FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-17696
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AMERICAN AFFORDABLE HOUSING II LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Massachusetts 04-2992309
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Boston, Place, Suite 2100, Boston Massachusetts 02108-4406
- --------------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 624-8900
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(Former name, former address and former fiscal year, if changed since last
report)
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
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<PAGE>
AMERICAN AFFORDABLE HOUSING II LIMITED PARTNERSHIP
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QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED September 30, 1996
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TABLE OF CONTENTS
-----------------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
Statements of Operations
Statement of Changes in Partners' Capital
Statements of Cash Flows
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
American Affordable Housing II Limited Partnership
BALANCE SHEETS
ASSETS
September 30, March 31,
1996 1996
(Unaudited) (Audited)
----------- ----------
INVESTMENTS IN OPERATING
PARTNERSHIPS (note D) $3,810,777 $4,153,171
OTHER ASSETS
Cash and cash equivalents 14,848 34,944
Notes receivable 40,000 78,875
Other assets 7,849 7,849
--------- ---------
$3,873,474 $4,274,839
========= =========
LIABILITIES
Accounts payable affiliates $3,317,110 $3,133,894
Accounts payable 3,500 3,500
--------- ---------
3,320,610 3,137,394
--------- ---------
PARTNERS' CAPITAL
Limited Partners
Units of limited partnership
interest, $1,000 stated value per
unit; issued and outstanding,
26,501 units (note A) 777,242 1,355,977
General Partners (224,378) (218,532)
--------- ---------
552,864 1,137,445
--------- ---------
$3,873,474 $4,274,839
========= =========
The accompanying notes are an integral part of these statements.
1
<PAGE>
American Affordable Housing II Limited Partnership
STATEMENTS OF OPERATIONS
Three Months Ended September 30,
(Unaudited)
1996 1995
Income ---- ----
Interest income $ 238 $ 172
Miscellaneous income - -
-------- --------
238 172
-------- --------
Share of loss from Operating
Partnerships (note D) (196,069) (365,491)
-------- --------
Expenses
Professional fees 24,900 35,059
General and administrative expenses 1,160 2,944
Asset management fees (note C) 107,035 115,348
-------- --------
133,095 153,351
-------- --------
NET LOSS $(328,926) $(518,670)
======== ========
Net loss allocated to general partners $ (3,289) $ (5,187)
======== ========
Net loss allocated to limited partners $(325,637) $(513,483)
======== ========
Net loss per unit of limited
partnership interest $ (12) $ (20)
======== ========
The accompanying notes are an integral part of these statements.
2
<PAGE>
American Affordable Housing II Limited Partnership
STATEMENTS OF OPERATIONS
Six Months Ended September 30,
(Unaudited)
1996 1995
Income ---- ----
Interest income $ 542 $ 358
Miscellaneous income 382 -
-------- --------
924 358
-------- --------
Share of loss from Operating
Partnerships (note D) (332,043) (721,286)
-------- --------
Expenses
Professional fees 35,615 36,920
General and administrative expenses 7,758 6,910
Asset management fees (note C) 210,089 231,309
-------- --------
253,462 275,139
-------- --------
NET LOSS $(584,581) $(996,067)
======== ========
Net loss allocated to general partners $ (5,846) $ (9,961)
======== ========
Net loss allocated to limited partners $(578,735) $(986,106)
======== ========
Net loss per unit of limited
partnership interest $ (22) $ (37)
======== ========
The accompanying notes are an integral part of these statements.
3
<PAGE>
American Affordable Housing II Limited Partnership
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
Six Months Ended September 30, 1996
(Unaudited)
Limited General
Partners Partners Total
-------- -------- -----
Partners' capital (deficit),
April 1, 1996 $1,355,977 $(218,532) $1,137,445
Net loss (578,735) (5,846) (584,581)
--------- -------- ---------
Partners' capital (deficit),
September 30, 1996 $ 777,242 $(224,378) $ 552,864
========= ======== =========
The accompanying notes are an integral part of these statements.
4<PAGE>
American Affordable Housing II Limited Partnership
STATEMENTS OF CASH FLOWS
Six Months Ended September 30,
(Unaudited)
1996 1995
---- ----
Cash flows from operating activities:
Net loss $(584,581) $(996,067)
Adjustments
Cash flow from Operating
Partnerships 10,351 3,220
Share of loss of Operating
Partnerships 332,043 721,286
Changes in assets and liabilities
Increase in accounts payable
and accrued expenses 183,216 253,304
-------- --------
Net cash provided by (used in)
operating activities (58,972) (18,257)
-------- --------
Cash flows from investing activity:
Repayments of loans to
Operating Partnerships 38,875 16,500
-------- --------
Net cash provided by
investing activity 38,875 16,500
-------- --------
INCREASE (DECREASE) IN CASH (20,096) (1,757)
Cash and cash equivalents, beginning 34,944 26,751
-------- --------
Cash and cash equivalents, ending $ 14,848 $ 24,944
======== ========
The accompanying notes are an integral part of these statements.
5<PAGE>
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
(Unaudited)
NOTE A - ORGANIZATION
American Affordable Housing II Limited Partnership
("Partnership") was formed under the laws of The Commonwealth of
Massachusetts on May 13, 1987, for the purpose of acquiring, holding, and
disposing of limited partnership interests in operating partnerships
which were to acquire, develop, rehabilitate, operate and own newly
constructed, existing or rehabilitated low-income apartment complexes.
The general partners of the Partnership are Boston Capital Associates
Limited Partnership and C&M Associates d/b/a Boston Capital Associates.
Pursuant to the Securities Act of 1933, the Partnership filed a
Form S-11 Registration Statement with the Securities and Exchange
Commission, effective September 21, 1987, which covered the offering (the
"Public Offering") of the Partnership's units of limited partner
interest, as well as the units of limited partner interest offered by
American Affordable Housing I, III, IV, and V Limited Partnerships
(together with the Partnership, the "Partnerships"). The Partnerships
registered 50,000 units of limited partner interest at $1,000 each unit
for sale to the public. The Partnership sold 26,501 units of limited
partner interest, representing $26,501,000 of capital contributions.
NOTE B - ACCOUNTING AND FINANCIAL REPORTING POLICIES
The condensed financial statements included herein as of September 30,
1996 and for the three and six months then ended have been prepared by the
Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The Registrant's accounting and financial
reporting policies are in conformity with generally accepted accounting
principles and include adjustments in interim periods considered necessary for
a fair presentation of the results of operations. All such adjustments are of
a normal recurring nature. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. It is suggested that these condensed
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Registrant's Annual Report Statement on
Form 10-K.
The accompanying financial statements reflect the Partnership's
results of operations for an interim period and are not necessarily
indicative of the results of operations for the fiscal year ending
March 31, 1997.
6<PAGE>
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1996
(Unaudited)
NOTE C - RELATED PARTY TRANSACTIONS
An annual asset management fee based on 0.5 percent of the aggregate
cost of all apartment complexes owned by the Operating Partnerships, less the
amount of certain partnership management and reporting fees paid or payable by
the Operating Partnerships, has been accrued as payable to Boston Capital
Asset Management Limited Partnership (formerly Boston Capital Communications
Limited Partnership). The portion of the annual asset management fee accrued
for the quarters ended September 30, 1996 and 1995 was $110,465 and $115,348,
respectively.
Affiliates of the General Partner have advanced $96,576 to the
Partnership to pay certain operating expenses. This and any additional
advances will be paid, without interest, from available cash flow or the
proceeds of sales or refinancing of the Partnership's interests in
Operating Partnerships.
On December 23, 1994 an affiliate of the General Partners funded
$100,375, interest free, to the Partnership so that it could make a $100,375
loan to the Operating Partnership Washington Mews. The loan enabled the
Operating Partnership to refinance its mortgage at a more favorable rate, and
will be repaid by the Operating Partnership with surplus cash from operations
over the course of the three years. As repayments are received from
Washington Mews, they will be used to repay the funding, free of interest,
from the General Partners' affiliate. As of September 30, 1996 Washington
Mews has paid the Partnership $60,375. As of September 30, 1996 $60,375 has
been repaid to the affiliate leaving a balance of $40,000.
NOTE D - INVESTMENTS IN OPERATING PARTNERSHIPS
At September 30, 1996 and 1995, the Partnership had limited partnership
equity interests in fifty and fifty one Operating Partnerships, respectively,
each of which owned an apartment complex.
Under the terms of the Partnership's investment in each Operating
Partnership, the Partnership was required to make capital contributions to
such Operating Partnerships. These contributions were payable in installments
upon each Operating Partnership achieving specified levels of construction
and/or operations. At September 30, 1996 and 1995, all such capital
contributions had been paid to the Operating Partnerships.
The Partnership's fiscal year ends March 31st of each year, while all
the Operating Partnerships' fiscal years are the calendar year. Pursuant to
the provisions of each Operating Partnership Agreement, financial results for
each of the Operating Partnerships are provided to the Partnership within 45
days after the close of each Operating Partnership's quarterly period.
Accordingly, the current financial results available for the Operating
Partnerships are for the six months ended June 30, 1996.
7 <PAGE>
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1996
(Unaudited)
COMBINED SUMMARIZED STATEMENTS OF OPERATIONS
NOTE D - INVESTMENTS IN OPERATING PARTNERSHIPS-Cont.
The unaudited combined summarized statements of operations of the
Operating Partnerships for the six months ended September 30, 1996 and 1995
are as follows:
1996 1995
Revenues ---- ----
Rental income $ 4,764,285 $5,063,957
Interest and other 189,630 272,211
--------- ---------
4,953,915 5,336,168
--------- ---------
Expenses
Interest expense 1,525,112 1,602,961
Depreciation and amortization 1,584,650 1,728,076
Operating expenses 3,019,160 3,360,580
--------- ---------
6,128,922 6,691,617
--------- ---------
NET LOSS $(1,175,007) $(1,355,449)
========= =========
Net loss allocated to American
Affordable Housing II Limited
Partnership $ (332,043) $ (721,286)
========= =========
Net loss allocated to other partners $ (11,750) $ (13,554)
========= =========
Net loss suspended $ (831,214) $ (620,609)
========= =========
The variance in allocated loss from the Operating Partnerships for the
six months ended June 30, 1996 and 1995 is mainly a result of the way
the Partnership accounts for its investment in Operating Partnerships. The
Partnership accounts for its investments using the equity method of
accounting. Under the equity method of accounting, the partnership adjusts
its investment cost for its share of each Operating Partnership's results of
operations and for any distributions received or accrued. However, the
Partnership recognizes individual operating losses only to the extent of
capital contributions. Excess losses are suspended for use in future years to
offset excess income.
8<PAGE>
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 1996
(Unaudited)
NOTE E - TAXABLE LOSS
The Partnership's taxable loss for the fiscal year ended March
31, 1997 is expected to differ from its loss for financial reporting
purposes primarily due to accounting differences in depreciation incurred
by the Operating Partnerships. No provision or benefit for income taxes
has been included in these financial statements since taxable income or
loss passes through to, and is reportable by, the partners individually.
9<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity
- ---------
The Partnership's primary source of funds was the proceeds of its
Public Offering. Other sources of liquidity have included (i) interest
earned on working capital reserves, and (ii) cash distributions from
operations of the Operating Partnerships in which the Partnership has
invested. Both of these sources of liquidity are available to meet the
obligations of the Partnership.
The Partnership is currently accruing the annual asset management fee.
Asset management fees accrued during the quarter ended September 30, 1996 were
$110,465 and total asset management fees accrued as of September 30, 1996 were
$3,179,837. Pursuant to the Partnership Agreement, such liabilities will
be deferred until the Partnership receives sales or refinancing proceeds
from Operating Partnerships, which will be used to satisfy such liabilities.
Affiliates of the General Partners have advanced $96,576 to the
Partnership to pay certain third party operating expenses. This and
any additional advances will be paid, without interest, from available
cash flow, reporting fees or the proceeds of sales or refinancing of the
Partnership's interests in Operating Partnerships.
The Partnership anticipates that as the Operating Partnerships continue to
mature more cash flow and reporting fees will be generated. Cash flow and
reporting fees will be added to the Partnership's working capital and will
be available to meet future third party obligations of the Partnership.
The Partnership is currently and will continue to aggressively pursue
available cash flow and reporting fees and anticipates that the amount
collected will be sufficient to cover future third party operating
expenses.
Capital Resources
- -----------------
The Partnership received $26,501,000 in subscriptions for Units (at
$1,000 per Unit) during the period February 2, 1988 to September 21, 1988
pursuant to the Public Offering, resulting in net proceeds available for
investment in Operating Partnerships (after payment of acquisition fees
and expenses and funding of a reserve) of $18,550,700. As of September 30,
1996 the Partnership had committed to investments requiring cash payments of
$18,613,764, all of which had been paid at September 30, 1996. At September
30, 1996 the Partnership held working capital of $14,848.
10 <PAGE>
Results of Operations
- ---------------------
As of September 30, 1996 and 1995 the Partnership held limited partnership
interests in 50 and 51, Operating Partnerships, respectively. In each
instance the Apartment Complex owned by the applicable Operating Partnership
is eligible for the Federal Housing Tax Credit. Occupancy of a unit in each
Apartment Complex which initially complied with the Minimum Set-Aside Test
(i.e., occupancy by tenants with incomes equal to no more than a certain
percentage of area median income) and the Rent Restriction Test (i.e., gross
rent charged tenants does not exceed 30% of the applicable income standards)
is referred to hereinafter as "Qualified Occupancy." Each of the Operating
Partnerships and each of the respective Apartment Complexes are described more
fully in the Prospectus or applicable report on Form 8-K. The General Partner
believes that there is adequate casualty insurance on the properties.
As of September 30, 1996 and 1995 the Qualified Occupancy of the Operating
Partnership's was 99.9% and 99.7%, respectively.
The Partnership had invested in a total of 50 and 51 Operating
Partnerships as of September 30, 1996 and 1995, respectively. During the
quarters ended September 30, 1996 and 1995, the Partnership received reporting
fees of $3,430 and $2,462, respectively, from the Operating Partnerships. No
significant distributions of cash flow or reporting fees from the Operating
Partnerships are anticipated due to the restrictions on rents which apply to
low-income apartment complexes such as those invested in by the Partnership.
In the prior fiscal year, the Operating Partnership, California Investors
II was experiencing operating difficulties. As a result, the holder of the
first mortgage had a receiver appointed. The Investment General Partner
believed that it was in the best interest of the Partnership to sell the
property owned by California Investors II. After restructuring and workout
negotiations with the lender, the property was sold to the lender for proceeds
sufficient to cover all outstanding liabilities of the Operating Partnership.
The Investment Partnership was subjected to a one time recapture event which
reduced investors' 13.1% annual tax credit as a percentage of capital invested
to 11.4% for the 1995 tax year. It is anticipated that calendar year 1996's
tax credit as a percentage of capital invested will be back over 13%.
The Partnership incurred an annual asset management fee to Boston
Capital Asset Management Limited Partnership (formerly Boston Capital
Communications Limited Partnership) in an amount equal to 0.5% of the
aggregate cost of the apartment complexes owned by the Operating Partnerships,
less the amount of certain partnership management and reporting fees paid by
the Operating Partnerships. The annual asset management fee incurred, net of
reporting fees received, during the quarters ended September 30, 1996 and 1995
was $107,035 and $116,978 respectively.
11<PAGE>
The reduction was a result of the removal of the portion of the fee related to
the Operating Partnership California Investors II which was sold in November
1995, and an increase in reporting fees collected in the current fiscal year.
Because the Partnership is not expected to receive significant cash flow or
reporting fees from the Operating Partnerships in subsequent years, the annual
asset management fee is being deferred and is expected to be paid from the
proceeds of sales or refinancing of the Partnership's interests in Operating
Partnerships.
12<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(2) None
(4)(a) Form of Amended and Restated Certificate and Agreement
of Limited Partnership and form of Subscription
Agreement for the Partnership
(4)(b)(i) Certificate and Agreement of Limited Partnership of
the Partnership
(4)(b)(ii) Amended Certificate and Agreement of Limited
Partnership of the Partnership
(4)(c) Form of Certificate of Limited Partnership Interest in
the Partnership
(11) None
(15) None
(18) None
(19) None
(20) None
(23) None
(24) None
(25) None
(28) None
(b) Reports on Form 8-K
-------------------
There were no reports on Form 8-K filed during the period
covered by this report.
13<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
American Affordable Housing II
Limited Partnership
By: Boston Capital Associates Limited
Partnership
By: C&M Associates, d/b/a
Boston Capital Associates,
Date: November 14, 1996 By: /s/JOHN P. MANNING
---------------------------
John P. Manning, Partner
14
<TABLE> <S> <C>
<ARTICLE> CT
<CIK> 0000815024
<NAME> AMERICAN AFFORDABLE HOUSING II LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<TOTAL-ASSETS> 3,873,474
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,873,474
<TOTAL-REVENUES> 924
<INCOME-TAX> 0
<INCOME-CONTINUING> (585,505)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (584,581)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
