelated third party. The modifications provide for minimum pay rate increases
from 6.0% per annum in 1990 to 7.5% per annum in March 1996. These FMBs provide
for a fluctuation in the interest rate in any one year to defray certain
rehabilitation or extraordinary costs. Beginning in March 1997, the pay rate
will be 8.25% per annum. The difference between the minimum interest rate and
the original stated rate is payable out of available future cash flow. In
addition, the contingent interest feature was changed. Under the modified terms
of the FMBs, after the Registrant receives the minimum rate of interest, the
borrower will receive all cash flow until it receives a 10% simple cumulative
annual return on the borrower's cumulative investment. The Registrant will then
be entitled to receive all previously accrued but unpaid contingent interest
(0.84% per annum) and then 25% of all remaining cash flow, if any, in excess of
an amount necessary to increase the borrower's return to 12% per annum on a
cumulative, compounded basis.
During 1991, forbearance agreements were finalized with the owners of the
North Glen and Thomas Lake properties. The General Partners further modified the
North Glen forbearance agreement in April 1993 to allow the owner to make debt
payments at a pay rate of 6.0% per annum through December 1995 at which time the
rate is scheduled to increase to the stated rate of 8.5% per annum. The pay rate
for the Thomas Lake property is scheduled to increase in annual increments to
the original stated rate of 8.5% per annum in December 1996.
During 1992, a forbearance agreement was finalized with the owner of the
Sunset Terrace property. Terms of the agreement call for a reduced pay rate of
7.0% per annum through May 1993 with scheduled annual increments to the original
stated rate of 8.0% in May 1996. With respect to all of these FMBs, the
difference between the pay rate and the original stated rate is deferred and
payable out of available future cash flow or ultimately from sales or
refinancing proceeds.
6
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<PAGE>
The determination as to whether it is in the best interest of the Registrant
to enter into forbearance agreements on the FMBs or, alternatively, to pursue
its remedies under the loan documents, including foreclosure, is based upon
several factors. These factors include, but are not limited to, property
performance, owner cooperation and projected legal costs.
The following FMB's interest income exceeded 15% of the Registrant's total
revenue for one or more of the three years in the period ended December 31,
1994:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cypress Run 17% 17% 18%
The Mansion 16% * *
</TABLE>
* FMB's interest income was less than 15% of the Registrant's total revenue for
the year.
Credit Facility
On January 15, 1993, the Registrant entered into a loan agreement with an
unaffiliated lender for a $15,000,000 credit facility with a maturity date of
January 14, 1998 and an option to extend for two years for an additional fee.
The debt service requirements include monthly interest only payments with a
variable interest rate equal to the 30-day commercial paper interest rate (5.90%
at December 31, 1994) plus 4.05% with principal due at maturity. The facility is
collateralized by a pledge of the FMBs and associated collateral of East Ridge,
Martin's Creek, The Mansion, Thomas Lake and Sunset Terrace. The initial
proceeds from this facility were used to repay a $10,000,000 credit facility
guaranteed by the Registrant, to repay a $3,000,000 noninterest-bearing working
capital loan made to the Registrant from the Related General Partner and to pay
associated closing costs. The $10,000,000 credit facility had been used to pay
for costs incurred to complete construction of the properties securing the High
Pointe Club and Clarendon Hills FMBs and to fund a loan toward the payment of
property taxes on the Thomas Lake property. The $3,000,000 working capital loan
was used to supplement distributions commencing with the fourth quarter 1988
distribution. The unused portion of the Registrant's $15,000,000 credit facility
is to be used for future working capital requirements and contingencies of the
Registrant, as necessary, subject to approval of the lender.
In conjunction with the Registrant's credit facility and the repayment of the
previously existing $10,000,000 credit facility, the Registrant was assigned
nonrecourse notes in the amount of $6,600,000, $3,180,000 and $220,000 from the
Clarendon Hills, High Pointe Club and Thomas Lake properties, respectively. The
Clarendon Hills promissory note, secured by a deed of trust, requires monthly
interest only payments of 8.0% per annum with the principal due on December 1,
2003. The unsecured High Pointe Club note also requires monthly interest only
payments of 8.0% per annum with the principal due on December 31, 2003. Since
the High Pointe Club property is paying interest on a cash flow basis, interest
on the promissory note is only recorded when cash flow is received in excess of
the stated rate. No interest on the High Pointe Club promissory note has been
received or recorded through December 31, 1994. The assigned High Pointe Club
note is subordinate to the High Pointe Club FMB; therefore, the promissory note
has been fully reserved. The Thomas Lake note, secured by a second mortgage on
the property, requires monthly interest only payments based on the Citibank,
N.A. prime rate (8.5% at December 31, 1994) plus 2.0% per annum with the
principal due on April 5, 1995. The Registrant intends to extend Thomas Lake
loan. Proposed terms call for a fixed interest rate of 8.5% with principal
amortization over a 36 month period. Clarendon Hills and Thomas Lake are current
on their interest payments.
Employees
The Registrant has no employees. Management and administrative services for
the Registrant are performed by the General Partners and their affiliates
pursuant to the Partnership Agreement. See Notes B and G to the financial
statements of the Registrant's Annual Report which is filed as an exhibit
hereto.
Other Information
On October 27, 1994, an affiliate of PBP, Prudential Securities Incorporated
(``PSI''), entered into cooperation and deferred prosecution agreements (the
``Agreements'') with the Office of the United States Attorney
7
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<PAGE>
for the Southern District of New York (the ``U.S. Attorney''). The Agreements
resolved a grand jury investigation that had been conducted by the U.S. Attorney
into PSI's sale during the 1980's of the Prudential-Bache Energy Income Fund oil
and gas limited partnerships (the ``Income Funds''). In connection with the
Agreements, the U.S. Attorney filed a complaint charging PSI with a criminal
violation of the securities laws. In its request for a deferred prosecution, PSI
acknowledged to having made certain misstatements in connection with the sale of
the Income Funds. Pursuant to the Agreements, the U.S. Attorney will defer any
prosecution of the charge in the complaint for a period of three years, provided
that PSI complies with certain conditions during the three-year period. These
include conditions that PSI not violate any criminal laws; that PSI contribute
an additional $330 million to a pre-existing settlement fund; that PSI cooperate
with the government in any future inquiries; and that PSI comply with various
compliance-related provisions. If, at the end of the three-year period, PSI has
complied with the terms of the Agreements, the U.S. Attorney will be barred from
prosecuting PSI on the charges set forth in the complaint. If, on the other
hand, during the course of the three-year period, PSI violates the terms of the
Agreements, the U.S. Attorney can elect to pursue such charges.
Item 2. Properties
The Registrant does not own or lease any property.
Item 3. Legal Proceedings
This information is incorporated by reference to Note H to the financial
statements in the Registrant's Annual Report which is filed as an exhibit
hereto.
Item 4. Submission of Matters to a Vote of BUC$holders
None
PART II
Item 5. Market for the Registrant's BUC$ and Related BUC$holder Matters
As of March 1, 1995, there were 7,358 holders of record owning 7,906,234
BUC$. The Registrant's BUC$ are listed on the American Stock Exchange under the
SUA symbol; however, the limited partner interests themselves are not listed.
The high and low stock prices for each quarterly period of the last two years
for which the BUC$ were traded are as follows:
<TABLE>
<CAPTION>
1994 1994 1993 1993
Low High Low High
<S> <C> <C> <C> <C>
------ ------- ------ -------
March 31 10 1/2 11 3/8 11 7/8 14 1/8
June 30 9 7/8 10 7/8 10 1/2 14 1/4
September 30 9 1/4 10 1/8 11 12 1/8
December 31 8 1/4 9 3/8 10 1/2 12 1/8
</TABLE>
Quarterly cash distributions per BUC paid during 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
Quarter ended 1994 1993
<S> <C> <C>
- ------------------- ---- ----
March 31 $.21 $.21
June 30 $.21 $.21
September 30 $.21 $.21
December 31 $.21 $.21
</TABLE>
There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Partnership Agreement. Cash distributions paid in 1994 and 1993 were funded from
adjusted cash flow from operations. In addition, the cash distributions paid in
1993 were supplemented by previously undistributed cash flow from operations.
Approximately $1,069,000 of the $6,641,000 and $2,588,000 of the $6,641,000 paid
to BUC$holders in 1994 and 1993, respectively, represent a return of capital on
a generally accepted accounting principles (GAAP) basis (The return of
8
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<PAGE>
capital on a GAAP basis is calculated as BUC$holder distributions less net
income allocated to BUC$holders). The Registrant currently expects that cash
distributions will be paid in the foreseeable future from adjusted cash flow
from operations. For discussion of other factors that may affect the amount of
future distributions, see Management's Discussion and Analysis of Financial
Condition and Results of Operations on pages 17 through 20 of the Registrant's
Annual Report which is filed as an exhibit hereto.
Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the financial statements of the
Registrant and the notes thereto on pages 2 through 16 of the Registrant's
Annual Report which is filed as an exhibit hereto.
<TABLE>
<CAPTION>
Year ended December 31
------------------------------------------------------------------------
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
Interest income from
participating first
mortgage bonds $ 6,900,700 $ 7,085,390 $ 6,466,662 $ 6,583,696 $ 8,847,840
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Income from assets held for
sale, net $ 2,476,090 $ 2,557,000 $ 1,897,017 $ 2,355,001 $ --
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Interest expense $ 1,156,858 $ 967,361 $ 9,166 $ 30,025 $ 19,799
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Provision for loss on
impairment of assets $ 1,350,000 $ 1,905,000 $ -- $ -- $ 2,501,450
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net income $ 5,685,890 $ 4,135,774 $ 6,462,572 $ 7,126,669 $ 4,248,567
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Net income per BUC $ .71 $ .51 $ .80 $ .88 $ .53
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Total assets $140,304,313 $141,881,705 $134,028,372 $133,938,510 $134,091,787
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Loan payable $ 13,680,866 $ 13,680,866 $ 45,620 $ 319,940 $ 594,260
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Distributions to BUC$holders $ 6,641,238 $ 6,641,238 $ 6,641,238 $ 6,641,238 $ 6,720,303
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Distributions per BUC $ .84 $ .84 $ .84 $ .84 $ .85
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 17 through 20 of the
Registrant's Annual Report which is filed as an exhibit hereto.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data are incorporated by reference
to pages 2 through 16 of the Registrant's Annual Report which is filed as an
exhibit hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The
Registrant is managed by the General Partners.
The Registrant, the Registrant's General Partners and their directors and
executive officers, and any persons holding more than ten percent of the
Registrant's BUC$ are required to report their initial ownership of such BUC$
and any subsequent changes in that ownership to the Securities and Exchange
Commission on Forms 3, 4 and 5. Each executive officer, director and BUC$holder
who owns greater than ten percent of
9
<PAGE>
<PAGE>
the Registrant's BUC$ are required by Securities and Exchange Commission
regulations to furnish the Registrant with copies of all Forms 3, 4 or 5 they
file. All of these filing requirements were satisfied on a timely basis. In
making these disclosures, the Registrant has relied solely on written
representations of the General Partners' directors and executive officers and
BUC$holders who own greater than ten percent of the Registrant's BUC$ or copies
of the reports they have filed with the Securities and Exchange Commission
during and with respect to its most recent fiscal year.
Prudential-Bache Properties, Inc.
The directors and executive officers of PBP and their positions with regard
to managing the Registrant are as follows:
Name Position
James M. Kelso President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
Barbara J. Brooks Vice President--Finance and Chief Financial
Officer
Robert J. Alexander Vice President and Chief Accounting Officer
Chester A. Piskorowski Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
JAMES M. KELSO, age 40, is the President, Chief Executive Officer, Chairman
of the Board of Directors and a Director of PBP. He is a Senior Vice President
of PSI. Mr. Kelso also serves in various capacities for other affiliated
companies. Mr. Kelso joined PSI in July 1981.
BARBARA J. BROOKS, age 46, is the Vice President-Finance and Chief Financial
Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in
various capacities for other affiliated companies. She has held several
positions within PSI since 1983. Ms. Brooks is a certified public accountant.
ROBERT J. ALEXANDER, age 33, is a Vice President of PBP. He is a First Vice
President of PSI. Mr. Alexander also serves in various capacities for other
affiliated companies. Prior to joining PSI in July 1992, he was with Price
Waterhouse for nine years. Mr. Alexander is a certified public accountant.
CHESTER A. PISKOROWSKI, age 51, is a Vice President of PBP. He is a Senior
Vice President of PSI and is the Senior Manager of the Specialty Finance Asset
Management area. Mr. Piskorowski has held several positions within PSI since
April 1972. Mr. Piskorowski is a member of the New York and Federal Bars.
FRANK W. GIORDANO, age 52, is a Director of PBP. He is a Senior Vice
President of PSI and General Counsel of Prudential Mutual Fund Management, Inc.,
an affiliate of PSI. Mr. Giordano also serves in various capacities for other
affiliated companies. He has been with PSI since July 1967.
NATHALIE P. MAIO, age 44, is a Director of PBP. She is a Senior Vice
President and Deputy General Counsel of PSI and supervises non-litigation legal
work for PSI. She joined PSI's Law Department in 1983; presently, she also
serves in various capacities for other affiliated companies.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and executive officers have
indefinite terms.
Related Tax Exempt Bond Associates, Inc.
The directors and executive officers of the Related Tax Exempt Bond
Associates, Inc. are as follows:
Name Position
J. Michael Fried President and Director
Stuart J. Boesky Vice President
Alan P. Hirmes Vice President
Lawrence J. Lipton Treasurer
Stephen M. Ross Director
Lynn A. McMahon Secretary
10
<PAGE>
J. MICHAEL FRIED, 50, is President and a Director of the Related General
Partner. Mr. Fried is President, a Director and a principal shareholder of
Related Capital Company (``Capital''), a real estate finance and acquisition
affiliate of the Related General Partner. In that capacity, he is the chief
executive officer of Capital, and is responsible for initiating and directing
all of Capital's syndication, finance, acquisition and investor reporting
activities. Mr. Fried practiced corporate law in New York City with the law firm
of Proskauer, Rose, Goetz & Mendelsohn from 1974 until he joined Capital in
1979. Mr. Fried graduated from Brooklyn Law School with a Juris Doctor degree,
magna cum laude; from Long Island University Graduate School with a Master of
Science degree in Psychology; and from Michigan State University with a Bachelor
of Arts degree in History.
STUART J. BOESKY, 39, is Vice President of the Related General Partner. Mr.
Boesky practiced real estate and tax law in New York City with the law firm of
Shipley & Rothstein from 1984 until February 1986 when he joined Capital. From
1983 to 1984 Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow,
Richard & Rothstein and from 1978 to 1980 was a consultant specializing in real
estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from
Michigan State University with a Bachelor of Arts degree and from Wayne State
School of Law with a Juris Doctor degree. He then received a Master of Law
degree in Taxation from Boston University School of Law.
ALAN P. HIRMES, 40, is a Vice President of the Related General Partner. Mr.
Hirmes has been a Certified Public Accountant in New York since 1978. Mr. Hirmes
is a Vice President of Capital. Prior to joining Capital in October 1983, Mr.
Hirmes was employed by Weiner & Co., certified public accountants. Mr. Hirmes
graduated from Hofstra University with a Bachelor of Arts degree.
LAWRENCE J. LIPTON, 38, is a Controller of the Related General Partner. Mr.
Lipton has been a Certified Public Accountant in New York since 1989. Prior to
joining Capital, Mr. Lipton was employed by Deloitte & Touche from 1987 to 1991.
Mr. Lipton graduated from Rutgers College with a Bachelor of Arts degree and
from Baruch College with a Masters of Business Administration degree.
STEPHEN M. ROSS, 54, is a Director of the Related General Partner. Mr. Ross
is President of The Related Companies, L.P. He graduated from The University of
Michigan with a Bachelor of Business Administration degree and from Wayne State
University School of Law. Mr. Ross then received a Master of Law degree in
taxation from New York University School of Law. He joined the accounting firm
of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York,
where he worked for two large Wall Street investment banking firms in their real
estate and corporate finance departments. Mr. Ross formed The Related Companies,
Inc. in 1972, to develop, manage, finance and acquire subsidized and
conventional apartment developments. To date, The Related Companies, Inc. has
developed multi-family properties totalling in excess of 25,000 units, all of
which it manages.
LYNN A. McMAHON, 39, is Secretary of the Related General Partner. Since 1983,
she has served as Assistant to the President of Capital. From 1978 to 1983 she
was employed at Sony Corporation of America in the Government Relations
Department.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and executive officers serve
indefinite terms.
Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to directors and officers of the General Partners for their
services. Certain officers and directors of the General Partners receive
compensation from affiliates of the General Partners, not from the Registrant,
for services performed for various affiliated entities, which may include
services performed for the Registrant; however, the General Partners believe
that any compensation attributable to services performed for the Registrant is
immaterial. See Item 13 Certain Relationships and Related Transactions for
information regarding compensation to the General Partners.
11
<PAGE>
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 1, 1995, the directors and officers of the Related General
Partner directly own 99.97% of the voting securities of the Related General
Partner; however, no director or officer of either General Partner owns directly
or beneficially any interest in the voting securities of PBP.
As of March 1, 1995, directors and officers of the Related General Partner
own directly or beneficially BUC$ issued by the Registrant as follows:
<TABLE>
<CAPTION>
Amount
Title of Name of Directors and Nature of Percent of
Class and Officers Beneficial Ownership Class
- ---------- -------------------- -------------------- ---------------
<C> <S> <C> <C>
BUC$ Alan P. Hirmes 1,200 BUC$ *
BUC$ J. Michael Fried 25,000 BUC$ *
BUC$ Stuart J. Boesky 4,000 BUC$ *
--------------------
30,200 BUC$
--------------------
--------------------
</TABLE>
- ------------------
* Less than 1% of the BUC$ issued by the Registrant.
As of March 1, 1995, no director or officer of PBP owns directly or
beneficially any BUC$ issued by the Registrant.
As of March 1, 1995, one BUC$holder beneficially owns more than five percent
(5%) of the BUC$ issued by the Registrant as follows:
<TABLE>
<CAPTION>
Amount
Title of Name of Beneficial and Nature of Percent of
Class Owner Beneficial Ownership Class
- ---------- -------------------- -------------------- ---------------
<C> <S> <C> <C>
BUC$ Virginia First 510,204 BUC$ 6.45%
Savings Bank
P.O. Box 2009
Petersburg, VA 23804
</TABLE>
Item 13. Certain Relationships and Related Transactions
The Registrant has, and will continue to have, certain relationships with the
General Partners and their affiliates. However, there have been no direct
financial transactions between the Registrant and the directors or officers of
the General Partners.
Reference is made to Notes B and G to the financial statements in the
Registrant's Annual Report which is filed as an exhibit hereto, which identify
the related parties and discuss the services provided by these parties and the
amounts paid or payable for their services.
12
<PAGE>
<PAGE>
PART IV
Page in
Annual
Report
Item 14(a) Exhibits, Financial Statement Schedules and Reports on Form 8-K
1. Financial Statements and Independent
Auditors' Report-Incorporated by reference
to the Registrant's Annual Report which is
filed as an exhibit hereto
Independent Auditors' Report 2
Financial Statements:
Statements of Financial
Condition--December 31, 1994 and 1993 3
Statements of Operations--Three years
ended December 31, 1994 4
Statements of Changes in Partners'
Capital--Three years ended December 31,
1994 5
Statements of Cash Flows--Three years
ended December 31, 1994 6
Notes to Financial Statements 7
2. Financial Statement Schedule and
Independent Auditors' Report on Schedule
Independent Auditors' Report on Schedule
Schedule:
II-Valuation and Qualifying Accounts and
Reserves--Three years ended December 31,
1994
All other schedules have been omitted
because they are not applicable or the
required information is included in the
financial statements and the notes
thereto.
3. Exhibits
Description:
3 Partnership Agreement, incorporated by
and reference to Exhibit A to the Prospectus
4 of Registrant, dated February 19, 1986,
filed pursuant to Rule 424(b) under the
Securities Act of 1933, File No. 33-2421
Amended and Restated Certificate of
Limited Partnership (incorporated by
reference to Exhibit 4 to Registration
Statement on Form S-11, File No. 33-2421)
10(a) First Mortgage Bond, dated May 13, 1986,
with respect to The Mansion project, in
the principal amount of $19,450,000
(incorporated by reference to Exhibit
10(a) in Registrant's Current Report on
Form 8-K dated May 13, 1986)
10(b) First Mortgage Bond, dated May 20, 1986,
with respect to the Martin's Creek
project, in the principal amount of
$7,300,000 (incorporated by reference to
Exhibit 10(c) in Registrant's Current
Report on Form 8-K dated May 20, 1986)
10(c) First Mortgage Bond, dated May 20, 1986,
with respect to the East Ridge project, in
the principal amount of $8,700,000
(incorporated by reference to Exhibit
10(b) in Registrant's Current Report on
Form 8-K dated May 20, 1986)
10(d) First Mortgage Bond, dated July 29, 1986,
with respect to the High Pointe Club
project (formerly named Greenhill), in the
principal amount of $8,900,000 (incorpo-
rated by reference to Exhibit 10(a) in
Registrant's Current Report on Form 8-K
dated July 29, 1986)
10(e) First Mortgage Bond, dated August 14,
1986, with respect to the Cypress Run
project at Tampa Palms, in the principal
amount of $15,750,000 (incorporated by
reference to Exhibit 10(a) in Registrant's
Current Report on Form 8-K dated August
14, 1986)
13
<PAGE>
10(f) First Mortgage Bond, dated September 2,
1986, with respect to the Thomas Lake
Place Apartments project, in the principal
amount of $12,975,000 (incorporated by
reference to Exhibit 10(a) in Registrant's
Current Report on Form 8-K dated Sep-
tember 2, 1986)
10(g) First Mortgage Bond, dated September 30,
1986, with respect to the North Glen
Apartments project (formerly named Tempo
Northridge), in the principal amount of
$12,400,000 (incorporated by reference to
Exhibit 10(a) in Registrant's Current
Report on Form 8-K dated September 30,
1986)
10(h) First Mortgage Bond, dated October 9,
1986, with respect to the Greenway Manor
project, in the principal amount of
$12,850,000 (incorporated by reference to
Exhibit 10(a) in Registrant's Current
Report on Form 8-K dated October 9, 1986)
10(i) First Mortgage Bond, dated December 8,
1986, with respect to the Clarendon Hills
Apartments project, in the principal
amount of $17,600,000 (incorporated by
reference to Exhibit 10(a) in Registrant's
Current Report on Form 8-K dated December
8, 1986)
10(j) First Mortgage Bond, dated December 29,
1986, with respect to the Cedar Creek
Village Apartments project, in the
principal amount of $8,100,000
(incorporated by reference to Exhibit
10(a) in Registrant's Current Report on
Form 8-K dated December 29, 1986)
10(k) First Mortgage Bond, dated February 12,
1987, with respect to the Sunset Terrace
project, in the principal amount of
$10,350,000 (incorporated by reference to
Exhibit 10(a) in Registrant's Current
Report on Form 8-K dated February 12,
1987)
10(l) Loan Agreement dated September 19, 1990
between River Bank America and the
Registrant (incorporated by reference to
Exhibit 10(a) in Registrant's Current
Report on Form 8-K dated September 19,
1990)
10(m) Note dated September 19, 1990 from the
Registrant to River Bank America (incor-
porated by reference to Exhibit 10(b) in
Registrant's Current Report on Form 8-K
dated September 19, 1990)
Pledge Agreement dated September 19, 1990
between River Bank America and the
10(n) Registrant (incorporated by reference to
Exhibit 10(c) in Registrant's Current
Report on Form 8-K dated September 19,
1990)
Indemnity and Reimbursement Agreement
10(o) dated September 19, 1990 between Stephen
M. Ross and the Registrant (incorporated
by reference to Exhibit 10(d) in
Registrant's Current Report on Form 8-K
dated September 19, 1990)
Settlement Agreement for the North Glen
10(p) First Mortgage Bond dated December 3, 1990
(incorporated by reference to Exhibit
10(p) in Registrant's Annual Report on
Form 10-K dated December 31, 1991)
Settlement Agreement for the Thomas Lake
10(q) First Mortgage Bond dated July 11, 1991
(incorporated by reference to Exhibit
10(q) in Registrant's Annual Report on
Form 10-K dated December 31, 1991)
Settlement Agreement for the Sunset
10(r) Terrace First Mortgage Bond dated July 10,
1992 (incorporated by reference to Exhibit
10(r) in the Registrant's Annual Report on
Form 10-K dated December 31, 1992)
Assignment and Assumption Agreement for
10(s) the Clarendon Hills First Mortgage Bond
dated May 1, 1992 (incorporated by
reference to Exhibit 10(s) in the Regis-
trant's Annual Report on Form 10-K dated
December 31, 1992)
14
<PAGE>
First Supplemental Indenture between City
of Hayward and Seattle-First National Bank
relating to the Clarendon Hills First
10(t) Mortgage Bond dated May 1, 1992
(incorporated by reference to Exhibit
10(t) in the Registrant's Annual Report on
Form 10-K dated December 31, 1992)
Loan Agreement dated as of January 14,
10(u) 1993 between the Registrant and U.S. West
Financial Services, Inc. (incorporated by
reference to Exhibit 10(u) in the
Registrant's Quarterly Report on Form 10-Q
dated June 30, 1993)
Pledge and Security Agreement dated as of
10(v) January 14, 1993 between the Registrant
and U.S. West Financial Services, Inc.
(incorporated by reference to Exhibit
10(v) in the Registrant's Quarterly Report
on Form 10-Q dated June 30, 1993)
Secured Promissory Note dated January 14,
10(w) 1993 between the Registrant and U.S. West
Financial Services, Inc. (incorporated by
reference to Exhibit 10(w) in the
Registrant's Quarterly Report on Form 10-Q
dated June 30, 1993)
Promissory Note dated January 15, 1993
between the Registrant and RHA Inc.
10(x) (incorporated by reference to Exhibit
10(x) in the Registrant's Quarterly
Report on Form 10-Q dated June 30, 1993)
10(y) Nonrecourse Promissory Note Secured by
Deed of Trust dated January 28, 1993
between Stephen P. Diamond and Clarendon
Hills Investors, Inc. assigned to the
Registrant (incorporated by reference to
Exhibit 10(y) in the Registrant's
Quarterly Report on Form 10-Q dated June
30, 1993)
Assignment Agreement dated January 15,
1993 between Summit Tax Exempt Funding
10(z) Corporation and the Registrant
(incorporated by reference to Exhibit
10(z) in the Registrant's Quarterly Report
on Form 10-Q dated June 30, 1993)
Amended Settlement Agreement for the North
10(aa) Glen First Mortgage Bond dated June 1,
1993 (incorporated by reference to Exhibit
10(aa) in the Registrant's Annual Report
on Form 10-K dated December 31, 1993)
Sale-Purchase Agreement between Mansion
Apartment Project Investors, Inc., Seller
and Independence Apartments Associates,
10(ab) L.P., Purchaser dated November 30, 1993
(incorporated by reference to Exhibit
10(ab) in the Registrant's Quarterly
Report on Form 10-Q dated March 31, 1994)
Addendum to Sale-Purchase Agreement
between Mansion Apartment Project In-
vestors, Inc., Seller and Independence
10(ac) Apartments Associates, L.P., Purchaser
dated March 31, 1994 (incorporated by
reference to Exhibit 10(ac) in the Regis-
trant's Quarterly Report dated March 31,
1994)
First Supplemental Indenture, dated as of
10(ad) October 18, 1994, between The Industrial
Development Authority of the City of
Independence, Missouri and Boatman's First
National Bank of Kansas City relating to
The Mansion project (filed herewith)
First Mortgage Bond, dated May 13, 1986
and revised as of October 18, 1994 with
10(ae) respect to The Mansion project, in the
principal amount of $19,450,000 (filed
herewith)
Registrant's 1994 Annual Report (with the
exception of the information and data
incorporated by reference in Items 3, 7
13 and 8 of this Annual Report on Form 10-K,
no other information or data appearing in
the Registrant's 1994 Annual Report is
deemed filed as part of this report)
(filed herewith)
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during
the last quarter of the period covered by
this report.
15
<PAGE>
(LOGO)
Two World Financial Center Telephone: (212) 436-2000
New York, NY 10281-1424 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of Summit Tax Exempt Bond Fund, L.P.
New York, New York
We have audited the financial statements of Summit Tax Exempt Bond Fund,
L.P. (a Delaware Limited Partnership) as of December 31, 1994 and 1993, and
for each of the three years in the period ended December 31, 1994, and
have issued our report thereon dated April 12, 1995; such financial
statements and report are included in your 1994 Annual Report and are
incorporated herein by reference. Our audits also included the financial
statement schedule of Summit Tax Exempt Bond Fund L.P., listed in Item 14(a)2.
This financial statement schedule is the responsibility of the General
Partners. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche
- ---------------------------
April 12, 1995
(LOGO)
-16-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Valuation allowance for first mortgage bonds
<TABLE>
<CAPTION>
Additions
Additions Deductions (Deductions)
------------ ------------ ------------
Balance at Amounts Amounts Amounts Balance at
Year ended beginning reserved recovered reclassified end of
December 31, of year during year during year during year year
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
1994 $ 435,940 $ 1,350,000 $ (69,766) $ -- $ 1,716,174
1993 505,706 -- (69,766) -- 435,940
1992 575,472 -- (69,766) -- 505,706
</TABLE>
Valuation allowance for uncollectible receivables
<TABLE>
<CAPTION>
Additions
Additions Deductions (Deductions)
------------ ------------ ------------
Balance at Amounts Amounts Amounts Balance at
Year ended beginning reserved recovered reclassified end of
December 31, of year during year during year during year year
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
1994 $ 57,276 $ -- $ -- $ -- $ 57,276
1993 57,276 -- -- -- 57,276
1992 57,276 -- -- -- 57,276
</TABLE>
Valuation allowance for promissory notes
<TABLE>
<CAPTION>
Additions
Additions Deductions (Deductions)
------------ ------------ ------------
Balance at Amounts Amounts Amounts Balance at
Year ended beginning reserved recovered reclassified end of
December 31, of year during year during year during year year
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
1994 $1,276,000 $ -- $ -- $ -- $ 1,276,000
1993 -- 1,276,000 -- -- 1,276,000
1992 -- -- -- -- --
</TABLE>
Valuation allowance for assets held for sale
<TABLE>
<CAPTION>
Additions
Additions Deductions (Deductions)
------------ ------------ ------------
Balance at Amounts Amounts Amounts Balance at
Year ended beginning reserved recovered reclassified end of
December 31, of year during year during year during year year
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
1994 $1,905,000 $ -- $ -- $ -- $ 1,905,000
1993 -- 1,905,000 -- -- 1,905,000
1992 -- -- -- -- --
</TABLE>
17
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Summit Tax Exempt Bond Fund, L.P.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Robert J. Alexander Date: April 17, 1995
---------------------------------------------
Robert J. Alexander
Vice President and Chief Accounting Officer
By: Related Tax Exempt Bond Associates, Inc.
A Delaware corporation, General Partner
By: /s/ Alan P. Hirmes Date: April 17, 1995
---------------------------------------------
Alan P. Hirmes
Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the General Partners) and on
the dates indicated.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ James M. Kelso Date: April 17, 1995
---------------------------------------------
James M. Kelso
President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
By: /s/ Barbara J. Brooks Date: April 17, 1995
---------------------------------------------
Barbara J. Brooks
Vice President - Finance and Chief Financial
Officer
By: /s/ Robert J. Alexander Date: April 17, 1995
---------------------------------------------
Robert J. Alexander
Vice President
By: /s/ Frank W. Giordano Date: April 17, 1995
---------------------------------------------
Frank W. Giordano
Director
By: /s/ Nathalie P. Maio Date: April 17, 1995
---------------------------------------------
Nathalie P. Maio
Director
18
<PAGE>
By: Related Tax Exempt Bond Associates, Inc.
A Delaware corporation, General Partner
By: /s/ J. Michael Fried Date: April 17, 1995
---------------------------------------------
J. Michael Fried
President and Director
(Principal Executive Officer)
By: /s/ Alan P. Hirmes Date: April 17, 1995
---------------------------------------------
Alan P. Hirmes
Vice President
(Principal Financial and Accounting Officer)
By: /s/ Lawrence J. Lipton Date: April 17, 1995
---------------------------------------------
Lawrence J. Lipton
Treasurer
By: Stephen M. Ross Date: April 17, 1995
---------------------------------------------
Stephen M. Ross
Director
19
<PAGE>
Execution Copy
FIRST SUPPLEMENTAL
INDENTURE
Between
THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE CITY
OF INDEPENDENCE, MISSOURI
and
BOATMAN'S FIRST NATIONAL BANK OF KANSAS CITY,
AS SUCCESSOR IN INTEREST
for
THE MERCHANTS BANK,
as Trustee
Relating to
$19,450,000
MULTIFAMILY HOUSING REVENUE BONDS
Series of 1986
(The Mansion Project)
<PAGE>
FIRST SUPPLEMENTAL INDENTURE
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of October 18, 1994,
is by and between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF
INDEPENDENCE, MISSOURI, a Missouri Industrial Development corporation organized
under the laws of the State of Missouri (the "Issuer"), and BOATMAN'S FIRST
NATIONAL BANK OF KANSAS CITY, as SUCCESSOR IN INTEREST for THE
MERCHANTS BANK, as Trustee (the "Trustee").
Recitals
In order to provide financing for a multifamily rental housing
development known as The Mansion Apartments (the "Project"), which was to
have been developed by The Mansion Apartments Limited, an Oklahoma Limited
Partnership ("Apartments"), the Issuer authorized the issuance pursuant to
the Indenture, dated as of May 1, 1986, by and between the Issuer and
the Trustee (the "Indenture"), of $19,450,000 aggregate principal amount
of its Multifamily Housing Revenue Bonds Series of 1986 (The Mansion
Project) (the "Bonds"). The Bonds were issued pursuant to Chapter 349,
R.S. Mo. 1978, as amended (collectively the "Law").
The Bonds were issued and sold on May 13, 1986 to Summit Tax Exempt
Bond Fund, L.P., a Delaware limited partnership (the "Partnership" or the
"Owner"). The Partnership continues to own the Bonds. The Owner has approved
of and consented to this First Supplemental Indenture.
The proceeds of the Bonds were used to provide funds to make a
mortgage loan in the principal amount of $19,450,000 (the "Mortgage Loan")
to Apartments pursuant to a Loan Agreement between Apartments and the Issuer
(the "Loan Agreement"). The Mortgage Loan is evidenced by a promissory note
(the "Note") and secured by a Deed of Trust on the Project (the "Mortgage").
<PAGE>
The Project has been completed. Ownership of the Project was
transferred from Apartments to Mansion Apartment Project Investors, Inc.,
which assumed the Mortgage Loan ("Investors").
Investors sold the Project to Independence Apartments Associates,
L.P., a Missouri Limited Partnership (the "Buyer"), on April 17, 1994 pursuant
to an agreement, dated April 1, 1994 (the "Sale-Purchase Agreement"), under
which, among other things, the Buyer took title to the Project subject to
the Mortgage and Mortgage Loan. Pursuant to an Assignment and Assumption
Agreement, dated as of October 1, 1993 and effective April 1, 1994, by and
among, among other parties, the Buyer, the Issuer and the Trustee (the
"Assumption Agreement") the Buyer assumed the obligations and duties of
Investors, as the Borrower under various loan documents relating to the
Project and the Bonds, as more particularly identified in paragraph A. of
the Assumption Agreement (the "Loan Documents"). A copy of the Assumption
Agreement is attached hereto as Exhibit B.
All things necessary to constitute this First Supplemental Indenture
a valid and binding amendment to the Indenture have been done and performed,
and the execution and delivery of this First Supplemental Indenture have in
all respects been duly authorized.
NOW, THEREFORE, the Issuer and the Trustee, in consideration of the
premises, hereby agree as follows.
ARTICLE I
DEFINITIONS AND CONSTRUCTION
Section 1.01. Definitions. As used in this First Supplemental
Indenture and the Indenture, unless the context otherwise shall require,
capitalized terms shall have the meanings ascribed to them in the Indenture,
except that, for purposes of the Indenture and the Bonds from and after
October 18, 1994, the following terms shall have the meanings ascribed
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<PAGE>
to them herein and in the event of conflict with defined terms in the
Indenture, the defined terms herein shall prevail for all purposes of
this First Supplemental Indenture and the Indenture, as amended hereby.
"Borrower" or "Buyer" means Independence Apartments Associates,
L.P., a Missouri Limited Partnership.
"Borrower's Equity Return" means an amount equal to an internal
rate of return of 13.5% per annum on a notional principal amount of
$1,200,000, i.e., a return to the Borrower of $1,200,000 plus a yield
on such notional principal amount of 13.5% per annum from April 1, 1994
to but not including the Borrower's Equity Return Satisfaction Date.
"Borrower's Equity Return Satisfaction Amount" means as of any
date of measurement an amount which, together with (x) all Net Cash Flow
minus the payment of interest on the Bonds on the basis of Net Cash Flow
between April 1, 1994 and such date (inclusive) and (y) all Net Sale or
Refinancing Proceeds minus all interest paid on the Bonds on the basis of
Net Sale or Refinancing Proceeds between April 1, 1994 and such date
(inclusive), will equal the Borrower's Equity Return.
"Borrower's Equity Return Satisfaction Date" means the first
payment date for interest specified in any of paragraphs 1, 2 or 3 of
Section 3.06(e) as of which the total of (x) and (y) equals the Borrower's
Equity Return, where (x) equals all Net Cash Flow minus all interest paid
on the basis of Net Cash Flow between April 1, 1994 and the payment date
(inclusive) and (y) equals all Net Sale or Refinancing Proceeds minus all
interest paid on the Bonds on the basis of Net Sale or Refinancing Proceeds
between April 1, 1994 and the payment date (inclusive).
"Borrower's Priority Return" means, on any payment date specified
in paragraph (e)(2) of Section 3.06, the total of (x) and (y) where (x)
equals $150,000 for the current calendar year (pro rated for partial years
on a daily basis) and (y) equals the amount
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<PAGE>
by which Net Cash Flow in each previous calendar year (pro rated for partial
years on a daily basis) from and after April 1, 1994 did not at least equal
$150,000 after subtracting from Net Cash Flow any Primary Contingent Interest
or Primary Deferred Interest paid from or on the basis of Net Cash Flow
during such year (or portion thereof).
"Contingent Interest" means Primary Contingent Interest,
Supplemental Contingent Interest and Deferred Interest.
"Deferred Interest" means Primary Deferred Interest and
Supplemental Deferred Interest.
"Disposition Factor" means, with respect to a Sale of the Project,
(a) in the case of an interest in the Project, the percentage of interest in
the Project sold, transferred or otherwise disposed of or (b) in the case of
an interest in an entity which owns an interest in the Project, the product
of the percentage of interest in such entity (the "Transferred Entity") that
is being sold, transferred or otherwise disposed of times the percentage of
interest that such entity owns in the Project. If the Transferred Entity
does not own an interest in the Project, but owns an interest in another
entity which owns an interest in the Project (the "Ownership Entity"),
then for purposes of clause (b) of this definition the Transferred Entity
shall be deemed to own an interest in the Project that is equal to the
product of the percentage of interest which the Transferred Entity owns
in the Ownership Entity times the percentage of interest which the Ownership
Entity owns in the Project. If the Transferred Entity does not own an
interest directly in the Ownership Entity, but does own an interest
indirectly in the Ownership Entity through one or more other entities,
then the percentage of interest which the Transferred Entity owns in the
Ownership Entity shall be the result of applying the calculation set forth
in the preceding sentence to the ownership relationships of the entities
through which the Transferred Entity owns an interest in the Ownership Entity.
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<PAGE>
"Excess Super Priority Deferred Interest" means Excess Super Priority
Deferred Interest as defined in Section 3.06(c)(3).
"Interest Payment Date" means (i) prior to the Conversion Date, and
with respect to the payment of Base Interest, the fifteenth day of each month,
beginning November 15, 1994; (ii) prior to the Conversion Date, and with
respect to the payment of Contingent Interest and any Deferred Interest,
the fifteenth day of each April, July, October and January, respectively,
commencing with the first of such months to occur during the Second Period;
and (iii) after the Initial Remarketing Date, and with respect to the payment
of Variable Rate Interest, each January 1 and July 1, unless different dates
are specified by the Borrower in accordance with Section 3.06(h).
"Maturity Date" means April 1, 2008.
"Maximum Primary Contingent Interest" means, on any payment date for
Contingent Interest and Deferred Interest specified in paragraph (e) of
Section 3.06 hereof, the product of the Primary Contingent Interest Rate
and the aggregate principal amount of the Bonds times a fraction, the
numerator of which is the number of days since the last payment date during
the Second Period for Contingent Interest and Deferred Interest (or the first
date of the Second Period if there is no such previous payment date) and the
denominator of which is 365.
"Maximum Supplemental Contingent Interest" means, on any payment
date for Contingent Interest and Deferred Interest specified in paragraph (e)
of Section 3.06 hereof, the product of the Supplemental Contingent Interest
Rate and the aggregate principal amount of the Bonds times a fraction, the
numerator of which is the number of days since the last payment date during
the Second Period for Contingent Interest and Deferred Interest (or the first
date of the Second Period if there is no such previous payment date) and the
denominator of which is 365.
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<PAGE>
"Net Cash Flow" means the Cash Flow remaining after subtracting (i)
the payment of Operating Expenses of the Project and the deposit in the
Replacement Reserve Fund specified in the Loan Agreement and (ii) without
duplication, an additional deposit to the Replacement Reserve Fund such that
there shall be deposited therein on a monthly basis not less than $4,583 for
the entire Project.
"Net Cash Flow Change Date" means the first payment date for interest
specified in any of paragraphs 1, 2 or 3 of Section 3.06(e) as of which the
total of (x) and (y) equals $1,200,000 plus $150,000 for each calendar year
(pro rated for partial years on a daily basis) from and after April 1, 1994,
to and including the payment date, where (x) equals all Net Cash Flow minus
all interest paid on the basis of Net Cash Flow between April 1, 1994 and the
payment date (inclusive) and (y) equals all Net Sale or Refinancing Proceeds
minus all interest paid on the Bonds on the basis of Net Sale or Refinancing
Proceeds between April 1, 1994 and the payment date (inclusive).
"Net Sale or Refinancing Proceeds" means the amount remaining from
the Sale or Refinancing Proceeds after deducting the Cost Basis (except in the
case of a Refinancing of the Project described in clause (iii) of the
definition thereof, in which case there shall be no deduction). The "Cost
Basis" for purposes of this definition (except as provided in the ensuing
sentence) shall mean the number equal to $19,450,000.
Notwithstanding the preceding sentence, in the context of a Sale
of the Project, "Cost Basis" shall be modified by multiplying the amount
determined according to the preceding sentence by a fraction, the numerator
of which is the Disposition Factor (treated as a whole number and not a
percentage) for the sale, transfer or other disposition in question
and the denominator of which is 100.
"Notice Address" means for the Issuer, 213 South Main Street,
Independence, Missouri 64050; for
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<PAGE>
the Buyer, 7733 Fosyth Blvd., 4th Floor, Clayton, Missouri 63105; for the
Trustee, 920 Main St., K.C.M. 1101, Kansas City, Missouri 64106-0001; and
for the Owner, c/o Related Capital Corporation, 625 Madison Avenue, New York,
New York 10022.
"Primary Contingent Interest" means Primary Contingent Interest as
defined in Section 3.06(c)(1).
"Primary Contingent Interest Rate" means a per annum interest rate
on the Bonds from and after October 18, 1994 during the Second Period of
0.386% per annum.
"Primary Deferred Interest" means Primary Deferred Interest as
defined in Section 3.06(c)(1).
"Proposed Refinancing" means Proposed Refinancing as defined in
Section 4.01(j).
"Sale-Purchase Agreement" means the Sale-Purchase Agreement, dated
as of April 1, 1994, by and between the Buyer and Mansion Apartment Project
Investors, Inc.
"Super Priority Deferred Interest" means so much of Deferred
Interest (and any Maximum Primary Contingent Interest and Maximum Supplemental
Interest that is Unpaid But Not Deferred) as is equal to an amount which,
together with all interest paid on the Bonds from and after April 1, 1994
to and including the date on which Super Priority Deferred Interest is
payable (other than Supplemental Deferred Interest on the Basis of Net
Sale or Refinancing Proceeds), will produce a simple (with no compounded
interest) annual return of 8.0% on the principal amount of the Bonds
Outstanding from time to time during that period of time.
"Supplemental Contingent Interest" means Supplemental Contingent
Interest as defined in Section 3.06(c)(2).
"Supplemental Contingent Interest Rate" means a per annum interest
rate on the Bonds from and after October 18, 1994 during the Second Period
of 10.376%.
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<PAGE>
"Supplemental Deferred Interest" means Supplemental Deferred
Interest as defined in Section 3.06(c)(4).
"Unpaid But Not Deferred" means, with respect to Maximum Primary
Contingent Interest and Maximum Supplemental Contingent Interest, on any
payment date for interest on the Bonds that is payable on the basis of Net
Sale or Refinancing Proceeds the amount of Maximum Primary Contingent
Interest or Maximum Supplemental Contingent Interest, as the case may be,
measured as of such payment date that is not paid on the basis of Net Cash
Flow on the payment date.
ARTICLE II
AMENDMENTS TO ARTICLE III OF INDENTURE
Section 2.01. Amendments. Those sections or subsections of Article
III of the Indenture set forth below in this Section 2.01 are hereby amended
to read in their entirety from and after October 18, 1994 as follows.
Section 3.06. Interest on the Bonds.
(a) General. Subject to Section 3.13, the Bonds shall bear interest
as provided in Section 3.06(b) through (g) until the Conversation Date and
as provided in (h) after such date.
(b) Base Interest. From and after October 18, 1994 and until the
Conversion Date, the Bonds shall bear interest calculated and payable as
follows (which shall be referred to herein as "Base Interest"):
(1) During the Second Period, the Bonds shall bear Base
Interest at the rate of 5.23% per annum from and after October 18,
1994, payable on each payment date specified in paragraph (e)(1) of
this Section 3.06; provided that the amount of Base Interest so
payable shall be subject to reduction quarterly
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<PAGE>
by the Property Tax Adjustment (defined below in paragraph (b)(2))
as specified in writing to the Trustee by the Owner from time to
time, but in no event shall Base Interest be payable on the Bonds
at an annual rate that is lower than the Minimum Base Interest Rate.
The "Minimum Base Interest Rate" shall mean the annual rate of
interest that is derived from the originally issued and Outstanding
principal amount of the Bonds and an annual interest payment equal
to $975,000.
(2) For purposes of adjusting Base Interest payable from and
after October 18, 1994, and subject to the immediately ensuing
sentence, Property Tax Adjustment shall mean the amount by which
(x) exceeds (y), where (x) equals increases in real property taxes
on the Project for the period of time in question ("Property Taxes")
over the "Property Tax Base," being the level of such taxes for
the fiscal year of the City of Independence, Missouri ended in
1991 and (y) equals a 3% cumulative annual increase in Property
Taxes over the Property Tax Base. Notwithstanding the foregoing,
in no event shall the Property Tax Adjustment exceed $50,000 in
any one twelve month period ending on October 18 in each year.
Base Interest shall be calculated on the basis of a year of 365 days,
actual days elapsed.
(c) Contingent Interest. From and after October 18, 1994 and
until the Conversion Date, the Bonds shall bear contingent interest
calculated and payable exclusively on the basis and to the extent of
Net Cash Flow and Net Sale or Refinancing Proceeds, and not otherwise
if there is no Net Cash Flow and there are no Net Sale or Refinancing
Proceeds, as follows:
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<PAGE>
(1) Primary Contingent Interest on the Basis of Net Cash Flow.
During each calendar year, or part thereof, of the Second Period from
and after October 18, 1994, the Bonds shall bear contingent interest
at an annual rate equal to the Primary Contingent Interest Rate payable
(A) on the basis and to the extent of 100% of Net Cash Flow for each
such year or part thereof or (B) to the extent not so paid, then
(as part of Super Priority Deferred Interest) on the basis and to
the extent of Net Sale or Refinancing Proceeds as described in
paragraph (c)(4) of this Section 3.06.
Contingent Interest equal to Maximum Primary Contingent Interest
shall be payable on the Bonds on each payment date specified in
paragraph (e)(2) of this Section 3.06 on the basis and to the extent
of 100% of Net Cash Flow, measured for purposes of such payment and
subject to the adjustments and reconciliation as specified in paragraph
(f) of this Section 3.06. If 100% of Net Cash Flow is insufficient,
then there shall be payable the maximum amount possible to the extent
of 100% of Net Cash Flow (which amount is referred to as the
"Primary Contingent Interest").
The difference between Maximum Primary Contingent Interest and
Primary Contingent Interest for any calculation period in any calendar
year shall be deferred without interest until paid (such difference is
referred to collectively together with all such amounts previously
deferred and remaining unpaid as "Primary Deferred Interest") and
shall thereafter be payable on the earliest possible payment dates
specified in paragraph (e)(2) of this Section 3.06 from and to the
extent of 100% of Net Cash Flow, measured for purposes of such
payment and subject to the adjustments and reconciliation as specified
in paragraph (f) of this Section 3.06. Net Cash Flow shall be applied
to such
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<PAGE>
payments of any Primary Deferred Interest prior to the payment
of Primary Contingent Interest.
To the extent that all Primary Deferred Interest and any Maximum
Primary Contingent Interest that is Unpaid But Not Deferred are not
paid on the basis of Net Cash Flow on a payment date specified in
paragraph (e)(2)(iii) of this Section 3.06, they shall be payable as
part of Super Priority Deferred Interest on the basis of Net Sale or
Refinancing Proceeds in accordance with Section 3.06(c)(4).
(2) Supplemental Contingent Interest on the Basis of Net Cash Flow.
During each calendar year, or part thereof, of the Second Period from and
after October 18, 1994, the Bonds shall bear contingent interest at an
annual rate equal to the Supplemental Contingent Interest Rate payable
on the basis and to the extent of 35% (50% from and after the Net Cash
Flow Change Date) of so much of Net Cash Flow for each such year, or part
thereof, as remains after reducing Net Cash Flow by the total of (x)
the Borrower's Priority Return in each calendar year and (y) any
payment of Primary Contingent Interest or Primary Deferred Interest
as specified above in
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<PAGE>
paragraph (c)(1).
Contingent Interest equal to Maximum Supplemental Contingent
Interest shall be payable on the Bonds on each payment date specified
in paragraph (e)(2) of this Section 3.06 on the basis and to the extent
of 35% (50% from and after the Net Cash Flow Change Date) of so much of
the Net Cash Flow as remains after reducing Net Cash Flow by the total
of (x) the Borrower's Priority Return in each calendar year and (y)
any payment of Primary Contingent Interest or Primary Deferred Interest
as specified above in paragraph (c)(1), measured for purposes of such
payment and subject to the adjustments and reconciliation as specified
in paragraph (f) of this Section 3.06. If 35% (50% from and after
the Net Cash Flow Change Date) of Net Cash Flow after such reduction
is insufficient to pay the Maximum Supplemental Contingent Interest
payable on any payment date specified in paragraph (e)(2) of this
Section 3.06, then there shall be payable the maximum amount possible
on the basis of and to the extent of 35% (50% from and after
the Net Cash Flow Change Date) of Net Cash Flow after such reduction
(which amount is referred to as the "Supplemental Contingent Interest").
The difference between Maximum Supplemental Contingent Interest and
Supplemental Contingent Interest for any calculation period in each year
shall be deferred without interest (such difference being referred to
collectively with all such amounts previously deferred and remaining
unpaid as "Supplemental Deferred Interest"). Supplemental Deferred
Interest and any Maximum Supplemental Contingent Interest that is
Unpaid But Not Deferred shall be payable in accordance with Section
3.06(c)(4) as part of Super Priority Deferred Interest and otherwise
in accordance with Section 3.06(c)(5).
(3) Super Priority Deferred Interest on the Basis of Net Sale or
Refinancing Proceeds. Super Priority Deferred Interest shall be payable
on the basis and to the extent of 50% of the balance of Net Sale or
Refinancing Proceeds remaining after reducing such amount by the
Borrower's Equity Return Satisfaction Amount on the earliest possible
payment dates specified in paragraph (e)(3) of this Section 3.06.
If the Disposition Factor for the Event of Sale or Refinancing
giving rise to Net Sale or Refinancing Proceeds is less than 100, then
Net Sale or
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<PAGE>
Refinancing Proceeds shall be reduced in such instance by only so much
of the Borrower's Equity Return Satisfaction Amount as equals, as a
percentage, such Disposition Factor.
Super Priority Deferred Interest paid on such basis shall be
credited first against all unpaid Primary Deferred Interest and any
Maximum Primary Contingent Interest that is Unpaid But Not Deferred
and second, to the extent the Super Priority Deferred Interest so
paid exceeds such Primary Deferred Interest and any Maximum Primary
Contingent Interest that is Unpaid But Not Deferred, against all unpaid
Supplemental Deferred Interest and any Maximum Supplemental Contingent
Interest that is Unpaid But Not Deferred (the amount of such excess
being referred to as "Excess Super Priority Deferred Interest").
(4) Supplemental Deferred Interest on the Basis of Net Sale or
Refinancing Proceeds. After reduction of Supplemental Deferred
Interest and any Maximum Supplemental Contingent Interest that is
Unpaid But Not Deferred by credit for the amount of any Excess Super
Priority Deferred Interest then paid and not previously taken as a
credit against Supplemental Deferred Interest, the remaining amount of
Supplemental Deferred Interest and such Maximum Supplemental Contingent
Interest shall be payable on the basis of and to the extent of 40% of
the excess of Net Sale or Refinancing Proceeds over the sum of (x) the
Super Priority Deferred Interest then paid on account of the same event
of Sale or Refinancing, (y) the Borrower's Equity Return Satisfaction
Amount and (z) any Contingent Interest or Deferred Interest previously
paid on the Bonds on the basis of Net Sale or Refinancing Proceeds
arising out of an earlier Event of Sale or Refinancing on the earliest
possible payment dates specified in paragraph (e)(3) of this Section
3.06.
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<PAGE>
(d) Reserved.
(e) Payment Dates for Interest. The interest payable on the Bonds to
and including the Conversion Date as provided above in this Section 3.06
shall be payable in arrears on the following dates:
(1) Base Interest shall be payable (i) on each Interest Payment
Date for Base Interest, (ii) on the Conversion Date and (iii) on each
redemption date before the Conversion Date (but only with respect to
the Bonds redeemed).
(2) Contingent Interest payable on the basis of Net Cash Flow
shall be payable (i) on each Interest Payment Date for Contingent
Interest and Deferred Interest to and including the Conversion Date,
(ii) on each redemption date during the Second Period Date (but only
with respect to the Bonds redeemed), (iii) on each date on which
Contingent Interest and Deferred Interest is payable from Net Sale or
Refinancing Proceeds (as provided in paragraph (e)(3) below) and
(iv) on the Conversion Date.
(3) Contingent Interest and Deferred Interest payable on the
basis of Net Sale or Refinancing Proceeds shall be payable on the next
Interest Payment Date for any interest succeeding by at least 30 days
the date of the Event of Sale or Refinancing relating to the Sale of
the Project or Refinancing of the Project which has occurred, except
in the case of:
(x) a Refinancing of the Project described in clause (i)
or (iv) of the definition thereof, in which case it shall be
payable on the redemption date or payment date specified therein,
as the case may be,
(y) a Sale of the Project described in clause (i) of the
definition thereof resulting in a call of the Bonds for redemption
pursuant to
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Section 4.01(f) hereof, in which case it shall be payable on the
redemption date, or
(z) a Refinancing of the Project described in clause (ii) of
the definition thereof, in which case it shall be payable on the
Initial Remarketing Date.
(f) Calculation of Net Cash Flow.
(1) (i) No later than thirty days before each payment date for
Contingent Interest specified in paragraph (e)(2) of Section 3.06 hereof
(or such lesser number of days as shall be the maximum number of days
possible if the payment date was not known to the Borrower until less
than 40 days before the payment date), the Borrower shall calculate Net
Cash Flow for the three month period ending on the last day of the
third preceding month before such payment date and shall provide the
Trustee and the Partnership (A) the analysis of such Net Cash Flow,
(B) unaudited financial statements of the Project for such three
month period and (C) a calculation of the amount of Contingent
Interest and Deferred Interest then payable.
(ii) Notwithstanding the foregoing in clause (i):
(A) except as may result from adjustments and reconciliation
provided below in this paragraph (f), the period of time for which
Net Cash Flow is measured for purposes of a payment date for
Contingent Interest and Deferred Interest on any Bonds specified
in paragraph (e)(2) of Section 3.06 hereof shall not include any
time for which Net Cash Flow has been measured for purposes of a
previous payment date for Contingent Interest and Deferred
Interest on such Bonds specified in paragraph (e)(2) of
Section 3.06 hereof, and
<PAGE>
(B) the calculation of Net Cash Flow and the amount of
Contingent Interest payable on the basis thereof on the Conversion
Date shall be reconciled and adjusted to give effect to (x) the
actual amount of Net Cash Flow for the current calendar year (and
the preceding calendar year if the Conversion Date falls before
delivery of the audit referred to in Section 3.06(f)(2) hereof in
the current calendar year) up to but not including the Conversion
Date (such actual amount of Net Cash Flow being measured by the
actual amount known as of the most recent possible date and an
amount reasonably estimated to be earned between such date and
the Conversion Date) and (y) all Contingent Interest paid during
the current calendar year (and the preceding calendar year if
the Conversion Date falls before delivery of the audit referred
to in Section 3.06(f)(2) hereof in the current calendar year) in
the manner described below in paragraph (f)(3) of this Section
3.06, except that any underpayments or overpayments of Contingent
Interest shall be paid or refunded, as the case may be, on the
Conversion Date.
(iii) The amount of Net Cash Flow reflected in the analysis
described above, as adjusted in the case of the analysis in connection
with the Conversion Date, shall provide the basis for the calculation
of Contingent Interest payable on the basis of Net Cash Flow on each
payment date therefor specified in paragraph (e)(2) of Section 3.06
hereof, except as provided below. The Trustee (if it has accepted the
duties as Acting Party in Article VIII) or the Partnership may each
request further substantiation of the Borrower's calculation of Net
Cash Flow and may verify and correct as necessary the calculations
thereof. If the Trustee or the Partnership do reasonably modify
<PAGE>
such calculation, the Trustee or Partnership shall notify the Borrower
and the Trustee or Partnership (whoever did not initiate notice) of
such modified calculations no later than ten Business Days before
such payment date (or such lesser number of days as shall be the
maximum number of days practicable if the Trustee or Partnership
received the calculation of Net Cash Flow less than 30 days before
the payment date) and such modified calculation shall be the basis
of Contingent Interest payable on the basis of Net Cash Flow on the
payment date. Except to the extent provided in this paragraph (f)(1)
with respect to the Conversion Date, the analysis and payment on the
basis of Net Cash Flow described in this paragraph (f)(1) is intended
to provide a preliminary payment of Contingent Interest on the basis
of Net Cash Flow prior and subject to the adjustment and reconciliation
process described in paragraphs (f)(2) and (f)(3) hereof.
(2) No later than March 15 of each calendar year (up to and,
unless the Conversion Date falls before delivery of the audit,
including the calendar year in which the Conversion Date occurs),
the Borrower shall provide to the Issuer, the Trustee and the
Partnership an audit of the operations of the Project for the
preceding calendar year prepared and certified by an Accountant
acceptable to the Trustee and the Partnership in accordance with
generally accepted auditing standards. The audit shall state the
actual amount of the Net Cash Flow for that calendar year and shall
calculate all Contingent Interest paid and payable from Net Cash
Flow during such calendar year pursuant to this Section 3.06.
(3) The audit prepared in accordance with paragraph (f)(2) shall
state the amount of Contingent Interest payable and paid during the
subject calendar
<PAGE>
year. If the amounts of Contingent Interest payable on the basis of
Net Cash Flow (measured on the basis of actual Net Cash Flow for
such calendar year according to the audit) exceeded the amount paid,
then there shall be payable, without interest, to the Owners of the
Bonds any such payable and unpaid amounts on the payment date for
Contingent Interest and Deferred Interest specified in paragraph
(e)(2) of this Section 3.06 immediately following the receipt of
the audit by the Trustee and the said Owners. If the amount of
Contingent Interest payable on the basis of Net Cash Flow (measured
on the basis of actual Net Cash Flow for such calendar year according
to the audit) is less than the amount actually paid, the Partnership
shall notify the Trustee of such overpaid amount which the Trustee
shall credit against any other Contingent Interest payments due
under this Indenture to the Owners of the Bonds on the Bond Payment
Date (or Bond Payment Dates) immediately following the receipt by
the Trustee and the said Owners of the audit and the Owners shall
not be required to refund any such amount unless the crediting
does not exhaust the overpayment, in which case the balance of the
overpayment will be refunded by the Owners to the Trustee on the
Conversion Date. Such payment or crediting shall be for the account
of the Owners of record on the date such payment or crediting is
made. On the Conversion Date the Trustee shall credit to the loan
payments due from the Borrower the amount of any overpayment repaid
by the Owners.
(4) The Issuer and the Trustee (unless the Trustee has accepted
the duties of the Acting Party specified in Section 8.01 hereof) may
conclusively rely on the determinations by the Borrower and Partnership
herein, and shall not have any responsibility therefor."
<PAGE>
ARTICLE III
AMENDMENTS TO ARTICLE IV OF INDENTURE
Section 3.01. Amendments. (a) Section 4.01 of the Indenture is hereby
amended by adding a new subsection (j) to read as follows:
"(j) in whole on April 1, 2006 (the "Redemption Date") if (1) there has
been filed with the Trustee not less than ninety (90) days before the
Redemption Date an Irrevocable commitment from a financial or commercial
institution regularly engaged in the business of making commercial or
residential mortgage loans by which such institution, subject to closing
conditions specified therein, irrevocably commits to extend financing to
the Borrower on or before the Redemption Date for the purpose of refinancing
the Bonds on terms that include the terms listed below (the "Proposed
Refinancing") and (2) Net Cash Flow for the most recent 12 month period
for which Net Cash Flow has been fully measured, adjusted and reconciled
as specified in paragraph (f) of this Section 3.06 was equal to not less
than 115% of the average annual interest cost and amortization (not
including principal due at maturity) of the Proposed Refinancing
(eliminating from Operating Expenses for this purpose any interest
paid during such 12 month period on the Borrower Note in order to pay Base
Interest):
(A) term to maturity of not less than three years,
(B) annual interest cost and amortization (not including
principal payment at maturity) not in excess of 7.75%
per annum,
(C) security limited to a first mortgage on the Project and
assignment of rents and leases, and
<PAGE>
(D) the Borrower will not be obligated to pay fees and closing
costs in connection with the refinancing in excess of 1%
of the principal amount of the Bonds then outstanding."
(b) Section 4.01(h) of Article IV of the Indenture is hereby
deleted.
(c) Section 4.03 is hereby amended by replacing each Redemption
Price in the table, except the Redemption Price for 1996 and thereafter,
with the number 100%.
ARTICLE IV
ACCRUED AND UNPAID INTEREST ON
THE BONDS THROUGH OCTOBER 17, 1994
Section 4.01. Certain Accrued and Unpaid Interest Abrogated. Any
accrued and unpaid interest on the Bonds as of October 17, 1994, and any
interest on the Bonds otherwise established as of October 17, 1994, including
any contingent interest or deferred interest on the Bonds established on or
before October 17, 1994, whether payable before, on or after October 17, 1994,
is hereby abrogated and discharged effective October 17, 1994.
ARTICLE V
AMENDMENT TO SECTION 6.05 OF THE INDENTURE
Section 5.01. Amendment to Section 6.05. Section 6.05 of the
Indenture is hereby amended to read in its entirety as follows:
Section 6.05. Replacement Reserve Fund. There shall be deposited in
the Replacement Reserve Fund all moneys received by the Trustee from the
Borrower pursuant to Section 2.2(g) to the Loan Agreement. Moneys in the
Replacement Reserve Fund shall be disbursed to the Borrower to be applied
to repairs of or replacements in part of the Project, upon receipt of a
written request of the Borrower, upon which the Trustee may conclusively
rely, specifying the purposes for and
<PAGE>
amounts of such disbursements; except that upon the occurrence and
continuance of an Event of Default hereunder and an acceleration of
the Bonds pursuant thereto, all moneys and investments in the Replacement
Reserve Fund (other than moneys held to pay costs required to be paid
but not yet payable) shall be transferred to the Revenue Fund and
applied to the payment of the Bonds. Before funding any disbursement
request from the Replacement Reserve Fund, the Trustee shall obtain
the Owner's approval; the Trustee shall inform the Owner of the
disbursement request in writing and if the Owner does not
object within fifteen (15) days thereafter, the Owner shall be deemed
to have approved the request. Upon the payment in full of the Bonds and
the fees and expenses of the Issuer and the Trustee (including those
incurred in connection with a remarketing of the Bonds), any amounts
remaining in the Replacement Reserve Fund shall be paid to the Borrower
as soon as practicable upon its request therefor.
ARTICLE VI
EFFECTIVE DATE OF FIRST SUPPLEMENTAL INDENTURE
Section 6.01. Effective Date. The terms and provisions of this First
Supplemental Indenture shall take effect on October 18, 1994.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed in their respective names,
all as of the date and year first above written.
THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE CITY OF
INDEPENDENCE, MISSOURI
By:___________________________________________
[SEAL]
Attest:
_______________________
BOATMAN'S FIRST NATIONAL BANK OF
KANSAS CITY, as SUCCESSOR IN
INTEREST for THE MERCHANTS BANK,
as Trustee
By:___________________________________________
<PAGE>
<PAGE>
OWNER'S CONSENT
The Summit Tax Exempt Bond Fund, L.P., as sole owner of all of the Bonds
referred to in the foregoing First Supplemental Indenture, does hereby consent
to the adoption and effectiveness of the same on and as of October 18, 1994.
Dated: November _____, 1994
SUMMIT TAX EXEMPT BOND FUND,
L.P.
By: Related Tax Exempt Bond
Associates, Inc.,
a general partner
By:___________________________________________
BORROWER'S (BUYER'S) CONSENT
Independence Apartments Associates, L.P., a Missouri Limited Partnership,
owner of the Project (the "Borrower"), does hereby consent to the adoption and
effectiveness of the foregoing First Supplemental Indenture on and as of
October 18, 1994.
INDEPENDENCE APARTMENTS
ASSOCIATES, L.P.
Independence Apartments
Management Company, Inc.
By:_______________________________________,
a general partner
By:________________________________________
Dated: November , 1994
<PAGE>
<PAGE>
AMENDMENT AND CONFIRMATION OF LOAN DOCUMENTS
The Issuer, the Trustee, the Owner and the Borrower, as their interests
may appear, hereby agree that
(i) The Loan Documents (as defined in the First Supplemental
Indenture by and between the Industrial Development Authority of The
City of Independence, Missouri, and Boatman's First National Bank of
Kansas City, dated as of October 18, 1994, relating to the $19,450,000
Multifamily Housing Revenue Bonds Series of 1986 (The Mansion Project))
shall be and hereby are deemed amended insofar as may be necessary to
give effect in the Loan Documents to the changes to the terms of the
Bonds and any other changes that are effected by the said First
Supplemental Indenture; and
(ii) the Loan Documents, as so amended, are hereby restated,
ratified and confirmed.
(iii) The Loan Documents include the following recorded documents:
Deed of Trust and Security Agreement with Collateral Assignment of
Rents and Leases, given by The Mansion Apartments Limited, as Borrower,
to Anthony Sommers, as Mortgage Trustee, for the benefit of The
Industrial Development Authority of the City of Independence, Missouri,
as Beneficiary, dated as of May 1, 1986 and filed on May 13, 1986 as
Document No. I-689489 in Book I-1538 at Page 361 of the Records of
Jackson County, Missouri, the Beneficiary's interest under which was
assigned to The Merchants Bank, as Trustee (predecessor in interest to
Boatsmen's First National Bank of Kansas City), pursuant to that
certain Memorandum of Trust Indenture, filed on May 13, 1986 as
Document No. I-689490 in Book I-1538 at Page 396 of the Records of
Jackson County, Missouri, and the Borrower's
<PAGE>
interest under which was assigned to and assumed by Mansion Apartment
Project Investors Inc. and was subsequently further assigned to and
assumed by Independence Apartments Associates, L.P., pursuant to that
certain Assignment and Assumption Agreement, dated as of October 1,
1993 and filed on April 13, 1994 as Document No. I-1266843 in Book
I-2544 at Page 142 of the Records of Jackson County, Missouri.
Regulatory Agreement, by and between the Industrial Development
Authority of the City of Independence, Missouri, and Mansion Apartments
Limited, dated as of May 1, 1986 filed on May 13, 1986 as Document No.
I-689488 in Book I-1538 at page 337 of the Records of Jackson County,
Missouri, as subsequently assigned to and assumed by Independence
Apartments Associates, L.P., as aforesaid.
THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE CITY OF
INDEPENDENCE, MISSOURI
Date: November _____, 1994 By:_____________________________________
Name:___________________________________
Title:__________________________________
BOATMAN'S FIRST NATIONAL BANK OF
KANSAS CITY, as SUCCESSOR IN
INTEREST for THE MERCHANTS BANK,
as Trustee
Date: November _____, 1994 By:_____________________________________
Name:___________________________________
Title:__________________________________
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
By: Related Tax Exempt Bond
Associates, Inc.,
a general partner
Date: November _____, 1994 By:_____________________________________
Name:___________________________________
Title:__________________________________
Date: November ______, 1994 By: Prudential-Bache Properties, Inc.,
a general partner
By:_____________________________________
Name:___________________________________
Title:__________________________________
INDEPENDENCE APARTMENTS
ASSOCIATES, L.P.
By: Independence Apartments
Management Company, Inc.
a general partner
Date: November _____, 1994 By:_____________________________________
Name:___________________________________
Title:__________________________________
<PAGE>
<PAGE>
ACKNOWLEDGEMENT
STATE OF MISSOURI )
) ss
CITY OF ST. LOUIS )
On this _____ day of November, in the year 1994, before me, the undersigned,
a Notary ublic in and for said State, personally appeared ___________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who executed this instrument as the _________________________
of Independence Apartments Management Company, Inc., the corporate general
partner of Independence Apartments Associates, L.P. ("Apartments"), and
acknowledge to me that he executed the within instrument on behalf of the
said corporate general partner as the act of Apartments, and further
acknowledged to me that the said corporate general partner executed it.
WITNESS my hand and official seal.
[SEAL]
_______________________________
Notary Public
<PAGE>
<PAGE>
STATE OF MISSOURI )
) ss
CITY OF ST. LOUIS )
On this ______ day of November, in the year 1994, before me, the undersigned,
a Notary Public in and for said State, personally appeared ____________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who executed the within instrument as the _____________________
of The Industrial Development Authority of the City of Independence, Missouri
(the "Authority"), and acknowledged to me that he/she executed the within
instrument on behalf of the Authority as the act of Authority, and further
acknowledged to me that he/she executed it.
WITNESS my hand and official seal.
[SEAL]
_______________________________
Notary Public
<PAGE>
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
On this _____ day of November, 1994, before me appeared ____________________,
to me personally known, who, being by me duly sworn did say that he is the
__________________ of Related Tax Exempt Bond Associates, Inc., a general
partner of Summit Tax Exempt Bond Fund, L.P., a Delaware Limited Partnership
and the person who executed the within instrument and that said instrument
was signed in behalf of said limited partnership by authority of its
partnership agreement, and __________________ acknowledged said instrument
to be the free act and deed of said limited partnership.
IN WITNESS WHEREOF, I have hereunder set my hand and affixed my official seal
in the County and State aforesaid, the day and year first above written.
[SEAL]
_______________________________
Notary Public
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
On this ______ day of November, 1994, before me appeared ____________________,
to me personally known, who, being by me duly sworn did say that he is
the _______________________ of Prudential-Bache Properties, Inc., a general
partner of Summit Tax Exempt Bond Fund, L.P., a Delaware Limited Partnership
and the person who executed the within instrument and that said instrument was
signed in behalf of said limited partnerships by authority of its partnership
agreement, and _______________________ acknowledged said instrument to be the
free act and deed of said limited partnership.
IN WITNESS WHEREOF, I have hereunder set my hand and affixed my official seal
in the County and State aforesaid, the day and year first above written.
[SEAL]
_______________________________
Notary Public
<PAGE>
STATE OF MISSOURI )
) ss.
COUNTY OF JACKSON )
On the ______ day of November, 1994, before me appeared _____________________,
to me personally known, who, being by me duly sworn did say that he is a
trust officer of Boatman's First National Bank of Kansas City, n.a. and the
person who executed the within instrument and that said instrument was signed
in behalf of said Bank by authority of its Charter, and he acknowledged said
instrument to be the free act and deed of said Bank.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
in the County and State aforesaid, the day and year first above written.
[SEAL]
_______________________________
Notary Public
PAGE
<PAGE>
EXHIBIT A
REVISED FORM OF BOND
<PAGE>
UNITED STATES OF AMERICA
STATE OF MISSOURI
The Industrial Development Authority of the
City of Independence, Missouri
Multi-Family Housing Revenue Bond, Series of 1986
(The Mansion Project)
Number: R-2
Dated Date: May 13, 1986
Maturity Date: April 1, 2008
Registered Owner: Summit Tax Exempt Bond Fund, L.P.
Principal Amount: $19,450,000.00
The Industrial Development Authority of the City of Independence,
Missouri (the "Authority"), an industrial development corporation of the State
of Missouri (the "State"), created and existing under and by virtue of the
laws of the State, hereby acknowledges itself indebted and for value received
promises to pay to the registered owner hereof stated above, or registered
assigns, at the maturity date stated above, but only from the sources and as
hereinafter provided, upon presentation and surrender of this Bond at the
principal office of Boatman's First National Bank of Kansas City, as Trustee,
under the Indenture (described below), the principal amount stated above, and
to pay interest on said principal amount, from and including the dated date
hereof (provided that any accrued interest or deferred or contingent interest
through October 17, 1994 has been abrogated and discharged) until the
principal amount shall have been paid in accordance with the terms of this
Bond, as and when set forth below, but only from the sources and as
hereinafter provided, by wire transfer if there be one Owner of all of the
Bonds or otherwise by check or draft mailed to the record Owners of Bonds as
the same appear upon the books of registry to be maintained by Boatsmen's
First National Bank of Kansas City, as registrar.
This Bond is issued pursuant to the Bond Resolution of the
Authority adopted March 27, 1986 and the Indenture of Trust dated as of May 1,
1986 between the Authority and The Merchants Bank, as Trustee (as amended and
supplemented from time to time, the "Indenture"), and Chapter 349, R.S.Mo.
1978, as amended (the "Act"). Boatsmen's First National Bank of Kansas City,
as Successor in Interest for The Merchants Bank, is now the Trustee and
Registrar. Reference is made to the Resolution, the Indenture and the Act for
a full statement of their respective terms. Capitalized terms used herein and
not otherwise defined have the respective meanings accorded such terms in the
Indenture. The Bonds issued under the Indenture are expressly limited to
$19,450,000 principal amount at any time Outstanding and are all of like
tenor, except as to numbers and denominations, and are issued for the purposes
of providing construction and permanent financing for qualified multi-family
rental housing units in the State and of paying certain expenses incidental
thereto.
<PAGE>
THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY.
NEITHER THE STATE OF MISSOURI NOR ANY POLITICAL SUBDIVISION THEREOF SHALL BE
LIABLE ON THE BONDS, AND THE BONDS DO NOT AND SHALL NOT CONSTITUTE A DEBT OF
THE STATE OF MISSOURI.
This Bond is a modified form of Bond which reflects amendments to
the original Indenture effected by the First Supplemental Trust Indenture,
dated as of October 18, 1994 and effective on October 18, 1994. This Bond is
issued in exchange for and replacement of the form of Bond originally issued
in the name of the registered owner hereof.
Interest on the Bonds.
(a) General. Subject to Section 3.13 of the Indenture, the Bonds
shall bear interest as provided in paragraphs (b) through (g) until the
Conversation Date and as provided in Section 3.06(h) of the Indenture
after such date.
(b) Base Interest. From and after October 18, 1994 and until the
Conversion Date, the Bonds shall bear interest calculated and payable as
follows (which shall be referred to herein as "Base Interest"):
(1) During the Second Period, the Bonds shall bear Base
Interest at the rate of 5.23% per annum from and after October 18,
1994, payable on each payment date specified in paragraph (e)(1)
below; provided that the amount of Base Interest so payable shall
be subject to reduction quarterly by the Property Tax Adjustment
(defined below in paragraph (b)(2)) as specified in writing to the
Trustee by the Owner from time to time, but in no event shall Base
Interest be payable on the Bonds at an annual rate that is lower
than the Minimum Base Interest Rate. The "Minimum Base Interest
Rate" shall mean the annual rate of interest that is derived from
the originally issued and Outstanding principal amount of the
Bonds and an annual interest payment equal to $975,000.
(2) For purposes of adjusting Base Interest payable from
and after October 18, 1994, and subject to the immediately ensuing
sentence, Property Tax Adjustment shall mean the amount by which
(x) exceeds (y), where (x) equals increases in real property taxes
on the Project for the period of time in question ("Property
Taxes") over the "Property Tax Base," being the level of such
taxes for the fiscal year of the City of Independence, Missouri
ended in 1991 and (y) equals a 3% cumulative annual increase in
Property Taxes over the Property Tax Base. Notwithstanding the
foregoing, in no event shall the Property Tax Adjustment exceed
$50,000 in any one twelve month period ending on October 18 in
each year.
2
<PAGE>
Base Interest shall be calculated on the basis of a year of 365 days,
actual days elapsed.
(c) Contingent Interest. From and after October 18, 1994 and
until the Conversion Date, the Bonds shall bear contingent interest
calculated and payable exclusively on the basis and to the extent of Net
Cash Flow and Net Sale or Refinancing Proceeds, and not otherwise if
there is no Net Cash Flow and there are no Net Sale or Refinancing
Proceeds, as follows:
(1) Primary Contingent Interest on the Basis of Net Cash
Flow. During each calendar year, or part thereof, of the Second
Period from and after October 18, 1994, the Bonds shall bear
contingent interest at an annual rate equal to the Primary
Contingent Interest Rate payable (A) on the basis and to the
extent of 100% of Net Cash Flow for each such year or part thereof
or (B) to the extent not so paid, then (as part of Super Priority
Deferred Interest) on the basis and to the extent of Net Sale or
Refinancing Proceeds as described in paragraph (c)(4) below.
Contingent Interest equal to Maximum Primary Contingent
Interest shall be payable on the Bonds on each payment date
specified in paragraph (e)(2) below on the basis and to the extent
of 100% of Net Cash Flow, measured for purposes of such payment
and subject to the adjustments and reconciliation as specified in
paragraph (f) below. If 100% of Net Cash Flow is insufficient,
then there shall be payable the maximum amount possible to the
extent of 100% of Net Cash Flow (which amount is referred to as
the "Primary Contingent Interest").
The difference between Maximum Primary Contingent Interest
and Primary Contingent Interest for any calculation period in any
calendar year shall be deferred without interest until paid (such
difference is referred to collectively together with all such
amounts previously deferred and remaining unpaid as "Primary
Deferred Interest") and shall thereafter be payable on the
earliest possible payment dates specified in paragraph (e)(2)
below from and to the extent of 100% of Net Cash Flow, measured
for purposes of such payment and subject to the adjustments and
reconciliation as specified in paragraph (f) below. Net Cash Flow
shall be applied to such payments of any Primary Deferred Interest
prior to the payment of Primary Contingent Interest.
To the extent that all Primary Deferred Interest and any
Maximum Primary Contingent Interest that is Unpaid But Not
Deferred are not paid on the basis of Net Cash Flow on a payment
date specified in paragraph (e)(2)(iii)
3
<PAGE>
below, they shall be payable as part of Super Priority Deferred
Interest on the basis of Net Sale or Refinancing Proceeds in
accordance with paragraph (c)(4) below.
(2) Supplemental Contingent Interest on the Basis of Net
Cash Flow. During each calendar year, or part thereof, of the
Second Period from and after October 18, 1994, the Bonds shall
bear contingent interest at an annual rate equal to the
Supplemental Contingent Interest Rate payable on the basis and to
the extent of 35% (50% from and after the Net Cash Flow Change
Date) of so much of Net Cash Flow for each such year, or part
thereof, as remains after reducing Net Cash Flow by the total of
(x) the Borrower's Priority Return in each calendar year and (y)
any payment of Primary Contingent Interest or Primary Deferred
Interest as specified above in paragraph (c)(1).
Contingent Interest equal to Maximum Supplemental Contingent
Interest shall be payable on the Bonds on each payment date
specified in paragraph (e)(2) below on the basis and to the extent
of 35% (50% from and after the Net Cash Flow Change Date) of so
much of the Net Cash Flow as remains after reducing Net Cash Flow
by the total of (x) the Borrower's Priority Return in each
calendar year and (y) any payment of Primary Contingent Interest
or Primary Deferred Interest as specified above in paragraph
(c)(1), measured for purposes of such payment and subject to the
adjustments and reconciliation as specified in paragraph (f)
below. If 35% (50% from and after the Net Cash Flow Change Date)
of Net Cash Flow after such reduction is insufficient to pay the
Maximum Supplemental Contingent Interest payable on any payment
date specified in paragraph (e)(2) below, then there shall be
payable the maximum amount possible on the basis of and to the
extent of 35% (50% from and after the Net Cash Flow Change Date)
of Net Cash Flow after such reduction (which amount is referred to
as the "Supplemental Contingent Interest").
The difference between Maximum Supplemental Contingent
Interest and Supplemental Contingent Interest for any calculation
period in each year shall be deferred without interest (such
difference being referred to collectively with all such amounts
previously deferred and remaining unpaid as "Supplemental Deferred
Interest"). Supplemental Deferred Interest and any Maximum
Supplemental Contingent Interest that is Unpaid But Not Deferred
shall be payable in accordance with paragraph (c)(3) below as part
of Super Priority Deferred Interest and otherwise in accordance
with Section 3.06(c)(4).
4
<PAGE>
(3) Super Priority Deferred Interest on the Basis of Net
Sale or Refinancing Proceeds. Super Priority Deferred Interest
shall be payable on the basis and to the extent of 50% of the
balance of Net Sale or Refinancing Proceeds remaining after
reducing such amount by the Borrower's Equity Return Satisfaction
Amount on the earliest possible payment dates specified in
paragraph (e)(3) below.
If the Disposition Factor for the Event of Sale or
Refinancing giving rise to Net Sale or Refinancing Proceeds is
less than 100, then Net Sale or Refinancing Proceeds shall be
reduced in such instance by only so much of the Borrower's Equity
Return Satisfaction Amount as equals, as a percentage, such
Disposition Factor.
Super Priority Deferred Interest paid on such basis shall be
credited first against all unpaid Primary Deferred Interest and
any Maximum Primary Contingent Interest that is Unpaid But Not
Deferred and second, to the extent the Super Priority Deferred
Interest so paid exceeds such Primary Deferred Interest and any
Maximum Primary Contingent Interest that is Unpaid But Not
Deferred, against all unpaid Supplemental Deferred Interest and
any Maximum Supplemental Contingent Interest that is Unpaid But
Not Deferred (the amount of such excess being referred to as
"Excess Super Priority Deferred Interest").
(4) Supplemental Deferred Interest on the Basis of Net Sale
or Refinancing Proceeds. After reduction of Supplemental Deferred
Interest and any Maximum Supplemental Contingent Interest that is
Unpaid But Not Deferred by credit for the amount of any Excess
Super Priority Deferred Interest then paid and not previously
taken as a credit against Supplemental Deferred Interest, the
remaining amount of Supplemental Deferred Interest and such
Maximum Supplemental Contingent Interest shall be payable on the
basis of and to the extent of 40% of the excess of Net Sale or
Refinancing Proceeds over the sum of (x) the Super Priority
Deferred Interest then paid on account of the same event of Sale
or Refinancing, (y) the Borrower's Equity Return Satisfaction
Amount and (z) any Contingent Interest or Deferred Interest
previously paid on the Bonds on the basis of Net Sale or
Refinancing Proceeds arising out of an earlier Event of Sale or
Refinancing on the earliest possible payment dates specified in
paragraph (e)(3) below.
(d) Reserved.
5
<PAGE>
(e) Payment Dates for Interest. The interest payable on the
Bonds to and including the Conversion Date as provided above shall be
payable in arrears on the following dates:
(1) Base Interest shall be payable (i) on each Interest
Payment Date for Base Interest, (ii) on the Conversion Date and
(iii) on each redemption date before the Conversion Date (but only
with respect to the Bonds redeemed).
(2) Contingent Interest payable on the basis of Net Cash
Flow shall be payable (i) on each Interest Payment Date for
Contingent Interest and Deferred Interest to and including the
Conversion Date, (ii) on each redemption date during the Second
Period Date (but only with respect to the Bonds redeemed),
(iii) on each date on which Contingent Interest and Deferred
Interest is payable from Net Sale or Refinancing Proceeds (as
provided in paragraph (e)(3) below) and (iv) on the Conversion
Date.
(3) Contingent Interest and Deferred Interest payable on
the basis of Net Sale or Refinancing Proceeds shall be payable on
the next Interest Payment Date for any interest succeeding by at
least 30 days the date of the Event of Sale or Refinancing
relating to the Sale of the Project or Refinancing of the Project
which has occurred, except in the case of:
(x) a Refinancing of the Project described in clause
(i) or (iv) of the definition thereof, in which case it
shall be payable on the redemption date or payment date
specified therein, as the case may be,
(y) a Sale of the Project described in clause (i) of
the definition thereof resulting in a call of the Bonds for
redemption, in which case it shall be payable on the
redemption date, or
(z) a Refinancing of the Project described in clause
(ii) of the definition thereof, in which case it shall be
payable on the Initial Remarketing Date.
(f) Calculation of Net Cash Flow.
(1) (i) No later than thirty days before each payment
date for Contingent Interest specified in paragraph (e)(2) above
(or such lesser number of days as shall be the maximum number of
days possible if the payment date was not known to the Borrower
until less than 40 days before the payment date), the Borrower
shall calculate Net Cash Flow for the three month period
6
<PAGE>
ending on the last day of the third preceding month before such
payment date and shall provide the Trustee and the Partnership (A)
the analysis of such Net Cash Flow, (B) unaudited financial statements
of the Project for such three month period and (C) a calculation of
the amount of Contingent Interest and Deferred Interest then payable.
(ii) Notwithstanding the foregoing in clause (i):
(A) except as may result from adjustments and
reconciliation provided below in this paragraph (f), the
period of time for which Net Cash Flow is measured for
purposes of a payment date for Contingent Interest and
Deferred Interest on any Bonds specified in paragraph (e)(2)
above shall not include any time for which Net Cash Flow has
been measured for purposes of a previous payment date for
Contingent Interest and Deferred Interest on such Bonds
specified in paragraph (e)(2) above, and
(B) the calculation of Net Cash Flow and the amount
of Contingent Interest payable on the basis thereof on the
Conversion Date shall be reconciled and adjusted to give
effect to (x) the actual amount of Net Cash Flow for the
current calendar year (and the preceding calendar year if
the Conversion Date falls before delivery of the audit
referred to in paragraph (f)(2) below in the current
calendar year) up to but not including the Conversion Date
(such actual amount of Net Cash Flow being measured by the
actual amount known as of the most recent possible date and
an amount reasonably estimated to be earned between such
date and the Conversion Date) and (y) all Contingent
Interest paid during the current calendar year (and the
preceding calendar year if the Conversion Date falls before
delivery of the audit referred to in paragraph (f)(2) below
in the current calendar year) in the manner described below
in paragraph (f)(3) below, except that any underpayments or
overpayments of Contingent Interest shall be paid or
refunded, as the case may be, on the Conversion Date.
(iii) The amount of Net Cash Flow reflected in the
analysis described above, as adjusted in the case of the analysis
in connection with the Conversion Date, shall provide the basis
for the calculation of Contingent Interest payable on the basis of
Net Cash Flow on each payment date therefor specified in paragraph
(e)(2) above, except as provided below. The Trustee (if it has
accepted the duties as Acting Party) or the Partnership may each
request further substantiation of the Borrower's calculation of
Net Cash Flow and may
7
<PAGE>
verify and correct as necessary the calculations thereof. If
the Trustee or the Partnership do reasonably modify such
calculation, the Trustee or Partnership shall notify the
Borrower and the Trustee or Partnership (whoever did not
initiate notice) of such modified calculations no later
than ten Business Days before such payment date (or such lesser
number of days as shall be the maximum number of days practicable
if the Trustee or Partnership received the calculation of Net Cash
Flow less than 30 days before the payment date) and such modified
calculation shall be the basis of Contingent Interest payable on
the basis of Net Cash Flow on the payment date. Except to the
extent provided in this paragraph (f)(1) with respect to the
Conversion Date, the analysis and payment on the basis of Net Cash
Flow described in this paragraph (f)(1) is intended to provide a
preliminary payment of Contingent Interest on the basis of Net
Cash Flow prior and subject to the adjustment and reconciliation
process described in paragraphs (f)(2) and (f)(3) below.
(2) No later than March 15 of each calendar year (up to
and, unless the Conversion Date falls before delivery of the
audit, including the calendar year in which the Conversion Date
occurs), the Borrower shall provide to the Issuer, the Trustee and
the Partnership an audit of the operations of the Project for the
preceding calendar year prepared and certified by an Accountant
acceptable to the Trustee and the Partnership in accordance with
generally accepted auditing standards. The audit shall state the
actual amount of the Net Cash Flow for that calendar year and
shall calculate all Contingent Interest paid and payable from Net
Cash Flow during such calendar year.
(3) The audit prepared in accordance with paragraph (f)(2)
above shall state the amount of Contingent Interest payable and
paid during the subject calendar year. If the amounts of
Contingent Interest payable on the basis of Net Cash Flow
(measured on the basis of actual Net Cash Flow for such calendar
year according to the audit) exceeded the amount paid, then there
shall be payable, without interest, to the Owners of the Bonds any
such payable and unpaid amounts on the payment date for Contingent
Interest and Deferred Interest specified in paragraph (e)(2) above
immediately following the receipt of the audit by the Trustee and
the said Owners. If the amount of Contingent Interest payable on
the basis of Net Cash Flow (measured on the basis of actual Net
Cash Flow for such calendar year according to the audit) is less
than the amount actually paid, the Partnership shall notify the
Trustee of such overpaid amount which the Trustee shall credit
against any other interest payments (whether Base Interest or
Contingent Interest) or other payments due under this Indenture to
the Owners of the Bonds on the Bond Payment Date (or Bond Payment
Dates) immediately following the receipt by the Trustee and the said
8
<PAGE>
Owners of the audit and the Owners shall not be required to
refund any such amount unless the crediting does not exhaust the
overpayment, in which case the balance of the overpayment will be
refunded by the Owners to the Trustee on the Conversion Date.
Such payment or crediting shall be for the account of the Owners
of record on the date such payment or crediting is made. On the
Conversion Date the Trustee shall credit to the loan payments due
from the Developer the amount of any overpayment repaid by the
Owners.
(4) The Issuer and the Trustee (unless the Trustee has
accepted the duties of the Acting Party) may conclusively rely on
the determinations by the Borrower and Partnership herein, and
shall not have any responsibility therefor.
Notwithstanding anything else herein contained, the interest rate
on this Bond shall not exceed 16% per annum simple and noncompounded from the
date of issuance hereof to any date of calculation. If the interest rate on
this Bond would at any time exceed the maximum interest rate permitted by law,
or would be computed by a method not in conformity with law, then this Bond
shall instead bear interest at the maximum interest rate, or in conformity
with the methods permitted by law.
The foregoing interest provisions are a summary of those contained
in this Indenture, and reference is hereby made to the Indenture for a full
statement of their terms.
Limited Recourse. Pursuant to a Loan Agreement dated as of May 1,
1986, and a Note dated May 13, 1986 (the "Note"), The Mansion Apartments
Limited, an Oklahoma limited partnership (the "Borrower") agreed to make
payments to the Authority in amounts equal to amounts of principal of,
premium, if any, and interest on the Bonds. THE OBLIGATIONS OF THE AUTHORITY
ON THIS BOND ARE EXPRESSLY LIMITED TO AND ARE PAYABLE SOLELY FROM THE PAYMENTS
RECEIVED BY THE AUTHORITY PURSUANT TO THE LOAN AGREEMENT AND THE NOTE AND ANY
SECURITY THEREFOR PROVIDED IN THE INDENTURE, WHICH INCLUDES AN ASSIGNMENT OF
THE LOAN AGREEMENT, THE NOTE AND THE DEED OF TRUST AND SECURITY AGREEMENT WITH
COLLATERAL ASSIGNMENT OF RENTS AND LEASES DATED AS OF MAY 1, 1986 FROM THE
BORROWER TO THE BOATMAN'S FIRST NATIONAL BANK OF KANSAS CITY, AS TRUSTEE (THE
"DEED OF TRUST"). THE OBLIGATIONS OF THE BORROWER UNDER THE LOAN AGREEMENT
AND THE NOTE AND DEED OF TRUST MADE THEREUNDER ARE NON-RECOURSE TO THE
BORROWER, AND ARE ENFORCEABLE SOLELY AGAINST THE PROJECT, EXCEPT AS OTHERWISE
PROVIDED THEREIN.
9
<PAGE>
Transfer. This Bond is transferable by the registered owner
hereof in person or by his attorney duly authorized in writing at the office
of the registrar, Boatsmen's First National Bank of Kansas City, but only in
the manner, subject to the limitations and upon payment of the charges
provided in the Indenture, and upon surrender and cancellation of this Bond.
Upon such transfer a new registered Bond or Bonds, in any authorized
denomination or denominations, of the same maturity and for the same aggregate
principal amount will be issued to the transferee in exchange herefor.
Prior to the Conversion Date, a Bond may only be transferred (i)
to any subsidiary of the Original Purchaser, an affiliate with the same or
substantially the same general partner as the Original Purchaser, to any
entity arising out of any merger or consolidation of the Original Purchaser,
by operation of law, or to a trustee in bankruptcy of the Original Purchaser;
(ii) by an assignment to a bank or other financial institution issuing a
letter of credit or like instrument in connection with the Mortgage Loan; or
(iii) in connection with a sale to an Institutional Investor if, in each
instance, the Authority and the registrar receive from the transferee its
agreement to the transfer restrictions set forth in this paragraph in
connection with subsequent transfers of the Bond.
The Bonds are issuable as fully registered Bonds in Authorized
Denominations as provided in the Indenture.
Redemption of Bonds. The Bonds are subject to redemption by the
Authority prior to maturity as a whole or in part at such time or times, under
such circumstances, at such redemption prices and in such manner as is set
forth in the Indenture.
Enforcement. Only the Trustee shall have the right to enforce the
provisions of this Bond or the Indenture or to institute any action to enforce
the covenants herein or therein, or to take any action with respect to any
Event of Default under the Indenture, or to institute, appear in or defend any
suit or other proceedings with respect thereto, except as provided in the
Indenture. If an Event of Default occurs and is continuing, the principal of
all Bonds then outstanding may be declared due and payable by the Trustee upon
the conditions and in the manner and with the effect provided in the
Indenture.
The Authority, the Trustee, and any other person may treat the
person in whose name this Bond is registered on the books of registry as the
Owner hereof for the purpose of receiving payment as herein provided and for
all other purposes, whether or not this Bond be overdue, and no person shall
be affected by notice to the contrary.
Discharge. The Indenture prescribes the manner in which it may be
discharged and after which the Bonds shall be deemed to be paid and no longer
be secured by or entitled
10
<PAGE>
to the benefits of the Indenture, except for the purposes of registration
and exchange of Bonds and of such payment.
Modification. Modifications or alterations of the Indenture, or
of any supplements thereto, may be made only to the extent and in the
circumstances permitted by the Indenture.
By its acceptance of this Bond, the Owner hereof agrees that it
will be bound by and accepts the provisions of the Indenture, accepts the
assignment by the Authority to the Trustee of the Authority's rights in and to
the Mortgage Loan and the documents evidencing and securing the same. This
Bond shall not be valid or obligatory for any purpose until it shall have been
signed on behalf of the Authority and such signature attested, by the officer,
and in the manner, provided in the Indenture, and authenticated by a duly
authorized officer of the Trustee, as Authenticating Agent.
IN WITNESS WHEREOF, the Authority has caused this Bond to be
executed as of the Dated Date stated above.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE CITY OF INDEPENDENCE, MISSOURI
By:_________________________________________
Title:______________________________________
Attest:
__________________________________
11
<PAGE>
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Bonds described in the within mentioned
Indenture and is one of the Multi-Family Housing Revenue Bonds, Series of 1986
(The Mansion Project) of The Industrial Development Authority of the City of
Independence, Missouri.
BOATMAN'S FIRST NATIONAL BANK OF
KANSAS CITY, as Trustee
By:______________________________________________
Date of Authentication:
November __, 1994
12
<PAGE>
<PAGE>
(FORM OF ASSIGNMENT)
For Value Received, the undersigned sells, assigns and transfers
unto ________________________, the within Multi-Family Housing Revenue Bond,
Series of 1986 (The Mansion Project), of the Industrial Development Authority
of the City of Independence, Missouri, and hereby authorizes the transfer of
this Bond on the registration books of the Registrar.
Date: _________________________________________
_________________________________________
Authorized Signature
_________________________________________
Name of Transferee
Signature Guaranteed by:
_________________________________________
_________________________________________
Name of Bank
By:_____________________________________
Title:__________________________________
13
<PAGE>
1994 ANNUAL REPORT
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
Letter to BUC$holders
For the Year Ended December 31, 1994
1
<PAGE>
(LOGO)
Two World Financial Center Telephone: (212) 436-2000
New York, NY 10281-1424 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of Summit Tax Exempt Bond Fund, L.P.
New York, New York
We have audited the accompanying statements of financial condition of
Summit Tax Exempt Bond Fund, L.P. (a Delaware Limited Partnership) as of
December 31, 1994 and 1993, and the related statements of operations,
changes in partners' capital and cash flows for each of the three years
in the period ended December 31, 1994. These financial statements are
the responsibility of the General Partners. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by the General Partners, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Summit Tax Exempt Bond Fund, L.P. as
of December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the three years in the period ended December 31,
1994 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche
- ---------------------------
April 12, 1995
(LOGO)
2
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
-----------------------------
1994 1993
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
ASSETS
Participating first mortgage bonds, net $100,294,960 $ 84,262,524
Assets held for sale, net 27,643,550 45,243,550
Temporary investments 1,915,874 1,500,760
Cash 173,689 200,227
Promissory notes receivable, net 7,071,156 7,243,567
Deferred bond selection fees, net 1,858,273 2,008,329
Interest receivable, net 944,367 890,798
Deferred financing fees, net 388,816 516,644
Other assets 13,628 15,306
------------ ------------
Total assets $140,304,313 $141,881,705
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Loan payable $ 13,680,866 $ 13,680,866
Deferred income 1,469,174 1,666,349
Accrued expenses 120,685 300,669
Accrued interest -- 84,821
Due to affiliates 46,422 70,950
------------ ------------
Total liabilities 15,317,147 15,803,655
------------ ------------
Contingencies
Partners' capital
BUC$holders (7,906,234 BUC$ issued and outstanding) 125,346,852 126,415,919
General partners (359,686) (337,869)
------------ ------------
Total partners' capital 124,987,166 126,078,050
------------ ------------
Total liabilities and partners' capital $140,304,313 $141,881,705
------------ ------------
------------ ------------
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
REVENUES
Interest income from participating first mortgage bonds $ 6,900,700 $7,085,390 $ 6,466,662
Income from assets held for sale, net 2,476,090 2,557,000 1,897,017
Interest income from promissory notes 612,090 634,449 87,152
Interest income from temporary investments 45,394 27,565 30,120
----------- ---------- -----------
10,034,274 10,304,404 8,480,951
----------- ---------- -----------
EXPENSES
Interest expense 1,156,858 967,361 9,166
Management fees 671,875 671,875 671,875
General and administrative 339,975 403,230 471,344
Loan servicing fees 335,938 335,938 335,938
Legal expense 215,854 336,667 380,000
Amortization of deferred bond selection fees 150,056 150,056 150,056
Amortization of deferred financing fees 127,828 122,503 --
Provision for uncollectible receivables -- 1,276,000 --
Provision for loss on impairment of assets 1,350,000 1,905,000 --
----------- ---------- -----------
4,348,384 6,168,630 2,018,379
----------- ---------- -----------
Net income $ 5,685,890 $4,135,774 $ 6,462,572
----------- ---------- -----------
----------- ---------- -----------
ALLOCATION OF NET INCOME
BUC$holders $ 5,572,171 $4,053,059 $ 6,333,321
----------- ---------- -----------
----------- ---------- -----------
General partners $ 113,719 $ 82,715 $ 129,251
----------- ---------- -----------
----------- ---------- -----------
Net income per BUC $ .71 $ .51 $ .80
----------- ---------- -----------
----------- ---------- -----------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
4
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
GENERAL
BUC$HOLDERS PARTNERS TOTAL
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Partners' capital (deficit)--December 31, 1991 $129,312,015 $(278,763) $129,033,252
Net income 6,333,321 129,251 6,462,572
Distributions (6,641,238) (135,536 ) (6,776,774)
------------ --------- ------------
Partners' capital (deficit)--December 31, 1992 129,004,098 (285,048 ) 128,719,050
Net income 4,053,059 82,715 4,135,774
Distributions (6,641,238) (135,536 ) (6,776,774)
------------ --------- ------------
Partners' capital (deficit)--December 31, 1993 126,415,919 (337,869 ) 126,078,050
Net income 5,572,171 113,719 5,685,890
Distributions (6,641,238) (135,536 ) (6,776,774)
------------ --------- ------------
Partners' capital (deficit)--December 31, 1994 $125,346,852 $(359,686) $124,987,166
------------ --------- ------------
------------ --------- ------------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
5
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 7,244,362 $ 7,299,931 $ 6,425,100
Cash received from assets held for sale, net 2,476,090 2,557,000 1,897,017
Fees and expenses paid (1,766,476) (1,534,070) (1,730,931)
Interest paid (1,241,679) (882,540) (9,166)
------------ ----------- -----------
Net cash provided by operating activities 6,712,297 7,440,321 6,582,020
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net purchase of temporary investments (415,114) (485,040) (165,586)
Income deferred upon assumption of participating
first mortgage bond obligations by new debtor 105,477 -- 1,441,209
------------ ----------- -----------
Net cash provided by (used in) investment activities (309,637) (485,040) 1,275,623
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Funds borrowed -- 13,680,866 --
Repayment of loan payable -- (45,620) (274,320)
Financing fees paid -- (639,147) --
Repayment of loan from affiliate -- (3,000,000) (505,557)
Principal payment received on FMB 347,576 -- --
Distributions paid (6,776,774) (6,776,774) (6,776,774)
Loans made to affiliates, net -- (10,126,000) (320,000)
------------ ----------- -----------
Net cash used in financing activities (6,429,198) (6,906,675) (7,876,651)
------------ ----------- -----------
Net increase (decrease) in cash (26,538) 48,606 (19,008)
Cash at beginning of year 200,227 151,621 170,629
------------ ----------- -----------
Cash at end of year $ 173,689 $ 200,227 $ 151,621
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
SCHEDULE RECONCILING NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income $ 5,685,890 $ 4,135,774 $ 6,462,572
------------ ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of valuation allowance (130,012) (130,012) (130,012)
Amortization of deferred income (130,241) (125,322) (73,105)
Amortization of deferred bond selection fees 150,056 150,056 150,056
Amortization of financing fees 127,828 122,503 --
Provision for loss on impairment of assets 1,350,000 1,905,000 --
Provision for uncollectible receivables -- 1,276,000 --
Changes in:
Promissory notes receivable, net 172,411 166,177 146,026
Interest receivable (53,569) (192,137) 44,285
Other assets 1,678 147,873 (163,179)
Deferred income (172,411) (166,177) (146,026)
Accrued expenses (179,984) 116,292 95,260
Accrued interest (84,821) 84,821 --
Due to affiliates (24,528) (50,527) 196,143
------------ ----------- -----------
Total adjustments 1,026,407 3,304,547 119,448
------------ ----------- -----------
Net cash provided by operating activities $ 6,712,297 $ 7,440,321 $ 6,582,020
------------ ----------- -----------
------------ ----------- -----------
- -----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF INVESTING ACTIVITIES
The Partnership transferred $17,600,000 from assets held for sale to participating first mortgage
bonds during both 1994 and 1992. The Partnership transferred $12,300,000 from participating first
mortgage bonds to assets held for sale during 1993. See Note C for further information.
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
6
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
A. General
Summit Tax Exempt Bond Fund, L.P. (the ``Partnership''), a Delaware limited
partnership, was formed on December 18, 1985 and will terminate on December 31,
2020 unless terminated sooner under the provisions of the Agreement of Limited
Partnership (the ``Partnership Agreement''). The Partnership was formed to
invest in tax-exempt participating first mortgage revenue bonds (``FMBs'')
issued by various state or local governments or their agencies or authorities.
The FMBs are secured by participating first mortgage loans on multi-family
residential apartment projects (the ``Properties''). The general partners of the
Partnership (the ``General Partners'') are Prudential-Bache Properties, Inc.
(``PBP'') (a wholly-owned subsidiary of Prudential Securities Group Inc.) and
Related Tax Exempt Bond Associates, Inc. (the ``Related General Partner'').
Related BUC$ Associates, Inc. (the ``Assignor Limited Partner''), which acquired
and holds limited partnership interests on behalf of those persons who purchase
Beneficial Unit Certificates (``BUC$''), has assigned to those persons
substantially all of its rights and interest in and under such limited
partnership interests. The Related General Partner and the Assignor Limited
Partner are under common ownership. As of December 31, 1994, the Partnership had
invested in a total of eleven FMBs.
B. Summary of Significant Accounting Policies
Basis of accounting
The books and records of the Partnership are maintained on the accrual basis
of accounting in accordance with generally accepted accounting principles.
Participating first mortgage bonds and promissory notes receivable
FMBs and promissory notes are carried at cost less a valuation allowance
where appropriate. A valuation allowance is recorded when the ultimate
collection of an FMB's or note's principal balance is in doubt. This evaluation
is based on an analysis of estimated undiscounted cash flows from the individual
properties securing the FMBs.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (``SFAS'') No. 114, ``Accounting by Creditors for
Impairment of a Loan,'' which will be prospectively adopted by the Partnership
as of January 1, 1995 for its 1995 financial statements. SFAS No. 114 requires
creditors to evaluate the collectibility of both interest and principal of an
FMB when determining whether it is impaired. An FMB is considered to be impaired
when, based on current information and events, it is probable the creditor will
be unable to collect all amounts due according to the existing contractual
terms. When an FMB is considered to be impaired, the amount of the loss accrual
is determined by discounting the expected future cash flows of the FMB at its
effective interest rate or, for practical purposes, from the estimated fair
value of the collateral. To the extent that the owners of properties underlying
the FMBs may require modifications to their forbearance agreements or the FMBs
may otherwise become impaired in 1995, the Partnership may be required to record
additional valuation allowances which could have a material effect on the
Partnership's financial statements. The amount of such allowances in 1995, if
any, resulting from the adoption of SFAS No. 114 cannot presently be determined.
Interest income is recognized at the stated rate when collectibility of
future amounts is reasonably assured. Interest income from FMBs with modified
terms where the collectibility of future amounts is uncertain is recognized
based upon expected cash receipts.
Assets Held for Sale
The original owners of the underlying properties and obligors of certain FMBs
have been replaced by affiliates of the Related General Partner who have not
made equity investments in the underlying properties. These entities have
assumed the day-to-day responsibilities and obligations of operating the
underlying properties. The FMBs are reported in the financial statements as
``Assets Held for Sale'' because buyers are being sought to make equity
investments in the underlying properties and assume the nonrecourse obligations
for the FMBs. Although these properties may not be producing sufficient cash
flow to fully service the debt, the Partnership has no present intention to
declare default on these FMBs.
7
<PAGE>
<PAGE>
Prior to the FMBs being classified as Assets Held for Sale, an allowance is
established to record them at the fair value of the underlying properties at the
time the original owners were replaced. If any further diminution in the fair
value of the underlying property occurs, additional valuation allowances for the
Assets Held for Sale will be established. Fair value is based on estimates of
the value of the underlying properties using the discounted cash flow method
which includes the discounted value of the favorable tax-exempt bond financing.
A significant assumption in the estimates is that a buyer will utilize the
tax-exempt financing currently available in purchasing such properties.
When a substantial equity investment in the underlying property is made, the
carrying amount of the Asset Held for Sale is reclassified to an FMB, and the
probable estimated future cash receipts specified by the new terms (including
interest and principal) in excess of the carrying amount of the FMB is amortized
as interest income over the remaining life of the FMB.
Income is recognized when cash is received and is recorded net of
disbursements made by the Partnership for expenses of the properties, if any.
Temporary investments
Temporary investments represent tax-exempt floating rate municipal bonds
which are carried at cost plus accrued interest which approximates market.
Income taxes
The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the BUC$holders. The Partnership may be subject to other state and
local taxes in jurisdictions in which it operates.
Profit and loss allocations and distributions
Net profits or losses and distributions are allocated 98% to the BUC$holders
and 2% to the General Partners in accordance with the Partnership Agreement.
Bond selection fees
The General Partners were paid bond selection fees (equal to 2% of the gross
proceeds from the initial offering) for evaluating and selecting FMBs,
negotiating the terms of mortgage loans and coordinating the development effort
with property developers and government agencies. These fees have been
capitalized and are being amortized over the terms of the FMBs. The accumulated
amortization as of December 31, 1994 and 1993 was approximately $1,233,000 and
$1,083,000, respectively.
Deferred financing fees
Financing fees incurred in connection with the Partnership's credit facility
were capitalized and are being amortized over five years (the life of the credit
facility). The accumulated amortization at December 31, 1994 and 1993 was
approximately $251,000 and $123,000, respectively.
C. Participating First Mortgage Bonds
Descriptions of the various FMBs owned by the Partnership at December 31,
1994 are as follows:
<TABLE>
<CAPTION>
Average
Interest Minimum Stated
Rate Paid Pay Rate Interest Call Maturity Face
Property Location 1994* December 1994 Rate* Date Date Amount
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Martin's Creek Summerville, SC 7.00% 7.00%(A) 8.25% Mar. 2000 May 2010 $ 7,300,000
East Ridge Mt. Pleasant, SC 7.00 7.00(A) 8.25 Mar. 2000 May 2010 8,700,000
Cypress Run Tampa, Fl 6.07 7.52(B) 8.50 Aug. 1998 Aug. 2006 15,402,428
Thomas Lake Eagan, Mn 8.27 7.50(A) 8.50 Aug. 1998 Aug. 2006 12,975,000
North Glen Atlanta, Ga 6.00 6.00(A) 8.50 Aug. 1998 Aug. 2008 12,400,000
Clarendon Hills Hayward, Ca 5.47 5.52 5.52 Dec. 2003 Dec. 2003 17,600,000
Sunset Terrace Lancaster, Ca 7.40 7.50(A) 8.00 Feb. 1999 Feb. 2007 10,350,000
The Mansion Independence, Mo 5.47 5.23 5.23 Dec. 2004 May 2010 19,450,000
------------
$104,177,428
------------
------------
Less: Allowance for loss on impairment of assets
Carrying Amount
* The rate paid represents the interest recorded by the Partnership while the stated rate represents the coupon rate of the FMB.
(A) The minimum pay rates on the FMBs are scheduled to increase to the stated interest rate over the remaining terms of the FMBs.
(B) The minimum pay rate is the current cash flow of the property.
<CAPTION>
Carrying
Property Amount
<S> <C>
- -------------------------------
Martin's Creek $ 6,981,310
East Ridge 8,336,222
Cypress Run 15,402,428
Thomas Lake 12,975,000
North Glen 12,400,000
Clarendon Hills 17,600,000
Sunset Terrace 10,350,000
The Mansion 17,600,000
------------
101,644,960
(1,350,000)
------------
$100,294,960
------------
------------
</TABLE>
8
<PAGE>
The principal and interest payments on each FMB are payable only from the
cash flows, including proceeds in the event of a sale, from the Properties
underlying the FMBs. None of these FMBs constitute a general obligation of any
state or local government, agency or authority. The FMBs are secured by the
mortgage loans on the underlying Properties and the structure of each mortgage
loan mirrors the structure of the corresponding FMB.
Unless otherwise modified, principal of the FMBs will not be amortized during
their respective terms (which range from 17 to 24 years) and will be required to
be repaid in lump sum ``balloon'' payments at the expiration of the respective
terms or at such earlier times as the Partnership may require pursuant to the
bond documents. The Partnership has a right to require redemption of the FMBs
approximately twelve years after their issuance. The Partnership anticipates
holding the FMBs for approximately 12 to 15 years from the date of issuance;
however, it can and may elect to hold until maturity.
In addition to the stated base rates of interest ranging from 5.23% to 8.5%
per annum, each of the FMBs which have not been modified provides for
``contingent interest'' consisting of (a) an amount equal to 50% to 100% of net
property cash flow and 50% to 100% of net sale or refinancing proceeds until the
borrower has paid, during the post-construction period, annually compounded
interest at a rate ranging from from 8.875% to 9.34% on a cumulative basis, and
thereafter (b) an amount equal to 25% to 50% of the remaining net property cash
flow and 25% to 50% of remaining net sale or refinancing proceeds until the
borrower has paid interest at a simple annual rate of 16% over the term of the
FMB. Both the stated and contingent interest are exempt from federal income
taxation. The Partnership has not received any contingent interest to date.
In order to protect the tax-exempt status of the FMBs, the owners of the
Properties are required to enter into certain agreements to own, manage and
operate such Properties in accordance with the requirements of the Internal
Revenue Code.
On April 1, 1994, Mansion Apartment Project Investors, Inc. (``MAPI''), an
affiliate of the Related General Partner who replaced the original developer of
The Mansion property, sold the ownership interest in the property to an
unrelated third party for $700,000 in cash and the assumption of the obligation
under the Partnership's $19,450,000 FMB as well as a $400,000 second mortgage
note payable to a lender affiliated with the Related General Partner taken by
assignment from the seller. Notwithstanding the assumption of the FMB, the
General Partners agreed to forbear on the Partnership's rights and remedies in
declaring an interest payment default under the FMB loan documents provided the
new borrower made minimum monthly interest payments to the Partnership equal to
approximately $81,000 per month (5% per annum) together with payments to a
replacement reserve escrow account of approximately $4,500 per month and
complied with all other covenants and obligations. The forbearance agreement
originally expired on September 30, 1994 but was extended to November 30, 1994.
Effective October 18, 1994, The Mansion FMB was modified. The modification
provides for a base pay rate of 5.23%. In addition, the contingent interest
feature has been changed. Under the modified FMB, an additional .386% per year
(primary contingent interest) is due and payable from 100% of cash flow above
the base pay rate. If not paid, the difference between the minimum pay rate and
the primary contingent interest rate is deferred and is payable from future cash
flow and sale or refinancing proceeds. Remaining cash flow and sale or
refinancing proceeds, if any, are paid to the Partnership in an amount equal to
35% of net cash flow until the borrower receives a 12.5% cumulative return on
its investment together with the return of the initial investment. Then, the
Partnership is entitled to 50% of remaining cash flow and net sale or
refinancing proceeds until the owner has paid interest at a cumulative annual
rate of 16%. Notwithstanding The Mansion owner's obligation to pay amounts due
as primary contingent interest, the Partnership has agreed, until 1998, the
obligation to pay such amounts will be considered satisfied subject to those
amounts being contributed by The Mansion's owner toward certain designated
repairs to the property. The Mansion's owner will nevertheless be obligated to
pay amounts due from remaining cash flow if available above the primary
contingent interest rate.
As a result of the cash equity investment, The Mansion (which had previously
been classified in the financial statements as an Asset Held for Sale) was
reinstated as an FMB. The net cash proceeds from the sale of approximately
$105,000 (net of a $400,000 escrow for certain repairs, a $50,000 second
mortgage note principal payment, and closing costs), paid to the Partnership to
reduce accrued and unpaid interest, was recorded by the Partnership as deferred
income and is being amortized as interest income from first mortgage bonds over
the remaining life of The Mansion FMB. The balance of the deferred income
relating to
9
<PAGE>
<PAGE>
The Mansion FMB was approximately $101,000 at December 31, 1994. All other
accrued and unpaid interest on The Mansion FMB which previously had been
reserved for financial statement purposes was forgiven.
In June 1992, the Partnership made a $320,000 second mortgage loan to the
owner of the property underlying the Cypress Run FMB for the payment of 1991
property taxes. This loan required monthly interest only payments at a rate of
8.5% per annum with the principal due on July 1, 1994. Interest payments on the
loan as well as the FMB were current through June 1994; however, due to
bankruptcy, the loan remains outstanding and the borrower has been notified of
the default (see below for discussion of borrower's bankruptcy filing). An
allowance for possible loss was established for this loan in 1993.
As a result of the failure to pay 1992 and 1993 real estate taxes, the
Partnership initiated steps to enforce its rights and remedies on the Cypress
Run property in July 1994. These remedies include acceleration of the loan and a
$350,000 draw on an irrevocable letter of credit issued on behalf of the owner
of Cypress Run as security relating to obligations under the Rental Performance
Agreement. Pursuant to the terms of the bond documents, approximately $348,000
of the proceeds received from the draw on the letter of credit has been recorded
as a reduction of the FMB with the balance applied as interest. In response, on
July 15, 1994, the owner of the property filed for bankruptcy under Chapter 11
of the United States Bankruptcy Code continued to operate the property as a
debtor-in-possession. The bankruptcy filing operated as a stay against the
enforcement of the Partnership's remedies which include foreclosure. At the
initial hearing, the court consented, among other things, to allow the
Partnership to receive the monthly net cash flow generated by the property as
its debt service payments for at least the initial 120 days of the proceedings.
On November 10, 1994, an Order Modifying Stay together with a Settlement
Stipulation was entered by the Court which granted the Partnership relief from
the Automatic Stay. This order became effective on March 31, 1995 unless a sale
of the property, subject to the Partnership's approval, was closed beforehand.
The Partnership continues to receive the monthly net cash flow generated
by the property as payment toward debt service.
On March 31, 1995, pursuant to the Court Order, ownership of the Cypress Run
property was transferred to an affiliate of the Related General Partner. The
affiliate has not made an equity investment in the underlying property; however,
it will assume the day-to-day responsibilities and obligations of operating the
property.
On May 31, 1992, Clarendon Hills Investor Inc. (``CHI''), an affiliate of the
Related General Partner who had replaced the developer of the Clarendon Hills
property, sold its ownership interest in the property to an unrelated third
party (the ``Purchaser'') for $26,200,000. The Purchaser paid $2,000,000 in
cash, assumed the $17,600,000 obligation of the Partnership's FMB and issued a
$6,600,000 promissory note to CHI which in turn was assigned to the Partnership.
The $6,600,000 promissory note bears interest at the rate of 8.0% per annum
payable in equal monthly installments until December 2003 at which time the
entire unpaid principal and interest will be due and payable.
In connection with the sale of the Clarendon Hills property by CHI, the FMB
collateralized by the property was modified to provide for, among other things:
the discharge of all accrued and unpaid interest relating to a previous owner
(which for financial statement purposes had been fully reserved); a reduction of
the base interest rate to 5.52% per annum on the $17,600,000 FMB; and a further
reduction of the base interest during the first four years from closing of an
amount equal to 50% of the increase in property taxes (if any) over the fiscal
1992 property tax bill resulting solely from this sale (limited to $35,000 per
annum).
As a result of this cash equity investment by the Purchaser, the Clarendon
Hills FMB (which had previously been classified as an Asset Held for Sale) was
reinstated as an FMB in 1992. The $1,441,209 in net cash proceeds of the sale
(net of certain closing costs), paid by CHI to the Partnership to reduce accrued
and unpaid interest, was recorded by the Partnership as deferred income and is
being amortized as interest income from FMBs over the remaining life of the
Clarendon Hills FMB. The balance of the deferred income relating to the
Clarendon Hills FMB was approximately $1,117,000 and $1,243,000 at December 31,
1994 and 1993, respectively. All other accrued and unpaid interest on the
Clarendon Hills FMB was forgiven.
The FMBs for the East Ridge and Martin's Creek properties were modified in
1990 when the equity interest in the properties and the related obligations of
the FMBs were sold by an affiliate of the Related General Partners to an
unrelated third party. The modifications provide for pay rate increases from
6.0% per
10
<PAGE>
<PAGE>
annum in 1990 to 7.5% per annum in March 1996. Beginning in March 1997, the pay
rate will be 8.25% per annum. The difference between the minimum interest rate
and the original stated rate is deferred and is payable out of available future
cash flow. As part of this modification, the Partnership received $950,000 in
13% second mortgage notes with monthly interest and principal payments through
December 1996. These notes are also partially secured by letters of credit.
Deferred income equal to the amount of the promissory notes was recorded in the
statements of financial condition. As a result of this transaction, income is
realized only as and when the Partnership receives payment on the promissory
notes. The balances of both the promissory notes and deferred income was
approximately $251,000 and $424,000 at December 31, 1994 and 1993, respectively.
There was no loss recorded on this transaction because the $1.3 million
valuation allowance previously established for these FMBs was in excess of the
concessions granted. At December 31, 1994 and 1993, the valuation allowance
relating to debt restructuring was approximately $366,000 and $436,000,
respectively. Such valuation allowance is accreted as interest income over the
remaining term of the FMBs as long as the estimated fair value of the underlying
properties is in excess of the carrying value of the related FMB.
During 1991, forbearance agreements were finalized with the owners of the
North Glen and Thomas Lake properties. The General Partners further modified the
North Glen forbearance agreement in April 1993 to allow the owner to make debt
payments at a pay rate of 6.0% per annum through December 1995 at which time the
rate is scheduled to increase to the stated rate of 8.5% per annum. In April
1993, the Partnership made a loan in the amount of $126,000 to the owner of the
North Glen property underlying the FMB for payment of past due property taxes.
This loan requires interest only payments at 8.5% per annum, payable monthly,
with the principal due on April 30, 1996. Due to the extension of the
forbearance agreement in 1993, an allowance for possible loss was established
for this loan; however, interest payments on this loan are current. The pay rate
for the Thomas Lake property was 6.0% per annum in 1994 and is scheduled to
increase in annual increments to the original stated rate of 8.5% in December
1996.
In May 1992, Summit Tax Exempt Funding Corp., an affiliate of the
Partnership, made a loan in the amount of $220,000 secured by a second mortgage
on the Thomas Lake property toward the payment of past due property taxes. In
January 1993, this loan was assigned to the Partnership as part of the
transaction in which the Partnership obtained a new credit facility. The loan
requires interest only payments at the Citibank, N.A. prime rate (8.5% at
December 31, 1994) plus 2.0% per annum, payable monthly. Principal is due in
full on April 15, 1995. Interest on this loan is current.
During 1992, a forbearance agreement was finalized with the owner of the
Sunset Terrace property. Terms of the agreement call for a reduced pay rate of
7.0% per annum through May 1993 with scheduled annual increments to the original
stated rate of 8.0% per annum in May 1996. With respect to all of these FMBs,
the difference between the pay rate and the original stated rate is payable out
of available future cash flow or ultimately from sales or refinancing proceeds.
The difference between the stated interest rates and the rates paid on
certain FMBs is not accrued for financial statement purposes, although it is
deferred and payable from available future cash flow and sale or refinancing
proceeds. Interest income relating to these FMBs of approximately $1,241,000,
$605,000, and $1,044,000 was not recorded for the years ended December 31, 1994,
1993 and 1992, respectively.
11
<PAGE>
<PAGE>
D. Assets Held for Sale
Assets Held for Sale and the related income thereon are as follows:
<TABLE>
<CAPTION>
Net cash received
Carrying Value Face Amount for the year ended
December 31, December 31, December 31,
Call Maturity ------------------------- ------------------------- ------------------------------------
Date Date 1994 1993 1994 1993 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Cedar
Creek,
McKinney,
Tx Dec. 1998 Dec. 2006 $ 7,798,550 $ 7,798,550 $ 8,100,000 $ 8,100,000 $ 611,164 $ 492,869 $ 414,739
High Pointe
Club,
Harrisburg,
Pa June 1998 June 2006 7,545,000 7,545,000 8,900,000 8,900,000 540,000 372,175 174,031
Clarendon
Hills,
Hayward,
Ca* Dec. 2003 Dec. 2003 -- -- -- -- -- -- 307,801
The
Mansion,
Independence,
Mo** Dec. 2004 May 2010 -- 17,600,000 -- 19,450,000 318,825 1,274,332 1,000,446
Greenway
Manor
St Louis,
Mo*** Oct. 1998 Sept. 2006 12,300,000 12,300,000 12,850,000 12,850,000 1,006,101 417,624 --
----------- ----------- ----------- ----------- ---------- ---------- ----------
$27,643,550 $45,243,550 $29,850,000 $49,300,000 $2,476,090 $2,557,000 $1,897,017
----------- ----------- ----------- ----------- ---------- ---------- ----------
----------- ----------- ----------- ----------- ---------- ---------- ----------
</TABLE>
* Reinstated as an FMB as of May 31, 1992.
** Reinstated as an FMB as of April 1, 1994. As such, the cash received for the
twelve months ended December 31, 1994 reflects cash flow only through March 31,
1994. Subsequent cash flow was recorded as interest income from FMBs.
*** Prior to June 30, 1993, cash received was recorded as interest income from
FMBs.
Due to the failure to pay 1990 and 1991 property taxes and interest from March
to August 1992, the Partnership instituted foreclosure proceedings against
Greenway Manor. On July 20, 1992, the Greenway partnership filed for bankruptcy
under Chapter 11 of the United States Bankruptcy Code. Pursuant to a 1992 court
order, the receiver paid the Partnership the cash flow remaining after paying
past due taxes, paying property operating costs and escrowing for 1992 taxes. On
June 30, 1993, the court dismissed the bankruptcy proceeding at which time the
owner of the property and obligor under the FMB agreed to transfer the
deed-in-lieu of foreclosure to an affiliate of the Related General Partner. A
$550,000 provision for impairment of assets was recorded during the year ended
December 31, 1993 based on an estimate of the value of the underlying property.
In 1992, the Partnership loaned approximately $220,000, in the aggregate, to
the owners of The Mansion and Cedar Creek properties to enable them to pay
property taxes. The loans were self-amortizing over two years with interest at
8.5% per annum beginning in June 1992. These loans were recorded in operating
results as a reduction in income from assets held for sale in 1992 because the
FMBs were paying interest on a cash flow basis. Subsequent principal payments
relating to these loans were recorded as income from assets held for sale. These
loans were fully repaid in the second quarter of 1994.
E. Loan Payable
On January 15, 1993, the Partnership entered into a loan agreement with an
unaffiliated lender for a $15,000,000 credit facility with a maturity date of
January 14, 1998 and an option to extend for two years for an additional fee.
The debt service requirements include monthly interest only payments with a
variable interest rate equal to the 30-day commercial paper interest rate (5.9%
at December 31, 1994) plus 4.05% with principal due at maturity. The facility is
collateralized by a pledge of the FMBs and associated collateral of East Ridge,
Martin's Creek, The Mansion, Thomas Lake and Sunset Terrace. The initial
proceeds from this facility were used to repay a $10,000,000 credit facility
guaranteed by the Partnership, to repay a $3,000,000 noninterest-bearing working
capital loan made to the Partnership from the Related General Partner and to pay
associated closing costs. The $10,000,000 credit facility had been used to pay
for costs incurred to complete construction of the properties securing the High
Pointe Club and Clarendon Hills FMBs and to fund a loan toward the payment of
property taxes on the Thomas Lake property. The $3,000,000 working capital loan
was used to supplement distributions commencing with the fourth quarter 1988
distribution. The unused portion of the Partnership's $15,000,000 credit
facility is to be used for future working capital requirements and contingencies
of the Partnership, as necessary, subject to approval of the lender.
In conjunction with the Partnership's credit facility and the repayment of
the previously existing $10,000,000 credit facility, the Partnership was
assigned nonrecourse notes in the amount of $6,600,000,
12
<PAGE>
<PAGE>
$3,180,000 and $220,000 from the Clarendon Hills, High Pointe Club and Thomas
Lake properties, respectively. The Clarendon Hills promissory note, secured by a
deed of trust, requires monthly interest only payments of 8.0% per annum with
the principal due on December 1, 2003. Since the High Pointe Club property is
paying interest on a cash flow basis, interest on the promissory note is only
recorded when cash flow is received in excess of the stated rate. No interest on
the High Pointe Club promissory note has been received or recorded through
December 31, 1994. The assigned High Pointe Club note is subordinate to the
High Pointe Club FMB; therefore, the promissory note has been fully reserved.
The Thomas Lake note, secured by a second mortgage on the property, requires
monthly interest only payments based on the Citibank, N.A. prime rate (8.5% at
December 31, 1994) plus 2.0% per annum with the principal due on April 5, 1995.
The Partnership intends to extend the Thomas Lake loan. Proposed terms call for
a fixed interest rate of 8.5% with principal amortization over a 36 month
period. Clarendon Hills and Thomas Lake are current on their interest payments.
F. Income Taxes
Following is a reconciliation of net income for financial statement purposes
with net income for Federal income tax reporting purposes:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Net income per financial statements $5,685,890 $ 4,135,774 $ 6,462,572
Provision for loss on impairment of assets 1,350,000 1,905,000 --
Provision for uncollectible receivable -- 830,000 --
Uncollected interest income from assets held for
sale 466,395 1,088,871 1,836,689
Uncollected interest on FMBs 1,240,910 604,505 1,043,670
Property tax loan deferred for tax reporting
purposes, net -- 325,969 150,034
Nondeductible interest expense 311,255 247,524 --
Uncollected interest on promissory notes 254,400 243,248 --
Amortization of bond selection fees 150,056 150,056 150,056
Amortization of valuation allowance on FMBs (130,012) (130,012) (130,012)
Write-off of accrued and unpaid interest -- -- (1,376,813)
Loss from debt restructure (3,632,747) -- (1,050,000)
Other, net (196,913) (224,618) (178,851)
---------- ----------- -----------
Net income for tax purposes $5,499,234 $ 9,176,317 $ 6,907,345
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
Net income for tax purposes is generally exempt from Federal income tax. The
differences between the tax and book bases of partner's capital are primarily
attributable to the cumulative effect of the book to tax income adjustments and
the recording of distributions.
G. Related Parties
The General Partners and their affiliates perform services for the
Partnership which include, but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; asset management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with these services, the amount of which is limited by the provisions
of the Partnership Agreement. The costs and expenses were:
13
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------
1994 1993 1992
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Prudential-Bache Properties, Inc. and affiliates
General and administrative $ 93,000 $ 108,729 $ 126,315
Management fee 335,937 335,937 335,937
---------- ---------- ----------
428,937 444,666 462,252
---------- ---------- ----------
Related Tax Exempt Bond Associates, Inc. and
affiliates
General and administrative 28,246 41,427 50,940
Management fee 335,938 335,938 335,938
Loan servicing fees 335,938 335,938 335,938
---------- ---------- ----------
700,122 713,303 722,816
---------- ---------- ----------
$1,129,059 $1,157,969 $1,185,068
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The General Partners are paid, in aggregate, an annual management fee equal
to .5% of the total invested assets (which equals the original face amount of
the total FMBs).
An affiliate of the Related General Partner receives loan servicing fees in
the amount of .25% per annum of the principal amount outstanding on mortgage
loans serviced by the affiliate.
A division of Prudential Securities Incorporated (``PSI''), an affiliate of
PBP, receives a fee for the purchase, sale, and safekeeping of the Partnership's
temporary investments. This account is maintained in accordance with the
Partnership Agreement.
Several executive officers and directors of the Related General Partner own
less than 1% of the outstanding BUC$.
H. Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes et
al. v. Prudential Securities Group Inc. et al. (93 Civ. 654) was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of investors in the Partnership against the Partnership, PBP, PSI and a number
of other defendants. On or about November 16, 1993, a putative class action
captioned Connelly et al. v. Prudential-Bache Securities Inc. et al. (93 Civ.
713), was filed in the United States District Court for the District of Arizona,
purportedly on behalf of investors in the Partnership against the Partnership,
PBP, PSI and a number of other defendants. On or about January 3, 1992, a
putative class action, captioned Levine v. Prudential-Bache Properties Inc. et
al. (92 Civ. 52), was filed in the United States District Court for the Northern
District of Illinois purportedly on behalf of investors in the Partnership
against the General Partners, PSI and a number of other defendants. Subsequently
the Related General Partner exited the Levine litigation by way of settlement.
On April 14, 1994, the Judicial Panel on Multidistrict Litigation (the
``Panel'') deferred transfer of the Levine case to the Southern District of New
York (discussed more fully below) until after the Illinois court decided a
pending motion to dismiss the complaint. On June 3, 1994, that court granted the
motion of PBP and PSI and dismissed the first amended complaint without
prejudice. On June 30, 1994, plaintiffs filed a second amended complaint. By
order dated July 13, 1994, the Panel unconditionally transferred the Levine case
for inclusion in the consolidated proceedings in the Southern District of New
York described below.
By its April 14, 1994 order, the Panel transferred (in addition to Levine as
discussed above) the Kinnes case, and by order dated June 8, 1994, the Connelly
case, together with a number of other actions, on each occasion not involving
the Partnership, to a single judge of the United States District Court for the
Southern District of New York and consolidated them for pretrial proceedings
under the caption In re Prudential Securities Incorporated Limited Partnerships
Litigation (MDL Docket 1005). On June 8, 1994, plaintiffs in the transferred
cases filed a complaint that consolidated the previously filed complaints and
named as defendants, among others, PSI, certain of its present and former
employees and the General Partners. The Partnership is not named a defendant in
the consolidated complaint, but the name of the Partnership is listed as being
among the limited partnerships at issue in the case. The consolidated complaint
alleges violations of the federal and New Jersey Racketeer Influenced and
Corrupt Organizations Act (``RICO'') statutes, fraud, negligent
misrepresentation, breach of fiduciary duties, breach of third-party beneficiary
contracts and breach of implied covenants in connection with the marketing and
sales of limited partnership
14
<PAGE>
<PAGE>
interests. Plaintiffs request relief in the nature of rescission of the purchase
of securities and recovery of all consideration and expenses in connection
therewith, as well as compensation for lost use of money invested, less cash
distributions; compensatory damages; consequential damages; treble damages for
defendants' RICO violations (both federal and New Jersey); general damages for
all injuries resulting from negligence, fraud, breaches of contract, and
breaches of duty in an amount to be determined at trial; disgorgement and
restitution of all earnings, profits, benefits and compensation received by
defendants as a result of their unlawful acts; costs and disbursements of the
action; reasonable attorneys' fees; and such other and further relief as the
court deems just and proper.
On November 28, 1994 the transferee court deemed each of the complaints in
the constituent actions (including Kinnes ) amended to conform to the
allegations of the consolidated complaint. PSI and PBP, along with various other
defendants filed a motion to dismiss the consolidated complaint on December 20,
1994. That motion is pending.
A derivative action entitled Litman et al. v. Prudential-Bache Properties,
Inc. et al. (No. 12137) was filed in Delaware Chancery Court, against the
General Partners and PSI. Plaintiffs are individual investors who purchased
Partnership interests. Plaintiffs' initial complaint, which was filed as a
putative class action alleging breach of fiduciary duty, was dismissed as
legally insufficient. On April 30, 1992, plaintiffs filed an amended complaint.
The amended complaint, which was solely a derivative action brought on behalf
of the Partnership, alleges that the defendants breached their fiduciary duties
in managing the affairs of the Partnership. Plaintiffs seek an indeterminate
amount of damages as well as attorneys' fees and costs. On June 5, 1992,
defendants filed a motion to dismiss the amended complaint in its entirety on
several grounds, including statute of limitations and failure to state a claim.
On January 4, 1993, defendants' motion was granted, and the amended complaint
was dismissed without leave to replead.
On February 2, 1993, plaintiffs filed a notice of appeal. On February 16,
1993, defendants filed a cross-appeal which appealed the court's failure to
dismiss plaintiffs' claims on statute of limitations grounds. After hearing oral
argument, the Delaware Supreme Court on November 18, 1993 remanded the action to
the Chancery Court for the limited purpose of determining whether plaintiffs'
claims were time-barred. On January 14, 1994, the Chancery Court concluded that
they were. After hearing all arguments, the Delaware Supreme Court on April 21,
1994 affirmed the decision of the Chancery Court dismissing the action for the
reasons set forth in the Chancery Court memorandum opinion of January 14, 1994.
On March 6, 1991, a derivative action entitled Virginia First Savings Bank,
F.S.B., et al. v. Tax Exempt Bond Associates, Inc. et al., No. (L91-726) was
filed in Virginia Circuit Court against the General Partners and others.
Plaintiffs are one named and other unknown individual investors who are
purportedly suing on behalf of the Partnership. Defendants include, among
others, the Partnership and its General Partners. The complaint alleges breach
of fiduciary duty. Plaintiffs seek an indeterminate amount of damages.
Defendants have moved to dismiss the complaint on the grounds that (i)
plaintiffs are precluded from bringing the action by a previous decision; (ii)
plaintiffs failed to adequately plead a valid derivative claim and that (iii)
the court lacks jurisdiction over certain defendants.
The General Partners and PSI believe they and where applicable, the
Partnership, have meritorious defenses to the complaints and intend to
vigorously defend these actions.
15
<PAGE>
<PAGE>
I. Selected Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
1994 Quarter ended
----------------------------------------------------------
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Interest income from participating first
mortgage bonds $1,600,164 $1,853,459 $ 1,591,270 $ 1,855,807
---------- ---------- ------------- -------------
---------- ---------- ------------- -------------
Income from assets held for sale, net $ 813,498 $ 545,672 $ 557,032 $ 559,888
---------- ---------- ------------- -------------
---------- ---------- ------------- -------------
Provision for loss on impairment of assets $ -- $ -- $ -- $ 1,350,000
---------- ---------- ------------- -------------
---------- ---------- ------------- -------------
Net income $1,914,411 $1,870,368 $ 1,594,240 $ 306,871
---------- ---------- ------------- -------------
---------- ---------- ------------- -------------
Net income per BUC $ .24 $ .23 $ .20 $ .04
---------- ---------- ------------- -------------
---------- ---------- ------------- -------------
<CAPTION>
1993 Quarter ended
----------------------------------------------------------
March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Interest income from participating first
mortgage bonds $1,758,587 $1,773,913 $ 1,637,250 $ 1,915,640
---------- ---------- ------------- -------------
---------- ---------- ------------- -------------
Income from assets held for sale, net $ 452,761 $ 540,952 $ 761,524 $ 801,763
---------- ---------- ------------- -------------
---------- ---------- ------------- -------------
Provision for loss on impairment of assets $ $ -- $ -- $ 1,905,000
---------- ---------- ------------- -------------
---------- ---------- ------------- -------------
Net income (loss) $1,604,165 $1,714,863 $ 1,811,370 $ (994,624)
---------- ---------- ------------- -------------
---------- ---------- ------------- -------------
Net income (loss) per BUC $ .20 $ .21 $ .23 $ (.13)
---------- ---------- ------------- -------------
---------- ---------- ------------- -------------
</TABLE>
J. Subsequent Event
In February 1995, distributions of approximately $1,660,000 and $34,000 were
paid to the BUC$holders and General Partners, respectively, for the quarter
ended December 31, 1994.
16
<PAGE>
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Summit Tax Exempt Bond Fund, L.P. (``the Partnership'') has invested in
eleven tax-exempt participating first mortgage bonds (``FMBs'') issued by
various state or local governments or their agencies or authorities. The FMBs
are secured by participating first mortgage loans on multi-family residential
apartment projects.
Interest payments from FMBs are anticipated to provide sufficient liquidity
to meet the operating expenditures of the Partnership in future years and to
fund distributions.
The Partnership's loan payable has a variable interest rate; therefore,
future levels of interest expense will fluctuate in correlation to movements in
the 30-day commercial paper interest rate.
The fourth quarter distribution of approximately $1,660,000 ($.21 per BUC)
was paid to BUC$holders in February 1995 from current and previously
undistributed adjusted cash flow from operations. The Partnership anticipates
funding future cash distributions from adjusted cash flow from operations.
As discussed in more detail in Note C to the financial statements, the
Partnership received net proceeds of approximately $105,000 in April 1994 in
connection with an affiliate's sale of its ownership interest in The Mansion to
an unrelated third party. The Partnership has recorded the proceeds as deferred
income.
In July 1994, the owner of the Cypress Run property filed for bankruptcy
under Chapter 11 of the United States Bankruptcy Code in response to the
Partnership's acceleration of its loan. The Partnership received approximately
$350,000 from the draw on a letter of credit of which approximately $348,000 was
recorded as a reduction of the FMB. Monthly interest income to the Partnership
from the Cypress Run FMB will be reduced during these proceedings. However, the
net cash flow from the Cypress Run property, together with the proceeds of a
letter of credit, has been sufficient such that the Partnership's net cash flow
was not negatively impacted during the year and, is not expected to be, in 1995.
On March 31, 1995, the ownership of the Cypress Run property was transferred to
an affiliate of the Related General Partner pursuant to a Court Order.
Results of Operations
1994 vs. 1993
Net income increased by approximately $1,550,000 for the year ended December
31, 1994 as compared to the corresponding period in 1993 primarily due to the
amount of provisions for loss on impairment of assets and uncollectible
receivables recorded in the respective years and the reasons discussed below.
Interest income from FMBs, including those classified as Assets Held for
Sale, decreased by approximately $266,000 for the year ended December 31, 1994
as compared to the corresponding period in 1993. This decrease primarily
resulted from the Cypress Run bankruptcy and a modification to the North Glen
forbearance agreement in 1993. These decreases were offset, in part, by
increased interest received from Sunset Terrace, Thomas Lake, High Pointe Club
and Cedar Creek.
Interest income from promissory notes decreased by approximately $22,000 for
the year ended December 31, 1994 as compared to the corresponding period in
1993. This decrease resulted from reduced interest received on the Cypress Run
tax loan in 1994 as compared to 1993.
Interest income from temporary investments increased by approximately $18,000
for the year ended December 31, 1994 as compared to the corresponding period in
1993 primarily due to higher interest rates and invested balances.
Interest expense increased by approximately $189,000 for the year ended
December 31, 1994 as compared to the corresponding period in 1993 due to
interest rate increases during 1994.
General and administrative expenses decreased by approximately $63,000 for
the year ended December 31, 1994 as compared to the corresponding periods in
1993 primarily due to the timing of certain expenses in the respective years and
a general decrease in the costs associated with the administration of the
Partnership.
17
<PAGE>
<PAGE>
A $1,350,000 provision for loss on impairment of assets was recorded during
the year ended December 31, 1994 to record the estimated impairment of the FMBs
based upon an analysis of estimated cash flows from the individual properties
securing the FMBs.
Legal expense decreased approximately $121,000 for the year ended December
31, 1994 as compared to the corresponding period in 1993. This decrease was
primarily because of non-recurring costs associated with the Greenway
foreclosure in 1993 and lower legal costs related to the Levine litigation
described in Note H to the financial statements. Continued legal costs will be
incurred due to other Partnership litigation described in Note H, the Cypress
Run bankruptcy proceedings and debt modifications and transactions, if any,
involving the Assets Held for Sale.
1993 vs. 1992
Net income decreased by approximately $2,327,000 for the year ended December
31, 1993 as compared to the corresponding period in 1992 primarily due to the
provisions for loss on impairment of assets and uncollectible receivables
recorded in 1993 and the reasons discussed below.
Interest income from FMBs, including those classified as Assets Held for
Sale, increased by approximately $1,279,000 for the year ended December 31, 1993
as compared to the corresponding period in 1992. The increase for the year is
primarily due to an increase in the pay rate relating to the Thomas Lake FMB,
deferred base interest received from East Ridge and Martin's Creek and increased
cash flow received from the Cedar Creek, The Mansion and High Pointe Club
properties partially offset by decreases in the pay rates relating to the North
Glen and Sunset Terrace FMBs as a result of forbearance agreements.
Interest income from promissory notes increased by approximately $547,000 for
the year ended December 31, 1993 as compared to the corresponding period in 1992
primarily due to interest earned on the notes assigned to the Partnership from
the Clarendon Hills and Thomas Lake properties in January 1993.
Provisions for loss on impairment of assets relating to the High Pointe Club
and Greenway FMBs of $1,355,000 and $550,000, respectively, were recorded during
the year ended December 31, 1993. These provisions were based on estimates of
the value of the underlying properties using the discounted cash flow method
which includes the discounted value of the favorable tax-exempt bond financing.
Interest expense increased by approximately $958,000 for the year ended
December 31, 1993 as compared to the corresponding period in 1992 due to the
credit facility obtained by the Partnership in January 1993.
General and administrative expenses decreased by approximately $68,000 for
the year ended December 31, 1993 as compared to the corresponding period in 1992
primarily due to a general decrease in the costs associated with the
administration of the Partnership and the timing of certain expenses in the
respective years.
Legal expense decreased by approximately $43,000 for the year ended December
31, 1993 as compared to the corresponding period in 1992 primarily due to the
non-recurring litigation costs associated with the Greenway FMB during 1992.
During 1993, a $1,276,000 provision for uncollectible receivables was
recorded to fully reserve the balances on the Cypress Run and North Glen tax
loans in the amounts of $320,000 and $126,000, respectively, and the balance on
the High Pointe Club unsecured promissory note (see Note E) in the amount of
$830,000 due to the uncertainty of collection.
18
<PAGE>
<PAGE>
Property Information
The following table lists the FMBs that the Partnership owns with occupancy
rates of the underlying properties as of February 12, 1995:
<TABLE>
<CAPTION>
Average Minimum
Interest Pay Rate
Face Amount Stated Rate Paid December
Property Location of Bond Occupancy Interest Rate* 1994* 1994
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
The Mansion Independence, Mo $ 19,450,000 92.5% 5.23% 5.47% 5.23%
Martin's Creek Summerville, SC 7,300,000 95.5 8.25 7.00 7.00(A)
East Ridge Mt. Pleasant, SC 8,700,000 94.9 8.25 7.00 7.00(A)
High Pointe Club Harrisburg, Pa 8,900,000 96.7 8.50 6.07 5.95(B)
Cypress Run Tampa, Fl 15,402,428 97.5 8.50 6.07 7.52(B)
Thomas Lake Eagan, Mn 12,975,000 99.5 8.50 8.27 7.50(A)
North Glen Atlanta, Ga 12,400,000 96.5 8.50 6.00 6.00(A)
Greenway Manor St. Louis, Mo 12,850,000 99.0 8.50 7.83 8.23(B)
Clarendon Hills Hayward, Ca 17,600,000 97.5 5.52 5.47 5.52
Cedar Creek McKinney, Tx 8,100,000 98.0 8.50 7.55 6.60(B)
Sunset Terrace Lancaster, Ca 10,350,000 89.6 8.00 7.40 7.50(A)
------------
$134,027,428
------------
------------
- ------------------------------------------------------------------------------------------------------------------
* The rate paid represents the interest recorded by the Partnership while the stated rate represents the coupon
rate of the FMB. See Note C to the financial statements as to the differences between stated interest rates and
interest rates paid for FMBs.
(A) The minimum pay rates on the FMBs are scheduled to increase to the stated interest rate over the remaining
terms of the FMBs.
(B) The minimum pay rate is the current cash flow of the property.
</TABLE>
General
The determination as to whether it is in the best interest of the Partnership
to enter into forbearance agreements on the FMBs, or alternatively, to pursue
its remedies under the loan documents, including foreclosure, is based upon
several factors. These factors include, but are not limited to, property
performance, owner cooperation and projected legal costs.
From time to time, certain property owners have elected to supplement the
cash flow generated by the properties to meet the required FMB interest
payments. There can be no assurance that in the future any property owner will
continue to elect to supplement property cash flow to satisfy FMB interest
requirements if necessary. The owner of the Sunset Terrace property supplemented
the cash flow generated by the property to meet the required interest payments
in 1994.
In November 1989, a $600,000 settlement was reached between the previous
developer of High Pointe Club Apartments (the ``Property'') and USF&G, the
construction performance bonding company for the Property. Prior to this
agreement, the previous developer agreed to place the settlement proceeds in
escrow later to be shared with the subsequent developer (``Greenhill Project
Investors, Inc.'') or its successors and assigns pursuant to an arbitration
proceeding.
On April 23, 1993, the previous developer agreed to release the escrowed
funds to RHA Inv., Inc. (``RHA''), the successor to Greenhill Project Investors,
Inc. RHA continues to have certain obligations to the Partnership, among others,
for the payment of accrued and unpaid interest as well as the repayment of
certain loans guaranteed by the Partnership. As a result, the General Partners
of the Partnership and RHA are negotiating which of RHA's obligations will be
satisfied by proceeds received from escrow. The Partnership's claim on the
escrowed funds is not recorded in the accompanying financial statements.
Other
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (``SFAS'') No. 114, ``Accounting by Creditors for
Impairment of a Loan,'' which will be prospectively adopted by the Partnership
as of January 1, 1995 for its 1995 financial statements. SFAS No. 114 requires
creditors to evaluate the collectibility of both interest and principal of an
FMB when determining whether it is impaired. An FMB is considered to be impaired
when, based on current information and events, it is probable the creditor will
be unable to collect all amounts due according to the existing contractual
terms. When an FMB is considered to be impaired, the amount of the loss accrual
is determined by discounting the expected future cash flows of the FMB at its
effective interest rate or, for practical purposes, from the
19
<PAGE>
<PAGE>
estimated fair value of the collateral. To the extent that the owners of
properties underlying the FMBs may require modifications to their forbearance
agreements or the FMBs may otherwise become impaired in 1995, the Partnership
may be required to record additional valuation allowances which could have a
material effect on the Partnership's financial statements. The amount of such
allowances in 1995, if any, resulting from the adoption of SFAS No. 114 cannot
presently be determined.
Inflation has had no material impact on operations or on the financial condition
of the Partnership for the period from inception through December 31, 1994.
20
<PAGE>
<PAGE>
OTHER INFORMATION
Quarterly cash distributions per BUC paid to BUC$holders during 1994 and 1993
were as follows:
<TABLE>
<CAPTION>
Quarter ended 1994 1993
<S> <C> <C>
- ------------------- ---- ----
March 31 $.21 $.21
June 30 $.21 $.21
September 30 $.21 $.21
December 31 $.21 $.21
</TABLE>
On October 27, 1994, an affiliate of Prudential-Bache Properties, Inc.,
Prudential Securities Incorporated (``PSI''), entered into cooperation and
deferred prosecution agreements (the ``Agreements'') with the Office of the
United States Attorney for the Southern District of New York (the ``U.S.
Attorney''). The Agreements resolved a grand jury investigation that had been
conducted by the U.S. Attorney into PSI's sale during the 1980's of the
Prudential-Bache Energy Income Fund oil and gas limited partnerships (the
``Income Funds''). In connection with the Agreements, the U.S. Attorney filed a
complaint charging PSI with a criminal violation of the securities laws. In its
request for a deferred prosecution, PSI acknowledged to having made certain
misstatements in connection with the sale of the Income Funds. Pursuant to the
Agreements, the U.S. Attorney will defer any prosecution of the charge in the
complaint for a period of three years, provided that PSI complies with certain
conditions during the three-year period. These include conditions that PSI not
violate any criminal laws; that PSI contribute an additional $330 million to a
pre-existing settlement fund; that PSI cooperate with the government in any
future inquiries; and that PSI comply with various compliance-related
provisions. If, at the end of the three-year period, PSI has complied with the
terms of the Agreements, the U.S. Attorney will be barred from prosecuting PSI
on the charges set forth in the complaint. If, on the other hand, during the
course of the three-year period, PSI violates the terms of the Agreements, the
U.S. Attorney can elect to pursue such charges.
The Partnership's Annual Report on Form 10-K as filed with the Securities and
Exchange Commission is available to BUC$holders without charge upon written
request to:
Summit Tax Exempt Bond Fund, L.P.
P.O. Box 2016
Peck Slip Station
New York, New York 10272-2016
21
<PAGE>
<PAGE>
1994
- --------------------------------------------------------------------------------
Summit Tax Exempt Annual
Bond Fund, L.P. Report
<PAGE>
<PAGE>
Prudential Securities Incorporated
Peck Slip Station
P.O. Box 2016
New York, NY 10272
STEBF86/SUA/170759
<PAGE>
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Summit Tax Exempt Bond Fund, L.P.
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000786156
<NAME> Summit Tax Exempt Bond Fund, L.P.
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-START> Jan-1-1994
<PERIOD-END> Dec-31-1994
<PERIOD-TYPE> 12-Mos
<CASH> 173,689
<SECURITIES> 129,854,384
<RECEIVABLES> 10,276,240
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 140,304,313
<CURRENT-LIABILITIES> 15,317,147
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 124,987,166
<TOTAL-LIABILITY-AND-EQUITY> 140,304,313
<SALES> 10,034,274
<TOTAL-REVENUES> 10,034,274
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,191,526
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,156,858
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,685,890
<EPS-PRIMARY> .71
<EPS-DILUTED> 0
</TABLE>
