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 June 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>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
BALANCE SHEETS
SERIES I
<TABLE>
<CAPTION>
June 30, 1994 December 31,
(Unaudited) 1993
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $5,277,104 $5,032,089
Interest receivable 321,037 296,040
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) 106,787,929 107,970,711
Other assets 26,125 18,060
--------------- ---------------
TOTAL ASSETS $157,954,695 $158,859,400
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $74,457 $71,793
Distributions payable 5,052,972 5,052,141
Due to affiliates (Note 4) 64,664 16,051
--------------- ---------------
TOTAL LIABILITIES $5,192,093 $5,139,985
--------------- ---------------
Partners' Capital
General Partners (275,980) (263,970)
Limited Partners (beneficial assignee certificates-
issued and outstanding 200,000 certificates) 153,038,582 153,983,385
--------------- ---------------
TOTAL PARTNERS' CAPITAL 152,762,602 153,719,415
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, & 5)
TOTAL LIABILITIES AND PARTNERS' CAPITAL $157,954,695 $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 six For the six
months ended months ended months ended months ended
June 30, 1994 June 30, 1993 June 30, 1994 June 30, 1993
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCOME
Interest on mortgage revenue bonds $867,140 $1,052,641 $1,734,281 $2,105,281
Interest on parity working capital loans 18,178 21,678 36,356 43,356
Non-taxable interest on short-term investments 5,926 8,580 14,257 15,105
Taxable interest on short-term investments 24,580 21,055 37,806 37,556
Equity in property net income 1,326,107 1,006,107 2,772,035 2,220,989
--------------- --------------- --------------- ---------------
TOTAL INCOME 2,241,931 2,110,061 4,594,735 4,422,287
--------------- --------------- --------------- ---------------
EXPENSES
Operating expenses (Note 4) 301,887 213,395 498,576 430,047
Valuation adjustment related to investment in
real estate 4,600,000 4,600,000
--------------- --------------- --------------- ---------------
TOTAL EXPENSES 301,887 4,813,395 498,576 5,030,047
--------------- --------------- --------------- ---------------
NET INCOME (LOSS) $1,940,044 ($2,703,334) $4,096,159 ($607,760)
=============== =============== =============== ===============
NET INCOME (LOSS) ALLOCATED TO GENERAL PARTNERS $19,400 ($27,033) $40,962 ($6,078)
=============== =============== =============== ===============
NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS $1,920,643 ($2,676,301) $4,055,197 ($601,682)
=============== =============== =============== ===============
NET INCOME (LOSS) PER BAC $9.60 ($13.38) $20.28 ($3.01)
=============== =============== =============== ===============
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 six For the six
months ended months ended
June 30, 1994 June 30, 1993
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $4,096,159 ($607,760)
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in property net income (2,772,035) (2,220,989)
Other changes in invesmtent in real
estate partnerships 144 (350)
Valuation adjustments related to investment
in real estate partnerships 4,600,000
Interest distributions from investment in
real estate partnerships 3,954,673 3,304,179
(Increase) decrease in interest receivable (24,997) (38,261)
(Increase) decrease in other assets (8,065) 17,202
Increase (decrease) in accounts payable
and accrued expenses 2,664 (16,069)
Increase (decrease) in due to affiliates 48,613 (29,739)
--------------- ---------------
Net cash provided by operating activities 5,297,156 5,008,213
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners (5,052,141) (5,053,619)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 245,015 (45,406)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 5,032,089 4,931,455
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,277,104 $4,886,049
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SERIES I
FOR THE PERIOD DECEMBER 31, 1990 THROUGH JUNE 30, 1994
<TABLE>
<CAPTION>
LIMITED PARTNERS
BENEFICIAL INITIAL
ASSIGNEE LIMITED GENERAL
CERTIFICATES PARTNER PARTNERS TOTAL
------------------ --------------- --------------- ---------------
<S> <C> <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) 4,055,197 - 40,962 4,096,159
Distribution to partners (unaudited) (5,000,000) - (52,972) (5,052,972)
------------------ --------------- --------------- ---------------
Balance, June 30, 1994 $153,038,582 $ - ($275,980) $152,762,602
================== =============== =============== ===============
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>
June 30, 1994 December 31,
(Unaudited) 1993
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $2,646,637 $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) 48,618,019 49,417,599
Other assets 40,793 8,140
--------------- ---------------
TOTAL ASSETS $82,194,356 $83,350,715
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $37,046 $41,804
Distributions payable 2,672,644 2,915,280
Due to affiliates (Note 4) 31,013 7,291
--------------- ---------------
TOTAL LIABILITIES 2,740,703 2,964,375
--------------- ---------------
Partners' Capital
General Partners (77,828) (69,624)
Limited Partners (beneficial assignee certificates-
issued and outstanding 96,256 certificates) 79,531,481 80,455,964
--------------- ---------------
TOTAL PARTNERS' CAPITAL 79,453,653 80,386,340
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4 & 5)
TOTAL LIABILITIES AND PARTNERS' CAPITAL $82,194,356 $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 six For the six
months ended months ended months ended months ended
June 30, 1994 June 30, 1993 June 30, 1994 June 30, 1993
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCOME
Interest on mortgage revenue bonds $581,133 $858,633 $1,162,266 $1,717,266
Interest on parity working capital loans 15,889 17,889 31,778 35,778
Non-taxable interest on short-term investments 5,217 11,861 11,652 22,867
Taxable interest on short-term investments 13,868 18,386 20,683 27,330
Equity in property net income 325,198 377,811 758,884 721,005
--------------- --------------- --------------- ---------------
TOTAL INCOME 941,305 1,284,580 1,985,263 2,524,246
--------------- --------------- --------------- ---------------
EXPENSES
Operating expenses (Note 4) 151,075 99,430 245,306 191,879
--------------- --------------- --------------- ---------------
NET INCOME $790,230 $1,185,150 $1,739,957 $2,332,367
=============== =============== =============== ===============
NET INCOME ALLOCATED TO GENERAL PARTNERS $7,902 $11,852 $17,400 $23,324
=============== =============== =============== ===============
NET INCOME ALLOCATED TO LIMITED PARTNERS $782,328 $1,173,298 $1,722,557 $2,309,043
=============== =============== =============== ===============
NET INCOME PER BAC $8.13 $12.19 $17.90 $23.99
=============== =============== =============== ===============
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 six For the six
months ended months ended
June 30, 1994 June 30, 1993
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,739,957 $2,332,367
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in property net income (758,884) (721,005)
Interest distributions from investment in
real estate partnerships 1,558,464 1,035,386
(Increase) decrease in interest receivable 1,200 (107,289)
Increase in other assets (32,653) -
Increase (decrease) in accounts payable
and accrued expenses (4,758) 668
Increase (decrease) in due to affiliates 23,722 (11,761)
--------------- ---------------
Net cash provided by operating activities 2,527,048 2,528,366
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from sale of short-term investments 50,000 -
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners (2,915,280) (2,913,528)
--------------- ---------------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (338,232) (385,162)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 2,984,869 3,503,766
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,646,637 $3,118,604
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SERIES II
FOR THE PERIOD DECEMBER 31, 1990 THROUGH JUNE 30, 1994
<TABLE>
<CAPTION>
LIMITED PARTNERS
BENEFICIAL INITIAL
ASSIGNEE LIMITED GENERAL
CERTIFICATES PARTNER PARTNERS TOTAL
------------------ --------------- --------------- ---------------
<S> <C> <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) 1,722,557 - 17,400 1,739,957
Distribution to partners (unaudited) (2,647,040) (25,604) (2,672,644)
------------------ --------------- --------------- ---------------
Balance, June 30, 1994 $79,531,481 $ - ($77,828) $79,453,653
================== =============== =============== ===============
The accompanying notes are an integral part of these financial statements.
<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 June 30, 1994, the results of operations for the three
and six months ended June 30, 1994 and 1993 and the cash flows
for the six months ended June 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 June 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 June 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).
Descriptions of the various mortgage revenue bonds and working
capital loans owned by the Partnership at June 30, 1994 are as follows:
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Series I
Investment in Mortgage Date of In- Base First Tier
Revenue Bonds and Parity Substance Interest Contingent Maturity Face Carrying
Working Capital Loans (Note 2) Foreclosure Rate Rate Date Amount Amount
----------------------------------- ------------------------- ---------- ------------ --------------- ---------------
<S> <C> <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 7,462,370
Fort Myers, FL
Barkley Place Limited Partnership
The Montclair Mar. 3, 1989 7.875 2.375 Dec. 2015 15,465,000 9,475,493
Springfield, MO
Montclair Limited Partnership
Newport Village Aug. 31, 1989 7.875 2.375 Dec. 2010 10,880,000 8,821,257
Thornton, CO
Newport Village Limited
Partnership
Nicollet Ridge Sept. 1, 1990 7.875 2.375 Dec. 2010 20,340,000 15,819,249
Burnsville, MN
Nicollet Ridge Limited
Partnership
Newport-on-Seven Dec. 1, 1991 8.125 2.375 Aug. 2008 10,800,000 7,755,261
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 17,190,860
Knoxville, TN
Steeplechase Falls Limited
Partnership
North Pointe Apartments Dec. 31, 1991 7.875 2.375 Aug. 2006 25,850,000 20,363,215
San Bernardino, CA
Cal-Shel Limited Partnership
Creekside Village Apartments Dec. 31, 1992 7.500 2.250 Nov. 2009 11,985,000 10,571,060
Sacramento, CA
Creekside Village Limited
Partnership
Willowgreen Apartments Sep. 30, 1993 8.000 2.250 Dec. 2010 9,450,000 9,329,164
Tacoma, WA
Willowgreen Associates
Limited Partnership --------------- ---------------
Series I Investment in
Real Estate Partnerships Total 132,500,000 106,787,929
--------------- ---------------
Series I Total $178,042,500 $152,330,429
=============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Series II
Investment in Mortgage Date of In- Base First Tier
Revenue Bonds and Parity Substance Interest Contingent Maturity Face Carrying
Working Capital Loans (Note 2) Foreclosure Rate Rate Date Amount Amount
----------------------------------- ------------------------- ---------- ------------ --------------- ---------------
<S> <C> <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 $2,173,421
Everett, WA
Mallard Cove I Limited
Partnership
Mallard Cove II June 1, 1991 8.094 2.376 Jan. 2006 6,740,000 6,257,813
Everett, WA
Mallard Cove II Limited
Partnership
Gilman Meadows Apartments June 1, 1991 8.000 2.250 Apr. 2007 7,100,000 6,707,956
Issaquah, WA
Gilman Meadows Limited
Partnership
The Meadows Apartments Sept. 30, 1991 7.625 2.500 Jan. 2008 7,200,000 6,885,626
Memphis, TN
Meadows Limited Partnership
Whispering Lake Dec. 31, 1991 7.625 2.250 Dec. 2007 18,190,000 13,666,816
Kansas City, MO
Whispering Lake Limited Partnership
Hamilton Chase Dec. 31, 1993 8.000 2.250 Aug. 2006 13,975,000 12,926,387
Chattanooga, TN
Hamilton Grove Limited
Partnership --------------- ---------------
Series II Investment in
Real Estate Partnerships Total 55,815,000 48,618,019
--------------- ---------------
Series II Total $86,255,000 $79,058,019
=============== ===============
<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 for the quarters
ended June 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., 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 six months of 1994 and 1993.
For investments accounted for as investments in real estate
partnerships, nine and eight for Series I and six and five for Series
II for 1994 and 1993, respectively, Series I recognized operating
income of approximately $2,772,000 and $2,221,000 and collected
approximately $3,955,000 and $3,304,000 in interest payments for
the six months ended June 30, 1994 and 1993, respectively. For
those same periods Series II recognized operating income of
approximately $759,000 and $721,000 and collected approximately
$1,558,000 and $1,035,000 in interest payments, respectively.
The Managing General Partner periodically evaluates the carrying
values of investments in real estate partnerships. During the
second 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. During the same period in 1993, Series I recorded a
valuation adjustment of $4,600,000 for North Pointe (formerly
Shandin Hills). 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
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 awaiting final approval from the bond issuer to
complete the transfer of the deed.
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. Once this
amount is fully funded by the property, debt service payments will
again approximate property cash flow.
Summarized Financial Information
Combined financial information for the investments in real estate
are 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) June 30, December 31,
(in 000's) 1994 1993
------------ ------------
<S> <C> <C>
Land, buildings and equipment,
net of accumulated depreciation $115,220 $116,212
Other assets 2,057 2,342
------------ ------------
Total Assets $117,277 $118,554
============ ============
Liabilities due to the Partnership
including bonds $149,022 $148,070
Other liabilities 2,017 2,566
Partners' deficit (33,762) (32,082)
------------ ------------
Total liabilities and partners' deficit $117,277 $118,554
============ ============
</table)
</TABLE>
<TABLE>
<CAPTION>
Combined Results of Operations - (unaudited)
(in 000's) For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 1994 June 30, 1993 June 30, 1994 June 30, 1993
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Revenues $4,682 $4,180 $9,427 $8,384
Operating expenses 2,613 2,492 5,169 4,799
------------ ------------ -------------- --------------
Net operating income 2,069 1,688 4,258 3,585
Depreciation 743 682 1,486 1,364
------------ ------------ -------------- --------------
Net Income $1,326 $1,006 $2,772 $2,221
============ ============ ============== ==============
</table)
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Series II
Combined Financial Position - (unaudited) June 30, December 31,
(in 000's) 1994 1993
------------ ------------
<S> <C> <C>
Land, buildings and equipment,
net of accumulated depreciation $46,348 $47,097
Other assets 1,240 998
------------ ------------
Total Assets $47,588 $48,095
============ ============
Liabilities due to the Partnership
including bonds $56,367 $55,729
Other liabilities 1,071 1,473
Partners' deficit (9,850) (9,107)
------------ ------------
Total liabilities and partners' deficit $47,588 $48,095
============ ============
</table)
</TABLE>
<TABLE>
<CAPTION>
Combined Results of Operations - (unaudited)
(in 000's) For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, 1994 June 30, 1993 June 30, 1994 June 30, 1993
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Revenues $1,798 $1,273 $3,692 $2,532
Operating expenses 1,084 689 2,173 1,399
------------ ------------ -------------- --------------
Net operating income 714 584 1,519 1,133
Depreciation 389 206 760 412
------------ ------------ -------------- --------------
Net Income $325 $378 $759 $721
============ ============ ============== ==============
</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 six For the six
months ended months ended months ended months ended
June 30, 1994 June 30, 1993 June 30, 1994 June 30, 1993
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Series I- (unaudited)
Salaries of noncontrolling persons &
related expenses $106,954 $81,191 $174,410 $145,432
Other administrative expenses 35,681 23,639 54,183 42,576
--------------- --------------- --------------- ---------------
Expenses reimbursed $142,635 $104,830 $228,593 $188,008
=============== =============== =============== ===============
Series II- (unaudited)
Salaries of noncontrolling persons &
related expenses $51,579 $41,429 $84,043 $72,275
Other administrative expenses 17,172 13,276 26,076 21,456
--------------- --------------- --------------- ---------------
Expenses reimbursed $68,751 $54,705 $110,119 $93,731
=============== =============== =============== ===============
</TABLE>
The accompanying balance sheets include amounts payable related
to such administrative and operating costs to the Managing General
Partner and its affiliates at June 30, 1994 and December 31, 1993
as follows:
June 30, December 31,
1994 1993
------------- -----------------
Series I $64,664 $ 16,051
Series II $31,013 $ 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 approximated $739,000 for the six months
ended June 30, 1994 and 1993 irrespective of any ownership
changes in the underlying partnerships.
The General Partners are entitled to an allocation of the
Partnership's profits, losses and cash distributions as specified in
the Partnership Agreement. For the six months ended June 30,
1994, the Partnership declared 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 Partner's
portion of the $5,052,972 and $2,672,644 semiannual distributions
declared for Series I and Series II, respectively, on June 30, 1994.
During the six months ended June 30, 1994 and 1993, the
operating expenses for several properties included property
management fees paid to affiliates of the Managing General
Partner. During the six months ended June 30, 1994 and 1993,
these fees approximated $297,000 for seven properties and
$251,000 for six 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 June 30, 1994, approximated $323,000 and
$455,000 for North Pointe and Whispering Lake, respectively.
Scheduled payments totalling $60,427 and $59,138 were received
on the North Pointe obligation during the first six months of 1994
and 1993, respectively. Under the Whispering Lake obligation,
scheduled payments totalling $85,603 and $83,777 were received
during the first six months of 1994 and 1993, respectively.
NOTE 5- OTHER EVENTS
The Managing General Partner continues to pursue actively a
means to provide BAC Holders with additional income and
enhanced value with a prudent level of risk. Negotiations are in
progress which are anticipated to create a mechanism to raise
additional capital for the acquisition of multi-family properties or
mortgage revenue bonds financing multi-family properties which
would generate additional income to be used to make payments on
the Partnership's bonds. The transaction being contemplated is
different from the restructuring considered in 1991; however, the
ultimate goals of increased Partnership income and enhanced value
of the assets remain the same. The ability to proceed will be
affected by the interest rate environment and would 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 unknown 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 | Expenses
Location | Amount | Units | 06/30/94 | 06/30/93 | 1/94-6/94 | 1/93-6/93 |1/94-6/94 |1/93-6/93
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES I | | | | | | | |
Alban Place | 10,500,000 | 194 | 99.9%| 100.0%| 774,826 | 741,973 | 392,152 | 342,439
Frederick, MD | | | | | | | |
Barkley Place | 9,630,000 | 156 | 96.8%| 95.5%| 1,380,266 | 1,283,851 | 940,533 | 916,600
Fort Myers, FL | | | | | | | |
Creekside Village | 11,985,000 | 296 | 98.0%| 90.9%| 770,974 | 710,903 | 433,066 | 383,601
Sacramento, CA | | | | | | | |
Lakeview Garden | 9,307,500 | 179 | 92.2%| 100.0%| 556,748 | 673,649 | 276,998 | 266,139
Dade County, FL | | | | | | | |
The Montclair | 15,465,000 | 159 | 99.4%| 96.9%| 1,191,090 | 1,096,792 | 642,137 | 569,913
Springfield, MO | | | | | | | |
Newport Village | 10,880,000 | 220 | 95.9%| 99.5%| 706,963 | 654,357 | 397,187 | 365,975
Thornton, CO | | | | | | | |
Newport on Seven | 10,800,000 | 167 | 94.0%| 98.8%| 708,429 | 672,907 | 427,358 | 430,994
St. Louis Park, MN| | | | | | | |
Nicollet Ridge | 20,340,000 | 339 | 94.7%| 99.1%| 1,261,029 | 1,313,725 | 838,082 | 836,420
Burnsville, MN | | | | | | | |
North Pointe | 25,850,000 | 540 | 80.0%| 74.6%| 1,381,289 | 1,388,089 | 754,578 |1,037,548
San Bernardino, CA| | | | | | | |
Northridge Park II | 8,950,000 | 128 | 96.9%| 96.1%| 480,522 | 495,552 | 211,584 | 183,941
Salinas, CA | | | | | | | |
Riverset Apartments | 6,535,000 | 120 | 97.1%| 93.8%| 407,285 | 386,963 | 136,301 | 125,361
Memphis, TN | | | | | | | |
Steeplechase Falls | 18,100,000 | 450 | 94.7%| 95.5%| 1,363,520 | 1,301,043 | 789,466 | 752,107
Knoxville, TN | | | | | | | |
Villa Hialeah | 10,250,000 | 245 | 100.0%| 100.0%| 866,588 | 821,154 | 495,995 | 437,116
Hialeah, FL | | | | | | | |
Willowgreen | 9,450,000 | 241 | 94.6%| 95.9%| 658,971 | 668,991 | 360,807 | 337,093
Fife, WA | | | | | | | |
- - ---------------------------------------------------------------|---------------|------------------------------------------------
TOTALS: | 178,042,500 | 3,434 |---------------|---------------| 12,508,500 |12,209,949 |7,096,244 |6,985,247
- - --------------------------------------------------------------------------------------------------------------------------------
</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 Interes| Paid From | Paid From |Other Sources/ |
Location | Due ($) | Paid ($) |Operations ($) | Reserves ($) | Guarantors($) |
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SERIES I | | | | | |
Alban Place | 413,438 | 413,438 | 413,438 | 0 | 0 |
Frederick, MD | | | | | |
Barkley Place | 385,202 | 434,186 | 434,186 | 0 | 0 |
Fort Myers, FL | | | | | |
Creekside Village | 449,438 | 397,967 | 324,000 | 28,967 | 45,000 |
Sacramento, CA | | | | | |
Lakeview Garden | 360,666 | 360,672 | 335,672 | 25,000 | 0 |
Dade County, FL | | | | | |
The Montclair | 608,934 | 568,116 | 568,116 | 0 | 0 |
Springfield, MO | | | | | |
Newport Village | 428,400 | 302,692 | 302,692 | 0 | 0 |
Thornton, CO | | | | | |
Newport on Seven | 438,750 | 292,369 | 292,369 | 0 | 0 |
St. Louis Park, MN| | | | | |
Nicollet Ridge | 800,888 | 447,202 | 447,202 | 0 | 0 |
Burnsville, MN | | | | | |
North Pointe | 1,017,844 | 548,207 | 500,654 | 0 | 47,553 |
San Bernardino, CA| | | | | |
Northridge Park II | 335,625 | 335,625 | 270,025 | 0 | 65,600 |
Salinas, CA | | | | | |
Riverset Apartments | 257,316 | 257,316 | 254,342 | 2,974 | 0 |
Memphis, TN | | | | | |
Steeplechase Falls | 712,688 | 603,471 | 603,471 | 0 | 0 |
Knoxville, TN | | | | | |
Villa Hialeah | 403,593 | 403,590 | 376,590 | 27,000 | 0 |
Hialeah, FL | | | | | |
Willowgreen | 378,000 | 308,578 | 308,578 | 0 | 0 |
Fife, WA | | | | | |
- - -----------------------------------------------------------------------------------------------|
TOTALS: | 6,990,782 | 5,673,429 | 5,431,335 | 83,941 | 158,153 |
- - ------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
| | | | | Total | Total | |
Mortgaged | | | Occupancy | Occupancy | Operating |Operating | Total | Total
Property Name & | Loan | Total | as of | as of | Revenues | Revenues | Expenses | Expenses
Location | Amount | Units | 06/30/94 | 06/30/93 | 1/94-6/94 |1/93-6/93 |1/94-6/94 |1/93-6/93
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES II | | | | | | | |
Emerald Hills | 7,250,000 | 130 | 98.5%| 97.7%| 505,250 | 467,687 | 251,389 | 230,210
Issaquah, WA | | | | | | | |
Gilman Meadows | 7,100,000 | 125 | 93.6%| 90.0%| 470,402 | 460,326 | 234,728 | 254,350
Issaquah, WA | | | | | | | |
Hamilton Chase | 13,975,000 | 300 | 92.3%| 89.7%| 978,769 | 971,896 | 567,268 | 395,300
Chattanooga, TN | | | | | | | |
Mallard Cove I | 2,610,000 | 63 | 96.8%| 92.1%| 168,410 | 166,314 | 116,744 | 112,006
Everett, WA | | | | | | | |
Mallard Cove II | 6,740,000 | 135 | 88.2%| 85.9%| 431,812 | 433,319 | 255,164 | 236,443
Everett, WA | | | | | | | |
The Meadows | 7,200,000 | 200 | 96.5%| 96.0%| 551,020 | 519,151 | 274,707 | 267,963
Memphis, TN | | | | | | | |
Riverset Apartments | 12,640,000 | 232 | 97.1%| 93.8%| 790,844 | 751,164 | 264,583 | 234,347
Memphis, TN | | | | | | | |
Southfork Village | 10,550,000 | 200 | 98.0%| 99.0%| 817,858 | 804,970 | 422,221 | 404,768
Lakeville, MN | | | | | | | |
Whispering Lake | 18,190,000 | 384 | 92.2%| 91.7%| 982,982 | 933,313 | 483,840 | 626,266
Kansas City, MO | | | | | | | |
- - ---------------------------------------------------------------|---------------|------------------------------------------------
TOTALS: | 86,255,000 | 1,769 |---------------|---------------| 5,697,347 |5,508,140 |2,870,644 |2,761,653
- - --------------------------------------------------------------------------------------------------------------------------------
</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 Interes| Paid From | Paid From |Other Sources/ |
Location | Due ($) | Paid ($) |Operations ($) | Reserves ($) | Guarantors($) |
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SERIES II | | | | | |
Emerald Hills | 280,938 | 280,938 | 267,812 | 13,126 | 0 |
Issaquah, WA | | | | | |
Gilman Meadows | 284,000 | 240,078 | 235,333 | 0 | 4,745 |
Issaquah, WA | | | | | |
Hamilton Chase | 559,000 | 295,804 | 295,804 | 0 | 0 |
Chattanooga, TN | | | | | |
Mallard Cove I | 95,265 | 51,805 | 51,805 | 0 | 0 |
Everett, WA | | | | | |
Mallard Cove II | 272,768 | 166,732 | 166,732 | 0 | 0 |
Everett, WA | | | | | |
The Meadows | 274,500 | 293,443 | 293,443 | 0 | 0 |
Memphis, TN | | | | | |
Riverset Apartments | 497,700 | 497,700 | 491,947 | 5,753 | 0 |
Memphis, TN | | | | | |
Southfork Village | 415,406 | 415,406 | 415,406 | 0 | 0 |
Lakeville, MN | | | | | |
Whispering Lake | 693,494 | 493,025 | 425,000 | 0 | 68,025 |
Kansas City, MO | | | | | |
- - -----------------------------------------------------------------------------------------------|
TOTALS: | 3,373,071 | 2,734,931 | 2,643,282 | 18,879 | 72,770 |
- - ------------------------------------------------------------------------------------------------
<FN>
FOOTNOTES:
"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 quarterly report may differ from those reported in last year's
second quarter report due to revisions to property operating statements or
reclassification of certain expenses.
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.
</TABLE>
<PAGE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
General Business
The Managing General Partner continues to pursue actively a
means to provide BAC Holders with additional income and
enhanced value with a prudent level of risk. Negotiations are in
progress which are anticipated to create a mechanism to raise
additional capital for the acquisition of multi-family properties or
mortgage revenue bonds financing multi-family properties which
would generate additional income to be used to make payments on
the Partnership's bonds. The transaction being contemplated is
different from the restructuring considered in 1991; however, the
ultimate goals of increased Partnership income and enhanced value
of the assets remain the same. The ability to proceed will be
affected by the interest rate environment and would 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 unknown 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 June 30, 1994 after
declaration of the distribution. 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. Approximately $150,000 of
Series II's working capital reserves were used to supplement the
June 30, 1994 distribution (see discussion below).
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 June 30, 1994, the Partnership's liquid assets approximated
$5,277,000 in Series I and $2,897,000 in Series II. These funds
primarily consist of undistributed funds generated from operations
during the first six months of 1994.
Results of Operations
During the six months ended June 30, 1994 Series I properties paid
$5,673,000 of interest to the Partnership of which $5,431,000 was
generated from property operations. This represents an increase of
approximately $225,000 (4%) in interest paid and $120,000 (2%)
in cash generated from operations over the six months ended June
30, 1993. During the six months ended June 30, 1994, Series II
properties paid $2,735,000 of interest to the Partnership of which
$2,643,000 was generated from property operations. This
represents a slight decrease (less than 2%) in total interest paid
and an increase of approximately 1% in cash generated from operations
over the six months ended June 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 the specific property interest payment
information.
Partnership operating expenses have increased by 16% in Series I
and 28% in Series II as compared to the first six 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 six months ended June 30, 1994, Series I had
approximately $131,000 in legal expenses related to the
restructuring as compared to $46,000 for the six months ended
June 30, 1993 while Series II had approximately $62,000 and
$22,000 for the same period in 1994 and 1993, respectively. A
portion of the increase in restructuring costs in Series I are offset
by a decreases in legal fees resulting from negotiations with Series
I defaulted borrowers. During the six months ended June 30, 1994,
Series I had approximately $21,000 of such costs as compared to
$51,000 for the same period in 1993.
The lingering effect of adverse market conditions continue to
impact the revenue stream of many of the properties in each series.
Accordingly, during the six month period ended June 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
six months ended June 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 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 June 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 classified as investments in real estate partnerships. As of
June 30, 1994, the carrying values of these investments in real
estate partnerships, net of accumulated depreciation and valuation
adjustments, approximated $106,788,000 for Series I and
$46,818,000 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 June 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), continues to be owned by the original
borrowers, however, negotiations are in progress to transfer the
deed. 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 six months ended June 30, 1994, there were no
valuation adjustments in either series.
The following is a discussion of events which occurred during the
first six months of 1994 which affected the properties that
collateralize the Partnership's investments. The discussion relates
to investments in real estate partnerships. If a property is not
mentioned, its status has remained unchanged, prior reports should
be referenced for further details.
Series I
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 six months of 1994, scheduled payments of
approximately $60,000 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 awaiting final approval from the bond issuer to
complete the transfer of the deed.
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. Once this amount is fully funded by the property,
debt service payments will again approximate property cash flow.
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 six months of
1994, scheduled payments of approximately $86,000 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: August 12, 1994
