SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-9373
SUMMIT TAX EXEMPT BOND FUND, L.P.
(Exact names 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
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(unaudited)
<TABLE>
<CAPTION>
=========== ===========
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Participating first mortgage bonds-at fair value $123,397,243 $123,364,743
Temporary investments 1,150,000 1,650,000
Cash and cash equivalents 853,178 244,439
Promissory notes receivable, net 6,649,980 6,679,795
Deferred bond selection fees, net 1,520,646 1,558,161
Interest receivable, net 724,827 825,237
Deferred financing fees, net 101,199 133,156
Other assets 9,640 20,504
------------ ------------
Total assets $134,406,713 $134,476,035
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Loan payable $13,680,866 $ 13,680,866
Deferred income 921,286 954,256
Due to affiliates 330,925 143,023
Accounts payable and accrued expenses 87,486 101,255
------------ ------------
Total liabilities 15,020,563 14,879,400
------------ ------------
Contingencies
Partners' capital (deficit):
BUC$holders (7,906,234 BUC$
issued and outstanding) 124,104,945 124,311,220
General Partners (385,032) (380,822)
Net unrealized loss on participating
first mortgage bonds (4,333,763) (4,333,763)
------------ ------------
Total partners' capital 119,386,150 119,596,635
------------ ------------
Total liabilities and partners' capital $134,406,713 $134,476,035
============ ============
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
=======================
Three Months Ended
March 31,
-----------------------
1997 1996
-----------------------
<S> <C> <C>
REVENUES:
Interest income:
Participating first mortgage bonds, net $2,142,851 $2,405,750
Promissory notes 135,615 158,734
Temporary investments 11,524 15,687
---------- ----------
Total revenues 2,289,990 2,580,171
---------- ----------
EXPENSES:
Interest 330,575 330,807
Management fees 167,969 167,969
General and administrative 89,183 80,254
Loan servicing fees 82,620 83,309
Legal 66,463 51,478
Amortization of deferred bond selection fees 37,515 37,514
Amortization of deferred financing fees 31,957 31,957
---------- ----------
Total expenses 806,282 783,288
---------- ----------
Net Income $1,483,708 $1,796,883
========== ==========
ALLOCATION OF NET INCOME:
BUC$holders $1,454,034 $1,760,945
========== ==========
General Partners $ 29,674 $ 35,938
========== ==========
Net Income per BUC $ .18 $ .22
========== ==========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
Loss on
General Participating First
Total BUC$holders Partners Mortgage Bonds
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Partners' capital (deficit) -
January 1, 1997 $119,596,635 $124,311,220 $ (380,822) $(4,333,763)
Net income 1,483,708 1,454,034 29,674 0
Distributions (1,694,193) (1,660,309) (33,884) 0
------------ ------------ ---------- -----------
Partners' capital (deficit) -
March 31, 1997 $119,386,150 $124,104,945 (385,032) $(4,333,763)
============ ============ ========== ===========
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1997 1996
-----------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received, net $ 2,435,828 $2,533,017
Loan made to property (110,898) 0
Amount paid which was due to affiliate (84,225) 0
Fees and expenses paid (137,013) (127,916)
Interest paid (330,575) (330,807)
----------- ----------
Net cash provided by operating activities 1,773,117 2,074,294
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sale (purchase) of temporary investments 500,000 (900,000)
Principal payments on promissory note 29,815 20,940
----------- ----------
Net cash provided by (used in) investing activities 529,815 (879,060)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid (1,694,193) (1,694,193)
----------- ----------
Net increase (decrease) in cash and cash equivalents 608,739 (498,959)
Cash and cash equivalents at beginning of period 244,439 626,391
----------- ----------
Cash and cash equivalents at end of period $ 853,178 $ 127,432
=========== ==========
SCHEDULE RECONCILING NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income $ 1,483,708 $1,796,883
----------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred income (65,470) (65,471)
Amortization of deferred bond selection fees 37,515 37,514
Amortization of deferred financing fees 31,957 31,957
Changes in:
Promissory notes receivable, net 0 57,053
Interest receivable, net 100,410 18,317
Other assets 10,864 10,776
Deferred income 0 (57,053)
Accounts payable and accrued expenses (13,769) (4,934)
Due to affiliates 187,902 249,252
----------- ----------
Total adjustments 289,409 277,411
----------- ----------
Net cash provided by operating activities $1,773,117 $2,074,294
=========== ==========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
NOTE 1 - General
These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the financial
position of Summit Tax Exempt Bond Fund, L.P. (the "Partnership") as of March
31, 1997 and the results of its operations and its cash flows for the three
months ended March 31, 1997 and 1996. However, the operating results for the
interim periods may not be indicative of the results expected for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1996.
Certain reclassifications have been made to prior year amounts to conform to
the current year's presentation.
NOTE 2 - Participating First Mortgage Bonds ("FMBs")
The Partnership accounts for its investments in the FMBs as "available for
sale" debt securities under the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"). Accordingly, investments in FMBs are carried at their
estimated fair values with unrealized gains and losses reported in a separate
component of partners' capital.
Because the FMBs are not readily marketable, the Partnership estimates fair
value for each bond as the present value of its expected cash flows using a
discount rate for comparable tax-exempt investments. This process is based upon
projections of future economic events affecting the real estate collateralizing
the bonds, such as property occupancy rates, rental rates, operating cost
inflation and market capitalization rates, and upon determination of an
appropriate market rate of interest, all of which 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, therefore, actual results may vary from the estimates
and the variance may be material.
Effective as of January 30, 1997, pursuant to the terms of a forbearance
agreement executed in August 1995, the obligor of the Sunset Terrace FMB
transferred the deed to the underlying Property to an affiliate of the Related
General Partner, who made no equity investment in the Property but assumed day
to day responsibilities of operations and obligations under the FMB.
6
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
NOTE 2 - Participating First Mortgage Bonds ("FMBs") (continued)
With respect to the Sunset Terrace FMB, the Partnership paid certain
insurance premiums on January 31, 1997 in the amount of approximately $64,000 as
a result of the forbearance agreement and transfer of the deed to the underlying
property to an affiliate of the Related General Partner. This loan was recorded
in operating income as a reduction of interest income from participating first
mortgage bonds because the Sunset Terrace FMB is paying interest on a cash flow
basis.
In February 1997, the Partnership made an additional advance of
approximately $111,000 to the obligor of the Cypress Run FMB (an affiliate of
the Related General Partner) toward payment of certain capital improvements to
cure deferred maintenance. This advance as well as previous advances in April
1995 and December 1996 in the amount of $721,000 and $274,000, respectively,
toward payment of delinquent real estate taxes, all of which are fully reserved
for (and accounted for as a reduction of interest income from Participating
First Mortgage Bonds), are made pursuant to a demand note from the obligor for a
loan amount up to $1,500,000 providing for interest only at 8.5% per annum,
payable monthly. Principal is due on demand.
With respect to the FMBs which are subject to forbearance agreements with
the respective obligors, the difference between the stated interest rates and
the rates paid (whether deferred and payable out of available future cash flow
or, ultimately, from sale or refinancing proceeds) on FMBs is not accrued for
financial statement purposes. The accrual of interest at the stated interest
rate will resume once a property's ability to pay the stated rate has been
adequately demonstrated. Unrecorded contractual interest income was
approximately $515,000 and $326,000 for the three months ended March 31, 1997
and 1996, respectively.
The cost basis of the FMBs at March 31, 1997 and December 31, 1996 was
$127,731,006 and $127,698,506, respectively. The net unrealized loss on FMBs
consists of gross unrealized gains and losses of $2,842,285 and $7,176,048,
respectively, at both March 31, 1997 and December 31, 1996.
7
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
NOTE 2 - Participating First Mortgage Bonds ("FMBs") (continued)
Descriptions of the various FMBs owned by the Partnership at March 31,
1997 are as follows:
<TABLE>
<CAPTION>
Annualized
interest rate
paid for the Minimum Carrying
three months Pay Rate at Stated Amount at
ended March March Interest Maturity March 31,
Property Location 31, 1997* 31, 1997* Rate* Call Date Date Face Amount 1997 (E)
- - ----------- --------- ------------- ----------- -------- --------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Mansion Independence, MO 6.75%(B) 5.23% 5.23% Apr. 2006 Apr. 2008 $ 19,450,000 $ 18,454,884
Martin's Creek Summerville, SC 7.37(C) 8.25 8.25 Mar. 2000 May 2010 7,300,000 6,657,721
East Ridge Mt. Pleasant, SC 8.25(C) 8.25 8.25 Mar. 2000 May 2010 8,700,000 8,233,000
Highpointe Club Harrisburg, PA 6.84 (A) 8.50 Jun. 1998 Jun. 2006 8,900,000 7,000,186
Cypress Run Tampa, FL 5.92 (A) 8.50 Aug. 1998 Aug. 2006 15,402,428 13,982,796
Thomas Lake Eagan, MN 9.94(D) 8.50 8.50 Aug. 1998 Aug. 2006 12,975,000 13,488,852
North Glen Atlanta, GA 6.00 6.00 8.50 Aug. 1998 Aug. 2008 12,400,000 11,228,210
Greenway Manor St. Louis, MO 9.00(D) 8.50 8.50 Oct. 1998 Sept.2006 12,850,000 13,020,536
Clarendon Hills Hayward, CA 5.52 5.52 5.52 Dec. 2003 Dec. 2003 17,600,000 14,683,645
Cedar Creek McKinney, TX 7.88 (A) 8.50 Dec. 1998 Dec. 2006 8,100,000 8,551,563
Sunset Terrace Lancaster, CA 4.93 (A) 8.00 Feb. 1999 May 2007 10,350,000 8,095,850
------------ ------------
$134,027,428 $123,397,243
------------ ------------
*The annualized interest rate paid represents the interest recorded by the
Partnership while the stated interest 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 three months ended March 31,
1997.
(C) Any deficit in the actual annual pay rate is restored as of the property's
fiscal year end based on audited financial statements to no less than the
minimum pay rate.
(D) Includes receipt of deferred base interest related to prior periods.
(E) The FMBs are carried at their estimated fair values at March 31, 1997.
</TABLE>
8
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
NOTE 3 - Related Parties
Prudential-Bache Properties, Inc. ("PBP") and the Related General Partner
(collectively, 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 Agreement of Limited Partnership (the "Partnership Agreement"). The costs
and expenses were:
Three Months Ended
March 31,
---------------------
1997 1996
-------- --------
PBP and affiliates:
General and administrative $ 9,731 $ 21,730
Management fee 83,984 83,984
-------- --------
93,715 105,714
The Related General Partner and affiliates:
General and administrative 11,692 15,000
Loan servicing fees 82,620 83,309
Management fee 83,985 83,985
-------- --------
178,297 182,294
-------- --------
$272,012 $288,008
======== ========
An affiliate of the Related General Partner receives loan servicing fees
(see above) in an amount of .25% per annum of the principal amount outstanding
on FMBs serviced by the affiliate.
The General Partners are paid, in the aggregate, an annual management fee
(see above) equal to .5% of the original amount invested in FMBs.
During January 1996, a division of Prudential Securities Incorporated
("PSI"), an affiliate of PBP, was responsible for the purchase, sale and
safekeeping of the Partnership's temporary investments. This account was
maintained in accordance with the Partnership Agreement.
PSI owns 7,600 BUC$ at March 31, 1997.
Several executive officers and directors of the Related General Partner own
less than 1% of the outstanding BUC$.
As of March 31, 1997, the original owners of the underlying properties and
obligors of the Cedar Creek, Cypress Run, Highpointe, Greenway Manor and Sunset
Terrace FMBs have been replaced with affiliates of the Related General Partner
who have not made equity investments. These entities have assumed the day-to-day
responsibilities and obligations of the underlying properties. Buyers are being
sought who would make equity investments in the underlying properties and assume
the nonrecourse obligations for each of the FMBs.
9
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
NOTE 4 - Contingencies
On or about October 18, 1993, a putative class action, captioned
Kinnes et al. v. Prudential Securities Group, Inc. et al. (CV-93-654), 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, PSI 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 was dismissed from the
Levine litigation.
By order of the Judicial Panel on Multidistrict Litigation dated
April 14, 1994, the Kinnes case, by order dated May 4, 1994, the Connelly case
and by order dated July 13, 1994, the Levine case, were transferred to a single
judge of the United States District Court for the Southern District of New York
(the "Court") and consolidated for pretrial proceedings under the caption In re
Prudential Securities Incorporated Limited Partnerships Litigation (MDL Docket
1005) (the "Class Action"). 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 Levine and Connelly
cases were dismissed with prejudice as to the Prudential defendants by court
order dated October 25, 1996. The consolidated action remains pending against
the Related General Partner and certain of its affiliates.
On December 31, 1996, the Court issued a preliminary approval
order (the "Order") with respect to settlement (the "Related Settlement") of the
Class Action against the Related General Partner and certain of its affiliates.
Pursuant to the stipulation of settlement entered into with counsel for the
class on December 24, 1996, the proposed Related Settlement contemplates, among
other matters, the reorganization (the "Reorganization") of the Partnership and
two other partnerships co-sponsored by affiliates of the Related General Partner
and PBP.
10
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
(unaudited)
NOTE 4 - Contingencies (continued)
The proposed Related Settlement and Reorganization are subject to
objections by the BUC$holders and limited partners of the Partnership as well as
each of the other concerned partnerships and final approval of the Court after
review of the proposals at a fairness hearing.
Under the proposed Reorganization plan, the BUC$holders of the
Partnership, and Summit Tax Exempt L.P. II and Summit Tax Exempt L.P. III, will
receive shares in a newly formed business trust. It is anticipated that shares
will be allocated proportionately among the partnerships and their respective
investors based upon appraisals and other factors as supported by a third-party
fairness opinion. Detailed information about the proposed Related Settlement and
Reorganization will be sent to BUC$holders in the near future. The terms of the
Reorganization include, among other matters, the acquisition by affiliates of
the Related Capital Company ("RCC") of PBP's general partner interest (the "PBP
Interest"), transfer to the BUC$holders of one-half of the PBP Interest,
reduction of the sum of the aggregate annual fees currently payable to both
General Partners by 25%, filing an application to list the new company's shares
on an exchange and the creation of an infinite, as opposed to finite,
life-operating business.
In connection with the proposed Related Settlement and
Reorganization, on December 19, 1996, PBP and RCC entered into an agreement for
the purchase by RCC or its affiliates of the PBP Interest. The agreement is
subject to numerous conditions, including the effectiveness of the Related
Settlement of the Class Action and the approval of the sale and withdrawal of
PBP as a general partner of the Partnership by the Court.
Pending final approval of the Related Settlement, the Court's
Order prohibits class members (including the BUC$holders) from, among other
matters, (i) granting a proxy to object to the Reorganization; or (ii)
commencing a tender offer for the BUC$. In addition, the General Partners are
enjoined from (i) recording any transfers made in violation of the Order and
(ii) providing the list of investors in any of the partnerships which are the
subject of the Reorganization to any person conducting a tender offer.
There can be no assurance that the conditions to the closing of
the proposed Related Settlement and Reorganization will be satisfied nor as to
the time frame in which a closing may occur. In the event a settlement cannot be
reached, the Related General Partner believes it has meritorious defenses to the
consolidated complaint and intends to vigorously defend this action.
NOTE 5 - Subsequent Event
In May 1997, distributions of approximately $1,660,000 and $34,000 were paid
to the BUC$holders and General Partners, respectively, for the quarter ended
March 31, 1997.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
Summit Tax Exempt Bond Fund, L.P. (the "Partnership") has invested in eleven
tax-exempt participating first mortgage bonds ("FMBs") issued by various state
or local governments or their agencies or authorities. The FMBs are secured by
participating first mortgage loans on multi-family residential apartment
projects.
At the beginning of the year, the Partnership had cash and temporary
investments of approximately $1,894,000. After payment of distributions of
approximately $1,694,000 and receipt of the net cash flow from operations of
approximately $1,773,000, the Partnership ended the three months with
approximately $2,003,000 in cash and temporary investments. The first quarter
distribution of $1,660,000 ($.21 per BUC) was paid to BUC$holders in May 1997
from cash flow from operations. The Partnership anticipates funding future cash
distributions from current and previously undistributed cash flow from
operations. The restructuring of the FMBs in prior years and any future
restructuring may result in the General Partners reducing the distributions to
BUC$holders in future periods.
Effective as of January 30, 1997, pursuant tothe terms of a forbearance
agreement executed in August 1995, the obligor of the Sunset Terrace FMB
transferred the deed to the underlying Property to an affiliate of the Related
General Partner, who made no equity investment in the Property but assumed day
to day responsibilities of operations and obligations under the FMB.
With respect to the Sunset Terrace FMB, the Partnership paid certain
insurance premiums on January 31, 1997 in the amount of approximately $64,000 as
a result of the forbearance agreement and transfer of the deed to the underlying
property to an affiliate of the Related General Partner. This loan was recorded
in operating income as a reduction of interest income from participating first
mortgage bonds because the Sunset Terrace FMB is paying interest on a cash flow
basis.
In February 1997, the Partnership made an additional advance of
approximately $111,000 to the obligor of the Cypress Run FMB (an affiliate of
the Related General Partner) toward payment of certain capital improvements to
cure deferred maintenance. This advance as well as previous advances in April
1995 and December 1996 in the amounts of $721,000 and $274,000, respectively,
toward payment of delinquent real estate taxes, all of which are fully reserved
for (and accounted for as a reduction of interest income from Participating
First Mortgage Bonds), are made pursuant to a demand note from the obligor for a
loan amount up to $1,500,000 providing for interest only at 8.5% per annum,
payable monthly. Principal is due on demand.
The Partnership has entered into forbearance agreements on several FMBs and
may be required to extend or modify those agreements or enter into new
agreements in the future. Such agreements may adversely impact liquidity;
however interest payments from FMBs are anticipated to provide sufficient
liquidity to fund in future years the Partnership's operating expenditures, debt
service and distributions.
The Partnership's loan payable has a variable interest rate; therefore,
future levels of interest expense will fluctuate in correlation to movements in
the 30-day commercial paper interest rate.
For a discussion of the proposed settlement of the Class Action relating to
the Partnership, see Note 4 to the financial statements.
Management is not aware of any trends or events, commitments or
uncertainties which have not otherwise been disclosed that will or are likely to
impact liquidity in a material way. The Partnership's investments in FMBs are
secured by a Partnership 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. However, the
geographic diversifications of the portfolio may not protect against a general
downturn in the economy.
12
<PAGE>
Results of Operations
Net income decreased approximately $313,000 for the three months ended March
31, 1997 as compared to the corresponding period in 1996 for the reasons
discussed below.
Interest income from FMBs decreased approximately $263,000 for the three
months ended March 31, 1997 as compared to the corresponding period in 1996
primarily due to a loan to Cypress Run in February 1997, which was fully
reserved for and accounted for as a reduction of interest from the FMB, a
decrease in the amount of contingent interest received from the Mansions FMB as
compared to the corresponding period in 1996 (which includes an adjustment in
prior periods) and a decrease due to the payment of insurance premiums related
to the underlying property of the Sunset Terrace FMB which was recorded as a
reduction of income.
Interest income from promissory notes decreased approximately $23,000 for
the three months ended March 31, 1997 as compared to the corresponding period in
1996, primarily due to the repayment of the East Ridge and Martin's Creek second
mortgage loans in January 1996.
Interest income from temporary investments decreased approximately $4,000
for the three months ended March 31, 1997 as compared to the corresponding
period in 1996 primarily due to lower cash and temporary investment balances in
1997.
General and administrative expenses increased approximately $9,000 for the
three months ended March 31, 1997 as compared to the corresponding period in
1996 primarily due to an overaccrual of audit fees at December 31, 1995.
Legal expenses increased approximately $15,000 for the three months ended
March 31, 1997 as compared to the corresponding period in 1996 primarily due to
legal costs incurred with respect to finalization of the Cypress Run bankruptcy
proceedings and related issues.
General
The determination as to whether it is in the best interest of the
Partnership to enter into forbearance agreements on the FMBs or, alternatively,
to pursue its remedies under the loan documents, including foreclosure, is based
upon several factors including, but not limited to, property performance, owner
cooperation and projected legal costs.
Certain property owners have, at times, supplemented 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 elect to supplement
property cash flow to satisfy bond interest requirements, if necessary. No
property owner made supplementary payments during the three months ended March
31, 1997 and 1996.
13
<PAGE>
Property Information
The following table lists the FMBs the Partnership owns together with occupancy
rates of the underlying properties as of March 31, 1997:
<TABLE>
<CAPTION>
Annualized
Interest
Rate Paid
for the three Minimum
Stated months ended Pay Rate at
Interest March March
Property Location Face Amount Occupancy Rate* 31, 1997* 31, 1997*
- - -------- -------- ----------- --------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
The Mansion Independence, MO $19,450,000 96.0% 5.23% 6.75% (B) 5.23%
Martin's Creek Summerville, SC 7,300,000 97.0 8.25 7.37 (C) 8.25
East Ridge Mt. Pleasant, SC 8,700,000 95.9 8.25 8.25 (C) 8.25
Highpointe
Club Harrisburg, PA 8,900,000 98.7 8.50 6.84 (A)
Cypress Run Tampa, FL 15,402,428 92.3 8.50 5.92 (A)
Thomas Lake Eagan, MN 12,975,000 99.5 8.50 9.94 (D) 8.50
North Glen Atlanta, GA 12,400,000 92.6 8.50 6.00 6.00
Greenway
Manor St. Louis, MO 12,850,000 97.1 8.50 9.00 (D) 8.50
Clarendon Hills Hayward, CA 17,600,000 99.6 5.52 5.52 5.52
Cedar Creek McKinney, TX 8,100,000 87.3 8.50 7.88 (A)
Sunset Terrace Lancaster, CA 10,350,000 89.1 8.00 4.93 (A)
-----------
$134,027,428
============
*The annualized interest rate paid represents the interest recorded by the
Partnership while the stated interest 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 net cash flow generated by the property.
(B) Includes contingent interest paid during the three months ended March 31,
1997.
(C) The actual annual 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 receipt of deferred base interest related to prior periods.
</TABLE>
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Incorporated by reference to Note 4 to the financial statements filed
herewith in Item 1 of Part 1 of the Registrant's Quarterly Report.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other information
Thomas F. Lynch, III ceased to serve as President, Chief Executive
Officer, Chairman of the Board of Directors and Director of Prudential-Bache
Properties, Inc. effective May 2, 1997. Effective May 2, 1997, Brian J. Martin
was elected President, Chief Executive Officer, Chairman of the Board of
Directors and Director of Prudential-Bache Properties, Inc.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
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.
4(b) Amended and Restated Certificate of Limited
Partnership, incorporated by reference to Exhibit 4 to the Registration
Statement on Form S-11, File No. 33-2421.
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K.
Current Report on Form 8-K dated December 31, 1996, was filed on
January 10, 1997 relating to a preliminary approval order with respect to the
settlement of class action litigation.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SUMMIT TAX EXEMPT BOND FUND, L.P.
By: Related Tax Exempt Bond Associates, Inc.
A Delaware corporation, General Partner
Date: May 14, 1997 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Vice President
(Principal Financial Officer)
Date: May 14, 1997 By: /s/ Richard A. Palermo
----------------------
Richard A. Palermo
Treasurer
(Principal Accounting Officer)
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
Date: May 14, 1997 By: /s/ Eugene D. Burak
-------------------
Eugene D. Burak
Vice President
17
<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
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 853,178
<SECURITIES> 124,547,243
<RECEIVABLES> 12,090,943
<ALLOWANCES> 4,716,136
<INVENTORY> 0
<CURRENT-ASSETS> 9,640
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 134,406,713
<CURRENT-LIABILITIES> 1,339,697
<BONDS> 13,680,866
0
0
<COMMON> 0
<OTHER-SE> 119,386,150
<TOTAL-LIABILITY-AND-EQUITY> 134,406,713
<SALES> 0
<TOTAL-REVENUES> 2,289,990
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 475,707
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 330,575
<INCOME-PRETAX> 1,483,708
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,483,708
<EPS-PRIMARY> .18
<EPS-DILUTED> 0
</TABLE>
