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 June 30, 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)
============= =============
June 30, December 31,
1997 1996
------------- -------------
ASSETS
Participating first mortgage bonds-at fair value $ 123,429,743 $ 123,364,743
Temporary investments 950,000 1,650,000
Cash and cash equivalents 1,089,356 244,439
Promissory notes receivable, net 6,619,526 6,679,795
Deferred bond selection fees, net 1,483,132 1,558,161
Interest receivable, net 687,948 825,237
Deferred financing fees, net 69,241 133,156
Other assets 0 20,504
------------- -------------
Total assets $ 134,328,946 $ 134,476,035
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Loan payable $ 13,680,866 $ 13,680,866
Deferred income 888,316 954,256
Due to affiliates 355,947 143,023
Accounts payable and accrued expenses 73,274 101,255
------------- -------------
Total liabilities 14,998,403 14,879,400
------------- -------------
Contingencies
Partners' capital (deficit):
BUC$holders (7,906,234 BUC$
issued and outstanding) 124,050,450 124,311,220
General Partners (386,144) (380,822)
Net unrealized loss on participating
first mortgage bonds (4,333,763) (4,333,763)
------------- -------------
Total partners' capital 119,330,543 119,596,635
------------- -------------
Total liabilities and partners' capital $ 134,328,946 $ 134,476,035
============= =============
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 Six Months Ended
June 30, June 30,
----------------------- -----------------------
1997 1996 1997 1996
----------------------- -----------------------
<S> <C> <C> <C> <C>
REVENUES:
Interest income:
Participating first mortgage
bonds, net $2,269,357 $2,293,601 $4,412,208 $4,699,351
Promissory notes 134,974 137,615 270,589 296,349
Temporary investments 16,578 17,633 28,102 33,320
---------- ---------- ---------- ----------
Total revenues 2,420,909 2,448,849 4,710,899 5,029,020
---------- ---------- ---------- ----------
EXPENSES:
Interest 335,550 327,942 666,125 658,749
Management fees 167,969 167,969 335,938 335,938
General and administrative 101,529 88,644 190,712 168,898
Loan servicing fees 83,537 83,310 166,157 166,619
Legal 24,266 58,075 90,729 109,553
Amortization of deferred
bond selection fees 37,514 37,515 75,029 75,029
Amortization of deferred
financing fees 31,958 31,957 63,915 63,914
---------- ---------- ---------- ----------
Total expenses 782,323 795,412 1,588,605 1,578,700
---------- ---------- ---------- ----------
Net Income $1,638,586 $1,653,437 $3,122,294 $3,450,320
========== ========== ========== ==========
ALLOCATION OF NET
INCOME:
BUC$holders $1,605,814 $1,620,369 $3,059,848 $3,381,314
========== ========== ========== ==========
General Partners $ 32,772 $ 33,068 $ 62,446 $ 69,006
========== ========== ========== ==========
Net Income per BUC $ .20 $ .21 $ .39 $ .43
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENT 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 3,122,294 3,059,848 62,446 0
Distributions (3,388,386) (3,320,618) (67,768) 0
------------- ------------- ------------- -------------
Partners' capital (deficit) -
June 30, 1997 $ 119,330,543 $ 124,050,450 $ (386,144) $ (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>
==========================
Six Months Ended
June 30,
--------------------------
1997 1996
--------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received, net $ 4,926,906 $ 4,920,237
Loans made to property (209,658) 0
Amount paid which was due to affiliate (84,225) 0
Fees and expenses paid (493,864) (521,866)
Interest paid (666,125) (658,749)
----------- -----------
Net cash provided by operating activities 3,473,034 3,739,622
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net sale (purchase) of temporary investments 700,000 (950,000)
Principal payments on promissory notes 60,269 42,327
----------- -----------
Net cash provided by (used in) investing activities 760,269 (907,673)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid (3,388,386) (3,388,387)
----------- -----------
Net increase (decrease) in cash and cash equivalents 844,917 (556,438)
Cash and cash equivalents at beginning of period 244,439 626,391
----------- -----------
Cash and cash equivalents at end of period $ 1,089,356 $ 69,953
=========== ===========
SCHEDULE RECONCILING NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income $ 3,122,294 $ 3,450,320
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of deferred income (130,940) (130,940)
Amortization of deferred bond selection fees 75,029 75,029
Amortization of deferred financing fees 63,915 63,914
Changes in:
Promissory notes receivable, net 0 57,054
Interest receivable, net 137,289 22,157
Other assets 20,504 5,740
Deferred income 0 (57,054)
Accounts payable and accrued expenses (27,981) (25,238)
Due to affiliates 212,924 278,640
----------- -----------
Total adjustments 350,740 289,302
----------- -----------
Net cash provided by operating activities $ 3,473,034 $ 3,739,622
=========== ===========
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 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 June 30,
1997, the results of its operations for the three and six months ended June 30,
1997 and 1996 and its cash flows for the six months ended June 30, 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. With
respect to the Sunset Terrace FMB, the Partnership paid certain insurance
premiums on January 31, 1997 in the amount of approximately $64,000. 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.
6
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(unaudited)
NOTE 2 - Participating First Mortgage Bonds ("FMBs") (continued)
In February and May of 1997, the Partnership made additional advances of
approximately $111,000 and $99,000, respectively, 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. These advances, 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), were 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 $921,000 and $660,000 for the six months ended June 30, 1997 and
1996, respectively.
The cost basis of the FMBs at June 30, 1997 and December 31, 1996 was
$127,763,506 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 June 30, 1997 and December 31, 1996.
7
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(unaudited)
NOTE 2 - Participating First Mortgage Bonds ("FMBs") (continued)
Descriptions of the various FMBs owned by the Partnership at June 30,
1997 are as follows
<TABLE>
<CAPTION>
Annualized
interest rate
paid for the Minimum Pay Carrying
six months Rate at Stated Amount at
ended June June 30, Interest Maturity June 30,
Property Location 30, 1997* 1997* Rate* Call Date Date Face Amount 1997 (E)
- - -------- -------- ------------- ------- ------ ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Mansion Independence, MO 6.64%(B) 5.23% 5.23% Apr. 2006 Apr. 2008 $ 19,450,000 $ 18,454,884
Martin's Creek Summerville, SC 7.19 (C) 8.25 8.25 Mar. 2000 May 2010 7,300,000 6,672,550
East Ridge Mt. Pleasant, SC 8.08 (C) 8.25 8.25 Mar. 2000 May 2010 8,700,000 8,250,671
Highpointe Club Harrisburg, PA 6.80 (A) 8.50 Jun. 1998 Jun. 2006 8,900,000 7,000,186
Cypress Run Tampa, FL 5.89 (A) 8.50 Aug. 1998 Aug. 2006 15,402,428 13,982,796
Thomas Lake Eagan, MN 9.70 (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 9.05 (D) 8.50 8.50 Oct. 1998 Sept. 2006 12,850,000 13,020,536
Clarendon Hills Hayward, CA 5.73 (B) 5.52 5.52 Dec. 2003 Dec. 2003 17,600,000 14,683,645
Cedar Creek McKinney, TX 8.09 (A) 8.50 Dec. 1998 Dec. 2006 8,100,000 8,551,563
Sunset Terrace Lancaster, CA 5.11 (A) 8.00 Feb. 1999 May 2007 10,350,000 8,095,850
------------ ------------
$134,027,428 $123,429,743
============ ============
</TABLE>
* 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 six months ended June 30,
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.
(E) The FMBs are carried at their estimated fair values at June 30, 1997.
8
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 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 Six Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
------------------- -------------------
PBP and affiliates:
General and administrative $ 6,535 $ 1,722 $ 16,266 $ 23,452
Management fee 83,985 83,985 167,969 167,969
-------- -------- -------- --------
90,520 85,707 184,235 191,421
-------- -------- -------- --------
The Related General Partner
and affiliates:
General and administrative 34,952 20,585 46,644 35,585
Loan servicing fees 83,537 83,310 166,157 166,619
Management fee 83,984 83,984 167,969 167,969
-------- -------- -------- --------
202,473 187,879 380,770 370,173
-------- -------- -------- --------
$292,993 $273,586 $565,005 $561,594
======== ======== ======== ========
An affiliate of the Related General Partner receives loan servicing fees
(see above) in an amount of .25% per annum of the principal amount outstanding
on FMBs serviced by the affiliate.
The General Partners are paid, in the aggregate, an annual management fee
(see above) equal to .5% of the original amount invested in FMBs.
During January 1996, a division of Prudential Securities Incorporated
("PSI"), an affiliate of PBP, was responsible for the purchase, sale and
safekeeping of the Partnership's temporary investments. This account was
maintained in accordance with the Partnership Agreement.
PSI owns 7,600 BUC$ at June 30, 1997.
Several executive officers and directors of the Related General Partner own
less than 1% of the outstanding BUC$.
As of June 30 , 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
June 30, 1997
(unaudited)
NOTE 4 - Contingencies
Previous quarterly and annual reports by the Partnership have disclosed the
commencement and status of the putative class actions captioned Kinnes, et al.
v. Prudential Securities Group, Inc., et al., CV-93-654 (D.Az.), Connelly, et.
al v. Prudential-Bache Securities, Inc., et al. 93 Civ. 713 (D. Az.), and Levine
v. Prudential-Bache Properties, Inc., et. al. 92 Civ. 52 (N.D., Ill.). These
putative class actions were transferred along with certain other cases, by the
Judicial Panel on Multidistrict Panel to a single judge of the United States
District Court for the Southern District of New York (the "Court") for
consolidated and coordinated pre-trial proceedings under the caption In re
Prudential Securities Incorporated Limited Partnerships Litigation, MDL Docket
No. 1005 (the "Class Action"). As previously disclosed in the last quarterly
report, the Related General Partner and certain of its affiliates entered in
December 1996, into a stipulation of settlement with counsel for plaintiffs to
settle the Class Action against the Related General Partner and certain of its
affiliates (the "Related Settlement").
On June 11, 1997, the Court issued orders that, inter alia, approved the
solicitation statement describing in detail the transactions contemplated
pursuant to the proposed Related Settlement, directed that it be mailed along
with the class notice to the members of the class and rescheduled the settlement
fairness hearing to consider the final approval of the Related Settlement for
August 28, 1997. In accordance with the Court's orders, the solicitation
statement and class notice were mailed to BUC$holders of the Partnership.
There can be no assurance that the conditions to the closing of the
proposed Related Settlement and the reorganization of the Partnership (as
disclosed in previous quarterly and annual reports and in the solicitation
statement and class notice) will be satisfied nor as to the time frame as to
which the closing may occur. In the event that the Related Settlement is not
consummated, the Related General Partner believes it has meritorious defenses to
the Class Action and intends to defend this action vigorously.
NOTE 5 - Subsequent Events
With respect to the Highpointe FMB, effective as of July 12, 1996, the
Partnership entered into a purchase agreement with Chemical Bank (now "Chase
Manhattan") which is secured by a pledge and assignment of the Partnership's
Highpointe FMB (face amount of $8,900,000). The purpose of this transaction was
to obtain an extension, to January 1998, of a Letter of Credit ("L/C") issued by
Chemical Bank on behalf of Highpointe (RHA Inv., Inc.) to credit enhance
$3,250,000 in pari-passu first mortgage "low floater" bonds ("Chemical Bonds"),
which proceeds were used to complete construction of the project in 1989.
Pursuant to the terms of the purchase agreement, the Partnership has agreed
that, should the Chemical Bonds not otherwise be refinanced or the L/C replaced
as of January 1998 or the Highpointe obligor defaults on its obligations under
the Chemical Bonds, the Partnership will unconditionally purchase the bonds from
Chemical Bank.
On July 28, 1997 the Partnership entered into agreements with RHA Inv.,
Inc. (the obligor under the Highpointe FMB), American Tax Exempt Bond Trust
("American") a Related affiliate, and Chase Manhattan to effect a mandatory
redemption of the Chemical Bonds and to immediately re-sell them at par to
American pursuant to the terms of an Assignment and Assumption Agreement which
is expected to be effective as of September 2, 1997. Upon redemption and
assignment to American of these bonds, the Letter of Credit will be terminated
and the pledge and assignment to Chase Manhattan of the Partnership's
10
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(unaudited)
NOTE 5 - Subsequent Events (continued)
Highpointe FMB ($8,900,000) will be released.
The Chemical Bonds to be owned by American ("American Bonds") will continue
to be secured by a pari-passu first mortgage with the Highpointe FMB, they will
no longer be credit enhanced and will carry a fixed rate of interest of 9% per
annum, payable monthly. Other terms and conditions of the Chemical Bonds
previously in effect will remain the same under the American Bonds.
In August 1997, distributions of $1,660,000 and $34,000 were paid to the
BUC$holders and General Partners, respectively, for the quarter ended June 30,
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 receipt of the net cash flow from
operations of approximately $3,473,000, principal payments on promissory notes
of approximately $60,000 and distributions of approximately $3,388,000, the
Partnership ended the six months with approximately $2,039,000 in cash and
temporary investments. The second quarter distribution of $1,660,000 ($.21 per
BUC) was paid to BUC$holders in August 1997 from cash flow from operations. The
Partnership anticipates funding future cash distributions from current and
previously undistributed cash flow from operations. The restructuring of the
FMBs in prior years and any future restructuring may result in the General
Partners reducing the distributions to BUC$holders in future periods.
Effective as of January 30, 1997, pursuant 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. With
respect to the Sunset Terrace FMB, the Partnership paid certain insurance
premiums on January 31, 1997 in the amount of approximately $64,000 . 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 and May of 1997, the Partnership made additional advances of
approximately $111,000 and $99,000, respectively, 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. These advances, 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), were 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 Highpointe FMB, effective as of July 12, 1996, the
Partnership entered into a purchase agreement with Chemical Bank (now "Chase
Manhattan") which is secured by a pledge and assignment of the Partnership's
Highpointe FMB (face amount of $8,900,000). The purpose of this transaction was
to obtain an extension, to January 1998, of a Letter of Credit ("L/C") issued by
Chemical Bank on behalf of Highpointe (RHA Inv., Inc.) to credit enhance
$3,250,000 in pari-passu first mortgage "low floater" bonds ("Chemical Bonds"),
which proceeds were used to complete construction of the project in 1989.
Pursuant to the terms of the purchase agreement, the Partnership has agreed
that, should the Chemical Bonds not otherwise be refinanced or the L/C replaced
as of January 1998 or the Highpointe obligor defaults on its obligations under
the Chemical Bonds, the Partnership will unconditionally purchase the bonds from
Chemical Bank.
On July 28, 1997 the Partnership entered into agreements with RHA Inv.,
Inc. (the obligor under the Highpointe FMB), American Tax Exempt Bond Trust
("American") a Related affiliate, and Chase Manhattan to effect a mandatory
redemption of the Chemical Bonds and to
12
<PAGE>
immediately re-sell them at par to American pursuant to the terms of an
Assignment and Assumption Agreement which is expected to be effective as of
September 2, 1997. Upon redemption and assignment to American of these bonds,
the Letter of Credit will be terminated and the pledge and assignment to Chase
Manhattan of the Partnership's Highpointe FMB ($8,900,000) will be released.
The Chemical Bonds to be owned by American ("American Bonds") will continue
to be secured by a pari-passu first mortgage with the Highpointe FMB, they will
no longer be credit enhanced and will carry a fixed rate of interest of 9% per
annum, payable monthly. Other terms and conditions of the Chemical Bonds
previously in effect will remain the same under the American Bonds.
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 diversification of the portfolio may not protect against a general
downturn in the economy.
Results of Operations
Net income decreased approximately $15,000 and $328,000, respectively, for
the three and six months ended June 30, 1997 as compared to 1996 for the reasons
discussed below.
Interest income from FMBs decreased approximately $24,000 and $287,000,
respectively, for the three and six months ended June 30, 1997 as compared to
1996 primarily due to loans to Cypress Run in February and May 1997, which were
fully reserved for and accounted for as a reduction of interest from the FMB, a
decrease due to the payment of insurance premiums related to the underlying
property of the Sunset Terrace FMB in the first quarter of 1997, which was
recorded as a reduction of income, partially offset by the receipt of deferred
base interest from the Thomas Lake FMB in the first and second quarters of 1997
and the receipt of contingent interest from the Clarendon Hills FMB in the
second quarter of 1997.
Interest income from temporary investments decreased approximately $5,000
for the six months ended June 30, 1997 as compared to 1996 primarily due to
lower cash and temporary investment balances in 1997.
General and administrative expenses increased approximately $13,000 and
$22,000, respectively, for the three and six months ended June 30, 1997 as
compared to 1996 primarily due to an increase in cost and expense reimbursements
to the General Partners in the second quarter of 1997 and an overaccrual of
audit fees at December 31, 1995.
13
<PAGE>
Legal expenses decreased approximately $34,000 and $19,000, respectively,
for the three and six months ended June 30, 1997 as compared to 1996 primarily
due to legal costs incurred with respect to the Highpointe letter of credit in
the second quarter of 1996. The decrease for the three months was partially
offset by an increase in the first quarter of 1997 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 six months
ended June 30, 1997 and 1996.
14
<PAGE>
Property Information
The following table lists the FMBs the Partnership owns together with occupancy
rates of the underlying properties as of June 30, 1997:
<TABLE>
<CAPTION>
Annualized
Interest
Rate Paid
for the six Minimum
Stated months ended Pay Rate at
Interest June 30, June 30,
Property Location Face Amount Occupancy Rate* 1997* 1997*
- - -------- -------- ------------ --------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
The Mansion Independence, MO $ 19,450,000 99.6% 5.23% 6.64% (B) 5.23%
Martin's Creek Summerville, SC 7,300,000 99.0 8.25 7.19 (C) 8.25
East Ridge Mt. Pleasant, SC 8,700,000 95.4 8.25 8.08 (C) 8.25
Highpointe
Club Harrisburg, PA 8,900,000 99.2 8.50 6.80 (A)
Cypress Run Tampa, FL 15,402,428 92.8 8.50 5.89 (A)
Thomas Lake Eagan, MN 12,975,000 99.1 8.50 9.70 (D) 8.50
North Glen Atlanta, GA 12,400,000 92.9 8.50 6.00 6.00
Greenway
Manor St. Louis, MO 12,850,000 99.4 8.50 9.05 (D) 8.50
Clarendon Hills Hayward, CA 17,600,000 99.6 5.52 5.73 (B) 5.52
Cedar Creek McKinney, TX 8,100,000 94.7 8.50 8.09 (A)
Sunset Terrace Lancaster, CA 10,350,000 95.6 8.00 5.11 (A)
------------
$134,027,428
============
</TABLE>
* The annualized interest rate paid represents the interest recorded by the
Partnership while the stated interest rate represents the coupon rate of
the FMB and the minimum pay rate represents the minimum rate payable
pursuant to the applicable forbearance agreement, if any.
(A) Pay rate is based on net cash flow generated by the property.
(B) Includes contingent interest paid during the six months ended June 30,
1997.
(C) The actual annual pay rate is adjusted as of the property's fiscal year end
based on audited financial statements to no less than the minimum pay rate.
(D) Includes receipt of deferred base interest related to prior periods.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Incorporated by reference to Note 4 to the financial statements filed
herewith in Item 1 of Part 1 of the Registrant's Quarterly Report.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other information
Thomas F. Lynch, III ceased to serve as President, Chief Executive Officer,
Chairman of the Board of Directors and Director of Prudential-Bache Properties,
Inc. effective May 2, 1997. Effective May 2, 1997, Brian J. Martin was elected
President, Chief Executive Officer, Chairman of the Board of Directors and
Director of Prudential-Bache Properties, Inc.
Solicitation information was mailed to BUC$holders in connection with the
proposed Related Settlement (see Note 4 to the financial statements filed
herewith in Item 1 of Part I of the Registrant's Quarterly Report).
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.
No reports on Form 8-K were filed during the quarter.
16
<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: August 13, 1997 By: /s/ Alan P. Hirmes
------------------------------
Alan P. Hirmes
Vice President
(Principal Financial Officer)
Date: August 13, 1997 By: /s/ Richard A. Palermo
------------------------------
Richard A. Palermo
Treasurer
(Principal Accounting Officer)
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
Date: August 13, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,089,356
<SECURITIES> 124,379,743
<RECEIVABLES> 12,122,369
<ALLOWANCES> 4,814,895
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 134,328,946
<CURRENT-LIABILITIES> 429,221
<BONDS> 13,680,866
0
0
<COMMON> 0
<OTHER-SE> 119,330,543
<TOTAL-LIABILITY-AND-EQUITY> 134,328,946
<SALES> 0
<TOTAL-REVENUES> 4,710,899
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 922,480
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 666,125
<INCOME-PRETAX> 3,122,294
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,122,294
<EPS-PRIMARY> .39
<EPS-DILUTED> 0
</TABLE>
