UNITED STATES
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, 1995
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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, New York 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: Beneficial Unit
Certificates
Name of each exchange on which registered: American Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
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. [X]
Aggregate market value of BUC$ held by unaffiliated BUC$holders of the
Registrant as of March 28, 1996 was $79,744,844.
DOCUMENTS INCORPORATED BY REFERENCE
Agreement of Limited Partnership, dated February 19, 1986, included as
part of the Registration Statement filed with the Securities and Exchange
Commission of December 24, 1985 pursuant to Rule 424(b) of the Securities Act of
1933, is incorporated by reference into Part IV of this Annual Report on Form
10-K.
Index to exhibits may be found on page
Page 1 of
<PAGE>
PART I
Item 1. Business.
General
Summit Tax Exempt Bond Fund, L.P. (the "Registrant"), a Delaware limited
partnership, was formed on December 18, 1985 and will terminate on December 31,
2020 unless terminated sooner under the provisions of the Registrant's Agreement
of Limited Partnership (the "Partnership Agreement"). The Registrant was formed
to invest in tax-exempt participating first mortgage revenue bonds ("First
Mortgage Bonds" or "FMBs") issued by various state or local governments or their
agencies or authorities. These investments were made with proceeds from the
initial sale of 7,906,234 Beneficial Unit Certificates ("BUC$"). 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 eleven garden apartment projects located in eight
states. 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
8.50% per annum, each of the FMBs provides for "contingent interest" consisting
of (a) an amount equal to 50% to 100% of net property cash flow and
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<PAGE>
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 interest are exempt from federal income taxation.
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.
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<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
The following table lists the FMBs that the Registrant owns, together
with the occupancy and rental rates of the underlying properties:
<TABLE>
<CAPTION>
Average
Final Interest Stated
Face Carrying Completion Rate Paid Interest
Property Closing Date Amount of Bond Amount Date in 1995* Rate*
- -------- ------------ -------------- ------ ---- -------- -----
<S> <C> <C> <C> <C> <C> <C>
The Mansion, Independence, MO 5/13/86 $ 19,450,000 $ 17,600,000 12/87 5.70%(D) 5.23%
Martin's Creek, Summerville, SC 5/20/86 7,300,000 7,040,626 5/86 7.00 (C) 8.25
East Ridge, Mt. Pleasant, SC 5/20/86 8,700,000 8,406,902 5/86 6.90 (C) 8.25
High Pointe Club, Harrisburg, PA 7/29/86 8,900,000 7,545,000 4/91 6.10 8.50
Cypress Run, Tampa, FL 8/14/86 15,402,428 15,402,428 6/88 6.70 8.50
Thomas Lake, Eagan, MN 9/02/86 12,975,000 12,975,000 2/88 8.30 (E) 8.50
North Glen, Atlanta, GA 9/30/86 12,400,000 12,400,000 12/87 6.00 8.50
Greenway Manor, St. Louis, MO 10/09/86 12,850,000 12,300,000 12/87 8.60 (E) 8.50
Clarendon Hills, Hayward, CA 12/08/86 17,600,000 17,600,000 7/89 5.52 5.52
Cedar Creek, McKinney, TX 12/29/86 8,100,000 7,798,550 2/88 6.60 8.50
Sunset Terrace, Lancaster, CA 2/12/87 10,350,000 10,350,000 2/87 6.10 8.00
------------ ------------
$134,027,428 129,418,506
============ ============
Less: Allowance for loss on impairment of assets (1,850,000)
------------
Carrying Amount $127,568,506
============
<CAPTION>
Minimum
Pay Rate at Occupancy Rental Rates No. of
December 31, February 11, at December Rental
1995* 1996 31, 1995 Units
----- ---- -------- -----
<S> <C> <C> <C> <C> <C>
The Mansion, Independence, MO 5.52% 93.2% $ 410-685 550
Martin's Creek, Summerville, SC 7.25 (A) 96.5 425-625 197
East Ridge, Mt. Pleasant, SC 7.25 (A) 97.0 490-725 200
High Pointe Club, Harrisburg, PA (B) 98.3 520-680 240
Cypress Run, Tampa, FL (B) 86.4 420-720 408
Thomas Lake, Eagan, MN 8.25 (A) 96.7 654-1056 216
North Glen, Atlanta, GA 8.50 (A) 97.9 510-745 284
Greenway Manor, St. Louis, MO 8.50 98.1 450-550 312
Clarendon Hills, Hayward, CA 5.52 100.0 775-1,300 285
Cedar Creek, McKinney, TX (B) 97.1 475-799 250
Sunset Terrace, Lancaster, CA (B) 81.4 460-680 184
</TABLE>
*The rate paid represents the interest recorded by the Registrant while the
stated rate represents the coupon rate of the FMB and the minimum pay rate
represents the minimum rate payable pursuant to the applicable forbearance
agreement, if any.
(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.
(C) The minimum pay rate on the FMB increases in increments from 6% in 1990 to
8.25% in 1997. The actual pay rate is adjusted as of the property's fiscal
year end based on audited financial statements to no less than the minimum
pay rate.
(D) Includes contingent interest paid during 1995.
(E) Includes receipt of deferred base interest relating to prior periods.
Note: A provision for loss on impairment of assets of $500,000 and $1,350,000
was recorded during the years ended December 31, 1995 and 1994 to record
the estimated impairment of FMBs based upon an analysis of estimated cash
flows from the individual properties securing the FMBs.
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<PAGE>
Bond Modifications/Forbearance Agreements
Effective with the May 1, 1995 payment date, the Sunset Terrace FMB has
made payments based on the monthly net cash flow generated by the operations of
the underlying property in accordance with the agreement outlined below.
Effective as of August 1, 1995, the obligor of the Sunset Terrace FMB entered
into a forbearance agreement. In accordance with the terms of this agreement,
the obligor of the FMB is paying debt service on the FMB to the extent of cash
flow generated by the underlying property. The difference between the pay rate
and the stated rate of this FMB is deferred and payable out of available future
cash flow. In addition, pursuant to the agreement, the obligor has replaced the
property manager and leasing agent with a new property manager who is an
affiliate of the Related General Partner. Other terms of the agreement call for
the deed to be transferred to the Registrant or its designee no later than
January 30, 1997 should the obligor be unable to bring the FMB fully current on
all interest due and payable (including deferred base interest) on or before
that date. These and other obligations are secured by a guarantee from an
affiliate of the obligor.
In November 1989, a $600,000 settlement was reached between the previous
developer of High Pointe Club Apartments and USF&G, the construction performance
bonding company for High Pointe property. Prior to this settlement, 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. In April 1995, RHA
paid to the Registrant approximately $721,0000 consisting of the settlement
proceeds plus accrued interest. These funds were applied as partial payment
toward accrued and unpaid interest due under the High Pointe Club FMB.
During April 1995, the Registrant made a loan in the amount of
approximately $721,000 to the new owner of the Cypress Run property toward
payment of delinquent 1992 and 1993 property taxes. This loan is self-amortizing
over three years and carries an 8.5% annual interest rate. This loan was
recorded in income as a reduction of interest income from FMBs because the
Cypress Run FMB is paying interest on a cash flow basis.
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, that 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.
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<PAGE>
The net cash proceeds from the sale of the ownership interest in The
Mansion by MAPI of approximately $105,0000 (net of $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 $94,000 and $101,000 at December
31, 1995 and 1994. All other accrued and unpaid interest on The Mansion FMB
which 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 the
borrower's 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 the entire loan amount
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 under the Cypress
Run FMB 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 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 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 has assumed 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 Sates 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 proceedings 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 FMB's. Although these properties are not producing
sufficient cash flow to fully service the debt, the Registrant has no present
intention to declare a default on these FMBs.
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<PAGE>
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 the
purchaser 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 $992,000
and $1,117,000 at December 31, 1995 and 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 statements purposes has 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 of the FMB and to pay the 8.0% interest owed on the promissory note; (2) to
pay 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 the minimum pay rate
increases from 6.0% per 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 Registrant
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 note
was recorded in the statements of financial condition. As a result of this
transaction, income is recognized only as and when the Registrant receives
payment on the promissory notes. The balances of both the promissory notes and
deferred income was approximately $57,000 and $251,000 at December 31, 1995 and
1994, respectively. There was no loss recorded on this transaction because the
allowance previously established for these FMBs was in excess of the concessions
granted. At December 31, 1995 and 1994, the valuation allowance relating to debt
restructuring was approximately $296,000 and $366,000, respectively. Such
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, a forbearance agreement was finalized with the owners of
the North Glen property. 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.
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<PAGE>
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 and is not accrued
for financial statement purposes. 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, 1995:
1995 1994 1993
---- ---- ----
Cypress Run * 17% 17%
The Mansion * 16% *
*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 the 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 (5.85%
and 5.90% at December 31, 1995 and 1994, respectively, 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 other cash requirements, 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
for 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 31, 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, 1995. The
assigned High Pointe Club note is subordinate to the High Pointe Club FMB and
has been fully reserved. The Thomas Lake promissory note in the principal amount
of $220,000, which is secured by a second mortgage on the property, matured in
April 1995 and was modified and extended. The modified loan is self-amortizing
over thirty months at an 8.5% interest rate. Clarendon Hills and Thomas Lake
promissory notes are current on their interest payments through December 31,
1995.
Employees
The Registrant has no employees. Management and administrative services
for the Registrant are performed by the General Partners and their affiliates
pursuant to the Partnership Agreement. See Note 6 to the
-8-
<PAGE>
financial statements in Item 8.
Item 2. Properties
The Registrant does not own or lease any property.
Item 3. Legal Proceedings
This information is incorporated by reference to Note 7 to the financial
statements in Item 8.
Item 4. Submission of Matters to a Vote of BUC$holders
None
PART II
Item 5. Market for the Registrant's BUC$ and Related BUC$holder Matters
As of March 1, 1996, there were 7,358 holders of record owning 7,906,234
BUC$. 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 prices for each quarterly period of the last two years
for which the BUC$ were traded are as follows:
<TABLE>
<CAPTION>
1995 1995 1994 1994
Low High Low High
--- ---- --- ----
<S> <C> <C> <C> <C>
March 31 8 1/2 9 7/8 10 1/2 11 3/8
June 30 9 3/8 10 1/4 9 7/8 10 7/8
September 30 9 3/4 10 1/4 9 1/4 10 1/8
December 31 9 1/2 10 3/8 8 1/4 9 3/8
</TABLE>
Quarterly cash distributions per BUC paid during 1995 and 1994 were as
follows:
Quarter ended 1995 1994
------------- ---- ----
March 31 $.21 $.21
June 30 $.21 $.21
September 30 $.21 $.21
December 31 $.21 $.21
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 1995 and 1994 were funded from
current and previously undistributed cash flow from operations. Approximately
$791,000 of the $6,641,000 and $1,069,000 of the $6,641,000 paid to BUC$holders
in 1995 and 1994, respectively, represents a return of capital under generally
accepted accounting principles (GAAP). (The return of 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 in Item 7.
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<PAGE>
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 contained in Item 8.
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Interest income from
participating first
mortgage bonds $ 9,246,436 $ 9,376,790 $ 9,642,390 $ 8,363,679 $ 8,938,697
============ ============ ============ ============ ============
Interest expense $ 1,391,496 $ 1,156,858 $ 967,361 $ 9,166 $ 30,025
============ ============ ============ ============ ============
Provision for loss on
impairment of assets $ 500,000 $ 1,350,000 $ 1,905,000 $ 0 $ 0
============ ============ ============ ============ ============
Net income $ 5,969,215 $ 5,685,890 $ 4,135,774 $ 6,462,572 $ 7,126,669
============ ============ ============ ============ ============
Net income per BUC $ 0.74 $ 0.71 $ 0.51 $ 0.80 $ 0.88
============ ============ ============ ============ ============
Total assets $139,177,776 $140,304,313 $141,881,705 $134,028,372 $133,938,510
============ ============ ============ ============ ============
Loan payable $ 13,680,866 $ 13,680,866 $ 13,680,866 $ 45,620 $ 319,940
============ ============ ============ ============ ============
Distributions to
BUC$holders $ 6,641,238 $ 6,641,238 $ 6,641,238 $ 6,641,238 $ 6,641,238
============ ============ ============ ============ ============
Distributions per BUC $ 0.84 $ 0.84 $ 0.84 $ 0.84 $ 0.84
============ ============ ============ ============ ============
</TABLE>
-10-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Capital Resources and Liquidity
The Registrant has invested in eleven tax-exempt 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.
At the beginning of the year, the Registrant had cash and temporary
investments of approximately $2,090,000. After payment of distributions and
receipt of the net cash flow from operations, Registrant ended the year with
approximately $1,976,000 in cash and temporary investments. The fourth quarter
distribution of approximately $1,660,000 ($.21 per BUC) was paid to BUC$holders
in February 1996 from current and previously undistributed cash flow from
operations. The Registrant anticipates funding future cash distributions from
current and previously undistributed cash flow from operations.
Interest payments from FMBs are anticipated to provide sufficient
liquidity to meet the operating expenditures of the Registrant in future years
and to fund distributions.
The Registrant'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.
As discussed in more detail in Note 3 to the financial statements in
Item 8, the Registrant 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 Registrant has recorded the proceeds as
deferred income.
Management is not aware of any trends or events, commitments or
uncertainties that will impact liquidity in a material way except as discussed
here and in the financial statements in Item 8. The Registrant's investments in
mortgage loans are secured by a Registrant interest in properties which are
diversified by location so that if one area of the country is experiencing
downturns in the economy, the remaining properties may be experiencing upswings.
Result of Operations
FMBs and promissory notes are carried at cost less a valuation allowance
where appropriate. The Registrant periodically evaluates the collectibility of
both interest and principal of these investments to determine whether they are
impaired. An FMB or promissory note is considered to be impaired when, based on
current information and events, it is probable that the Registrant will be
unable to collect all amounts due according to the existing contractual terms.
When an FMB or promissory note is considered to be impaired, the amount of the
valuation allowance is determined by discounting the expected cash flows at the
FMB's or promissory note's original effective interest rate, or, for practical
purposes, at the estimated fair value of the collateral.
The process of determining impairment and the appropriate level of the
valuation allowance is based upon projections of future economic events such as
property occupancy rates, rental rates, operating cost inflation and market
capitalization rates. The cash flows used in this process are based on good
faith estimates and assumptions developed by the Registrant's management.
Changes in market conditions and circumstances may occur which would cause these
estimates and assumptions to change, which, in turn, could cause additional
impairments. Thus, the Registrant may be required to provide for additional
valuation allowances, which could be material, in subsequent years.
The Registrant's accounting policy for its FMBs and promissory notes
conforms to Statement of Financial Accounting Standards 114 and 118, "Accounting
by Creditors for Impairment of a Loan" (the "Statements"), which the Registrant
adopted in 1995. Adoption of the Statements did not have a material impact on
the Registrant's financial position or results of operations. Prior to the
adoption of the Statements, the Registrant
-11-
<PAGE>
classified FMBs as Assets Held for Sale when the original owner of the property
and obligor of the FMB was replaced by an affiliate of the Related General
Partner, who had not made an equity investment in the property. Because the
Registrant has not declared default on these FMBs and has no present intention
to do so, they have been reclassified as FMBs for all periods presented, in
accordance with the Statements. Such FMBs were written down to the estimated
fair value of the underlying properties at the time the original owners were
replaced.
1995 vs. 1994
Net income increased approximately $283,000 for the year ended December
31, 1995 as compared to the corresponding period in 1994 primarily due to the
amount of provisions for loss on impairment of assets recorded in the respective
years and for the following reasons below.
Interest income from FMBs decreased by approximately $130,000 for the
year ended December 31, 1995 as compared to the corresponding period in 1994
primarily due to reduced debt service payments received from the Sunset Terrace
and Cedar Creek FMBs.
Interest income from promissory notes decreased by approximately $35,000
for the year ended December 31, 1995 as compared to the corresponding period in
1994. This decrease resulted primarily from the repayment of the Cypress Run tax
loan in 1994 resulting in no interest income in 1995.
Interest income from temporary investments increased approximately
$29,000 for the year ended December 31, 1995 as compared to the corresponding
period in 1994 primarily due to higher interest rates and invested balances.
Interest expense increased approximately $235,000 for the year ended
December 31, 1995 as compared to the corresponding period in 1994 due to
interest rate increases during 1995 on the Registrant's loan.
General and administrative expenses increased approximately $66,000 for
the year ended December 31, 1995 as compared to the corresponding period in 1994
primarily due to the timing of certain accruals recorded in the respective years
and increased costs associated with the administration of the Registrant.
Provisions for loss on impairment of assets of $500,000 and $1,350,000
were recorded during the years ended December 31, 1995 and 1994, respectively,
for the estimated impairment of the FMBs based upon an analysis of estimated
cash flows from the individual properties securing the FMBs.
Legal expenses increased approximately $131,000 for the year ended
December 31, 1995 as compared to the corresponding period in 1994 primarily due
to the legal costs incurred with respect to the Cypress Run bankruptcy
proceedings, debt modifications and the Kinnes litigation discussed in Note 7 to
the financial statements in Item 8.
1994 vs. 1993
Net income increased 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 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.
-12-
<PAGE>
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 period 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
Registrant.
A $1,350,000 provision for loss on impairment of assets was recorded
during the year ended December 31, 1994 for the estimated impairment of the FMBs
based upon an analysis of estimated cash flows from the individual properties
securing the FMBs.
Legal expenses 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 7 to the financial statements in Item 8.
-13-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
Property Information
The following table lists the FMBs that the Registrant owns with
occupancy rates of the underlying properties as of February 11, 1996:.
<TABLE>
<CAPTION>
Average Stated Minimum
Face Carrying Interest Rate Interest Pay Rate at
Property Location Amount of Bond Amount Occupancy Paid in 1995* Rate* December 31,1995*
<S> <C> <C> <C> <C> <C> <C>
The Mansion Independence, MO $ 19,450,000 $ 17,600,000 93.2% 5.70%(D) 5.23% 5.52%
Martin's Creek Summerville, SC 7,300,000 7,040,626 96.5 7.00 (C) 8.25 7.25 (A)
East Ridge Mt. Pleasant, SC 8,700,000 8,406,902 97.0 6.90 (C) 8.25 7.25 (A)
High Pointe Club Harrisburg, PA 8,900,000 7,545,000 98.3 6.10 8.50 (B)
Cypress Run Tampa, FL 15,402,428 15,402,428 86.4 6.70 8.50 (B)
Thomas Lake Eagan, MN 12,975,000 12,975,000 96.7 8.30 (E) 8.50 8.25 (A)
North Glen Atlanta, GA 12,400,000 12,400,000 97.9 6.00 8.50 8.50 (A)
Greenway Manor St. Louis, MO 12,850,000 12,300,000 98.1 8.60 (E) 8.50 8.50
Clarendon Hills Hayward, CA 17,600,000 17,600,000 100.0 5.52 5.52 5.52
Cedar Creek McKinney, TX 8,100,000 7,798,550 97.1 6.60 8.50 (B)
Sunset Terrace Lancaster, CA 10,350,000 10,350,000 81.4 6.10 8.00 (B)
------------ ------------
$134,027,428 129,418,506
============
Less: Allowance for loss on impairment of assets (1,850,000)
------------
Carrying Amount $127,568,506
============
</TABLE>
*The rate paid represents the interest recorded by the Registrant while the
stated rate represents the coupon rate of the FMB and the minimum pay rate
represents the minimum rate pursuant to the payable applicable forbearance
agreement, if any.
(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.
(C) The minimum pay rate on the FMB increases in increments from 6% in 1990
to 8.25% in 1997. The actual pay rate is adjusted as of the property's
fiscal year end based on audited financial statements to no less than
the minimum pay rate.
(D) Includes contingent interest paid during 1995.
(E) Includes receipt of deferred base interest relating to prior periods.
-14-
<PAGE>
General
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 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 $1,571,000,
$1,707,000, and $1,639,000 was not recorded for the years ended December 31,
1995, 1994 and 1993, respectively.
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. No property owner made supplementary payments in 1995.
-15-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
(a) 1. Financial Statements Page
-------------------- ----
Independent Auditors' Report
Statements of Financial Condition as of December 31, 1995 and 1994
Statements of Income for the years ended December 31, 1995, 1994 and
1993
Statements of Changes in Partners' Capital (Deficit) for the years
ended December 31, 1995, 1994 and 1993
Statements of Cash Flows for the years ended December 31, 1995, 1994
and 1993
Notes to Financial Statements
-16-
<PAGE>
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, 1995 and 1994, and the related statements of income, changes in partners'
capital (deficit) and cash flows for each of the three years in the period ended
December 31, 1995. Our audits also included the financial statement schedule
listed in the Index at Item 14. These financial statements and financial
statement schedule are the responsibility of the General Partners. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule 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, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles. Also, 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.
DELOITTE & TOUCHE LLP
New York, New York
March 20, 1996
-17-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
ASSETS
December 31,
-----------------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Participating first mortgage bonds, net $127,568,506 $127,938,510
Temporary investments 1,350,000 1,915,874
Cash and cash equivalents 626,391 173,689
Promissory notes receivable, net 6,823,335 7,071,156
Deferred bond selection fees, net 1,708,218 1,858,273
Interest receivable, net 829,565 944,367
Deferred financing fees, net 260,985 388,816
Other assets 10,776 13,628
------------ ------------
Total assets $139,177,776 $140,304,313
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Loan payable $ 13,680,866 $ 13,680,866
Deferred income 1,143,191 1,469,174
Accounts payable and accrued expenses 124,850 120,685
Due to affiliates 49,262 46,422
------------ ------------
Total liabilities 14,998,169 15,317,147
------------ ------------
Contingencies
Partner's capital (deficit):
BUC$holders (7,906,234 BUC$
issued and outstanding) 124,555,445 125,346,852
General partners (375,838) (359,686)
------------ ------------
Total partners' capital 124,179,607 124,987,166
------------ ------------
Total liabilities and partners' capital $139,177,776 $140,304,313
============ ============
</TABLE>
See accompanying notes to financial statements
-18-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Interest income:
Participating first mortgage bonds $ 9,246,436 $ 9,376,790 $ 9,642,390
Promissory notes 577,562 612,090 634,449
Temporary investments 74,084 45,394 27,565
----------- ----------- -----------
Total revenues 9,898,082 10,034,274 10,304,404
----------- ----------- -----------
Expenses:
Interest expense 1,391,496 1,156,858 967,361
Management fees 671,875 671,875 671,875
General and administrative 405,528 339,975 403,230
Loan servicing fees 335,068 335,938 335,938
Legal expense 347,014 215,854 336,667
Amortization of deferred bond selection fees 150,055 150,056 150,056
Amortization of deferred financing fees 127,831 127,828 122,503
Provision for uncollectible receivables 0 0 1,276,000
Provision for loss on impairment of assets 500,000 1,350,000 1,905,000
----------- ----------- -----------
Total expenses 3,928,867 4,348,384 6,168,630
----------- ----------- -----------
Net income $ 5,969,215 $ 5,685,890 $ 4,135,774
=========== =========== ===========
Allocation of Net Income
BUC$holders $ 5,849,831 $ 5,572,171 $ 4,053,059
=========== =========== ===========
General partners $ 119,384 $ 113,719 $ 82,715
=========== =========== ===========
Net income per BUC $ 0.74 $ 0.71 $ 0.51
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements
-19-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Total BUC$holders General Partners
----- ----------- ----------------
<S> <C> <C> <C>
Partners' capital (deficit) - December 31, 1992 $128,719,050 $129,004,098 $ (285,048)
Net income 4,135,774 4,053,059 82,715
Distributions (6,776,774) (6,641,238) (135,536)
------------ ------------ -----------
Partners' capital (deficit) - December 31, 1993 126,078,050 126,415,919 (337,869)
Net income 5,685,890 5,572,171 113,719
Distributions (6,776,774) (6,641,238) (135,536)
------------ ------------ -----------
Partners' capital (deficit) - December 31, 1994 124,987,166 125,346,852 (359,686)
Net income 5,969,215 5,849,831 119,384
Distributions (6,776,774) (6,641,238) (135,536)
------------ ------------ -----------
Partners' capital (deficit) - December 31, 1995 $124,179,607 $124,555,445 $ (375,838)
============ ============ ===========
</TABLE>
See accompanying notes to financial statements
-20-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1995 1994 1993
------------ ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $ 10,472,273 $ 9,720,452 $ 9,856,931
Loan made to property affiliate (721,266) 0 0
Fees and expenses paid (1,749,628) (1,766,476) (1,534,070)
Interest paid (1,391,496) (1,241,679) (882,540)
------------ ----------- ------------
Net cash provided by operating activities 6,609,883 6,712,297 7,440,321
------------ ----------- ------------
Cash flows from investing activities:
Net (purchase) sale of temporary investments 565,874 (415,114) (485,040)
Income deferred upon assumption of FMB
obligations by new debtor 0 105,477 0
------------ ----------- ------------
Net cash provided by (used in) investment activities 565,874 (309,637) (485,040)
------------ ----------- ------------
Cash flows from financing activities:
Funds borrowed 0 0 13,680,866
Principal repayments on promissory note 53,719 0 0
Repayment of loan payable 0 0 (45,620)
Financing fees paid 0 0 (639,147)
Repayment of loan from affiliate 0 0 (3,000,000)
Principal payment received on FMB 0 347,576 0
Distributions paid (6,776,774) (6,776,774) (6,776,774)
Loans made to affiliate, net 0 0 (10,126,000)
------------ ----------- ------------
Net cash used in financing activities (6,723,055) (6,429,198) (6,906,675)
------------ ----------- ------------
Net increase (decrease) in cash and
cash equivalents 452,702 (26,538) 48,606
Cash and cash equivalents at beginning of year 173,689 200,227 151,621
------------ ----------- ------------
Cash and cash equivalents at end of year $ 626,391 $ 173,689 $ 200,227
============ =========== ============
</TABLE>
(continued)
-21-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(continued)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1995 1994 1993
------------ ----------- -----------
<S> <C> <C> <C>
Schedule reconciling net income to net cash
provided by operating activities
Net income $ 5,969,215 $ 5,685,890 $ 4,135,774
------------ ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of valuation allowance (129,996) (130,012) (130,012)
Amortization of deferred income (131,881) (130,241) (125,322)
Amortization of deferred bond selection fees 150,055 150,056 150,056
Amortization of deferred financing fees 127,831 127,828 122,503
Provision for loss on impairment of assets 500,000 1,350,000 1,905,000
Provision for uncollectible receivables 0 0 1,276,000
Changes in:
Promissory notes receivable, net 247,821 172,411 166,177
Interest receivable 114,802 (53,569) (192,137)
Other assets 2,852 1,678 147,873
Deferred income (247,821) (172,411) (166,177)
Accounts payable and accrued expenses 4,165 (179,984) 116,292
Accrued interest expense 0 (84,821) 84,821
Due to affiliates 2,840 (24,528) (50,527)
------------ ----------- -----------
Total adjustments 640,668 1,026,407 3,304,547
------------ ----------- -----------
Net cash provided by operating activities $ 6,609,883 $ 6,712,297 $ 7,440,321
============ =========== ===========
</TABLE>
See accompanying notes to financial statements
-22-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 - 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, 1995, the Partnership had
invested in a total of eleven FMBs.
NOTE 2 - Summary of Significant Accounting Policies
a) 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.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the General Partners to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
b) Participating first mortgage bonds and promissory notes receivable
FMBs and promissory notes are carried at cost less a valuation
allowance where appropriate. The Partnership periodically evaluates the
collectibility of both interest and principal of these investments to determine
whether they are impaired. An FMB or promissory note is considered to be
impaired when, based on current information and events, it is probable that the
Partnership will be unable to collect all amounts due according to the existing
contractual terms. When an FMB or promissory note is considered to be impaired,
the amount of the valuation allowance is determined by discounting the expected
cash flows at the FMB's or promissory note's original effective interest rate,
or, for practical purposes, at the estimated fair value of the collateral.
The process of determining impairment and the appropriate level of
the valuation allowance is based upon projections of future economic events such
as property occupancy rates, rental rates, operating cost inflation and market
capitalization rates. The cash flows used in this process are based on good
faith estimates and assumptions developed by the Partnership's Management.
Changes in market conditions and circumstances may occur which would cause these
estimates and assumptions to change, which, in turn, could cause additional
impairments. Thus, the Partnership may be required to provide for additional
valuation allowances, which could be material, in subsequent years.
-23-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 2 - Summary of Significant Accounting Policies (continued)
The Partnership's accounting policy for its FMBs and promissory
notes conforms to Statement of Financial Accounting Standards 114 and 118,
"Accounting by Creditors for Impairment of a Loan" (the Statements"), which the
Partnership adopted in 1995. Adoption of the Statements did not have a material
impact on the Partnership's financial position or results of operations. Prior
to the adoption of the Statements, the Partnership classified FMBs as Assets
Held for Sale when the original owner of the property and obligor of the FMB was
replaced by an affiliate of the Related General Partner, who had not made an
equity investment in the property. Because the Partnership has not declared
default on these FMBs and has no present intention to do so, they have been
reclassified as FMBs for all periods presented, in accordance with the
Statements. Such FMBs were written down to the estimated fair value of the
underlying properties at the time the original owners were replaced.
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.
c) Temporary investments
Temporary investments at December 31, 1995 represent tax-exempt
Municipal Preferred Stock which are carried at cost which approximates market
value. Temporary investments at December 31, 1994 represent tax-exempt floating
rate municipal bonds which are carried at cost plus accrued interest which
approximates market value.
d) Cash and cash equivalents
Cash and cash equivalents include cash on hand, cash in banks, and
investments in short-term instruments with an original maturity of three months
or less, for which cost approximates market value.
e) Income taxes
The Partnership is not required to provide for, or pay, any Federal
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.
f) 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.
g) Deferred 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, 1995 and 1994 was approximately $1,383,000 and
$1,233,000, respectively.
-24-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 2 - Summary of Significant Accounting Policies (continued)
h) 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, 1995 and 1994
was approximately $378,000 and $251,000, respectively.
i) Reclassifications
Certain reclassifications have been made to prior year amounts to
conform to the current year's presentation.
NOTE 3 - Participating 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 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 interest rates ranging from 5.23% to
8.50% 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 of 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 interest are exempt from federal income
taxation.
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.
Effective with the May 1, 1995 payment date, the Sunset Terrace FMB
has made payments based on the monthly net cash flow generated by the operations
of the underlying property in accordance with the agreement outlined below.
Effective as of August 1, 1995, the obligor of the Sunset Terrace FMB entered
into a forbearance agreement. In accordance with the terms of this agreement,
the obligor of the FMB is paying debt service on the FMB to the extent of cash
flow generated by the underlying property. The difference between the pay rate
and the stated rate of this FMB is deferred and payable out of available future
cash flow. In addition, pursuant to the agreement, the obligor has replaced the
property manager and leasing agent with a new property manager who is an
affiliate of the Related General Partner. Other terms of the agreement call for
the deed to be transferred to the
-25-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - Participating First Mortgage Bonds (continued)
Partnership or its designee no later than January 30, 1997 should the obligor be
unable to bring the FMB fully current on all interest due and payable (including
deferred base interest) on or before that date. These and other obligations are
secured by a guarantee from an affiliate of the obligor.
In November 1989, a $600,000 settlement was reached between the
previous developer of High Pointe Club Apartments and USF&G, the construction
performance bonding company for the High Pointe property. Prior to this
settlement, 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. In April 1995, RHA paid to the Partnership approximately
$721,0000 consisting of the settlement proceeds plus accrued interest. These
funds were applied as partial payment toward accrued and unpaid interest due
under the High Pointe Club FMB.
During April 1995, the Partnership made a loan in the amount of
approximately $721,000 to the new owner of the Cypress Run property toward
payment of delinquent 1992 and 1993 property taxes. This loan is self-amortizing
over three years and carries an 8.5% annual interest rate. This loan was
recorded in income as a reduction of interest income from FMBs because the
Cypress Run FMB is paying interest on a cash flow basis.
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.
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 rates 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 obligations to pay amounts due
as primary contingent interest, the Partnership has agreed, until 1998, that 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.
The net cash proceeds from the sale of the ownership interest in The
Mansion by MAPI 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
over the remaining life of The Mansion
-26-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - Participating First Mortgage Bonds (continued)
FMB. The balance of the deferred income relating to The Mansion FMB was
approximately $94,000 at December 31, 1995. 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 of 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 of 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 Partnership's remedies which include foreclosure. At the
initial hearing, the court consented, among other things, to allow the
Partnership to receive 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.
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 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.
-27-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - Participating First Mortgage Bonds (continued)
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 $6,600,0000 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
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 $992,000
and $1,117,000 at December 31, 1995 and 1994, respectively. All other accrued
and unpaid interest on the Clarendon Hills FMB was forgiven.
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 Partnership its 5.52% base
rate of 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 Partnership 65% of cash flow until the Partnership
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 Partnership.
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 the minimum pay rate
increases from 6.0% per 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 note
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 $57,000 and $251,000 at December 31, 1995 and
1994, respectively. There was no loss recorded on this transaction because the
valuation allowance previously established for these FMBs was in excess of the
concessions granted. At December 31, 1995 and 1994, the allowance relating to
debt restructuring was approximately $296,000 and $366,000, respectively. Such
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, a forbearance agreement was finalized with the owners of
the North Glen property. The General Partners further modified the North Glen
forbearance agreement on 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.
-28-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - Participating First Mortgage Bonds (continued)
The pay rate for the Thomas Lake property 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 was due in
full on April 15, 1995 but the loan was modified and extended. The modified loan
is self-amortizing over thirty months at an 8.5% interest rate.
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.
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 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. These loans were fully
repaid in the second quarter of 1994.
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 FMB's. Although these properties are not producing
sufficient cash flow to fully service the debt, the Partnership has no present
intention to declare a default on these FMBs. A $1,355,000 provision for
impairment was recorded during 1993 based on an estimate of the value of the
underlying property of one the above FMBs.
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 $1,571,000,
$1,707,000, and $1,639,000 was not recorded for the years ended December 31,
1995, 1994 and 1993, respectively.
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.
-29-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - Participating First Mortgage Bonds (continued)
The following FMB's interest income exceeded 15% of the Partnership's
total revenue for one or more of the three years in the period ended December
31, 1995:
1995 1994 1993
Cypress Run * 17% 17%
The Mansion * 16% *
*FMB's interest income was less than 15% of the Partnership's total
revenue for the year.
At December 31, 1995, the estimated fair value of the FMBs was
$123,600,000. This estimate is based on the projected cash flows of the FMBs and
a market interest rate for similar tax-exempt financing as of December 31, 1995.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. This estimate
is subjective in nature and involves uncertainties and matters of significant
judgment. Changes in assumptions could significantly affect estimates. Due to
the property-specific nature of the FMBs and the lack of a ready market for such
investments, this fair value estimate does not necessarily represent the amount
which the Partnership could realize upon a current sale of its investments.
As of December 31, 1995, the Partnership has classified FMBs with a
recorded investment totaling $66,795,978 as impaired in accordance with the
definition in Note 2.b. A valuation allowance has been provided for FMBs
comprising $25,752,428 of this amount; the Partnership has determined that the
remainder do not require a valuation allowance at December 31, 1995. Interest
income of approximately $4,476,000 was recognized on loans classified as
impaired during 1995.
The total valuation allowance relating to FMBs was $1,850,000 at
December 31, 1995. $1,350,000 of this amount was recorded in 1994 and $500,000
in 1995. The Partnership also maintains a valuation allowance for its promissory
notes, which totals $1,276,000 at December 31, 1995 and was recorded in 1993.
-30-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 3 - Participating First Mortgage Bonds (continued)
Descriptions of the various FMBs owned by the Partnership at December
31, 1995 are as follows:
<TABLE>
<CAPTION>
Average Minimum Stated
Interest Rate Pay Rate at Interest
Property Location Paid in 1995* December 31,1995* Rate*
- -------- -------- ------------- ----------------- -----
<S> <C> <C> <C> <C>
The Mansion Independence, MO 5.70%(B) 5.52% 5.23%
Martin's Creek Summerville, SC 7.00 (D) 7.25 8.25
East Ridge Mt. Pleasant, SC 6.90 (D) 7.25 8.25
High Pointe Club Harrisburg, PA 6.10 (A) 8.50
Cypress Run Tampa, FL 6.70 (A) 8.50
Thomas Lake Eagan, MN 8.30 (C) 8.25 8.50
North Glen Atlanta, GA 6.00 8.50 8.50
Greenway Manor St. Louis, MO 8.60 (C) 8.50 8.50
Clarendon Hills Hayward, CA 5.52 5.52 5.52
Cedar Creek McKinney, TX 6.60 (A) 8.50
Sunset Terrace Lancaster, CA 6.10 (A) 8.00
<CAPTION>
Property Call Date Maturity Date Face Amount Carrying Amount
- -------- --------- ------------- ----------- ---------------
<S> <C> <C> <C> <C>
The Mansion Dec. 2004 May 2010 $ 19,450,000 $ 17,600,000
Martin's Creek Mar. 2000 May 2010 7,300,000 7,040,626
East Ridge Mar. 2000 May 2010 8,700,000 8,406,902
High Pointe Club June 1998 June 2006 8,900,000 7,545,000
Cypress Run Aug. 1998 Aug. 2006 15,402,428 15,402,428
Thomas Lake Aug. 1998 Aug. 2006 12,975,000 12,975,000
North Glen Aug. 1998 Aug. 2008 12,400,000 12,400,000
Greenway Manor Oct. 1998 Sept. 2006 12,850,000 12,300,000
Clarendon Hills Dec. 2003 Dec. 2003 17,600,000 17,600,000
Cedar Creek Dec. 1998 Dec. 2006 8,100,000 7,798,550
Sunset Terrace Feb. 1999 Feb. 2007 10,350,000 10,350,000
------------ ------------
$134,027,428 129,418,506
============
Less: Allowance for loss on impairment of assets (1,850,000)
------------
Carrying Amount $127,568,506
============
</TABLE>
*The rate paid represents the interest recorded by the Partnership while the
stated rate represents the coupon rate of the FMB and the minimum pay rate
represents the minimum rate payable pursuant to the applicable forbearance
agreement, if any.
(A) Pay rate is based on the net cash flow generated by the property.
(B) Includes contingent interest paid during the year ended December 31,
1995.
(C) Includes receipt of deferred base interest related to prior periods.
(D) The actual pay rate is adjusted as of the property's fiscal year-end
based on audited financials to no less than the minimum pay rate.
-31-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 4 - 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 (5.85%
and 5.90% at December 31, 1995 and 1994, respectively 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 other cash requirements, as necessary, subject to the
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,
$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, 1995.
The assigned High Pointe Club note is subordinate to the High Pointe Club FMB
and has been fully reserved. The Thomas Lake promissory note in the principal
amount of $220,000, which is secured by a second mortgage on the property,
matured in April 1995 and was modified and extended. The modified loan is
self-amortizing over thirty months at an 8.5% interest rate. Clarendon Hills and
Thomas Lake promissory notes are current on the interest payments through
December 31, 1995.
-32-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 5 - Income Taxes
Following is a reconciliation of net income for financial statement
purposes with net income for Federal income tax reporting purposes:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net income per financial statements $ 5,969,215 $ 5,685,890 $ 4,135,774
Provision for loss on impairment of assets 500,000 1,350,000 1,905,000
Provision for uncollectible receivable 0 0 830,000
Uncollected interest on FMBs 1,570,781 1,707,305 1,693,376
Property tax loan deferred for tax reporting
purposes, net 0 0 325,969
Nondeductible interest expense 374,452 311,255 247,524
Uncollected interest on promissory notes 254,400 254,400 243,248
Amortization of bond selection fees 150,055 150,056 150,056
Amortization of valuation allowance
on FMBs (130,001) (130,012) (130,012)
Loss from debt restructure 0 (3,632,747) 0
Other, net (84,697) (196,913) (224,618)
----------- ----------- -----------
Net income for tax purposes $ 8,604,205 $ 5,499,234 $ 9,176,317
=========== =========== ===========
</TABLE>
Net income for tax purposes is generally exempt from Federal income
tax. The differences between the tax and book bases of partners' capital are
primarily attributable to the cumulative effect of the book to tax income
adjustments and the recording of distributions.
Effective October 1, 1995 the Related General Partner has assumed from
PBP, the responsibilities and duties of the Tax Matters Partner as defined in
the Partnership Agreement.
-33-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 6 - 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:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Prudential-Bache Properties, Inc.
and affiliates
General and administrative $ 93,392 $ 93,000 $ 108,729
Management fee 335,937 335,937 335,937
---------- ---------- ----------
429,329 428,937 444,666
---------- ---------- ----------
Related Tax Exempt Bond Associates, Inc.
and affiliates
General and administrative 39,723 28,246 41,427
Management fee 335,938 335,938 335,938
Loan servicing fees 335,068 335,938 335,938
---------- ---------- ----------
710,729 700,122 713,303
---------- ---------- ----------
$1,140,058 $1,129,059 $1,157,969
========== ========== ==========
</TABLE>
The General Partners are paid, in aggregate, an annual management fee
equal to .5% of the total invested assets (which equals the original face amount
of the total FMBs).
An affiliate of the Related General Partner receives loan servicing
fees in the amount of .25% per annum of the principal amount outstanding on
mortgage loans serviced by the affiliate.
A division of Prudential Securities Incorporated ("PSI"), an affiliate
of PBP, is responsible for the purchase, sale, and safekeeping of the
Partnership's temporary investments. This account is maintained in accordance
with the Partnership Agreement. In addition, PSI owns 2,600 BUC$ at December 31,
1995.
Several executive officers and directors of the Related General
Partner own less than 1% of the outstanding BUC$.
-34-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 7 - 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 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, Prudential Securities Incorporated and a number of
other defendants. On 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.
By order dated April 14, 1994, the Judicial Panel on Multidistrict
Litigation transferred the Kinnes case, by order dated May 4, 1994, the Connelly
case, and by order dated July 13, 1994, the Levine case, to a single judge of
the United States District Court for the Southern District of New York and
consolidated for pretrial proceedings under the caption In re Prudential
Securities Incorporated Limited Partnerships Litigation (MDL Docket No. 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 was not named a defendant in the consolidated
complaint, but the name of the Partnership was listed as being among the limited
partnerships at issue in the case.
On August 9, 1995 PBP, PSI and other Prudential defendants entered
into a Stipulation and Agreement of Partial Compromise and Settlement with legal
counsel representing plaintiffs in the consolidated actions. The court
preliminarily approved the settlement agreement by order dated August 29, 1995
and, following a hearing held November 17, 1995, found that the agreement was
fair, reasonable, adequate and in the best interests of the plaintiff class. The
court gave final approval to the settlement, certified a class of purchasers of
specific limited partnerships, including the Partnership, released all settled
claims by members of the class against the PSI settling defendants and
permanently barred and enjoined class members from instituting, commencing or
prosecuting any settled claim against the released parties. The full amount due
under the settlement agreement has been paid by PSI. The consolidated action
remains pending against the Related General Partner and certain of its
affiliates.
The Related General Partner believes it has meritorious defenses to
the consolidated complaint and intended to vigorously defend against this
action.
-35-
<PAGE>
NOTE 8 - Selected Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
1995 Quarter ended
-------------------------------------------------
March 31 June 30 September 30 December 31
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income from participating
first mortgage bonds $2,359,498 $2,320,794 $2,274,988 $2,291,156
========== ========== ========== ==========
Provision for loss on impairment of assets $ 0 $ 0 $ 0 $ 500,000
========== ========== ========== ==========
Net income $1,689,483 $1,562,255 $1,590,145 $1,127,332
========== ========== ========== ==========
Net income per BUC $ 0.21 $ 0.19 $ 0.20 $ 0.14
========== ========== ========== ==========
<CAPTION>
1994 Quarter ended
-------------------------------------------------
March 31 June 30 September 30 December 31
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income from participating
first mortgage bonds $2,413,662 $2,399,131 $2,148,302 $2,415,695
========== ========== ========== ==========
Provision for loss on impairment of assets $ 0 $ 0 $ 0 $1,350,000
========== ========== ========== ==========
Net income $1,914,411 $1,870,368 $1,594,240 $ 306,871
========== ========== ========== ==========
Net income per BUC $ 0.24 $ 0.23 $ 0.20 $ 0.04
========== ========== ========== ==========
</TABLE>
NOTE 9 - Subsequent Events
In February 1996, 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, 1995.
-36-
<PAGE>
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.
The Registrant has no directors or executive officers. The
Registrant's affairs are managed and controlled by the General Partners. Certain
information concerning the directors and officers of the General Partners are
set forth below.
The Related General Partner assumed the responsibility of the Tax
Matters Partner as of October 1, 1995.
Prudential-Bache Properties, Inc.
PBP and its 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. Such
executive officers, directors and persons who own greater than ten percent of
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 for the
current year. In making these disclosures, the Registrant has relied solely on
written representations of PBP's directors and executive officers and persons
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.
The directors and executive officers of PBP with regard to
managing the Registrant are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Thomas F. Lynch, III President, Chief Executive Officer, Chairman of the
Board of Directors and Director
Barbara J. Brooks Vice President-Finance and Chief Financial Officer
Eugene D. Burak Vice President
Chester A. Piskorowski Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
</TABLE>
THOMAS F. LYNCH, III, age 37, is the President, Chief Executive
Officer, Chairman of the Board of Director, and a Director of PBP. He is a
Senior Vice President of Prudential Securities Incorporated ("PSI"), an
affiliate of PBP. Mr. Lynch also serves in various capacities for other
affiliated companies. Mr. Lynch joined PSI in November 1989.
BARBARA J. BROOKS, age 47, 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.
-37-
<PAGE>
EUGENE D. BURAK, age 50, is a Vice President of PBP. He is a First
Vice President of PSI. Prior to joining PSI in September 1995, he was a
management consultant for three years and was with Equitable Capital Management
Corporation from March 1990 to May 1992. Mr. Burak is a certified public
accountant.
CHESTER A. PISKOROWSKI, age 52, 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 53, is a Director of PBP. He is a Senior
Vice President of PSI and an Executive Vice President 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 45, is a Director of PBP. Ms. Maio is a
Senior Vice President and Deputy General Counsel of PSI and supervises
non-litigative legal work for PSI. She joined the Law Department of PSI in 1983,
presently, she also serves in various capacities for other affiliated companies.
James M. Kelso ceased to serve as President, Chief Executive
Officer, Chairman of the Board of Directors and Director effective June 30,
1995. Effective June 30, 1995, Thomas F. Lynch, III was elected President, Chief
Executive Officer, Chairman of the Board of Directors and Director. Robert J.
Alexander ceased to serve as Vice President effective August 25, 1995. Eugene D.
Burak was elected Vice President effective October 9, 1995.
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.
The Related General Partner
Based on a review of Forms 3 and 4 and amendments thereto furnished
to the Registrant pursuant to Rule 16a-3(e) during its most recent fiscal year
and Form 5 and amendments thereto furnished to the Registrant with respect to
its most recent fiscal year and written representations pursuant to Item
405(b)(2)(i) of Regulation S-K, neither the Related General Partner nor its
directors or officers or beneficial owners of more than 10% of the Units, failed
to file, on a timely basis, reports required by Section 16(a) of the Exchange
Act during the most recent fiscal year.
The directors and executive officers of the Related General Partner
with respect to the Partnership and their positions with the Related General
Partner 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
-38-
<PAGE>
J. MICHAEL FRIED, 51, 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 a 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 where he presently serves as Managing Director. 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 University
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, 41, is a Vice President of the Related General
Partner. Mr. Hirmes has been a Certified Public Accountant in New York since
1978. Prior to joining Capital in October 1983, Mr. Hirmes was employed by
Weiner & Co., certified public accountants. Mr. Hirmes is also a Managing
Director of Capital. Mr. Hirmes graduated from Hofstra University with a
Bachelor of Arts degree.
LAWRENCE J. LIPTON, 39, is Treasurer of the Related General
Partner. Mr. Lipton has been a Certified Public Accountant in New York since
1989. Mr. Lipton is also Controller of The Related Companies, L.P. ("Related"),
an affiliate of Capital. Prior to joining Related in 1991, Mr. Lipton was
employed by Deloitte & Touche LLP from 1987-1991. 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, 55, 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 totaling in excess of
25,000 units, all of which it manages.
LYNN A. McMAHON, 40, 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 officers. All of the foregoing officers and/or directors have
indefinite terms.
-39-
<PAGE>
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.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of March 1, 1996, the directors and officers of the Related
General Partner directly or indirectly 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, 1996, directors and officers of the Related General
Partner own directly or beneficially BUC$ issued by the Registrant as follows:
Title of Name of Amount and Nature of
Class Directors and Officers Beneficial Ownership Percent of Class
- ----- ---------------------- -------------------- ----------------
BUC$ Alan P. Hirmes 1,200 BUC$ *
BUC$ J. Michael Fried 25,000 BUC$ *
BUC$ Stuart J. Boesky 4,000 BUC$ *
-----------
30,200 BUC$
===========
* Less than 1% of the BUC$ issued by the Registrant
As of March 1, 1996, no director or officer of PBP owns directly or
beneficially any BUC$ issued by the Registrant.
As of March 1, 1996, one BUC$holder beneficially owns more than
five percent (5%) of the BUC$ issued by the Registrant.
Title of Name and address of Amount and Nature of
Class Beneficial Owner Beneficial Ownership Percent of Class
- ----- ---------------- -------------------- ----------------
BUC$ Virginia First Savings Bank 510,204 BUC$ 6.45%
P.O. Box 2009
Petersburg, VA 23804
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 Note 6 to the financial statements in Item 8,
which identify the related parties and discuss the services provided by these
parties and the amounts paid or payable for their services.
-40-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
Sequential
Page
----
(a) 1. Financial Statements
Independent Auditors' Report
Statements of Financial Condition as of December
31, 1995 and 1994
Statements of Income for the years ended December
31, 1995, 1994 and 1993
Statements of Changes in Partners' Capital
(Deficit) for the years ended December 31, 1995,
1994 and 1993
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Financial Statements
(a) 2. Financial Statement Schedules
Schedule II-Valuation and Qualifying Accounts and
Reserves for the three years ended December 31,
1995
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.
(a) 3. Exhibits
3(a) and 4(a) Partnership Agreement, incorporated by
reference to Exhibit A to the Prospectus of
Registrant, dated February 19, 1986, filed pursuant
to Rule 424(b) under the Securities Act of 1933,
File No. 33-2421
3(b) and 4(b) Amended and Restated Certificate of Limited Partnership
(incorporated by reference to Exhibit 4 and Registration
Statement on Form S-11, File No. 33-2421)
3(c) and 4(c) Amendment No. 1 to the Partnership Agreement, dated
October 1, 1995 (filed herewith)
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 Registrants' 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)
-41-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(continued)
Sequential
Page
----
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 (incorporated 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)
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
September 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 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)
-42-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(continued)
Sequential
Page
----
10(m) Note dated September 19, 1990 from the Registrant
to River Bank America (incorporated by reference to
Exhibit 10(b) in Registrant's Current Report on
Form 8-K dated September 19, 1990)
10(n) Pledge Agreement dated September 19, 1990 between
River Bank America and the Registrant (incorporated
by reference to Exhibit 10(c) in Registrant's
Current Report on Form 8-K dated September 19,
1990)
10(o) Indemnity and Reimbursement Agreement 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)
10(p) Settlement Agreement for the North Glen 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)
10(q) Settlement Agreement for the Thomas Lake Mortgage
Bond dated July 11, 1991 (incorporated by reference
to Exhibit 10(q) in the Registrant's Annual Report
on Form 10-K dated December 31, 1991)
10(r) Settlement Agreement for the Sunset 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)
10(s) Assignment and Assumption Agreement for the
Clarendon Hills First Mortgage Bond dated May 1,
1992 (incorporated by reference to Exhibit 10 (s)
in the Registrant's Annual report on Form 10-K
dated December 31, 1992)
10(t) First Supplemental Indenture between City of
Hayward and Seattle-First National Bank relating to
the Clarendon Hills First 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)
10(u) Loan Agreement dated as of January 14, 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)
10(v) Pledge and Security Agreement dated as of January
14, 1993 between the Registrant and U.S. West
Financial Service, Inc. (incorporated by reference
to Exhibit 10(v) in the Registrants's Quarterly
Report on Form 10-Q dated June 30, 1993)
10(w) Secured Promissory Note dated January 14, 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)
-43-
<PAGE>
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(continued)
Sequential
Page
----
10(x) Promissory Note dated January 15, 1993 between the
Registrant and RHA Inc. (incorporated be 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)
10(z) Assignment Agreement dated January 15, 1993 between
Summit Tax Exempt Funding 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)
10(aa) Amended Settlement Agreement for the North Glen
First Mortgage 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)
10(ab) Sale-Purchase Agreement between Mansion Apartment
Project Investors, Inc., Seller and Independence
Apartments Associates, L.P., Purchaser dated
November 30,1993 (incorporated by reference to
Exhibit 10 (ab) in the Registrant's Quarterly
Report on Form-Q dated March 31, 1994)
10(ac) Addendum to Sale-Purchase Agreement between Mansion
Apartment Project Investors, Inc., Seller and
Independence Apartments Associates, L.P., Purchase
dated March 31, 1994 (incorporated by reference to
Exhibit 10(ac) in the Registrant's Quarterly Report
on Form 10-Q dated March 31, 1994)
10(ad) First Supplemental Indenture, dated as of 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 (incorporated by
reference to Exhibit 10(ad) in the Registrant's
Annual Report on Form 10-K dated December 31, 1994)
10(ae) First Mortgage Bond, dated May 13, 1986 and revised
as of October 18, 1994 with respect to The Mansion
project, in the principal amount of $19,450,000
(incorporated by reference to Exhibit 10(ae) in the
Registrant's Annual Report on Form 10-K dated
December 31, 1994)
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.
-44-
<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: Eugene D. Burak Date: March 29, 1996
------------------------------------
Eugene D. Burak
Vice President
By: Related Tax Exempt Bond Associates, Inc.
A Delaware corporation, General Partner
By: Alan P. Hirmes Date: March 29, 1996
------------------------------------
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: Thomas F. Lynch, III Date: March 29, 1996
------------------------------------
Thomas F. Lynch, III
President, Chief Executive Officer,
Chairman of the Board of Directors
and Director
By: Barbara J. Brooks Date: March 29, 1996
------------------------------------
Barbara J. Brooks
Vice President-Finance and Chief
Financial Officer
By: Eugene D. Burak Date: March 29, 1996
------------------------------------
Eugene D. Burak
Vice President
By: ____________________________________ Date:
Frank W. Giordano
Director
By: Nathalie P. Maio Date: March 29, 1996
------------------------------------
Nathalie P. Maio
Director
-45-
<PAGE>
By: Related Tax Exempt Bond Associates, Inc.
A Delaware corporation, General Partner
By: J. Michael Fried Date: March 29, 1996
------------------------------------
J. Michael Fried
President and Director
By: Alan P. Hirmes Date: March 29, 1996
------------------------------------
Alan P. Hirmes
Vice President
By: Lawrence J. Lipton Date: March 29, 1996
------------------------------------
Lawrence J. Lipton
Treasurer
By: Stephen M. Ross Date: March 29, 1996
------------------------------------
Stephen M. Ross
Director
-46-
<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
Year ended beginning reserved recovered reclassified Balance at
December 31, of year during year during year during year end of year
- ------------ ------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1995 $1,350,000 $ 500,000 $ 0 $ 0 $1,850,000
1994 0 1,350,000 0 0 1,350,000
1993 0 0 0 0 0
Valuation allowance for uncollectible receivables
<CAPTION>
Additions
Additions Deductions (Deductions)
Balance at Amounts Amounts Amounts
Year ended beginning reserved recovered reclassified Balance at
December 31, of year during year during year during year end of year
- ------------ ------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1995 $ 57,276 $ 0 $ 0 $ 0 $ 57,276
1994 57,276 0 0 0 57,276
1993 57,276 0 0 0 57,276
Valuation allowance for promissory notes
<CAPTION>
Additions
Additions Deductions (Deductions)
Balance at Amounts Amounts Amounts
Year ended beginning reserved recovered reclassified Balance at
December 31, of year during year during year during year end of year
- ------------ ------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1995 $ 1,276,000 $ 0 $ 0 $ 0 $ 1,276,000
1994 1,276,000 0 0 0 1,276,000
1993 0 1,276,000 0 0 1,276,000
</TABLE>
AMENDMENT NUMBER ONE
TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
SUMMIT TAX EXEMPT BOMD FUND, L.P.
AMENDMENT NUMBER ONE (this "Amendment"), is made as of October 1, 1995
(the "Effective Date") to the Agreement of Limited Partnership entered into as
of the 18th day of December, 1985, and amended as of January 31, 1986 (the
"Partnership Agreement") of Summit Tax Exempt Bond Fund, L.P. (the
"Partnership").
All capitalized terms used herein shall have the meanings specified in
Article One of this Amendment.
RECITALS
A. The purpose of this amendment is to amend the Partnership Agreement
to permit the subsistution of the Related General Partner for Pru-Bache
Properties as the "Tax Matters partner."
B. The General Partners have agreed that the Related General Partner
will assume the responsibilities and duties of the Tax Matters Partner (as
defined in Section 2.1 hereof) as of the Effective Date.
C. Pursuant to Section 15.2.19(i) of the Partnership Agreement, the
General Partners, without consent of the Limited Partners or BUC$ holders, may
amend the Partnership Agreement to add to their duties or surrender any right or
power granted to them, for the benefit if the Limited Partners and BUC$ holders.
D. The General Pertners have determined that the duties of the Tax
Matters Partner from Pru-Bache Properties to the Related General Partner is in
the best interests of the Limited Partners and BUC$ holders and that the
Partnership Agreement be amended to reflect that the Related General Partner is
the Tax Matters Partner as of the Effective Date.
E. Pursuant to Article 20 of the Partnership Agreement, each Limited
Partner has granted to the General Partners a special power of attorney
irrevocably making, constituting and appointing and appointing eah of the
General Partners as the attorney-in-fact for such Limited Partner, with power
and authority to act in his name and on his behalf to execute,
<PAGE>
acknowledge and swear to the execution, acknowledgement and filing of certain
amendments to the Partnership Agreement.
Accordingly, the Partnership Agreement is hereby amended as follows:
ARTICLE ONE
DEFINITIONS
1.1 Definitions. For all purposes of this Amendment, except as otherwise
expressly provided or unless the context requires, (i) the terms defined in this
Amendment have the meanings assigned to them in this Amendment and include the
plural as well as the singular and (ii) all acpitalized terms used in this
Amendment but not defined herein have the meanings ascribed to them in the
Partnership Agreement.
ARTICLE TWO
AMENDMENTS
2.1 Amendment. Section 15.9 of the Partnership Agreement is hereby
amended as of the Effective Date to reflect that the General Realted Partner is
the "Tax Matters Partner." As of the Effective Date, all other references in the
Partnership Agreement to the Tax Matters Partner shall mean the Related General
Partner.
ARTICLE THREE
NOTICE
3.1 Counterparts. This Amendment may be executed in counterparts, each
of which shall be deemed an original and all of which, when taken together,
shall constitute one and the same instrument.
3.2 Effectiveness. The provisions of this Amendment shall be effective
as of the Effective Date.
3.3 Conflict. in the event of a conflict between the terms and
provisions of this Amendment and the terms and provisions of the Partnership
Agreement, the terms of this Amendment shall govern. in all other respects, the
Partnership Agreement, as amended, modified and supplemented hereby, shall
remain unchanged and infull force and effect.
3.4 Governing Law. This Amendment shall be governed by and contrued in
accordance with the laws of the State of Delaware.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be
duly executed as of the date and year first above written.
Related Tax Exempt Bond Associates, Inc.
By: /S/ ALAN P. HIRMES
--------------------------
Name: Alan P. Hirmes
Title:
Prudential-Bache Properties, Inc.
By: /S/ THOMAS F. LYNCH, III
--------------------------
Name: Thomas F. Lynch, III
Title: President
Limited Partners
By: Related Tax Exempt Bond Associates, Inc.
By: /S/ ALAN P. HIRMES
--------------------------
Name: Alan P. Hirmes
Title:
By: Prudential-Bache Properties, Inc.
By: /S/ THOMAS F. LYNCH, III
--------------------------
Name: Thomas F. Lynch, III
Title: President
As attorneys-in-fact for all Limited Partners
pursuant to Article 20 of the Partnerhip
Agreement
-3-
<TABLE> <S> <C>
<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>
<CIK> 0000786156
<NAME> Summit Tax Exempt Bond Fund L.P.
<MULTIPLIER> 1
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<S> <C>
<PERIOD-TYPE> YEAR
<CASH> 626,391
<SECURITIES> 128,918,506
<RECEIVABLES> 9,632,879
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 139,177,776
<CURRENT-LIABILITIES> 1,317,303
<BONDS> 13,680,866
0
0
<COMMON> 0
<OTHER-SE> 124,179,607
<TOTAL-LIABILITY-AND-EQUITY> 139,177,776
<SALES> 0
<TOTAL-REVENUES> 9,898,082
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,537,371
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,391,496
<INCOME-PRETAX> 5,969,215
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,969,215
<EPS-PRIMARY> .74
<EPS-DILUTED> 0
</TABLE>
