SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
For the period ended September 30, 1994 Commission file number
0-15725
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 52-1449733
(State of organization) (I.R.S. Employer Identification No.)
218 North Charles Street, Suite 500, Baltimore, Maryland 21201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(410)962-0595
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>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
Part I- FINANCIAL INFORMATION
Item
1. Financial Statements
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II- OTHER INFORMATION
Item
1. Legal Proceedings
2. Changes in Securities
3. Defaults Upon Senior Securities
4. Submission of Matters to a Vote of Security Holders
5. Other Information
6. Exhibits and Reports on Form 8-K
<PAGE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
BALANCE SHEETS
SERIES I
<TABLE>
<CAPTION>
September 30, 1994 December 31,
(Unaudited) 1993
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $2,346,316 $5,032,089
Interest receivable 296,036 296,040
Investment in mortgage revenue bonds (Note 2) 44,607,900 44,607,900
Investment in parity working capital loans (Note 2) 934,600 934,600
Investment in real estate partnerships (Note 3) 106,066,907 107,970,711
Other assets (Note 5) 690,306 18,060
--------------- ---------------
TOTAL ASSETS $154,942,065 $158,859,400
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $303,214 $71,793
Distributions payable - 5,052,141
Due to affiliates (Note 4) 28,649 16,051
--------------- ---------------
TOTAL LIABILITIES $331,863 $5,139,985
--------------- ---------------
Partners' Capital
General Partners (257,504) (263,970)
Limited Partners (beneficial assignee certificates-
issued and outstanding 200,000 certificates) 154,867,706 153,983,385
--------------- ---------------
TOTAL PARTNERS' CAPITAL 154,610,202 153,719,415
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, 5, & 6)
TOTAL LIABILITIES AND PARTNERS' CAPITAL $154,942,065 $158,859,400
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENTS OF INCOME- (UNAUDITED)
SERIES I
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1994 1993 1994 1993
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCOME
Interest on mortgage revenue bonds $867,141 $1,052,641 $2,601,422 $3,157,922
Interest on parity working capital loans 18,178 21,678 54,534 65,034
Non-taxable interest on short-term investments 6,280 9,261 20,537 24,366
Taxable interest on short-term investments 28,675 18,720 66,481 56,276
Equity in property net income 1,109,651 1,106,767 3,881,685 3,327,756
--------------- --------------- --------------- ---------------
TOTAL INCOME 2,029,925 2,209,067 6,624,659 6,631,354
--------------- --------------- --------------- ---------------
EXPENSES
Operating expenses (Note 4) 182,324 208,600 680,900 638,647
Valuation adjustment related to investment in
real estate - - - 4,600,000
--------------- --------------- --------------- ---------------
TOTAL EXPENSES 182,324 208,600 680,900 5,238,647
--------------- --------------- --------------- ---------------
NET INCOME $1,847,601 $2,000,467 $5,943,759 $1,392,707
=============== =============== =============== ===============
NET INCOME ALLOCATED TO GENERAL PARTNERS $18,476 $20,005 $59,438 $13,927
=============== =============== =============== ===============
NET INCOME ALLOCATED TO LIMITED PARTNERS $1,829,125 $1,980,462 $5,884,321 $1,378,780
=============== =============== =============== ===============
NET INCOME PER BAC $9.15 $9.90 $29.42 $6.89
=============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS- (UNAUDITED)
SERIES I
<TABLE>
<CAPTION>
For the nine For the nine
months ended months ended
September 30, September 30,
1994 1993
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $5,943,759 $1,392,707
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in property net income (3,881,685) (3,327,756)
Other changes in investment in real
estate partnerships 144 (449)
Valuation adjustments related to investment
in real estate partnerships - 4,600,000
Interest distributions from investment in
real estate partnerships 5,785,345 4,962,618
Interest receivable transferred to investment in
real estate partnerships - (63,949)
(Increase) decrease in interest receivable 4 28,765
(Increase) decrease in other assets (672,246) 20,405
Increase (decrease) in accounts payable
and accrued expenses 231,421 (27,675)
Increase (decrease) in due to affiliates 12,598 (31,451)
--------------- ---------------
Net cash provided by operating activities 7,419,340 7,553,215
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners (10,105,113) (10,103,816)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (2,685,773) (2,550,601)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 5,032,089 4,931,455
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,346,316 $2,380,854
=============== ===============
DISCLOSURE OF NON-CASH ACTIVITIES:
Transfer of investment in mortgage revenue
bonds and working capital loans to
investment in real estate partnerships - $9,450,000
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SERIES I
FOR THE PERIOD DECEMBER 31, 1990 THROUGH SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
LIMITED PARTNERS
BENEFICIAL
ASSIGNEE GENERAL
CERTIFICATES PARTNERS TOTAL
---------------- --------------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1990 $173,622,850 ($76,297) $173,546,553
Net income 7,242,370 73,155 7,315,525
Distribution to partners (10,500,000) (98,983) (10,598,983)
---------------- --------------- ---------------
Balance, December 31, 1991 170,365,220 (102,125) 170,263,095
Net income 1,032,891 10,433 1,043,324
Distribution to partners (10,250,000) (98,581) (10,348,581)
---------------- --------------- ---------------
Balance, December 31, 1992 161,148,111 (190,273) 160,957,838
Net income 2,835,274 28,639 2,863,913
Distribution to partners (10,000,000) (102,336) (10,102,336)
---------------- --------------- ---------------
Balance, December 31, 1993 $153,983,385 ($263,970) 153,719,415
Net income (unaudited) 5,884,321 59,438 5,943,759
Distribution to partners (unaudited) (5,000,000) (52,972) (5,052,972)
---------------- --------------- ---------------
Balance, September 30, 1994 (unaudited) $154,867,706 ($257,504) $154,610,202
================ =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
BALANCE SHEETS
SERIES II
<TABLE>
<CAPTION>
September 30, 1994 December 31,
(Unaudited) 1993
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $966,305 $2,984,869
Short-term investments 250,000 300,000
Interest receivable 198,907 200,107
Investment in mortgage revenue bonds (Note 2) 29,624,600 29,624,600
Investment in parity working capital loans (Note 2) 815,400 815,400
Investment in real estate partnerships (Note 3) 48,432,321 49,417,599
Other assets (Note 5) 411,845 8,140
--------------- ---------------
TOTAL ASSETS $80,699,378 $83,350,715
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $144,020 $41,804
Distributions payable - 2,915,280
Due to affiliates (Note 4) 13,724 7,291
--------------- ---------------
TOTAL LIABILITIES 157,744 2,964,375
--------------- ---------------
Partners' Capital
General Partners (66,949) (69,624)
Limited Partners (beneficial assignee certificates-
issued and outstanding 96,256 certificates) 80,608,583 80,455,964
--------------- ---------------
TOTAL PARTNERS' CAPITAL 80,541,634 80,386,340
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, 5 & 6)
TOTAL LIABILITIES AND PARTNERS' CAPITAL $80,699,378 $83,350,715
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENTS OF INCOME- (UNAUDITED)
SERIES II
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1994 1993 1994 1993
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCOME
Interest on mortgage revenue bonds $581,132 $858,632 $1,743,398 $2,575,898
Interest on parity working capital loans 15,889 17,889 47,667 53,667
Non-taxable interest on short-term investments 4,614 8,452 16,266 31,319
Taxable interest on short-term investments 14,888 14,297 35,571 41,627
Equity in property net income 584,209 402,126 1,343,093 1,123,131
--------------- --------------- --------------- ---------------
TOTAL INCOME 1,200,732 1,301,396 3,185,995 3,825,642
--------------- --------------- --------------- ---------------
EXPENSES
Operating expenses (Note 4) 112,751 79,360 358,057 271,239
Valuation adjustments related to investment in
real estate partnerships (Note 3) - 250,000 - 250,000
--------------- --------------- --------------- ---------------
TOTAL EXPENSES 112,751 329,360 358,057 521,239
=============== =============== =============== ===============
NET INCOME $1,087,981 $972,036 $2,827,938 $3,304,403
=============== =============== =============== ===============
NET INCOME ALLOCATED TO GENERAL PARTNERS $10,880 $9,720 $28,279 $33,044
=============== =============== =============== ===============
NET INCOME ALLOCATED TO LIMITED PARTNERS $1,077,101 $962,316 $2,799,659 $3,271,359
=============== =============== =============== ===============
NET INCOME PER BAC $11.19 $10.00 $29.09 $33.99
=============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS- (UNAUDITED)
SERIES II
<TABLE>
<CAPTION>
For the nine For the nine
months ended months ended
September 30, September 30,
1994 1993
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,827,938 $3,304,403
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in property net income (1,343,093) (1,123,131)
Valuation adjustment related to investment in
real estate partnerships - 250,000
Interest distributions from investment in
real estate partnerships 2,328,371 1,620,268
(Increase) decrease in interest receivable 1,200 (111,945)
Increase in other assets (403,705) -
Increase (decrease) in accounts payable
and accrued expenses 102,216 (1,067)
Increase (decrease) in due to affiliates 6,433 (21,515)
--------------- ---------------
Net cash provided by operating activities 3,519,360 3,917,013
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of short-term investments 50,000 -
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners (5,587,924) (5,826,744)
--------------- ---------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (2,018,564) (1,909,731)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 2,984,869 3,503,766
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $966,305 $1,594,035
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SERIES II
FOR THE PERIOD DECEMBER 31, 1990 THROUGH SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
LIMITED PARTNERS
BENEFICIAL
ASSIGNEE GENERAL
CERTIFICATES PARTNERS TOTAL
---------------- --------------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1990 $89,868,462 ($1,522) $89,866,940
Net income 2,590,010 26,162 2,616,172
Distribution to partners (6,737,920) (56,831) (6,794,751)
---------------- --------------- ---------------
Balance, December 31, 1991 85,720,552 (32,191) 85,688,361
Net income 3,720,799 37,584 3,758,383
Distribution to partners (6,016,000) (50,224) (6,066,224)
---------------- --------------- ---------------
Balance, December 31, 1992 83,425,351 (44,831) 83,380,520
Net income 2,805,974 28,343 2,834,317
Distribution to partners (5,775,361) (53,136) (5,828,497)
---------------- --------------- ---------------
Balance, December 31, 1993 $80,455,964 ($69,624) $80,386,340
Net income (unaudited) 2,799,659 28,279 2,827,938
Distribution to partners (unaudited) (2,647,040) (25,604) (2,672,644)
---------------- --------------- ---------------
Balance, September 30, 1994 (unaudited) $80,608,583 ($66,949) $80,541,634
================ =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
(SERIES I AND SERIES II)
NOTE 1 - STATEMENT OF INFORMATION FURNISHED
The accompanying unaudited financial statements have been
prepared in accordance with Form 10-Q instructions and in the
opinion of management contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial
position as of September 30, 1994, the results of operations and
cash flows for the periods ended September 30, 1994 and 1993.
These results have been determined on the basis of generally
accepted accounting principles and practices applied consistently
with those used in the preparation of the Partnership's 1993
Annual Report on Form 10-K.
Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that the accompanying financial statements be read
in conjunction with the financial statements and notes thereto
included in the Partnership's 1993 Annual Report on Form 10-K.
NOTE 2 - INVESTMENT IN MORTGAGE REVENUE
BONDS AND PARITY WORKING CAPITAL LOANS
The Partnership has invested in various mortgage revenue bonds,
whose proceeds were used to make nonrecourse participating first
mortgage loans on multifamily housing developments. The
Partnership's rights and specific terms are defined by the various
loan documents which were negotiated at the time of settlement.
The basic terms and structure of each transaction were described
in Note 3 to the December 31, 1993 financial statements included
in Form 10-K.
As of September 30, 1994, Series I held 14 mortgage revenue
bonds, five of which are treated as investments in mortgage
revenue bonds aggregating $44,607,900. Series II held nine
mortgage revenue bonds at September 30, 1994, three of which
are treated as investments in mortgage revenue bonds aggregating
$29,624,600. The remaining Series I and Series II mortgage
revenue bonds are treated as investments in real estate
partnerships as required by generally accepted accounting
principles (see also Note 3).
Lakeview: As of September 30, 1994, the borrowing partnership
for Lakeview Garden Apartments was not in monetary default of
the loan agreement. However, project cash flow is not adequate
to pay the full monthly debt service and property-level reserves,
which have supplemented interest payments from property
operations, will soon be exhausted. Deficits in base interest are
anticipated to occur in the fourth quarter of 1994. As a result, the
Managing General Partner began negotiations to transfer the deed
in-lieu of foreclosure to a New Borrower. The transfer of the
deed may take place in the first quarter of 1995.
Descriptions of the various mortgage revenue bonds and working
capital loans owned by the Partnership at September 30, 1994 are
as follows:
<PAGE>
<TABLE>
<CAPTION>
Series I
Investment in Mortgage Base First Tier
Revenue Bonds and Parity Interest Contingent Maturity Face Carrying
Working Capital Loans (Note 2) Rate Rate Date Amount Amount
- - ----------------------------------- --------------- ---------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Alban Place Apartments 7.875 2.375 Oct. 2008 $10,500,000 $10,500,000
Frederick, MD
Alban Place Limited Partnership
Northridge Park Apartments 7.500 2.000 June 2012 8,950,000 8,950,000
Salinas, CA
Northridge Park Phase II
Lakeview Garden Apartments 7.750 2.500 Aug. 2007 9,307,500 9,307,500
Dade Co., FL
Lakeview Garden Apartments
Limited Partnership
Riverset Apartments 7.875 2.100 Nov. 1999 6,535,000 6,535,000
Memphis, TN
Auction Street Associates
Limited Partnership
Villa Hialeah 7.875 2.375 Oct. 2009 10,250,000 10,250,000
Hialeah, FL
Shelter Group South East -
Hialeah, A Limited Partnership
------------ ---------------
Series I Mortgage Revenue
Bond and Parity Working
Capital Loan Investment Total 45,542,500 45,542,500 (1)
============ ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Date of In- Base First Tier
Series I Investment in Real Substance Interest Contingent Maturity Face Carrying
Estate Partnerships (Note 3) Foreclosure Rate Rate Date Amount Amount
- - ----------------------------------- --------------- ---------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Barkley Place Sept. 7, 1988 8.000 2.250 May 2011 9,630,000 7,383,663
Fort Myers, FL
Barkley Place Limited Partnership
The Montclair Mar. 3, 1989 7.875 2.375 Dec. 2015 15,465,000 9,400,303
Springfield, MO
Montclair Limited Partnership
Newport Village Aug. 31, 1989 7.875 2.375 Dec. 2010 10,880,000 8,792,838
Thornton, CO
Newport Village Limited
Partnership
Nicollet Ridge Sept. 1, 1990 7.875 2.375 Dec. 2010 20,340,000 15,717,929
Burnsville, MN
Nicollet Ridge Limited
Partnership
Newport-on-Seven Dec. 1, 1991 8.125 2.375 Aug. 2008 10,800,000 7,739,388
St. Louis Park, MN
St. Louis Park Housing Partners,
A Limited Partnership
Steeplechase Falls Apartments Feb. 1, 1991 7.875 2.375 Dec. 2008 18,100,000 17,079,077
Knoxville, TN
Steeplechase Falls Limited
Partnership
North Pointe Apartments Dec. 31, 1991 7.875 2.375 Aug. 2006 25,850,000 20,197,425
San Bernardino, CA
Cal-Shel Limited Partnership
Creekside Village Apartments Dec. 31, 1992 7.500 2.250 Nov. 2009 11,985,000 10,481,572
Sacramento, CA
Creekside Village Limited
Partnership
Willowgreen Apartments Sep. 30, 1993 8.000 2.250 Dec. 2010 9,450,000 9,274,712
Tacoma, WA
Willowgreen Associates
Limited Partnership --------------- ---------------
Series I Investment in
Real Estate Partnerships Total 132,500,000 106,066,907
--------------- ---------------
Series I Total $178,042,500 $151,609,407
=============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Series II
Investment in Mortgage Base First Tier
Revenue Bonds and Parity Interest Contingent Maturity Face Carrying
Working Capital Loans (Note 2) Rate Rate Date Amount Amount
- - ----------------------------------- --------------- ---------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Riverset Apartments 7.875 2.100 Nov. 1999 $12,640,000 $12,640,000
Memphis, TN
Auction Street Associates
Limited Partnership
Southfork Village Apartments 7.875 2.375 Jan. 2009 10,550,000 10,550,000
Lakeville, MN
Southfork Apartments
Limited Partnership
Emerald Hills Apartments 7.750 2.500 Apr. 2008 7,250,000 7,250,000
Issaquah, WA
Axelrod Emerald Hills Association
Limited Partnership ------------ ---------------
Series II Mortgage Revenue
Bond and Working Capital
Loan Investment Total 30,440,000 30,440,000 (2)
============ ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Date of In- Base First Tier
Series II Investment in Real Substance Interest Contingent Maturity Face Carrying
Estate Partnerships (Note 3) Foreclosure Rate Rate Date Amount Amount
- - ----------------------------------- --------------- ---------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Mallard Cove I June 1, 1991 7.300 2.375 Jan. 2006 2,610,000 2,156,354
Everett, WA
Mallard Cove I Limited
Partnership
Mallard Cove II June 1, 1991 8.094 2.376 Jan. 2006 6,740,000 6,271,820
Everett, WA
Mallard Cove II Limited
Partnership
Gilman Meadows Apartments June 1, 1991 8.000 2.250 Apr. 2007 7,100,000 6,681,220
Issaquah, WA
Gilman Meadows Limited
Partnership
The Meadows Apartments Sept. 30, 1991 7.625 2.500 Jan. 2008 7,200,000 6,826,713
Memphis, TN
Meadows Limited Partnership
Whispering Lake Dec. 31, 1991 7.625 2.250 Dec. 2007 18,190,000 13,525,852
Kansas City, MO
Whispering Lake Limited Partnership
Hamilton Chase Dec. 31, 1993 8.000 2.250 Aug. 2006 13,975,000 12,970,362
Chattanooga, TN
Hamilton Grove Limited
Partnership --------------- ---------------
Series II Investment in
Real Estate Partnerships Total 55,815,000 48,432,321
--------------- ---------------
Series II Total $86,255,000 $78,872,321
=============== ===============
<FN>
(1) Amount includes $44,607,900 of mortgage revenue bonds and $934,600 of parity working capital loans.
(2) Amount includes $29,624,600 of mortgage revenue bonds and $815,400 of parity working capital loans.
</TABLE>
<PAGE>
The Managing General Partner periodically evaluates the carrying
values of investments in mortgage revenue bonds and working
capital loans. There were no valuation adjustments on the
investment in mortgage revenue bonds and working capital loans
for the quarters ended September 30, 1994 and 1993, as the
Managing General Partner's estimate of net realizable value
exceeded the respective carrying value for each investment. The
Managing General Partner will continue to evaluate the need for
valuation allowances in the future as circumstances change.
NOTE 3 - INVESTMENT IN REAL ESTATE
PARTNERSHIPS
As previously discussed in Note 4 to the December 31, 1993
financial statements included in Form 10-K, the Partnership
accounts for certain investments in mortgage revenue bonds as
investments in real estate partnerships. This accounting treatment
is for financial reporting purposes only and does not affect the
income reported for federal income tax purposes, the amount of
distributions to investors or the Managing General Partner's
intentions related to other matters including ongoing legal actions,
if any. The Partnership reclassified all of the current investments
in real estate partnerships (nine in Series I and six in Series II)
prior to 1994.
The Partnership continues to share in earnings of properties
treated as investments in real estate partnerships in accordance
with the original terms of the mortgage loans collateralizing the
mortgage revenue bonds. For those properties owned by
partnerships controlled by SCA Successor, Inc., an affiliate of the
Managing General Partner, the Partnership has not waived default;
however, the Managing General Partner has no plans or intentions
to accelerate the maturity of the mortgage loans. In addition, the
Partnership is responsible for any post-transfer operating deficits
incurred. No operating deficits were funded by the Partnership
during the first nine months of 1994 or 1993.
For investments accounted for as investments in real estate
partnerships, Series I recognized net operating income after
depreciation of approximately $3,882,000 for nine properties and
$3,328,000 for eight properties while Series II recognized
approximately $1,343,000 for six properties and $1,123,000 for
five properties for the nine months ended September 30, 1994 and
1993, respectively. For those same periods and for the same
number of properties, Series I collected interest payments of
approximately $5,785,000 and $4,963,000 and Series II collected
approximately $2,328,000 and $1,620,000.
The Managing General Partner periodically evaluates the carrying
values of investments in real estate partnerships. During the third
quarter of 1994, no valuation adjustments were made as the
relevant estimate of net realizable value or fair value, as the case
may be, exceeded the respective carrying value for each
investment. In 1993, Series II recorded a valuation adjustment of
$250,000 for Mallard Cove I during the third quarter while Series
I recorded a valuation adjustment of $4,600,000 for North Pointe
(formerly Shandin Hills) during the second quarter. The
Managing General Partner will continue to evaluate the need for
valuation allowances in the future as circumstances change.
Legal and Other
The following summarizes the status of legal and other matters
affecting the investments in real estate partnerships since
December 31, 1993.
Series I
Creekside: Under the terms of the settlement agreement reached
with the guarantor as previously discussed in Note 4 to the
December 31, 1993 financial statements included in form 10-K,
the guarantor paid $12,400 to Series I in August 1994. This
represents $10,000 in principal owed plus $2,400 in interest. The
remaining $20,000 owed will be paid in two installments of
$10,000 plus interest. These payments are due on or before
August 31, 1995 and August 31, 1996.
Willowgreen: As previously discussed in Note 4 to the
December 31, 1993 financial statements included in Form 10-K,
Willowgreen's original borrower defaulted on the mortgage thus
initiating workout discussions. The Managing General Partner has
reached an agreement with the original borrower to take title to
the property and is in receipt of the deed transfer.
Series II
Hamilton Chase: On February 24, 1994, the Managing General
Partner entered into an agreement with the original borrower
which provided for SCA Successor, Inc. to take the place of the
original borrowing partnership's managing general partner. This
agreement resulted from the borrower's failure to pay its full debt
service obligation. The amended partnership agreement was
executed on June 13, 1994 thus completing the workout
negotiations.
During the six months ended June 30, 1994, the Managing
General Partner set aside approximately $75,000 of property cash
flow to fully fund the tax and insurance escrow accounts which
the original borrower had refused to fund. Upon the transfer of
the property, SCA Successor, Inc. determined that approximately
$150,000 needs to be spent on physical improvements. These
repairs are expected to be completed by the Spring of 1995.
Summarized Financial Information
Combined financial information for the investments in real estate
is presented below. This summary includes the results of
operations of the properties subsequent to their respective
effective dates for reclassification to investments in real estate. In
Series I, the combined results of operations includes nine
properties for 1994 and eight for 1993 while in Series II it
includes six and five for 1994 and 1993, respectively. The table
in Note 2 should be referenced for the effective dates of
reclassification.
<PAGE>
<TABLE>
<CAPTION>
Series I
Combined Financial Position - (unaudited) September 30, December 31,
(in 000's) 1994 1993
------------ ------------
<S> <C> <C>
Land, buildings and equipment,
net of accumulated depreciation $114,429 $116,212
Other assets 2,823 2,342
------------ ------------
Total Assets $117,252 $118,554
============ ============
Liabilities due to the Partnership
including bonds $150,196 $148,070
Other liabilities 2,735 2,566
Partners' deficit (35,679) (32,082)
------------ ------------
Total liabilities and partners' deficit $117,252 $118,554
============ ============
</table)
</TABLE>
<TABLE>
<CAPTION>
Combined Results of Operations - (unaudited)
(in 000's) For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1994 1993 1994 1993
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Revenues $4,810 $4,259 $14,237 $12,643
Operating expenses 2,982 2,470 8,152 7,268
------------ ------------ -------------- --------------
Net operating income 1,828 1,789 6,085 5,375
Depreciation 718 682 2,203 2,047
------------ ------------ -------------- --------------
Net Income $1,110 $1,107 $3,882 $3,328
============ ============ ============== ==============
</table)
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Series II
Combined Financial Position - (unaudited) September 30, December 31,
(in 000's) 1994 1993
------------ ------------
<S> <C> <C>
Land, buildings and equipment,
net of accumulated depreciation $45,985 $47,097
Other assets 1,378 998
------------ ------------
Total Assets $47,363 $48,095
============ ============
Liabilities due to the Partnership
including bonds $57,279 $55,729
Other liabilities 958 1,473
Partners' deficit (10,874) (9,107)
------------ ------------
Total liabilities and partners' deficit $47,363 $48,095
============ ============
</table)
</TABLE>
<TABLE>
<CAPTION>
Combined Results of Operations - (unaudited)
(in 000's) For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1994 1993 1994 1993
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Revenues $1,890 $1,282 $5,582 $3,814
Operating expenses 926 673 3,099 2,073
------------ ------------ -------------- --------------
Net operating income 964 609 2,483 1,741
Depreciation 380 206 1,140 618
------------ ------------ -------------- --------------
Net Income $584 $403 $1,343 $1,123
============ ============ ============== ==============
</table)
<PAGE>
NOTE 4 - RELATED PARTY TRANSACTIONS
The Managing General Partner and its affiliates are entitled to
reimbursement for all costs and expenses paid by them on behalf
of the Partnership for administrative services necessary for the
prudent operation of the Partnership. The Partnership does not
employ any personnel. All staff required by the Partnership are
employees of the Managing General Partner or its affiliates which
receive direct reimbursement from the Partnership for all costs
related to such personnel including payroll taxes, workers'
compensation and health insurance and other fringe benefits, as
summarized in the table below.
</TABLE>
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1994 1993 1994 1993
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Series I- (unaudited)
Salaries of noncontrolling persons &
related expenses $104,465 $81,160 $278,875 $226,591
Other administrative expenses 27,093 12,665 81,276 55,242
--------------- --------------- --------------- ---------------
Expenses reimbursed $131,558 $93,825 $360,151 $281,833
=============== =============== =============== ===============
Series II- (unaudited)
Salaries of noncontrolling persons &
related expenses $50,275 $40,910 $134,318 $113,185
Other administrative expenses 13,039 6,775 39,115 28,231
--------------- --------------- --------------- ---------------
Expenses reimbursed $63,314 $47,685 $173,433 $141,416
=============== =============== =============== ===============
</TABLE>
The accompanying balance sheets include amounts payable related
to such administrative and operating costs to the Managing
General Partner and its affiliates at September 30, 1994 and
December 31, 1993 as follows:
September 30,
1994 December 31,
(unaudited) 1993
----------------- --------------
Series $28,649 $16,051
Series II $13,724 $ 7,291
As previously detailed in the Partnership's Prospectus, affiliates of
the Managing General Partner receive fees for mortgage servicing
from the limited partnerships owning the mortgaged properties.
With respect to the investments in real estate partnerships (see
Note 3), the payment of these fees has continued after the
reclassification from investments in mortgage revenue bonds, since
the bonds are still owned by the Partnership and there has been no
modification of the individual loan terms. The fees paid by all
borrowing partnerships to affiliates of the Managing General
Partner approximated $1,109,000 for the nine months ended
September 30, 1994 and 1993.
The General Partners are entitled to an allocation of the
Partnership's profits, losses and cash distributions as specified in
the Partnership Agreement. During the third quarter of 1994 the
Partnership paid a cash distribution of $52,972 and $25,604 to the
General Partners of Series I and Series II, respectively. These
amounts represent the General Partners' portion of the $5,052,972
and $2,672,644 semiannual distributions paid for Series I and
Series II, respectively, on August 12, 1994.
The operating expenses for several properties include property
management fees paid to affiliates of the Managing General
Partner. During the nine months ended September 30, 1994 and
1993, these fees approximated $495,000 for nine properties and
$381,000 for seven properties, respectively.
Shelter Corporation of Canada Limited (SCCL), a general partner
of the Associate General Partner, is contractually obligated under
guarantees to the nonaffiliated borrowers of North Pointe and
Whispering Lake to fund operating deficits. The unpaid balances
due under the limited operating deficit guarantees, including
accrued interest as of September 30, 1994, approximated
$302,000 and $425,000 for North Pointe and Whispering Lake,
respectively. Scheduled payments totalling $87,332 and $86,977
were received on the North Pointe obligation during the first nine
months of 1994 and 1993, respectively. Under the Whispering
Lake obligation, scheduled payments totalling $123,718 and
$123,214 were received during the first nine months of 1994 and
1993, respectively.
NOTE 5- DEFERRED RESTRUCTURING COSTS
Included in Other Assets, for Series I and II respectively, is
approximately $638,000 and $382,000 of Deferred Restructuring
Costs. These costs reflect the efforts to pursue the raising of
additional capital as discussed in Note 6.
NOTE 6- OTHER EVENTS
The Managing General Partner has continued to actively pursue
a means to provide BAC Holders with additional current income
while enhancing investment value with a prudent level of risk.
Negotiations are still in progress which are anticipated to create
a mechanism to raise additional capital for the acquisition of
mortgage revenue bonds financing multi-family properties or
multi-family real estate. It is anticipated that, if consumated, this
transaction will generate additional income, strengthen the
Partnership's current asset base and increase future returns to
BAC Holders.
As of September 30, 1994, approximately $1,020,000, $638,000
in Series I and $382,000 in Series II, in legal and other financial
services associated with the structuring of the transaction have
been deferred, pending final determination of whether the
transaction will occur, and if so, what form it will take. In the
event that the expansion of the Partnership's investments is
undertaken, such costs will be accounted for accordingly at that
time. If the Managing General Partner determines that it is not in
the best interest of the BAC Holders to proceed with this
transaction, then the deferred costs will be expensed.
The ability to proceed with this transaction will be affected in part
by the interest rate environment and will only be consummated if
it is anticipated that BAC Holder returns will be meaningfully
improved. Although negotiations are in progress, no definite
agreements have been finalized. It is uncertain at this time when
such agreements will be completed and there can be no assurance
that anticipated returns will be realized.
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
| | | | | Total | Total | Total | Total |
Mortgaged | | | Occupancy | Occupancy | Operating | Operating | Operating | Operating |
Property Name & | Loan | Total | as of | as of | Revenues | Revenues |Expenses (1)|Expenses (1)|
Location | Amount | Units | 09/30/94 | 09/30/93 | 1/94-9/94 | 1/93-9/93 | 1/94-9/94 | 1/93-9/93 |
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES I | | | | | | | | |
Alban Place | 10,500,000 | 194 | 98.5%| 99.5%| 1,167,182 | 1,140,322 | 591,222 | 557,600 |
Frederick, MD | | | | | | | | |
Barkley Place | 9,630,000 | 156 | 98.7%| 98.7%| 2,076,025 | 1,932,101 | 1,447,191 | 1,360,513 |
Fort Myers, FL | | | | | | | | |
Creekside Village | 11,985,000 | 296 | 98.3%| 93.2%| 1,161,684 | 1,075,415 | 643,889 | 573,070 |
Sacramento, CA | | | | | | | | |
Lakeview Garden (3) | 9,307,500 | 180 | 93.0%| 97.7%| 864,530 | 992,454 | 421,449 | 422,406 |
Dade County, FL | | | | | | | | |
The Montclair | 15,465,000 | 159 | 96.2%| 96.9%| 1,809,615 | 1,666,290 | 959,179 | 845,194 |
Springfield, MO | | | | | | | | |
Newport Village | 10,880,000 | 220 | 95.0%| 99.5%| 1,076,654 | 1,001,319 | 628,889 | 587,774 |
Thornton, CO | | | | | | | | |
Newport on Seven | 10,800,000 | 167 | 99.4%| 97.6%| 1,073,340 | 1,019,855 | 659,683 | 645,963 |
St. Louis Park, MN| | | | | | | | |
Nicollet Ridge | 20,340,000 | 339 | 97.9%| 94.4%| 1,931,235 | 1,967,101 | 1,234,250 | 1,250,364 |
Burnsville, MN | | | | | | | | |
North Pointe | 25,850,000 | 540 | 80.0%| 83.3%| 2,062,776 | 1,998,814 | 1,323,026 | 1,670,588 |
San Bernardino, CA| | | | | | | | |
Northridge Park II | 8,950,000 | 128 | 93.8%| 94.5%| 729,077 | 748,524 | 326,563 | 275,096 |
Salinas, CA | | | | | | | | |
Riverset Apartments | 6,535,000 | 120 | 97.2%| 97.2%| 613,148 | 581,135 | 205,096 | 196,919 |
Memphis, TN | | | | | | | | |
Steeplechase Falls | 18,100,000 | 450 | 96.7%| 97.1%| 2,068,609 | 1,968,159 | 1,143,073 | 1,022,168 |
Knoxville, TN | | | | | | | | |
Villa Hialeah | 10,250,000 | 245 | 97.6%| 100.0%| 1,301,108 | 1,241,058 | 753,518 | 658,401 |
Hialeah, FL | | | | | | | | |
Willowgreen | 9,450,000 | 241 | 91.3%| 92.5%| 985,492 | 991,986 | 532,509 | 558,575 |
Fife, WA | | | | | | | | |
- - ---------------------------------------------------------------|--------------|----------------------------------------------------
TOTALS: | 178,042,500 | 3,435 |--------------|--------------| 18,920,475 |18,324,533 | 10,869,537 | 10,624,631 |
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
| | | 1/94-9/94 | 1/94-9/94 | 1/94-9/94 |
Mortgaged | 1/94-6/94 | 1/94-9/94 |Base Interest |Base Interest | Paid From |
Property Name & |Base Interest|Base Interest| Paid From | Paid From |Other Sources|
Location | Due ($) |Paid ($) (2) |Operations ($)| Reserves ($) |Guarantors($)|
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SERIES I | | | | | |
Alban Place | 620,156 | 620,156 | 620,156 | 0 | 0 |
Frederick, MD | | | | | |
Barkley Place | 577,803 | 635,886 | 635,886 | 0 | 0 |
Fort Myers, FL | | | | | |
Creekside Village | 674,156 | 606,367 | 520,000 | 28,967 | 57,400 |
Sacramento, CA | | | | | |
Lakeview Garden | 540,999 | 541,007 | 491,007 | 50,000 | 0 |
Dade County, FL | | | | | |
The Montclair | 913,401 | 878,714 | 878,714 | 0 | 0 |
Springfield, MO | | | | | |
Newport Village | 642,600 | 441,692 | 441,692 | 0 | 0 |
Thornton, CO | | | | | |
Newport on Seven | 658,125 | 411,369 | 411,369 | 0 | 0 |
St. Louis Park, MN| | | | | |
Nicollet Ridge | 1,201,331 | 644,202 | 644,202 | 0 | 0 |
Burnsville, MN | | | | | |
North Pointe | 1,526,766 | 790,098 | 721,468 | 0 | 68,630 |
San Bernardino, CA| | | | | |
Northridge Park II | 503,438 | 503,438 | 414,242 | 0 | 89,196 |
Salinas, CA | | | | | |
Riverset Apartments | 385,973 | 385,973 | 382,999 | 2,974 | 0 |
Memphis, TN | | | | | |
Steeplechase Falls | 1,069,031 | 936,183 | 936,183 | 0 | 0 |
Knoxville, TN | | | | | |
Villa Hialeah | 605,391 | 605,385 | 578,385 | 27,000 | 0 |
Hialeah, FL | | | | | |
Willowgreen | 567,000 | 463,121 | 463,121 | 0 | 0 |
Fife, WA | | | | | |
- - --------------------------------------------------------------------------------------------|
TOTALS: | 10,486,170 | 8,463,591 | 8,139,424 | 108,941 | 215,226 |
- - ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------------
| | | | | Total | Total | Total | Total |
Mortgaged | | | Occupancy | Occupancy | Operating | Operating | Operating | Operating |
Property Name & | Loan | Total | as of | as of | Revenues | Revenues |Expenses (1)|Expenses (1)|
Location | Amount | Units | 09/30/94 | 09/30/93 | 1/94-9/94 | 1/93-9/93 | 1/94-9/94 | 1/93-9/93 |
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES II | | | | | | | | |
Emerald Hills | 7,250,000 | 130 | 99.2%| 94.6%| 769,829 | 711,810 | 374,049 | 368,244 |
Issaquah, WA | | | | | | | | |
Gilman Meadows | 7,100,000 | 125 | 94.4%| 96.0%| 732,587 | 694,082 | 352,857 | 379,826 |
Issaquah, WA | | | | | | | | |
Hamilton Chase | 13,975,000 | 300 | 94.7%| 95.3%| 1,461,476 | 1,474,584 | 877,640 | 609,120 |
Chattanooga, TN | | | | | | | | |
Mallard Cove I | 2,610,000 | 63 | 96.8%| 95.2%| 259,226 | 253,505 | 175,588 | 169,557 |
Everett, WA | | | | | | | | |
Mallard Cove II | 6,740,000 | 135 | 95.6%| 86.7%| 647,728 | 640,807 | 401,761 | 374,533 |
Everett, WA | | | | | | | | |
The Meadows | 7,200,000 | 200 | 97.5%| 97.0%| 835,729 | 788,772 | 413,131 | 398,401 |
Memphis, TN | | | | | | | | |
Riverset Apartments | 12,640,000 | 232 | 97.2%| 97.2%| 1,190,227 | 1,128,087 | 398,127 | 382,254 |
Memphis, TN | | | | | | | | |
Southfork Village | 10,550,000 | 200 | 96.5%| 97.0%| 1,252,811 | 1,234,422 | 654,944 | 629,174 |
Lakeville, MN | | | | | | | | |
Whispering Lake | 18,190,000 | 384 | 93.0%| 94.3%| 1,493,951 | 1,436,874 | 845,584 | 915,173 |
Kansas City, MO | | | | | | | | |
- - ---------------------------------------------------------------|--------------|----------------------------------------------------
TOTALS: | 86,255,000 | 1,769 |--------------|--------------| 8,643,564 | 8,362,943 | 4,493,681 | 4,226,282 |
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------
| | | 1/94-6/94 | 1/94-6/94 | 1/94-6/94 |
Mortgaged | 1/94-6/94 | 1/94-6/94 |Base Interest |Base Interest | Paid From |
Property Name & |Base Interest|Base Interest| Paid From | Paid From |Other Sources|
Location | Due ($) |Paid ($) (2) |Operations ($)| Reserves ($) |Guarantors($)|
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SERIES II | | | | | |
Emerald Hills | 421,406 | 421,406 | 403,281 | 18,125 | 0 |
Issaquah, WA | | | | | |
Gilman Meadows | 426,000 | 369,181 | 364,436 | 0 | 4,745 |
Issaquah, WA | | | | | |
Hamilton Chase | 838,500 | 495,468 | 495,468 | 0 | 0 |
Chattanooga, TN | | | | | |
Mallard Cove I | 142,898 | 85,369 | 85,369 | 0 | 0 |
Everett, WA | | | | | |
Mallard Cove II | 409,152 | 247,689 | 247,689 | 0 | 0 |
Everett, WA | | | | | |
The Meadows | 411,750 | 444,693 | 444,693 | 0 | 0 |
Memphis, TN | | | | | |
Riverset Apartments | 746,550 | 746,550 | 740,797 | 5,753 | 0 |
Memphis, TN | | | | | |
Southfork Village | 623,109 | 623,109 | 623,109 | 0 | 0 |
Lakeville, MN | | | | | |
Whispering Lake | 1,040,241 | 735,195 | 637,000 | 0 | 98,195 |
Kansas City, MO | | | | | |
- - --------------------------------------------------------------------------------------------|
TOTALS: | 5,059,606 | 4,168,660 | 4,041,842 | 23,878 | 102,940 |
- - ---------------------------------------------------------------------------------------------
<FN>
FOOTNOTES:
(1) Operating Expenses include normal operating expenses (excluding depreciation)
plus escrows for real estate taxes and insurance, reserve for replacement
payments, servicing fees, bond issuer fees, and capital improvements.
Total Operating Revenues and Total Operating Expenses for January through June of
1993 as reported in this quarter may differ from those reported in last year's second
quarter report due to revisions to property operating statements or
reclassification of certain expenses.
(2) Base Interest Paid equals, generally, cash receipts from property operations,
property level reserves and other sources during the first two quarters. For purposes of
this table, these receipts are compared to base interest due in the same two quarters.
Therefore, the cumulative base interest shortfall for a property may exceed
the shortfall for first two quarters.
(3) As of the issuance of this report, operating reports for the period ending September
1994 had not been received. Operating results were estimated based on financial
data through August 1994.
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
General Business
The Managing General Partner has continued to actively pursue
a means to provide BAC Holders with additional current income
while enhancing investment value with a prudent level of risk.
Negotiations are still in progress which are anticipated to create
a mechanism to raise additional capital for the acquisition of
mortgage revenue bonds financing multi-family properties or
multi-family real estate. It is anticipated that, if consumated, this
transaction will generate additional income, strengthen the
Partnership's current asset base and increase future returns to
BAC Holders.
As of September 30, 1994, approximately $1,020,000, $638,000
in Series I and $382,000 in Series II, in legal and other financial
services associated with the structuring of the transaction have
been deferred, pending final determination of whether the
transaction will occur, and if so, what form it will take. In the
event that the expansion of the Partnership's investments is
undertaken, such costs will be accounted for accordingly at that
time. If the Managing General Partner determines that it is not in
the best interest of the BAC Holders to proceed with this
transaction, then the deferred costs will be expensed.
The ability to proceed with this transaction will be affected in part
by the interest rate environment and will only be consummated if
it is anticipated that BAC Holder returns will be meaningfully
improved. Although negotiations are in progress, no definite
agreements have been finalized. It is uncertain at this time when
such agreements will be completed and there can be no assurance
that anticipated returns will be realized.
Financial Condition and Liquidity
The Partnership's capital remains invested in 23 mortgage revenue
bonds and related working capital loans. Of these investments, 14
(totalling $178,042,500) were acquired with Series I proceeds
while nine (totalling $86,255,000) were acquired with Series II
proceeds. To the extent that offering proceeds exceeded
organization and offering expenses and initial project investments,
the Managing General Partner created Partnership working capital
reserves.
The Series I working capital reserves, as a result of supplementing
distributions to BAC Holders and providing additional working
capital loans to the properties, are exhausted. Series II working
capital reserves approximated $150,000 at September 30, 1994.
The remaining Series II working capital reserves are available at
the Managing General Partner's discretion to make additional
working capital loans to Series II borrowers, to pay unanticipated
and unusual costs of operating and administering Series II and to
reduce fluctuations in cash distributions to Series II investors.
During the nine months ended September 30, 1994, approximately
$150,000 was used to supplement the June 30, 1994 distribution.
Distributions are affected by the Partnership's ability to collect
base and contingent interest from the cash flow of the properties
securing the mortgage revenue bonds, the ability of the Managing
General Partner to control operating expenses and the level of
working capital reserves available (see discussion above). Cash
collected by the Partnership does not necessarily reflect property
operating results to the extent that debt service can be paid from
property reserves and/or guarantees. Similarly, some of the cash
generated by property operations may not be available to pay debt
service as it may have been utilized for capital expenditures,
escrows or prepaid expenses. As available debt service payments
from secondary sources decrease, the level of debt service
collected by the Partnership will more closely approximate
property performance. In addition, once Partnership working
capital reserves are depleted, distributions to BAC holders will
also approximate property performance.
On August 12, 1994, the Managing General Partner paid semi-
annual distributions of $25.00 and $27.50 per BAC in Series I and
Series II, respectively. These amounts represent an annualized
primarily tax-exempt distribution rate of 5.00% in Series I, which
is consistent with the three previous semi-annual distributions and
5.50% in Series II, a decrease of .50% as compared to previous
semi-annual distributions. The Series II distribution was reduced
due to both the decrease in the amount of property level and
Partnership working capital reserves available to supplement the
distribution and the increase in the costs associated with the
transfer of Hamilton Chase (See the discussion of Hamilton Chase
below for more details).
At September 30, 1994, the Partnership's liquid assets
approximated $2,346,000 in Series I and $1,216,000 in Series II.
These funds primarily consist of undistributed funds generated
from operations during the third quarter of 1994.
Results of Operations
During the nine months ended September 30, 1994 Series I
properties paid $8,464,000 of interest to the Partnership of which
$8,139,000 was generated from property operations. This
represents an increase of approximately $300,000 in interest paid
and $160,000 in cash generated from operations over the nine
months ended September 30, 1993. During the nine months
ended September 30, 1994, Series II properties paid $4,169,000
of interest to the Partnership of which $4,042,000 was generated
from property operations. This represents an increase of
approximately $30,000 in total interest paid and an increase of
approximately $94,000 in cash generated from operations over the
nine months ended September 30, 1993. The differences between
the interest paid and the cash generated from operations are due
to payments from property level reserves, guarantees and other
miscellaneous sources. The table at the beginning of this report
should be referenced for more information regarding specific
property interest payment information.
Partnership operating expenses have increased by approximately
$42,000 in Series I and $87,000 in Series II as compared to the
first nine months of 1993. Both Series increases reflect the cost
of efforts to pursue the raising of additional capital as previously
discussed in General Business. For the nine months ended
September 30, 1994, Series I had approximately $140,000 in legal
expenses related to the restructuring as compared to $68,000 for
the nine months ended September 30, 1993 while Series II had
approximately $69,000 and $33,000 for the same period in 1994
and 1993, respectively. Also, the Salary and Other
Administrative expenses have increased from prior year due to the
increased efforts that are necessary with the restructuring. As
outlined in Note 4 to the financial statements, Series I incurred
approximately $360,000 for the nine months ended September 30,
1994 as compared to $282,000 in 1993 while Series II incurred
approximately $173,000 and $141,000, respectively for the same
periods. A portion of the increase of restructuring costs in Series
I was offset by a decrease in legal fees resulting from negotiations
with Series I defaulted borrowers. During the nine months ended
September 30, 1994 Series I had approximately $26,000 in such
costs as compared to $93,000 for the same period in 1993.
The lingering effect of adverse market conditions continues to
impact the revenue stream of many of the properties in each series.
Accordingly, during the nine months ended September 30, 1994,
13 properties (eight from Series I and five from Series II) were
unable to pay full base interest. Cash flows from all properties
have been insufficient to support the payment of contingent
interest during the nine months ended September 30, 1994,
however, Barkley Place (Series I) and Meadows (Series II) have
begun to repay their delinquent base interest.
When base interest payments cannot be fully satisfied by an
original borrower through property level cash flow, reserves or
guarantee payments, the Managing General Partner evaluates
various courses of action, including sale, refinancing, deed-in-lieu
of foreclosure or foreclosure. As discussed in previous reports, in
cases where there have been monetary defaults in the payment of
full base interest, control of the properties collateralizing the
mortgage revenue bonds has been or is expected to be transferred
by foreclosure or deed-in-lieu of foreclosure to "New Borrowers."
These New Borrowers are partnerships whose general partner is
SCA Successor, Inc., a corporation which is an affiliate of the
Managing General Partner.
As required by generally accepted accounting principles, the
Partnership reclassifies investments in mortgage revenue bonds to
investments in real estate partnerships whenever it becomes
apparent that the underlying properties are unable to continue to
support their entire debt service obligation and that the other
sources of funds for debt service, including property level reserves
and operating deficit guarantees, are considered insufficient to
meet mortgage loan obligations. Under this method of
accounting, interest collected from the investments in real estate
partnerships is recorded not as interest income, but as a
distribution from the investment which decreases the investment's
carrying value. Consequently, for financial reporting purposes, as
reclassifications occur, there is a corresponding decrease in
interest income from investments in mortgage revenue bonds and
working capital loans. Further, income is recorded by the
Partnership as "Equity in property net income" and the carrying
value of the investment in real estate partnerships is adjusted as
income or loss (after depreciation) is recognized by the properties.
This accounting treatment is for financial reporting purposes only
and is not used to determine the income reported for federal
income tax purposes, the amount of distributions to investors or
the Managing General Partner's intentions related to other matters
including any ongoing legal actions.
As of September 30, 1994, nine Series I properties and six Series
II properties which secure mortgage revenue bonds and working
capital loans totalling $132,500,000 and $55,815,000,
respectively, were accounted for as investments in real estate
partnerships. As of September 30, 1994, the carrying values of
these investments in real estate partnerships, net of accumulated
depreciation and valuation adjustments, approximated
$106,067,000 for Series I and $48,432,000 for Series II. As the
partnership reclassified all of the current investments in real estate
partnerships prior to 1994, prior reports should be referenced for
further details.
As of September 30, 1994 eight of the nine investments in real
estate in Series I and all of the investments in real estate in Series
II had been transferred to New Borrowers. The transfers to the
New Borrowers were accomplished through the acceptance of
deeds-in-lieu of foreclosure, or otherwise settled by SCA
Successor, Inc. replacing the original managing general partner of
the original borrowing partnership. One investment in real estate
partnership, Willowgreen (Series I), is currently in receipt of the
deed transfer. See further discussion of Willowgreen below.
Despite the financial reporting treatment of the investments, the
Managing General Partner has taken the position that these
transfers and reclassifications do not affect the tax-exempt nature
of the income received by the Partnership on any of the loans, nor
does it change the character of the Partnership's income for tax
purposes. This position is consistent with industry practice, and
the Managing General Partner is not aware of any contrary
rulings. As with all federal income tax matters, the Internal
Revenue Service may choose to review and rule on the subject at
a later date.
The Managing General Partner monitors all of the properties in
both series of the Partnership. Management will continue to
periodically assess the estimated net realizable value and fair value
of the properties to determine whether further valuation
adjustments are appropriate due to, among other factors, a change
of market conditions or the physical condition of the properties.
During the nine months ended September 30, 1994, there were no
valuation adjustments in either series.
The following is a discussion of events which occurred during the
first nine months of 1994 which affected the properties that
collateralize the Partnership's investments. If a property is not
mentioned, its status has remained unchanged; prior reports
should be referenced for further details.
Series I
Creekside: Under the terms of the settlement agreement reached
with the guarantor as previously discussed in Note 4 to the
December 31, 1993 financial statements included in form 10-K,
the guarantor paid $12,400 to Series I in August 1994. This
represents $10,000 in principal owed plus $2,400 in interest. The
remaining $20,000 owed will be paid in two installments of
$10,000 plus interest. These payments are due on or before
August 31, 1995 and August 31, 1996.
North Pointe: As discussed in previous reports, a settlement
agreement was signed on November 23, 1992 whereby Shelter
Corporation of Canada Limited (SCCL) and Winnipeg Financial
and Management, Inc., the third party guarantors, are to perform
fully under the terms of the limited operating deficit guarantee.
During the first nine months of 1994, scheduled payments of
approximately $87,000 were received by the Partnership as
payment in accordance with the settlement agreement. In
addition, the settlement agreement provides for the accrual of
interest compounded quarterly on the unpaid balance. The
December 31, 1992 report on Form 10-K should be referenced for
additional information on the terms of the settlement agreement.
Willowgreen: As previously discussed in Note 4 to the
December 31, 1993 financial statements included in Form 10-K,
Willowgreen's original borrower defaulted on the mortgage thus
initiating workout discussions. The Managing General Partner has
reached an agreement with the original borrower to take title to
the property and is in receipt of the deed transfer.
Lakeview: As of September 30, 1994, the borrowing partnership
for Lakeview Garden Apartments was not in monetary default of
the loan agreement. However, project cash flow is not adequate
to pay the full monthly debt service and property-level reserves,
which have supplemented interest payments from property
operations, will soon be exhausted. Deficits in base interest are
anticipated to occur in the fourth quarter of 1994. As a result, the
Managing General Partner began negotiations to transfer the deed
in-lieu of foreclosure to a New Borrower. The transfer of the
deed may take place in the first quarter of 1995.
Series II
Hamilton Chase: On February 24, 1994, the Managing General
Partner entered into an agreement with the original borrower
which provided for SCA Successor, Inc. to take the place of the
original borrowing partnership's managing general partner. This
agreement resulted from the borrower's failure to pay its full debt
service obligation. The amended partnership agreement was
executed on June 13, 1994 thus completing the workout
negotiations.
During the six months ended June 30, 1994, the Managing
General Partner set aside approximately $75,000 of property cash
flow to fully fund the tax and insurance escrow accounts which
the original borrower had refused to fund. Upon the transfer of
the property, SCA Successor, Inc. determined that approximately
$150,000 needs to be spent on physical improvements. These
repairs are expected to be completed by the Spring of 1995.
Whispering Lake: As discussed in previous reports, a settlement
agreement was signed on November 23, 1992 whereby SCCL, the
third party guarantor, is to perform fully under the terms of the
limited operating deficit guarantee. During the first nine months
of 1994, scheduled payments of approximately $124,000 were
received by the Partnership as payment in accordance with the
settlement agreement. In addition, the settlement agreement
provides for the accrual of interest on the unpaid balance
compounded quarterly. The December 31, 1992 report on Form
10-K should be referenced for additional information on the terms
of the settlement agreement.
<PAGE>
PART II - OTHER INFORMATION
Items 1 through 5 are not applicable.
Item 6 - The Partnership filed no reports on Form 8-K for the
period covered by this report.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
SCA TAX EXEMPT FUND
LIMITED PARTNERSHIP
(Registrant)
By: SCA REALTY I, INC.
Managing General Partner
By: Thomas R. Hobbs
Thomas R. Hobbs
Senior Vice President
Signing on behalf of registrant and as acting chief financial
officer.
DATED: November 14, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SERIES I AND SERIES II AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO BOTH THOSE FINANCIAL STATEMENTS AND THE FOOTNOTES
PROVIDED WITHIN THIS SCHEDULE.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 3,312,621<F1>
<SECURITIES> 250,000<F2>
<RECEIVABLES> 494,943<F3>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,057,564<F4>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 235,641,443<F5>
<CURRENT-LIABILITIES> 489,607<F6>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 235,151,836<F7>
<TOTAL-LIABILITY-AND-EQUITY> 235,641,443<F8>
<SALES> 0
<TOTAL-REVENUES> 9,810,654<F9>
<CGS> 0
<TOTAL-COSTS> 1,038,957<F10>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,771,697<F11>
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,771,697<F12>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,771,697<F13>
<EPS-PRIMARY> 58.51<F14>
<EPS-DILUTED> 0
<FN>
<F1>
SERIES I SERIES II TOTAL
---------- ---------- --------
Cash 2,346,316 966,305 3,312,621
<F2>
Securities - 250,000 250,000
<F3>
Receivables 296,036 198,907 494,943
<F4>
Current Assets 2,642,352 1,415,212 4,057,564
<F5>
Total Assets 154,942,065 80,699,378 235,641,443
<F6>
Current Liab 331,863 157,744 489,607
<F7>
Other SE 154,610,202 80,541,634 235,151,836
<F8>
Total Liab and SE 154,942,065 80,699,378 235,641,443
<F9>
Total Revenues 6,624,659 3,185,995 9,810,654
<F10>
Total Costs 680,900 358,057 1,038,957
<F11>
Income Pre-Tax 5,943,759 2,827,938 8,771,697
<F12>
Income Continuing 5,943,759 2,827,938 8,771,697
<F13>
Net Income 5,943,759 2,827,938 8,771,697
<F14>
EPS- Primare 29.42 29.09 58.51
</FN>
</TABLE>
