United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 1996
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: 0-18333
VICTORY TAX EXEMPT REALTY INCOME FUND LIMITED PARTNERSHIP
Exact Name of Registrant as Specified in its Charter
Delaware 13-3516912
State or Other Jurisdiction of
Incorporation or Organization I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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 ____
Balance Sheets
At June 30, At December 31,
1996 1995
Assets
Investment in mortgage revenue bond,
working capital loan, and capital
improvements loan $ 13,084,446 $ 13,222,356
Cash and cash equivalents 542,208 679,620
Mortgage acquisition fees, net of
accumulated amortization of $307,209
and $285,809 in 1996 and 1995, respectively 120,791 142,191
------------ ------------
Total Assets $ 13,747,445 $ 14,044,167
============ ============
Liabilities and Partners' Capital
Liabilities:
Accounts payable $ 15,994 $ 26,187
Due to affiliates 9,000 6,500
Distributions payable 269,462 272,423
------------ ------------
Total Liabilities 294,456 305,110
------------ ------------
Partners' Capital (Deficit):
General Partner (61,474) (58,613)
BAC Holders (2,140,000 BACS outstanding) 13,514,463 13,797,670
------------ ------------
Total Partners' Capital 13,452,989 13,739,057
------------ ------------
Total Liabilities and Partners' Capital $ 13,747,445 $ 14,044,167
============ ============
Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1996
General BAC
Partner Holders Total
Balance at December 31, 1995 $ (58,613) $ 13,797,670 $ 13,739,057
Net income 2,499 247,396 249,895
Cash distributions (5,360) (530,603) (535,963)
--------- ------------ ------------
Balance at June 30, 1996 $ (61,474) $ 13,514,463 $ 13,452,989
========= ============ ============
Statements of Operations
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Revenue Share of earnings (loss)
from investment in mortgage
revenue bond $ 170,068 $ 165,619 $ 301,682 $ (248,656)
Other Interest 4,932 7,403 10,199 14,194
--------- --------- --------- ----------
Total Revenue 175,000 173,022 311,881 (234,462)
--------- --------- --------- ----------
Expenses
General and administrative 20,705 15,502 40,586 26,763
Amortization of mortgage costs 10,700 10,700 21,400 21,400
--------- --------- --------- ----------
Total Expenses 31,405 26,202 61,986 48,163
--------- --------- --------- ----------
Net income (loss) $ 143,595 $ 146,820 $ 249,895 $ (282,625)
========= ========= ========= ==========
Net Income (Loss) Allocated:
To the General Partner $ 1,436 $ 1,468 $ 2,499 $ (2,826)
To the BAC Holders 142,159 145,352 247,396 (279,799)
--------- --------- --------- ----------
$ 143,595 $ 146,820 $ 249,895 $ (282,625)
========= ========= ========= ==========
Per BAC unit
(2,140,000 outstanding) $.07 $.07 $.12 $(.13)
--------- --------- --------- ----------
Statements of Cash Flows
For the six months ended June 30, 1996 1995
Cash Flows From Operating Activities
Net income (loss) $ 249,895 $ (282,625)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Share of earnings (loss) from investment in
mortgage revenue bond (301,682) 248,656
Interest received on mortgage revenue bond 439,592 497,775
Amortization 21,400 21,400
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Accounts payable (10,193) (11,669)
Due to affiliates 2,500 (6,900)
---------- ----------
Net cash provided by operating activities 401,512 466,637
---------- ----------
Cash Flows From Financing Activities
Cash distributions (538,924) (538,924)
---------- ----------
Net cash used for financing activities (538,924) (538,924)
---------- ----------
Net decrease in cash and cash equivalents (137,412) (72,287)
Cash and cash equivalents, beginning of period 679,620 802,222
---------- ----------
Cash and cash equivalents, end of period $ 542,208 $ 729,935
========== ==========
Notes to the Financial Statements
The unaudited financial statements should be read in conjunction with the
Partnership's annual 1995 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of June 30, 1996 and the results of operations for the three and
six months ended June 30, 1996 and 1995; and cash flows for the six months
ended June 30, 1996 and 1995 and the statement of changes in partner's capital
(deficit) for the six months ended June 30, 1996. Results of operations for the
period are not necessarily indicative of the results to be expected for the
full year.
The following significant events have occurred subsequent to fiscal year 1995,
or the following material contingencies exist and require disclosure in this
interim report per Regulation S- X, Rule 10-01, Paragraph (a) (5).
On May 8, 1996, as a result of negotiations with the ConCam Owner, the
Partnership executed a Letter Agreement (the "Agreement") to generally allow a
continuance of the terms of the Forbearance Agreement provided that in lieu of
the minimum pay rate, the ConCam Owner pay as debt service all available cash
flow. The Agreement will be in effect through December 31, 1996, the expiration
of the Forbearance Agreement, but can be terminated by either party upon 30
days written notice.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Partnership's operating income is derived from its investment in a mortgage
revenue bond (the "Bond") in the original principal amount of $15,515,000
secured by a first deed of trust on Camelot Lakes Apartments (the "Property").
Operating difficulties at the Property resulted in Camelot Lakes Associates, an
unaffiliated limited partnership ("Camelot Lakes" or the "Original Borrower"),
defaulting on the November 1993 through January 1994 Bond payments. On
February 1, 1994, the General Partner reached a restructuring agreement with
the Original Borrower, whereby the ownership of the Property was transferred to
ConCam Associates (the "ConCam Owner" or the "New Borrower"), and property
management was transferred to the ConAm Management Corporation ("ConAm"), a
major property management company. In addition to ownership, the ConCam Owner,
an affiliate of ConAm, assumed the obligations under the Bond and loan
documents on a nonrecourse basis. Pursuant to the restructuring, the
Partnership entered into a Forbearance Agreement (the "Forbearance Agreement")
with the ConCam Owner, which modified the terms of the Bond and amended the
second mortgage. The Forbearance Agreement will expire on December 31, 1996
and is subject to renewal at the Partnership's sole option. Pursuant to the
Forbearance Agreement, the minimum interest payment on the Bond increased to
7.0% on February 1, 1996 from the previous rate of 6.5%. Given the
difficulties confronting multifamily property owners in Fresno, California,
ConCam indicated that it was unlikely that the Property's operations could
support debt service payments at the increased rate in 1996. Although the
ConCam Owner paid debt service at the 7.0% minimum pay rate (partially from its
cash reserves) on February 1, 1996, it made its March 1 and April 1, 1996
payments at an annualized rate lower than the minimum pay rate. In view of
these circumstances, the General Partner engaged in discussions with the ConCam
Owner to negotiate an agreement to continue operations under the Forbearance
Agreement. On May 8, 1996, as a result of negotiations with the ConCam Owner,
the Partnership executed a Letter Agreement (the "Agreement") to generally
allow a continuance of the terms of the Forbearance Agreement provided that in
lieu of the minimum pay rate, the ConCam Owner pay as debt service all
available cash flow. The Agreement will be in effect through
December 31, 1996, the expiration of the Forbearance Agreement, but can be
terminated by either party upon 30 days written notice.
At June 30, 1996, the Partnership had cash and cash equivalents, which are
invested in tax-exempt money market accounts, of $542,208, compared with
$679,620 at December 31, 1995. The decrease is due to net cash used to fund
cash distributions exceeding net cash provided by operating activities.
Due to the Property's operating difficulties, the General Partner reduced the
cash distribution paid to the partners from an annual return of 7.5% to 5.0%,
effective with the second quarter of 1993. Total cash distributions declared
year-to- date for 1996 were $535,963, which included $530,603, or $.250 per
Beneficial Assignee Certificate, declared payable to the Limited Partners. As
of June 30, 1996, total cash distributions paid to the Limited Partners since
inception have been funded 77% from operating cash flow and 23% from the
Partnership's cash reserves. The sources of the Partnership's future cash
flows are expected to be from payments of Base Interest on the Bond, and
interest earned on cash and cash equivalents. The ConCam Owner's ability to
service the new pay rate of 7.0% has been impeded due to the adverse market
conditions in Fresno. Depending on the level of debt service made by the ConCam
Owner, it may be necessary to reduce the level of cash distributions during
1996.
Results of Operations
The Partnership accounts for its investment in the Bond using the equity method
of accounting. Accordingly, the Partnership reports as income its share of the
Property's results of operations.
For the three months ended June 30, 1996, the Partnership generated net income
of $143,595, compared with net income of $146,820 for the three months ended
June 30, 1995. The decrease for the three-month period primarily is due to a
decrease in other interest and an increase in general and administrative
expenses, which was partially offset by an increase in the Partnership's share
of earnings from its investment in the Bond. For the six months ended
June 30, 1996, the Partnership generated net income of $249,895, compared with
a net loss of $282,625 for the six months ended June 30, 1995. The change from
net loss to net income primarily is due to an increase in the Partnership's
share of earnings from its investment in the Bond, which was partially offset
by an increase in general and administrative expenses and a decrease in other
interest.
The Partnership's share of earnings from investment in the Bond is based on the
Property's earnings before debt service, which was relatively unchanged for the
six months ended June 30, 1996 relative to the same period in 1995. The
Partnership's equity interest in the Property's earnings for the three months
ended June 30, 1996 was $170,068, compared with $165,619 for the three months
ended June 30, 1995. The Partnership's equity interest in the Property's
earnings for the six months ended June 30, 1996 was $301,682, compared with
$(248,656) for the six months ended June 30, 1995. The Partnership's equity
interest in the Property's earnings increased for the six-month period in 1996,
primarily due to higher expenses incurred at the Property in the first quarter
of 1995. Total income at Camelot Lakes Apartments was $1,037,380 for the six
months ended June 30, 1996, compared with $1,044,612 for the six months ended
June 30, 1995. The decrease primarily is due to a decrease in other income,
consisting of laundry revenues, which was partially offset by an increase in
rental income as a result of increased occupancy at the Property. Total
expenses at Camelot Lakes Apartments, net of debt service, were $555,134 for
the six months ended June 30, 1996, compared to $1,107,703 for the six months
ended June 30, 1995. The decrease primarily is due to higher repairs and
maintenance expense in the first quarter of 1995.
For the three and six months ended June 30, 1996, other interest was $4,932 and
$10,199, respectively, compared to $7,403 and $14,194, respectively, for the
three and six months ended June 30, 1995. The decreases primarily are due to
lower cash balances maintained by the Partnership during 1996.
Total expenses for the three and six months ended June 30, 1996 were $31,405
and $61,986, respectively, compared to $26,202 and $48,163, respectively, for
the three and six months ended June 30, 1995. The increases are attributable
to higher general and administrative expenses in 1996, primarily as a result of
increased legal expenses associated with the modification of the Forbearance
Agreement and an increase in Partnership administrative expenses, partially
offset by a decrease in miscellaneous expenses.
Interest received on the mortgage revenue bond was $439,592 for the six months
ended June 30, 1996, compared with $497,775 for the six months ended
June 30, 1995. The decrease is largely due to the ConCam Owner providing for
debt service at a lower rate due to the current operating and market
constraints mentioned above.
As of June 30, 1996, occupancy at the Property was 89.0%, compared with 87.2%
as of June 30, 1995.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8- K were filed
during the quarter ended June 30, 1996.
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, thereunto duly authorized.
VICTORY TAX EXEMPT REALTY INCOME FUND
LIMITED PARTNERSHIP
BY: CA Victory Inc.
General Partner
Date: August 14, 1996 BY: /s/ Paul L. Abbott
------------------
Director and Chief
Executive Officer
Date: August 14, 1996 BY: /s/Robert Hellman
-----------------
President
Date: August 14, 1996 BY: /s/Greg Mayer
-------------
Vice President and Chief
Financial Officer
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<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Jun-30-1996
<CASH> 542,208
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<RECEIVABLES> 0
<ALLOWANCES> 0
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