UNITED STATES
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, 1995 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
IN THOUSANDS, EXCEPT BAC DATA
<TABLE>
<CAPTION>
September 30,
1995 December 31,
(Unaudited) 1994
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $3,415 $5,240
Interest receivable 235 357
Investment in mortgage revenue bonds and working capital loans,
net of valuation allowance of $1,430 in 1994 (Note 2) 36,235 44,113
Investment in real estate partnerships (Note 3) 54,177 104,709
Investment in joint investment pool (Note 4) 53,537 -
Other assets 104 622
--------------- ---------------
TOTAL ASSETS $147,703 $155,041
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $417 $663
Distributions payable - 5,044
Due to affiliates (Note 5) 25 64
--------------- ---------------
TOTAL LIABILITIES 442 5,771
--------------- ---------------
Partners' Capital
General Partners (319) (305)
Limited Partners (beneficial assignee certificates-
issued and outstanding 200,000 certificates) 147,580 149,575
--------------- ---------------
TOTAL PARTNERS' CAPITAL 147,261 149,270
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, & 5)
TOTAL LIABILITIES AND PARTNERS' CAPITAL $147,703 $155,041
=============== ===============
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
IN THOUSANDS EXCEPT PER BAC DATA
<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,
1995 1994 1995 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCOME
Interest on mortgage revenue bonds and $705 $885 $2,356 $2,655
parity working capital loans
Interest on short-term investments 54 35 169 88
Equity in joint investment pool 710 - 770 -
Equity in property net income 307 1,110 1,589 3,882
--------------- --------------- --------------- ---------------
TOTAL INCOME 1,776 2,030 4,884 6,625
--------------- --------------- --------------- ---------------
EXPENSES
Operating expenses (Note 5) 903 182 1,596 681
--------------- --------------- --------------- ---------------
NET INCOME $873 $1,848 $3,288 $5,944
=============== =============== =============== ===============
NET INCOME ALLOCATED TO GENERAL PARTNERS $9 $18 $33 $59
=============== =============== =============== ===============
NET INCOME ALLOCATED TO LIMITED PARTNERS $864 $1,830 $3,255 $5,885
=============== =============== =============== ===============
NET INCOME PER BAC $4.32 $9.15 $16.28 $29.42
=============== =============== =============== ===============
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
IN THOUSANDS
<TABLE>
<CAPTION> For the nine For the nine
months ended months ended
September 30, September 30,
1995 1994
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,288 $5,944
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in property net income (1,589) (3,882)
Equity in joint investment pool income (770) -
Interest distributions from investment in
real estate partnerships 3,350 5,785
Interest distributions from investment in joint
investment pool 2,297 -
(Increase) decrease in interest receivable (115) -
(Increase) decrease in other assets 518 (672)
Increase (decrease) in accounts payable
and accrued expenses (246) 231
Increase (decrease) in due to affiliates (39) 13
--------------- ---------------
Net cash provided by operating activities 6,694 7,419
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfer of proceeds from investment in joint investment pool 1,822 -
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners (10,341) (10,105)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,825) (2,686)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 5,240 5,032
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,415 $2,346
=============== ===============
DISCLOSURE OF NON-CASH ACTIVITES
Transfer of investment in mortgage revenue bonds,
working capital loans and related accrued interest
to investment in real estate $8,115 -
Transfer of investment in real estate partnerships
to investment in joint investment pool $56,886 -
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, 1994 THROUGH SEPTEMBER 30, 1995
IN THOUSANDS
<TABLE>
<CAPTION>
LIMITED PARTNERS
BENEFICIAL
ASSIGNEE GENERAL
CERTIFICATES PARTNERS TOTAL
---------------- --------------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1994 $149,575 ($305) $149,270
Net income (unaudited) 3,255 33 3,288
Distribution to partners (unaudited) (5,250) (47) (5,297)
---------------- --------------- ---------------
Balance, September 30, 1995 (unaudited $147,580 ($319) $147,261
================ =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
BALANCE SHEETS
SERIES II
IN THOUSANDS, EXCEPT BAC DATA
<TABLE>
<CAPTION> September 30,
1995 December 31,
(Unaudited) 1994
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $2,126 $2,615
Interest receivable 199 199
Investment in mortgage revenue bonds and
parity working capital loans (Note 2) 30,440 30,440
Investment in real estate partnerships (Note 3) - 47,982
Investment in joint investment pool (Note 4) 44,898 -
Other assets 51 504
--------------- ---------------
TOTAL ASSETS $77,714 $81,740
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $197 $447
Distributions payable - 2,669
Due to affiliates (Note 5) 12 31
--------------- ---------------
TOTAL LIABILITIES 209 3,147
--------------- ---------------
Partners' Capital
General Partners (90) (81)
Limited Partners (beneficial assignee certificates-
issued and outstanding 96,256 certificates) 77,595 78,674
--------------- ---------------
TOTAL PARTNERS' CAPITAL 77,505 78,593
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, & 5)
TOTAL LIABILITIES AND PARTNERS' CAPITAL $77,714 $81,740
=============== ===============
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
IN THOUSANDS EXCEPT PER BAC DATA
<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,
1995 1994 1995 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCOME
Interest on mortgage revenue bonds and
parity working capital loans $597 $597 $1,791 $1,791
Interest on short-term investments 34 20 107 52
Equity in joint investment pool 504 - 152 -
Equity in property net income 584 296 1,343
--------------- --------------- --------------- ---------------
TOTAL INCOME 1,135 1,201 2,346 3,186
--------------- --------------- --------------- ---------------
EXPENSES
Operating expenses (Note 5) 430 113 762 358
--------------- --------------- --------------- ---------------
NET INCOME $705 $1,088 $1,584 $2,828
=============== =============== =============== ===============
NET INCOME ALLOCATED TO GENERAL PARTNERS $7 $11 $16 $28
=============== =============== =============== ===============
NET INCOME ALLOCATED TO LIMITED PARTNERS $698 $1,077 $1,568 $2,800
=============== =============== =============== ===============
NET INCOME PER BAC $7.25 $11.19 $16.29 $29.09
=============== =============== =============== ===============
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
IN THOUSANDS
<TABLE>
<CAPTION> For the nine For the nine
months ended months ended
September 30, September 30,
1995 1994
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,584 $2,828
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in property net income (296) (1,343)
Equity in joint investment pool income (152) -
Interest distributions from investment in
real estate partnerships 852 2,328
Interest distribution from investment in joint
investment pool 1,515 -
(Increase) decrease in interest receivable - 1
(Increase) decrease in other assets 453 (404)
Increase (decrease) in accounts payable
and accrued expenses (250) 102
Increase (decrease) in due to affiliates (19) 7
--------------- ---------------
Net cash provided by operating activities 3,687 3,519
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfer of proceeds from investment in joint investment pool 1,165 -
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners (5,341) (5,588)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (489) (2,069)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 2,615 3,035
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $2,126 $966
=============== ===============
DISCLOSURE OF NON-CASH ACTIVITES
Transfer of investment in real estate partnerships
to investment in joint investment pool $47,426 -
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, 1994 THROUGH SEPTEMBER 30, 1995
IN THOUSANDS
<TABLE>
<CAPTION>
LIMITED PARTNERS
BENEFICIAL
ASSIGNEE GENERAL
CERTIFICATES PARTNERS TOTAL
---------------- --------------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1994 $78,674 ($81) $78,593
Net income (unaudited) 1,568 16 1,584
Distribution to partners (unaudited) (2,647) (25) (2,672)
---------------- --------------- ---------------
Balance, September 30, 1995 (unaudited $77,595 ($90) $77,505
================ =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
(SERIES I AND SERIES II)
(Unaudited)
NOTE 1 - STATEMENT OF INFORMATION FURNISHED
The accompanying unaudited financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission 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, 1995 and the results of operations for
the three and nine months ended September 30, 1995 and 1994 and the cash
flows for the nine months ended September 30, 1995 and 1994. These results
have been determined on the basis of accounting principles and policies
discussed in Note 2 to the Financial Statements appearing in the SCA Tax
Exempt Fund Limited Partnership's (the "Partnership") 1994 Annual Report
on Form 10-K, as amended (the "Form 10-K").
Accordingly, 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 Form 10-K.
NOTE 2 - INVESTMENT IN MORTGAGE REVENUE BONDS AND
PARITY WORKING CAPITAL LOANS
The Partnership has invested in various mortgage revenue bonds, the proceeds
from which 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, 1994 financial statements included
in the Form 10-K.
As of September 30, 1995, Series I held 14 mortgage revenue bonds, four of
which are treated as investments in mortgage revenue bonds aggregating
$35,605,400 and five of which are treated as investments in real estate
partnerships (see Note 3). The remaining Series I mortgage revenue bonds
(five) were reclassified to the joint investment pool discussed in Note 4.
Series II held nine mortgage revenue bonds at September 30, 1995, three of
which are treated as investments in mortgage revenue bonds aggregating
$29,624,600. The remaining Series II mortgage revenue bonds (six) were
reclassified to the joint investment pool discussed in Note 4.
During the nine months ended September 30, 1995, Lakeview Garden (Series
I) was reclassified from an investment in mortgage revenue bonds to an
investment in real estate partnerships. See further discussion of Lakeview
Garden in Note 3.
Descriptions of the various mortgage revenue bonds and working capital loans
owned by the Partnership at September 30, 1995 are as follows:
<PAGE>
<TABLE>
<CAPTION>
Series I
Investment in Mortgage Base First Tier Face Carrying
Revenue Bonds and Parity Interest Contingent Maturity Amount Amount
Working Capital Loans (Note 2) Rate Rate Date (000's) (000's)
- ----------------------------------- --------------- ---------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Alban Place Apartments 7.875 2.375 Oct. 2008 $10,500 $10,500
Frederick, MD
Alban Place Limited Partnership
Northridge Park Apartments 7.500 2.000 June 2012 8,950 8,950
Salinas, CA
Northridge Park Phase II
Riverset Apartments 7.875 2.100 Nov. 1999 6,535 6,535
Memphis, TN
Auction Street Associates
Limited Partnership
Villa Hialeah 7.875 2.375 Oct. 2009 10,250 10,250
Hialeah, FL
Shelter Group South East -
Hialeah, A Limited Partnership
------------ ---------------
Series I Mortgage Revenue
Bond and Parity Working
Capital Loan Investment Total $36,235 $36,235 (1)
============ ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Date of In-
Substance Base First Tier Face Carrying
Series I Investment in Real Foreclosure/ Interest Contingent Maturity Amount Amount
Estate Partnerships (Note 3) Deed Transfer Rate Rate Date (000's) (000's)
- ----------------------------------- --------------- ---------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Newport-on-Seven Dec. 1, 1991 8.125 2.375 Aug. 2008 $10,800 $7,321
St. Louis Park, MN
St. Louis Park Housing Partners,
A Limited Partnership
North Pointe Apartments Dec. 31, 1991 7.875 2.375 Aug. 2006 25,850 19,670
San Bernardino, CA
Cal-Shel Limited Partnership
Creekside Village Apartments Dec. 31, 1992 7.500 2.250 Nov. 2009 11,985 10,149
Sacramento, CA
Creekside Village Limited
Partnership
Willowgreen Apartments Sep. 30, 1993 8.000 2.250 Dec. 2010 9,450 9,029
Tacoma, WA
Willowgreen Associates
Limited Partnership
Lakeview Garden Apartments Apr. 19, 1995 7.750 2.500 Aug. 2007 9,308 8,008
Dade Co., FL
SCA Lakeview Apartments
Limited Partnership
--------------- ---------------
Series I Investment in
Real Estate Partnerships Total $67,393 $54,177
=============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Series II
Investment in Mortgage Base First Tier Face Carrying
Revenue Bonds and Parity Interest Contingent Maturity Amount Amount
Working Capital Loans (Note 2) Rate Rate Date (000's) (000's)
- ----------------------------------- --------------- ---------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Riverset Apartments 7.875 2.100 Nov. 1999 $12,640 $12,640
Memphis, TN
Auction Street Associates
Limited Partnership
Southfork Village Apartments 7.875 2.375 Jan. 2009 10,550 10,550
Lakeville, MN
Southfork Apartments
Limited Partnership
Emerald Hills Apartments 7.750 2.500 Apr. 2008 7,250 7,250
Issaquah, WA
Axelrod Emerald Hills Association
Limited Partnership ------------ ---------------
Series II Mortgage Revenue
Bond and Working Capital
Loan Investment Total $30,440 $30,440 (2)
============ ===============
<FN>
(1) Amount includes $35,605,400 of mortgage revenue bonds and $629,600 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 during the nine months ended September 30, 1995
and 1994, 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, 1994 financial
statements included in the 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.
On February 14, 1995, the Partnership consummated a financing transaction
whereby additional proceeds were raised through the offering of $67,700,000
in aggregate principal amount of Multifamily Mortgage Revenue Bond
Receipts, (collectively, the "Receipts"). The Receipts are collateralized by a
pool of eleven of the original mortgage revenue bonds (five in Series I and six
in Series II) held by the Partnership. As a result, the eleven original
mortgage revenue bonds, previously recorded as investments in real estate
partnerships, were reclassified to the joint investment pool (discussed in
Note 4).
After the reclassification of properties to the joint investment pool and the
reclassification of Lakeview Garden (see discussion below), five properties in
Series I and none in Series II were accounted for as investments in real estate
partnerships at September 30, 1995 as compared to nine in Series I and six in
Series II at September 30, 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. and SCA
Successor II, Inc., affiliates of the Managing General Partner, the Partnership
has not waived the monetary 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 1995 or 1994.
Legal and Other
The following summarizes the status of legal and other matters affecting the
investments in real estate partnerships since December 31, 1994:
Lakeview Garden: On April 19, 1995, the Managing General Partner
successfully transferred the Lakeview Garden deed to a partnership controlled
by SCA Successor, Inc. pursuant to the terms of a settlement agreement
negotiated with the original borrower. As of the date of transfer, therefore,
Lakeview Garden is accounted for as an investment in real estate partnerships.
Summarized Financial Information
Combined financial information for the investments in real estate partnerships
is presented below. Each Series recognized net operating income after
depreciation for the period January 1 through February 14, 1995 for those
properties reclassified to the joint investment pool (five for Series I and six
for Series II). In addition, Series I recognized net operating income after
depreciation for the three and nine months ended September 30, 1995 for five
properties classified as investments in real estate partnerships (See Note 2 for
effective dates of reclassification). For the three and nine months ended
September 30, 1994, the combined results of operations for Series I and
Series II includes nine and six properties, respectively. This summary has
been derived from the financial records of the individual partnerships and does
not reflect related valuation adjustments and other basis differences recorded
by the Partnership in its financial statements.
<PAGE>
<TABLE>
<CAPTION>
Series I
Combined Financial Position (unaudited) September 30, December 31,
(in 000's) 1995 1994
------------ ------------
<S> <C> <C>
Land, buildings and equipment,
net of accumulated depreciation $58,633 $114,160
Other assets 1,446 2,057
------------ ------------
Total Assets $60,079 $116,217
============ ============
Liabilities due to the Partnership
including bonds $73,918 $146,996
Other liabilities 1,411 2,351
Partners' deficit (15,250) (33,130)
------------ ------------
Total liabilities and partners' deficit $60,079 $116,217
============ ============
</TABLE>
<TABLE>
<CAPTION>
Combined Results of Operations (unaudited)
(in 000's)
Three Months Ended September 30, Nine Months Ended September 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $2,088 $4,810 $7,310 $14,237
Operating expenses 1,398 2,982 4,417 8,152
Depreciation 383 718 1,304 2,203
------------ ------------ ------------ ------------
Net Income $307 $1,110 $1,589 $3,882
============ ============ ============ ============
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Series II
Combined Financial Position (unaudited) December 31,
(in 000's) 1994
------------
<S> <C>
Land, buildings and equipment,
net of accumulated depreciation $45,616
Other assets 1,219
------------
Total Assets $46,835
============
Liabilities due to the Partnership
including bonds $57,572
Other liabilities 1,220
Partners' deficit (11,957)
------------
Total liabilities and partners' deficit $46,835
============
</TABLE>
<TABLE>
<CAPTION>
Combined Results of Operations (unaudited)
(in 000's)
Three Months Ended September 30, Nine Months Ended September 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues - $1,890 $959 $5,582
Operating expenses - 926 483 3,099
Depreciation - 380 180 1,140
------------ ------------ ------------ ------------
Net Income - 584 296 1,343
============ ============ ============ ============
<PAGE>
For the nine months ended September 30, 1995 and 1994, Series I collected
interest payments of approximately $3,350,000 and $5,785,000, respectively,
from the investments in real estate partnerships while Series II collected
approximately $852,000 and $2,328,000, respectively.
The Managing General Partner periodically evaluates the carrying values of
investments in real estate partnerships. During the first nine months of 1995
and 1994, no valuation adjustments were made 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 4 - JOINT INVESTMENT POOL
As previously discussed, on February 14, 1995, the Partnership consummated
a financing transaction which raised additional proceeds through the offering
of $67,700,000 in aggregate principal amount of Multifamily Mortgage
Revenue Bond Receipts, (collectively, the "Receipts"). The Receipts are
collateralized by a pool of eleven mortgage revenue bonds held by the
Partnership (five in Series I and six in Series II). These eleven bonds all
relate to properties that defaulted on their original debt obligation and were
previously recorded as investments in real estate partnerships. Subsequent to
the financing transaction, the net carrying values of these bonds were
reclassified to the joint investment pool. The cash stream from one additional
property, Creekside Village ("Creekside"), which also defaulted on its original
debt obligation, has been pledged as further security for the transaction. The
operating partnerships for the underlying properties that collateralize the
bonds, including Creekside, were controlled by SCA Successor, Inc., an
affiliate of the Managing General Partner. On January 1, 1995, SCA
Successor, Inc., the general partner of these operating partnerships, withdrew
and was replaced by SCA Successor II, Inc., an affiliate of the Managing
General Partner, as sole general partner. The specific bonds are as follows:
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
MORTGAGE REVENUE REFUNDING BONDS
</TABLE>
<TABLE>
<CAPTION>
A Bond
Interest A Bond B Bond Total
Rate Face Amount Face Amount Face Amount
------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Montclair 7.10% $ 8,500,000 $ 6,840,000 $ 15,340,000
Newport Village 7.10% 6,250,000 4,175,000 10,425,000
Nicollet Ridge 7.10% 7,925,000 12,415,000 20,340,000
Steeplechase Falls 7.125% 12,650,000 5,300,000 17,950,000
Barkley Place 7.05% 5,350,000 3,480,000 8,830,000
---------------- ---------------- ----------------
Total Series I 40,675,000 32,210,000 72,885,000
---------------- ---------------- ----------------
Mallard Cove I 7.40% 800,000 1,670,000 2,470,000
Mallard Cove II 7.40% 2,700,000 3,750,000 6,450,000
Whispering Lake 7.10% 8,900,000 8,500,000 17,400,000
Gilman Meadows 7.40% 4,000,000 2,875,000 6,875,000
Hamilton Chase 7.35% 7,625,000 6,250,000 13,875,000
Meadows 7.35% 3,000,000 3,635,000 6,635,000
---------------- ---------------- ----------------
Total Series II 27,025,000 26,680,000 53,705,000
---------------- ---------------- ----------------
TOTAL 67,700,000 58,890,000 126,590,000
Creekside Village N/A N/A 11,760,000
---------------- ---------------- ----------------
TOTAL with Creekside $ 67,700,000 $ 58,890,000 $ 138,350,000
================ ================ ================
</TABLE>
<PAGE>
Eleven bonds in the aggregate principal amount of $126,590,000 were
refunded by the issuers of such bonds. As a result, a Series A Bond and a
Series B Bond (whose aggregate principal amount equals that of the original
bonds) were exchanged for each of the original bonds. The aggregate
principal amount of the Series A Bonds and Series B Bonds is $67,700,000
and $58,890,000, respectively. Each Series B Bond is subordinate to the
Series A Bonds. In addition, the maturity date for each bond has been
extended as part of the refunding to January 2030.
The Series A Bonds bear interest at various fixed rates per annum, as detailed
on the schedule above, which is due and payable monthly. The Series A
Bonds are subject to mandatory sinking fund redemptions commencing
January 1, 2001 and continuing through maturity. Interest paid on the Series
A Bonds for the nine months ended September 30, 1995 approximated
$1,821,000 for Series I and $1,241,000 for Series II.
The Series B Bonds, except for the Series B Bonds relating to Steeplechase
Falls, Barkley Place and Meadows, bear interest equal to the greater of (a)
three percent (3%) per annum or (b) the amount of available cash flow not
exceeding 16% per annum. The Series B Bonds relating to Steeplechase
Falls, Barkley Place and Meadows bear interest equal to 16%. Principal
amortization on the Series B Bonds is permitted but not required. However,
in any event, Series B Bond principal will be required to be repaid or
refinanced in a lump sum payment at maturity, January 2030. To the extent
the operating partnerships have available cash flow, interest on the principal
amount shall be due and payable monthly. For the nine months ended
September 30, 1995, approximately $1,116,000 and $658,000 of interest was
paid on the Series B Bonds for Series I and Series II, respectively.
The Partnership deposited each of the Series A Bonds and Series B Bonds
with the SCA Tax Exempt Trust (the "Trust") which was created to hold
these assets. A Certificate of Participation in the corpus and the income of
the Trust was issued representing interests in the two series of bonds. The
Partnership is the sole holder of the Certificate of Participation.
The Series A Bonds were then deposited by the Trust with a custodian and
the additional proceeds were raised through the sale of Receipts in the Series
A Bonds to new investors. The Receipts are credit enhanced by Financial
Security Assurance Inc. ("FSA") and are rated AAA and Aaa by Standard and
Poors and Moody's, respectively.
Through the Series A Bonds, the Receipt holders have a fixed interest rate
and preferred return position so that a guaranteed, preferred, fixed rate tax
exempt return will be paid from the interest collected. The operating
partnerships entered into an interest rate swap agreement whereby a portion
of the fixed interest rate under the Series A Bonds was swapped for a floating
tax exempt interest rate. This mechanism will allow the Partnership to realize
the potential benefit of traditionally lower floating interest rates. Under this
interest rate swap, the operating partnerships are obligated to pay a floating
rate equivalent to the PSA Municipal Swap Index, an index of weekly tax
exempt variable rate issues. For the nine months ended September 30, 1995,
approximately $528,000 and $351,000 of net proceeds was received under the
swap agreement in Series I and Series II properties, respectively. Also, an
interest rate cap was purchased by the operating partnerships to limit their
exposure resulting from the floating tax exempt interest rate obligation.
Approximately $156,000 and $104,000 of amortization was expensed for the
nine months ended September 30, 1995 related to the cost of the interest rate
cap in Series I and Series II properties, respectively. These amounts are
included in net interest expense as adjustments to the cost of the additional
proceeds.
In order to obtain credit enhancement and an investment grade rating of the
Receipts, the Partnership was required to pledge the eleven bonds, as well as
the cash stream from the eleven properties collateralizing the bonds to FSA.
In addition, the cash stream from Creekside has been pledged to FSA as
further security. Any cash in excess of the amount needed to pay interest on
the Receipts is then paid for the benefit of BAC Holders. The cash flow
generated on assets acquired with the new proceeds, as discussed below, and
any net proceeds received under the swap agreement also will be for the
benefit of BAC Holders. These cash streams are not pledged to the new
investors.
In return for the sale of Receipts in the Series A Bonds, the Trust, for the
benefit of the Partnership, received $67.7 million. The proceeds from the sale
of the Receipts have been invested in MLP III Investment Limited Partnership
("MLP III"), a Maryland limited partnership. MLP III is owned by the
Partnership through a 99% general partner interest and by SCA Limited
Partner Corporation ("SCALPC"), an affiliate of the Managing General
Partner, through a one percent (1%) limited partner interest. MLP III
invested the net proceeds from the sale of the Receipts, approximately $56.8
million, in MLP II Acquisition Limited Partnership ("MLP II"), a Maryland
limited partnership. MLP II is owned by MLP III through a 98.99% limited
partner interest (39.996% annual profits and distributions interest), MLP I
LLC ("MLP I"), a Maryland limited liability company, through a one percent
(1%) general partner interest (60% annual profits and distributions interest)
and SCALPC through a .01% limited partner interest (.001% annual profits
and distributions interest). MLP I is owned collectively by the operating
partnerships. MLP III and MLP II are both affiliates of the Managing General
Partner. The net proceeds held by MLP II are currently invested in various
short-term investments. Approximately $10.9 million was used to finance
transaction costs, Partnership reserves and the interest rate cap.
As part of the financing transaction, the operating partnerships entered into
a cross-collateralization agreement among themselves. This
cross-collateralization agreement may result in the operating partnerships being
obligated under the Series A Bond obligations of the other operating
partnerships due to shortfalls in their cash flows or required debt service
coverage ratios. Based upon information currently available, the Managing
General Partner does not anticipate that any payments will be required under
the cross-collateralization agreement.
Unpaid accrued base interest of approximately $15.5 million on the eleven
original bonds and the Parity Working Capital Loans, and interest thereon, of
approximately $4.8 million, were converted to Accrued Interest Notes and
Working Capital Notes, respectively, in equivalent principal amounts. The
Partnership contributed the Accrued Interest Notes and Working Capital
Notes to MLP III who contributed them, in turn, to MLP II. In addition,
MLP II loaned the operating partnerships approximately $4.2 million (the
"Load Loan Notes") to purchase an interest rate cap which will serve to limit
the operating partnerships' obligation under the floating rate obligations
discussed above. The Accrued Interest Notes, Working Capital Notes and
Load Loan Notes, (collectively the "Notes") in the aggregate principal amount
of approximately $24.5 million, are due on demand, but in any case not later
than January 2030. The Notes bear interest at a compound annual rate equal
to the Blended Annual Rate in effect for that calendar year as published by the
Internal Revenue Service. To the extent the operating partnerships have
available cash flow, interest on the principal amount and scheduled principal
payments shall be due and payable monthly. Principal payments made on the
Notes for the nine months ended September 30, 1995 were approximately
$774,000 for Series I properties and $727,000 for Series II properties while
interest payments made during the first nine months of 1995 were
approximately $610,000 and $304,000 in Series I and Series II properties.
The Notes and the Series B Bonds (collectively the "Junior Obligations") are
subordinate in priority and right of payment to the Series A Bonds and
payable only to the extent of cash flow. Payments of principal and interest on
the Junior Obligations are prioritized as follows: (i) interest payments due to
MLP II on the Notes, prorata between the Notes; (ii) principal payments due
to MLP II on the Notes, prorata between the Notes; (iii) interest payments
due to Trust on the Series B Bonds; and (iv) the principal payment of the
Series B Bonds due January 2030.
The Partnership continues to report Series I and Series II separately after the
financing transaction with each Series having an interest in the joint
investment pool as described below. Income generated from the additional
proceeds is allocated approximately 60.1% to Series I and approximately
39.9% to Series II. Such percentages are based on the face amount of the
Series A Bonds related to the refunded bonds of each respective Series.
The joint investment pool comprises the eleven operating partnerships, MLP
I, MLP II, MLP III and the Trust. The combined balance sheet, income
statement and changes in equity of the joint investment pool as of and for the
three and nine months ended September 30, 1995 shown below reflects all
related valuation adjustments and other basis differences recorded by the
Partnership in its financial statements through that date. All significant
intercompany balances and transactions have been eliminated.
<PAGE>
JOINT INVESTMENT POOL:
(Unaudited) September 30, 1995
------------------
ASSETS (000's)
Land & land improvements $ 10,811
Buildings & improvements 103,627
Furniture & fixtures 3,449
-----------------
Subtotal 117,887
Less accumulated depreciation (14,972)
-----------------
Total 102,915
Cash and cash equivalents 2,467
Short-term investments 57,637
Interest receivable on
short-term investments 407
Accounts receivable and
prepaid expenses 280
Other assets 5,649
-----------------
TOTAL ASSETS $ 169,355
=================
LIABILITIES AND EQUITY
Accounts payable and
accrued expenses $ 3,208
Custody receipts outstandings 67,700
-----------------
TOTAL LIABILITIES 70,908
-----------------
Minority interest 12
-----------------
Equity:
Series I 53,537
Series II 44,898
-----------------
TOTAL EQUITY 98,435
-----------------
TOTAL LIABILITIES AND EQUITY $ 169,355
=================
<PAGE>
INCOME STATEMENT: Three Nine
(in thousands) Months ended Months ended
September 30, 1995 September 30, 1995
------------------ ------------------
INCOME:
Net rental income $ 5,196 $ 12,892
Interest income 969 2,382
----------------- ----------------
TOTAL INCOME 6,165 15,274
----------------- ----------------
Rental expenses 4,102 10,184
Operating expenses - 1,909
Net interest expense 818 2,184
----------------- ----------------
TOTAL EXPENSES 4,920 14,277
----------------- ----------------
NET INCOME (LOSS) BEFORE
MINORITY INTEREST 1,245 997
MINORITY INTEREST 39 83
----------------- ----------------
NET INCOME (LOSS) $ 1,206 $ 914
================= ================
NET INCOME (LOSS)
ALLOCATED TO SERIES I $ 706 $ 766
================= ================
NET INCOME (LOSS)
ALLOCATED TO SERIES II $ 500 $ 148
================= ================
STATEMENT OF CHANGES IN EQUITY:
(in thousands) SERIES I SERIES II
----------------- ----------------
Balance, February 14, 1995 $ 55,068 $ 46,265
Net income (loss) 766 148
Distributions (2,297) (1,515)
----------------- ----------------
Balance, September 30, 1995 $ 53,537 $ 44,898
================= ================
<PAGE>
NOTE 5 - 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>
<CAPTION> For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
(Unaudited) September 30, 1995 September 30, 1994 September 30, 1995 September 30, 1994
------------------ ------------------ ------------------ ------------------
(in 000's)
<S> <C> <C> <C> <C>
Series I
Salaries of noncontrolling persons &
related expenses $113 $104 $307 $279
Other administrative expenses 31 27 65 81
------------------ ------------------ ------------------ ------------------
Expenses reimbursed $144 $131 $372 $360
================== ================== ================== ==================
Series II
Salaries of noncontrolling persons &
related expenses $54 $50 $148 $134
Other administrative expenses 15 13 31 39
------------------ ------------------ ------------------ ------------------
Expenses reimbursed $69 $63 $179 $173
================== ================== ================== ==================
</TABLE>
Included in Due to Affiliates in the accompanying balance sheets are amounts
payable to the Managing General Partner and its affiliates related to such
administrative and operating costs. At September 30, 1995, the amounts due
approximated $25,000 in Series I and $12,000 in Series II, while at December
31, 1994, they were approximately $64,000 in Series I and $31,000 in Series
II.
As previously detailed in the Partnership's Prospectus, affiliates of the
Managing General Partner receive fees for mortgage servicing from the
operating partnerships owning the mortgaged properties. With respect to the
investments in real estate partnerships (see Note 3) and those properties in the
joint investment pool (see Note 4), 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. 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, 1995 and 1994.
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 1995 the Partnership paid a cash distribution of
$47,000 and $25,000 to the General Partners of Series I and Series II,
respectively. These amounts represent the General Partners' portion of the
$5,297,000 and $2,672,000 semi-annual distributions paid for Series I and
Series II, respectively, on August 11, 1995.
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, 1995 and 1994, these fees approximated
$676,000 for eleven properties and $495,000 for nine properties, respectively.
177061 Canada Ltd. (formerly Shelter Corporation of Canada Limited), 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, 1995, approximated $204,000 and $285,000 for North Pointe
and Whispering Lake, respectively. Scheduled payments totaling $85,000 and
$87,000 were received on the North Pointe obligation during the first nine
months of 1995 and 1994, respectively. Under the Whispering Lake
obligation, scheduled payments totaling $120,000 and $124,000 were
received during the first nine months of 1995 and 1994, respectively.
<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 | 9/30/95 | 9/30/94 |1/95 to 9/95 |1/94 to 9/94 |1/95 to 9/95|1/94 to 9/94|
- ---------------------------------- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES I | | | | | | | | |
Alban Place | 10,500,000 | 194 | 92.8%| 98.5%| 1,205,641 | 1,167,182 | 598,708 | 577,689 |
Frederick, MD | | | | | | | | |
Barkley Place | 9,630,000 | 156 | 94.9%| 98.7%| 2,212,111 | 2,076,025 | 1,567,697 | 1,447,191 |
Fort Myers, FL | | | | | | | | |
Creekside Village | 11,985,000 | 296 | 94.3%| 98.3%| 1,130,863 | 1,170,667 | 647,984 | 632,903 |
Sacramento, CA | | | | | | | | |
Lakeview Garden | 9,307,500 | 180 | 98.3%| 93.0%| 863,793 | 882,899 | 565,704 | 450,389 |
Dade County, FL | | | | | | | | |
The Montclair | 15,465,000 | 159 | 97.5%| 96.2%| 1,918,809 | 1,812,262 | 1,041,235 | 962,141 |
Springfield, MO | | | | | | | | |
Newport Village | 10,880,000 | 220 | 98.2%| 95.0%| 1,148,907 | 1,076,654 | 663,679 | 593,570 |
Thornton, CO | | | | | | | | |
Newport on Seven | 10,800,000 | 167 | 98.2%| 99.4%| 1,120,441 | 1,073,340 | 697,051 | 638,031 |
St. Louis Park, MN| | | | | | | | |
Nicollet Ridge | 20,340,000 | 339 | 99.7%| 97.9%| 2,093,923 | 1,931,235 | 1,414,654 | 1,234,250 |
Burnsville, MN | | | | | | | | |
North Pointe | 25,850,000 | 540 | 90.0%| 80.0%| 1,894,849 | 2,105,243 | 1,471,339 | 1,357,098 |
San Bernardino, CA| | | | | | | | |
Northridge Park II | 8,950,000 | 128 | 96.8%| 93.8%| 787,315 | 729,077 | 396,590 | 321,391 |
Salinas, CA | | | | | | | | |
Riverset Apartments | 6,535,000 | 120 | 99.1%| 97.2%| 643,813 | 613,148 | 226,698 | 205,096 |
Memphis, TN | | | | | | | | |
Steeplechase Falls | 18,100,000 | 450 | 92.7%| 96.7%| 2,213,715 | 2,068,609 | 1,056,238 | 1,142,532 |
Knoxville, TN | | | | | | | | |
Villa Hialeah | 10,250,000 | 245 | 95.9%| 97.6%| 1,286,437 | 1,301,108 | 742,521 | 753,518 |
Hialeah, FL | | | | | | | | |
Willowgreen | 9,450,000 | 241 | 95.8%| 91.3%| 1,027,264 | 1,023,136 | 567,551 | 573,153 |
Fife, WA | | | | | | | | |
- ---------------------------------- -----------------------------|---------|------------------------------------------------------
TOTALS: | 178,042,500 | 3,435 |--------------|---------| 19,547,881 | 19,030,585 | 11,657,649 | 10,888,952 |
- ---------------------------------- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------- ------------------------------
| | | |
| | | 1/95 to 9/95 |
Mortgaged |1/95 to 9/95 |1/95 to 9/95 | Cash |
Property Name & |Debt Service |Debt Service |Available for |
Location | Due ($) |Paid ($) (3) | SCATEF (4) |
- ---------------------------------- ------------------------------
<S> <C> <C> <C>
SERIES I | | | |
Alban Place | 620,156 | 620,156 | 620,156 |
Frederick, MD | | | |
Barkley Place | 894,052 (2)| 814,922 | 365,170 |
Fort Myers, FL | | | |
Creekside Village | 674,156 | 544,946 | 544,946 |
Sacramento, CA | | | |
Lakeview Garden | 540,999 | 299,525 | 299,525 |
Dade County, FL | | | |
The Montclair | 938,989 (2)| 1,131,077 | 472,572 |
Springfield, MO | | | |
Newport Village | 688,687 (2)| 713,893 | 225,388 |
Thornton, CO | | | |
Newport on Seven | 658,125 | 434,600 | 434,600 |
St. Louis Park, MN| | | |
Nicollet Ridge | 1,157,388 (2)| 1,345,259 | 620,877 |
Burnsville, MN | | | |
North Pointe | 1,526,766 | 476,632 | 476,632 |
San Bernardino, CA| | | |
Northridge Park II | 503,438 | 503,438 | 503,438 |
Salinas, CA | | | |
Riverset Apartments | 385,973 | 385,974 | 385,974 |
Memphis, TN | | | |
Steeplechase Falls | 1,592,346 (2)| 1,567,628 | 683,426 |
Knoxville, TN | | | |
Villa Hialeah | 605,391 | 605,385 | 605,385 |
Hialeah, FL | | | |
Willowgreen | 567,000 | 456,034 | 456,034 |
Fife, WA | | | |
Cash from Other | | | |
Sources (5) | | | 1,320,122 |
- ---------------------------------- ------------------------------
TOTALS: | 11,353,466 | 9,899,469 | 8,014,245 |
- ---------------------------------- ------------------------------
</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 | 9/30/95 | 9/30/94 |1/95 to 9/95 |1/94 to 9/94 |1/95 to 9/95|1/94 to 9/94|
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES II | | | | | | | | |
Emerald Hills | 7,250,000 | 130 | 92.3%| 99.2%| 755,827 | 769,829 | 360,860 | 374,049 |
Issaquah, WA | | | | | | | | |
Gilman Meadows | 7,100,000 | 125 | 94.4%| 94.4%| 815,889 | 757,353 | 422,835 | 377,623 |
Issaquah, WA | | | | | | | | |
Hamilton Chase | 13,975,000 | 300 | 94.7%| 94.7%| 1,525,966 | 1,461,476 | 944,320 | 870,758 |
Chattanooga, TN | | | | | | | | |
Mallard Cove I | 2,610,000 | 63 | 95.2%| 96.8%| 266,550 | 264,649 | 169,706 | 181,011 |
Everett, WA | | | | | | | | |
Mallard Cove II | 6,740,000 | 135 | 94.8%| 95.6%| 660,099 | 657,370 | 378,932 | 411,403 |
Everett, WA | | | | | | | | |
The Meadows | 7,200,000 | 200 | 100.0%| 97.5%| 912,547 | 835,729 | 442,791 | 413,131 |
Memphis, TN | | | | | | | | |
Riverset Apartments | 12,640,000 | 232 | 99.1%| 97.2%| 1,245,263 | 1,190,227 | 438,478 | 398,127 |
Memphis, TN | | | | | | | | |
Southfork Village | 10,550,000 | 200 | 99.5%| 96.5%| 1,382,970 | 1,276,904 | 678,732 | 669,037 |
Lakeville, MN | | | | | | | | |
Whispering Lake | 18,190,000 | 384 | 96.9%| 93.0%| 1,689,113 | 1,493,951 | 909,951 | 843,584 |
Kansas City, MO | | | | | | | | |
- ------------------------------------------------------------------|---------|------------------------------------------------------
TOTALS: | 86,255,000 | 1,769 |--------------|---------| 9,254,224 | 8,707,488 | 4,746,605 | 4,538,723 |
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
| | |1/95 to 9/95 |
Mortgaged |1/95 to 9/95 |1/95 to 9/95 | Cash |
Property Name & |Debt Service |Debt Service |Available for |
Location | Due ($) (2) |Paid ($) (3) | SCATEF (4) |
- ------------------------------------------------------------------
<S> <C> <C> <C>
SERIES II | | | |
Emerald Hills | 421,406 | 421,406 | 421,406 |
Issaquah, WA | | | |
Gilman Meadows | 434,115 (2)| 511,335 | 202,129 |
Issaquah, WA | | | |
Hamilton Chase | 799,157 (2)| 790,657 | 248,438 |
Chattanooga, TN | | | |
Mallard Cove I | 138,667 (2)| 155,586 | 72,048 |
Everett, WA | | | |
Mallard Cove II | 388,525 (2)| 401,477 | 151,457 |
Everett, WA | | | |
The Meadows | 697,800 (2)| 584,890 | 319,217 |
Memphis, TN | | | |
Riverset Apartments | 746,550 | 746,550 | 746,550 |
Memphis, TN | | | |
Southfork Village | 623,109 | 623,109 | 623,109 |
Lakeville, MN | | | |
Whispering Lake | 1,051,983 (2)| 1,337,233 | 515,517 |
Kansas City, MO | | | |
Cash from Other | | | |
Sources (5) | | | 977,583 |
- -------------------------------------------------------------------
TOTALS: | 5,301,312 | 5,572,243 | 4,277,454 |
- -------------------------------------------------------------------
<FN>
FOOTNOTES:
(1) "Total Expenses" include normal operating expenses (excluding depreciation)
plus escrows for real estate taxes and insurance, reserve for replacement
payments, servicing fees, bond issuer fees, guarantor fees, collateral agent
expenses and capital improvements.
Total Operating Revenues and Total Operating Expenses for 1994 as reported
in this quarterly report may differ from those reported in last year's
quarterly report due to revisions to property operating statements or
reclassification of certain expenses.
(2) "Debt Service Due" includes interest on Series A Bonds, Series B Bonds
and principal and interest on Demand Notes.
(3) "Debt Service Paid" equals, generally, debt service paid from property operations,
property level reserves and other sources during the quarter including interest payments
on Series A and B Bonds and interest and principal payments on Demand Notes. For purposes
of this table, these receipts are compared to debt service due in the same reporting
period. Therefore, the cumulative debt service shortfall for a property may exceed
the resulting shortfall for the reporting period.
(4) "Debt Service Available for SCATEF" represents total debt service paid by the
properties less any interest on Series A Bonds paid.
(5) "Cash from Other Sources" includes cash received from investments
subsequent to the reporting period.
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Financial Condition and Liquidity
The Partnership's initial capital remains invested in 23 mortgage revenue
bonds and related working capital loans. Of these investments, 14 (totaling
$178,042,500) were acquired with Series I proceeds while nine (totaling
$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.
These initial reserves, however, as a result of supplementing distributions to
BAC Holders and providing additional working capital loans to the properties,
are exhausted. During the six months ended June 30, 1995, approximately
$300,000 of the initial reserves were used to supplement Series II's December
31, 1994 distribution.
Additional working capital reserves for both Series were created as a result
of the financing transaction which occurred on February 14, 1995. These
working capital reserves are available at the Managing General Partner's
discretion to make additional working capital loans to borrowers, to pay
unanticipated and unusual costs of operating and administering the Partnership
and to reduce fluctuations in cash distributions to investors. As of September
30, 1995, reserves outstanding approximated $1.2 million and $750,000 in
Series I and Series II, respectively.
On August 11, 1995, the Managing General Partner paid semi-annual
distributions of $26.25 and $27.50 per BAC in Series I and Series II,
respectively. These amounts represent an annualized primarily tax-exempt
distribution rate of 5.25% in Series I and 5.50% in Series II. The distribution
rate in Series I represents an increase of .25% from the previous semi-annual
distribution. In Series II, the distribution rate was consistent with the two
previous semi-annual distributions.
At September 30, 1995, the Partnership's liquid assets approximated
$3,415,000 in Series I and $2,126,000 in Series II, primarily consisting of
undistributed funds generated from operations during the third quarter of
1995 and working capital reserves created when the additional proceeds were
raised. These amounts do not include the liquid assets in the joint investment
pool, which the Partnership intends to permanently invest in connection with
the Transaction disclosed in the Prospectus/Consent Solicitation filed on Form
S-4 under the Securities Act of 1933 on November 7, 1995 as discussed
below.
Results of Operations
For the nine months ended September 30, 1995, results of operations for
Series I and Series II reflect the results of the financing transaction which
occurred on February 14, 1995. Various costs were incurred to consummate
the financing transaction of which approximately $1.9 million were expensed
in the first quarter of 1995.
On November 7, 1995, the Partnership filed on Form S-4 a
Prospectus/Consent Solicitation under the Securities Act of 1933. The
Prospectus/Consent Solicitation describes a new business strategy for the
future of the Partnership's investments and a proposed new investment
structure which result from the efforts of the Managing General Partner to
maximize the value of BAC Holder investments. Accordingly, the transaction
described in the Prospectus/Consent Solicitation (the "Transaction") will
provide BAC Holders with different investment choices designed to fit their
individual investment objectives. Through the Prospectus/Consent
Solicitation, the Transaction is being presented to BAC Holders for
consideration. As a result, for the nine months ended September 30, 1995,
approximately $1.1 million was expensed between both series related to the
preparation of the Prospectus/Consent Solicitation.
SERIES I
For the quarter ended September 30, 1995, income per BAC was $4.32
versus $9.15 for the same period last year. The decrease is due primarily to
an increase in costs associated with the Prospectus/Consent Solicitation of
approximately $452,000 and an increase in legal fees associated with
defending the Complaint filed on May 24, 1995 of approximately $138,000
(see discussion in "Other" below). Also contributing to the decline in earnings
per BAC is the reclassification of the Lakeview Garden Bond (see Note 3 to
the financial statements) and a decrease in equity earnings generated from
operating partnerships, specifically North Pointe.
For the nine months ended September 30, 1995, income per BAC was $16.28
versus $29.42 for the same period last year. The decrease is primarily due to
costs associated with the raising of the additional proceeds and costs incurred
related to the Prospectus/Consent Solicitation. Approximately $1.2 million
of such costs related to the financing transaction were expensed during the
first quarter of 1995. This expense is included in the net income of $770,000
from the joint investment pool. Costs associated with the preparation of the
Prospectus/Consent Solicitation for the nine months ended September 30,
1995 were approximately $720,000 and are included in operating expenses.
Interest on mortgage revenue bonds and parity working capital loans
decreased for the quarter and nine months ended September 30, 1995 versus
the same periods in 1994. This decrease is due to the reclassification of the
Lakeview Garden bond to an investment in real estate. Equity in property net
income for the quarter and nine months ended September 30, 1995 decreased
as compared to the same periods of 1994. This decrease is primarily due to
the reclassification of five properties to the joint investment pool. Equity
in property net income for the quarter ended September 30, 1995 includes five
properties as compared to nine properties for the same period in 1994. Equity
in property net income for the nine months ended September 30, 1995
includes five properties for the period January 1, 1995 through September 30,
1995 and five properties for the period January 1, 1995 through February 14,
1995. For the nine months ended September 30, 1994, equity in property net
income includes nine properties.
During the nine months ended September 30, 1995, Series I properties paid
approximately $8.0 million to the Partnership. This represents a slight
decrease as compared to the same period last year. The table at the
beginning of this report should be referenced for more information regarding
specific property information.
SERIES II
For the quarter ended September 30, 1995, income per BAC was $7.25
versus $11.19 for the same period last year. The decrease is due primarily to
an increase in costs associated with the Prospectus/Consent Solicitation of
approximately $212,000 and an increase in legal fees associated with
defending the Complaint filed on May 24, 1995 of approximately $66,000 (see
discussion in "Other" below). Also contributing to the decline in earnings per
BAC is a decrease in equity earnings generated from operating partnerships
as result of the bond refundings and financing transaction under which a
portion of the operating partnerships' income stream is paid to the custody
receipt holders. Until the net proceeds are fully invested in permanent
investments, this obligation is not entirely offset by investment earnings on
the additional proceeds raised in the financing transaction.
For the nine months ended September 30, 1995, income per BAC was $16.29
versus $29.09 for the same period last year. The decrease is primarily due to
costs associated with the raising of the additional proceeds and costs incurred
related to the Prospectus/Consent Solicitation. Approximately $740,000 of
such costs related to the financing transaction were expensed during the first
quarter of 1995. This expense is included in the net income of $152,000 from
the joint investment pool. Costs associated with the preparation of the
Prospectus/Consent Solicitation for the nine months ended September 30,
1995 were approximately $346,000 and are included in operating expenses.
Interest on mortgage revenue bonds and parity working capital loans remained
the same for the quarters and nine months ended September 30, 1995 and
1994. Equity in property net income for the quarter and nine months ended
September 30, 1995 decreased as compared to the same periods in 1994. For
the quarter ended September 30, 1995, no equity in property net income was
recorded since all of the properties that were previously accounted for as
investments in real estate were reclassified to the investment in joint
investment pool. This reclassification also caused the decrease for the nine
months ended September 30, 1995. Results of operations of the properties
for the nine months ended September 30, 1995 includes six properties for the
period January 1, 1995 through February 14, 1995. For the quarters and nine
months ended September 30, 1994, results of operations includes six
properties.
During the nine months ended September 30, 1995, Series II properties paid
approximately $4.3 million to the Partnership. This represents a $100,000
(3%) increase over the same period last year. This increase is primarily due
to improved property performance in 1995 as compared to 1994. The table
at the beginning of this report should be referenced for more information
regarding specific property information.
Other
On May 24, 1995, the General Partners were served with a Complaint filed
in the Superior Court of the State of California, for the County of Los
Angeles, by a BAC Holder claiming a breach of the Partnership Agreement
and breach of fiduciary duties in connection with the February 1995 financing
transaction. The plaintiff subsequently dismissed the California action but
refiled it, in July 1995, in the Superior Court of the District of Columbia. The
action was removed by the General Partners to the United States District
Court for the District of Columbia. The plaintiff claims that the Partnership's
participation in the transaction was not authorized under the Partnership
Agreement and that the proceeds received should be distributed immediately
to the BAC Holders. The plaintiff purports to bring the action derivatively on
behalf of the Partnership and also seeks to be appointed representative of the
BAC Holders as a class.
The General Partners believe that the allegations are without merit. On
November 8, 1995, the parties agreed to the settlement of the action in
consideration of certain modifications to the terms of and disclosure with
respect to the Transaction disclosed in the Prospectus/Consent Solicitation.
The terms and conditions of the settlement are set forth in a formal stipulation
of settlement which will be filed with the district court. BAC Holders are
being sent under separate cover a Notice of Pendency and Proposed
Settlement of the Action, which will explain the settlement and the rights of
BAC Holders in connection therewith. The settlement is subject to the
approval of the district court and other terms and conditions, as set forth in
the Notice. Approval of the settlement as proposed will not have a material
effect on the result of operations of the Partnership.
<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 9, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS 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-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,541,000<F1>
<SECURITIES> 0
<RECEIVABLES> 434,000<F2>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,975,000<F3>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 225,417,000<F4>
<CURRENT-LIABILITIES> 651,000<F5>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 224,766,000<F6>
<TOTAL-LIABILITY-AND-EQUITY> 225,417,000<F7>
<SALES> 0
<TOTAL-REVENUES> 7,230,000<F8>
<CGS> 0
<TOTAL-COSTS> 2,358,000<F9>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,872,000<F10>
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,872,000<F11>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,872,000<F12>
<EPS-PRIMARY> 32.57<F13>
<EPS-DILUTED> 0
<FN>
<F1> SERIES I SERIES II
---------- -----------
CASH 3,415,000 2,126,000
<F2>RECEIVABLES 235,000 199,000
<F3>CURRENT ASSETS 3,650,000 2,325,000
<F4>TOTAL ASSETS 147,703,000 77,714,000
<F5>CURRENT LIABILITIES 442,000 209,000
<F6>OTHER S-E 147,261,000 77,505,000
<F7>TOTAL LIABILITIES
& EQUITY 147,703,000 77,714,000
<F8>TOTAL REVENUE 4,884,000 2,346,000
<F9>TOTAL COSTS 1,596,000 762,000
<F10>INCOME- PRETAX 3,288,000 1,584,000
<F11>INCOME-CONTINUING 3,288,000 1,584,000
<F12>NET INCOME 3,288,000 1,584,000
<F13>EPS 16.28 16.29
</FN>
</TABLE>
