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 December 31, 1997
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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
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(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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AMERICAN AFFORDABLE HOUSING II LIMITED PARTNERSHIP
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QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED December 31, 1997
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TABLE OF CONTENTS
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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
American Affordable Housing II Limited Partnership
BALANCE SHEETS
ASSETS
December 31,
March 31,
1997
1997
(Unaudited)
(Audited)
-----------
- ----------
INVESTMENTS IN OPERATING
PARTNERSHIPS (note D) $2,866,658
$3,347,143
OTHER ASSETS
Cash and cash equivalents 13,109
14,290
Notes receivable 40,000
40,000
Other assets 7,849
7,849
---------
- ---------
$2,927,616
$3,409,282
=========
=========
LIABILITIES
Accounts payable affiliates $3,897,527
$3,539,181
Accounts payable 3,500
3,500
---------
- ---------
3,901,027
3,542,681
---------
- ---------
PARTNERS' CAPITAL
Limited Partners
Units of limited partnership
interest, $1,000 stated value per
unit; issued and outstanding,
26,501 units (note A) (733,771)
97,841
General Partners (239,640)
(231,240)
---------
- ---------
(973,411)
(133,399)
---------
- ---------
$2,927,616
$3,409,282
=========
=========
The accompanying notes are an integral part of these
statements.
1
American Affordable Housing II Limited Partnership
STATEMENTS OF OPERATIONS
Three Months Ended December 31,
(Unaudited)
1997
1996
Income ----
- ----
Interest income $ 43 $
98
Miscellaneous income -
1088
--------
- --------
43
1186
--------
- --------
Share of loss from Operating
Partnerships (note D) (129,844)
(124,882)
--------
- --------
Expenses
Professional fees 750
- -
General and administrative expenses 4,970
1839
Asset management fees (note C) 110,465
109,094
--------
- --------
116,185
110,933
--------
- --------
NET LOSS $(245,986)
$(234,629)
========
========
Net loss allocated to general partners $ (2,460) $
(2,346)
========
========
Net loss allocated to limited partners $(243,526)
$(232,283)
========
========
Net loss per unit of limited
partnership interest $ (9) $
(9)
========
========
The accompanying notes are an integral part of these
statements.
2
American Affordable Housing II Limited
Partnership
STATEMENTS OF OPERATIONS
Nine Months Ended December 31,
(Unaudited)
1997
1996
Income ----
- ----
Interest income $ 262 $
640
Miscellaneous income -
1470
--------
- --------
262
2110
--------
- --------
Share of loss from Operating
Partnerships (note D) (474,836)
(456,925)
--------
- --------
Expenses
Professional fees 30,833
35,615
General and administrative expenses 16,408
9,598
Asset management fees (note C) 318,197
319,183
--------
- --------
365,438
364,396
--------
- --------
NET LOSS $(840,012)
$(819,211)
========
========
Net loss allocated to general partners $ (8,400) $
(8,192)
========
========
Net loss allocated to limited partners $(831,612)
$(811,019)
========
========
Net loss per unit of limited
partnership interest $ (31) $
(31)
========
========
The accompanying notes are an integral part of these
statements.
3
American Affordable Housing II Limited Partnership
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
Nine Months Ended December 31, 1997
(Unaudited)
Limited General
Partners Partners Total
-------- -------- -----
Partners' capital (deficit),
April 1, 1997 $ 97,841 $(231,240)
$(133,399)
Net loss (831,612) (8,400)
(840,012)
--------- --------
- ---------
Partners' capital (deficit),
December 31, 1997 $(733,771) $(239,640)
$(973,411)
========= ========
=========
The accompanying notes are an integral part of these
statements.
4
American Affordable Housing II Limited Partnership
STATEMENTS OF CASH FLOWS
Nine Months Ended December 31,
(Unaudited)
1997
1996
----
- ----
Cash flows from operating activities:
Net loss $(840,012) $
(819,211)
Adjustments
Cash flow from Operating
Partnerships 5,649 10,352
Share of loss of Operating
Partnerships 474,836 456,925
Changes in assets and liabilities
Increase in accounts payable
and accrued expenses 358,346 294,315
--------
- ---------
Net cash provided by (used in)
operating activities (1,181)
(57,619)
--------
- ---------
Cash flows from investing activity:
Repayments of loans to
Operating Partnerships - 38,875
--------
- ---------
Net cash provided by
investing activity - 38,875
--------
- ---------
INCREASE (DECREASE) IN CASH (1,181)
(18,744)
Cash and cash equivalents, beginning 14,290 34,944
--------
- ---------
Cash and cash equivalents, ending $ 13,109 $ 16,200
========
=========
The accompanying notes are an integral part of these
statements.
5
American Affordable Housing II Limited
Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
(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
December 31,
1997 and for the three and nine 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, 1998.
6
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
(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, 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
December 31,
1997 and 1996 was $110,465 for both years, respectively.
Affiliates of the General Partner have advanced $113,915
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 December 31, 1997
Washington
Mews has paid the Partnership $60,375. As of December 31, 1997
$60,375 has
been repaid to the affiliate leaving a balance of $40,000.
NOTE D - INVESTMENTS IN OPERATING PARTNERSHIPS
At December 31, 1997 and 1996, the Partnership had limited
partnership equity interests in fifty Operating Partnerships,
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 December, 1997 and
1996, 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 nine months ended September 30, 1997.
7
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
(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 nine months ended September 30,
1997 and 1996
are as follows:
1997 1996
Revenues ---- ----
Rental income $ 7,211,140 $ 7,232,748
Interest and other 306,407 287,459
---------- ----------
7,517,547 7,520,207
---------- ----------
Expenses
Interest expense 2,245,008 2,265,972
Depreciation and amortization 2,217,374 2,353,840
Operating expenses 4,680,186 4,551,152
---------- ----------
9,142,568 9,170,964
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NET LOSS $(1,625,021)
$(1,650,757)
========== ==========
Net loss allocated to American
Affordable Housing II Limited
Partnership $ (474,836) $
(456,925)
========== ==========
Net loss allocated to other partners $ (16,250) $
(16,507)
========== ==========
Net loss suspended $(1,133,934)
$(1,177,325)
========== ==========
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
American Affordable Housing II Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997
(Unaudited)
NOTE E - TAXABLE LOSS
The Partnership's taxable loss for the fiscal year ended
March
31, 1998 is expected to differ from its loss for financial
reporting
purposes. This is primarily due to accounting differences in
depreciation
incurred by the Operating Partnerships and also differences
between the equity method of accounting and IRS accounting
methods. 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
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 December
31, 1997 were $110,465 and total asset management fees accrued as
of September 30, 1997 were $3,727,263. 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 $113,915 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.
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
December 31,
1997 the Partnership had committed to investments requiring cash
payments of
$18,613,764, all of which had been paid at December 31, 1997. At
December 31, 1997 the Partnership held working capital of
$13,109.
10
Results of Operations
- ---------------------
As of December 31, 1997 and 1996 the Partnership held limited
partnership interests in 50 Operating Partnerships. 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 December 31, 1997 and 1996 the Qualified Occupancy of
the Operating Partnership's was 99.5% and 99.9%, respectively.
The Partnership had invested in a total of 50 Operating
Partnerships as of December 31, 1997 and 1996. During the
quarters ended December 31, 1997 and 1996, the Partnership
received cash flow distributions of $0 and reporting fees of $0
and $1,371, respectively, from the Operating Partnerships. The
reductions are a result of timing variances in the cash receipts
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.
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 December 31, 1997 and 1996
was $110,465 and $109,094 respectively.
11
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.
12
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: By: /s/JOHN P. MANNING
---------------------------
John P. Manning, Partner
13
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<NAME> AMERICAN AFFORDABLE HOUSING II LIMITED PARTNERSHIP
<S> <C>
<PERIOD-TYPE> 9-MOS
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<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
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