UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________.
Commission File Number: 0-15764
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
TEMPO-LP, INC.
(Exact name of registrant as specified in governing instrument)
Dean Witter/Coldwell Banker Tax
Exempt Mortgage Fund, L.P.
Delaware 58-1710934
(State of organization) (IRS Employer Identification No.)
TEMPO-LP, Inc.
58-1710930
(IRS Employer Identification No.)
2 World Trade Center, New York, NY 10048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 392-1054
Former name, former address and former fiscal year, if changed since last
report: not applicable
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 1 of 15<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
BALANCE SHEETS
<CAPTION>
September 30, December 31,
1996 1995
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 5,399,390 $ 5,255,586
Investments in revenue bonds
available for sale 107,827,228 108,635,226
Deferred bond selection fee, net 1,101,275 1,261,006
Escrowed funds 877,095 741,613
Accrued interest receivable 456,814 543,723
$115,661,802 $116,437,154
LIABILITIES AND PARTNERS' CAPITAL
Excess of equity in losses of
property-owning investees over
investments therein $ 5,720,472 $ 5,135,109
Accounts payable and other liabilities 1,097,041 865,304
6,817,513 6,000,413
Partners' capital:
Net unrealized gain (loss) on
revenue bonds available for sale (94,861) 713,137
Assigned Benefit Certificates
(7,454,110 ABCs outstanding) 108,939,150 109,723,604
Total Partners' capital 108,844,289 110,436,741
$115,661,802 $116,437,154
See accompanying notes to financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
STATEMENTS OF OPERATIONS
Three and nine months ended September 30, 1996 and 1995
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income:
Revenue bonds $2,215,666 $2,048,130 $6,818,899 $6,467,280
Short-term investments 38,858 47,553 116,374 114,846
2,254,524 2,095,683 6,935,273 6,582,126
Equity in losses of property-
owning investees 50,093 231,489 600,363 693,303
Expenses:
General and administrative 85,990 46,342 273,754 298,743
Net income $2,118,441 $1,817,852 $6,061,156 $5,590,080
Net income allocated to:
Limited Partner $2,076,072 $1,781,495 $5,939,933 $5,478,278
General Partner 42,369 36,357 121,223 111,802
$2,118,441 $1,817,852 $6,061,156 $5,590,080
Net income per Assigned Benefit Certificate $ .28 $ .24 $ .80 $ .73
See accompanying notes to financial statements.
/TABLE
<PAGE>
<TABLE>
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
STATEMENT OF PARTNERS' CAPITAL
Nine months ended September 30, 1996
<CAPTION>
Net
Unrealized
Gain (Loss)
Limited General on Revenue
Partner Partner Bonds Total
<S> <C> <C> <C> <C>
Partners' capital (deficit) at
December 31, 1995 $110,346,295 $ (622,691) $ 713,137 $110,436,741
Net income 5,939,933 121,223 6,061,156
Cash distributions (6,708,698) (136,912) (6,845,610)
Net change in fair value of
revenue bonds available
for sale - - (807,998) (807,998)
Partners' capital (deficit) at
September 30, 1996 $109,577,530 $ (638,380) $ (94,861) $108,844,289
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1996 and 1995
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,061,156 $ 5,590,080
Adjustments to reconcile net income to
net cash provided by operating activities:
Equity in losses of property-owning investees 600,363 693,303
Amortization of deferred bond selection fee 159,731 159,731
(Increase) decrease in accrued interest receivable 86,909 269,500
(Increase) decrease in escrowed funds (135,482) (129,410)
Increase (decrease) in accounts payable and other
liabilities 231,737 31,694
Net cash provided by operating activities 7,004,414 6,614,898
Cash flows (used in) provided by investing activities:
Investment in property-owning investees (15,000) 57,559
Cash flows used in financing activities:
Cash distributions (6,845,610) (5,419,441)
Increase in cash and cash equivalents 143,804 1,253,016
Cash and cash equivalents at beginning
of period 5,255,586 3,736,746
Cash and cash equivalents at end
of period $ 5,399,390 $ 4,989,762
See accompanying notes to financial statements.
</TABLE>
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
1. The Partnership and Accounting Policies
Dean Witter/Coldwell Banker Tax Exempt Mortgage Fund, L.P. (the
"Partnership") is a limited partnership organized under the laws of the
State of Delaware on August 20, 1986.
The Partnership's records are maintained on the accrual basis of
accounting for financial reporting and tax purposes.
Net income per Assigned Benefit Certificate ("ABC") is calculated by
dividing net income allocated to the Investors, in accordance with the
Partnership Agreement, by the number of ABCs outstanding.
In the opinion of management, the accompanying financial statements,
which have not been audited, include all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the results for
the interim periods.
These financial statements should be read in conjunction with the annual
financial statements and notes thereto included in the Partnership's
annual report on Form 10-K/A filed with the Securities and Exchange
Commission for the year ended December 31, 1995. Operating results of
interim periods may not be indicative of the operating results for the
entire year.
Certain 1995 amounts have been reclassified to conform to 1996
presentation.
2. Investment in Revenue Bonds
The Partnership recognized provisions for uncollectible interest of
$729,134 and $712,350 for the nine months ended September 30, 1996 and
1995, respectively, which amounts approximate accrued but unpaid interest
on the Park at Landmark revenue bond in 1996 and 1995. These amounts
were recorded as a reduction of interest income from revenue bonds.
Because the revenue bonds are not readily marketable, the Partnership
estimates the fair value of each bond as the present value of its
expected cash flows using a rate of interest for similar investments.
The process of determining the fair value of the revenue bonds 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, market capitalization rates, and upon market
interest rates; therefore, amounts ultimately collected from the revenue
bonds may differ materially from their carrying values. The cash flows
used in this process are based on good faith estimates and assumptions
developed by the Managing General Partner. Unanticipated events and
DEAN WITTER/COLDWELL BANKER TAX EXEMPT MORTGAGE FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
circumstances may occur and some assumptions may not materialize;
therefore, actual results may vary from the estimates and the variance
may be material.
The amortized cost basis of the revenue bonds was $107,922,089 at
September 30, 1996 and December 31, 1995. Net unrealized gain (loss) on
revenue bonds consists of gross unrealized gains and losses of $4,246,247
and $4,612,694, respectively, at September 30, 1996 and $3,152,980 and
$2,439,843, respectively, at December 31, 1995.
3. Related Party Transactions
An affiliate of the General Partner performs bond servicing and
administrative functions, processes investor transactions and prepares
tax information for the Partnership. For each of the nine-month periods
ended September 30, 1996 and 1995, the Partnership incurred approximately
$387,000 for these services. As of September 30, 1996, the affiliate was
owed approximately $15,800 for these services.
Another affiliate of the General Partner earned fees of $76,424 and
$78,978 for the management of the Park at Landmark property during the
nine months ended September 30, 1996 and 1995, respectively. As of
September 30, 1996, the affiliate was owed approximately $8,600 by the
owner of Park at Landmark for these services.
4. Litigation
On October 7, 1996, a class action lawsuit naming various public real
estate partnerships sponsored by Realty (including the Partnership and
its Managing General Partner), Realty, Dean Witter, Discover & Co., Dean
Witter Reynolds Inc. and others as defendants was filed in the Delaware
Court of Chancery for New Castle County. The complaint alleges breach
of fiduciary duty and seeks an accounting of profits, compensatory
damages in an unspecified amount, possible liquidation of the Partnership
under a receiver's supervision and other equitable relief. The
defendants have not yet responded to this complaint and intend to
vigorously defend the action. It is impossible to predict the effect,
if any, the outcome this action might have on the Partnership's financial
statements.
5. Cash Distributions
On November 12, 1996, the Partnership paid a cash distribution of
$2,422,586 to the Investors ($0.325 per ABC) and $49,441 to the General
Partner.
<PAGE>
TEMPO-LP, INC.
BALANCE SHEETS
September 30, December 31,
1996 1995
ASSETS
Cash $ 900 $ 900
Investment in Partnership, at cost 100 100
$1,000 $1,000
STOCKHOLDER'S EQUITY
Common stock, $1 par value, 1,000 shares
authorized and outstanding $1,000 $1,000
See accompanying note.
<PAGE>
TEMPO-LP, INC.
NOTE TO BALANCE SHEETS
1. Organization
TEMPO-LP, Inc. (the "Corporation"), was formed in April 1986 to be the
limited partner of the Dean Witter/Coldwell Banker Tax Exempt Mortgage
Fund, L.P. (the "Partnership"). The Partnership issued limited
partnership interests to the Corporation, which in turn assigned those
limited partnership interests to investors. Investors received assigned
benefit certificates to represent the limited partnership interests
assigned to them. The Corporation has had no activity since assignment
of the limited partnership interests in 1986.
The Corporation's capital stock is owned by Dean Witter, Discover & Co.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The Partnership raised $149,082,200 in a public offering of 7,454,110
ABCs which was terminated in 1987. The Registrants have no plans to
raise additional capital.
The Partnership has purchased ten series of revenue bonds, the proceeds
of which funded the development of eight multi-family residential
properties (the "Properties"). The Partnership's acquisition program has
been completed. No additional investments are planned.
Cash flow generated by the Properties is the primary source of all
payments due the Partnership under the terms of the revenue bonds, which
are collateralized by the Properties.
The Partnership's business is indirectly affected by competition to the
extent that the Properties may be subject to competition from neighboring
properties.
Moderate economic growth resulted in steady demand for apartment units
during 1996, although at a slower rate than in 1995. In general, rental
rates have not increased significantly during 1996 due to competition
from new apartment projects and the relative affordability of single-
family housing. Development of new apartments appears to be shifting out
of certain areas of the Southwest, where building was prominent during
1995, and is increasing in some Midwest, Northeast and West coast
markets.
Because the revenue bonds are not readily marketable, the Partnership
estimates the fair value of each bond as the present value of its
expected cash flows using a rate of interest for similar investments.
The process of determining the fair value of the revenue bonds 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, market capitalization rates, and upon market
interest rates; therefore, amounts ultimately collected from the revenue
bonds may differ materially from their carrying values. The cash flows
used in this process are based on good faith estimates and assumptions
developed by the Managing General Partner. Unanticipated events and
circumstances may occur and some assumptions may not materialize;
therefore, actual results may vary from the estimates and the variance
may be material.
Based on an assessment of the projected cash flow from operations of the
Partnership's investments and anticipated future cash needs, the
Partnership determined that it can distribute a portion of its existing
cash reserves. Accordingly, the Partnership increased the annual cash
distribution rate from 5% to 6%, beginning with the cash distribution for
the fourth quarter of 1995, which was paid in February 1996, and
increased it to 6.5%, beginning with the cash distribution for the third
quarter of 1996, which was paid in November 1996.
The payment status of each revenue bond during the nine months ended
September 30, 1996 was as follows:
Cash flow from the High Ridge Apartments, Township in Hampton Woods
Apartments, Wildcreek Apartments and Burlington Arboretum Apartments
properties enabled their owners to pay debt service during the nine
months ended September 30, 1996 at effective interest rates of 8.56%,
10.20%, 8.02% and 7.55%, respectively. These payment rates exceeded the
minimum interest required on the respective loans; the excess payments
were applied to base interest. During the remainder of 1996, each of
these properties is expected to operate at a modest cash flow surplus
after payment of minimum debt service and, therefore, should be able to
continue to pay a portion of base interest.
Cash flow from the Pine Club Apartments enabled their owner to pay
minimum debt service and a portion of additional base interest. The
property is expected to generate sufficient cash flow to fully pay
minimum debt service during the remainder of 1996.
During the nine months ended September 30, 1996, the Fountain Head
property, which is owned 50% each by the Partnership and Fountain Head
Partners, an unaffiliated party, operated at a modest cash flow deficit,
but the owner paid its required minimum debt service and real estate tax
escrow in full. As of September 30, 1996, Fountain Head Partners has a
remaining commitment to fund property operating deficits of approximately
$26,500 secured by a letter of credit in favor of the Partnership.
During the remainder of 1996, the Partnership and Fountain Head Partners
will be required to fund operating deficits; the Partnership's share of
such fundings is not expected to be material.
Cash flow from the SunBrook property (which is partly owned by the
Partnership) enabled its owner to pay minimum debt service during the
nine months ended June 30, 1996. Cash flow from the property is expected
to be sufficient to fully pay minimum debt service for the remainder of
1996.
All of the cash flow generated by the Park at Landmark property (which
is partly owned by the Partnership) is paid to the Partnership. During
the nine months ended September 30, 1996, the Partnership received
$1,219,928 from the property; this amount was less than required minimum
debt service by $729,134. Cash flow from the property is not expected
to be sufficient to fully pay minimum debt service in the foreseeable
future.
On November 12, 1996, the Partnership paid the third quarter cash
distribution of $2,422,586 to the Investors ($0.325 per ABC) and $49,441
to the General Partner.
Except as discussed herein and in the financial statements, the General
Partner is not aware of any trends or events, commitments or
uncertainties that will have a material impact on liquidity.
In June 1996, the Internal Revenue Service published final regulations
with respect to the modification of debt instruments. These regulations,
which have an effective date of September 24, 1996, limit the type and
extent of direct, indirect and implied modifications that can be made by
a bond holder with respect to the terms of the revenue bonds without
adversely affecting the tax-exempt status of the revenue bonds. The
Partnership is in the process of determining what actions, if any, should
be taken with respect to certain of the revenue bonds held by the
Partnership which may be subject to the provisions of these regulations.
Operations
Fluctuations in the Partnership's operating results for the nine- and
three-month periods ended September 30, 1996 compared to 1995 were
primarily attributable to the following:
Interest income from revenue bonds during the nine months increased
because $108,000 of interest was received in the first quarter of 1996
from the Township in Hampton Woods property pertaining to the settlement
of its loan default and approximately $78,000 more interest was received
from the Park at Landmark property in the second quarter of 1996 than in
1995. Interest income also increased in 1996 because approximately
$148,000 more interest was received from the Burlington Arboretum
Apartments in the third quarter of 1996 than in 1995.
Equity in losses of property-owning investees decreased during the third
quarter of 1996 primarily because of increased rental income and reduced
property operating expenses at the Sunbrook property.
A summary of the markets in which the Properties are located is as
follows:
Burlington Arboretum Apartments, located in Burlington, MA, a suburb of
Boston, is in a strong market with a current vacancy rate of 5%. At the
property, rental rates increased during 1996 and are expected to increase
further as long as the tight market conditions continue. Average
occupancy during the third quarter decreased slightly to 98%.
The Park at Landmark property, located in Alexandria, VA, is in a market
experiencing a vacancy rate of 10%. Early in 1996, the property matched
the levels of rental concessions made by competing apartment buildings
to attract new tenants. Occupancy has increased slightly to 93%, and
only nominal move in allowances were granted in the third quarter.
Pine Club Apartments, located in Orlando, Fl, is in a market with a
current vacancy rate of approximately 6%. The market has remained strong
due to continued employment growth. Average occupancy during the third
quarter increased to 94% despite the opening of a competing apartment
complex in this market. The owner has been able to increase rents in
1996.
SunBrook Apartments, located in St. Charles County, MO, a suburb of St.
Louis, consists primarily of furnished apartments and offers short-term
leases. These apartments have little direct competition; they compete
primarily with other furnished apartment units and extended-stay hotels.
During 1996, the owner was able to raise rental rates. Demand for this
type of apartment increases in the spring and summer months and decreases
in the fall and winter months. Average occupancy during the third
quarter increased from 84% to 88%. The owner is implementing a marketing
program to increase corporate rentals at the property.
Wildcreek Apartments is located in Clarkston, GA, a suburb of Atlanta,
a market with a current vacancy rate of approximately 10%. At the
property, average occupancy during the third quarter increased slightly
to 98%. There is no new apartment construction in this sub-market.
The Township in Hampton Woods property, located in Hampton, VA, is in a
market which is primarily dependent on the defense industry. The market
vacancy rate is approximately 10%, and demand for apartment units in this
market remains steady and has outpaced the existing supply. Average
occupancy during the third quarter increased from 92% to 98% and the
owner was able to raise rental rates. New apartments under construction
in the area, which are expected to be ready for occupancy in late 1996
and 1997, may effect rental rates and/or occupancy at the property.
High Ridge Apartments, located in Albuquerque, NM, is in a market
experiencing a current vacancy rate of 7%. The market continues to
experience moderate economic and population growth. High Ridge
Apartments currently offers no concessions, but rental rates may have to
be postponed or rates decreased to keep the property competitive.
Increased development of apartments and single family homes may also have
an adverse effect on the property in the future. Average occupancy
during the third quarter increased slightly to 98%.
Fountain Head Apartments, located in Kansas City, MO, is in a market
which has a vacancy rate of 5%. Average occupancy during the third
quarter decreased to 93% and the owner was able to raise rental rates
slightly. New apartment units are under construction, but they are not
expected to adversely affect the property.
Inflation
Inflation has been consistently low during the periods presented in the
financial statements and, as a result, has not had a significant effect
on the operations of the Partnership or its properties.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On October 7, 1996, a class action lawsuit naming various public real
estate partnerships sponsored by Realty (including the Partnership and
its Managing General Partner), Realty, Dean Witter, Discover & Co., Dean
Witter Reynolds Inc. and others as defendants was filed in the Delaware
Court of Chancery for New Castle County. The complaint alleges breach
of fiduciary duty and seeks an accounting of profits, compensatory
damages in an unspecified amount, possible liquidation of the Partnership
under a receiver's supervision and other equitable relief. The
defendants have not yet responded to this complaint and intend to
vigorously defend the action. It is impossible to predict the effect,
if any, the outcome this action might have on the Partnership's financial
statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
An exhibit index has been filed as part of this Report on
Page E1.
(b) Reports on Form 8-K - none.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by
the undersigned thereunto duly authorized.
DEAN WITTER/COLDWELL BANKER
TAX EXEMPT MORTGAGE FUND, L.P.
By: TEMPO-GP, INC.
Managing General Partner
Date: November 14, 1996 By: /s/ E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: November 14, 1996 By: /s/ Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)
TEMPO-LP, INC.
Date: November 14, 1996 By: /s/ E. Davisson Hardman, Jr.
E. Davisson Hardman, Jr.
President
Date: November 14, 1996 By: /s/ Lawrence Volpe
Lawrence Volpe
Controller
(Principal Financial and
Accounting Officer)<PAGE>
Exhibit Index
Quarter Ended June 30, 1996
Exhibit Sequentially
No. Description Numbered Page
27 Financial Data Schedule
E1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Registrant is a limited partnership which invests in federally tax-exempt
revenue bonds, which financed construction and/or ownership of multi-
family residential properties. In accordance with indsutry practice, its
balance sheet is unclassified. For full informaiton, refer to the
accompanying unaudited financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,399,390
<SECURITIES> 0
<RECEIVABLES> 456,814
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 115,661,802<F1>
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 108,844,289<F2>
<TOTAL-LIABILITY-AND-EQUITY> 115,661,802<F3>
<SALES> 0
<TOTAL-REVENUES> 6,935,273<F4>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 874,117<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,061,156
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,061,156
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,061,156
<EPS-PRIMARY> .80<F6>
<EPS-DILUTED> 0
<FN>
<F1>In addition to cash and receivables, total assets include investment in
revenue bonds of $107,827,228, net deferred expenses of $1,101,275 and
escrowed funds of $877,095.
<F2>Represents partners' capital.
<F3>Liabilities include accounts payable and other liabilities of $1,097,041
and excess of equity in losses of property-owning investees over investments
therein of $5,720,472.
<F4>Total revenue includes interest income of $6,935,273.
<F5>Other expenses include equity in losses of property-owning investees of
$600,363 and general and administrative expenses of $273,754.
<F6>Represents net income per Assigned Benefit Certificate.
</FN>
</TABLE>
