<PAGE>
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1995
----------------------
Commission file number 1-9793
----------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
-------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 52-1483643
- ----------------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
- ----------------------------------------- ------------------------
(Address of principal executive officer) (Zip Code)
(301) 468-9200
-------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
As of May 5, 1995, 2,280,000 (Series I) and 3,238,760 (Series II)
Beneficial Assignee Certificates were outstanding.
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995
Page
----
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1995
and December 31, 1994 . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations - for the
three months ended March 31, 1995 and 1994 . . . . . 5
Consolidated Statements of Changes in Partners'
Capital (Deficit) - for the three months ended
March 31, 1995 . . . . . . . . . . . . . . . . . . . 7
Consolidated Statements of Cash Flows - for the three
months ended March 31, 1995 and 1994 . . . . . . . . 8
Notes to Consolidated Financial Statements . . . . . . 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . 23
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 33
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . 34
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Series I
--------------------------
As of As of
March 31, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
Investment(s) in
Real estate:
Land $ 2,071,822 $ 2,071,822
Buildings and personal property 35,649,844 35,649,844
------------ ------------
37,721,666 37,721,666
Less: accumulated depreciation (7,243,894) (6,877,327)
------------ ------------
30,477,772 30,844,339
Mortgage revenue bond 1,600,000 1,600,000
Cash and cash equivalents 100,361 103,864
Restricted cash and cash equivalents 1,604,307 1,251,815
Marketable securities 563,603 1,089,522
Working capital reserves
invested in marketable securities 1,037,460 921,929
Receivables and other assets 298,173 393,469
------------ ------------
Total assets $ 35,681,676 $ 36,204,938
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Series I
--------------------------
As of As of
March 31, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
Distributions payable $ 621,881 $ 1,151,631
Accrued mortgage administration and
servicing fees due to related parties 1,159,734 1,093,242
Other liabilities related to real
estate operations 940,027 688,704
Deferred revenue 710,118 710,118
Accounts payable and accrued expenses 61,582 77,235
------------ ------------
Total liabilities 3,493,342 3,720,930
------------ ------------
Partners' capital (deficit):
General Partner (211,966) (208,980)
Beneficial Assignee Certificates
(BACs) - issued and outstanding
(2,280,000 of Series I BACs
and 3,238,760 of Series II BACs) 32,400,300 32,692,988
------------ ------------
Total partners' capital 32,188,334 32,484,008
------------ ------------
Total liabilities and partners'
capital $ 35,681,676 $ 36,204,938
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Series II
--------------------------
As of As of
March 31, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
Investment(s) in
Real estate:
Land $ 4,945,198 $ 4,945,198
Buildings and personal property 51,436,807 51,436,807
------------ ------------
56,382,005 56,382,005
Less: accumulated depreciation (9,980,259) (9,481,589)
------------ ------------
46,401,746 46,900,416
Mortgage revenue bond -- --
Cash and cash equivalents 11,355 101,283
Restricted cash and cash equivalents 1,931,944 1,526,228
Marketable securities 842,870 1,447,843
Working capital reserves
invested in marketable securities 1,679,355 1,646,746
Receivables and other assets 384,721 457,368
------------ ------------
Total assets $ 51,251,991 $ 52,079,884
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-3-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Series II
--------------------------
As of As of
March 31, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
Distributions payable $ 883,387 $ 1,635,903
Accrued mortgage administration and
servicing fees due to related parties 1,749,672 1,670,426
Other liabilities related to real
estate operations 788,650 461,336
Deferred revenue 594,180 594,180
Accounts payable and accrued expenses 75,383 99,475
------------ ------------
Total liabilities 4,091,272 4,461,320
------------ ------------
Partners' capital (deficit):
General Partner (275,539) (270,915)
Beneficial Assignee Certificates
(BACs) - issued and outstanding
(2,280,000 of Series I BACs
and 3,238,760 of Series II BACs) 47,436,258 47,889,479
------------ ------------
Total partners' capital 47,160,719 47,618,564
------------ ------------
Total liabilities and partners'
capital $ 51,251,991 $ 52,079,884
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-4-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Series I
--------------------------
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Income from investments in real estate:
Rental revenue $ 1,483,053 $ 1,385,474
Rental expenses (772,616) (799,675)
Depreciation (366,567) (395,153)
------------ ------------
Net rental income 343,870 190,646
Mortgage revenue bond interest 32,000 32,001
------------ ------------
375,870 222,647
------------ ------------
Other income (expenses):
Interest and other income 12,323 7,968
General and administrative (50,626) (45,032)
Professional fees (11,360) (10,943)
------------ ------------
(49,663) (48,007)
------------ ------------
Net income $ 326,207 $ 174,640
============ ============
Net income allocated to General
Partner (1.01%) $ 3,295 $ 1,764
============ ============
Net income allocated to BAC
Holders (98.99%) $ 322,912 $ 172,876
============ ============
Net income per BAC $ 0.14 $ 0.08
============ ============
BACs outstanding 2,280,000 2,280,000
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-5-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Series II
--------------------------
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Income from investments in real estate:
Rental revenue $ 2,057,238 $ 1,956,596
Rental expenses (1,081,001) (1,074,439)
Depreciation (498,670) (510,824)
------------ ------------
Net rental income 477,567 371,333
------------ ------------
Other income (expenses):
Interest and other income 23,032 23,885
General and administrative (60,962) (57,212)
Professional fees (14,095) (19,585)
------------ ------------
(52,025) (52,912)
------------ ------------
Net income $ 425,542 $ 318,421
============ ============
Net income allocated to General
Partner (1.01%) $ 4,298 $ 3,216
============ ============
Net income allocated to BAC
Holders (98.99%) $ 421,244 $ 315,205
============ ============
Net income per BAC $ 0.13 $ 0.10
============ ============
BACs outstanding 3,238,760 3,238,760
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-6-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the three months ended March 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
SERIES I
------------------------------------------
Beneficial
Assignee
Certificate General
Holders Partner Total
------------ ----------- ------------
<S> <C> <C>
Balance, December 31, 1994 $ 32,692,988 $ (208,980) $ 32,484,008
Net income 322,912 3,295 326,207
Distributions paid or accrued
of $0.27 per BAC (including
return of capital of $0.13
per BAC) (615,600) (6,281) (621,881)
------------ ----------- ------------
Balance, March 31, 1995 $ 32,400,300 $ (211,966) $ 32,188,334
============ =========== ============
SERIES II
------------------------------------------
Beneficial
Assignee
Certificate General
Holders Partner Total
------------ ----------- ------------
<S> <C> <C>
Balance, December 31, 1994 $ 47,889,479 $ (270,915) $ 47,618,564
Net income 421,244 4,298 425,542
Distributions paid or accrued
of $0.27 per BAC (including
return of capital of $0.14
per BAC) (874,465) (8,922) (883,387)
------------ ----------- ------------
Balance, March 31, 1995 $ 47,436,258 $ (275,539) $ 47,160,719
============ =========== ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-7-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Series I
--------------------------
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 326,207 $ 174,640
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 366,567 395,153
Changes in assets and liabilities:
Increase in restricted cash and
cash equivalents (352,492) (372,072)
Decrease (increase) in receivables and
other assets 95,296 (133)
Increase in accrued mortgage
administration and servicing fees
due to related parties 66,492 123,300
Decrease in accounts payable and
accrued expenses (15,653) (17,607)
Increase in other liabilities related
to real estate operations 251,323 240,921
------------ ------------
Net cash provided by operating
activities 737,740 544,202
------------ ------------
Cash flows from investing activities:
Net sales of marketable securities 525,919 926,875
Net (deposits to) withdrawal from
working capital reserves invested
in marketable securities (115,531) 36,020
------------ ------------
Net cash provided by investing
activities 410,388 962,895
------------ ------------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-8-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
(Unaudited)
<TABLE>
<CAPTION>
Series I
--------------------------
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from financing activities:
Distributions to BAC Holders and
General Partners (1,151,631) (1,151,631)
------------ ------------
Net (decrease) increase in cash and cash
equivalents (3,503) 355,466
------------ ------------
Cash and cash equivalents, beginning
of period 103,864 33,549
------------ ------------
Cash and cash equivalents, end of period $ 100,361 $ 389,015
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-9-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Series II
--------------------------
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 425,542 $ 318,421
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 498,670 510,824
Changes in assets and liabilities:
Increase in restricted cash and
cash equivalents (405,716) (392,689)
Decrease in receivables and
other assets 72,647 64,726
Increase in accrued mortgage
administration and servicing fees
due to related parties 79,246 97,825
Decrease in accounts payable and
accrued expenses (24,092) (22,959)
Increase in other liabilities related
to real estate operations 327,314 281,138
------------ ------------
Net cash provided by operating
activities 973,611 857,286
------------ ------------
Cash flows from investing activities:
Net sales of marketable securities 604,973 737,740
Net deposits to working capital reserves
invested in marketable securities (32,609) (63,379)
------------ ------------
Net cash provided by investing
activities 572,364 674,361
------------ ------------
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-10-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
(Unaudited)
<TABLE>
<CAPTION>
Series II
--------------------------
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from financing activities:
Distributions to BAC Holders and
General Partners (1,635,903) (1,635,903)
------------ ------------
Net decrease in cash and cash equivalents (89,928) (104,256)
Cash and cash equivalents, beginning
of period 101,283 202,810
------------ ------------
Cash and cash equivalents, end of period $ 11,355 $ 98,554
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-11-
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of CRITEF Associates Limited Partnership (the General
Partner), the accompanying unaudited consolidated financial statements of
Capital Realty Investors Tax Exempt Fund Limited Partnership (the Partnership)
contain all adjustments of a normal recurring nature necessary to present
fairly the Partnership's consolidated financial position as of March 31,
1995 and December 31, 1994, and the results of its consolidated operations for
the three months ended March 31, 1995 and 1994 and its consolidated cash flows
for the three months ended March 31, 1995 and 1994.
These unaudited consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. While the General Partner believes
that the disclosures presented are adequate to make the information not
misleading, it is suggested that these consolidated financial statements be read
in conjunction with the consolidated financial statements and the notes included
in the Partnership's Annual Report filed on Form 10-K for the year ended
December 31, 1994.
The Partnership's consolidated balance sheets reflect the financial
position of the properties for the dates presented. The Partnership's
consolidated statements of income include the rental income, rental expenses and
depreciation of nine of its ten properties, exclusive of debt service due to the
Partnership, as a result of the receipt of deeds in lieu of foreclosure. The
underlying real estate for Observatory II (formerly known as Greenhaven) in
Series I is not included in this consolidation because the investment is
accounted for as a loan for financial statement purposes.
Certain amounts in the 1994 financial statements have been reclassified to
conform to 1995 presentation.
2. INVESTMENTS
SERIES I
--------
Series I invested in five federally tax-exempt mortgage revenue bonds with
a current aggregate principal amount of $44,155,000. As discussed in the
Partnership's Annual Report filed on Form 10-K for the year ended December 31,
1994, all five properties collateralizing the bonds have been transferred by
foreclosure or deed in lieu of foreclosure to nominees of the Partnership
(Observatory II was subsequently sold to an unaffiliated third party and the
related bond modified). As a result, the Partnership accounts for four of the
five investments as real estate for financial statement purposes. Accordingly,
the consolidated balance sheets reflect the Investments in Real Estate in the
amounts of $30,477,772 and $30,844,339 as of March 31, 1995 and December 31,
1994, respectively, net of accumulated depreciation, based on the lower of cost
or fair value at the date of deed transfer or in-substance foreclosure (ISF).
The Partnership continues to evaluate these investments on a lower of cost or
net realizable basis, taking into consideration the Partnership's intention to
hold these properties for the long term if necessary, and with investor consent,
to recover its recorded investment. The financial statement presentation is
independent of the characterization of the bonds as loans for federal income tax
-12-
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. INVESTMENTS - Continued
purposes and the tax-exempt nature of the mortgage revenue bond interest.
Additionally, the Partnership accounts for the investment in the Observatory II
mortgage revenue bond as a loan with a carrying value of $1,600,000 as of both
March 31, 1995 and December 31, 1994.
No significant events have occurred during the three months ended March 31,
1995 in connection with the Series I properties.
SERIES II
---------
Series II invested in five federally tax-exempt mortgage revenue bonds with
an aggregate principal amount of $62,608,001. As discussed in the Partnership's
Annual Report filed on Form 10-K for the year ended December 31, 1994, all five
properties collateralizing the bonds have been transferred by deed in lieu of
foreclosure to nominees of the Partnership. As a result, the Partnership
accounts for these investments as real estate for financial statement purposes.
Accordingly, the consolidated balance sheets reflect the Investments in Real
Estate in the amounts of $46,401,746 and $46,900,416 as of March 31, 1995 and
December 31, 1994, respectively, net of accumulated depreciation, based on the
lower of cost or fair value at the date of deed transfer or ISF. The Partnership
continues to evaluate these investments on a lower of cost or net realizable
basis, taking into consideration the Partnership's intention to hold these
properties for the long term if necessary, and with investor consent, to recover
its recorded investment. The financial statement presentation is independent of
the characterization of the bonds as loans for federal income tax purposes and
the tax-exempt nature of the mortgage revenue bond interest.
The following is an update of significant events affecting the Series II
properties during the three months ended March 31, 1995:
Ethan's Ridge and Ethan's Glen IIB
- ----------------------------------
In April 1995, Ethan's Ridge and Ethan's Glen IIB suffered damage to
certain roofs due to a severe hail storm. Insurance adjusters are currently
examining the damage to determine the number of affected buildings, and whether
the roofs can be repaired or if replacement is necessary. An estimate of the
damage is not currently available. It is expected that the cost to repair or
replace the damaged roofs will be covered by the property's insurance carrier,
less a minimal deductible. Due to the nature of the required repairs, occupancy
levels at the property are not expected to decrease as a result of ongoing
repair work.
SERIES I and II
---------------
In 1991, the U. S. Supreme Court decided a case, Cottage Savings
Association v. Commissioner, that could be interpreted to compromise the tax-
exempt status of mortgage revenue bonds which have been modified. In response
to this decision, in December 1992, the Internal Revenue Service (IRS) issued
proposed regulations in connection with the modification of debt instruments.
If the regulations are adopted in their present form, they would alter existing
authority and curtail the type and extent of modifications that could be made by
-13-
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. INVESTMENTS - Continued
a bond owner/lender without adversely affecting the tax-exempt status of bonds.
It is not clear at this time what effect the Cottage Savings decision or the
proposed regulations may have on the Partnership with respect to the bonds
secured by loans on properties currently held by nominees. The General Partner
continues to believe that these bonds remain tax-exempt. The General Partner
will continue its efforts, which include the transfer of title on the properties
to nominees, in an attempt to protect the tax-exempt status of the bonds and the
interest thereon. However, in light of the Cottage Savings decision and the
proposed regulations, there can be no assurance that the General Partner will be
successful in its efforts.
3. DISTRIBUTIONS TO BAC HOLDERS
The Partnership expects to continue to make distributions to BAC Holders on
a semi-annual basis. There are no legal restrictions on the Partnership's
present or future ability to make cash distributions. However, property level
reserves are depleted and estimated cash flows from the properties' operations
are insufficient to pay full monthly base interest (except for Observatory II in
Series I), therefore, the distributions to BAC Holders may fluctuate from
current levels. The General Partner has undertaken various measures in an
attempt to stabilize the properties' operations. Despite these efforts, the
amounts paid to the Partnership from the properties' operations may be expected
to fluctuate from period to period due to changes in occupancy rates, rental
rates, operating expenses and other variables. Based upon the current
operations of the Partnership, the General Partner expects the 1995
distribution for both Series I and Series II to approximate $1.08 per BAC.
SERIES I
--------
The following distributions were accrued to BAC Holders of record during
the three months ended March 31, 1995 and 1994:
-14-
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. DISTRIBUTIONS TO BAC HOLDERS - Continued
<TABLE>
<CAPTION>
1995 1994
Distributions to Distributions to
BAC Holders BAC Holders
--------------------- ---------------------
Quarter Ended Total Per BAC Total Per BAC
- ------------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C>
March 31 $ 615,600 $ 0.27 $ 570,000 $ 0.25
=========== ======= =========== =======
</TABLE>
Distributions to BAC Holders for the three months ended March 31, 1995 and
1994 were funded as follows:
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash Available for Distribution:
Cash flow from the Partnership's
operations $ 737,412 $ 539,796
Net (deposits to) withdrawals from working
capital reserves (115,531) 36,020
------------ ------------
Total cash available for distribution $ 621,881 $ 575,816
============ ============
Distributions to:
General partner (1.01%) $ 6,281 $ 5,816
============ ============
BAC Holders (98.99%) $ 615,600 $ 570,000
============ ============
</TABLE>
The General Partner expects the distribution for the quarter ending June
30, 1995 to total approximately $0.27 per BAC, payable to Series I BAC Holders
of record as of the last day in each month during this period.
-15-
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. DISTRIBUTIONS TO BAC HOLDERS - Continued
SERIES II
---------
The following distributions were accrued to BAC Holders of record during
the three months ended March 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
Distributions to Distributions to
BAC Holders BAC Holders
--------------------- ---------------------
Quarter Ended Total Per BAC Total Per BAC
- ------------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C>
March 31 $ 874,465 $ 0.27 $ 809,690 $ 0.25
=========== ======= =========== =======
</TABLE>
Distributions to BAC Holders for the three months ended March 31, 1995 and
1994 were funded as follows:
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash Available for Distribution:
Cash flow from the Partnership's
operations $ 915,996 $ 881,330
Net deposits to working capital reserves (32,609) (63,379)
------------ ------------
Total cash available for distribution $ 883,387 $ 817,951
============ ============
Distributions to:
General partner (1.01%) $ 8,922 $ 8,261
============ ============
BAC Holders (98.99%) $ 874,465 $ 809,690
============ ============
</TABLE>
The General Partner expects the distribution for the quarter ending June
30, 1995 to total approximately $0.27 per BAC, payable to Series II BAC Holders
of record as of the last day in each month during this period.
-16-
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. INCOME TAXES
For income tax purposes, base interest income is accrued when earned. The
accrual of interest is discontinued when, at the time of accrual, ultimate
collectibility of the interest due is considered unlikely. Once a loan has been
placed on a non-accrual status, income is recorded only as cash payments are
received from the borrower until such time as the uncertainty of collection of
unpaid base interest is eliminated. As of December 31, 1993, all loans except
Observatory II were placed on a non-accrual status for income tax purposes;
therefore, income was recognized to the extent of cash received. Contingent
interest from the investment is recognized as revenue when collected. No
contingent interest was recognized for the three months ended March 31, 1995 and
1994.
A publicly traded partnership is treated as a corporation for income tax
purposes unless it meets certain exceptions. To qualify under these exceptions,
the General Partner annually invests in de minimus taxable investments for both
Series I and Series II.
SERIES I
--------
As discussed in Note 2, four of the five investments in Series I mortgage
revenue bonds are accounted for as investments in real estate for financial
statement purposes as of March 31, 1995. However, for federal income tax
purposes, the investments in all of the mortgage revenue bonds are treated as
loans, interest on which is exempt from federal income tax. A reconciliation of
the primary differences between the financial statement net income and municipal
income for tax purposes is as follows:
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Financial statement net income $ 326,207 $ 174,640
Municipal interest income not recognized (1) 755,076 552,788
Rental income, net (2) (343,870) (190,646)
------------ ------------
Municipal income, net for tax purposes $ 737,413 $ 536,782
============ ============
Municipal income per BAC outstanding $ 0.32 $ 0.23
============ ============
</TABLE>
(1) Represents the adjustment for interest income received or receivable during
the period, which was previously eliminated from net income for financial
statement purposes.
(2) Represents net rental income from investments accounted for as real estate.
Although the Partnership accounted for four of the five mortgage loan
investments as real estate for financial statement purposes during the three
-17-
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. INCOME TAXES - Continued
months ended March 31, 1995 and 1994 and reclassified the cash flow from the
properties as rental income and expense, the Partnership continued to charge the
borrowers interest under the terms of the original loans and interest on unpaid
base interest. The Observatory II mortgage revenue bond investment is not shown
in the table below since it pays all debt service currently. The following
tables summarize the full interest payments for the three months ended March 31,
1995 and 1994 that are due to the Partnership from the properties:
<TABLE>
<CAPTION>
For the three months ended March 31, 1995
----------------------------------------------------
Base Base
Interest Interest Current
Current Base Paid From Paid From Base
Interest Properties' Non-Operating Interest
Due(1) Operations Sources(2) Not Paid
------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
Royal Oaks $ 267,324 $ 213,415 $ -- $ 53,909
Trailway Pond 115,122 63,194 -- 51,928
Valley Creek 331,588 237,721 -- 93,867
White Bear Woods 327,731 246,866 -- 80,865
------------ ----------- ------------- ----------
$ 1,041,765 $ 761,196 $ -- $ 280,569
============ =========== ============= ==========
For the three months ended March 31, 1994
----------------------------------------------------
Base Base
Interest Interest Current
Current Base Paid From Paid From Base
Interest Properties' Non-Operating Interest
Due(1) Operations Sources(2) Not Paid
------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
Royal Oaks $ 267,324 $ 147,496 $ -- $ 119,828
Trailway Pond 115,122 48,661 -- 66,461
Valley Creek 331,588 189,255 -- 142,333
White Bear Woods 327,731 178,766 -- 148,965
------------ ----------- ------------- ----------
$ 1,041,765 $ 564,178 $ -- $ 477,587
============ =========== ============= ==========
</TABLE>
(1) Although these loans were placed on non-accrual status for income tax
purposes, the Partnership continues to charge the borrowers interest on
unpaid base interest, which totalled $176,696 and $126,769 for the three
months ended March 31, 1995 and 1994, respectively.
(2) Amounts were funded from reserves provided for from the mortgage loan
proceeds.
-18-
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. INCOME TAXES - Continued
SERIES II
---------
As discussed in Note 2, the five investments in Series II mortgage revenue
bonds are accounted for as investments in real estate for financial statement
purposes as of March 31, 1995. However, for federal income tax purposes, the
investments in these mortgage revenue bonds are treated as loans, interest on
which is exempt from federal income tax. A reconciliation of the primary
differences between the financial statement net income and municipal income for
tax purposes is as follows:
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Financial statement net income $ 425,542 $ 318,421
Municipal interest income not recognized (1) 968,019 934,240
Rental income, net (2) (477,567) (371,333)
------------ ------------
Municipal income, net for tax purposes $ 915,994 $ 881,328
============ ============
Municipal income per BAC outstanding $ 0.28 $ 0.27
============ ============
</TABLE>
(1) Represents the adjustment for interest income received or receivable during
the period, which was previously eliminated from net income for financial
statement purposes.
(2) Represents net rental income from investments accounted for as real estate.
Although the Partnership accounted for all of the mortgage loan investments
as real estate for financial statement purposes during the three months ended
March 31, 1995 and 1994 and reclassified the cash flow from the properties as
rental income and expense, the Partnership continued to charge the borrowers
interest under the terms of the original loans and interest on unpaid base
interest. The following tables summarize the full interest payments for the
three months ended March 31, 1995 and 1994 that are due to the Partnership from
the properties:
-19-
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. INCOME TAXES - Continued
<TABLE>
<CAPTION>
For the three months ended March 31, 1995
----------------------------------------------------
Base Base
Interest Interest Current
Current Base Paid From Paid From Base
Interest Properties' Non-Operating Interest
Due(1) Operations Sources(2) Not Paid
------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
Ethan's Ridge and
Ethan's Glen IIB $ 379,688 $ 310,916 $ -- $ 68,772
Fountain Place 496,375 330,846 -- 165,529
James Street
Crossing 333,939 261,980 -- 71,959
Trailway Pond II 250,750 146,766 -- 103,984
------------ ----------- ------------- ----------
$ 1,460,752 $ 1,050,508 $ -- $ 410,244
============ =========== ============= ==========
For the three months ended March 31, 1994
----------------------------------------------------
Base Base
Interest Interest Current
Current Base Paid From Paid From Base
Interest Properties' Non-Operating Interest
Due(1) Operations Sources(2) Not Paid
------------ ----------- ------------- ----------
<S> <C> <C> <C> <C>
Ethan's Ridge and
Ethan's Glen IIB $ 379,688 $ 297,000 $ -- $ 82,688
Fountain Place 496,375 278,492 -- 217,883
James Street
Crossing 333,939 239,754 -- 94,185
Trailway Pond II 250,750 100,569 -- 150,181
------------ ----------- ------------- ----------
$ 1,460,752 $ 915,815 $ -- $ 544,937
============ =========== ============= ==========
</TABLE>
(1) Although certain loans were placed on non-accrual status for income tax
purposes, the Partnership continues to charge the borrowers interest on
unpaid base interest, which totalled $274,821 and $188,083 for the three
months ended March 31, 1995 and 1994, respectively.
(2) Amounts were funded from reserves provided for from the mortgage loan
proceeds and/or from partners of the borrowers.
5. RELATED PARTY TRANSACTIONS
-20-
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. RELATED PARTY TRANSACTIONS - Continued
The General Partner and its affiliates are entitled to receive
reimbursements from the Partnership for actual costs and expenses incurred in
connection with the operation of the Partnership.
SERIES I
--------
Expense reimbursements to an affiliate of the General Partner for the three
months ended March 31, 1995 and 1994 were $33,044 and $36,375, respectively.
These expenses are included in general and administrative expense in the
consolidated statements of income.
CRICO Mortgage Company, Inc. (CRICO Mortgage), an affiliate of the General
Partner, is entitled to annual mortgage administration and servicing fees from
the borrowers which are payable from operating revenues each month after payment
of debt service on the mortgage loan. Unpaid fees of $1,159,734 and $1,093,242
were due to this affiliate as of March 31, 1995 and December 31, 1994,
respectively. The unpaid fees are payable from available cash flow after
payment of all current and delinquent base interest and accrued interest on
delinquent base interest. If available cash flow from the borrower is
insufficient to pay the fee, it is payable on the earlier of prepayment or
maturity of the loan, after debt repayment. During each of the three months
ended March 31, 1995 and 1994, the fees paid by the borrowers totalled $2,500.
CRICO Mortgage Company, Inc. and two other affiliates of the General
Partner are currently considering a merger with a publicly traded REIT. If the
merger is completed, the right to receive all or a substantial portion of the
accrued and unpaid mortgage administration and servicing fees as of the date of
the merger will be transferred from CRICO Mortgage Company, Inc. to CRI or an
affiliate of CRI. After the merger, the mortgage administration and servicing
fees will be performed by an affiliate of the REIT and mortgage administration
and servicing fees will be paid to that entity. This proposed merger will not
result in any increase in fees or changes in the amount of fees which are
currently payable. The merger is subject to the performance of certain
conditions and there is no guarantee the merger will be consummated.
In addition, CRICO Management of Minnesota, Inc. (CRICO Minnesota), an
affiliate of the General Partner, provided property management services to White
Bear Woods, Trailway Pond, Royal Oaks and Valley Creek through January 31, 1994.
Management fees of $16,916 were paid or accrued to this affiliate of the General
Partner by the properties for the month ended January 31, 1994. On February 1,
1994, CRICO Minnesota contributed its property management contracts and
personnel to CAPREIT Residential Corporation (CAPREIT). CAPREIT was formed by
CRI but is not currently owned or controlled by CRI and/or its affiliates.
-21-
<PAGE>
CAPITAL REALTY INVESTORS TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. RELATED PARTY TRANSACTIONS - Continued
SERIES II
---------
Expense reimbursements to an affiliate of the General Partner for the three
months ended March 31, 1995 and 1994, were $37,613 and $40,258, respectively.
These expenses are included in general and administrative expense in the
consolidated statements of income.
CRICO Mortgage is entitled to annual mortgage administration and servicing
fees from the borrowers which are payable from operating revenues each month
after payment of debt service on the mortgage loan. Unpaid fees of $1,749,672
and $1,670,426 were due to this affiliate as of March 31, 1995 and December 31,
1994, respectively. The unpaid fees are payable from available cash flow after
payment of all current and delinquent base interest and accrued interest on
delinquent base interest. If available cash flow from the borrower is
insufficient to pay the fee, it is payable on the earlier of prepayment or
maturity of the loan, after debt repayment. During the three months ended March
31, 1995 and 1994, no fees were paid by the borrowers.
CRICO Mortgage Company, Inc. and two other affiliates of the General
Partner are currently considering a merger with a publicly traded REIT. If the
merger is completed, the right to receive all or a substantial portion of the
accrued and unpaid mortgage administration and servicing fees as of the date of
the merger will be transferred from CRICO Mortgage Company, Inc. to CRI or an
affiliate of CRI. After the merger, the mortgage administration and servicing
fees will be performed by an affiliate of the REIT and mortgage administration
and servicing fees will be paid to that entity. This proposed merger will not
result in any increase in fees or changes in the amount of fees which are
currently payable. The merger is subject to the performance of certain
conditions and there is no guarantee the merger will be consummated.
In addition, CRICO Minnesota provided property management services to
Trailway Pond II, Ethan's Ridge and Ethan's Glen IIB through January 31, 1994.
Additionally, CRICO Management Northwest, Inc. (CRICO Northwest) provided
property management services to James Street Crossing. Management fees of
$15,446 were paid or accrued to these affiliates of the General Partner by the
properties for the month ended January 31, 1994. On February 1, 1994, CRICO
Minnesota and CRICO Northwest contributed their property management contracts
and personnel to CAPREIT.
-22-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Business
--------
SERIES I
--------
Series I invested in five federally tax-exempt mortgage revenue bonds with
a current aggregate principal amount of $44,155,000. As discussed in the
Partnership's Annual Report filed on Form 10-K for the year ended December 31,
1994, all five properties collateralizing the bonds have been transferred by
foreclosure or deed in lieu of foreclosure to nominees of the Partnership
(Observatory II was subsequently sold to an unaffiliated third party and the
related bond modified). As a result, the Partnership accounts for four of the
five investments as real estate for financial statement purposes. Accordingly,
the consolidated balance sheets reflect the Investments in Real Estate in the
amounts of $30,477,772 and $30,844,339 as of March 31, 1995 and December 31,
1994, respectively, net of accumulated depreciation, based on the lower of cost
or fair value at the date of deed transfer or in-substance foreclosure (ISF).
The Partnership continues to evaluate these investments on a lower of cost or
net realizable basis, taking into consideration the Partnership's intention to
hold these properties for the long term if necessary, and with investor consent,
to recover its recorded investment. The financial statement presentation is
independent of the characterization of the bonds as loans for federal income tax
purposes and the tax-exempt nature of the mortgage revenue bond interest.
Additionally, the Partnership accounts for the investment in the Observatory II
mortgage revenue bond as a loan with a carrying value of $1,600,000 as of both
March 31, 1995 and December 31, 1994.
No significant events have occurred during the three months ended March 31,
1995 in connection with Series I properties.
SERIES II
---------
Series II invested in five federally tax-exempt mortgage revenue bonds with
an aggregate principal amount of $62,608,001. As discussed in the Partnership's
Annual Report filed on Form 10-K for the year ended December 31, 1994, all five
properties collateralizing the bonds have been transferred by deed in lieu of
foreclosure to nominees of the Partnership. As a result, the Partnership
accounts for these investments as real estate for financial statement purposes.
Accordingly, the consolidated balance sheets reflect the Investments in Real
Estate in the amounts of $46,401,746 and $46,900,416 as of March 31, 1995 and
December 31, 1994, respectively, net of accumulated depreciation, based on the
lower of cost or fair value at the date of deed transfer or ISF. The Partnership
continues to evaluate these investments on a lower of cost or net realizable
basis, taking into consideration the Partnership's intention to hold these
properties for the long term if necessary, and with investor consent, to recover
its recorded investment. The financial statement presentation is independent of
the characterization of the bonds as loans for federal income tax purposes and
the tax-exempt nature of the mortgage revenue bond interest.
The following is an update of significant events affecting the Series II
properties during the three months ended March 31, 1995:
-23-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
Ethan's Ridge and Ethan's Glen IIB
- ----------------------------------
In April 1995, Ethan's Ridge and Ethan's Glen IIB suffered damage to
certain roofs due to a severe hail storm. Insurance adjusters are currently
examining the damage to determine the number of affected buildings, and whether
the roofs can be repaired or if replacement is necessary. An estimate of the
damage is not currently available. It is expected that the cost to repair or
replace the damaged roofs will be covered by the property's insurance carrier,
less a minimal deductible. Due to the nature of the required repairs, occupancy
levels at the property are not expected to decrease as a result of ongoing
repair work.
Financial Condition and Liquidity
---------------------------------
The primary sources of the Partnership's future cash flows are expected to
be from receipts of base interest on the mortgage loans, which are dependent
upon the net operating income of the properties. Therefore, the Partnership's
investment in the mortgage revenue bonds is subject to the general risks
inherent to the ownership of real property. These risks include reduction in
rental income due to an inability to maintain occupancy levels, adverse changes
in general economic conditions, and adverse changes in local conditions. The
General Partner expects that the properties transferred to nominees of the
Partnership will continue to generate sufficient cash flow to pay all operating
expenses, meet escrow deposit requirements and pay some, but not all, of the
base interest due to the Partnership. The Partnership has no material
commitments for capital expenditures. However, the nominee owner of James
Street Crossing (Series II) may be required to fund approximately $100,000 to
$150,000 for environmental mitigation if such an obligation is determined to run
with the land at the property. If required, such funding could be provided from
the property's cash flow or from existing replacement reserves. Because the
nominee owner of James Street Crossing believes that the obligation does not run
with the land at the property, the financial statements do not include an
adjustment for this obligation.
In 1991, the U. S. Supreme Court decided a case, Cottage Savings
Association v. Commissioner, that could be interpreted to compromise the tax-
exempt status of mortgage revenue bonds which have been modified. In response
to this decision, in December 1992, the Internal Revenue Service (IRS) issued
proposed regulations in connection with the modification of debt instruments.
If the regulations are adopted in their present form, they would alter existing
authority and curtail the type and extent of modifications that could be made by
a bond owner/lender without adversely affecting the tax-exempt status of bonds.
It is not clear at this time what effect the Cottage Savings decision or the
proposed regulations may have on the Partnership with respect to the bonds
secured by loans on properties currently held by nominees. The General Partner
continues to believe that these bonds remain tax-exempt. The General Partner
will continue its efforts, which include the transfer of title on the properties
to nominees, in an attempt to protect the tax-exempt status of the bonds and the
interest thereon. However, in light of the Cottage Savings decision and the
proposed regulations, there can be no assurance that the General Partner will be
successful in its efforts.
-24-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
Based on current market conditions, to maximize overall yields and residual
proceeds upon the sale or refinancing of the properties acquired in settlement
of loans, it may be necessary for the nominees to hold the properties through
longer periods within the terms of the respective mortgage revenue bonds, rather
than the shorter existing loan terms. On an ongoing basis, the General Partner
monitors the real estate market to assess an appropriate holding period for the
properties. If conditions warrant in future years, the General Partner may
recommend for investor approval extension of certain mortgage loan maturity
dates and arrange for related adjustments of the pertinent mortgage revenue
bonds, as needed.
The Partnership expects to continue to make distributions to BAC Holders on
a semi-annual basis. There are no legal restrictions on the Partnership's
present or future ability to make cash distributions. However, property level
reserves are depleted and estimated cash flows from the properties' operations
are insufficient to pay full monthly base interest (except for Observatory II in
Series I), therefore, the distributions to BAC Holders may fluctuate from
current levels. The General Partner has undertaken various measures in an
attempt to stabilize the properties' operations. Despite these efforts, the
amounts paid to the Partnership from the properties' operations may be expected
to fluctuate from period to period due to changes in occupancy rates, rental
rates, operating expenses and other variables. Based upon the current
operations of the Partnership, the General Partner expects the 1995
distribution for both Series I and Series II to approximate $1.08 per BAC.
SERIES I
--------
The following distributions were accrued to BAC Holders of record during
the three months ended March 31, 1995 and 1994:
-25-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
1995 1994
Distributions to Distributions to
BAC Holders BAC Holders
--------------------- ---------------------
Quarter Ended Total Per BAC Total Per BAC
- ------------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C>
March 31 $ 615,600 $ 0.27 $ 570,000 $ 0.25
=========== ======= =========== =======
</TABLE>
Distributions to BAC Holders for the three months ended March 31, 1995 and
1994 were funded as follows:
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash Available for Distribution:
Cash flow from the Partnership's
operations $ 737,412 $ 539,796
Net (deposits to) withdrawals from working
capital reserves (115,531) 36,020
------------ ------------
Total cash available for distribution $ 621,881 $ 575,816
============ ============
Distributions to:
General partner (1.01%) $ 6,281 $ 5,816
============ ============
BAC Holders (98.99%) $ 615,600 $ 570,000
============ ============
</TABLE>
The General Partner expects the distribution for the quarter ending June
30, 1995 to total approximately $0.27 per BAC, payable to Series I BAC Holders
of record as of the last day in each month during this period.
As of March 31, 1995, Series I had cash and cash equivalents of $100,361,
unrestricted marketable securities of $563,603, restricted cash and cash
equivalents of $1,604,307 and working capital reserves invested in marketable
securities of $1,037,460. Marketable securities consist of tax-exempt municipal
bonds which generally contain a seven-day put option with established banks or
-26-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
brokerage houses. Realized gains and losses on the sale of marketable
securities was determined on a specific identification basis. There were no net
unrealized holding gains or losses recognized during the three months ended
March 31, 1995 as the cost for the tax-exempt municipal bonds approximated
market value throughout the first quarter of 1995.
The Partnership closely monitors its cash flow and liquidity position for
Series I in an effort to ensure that sufficient cash is available for operating
requirements and distributions to BAC Holders. Series I's net cash provided by
operating activities, which consists primarily of receipt of base interest on
mortgage loans, for the three months ended March 31, 1995, was adequate to
support operating requirements and declared distributions to BAC Holders and the
General Partners. The Partnership estimates that future cash flows from receipt
of base interest on mortgage loans, in the aggregate, will be sufficient to pay
operating expenses and make distributions to BAC Holders.
SERIES II
---------
The following distributions were accrued to BAC Holders of record during
the three months ended March 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
Distributions to Distributions to
BAC Holders BAC Holders
--------------------- ---------------------
Quarter Ended Total Per BAC Total Per BAC
- ------------- ----------- ------- ----------- -------
<S> <C> <C> <C> <C>
March 31 $ 874,465 $ 0.27 $ 809,690 $ 0.25
=========== ======= =========== =======
</TABLE>
Distributions to BAC Holders for the three months ended March 31, 1995 and
1994 were funded as follows:
-27-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash Available for Distribution:
Cash flow from the Partnership's
operations $ 915,996 $ 881,330
Net deposits to working capital reserves (32,609) (63,379)
------------ ------------
Total cash available for distribution $ 883,387 $ 817,951
============ ============
Distributions to:
General partner (1.01%) $ 8,922 $ 8,261
============ ============
BAC Holders (98.99%) $ 874,465 $ 809,690
============ ============
</TABLE>
The General Partner expects the distribution for the quarter ending June
30, 1995 to total approximately $0.27 per BAC, payable to Series II BAC Holders
of record as of the last day in each month during this period.
As of March 31, 1995, Series II had cash and cash equivalents of $11,355,
unrestricted marketable securities of $842,870, restricted cash and cash
equivalents of $1,931,944 and working capital reserves invested in marketable
securities of $1,679,355. Marketable securities consist of tax-exempt municipal
bonds which generally contain a seven-day put option with established banks or
brokerage houses. Realized gains and losses on the sale of marketable
securities was determined on a specific identification basis. There were no net
unrealized holding gains or losses recognized during the three months ended
March 31, 1995 as the cost for the tax-exempt municipal bonds approximated
market value throughout the first quarter of 1995.
The Partnership closely monitors its cash flow and liquidity position for
Series II in an effort to ensure that sufficient cash is available for operating
requirements and distributions to BAC Holders. Series II's net cash provided by
operating activities, which consists primarily of receipt of base interest on
mortgage loans, for the three months ended March 31, 1995, was adequate to
support operating requirements and declared distributions to BAC Holders and the
General Partners. The Partnership estimates that future cash flows from receipt
of base interest on mortgage loans, in the aggregate, will be sufficient to pay
operating expenses and make distributions to BAC Holders.
-28-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
Results of Operations
---------------------
SERIES I
--------
Series I's net income for the three months ended March 31, 1995 increased
from the corresponding period in 1994 primarily due to an increase in rental
revenue resulting from an increase in rental rates and occupancy levels at all
properties, and a decrease in depreciation expense as a result of the use of an
accelerated method for personal property. Contributing to the increase in net
income was a decrease in rental expenses primarily due to a reduction in non-
recurring repairs and maintenance costs at certain properties.
SERIES II
---------
Series II's net income for the three months ended March 31, 1995 increased
from the corresponding period in 1994 primarily due to an increase in rental
revenue resulting from an increase in rental rates and occupancy levels at
certain properties.
Presented below is a summary of the rental operations for the three
months ended March 31, 1995 and 1994 of each of the properties accounted for as
Investments in Real Estate in which Series I and II have invested.
-29-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
SERIES I
--------
<TABLE>
<CAPTION>
Average Physical
Name of Investment No. of Occupancy
Rental Property Rental for the three months
and Location Units ended March 31,
- ------------------ ------ --------------------
1995 1994
---- ----
<S> <C> <C> <C>
Observatory II
Burnsville, MN(3) 75 100% 98%
Royal Oaks
Eagan, MN 231 100% 93%
Trailway Pond
Burnsville, MN 75 97% 94%
Valley Creek
Woodbury, MN 225 96% 92%
White Bear Woods
White Bear Lake, MN 225 97% 93%
----- --- ---
831 98% 93%
===== === ===
SERIES II
---------
Average Physical
Name of Investment No. of Occupancy
Rental Property Rental for the three months
and Location Units ended March 31,
- ------------------ ------ --------------------
1995 1994
---- ----
<S> <C> <C> <C>
Ethan's Ridge and
Ethan's Glen IIB
Kansas City, MO 364 94% 93%
Fountain Place
Eden Prairie,MN 332 94% 94%
James Street Crossing
Kent, WA 300 98% 93%
Trailway Pond II
Burnsville, MN 165 97% 88%
----- --- ---
1,161 95% 93%
===== === ===
</TABLE>
-30-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
SERIES I
--------
<TABLE>
<CAPTION>
Base Interest Paid From
Name of Investment No. of Properties' Operations(1)
Rental Property Rental for the three months ended
and Location Units March 31,
- ------------------ ------ ---------------------------
1995 1994
------------ ------------
<S> <C> <C> <C>
Observatory II
Burnsville, MN(3) 75 $ -- $ --
Royal Oaks
Eagan, MN 231 213,415 147,496
Trailway Pond
Burnsville, MN 75 63,194 48,661
Valley Creek
Woodbury, MN 225 237,721 189,255
White Bear Woods
White Bear Lake, MN 225 246,866 178,766
----- ------------ ------------
831 $ 761,196 $ 564,178
===== ============ ============
SERIES II
---------
Base Interest Paid From
Name of Investment No. of Properties' Operations(1)
Rental Property Rental for the three months ended
and Location Units March 31,
- ------------------ ------ ---------------------------
1995 1994
------------ ------------
<S> <C> <C> <C>
Ethan's Ridge and
Ethan's Glen IIB
Kansas City, MO 364 $ 310,916 $ 297,000
Fountain Place
Eden Prairie,MN 332 330,846 278,492
James Street Crossing
Kent, WA 300 261,980 239,754
Trailway Pond II
Burnsville, MN 165 146,766 100,569
----- ------------ ------------
1,161 $ 1,050,508 $ 915,815
===== ============ ============
</TABLE>
-31-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
SERIES I
--------
<TABLE>
<CAPTION>
Net Rental Operating
Name of Investment No. of Income (2)
Rental Property Rental for the three months ended
and Location Units March 31,
- ------------------ ------ --------------------------
1995 1994
----------- -----------
<S> <C> <C> <C>
Observatory II
Burnsville, MN(3) 75 $ -- $ --
Royal Oaks
Eagan, MN 231 242,031 185,710
Trailway Pond
Burnsville, MN 75 60,594 53,851
Valley Creek
Woodbury, MN 225 238,576 195,782
White Bear Woods
White Bear Lake, MN 225 224,237 223,217
----- ----------- ------------
831 $ 765,438 $ 658,560
===== =========== ============
SERIES II
---------
Net Rental Operating
Name of Investment No. of Income (2)
Rental Property Rental for the three months ended
and Location Units March 31,
- ------------------ ------ --------------------------
1995 1994
----------- -----------
<S> <C> <C> <C>
Ethan's Ridge and
Ethan's Glen IIB
Kansas City, MO 364 $ 317,925 $ 306,965
Fountain Place
Eden Prairie,MN 332 371,131 326,337
James Street Crossing
Kent, WA 300 244,787 277,054
Trailway Pond II
Burnsville, MN 165 140,705 110,416
----- ----------- -----------
1,161 $ 1,074,548 $ 1,020,772
===== =========== ===========
</TABLE>
-32-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
(1) Exclusive of amount paid to the Partnership from properties' reserves,
mortgage loan proceeds, partners of the borrowers or other sources. No
such amounts for Series I or Series II were paid for the three months ended
March 31, 1995 and 1994.
(2) Calculated from the respective properties' unaudited financial statements
as net loss adjusted for depreciation, amortization, mortgage loan interest
and mortgage servicing and administration fees.
(3) Rental operating information is not provided for the Observatory II
investment because it is accounted for as an Investment in Mortgage Revenue
Bond and is paying full base interest.
PART II. OTHER INFORMATION
-----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
No reports on Form 8-K were filed with the Commission during the
quarter ended March 31, 1995.
All other items are not applicable.
-33-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Capital Realty Investors Tax Exempt
Fund Limited Partnership
By: CRITEF Associates Limited
Partnership
General Partner
By: C.R.I., Inc.
General Partner
June 12, 1995 By: /s/ Richard J. Palmer
- ------------------------ -----------------------------------
Date Richard J. Palmer
Senior Vice President/Finance
Signing on behalf of the Registrant
and as Principal Accounting Officer
-34-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SUMMARY CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 111,716
<SECURITIES> 4,123,288
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 94,103,671
<DEPRECIATION> 17,224,153
<TOTAL-ASSETS> 86,933,667
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 79,349,053
<TOTAL-LIABILITY-AND-EQUITY> 86,933,667
<SALES> 0
<TOTAL-REVENUES> 3,607,646
<CGS> 0
<TOTAL-COSTS> 2,718,854
<OTHER-EXPENSES> 137,043
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 751,749
<INCOME-TAX> 0
<INCOME-CONTINUING> 751,749
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 751,749
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
