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 29, 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: 0-17619
American Tax Credit Properties L.P.
(Exact name of Registrant as specified in its charter)
Delaware 13-3458875
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Richman Tax Credit Properties L.P.
599 West Putnam Avenue, 3rd Floor
Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 869-0900
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 filing requirements
for the past 90 days. Yes X No ___.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
PART I - FINANCIAL INFORMATION.
Item 1. Financial Statements.
Table of Contents
Balance Sheets as of June 29, 1996 (Unaudited) and March 30, 1996 (Unaudited)
Statements of Operations for the three month periods ended June 29, 1996
(Unaudited) and June 29, 1995 (Unaudited)
Statements of Cash Flows for the three month periods ended
June 29, 1996 (Unaudited) and June 29, 1995 (Unaudited)
Notes to Financial Statements as of June 29, 1996 (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
BALANCE SHEETS
JUNE 29, 1996 AND MARCH 30, 1996
(UNAUDITED)
June 29, March 30,
Notes 1996 1996
ASSETS ------ ---------- ---------
<S> <C> <C> <C>
Cash and cash equivalents $ 493,810 $ 397,120
Investments in bonds available-for-sale 2 2,986,123 3,112,049
Investment in Local Partnerships 3 8,982,036 9,464,434
Interest receivable 61,270 66,580
----------- -----------
$12,523,239 $13,040,183
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Accounts payable and accrued expenses $ 58,016 $ 57,961
Payable to General Partner 87,728 43,861
------- --------
145,744 101,822
------- --------
Partners' equity (deficit):
General Partner (243,359) (238,223)
Limited Partners, $1,000 stated value per unit (41,286 Units of
Limited Partnership Interest outstanding) 12,477,329 12,985,812
Unrealized gain on investments in bonds available-for-sale, net 2 143,525 190,772
---------- ----------
12,377,495 12,938,361
---------- ----------
$12,523,239 $13,040,183
========== ==========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED JUNE 29, 1996 AND 1995
(UNAUDITED)
Notes 1996 1995
REVENUE ----- ----- -----
<S> <C> <C> <C>
Interest $ 66,360 $ 74,287
Other income from Local Partnerships 2,500
------ ------
TOTAL REVENUE 66,360 76,787
------ ------
EXPENSES
Administration fees 45,931 45,931
Management fee 43,867 43,867
Professional fees 16,525 13,726
Printing, postage and other 6,258 9,117
------- -------
TOTAL EXPENSE 112,581 112,641
------- -------
Loss from operations (46,221) (35,854)
Equity in loss of Investment in Local Partnerships 3 (467,398) (617,737)
-------- ---------
NET LOSS $ (513,619) $ (653,591)
======== =========
NET LOSS ATTRIBUTABLE TO
General Partner $ (5,136) $ (6,536)
Limited Partners (508,483) (647,055)
-------- ---------
$ (513,619) $ (653,591)
======== =========
NET LOSS per Unit of Limited Partnership Interest (41,286
Units of Limited Partnership Interest) $ (12.32) $ (15.67)
======= ========
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED JUNE 29, 1996 AND 1995
(UNAUDITED)
1996 1995
----- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 75,349 $ 79,871
Cash paid for:
printing, postage and other expenses (969) (1,384)
professional fees (29,500) (7,422)
administration fees (38,190) (38,190)
-------- -------
Net cash provided by operating activities 6,690 32,875
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash distributions from Local Partnerships (includes $2,500 of other income
from Local Partnerships for the three month period ended June
29, 1995) 15,000 27,350
Maturity/redemption of bonds 75,000 37,000
------ -------
Net cash provided by investing activities 90,000 64,350
------ -------
Net increase in cash and cash equivalents 96,690 97,225
Cash and cash equivalents at beginning of period 397,120 342,688
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 493,810 $ 439,913
======= =======
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain (loss) on investments in bonds available-for-sale, net $ (47,247) $ 198,000
======= =======
- - --------------------------------------------------------------------------------
See reconciliation of net loss to net cash provided by operating activities on
the following page.
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS - (Continued)
THREE MONTH PERIODS ENDED JUNE 29, 1996 AND 1995
(UNAUDITED)
1996 1995
------ ------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
NET LOSS $ (513,619) $ (653,591)
-------- --------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
Equity in loss of Investment in Local Partnerships 467,398 617,737
Amortization of net premium on investments in bonds 7,755 7,947
Accretion of zero coupon bonds (4,076) (4,075)
Increase in payable to General Partner 43,867 43,867
Increase in accounts payable and accrued expenses 55 21,778
Decrease (increase) in interest receivable 5,310 (788)
-------- --------
Total adjustments 520,309 686,466
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,690 $ 32,875
======== ========
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 29, 1996
(UNAUDITED)
1.Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
They do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. The results of
operations are impacted significantly by the combined results of operations of
the Local Partnerships, which are provided by the Local Partnerships on an
unaudited basis during interim periods. Accordingly, the accompanying financial
statements are dependent on such unaudited information. In the opinion of the
General Partner, the financial statements include all adjustments necessary to
present fairly the financial position as of June 29, 1996 and the results of
operations and cash flows for the interim periods presented. All adjustments are
of a normal recurring nature. The results of operations for the three month
period ended June 29, 1996 are not necessarily indicative of the results that
may be expected for the entire year.
Certain reclassifications of amounts have been made to conform to the
current period presentation.
2.Investments in Bonds Available-For-Sale
As of June 29, 1996, certain information concerning investments in bonds
available-for-sale is as follows:
<TABLE>
<CAPTION>
Amortized Gross unrealized Gross unrealized Estimated
cost gains losses fair value
---------- --------------- ----------------- ----------
<S> <C> <C> <C> <C>
Description and maturity Corporate debt
securities:
Within one year $ 60,684 $ 495 $ (685) $ 60,494
After one year through five years 262,096 806 (510) 262,392
After five years through ten years 640,183 284 (26,145) 614,322
After ten years 454,008 212 (9,510) 444,710
--------- ------ ------- ---------
1,416,971 1,797 (36,850) 1,381,918
--------- ------ ------- ---------
Within one year 52,886 1,339 -- 54,225
After one year through five years 243,503 24,386 -- 267,889
After five years through ten years 943,578 168,635 -- 1,112,213
--------- ------- ------- ---------
1,239,967 194,360 -- 1,434,327
--------- ------- ------- ----------
U.S. government and agency securities:
After ten years 185,660 -- (15,782) 169,878
--------- ------- --------- ----------
$2,842,598 $ 196,157 $ (52,632) $2,986,123
========== ======= ========= ==========
</TABLE>
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1996
(UNAUDITED)
3.Investment in Local Partnerships
The Partnership owns limited partnership interests in nineteen Local
Partnerships, of which the Partnership has made capital contributions in the
aggregate amount of $34,510,290. As of March 31, 1996, the Local Partnerships
have outstanding mortgage loans payable totaling approximately $83,305,000 and
accrued interest payable on such loans totaling approximately $4,010,000, which
are secured by security interests and liens common to mortgage loans on the
Local Partnerships' real property and other assets.
For the three month period ended June 29, 1996, the Investment in Local
Partnerships activity consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Investment in Local Partnerships as of March 30, 1996 $ 9,464,434
Equity in loss of Investment in Local Partnerships for
the three month period ended March 31, 1996 (467,398) (A)
Cash distributions received from Local Partnerships
during the three month period ended June 29, 1996 (15,000)
----------
Investment in Local Partnerships as of June 29, 1996 $ 8,982,036
==========
</TABLE>
(A)Equity in loss of Investment in Local Partnerships is limited to the
Partnership's investment balance in each Local Partnership; any excess is
applied to other partners' capital in any such Local Partnership. The amount of
such excess losses applied to other partners' capital was $721,823 and $579,328
for the three month periods ended March 31, 1996 and 1995, respectively, as
reflected in the combined statements of operations of the Local Partnerships
reflected herein Note 3.
The combined unaudited balance sheets of the Local Partnerships as of March 31,
1996 and December 31, 1995 and the combined unaudited statements of operations
of the Local Partnerships for the three month periods ended March 31, 1996 and
1995 are reflected on pages 9 and 10, respectively.
<PAGE>
<TABLE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1996
(UNAUDITED)
3.Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of March 31, 1996 and
December 31, 1995 are as follows:
1996 1995
------ -----
<S> <C> <C>
ASSETS
Cash and other investments $ 1,048,056 $ 1,304,492
Rental receivable 145,303 165,626
Escrow deposits and reserves 3,259,830 3,640,218
Land 4,476,955 4,476,955
Buildings and improvements (net of accumulated
depreciation of $28,827,251 and $27,836,776) 87,806,172 88,484,487
Intangible assets (net of accumulated amortization of
$762,868 and $736,962) 2,003,795 2,029,039
Other 1,053,280 862,904
---------- -----------
$ 99,793,391 $100,963,721
LIABILITIES AND PARTNERS EQUITY ========== ============
Liabilities:
Accounts payable and accrued expenses $ 1,162,457 $ 1,175,581
Due to related parties 4,863,070 5,144,533
Mortgage loans 83,305,427 83,354,276
Notes payable 1,017,151 1,017,151
Accrued interest 4,009,752 3,744,233
Other 2,227,575 2,103,775
--------- ---------
96,585,432 96,539,549
Partners' equity (deficit): --------- ---------
American Tax Credit Properties L.P.:
Capital contributions, net of distributions 33,990,139 34,007,639
Cumulative loss (24,993,103) (24,525,705)
---------- -----------
8,997,036 9,481,934
General partners and other limited partners, including ATCP II: ---------- -----------
Capital contributions, net of distributions 362,230 362,230
Cumulative loss (6,151,307) (5,419,992)
--------- -----------
(5,789,077) (5,057,762)
---------- -----------
3,207,959 4,424,172
---------- -----------
$ 99,793,391 $100,963,721
========== ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1996
(UNAUDITED)
3.Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the three
month periods ended March 31, 1996 and 1995 are as follows:
1996 1995
REVENUE ----- -----
<S> <C> <C>
Rental $ 3,946,405 $ 3,742,622
Interest and other 53,786 53,829
--------- ---------
Total Revenue 4,000,191 3,796,451
--------- ---------
EXPENSES
Administrative 578,688 565,792
Utilities 414,238 358,072
Operating, maintenance and other 827,865 741,422
Taxes and insurance 518,144 462,479
Interest (including amortization of $25,906 and $23,764) 1,869,494 1,899,907
Depreciation 990,475 973,977
---------- ---------
Total Expenses 5,198,904 5,001,649
---------- ---------
NET LOSS $(1,198,713) $(1,205,198)
========== ===========
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties L.P. $ (467,398) $ (617,737)
General partners and other limited partners, including ATCP
II, which includes $721,823 and $579,328 of American Tax
Credit Properties L.P. equity in loss in excess of
investment balance (731,315) (587,461)
----------- -----------
$(1,198,713) $(1,205,198)
=========== ===========
</TABLE>
The combined results of operations of the Local Partnerships for the three month
period ended March 31, 1996 are not necessarily indicative of the results that
may be expected for an entire operating period.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1996
(UNAUDITED)
3.Investment in Local Partnerships (continued)
The Partnership acquired a 99% limited partnership interest in B & V, Ltd. (the
"B & V Local Partnership"), a 190-unit complex located in Homestead, Florida in
December, 1988. In August, 1992, much of Homestead, Florida was devastated by
Hurricane Andrew and the Property owned by the B & V Local Partnership sustained
substantial damage. The City of Homestead has taken, but has not acted upon,
administrative action threatening to demolish approximately 100 rental units in
the B & V complex unless reconstruction immediately commences. If demolished,
the rebuilding of all such rental units would be subject to changes in zoning by
the City of Homestead and the results of litigation remedies being pursued by
the B & V Local Partnership, discussed below. The damage to the complex is
covered by property insurance. The Local General Partner of the B & V Local
Partnership, on behalf of the B & V Local Partnership and at the insistence of
the insurance company, entered into a contract with a particular contractor to
repair the damage. After some delay the insurance company funded insurance
proceeds to rebuild the complex and repairs commenced; however, on or about
March 30, 1994, the contractor discontinued the repair work due to a dispute
concerning costs and the refusal of the insurance company to advance additional
funds. The insurance carrier has ceased making rental interruption insurance
payments and the lender has declared a default. The Local General Partner of the
B & V Local Partnership has taken the position that the insurance company has
defaulted under its obligations to fully fund the reconstruction of the property
and make required rental interruption insurance payments. Accordingly, the B & V
Local Partnership is pursuing a lawsuit against the insurance company in State
court. The Local General Partner of the B & V Local Partnership had agreed with
the lender and the Partnership to effect a plan of action. The objectives of the
plan were to seek the protection of the bankruptcy court, stop the City of
Homestead's demolition process, complete reconstruction of the buildings,
preserve the Low-income Tax Credits and avoid foreclosure by working with the
lender and allowing the B & V Local Partnership to pursue litigation remedies
against the insurance companies. According to the plan of action, the B & V
Local Partnership filed a petition of bankruptcy under Chapter 11 of the
Bankruptcy Code on November 21, 1994. The bankruptcy court decided to have the
action against the contractor and its bonding company settled in binding
arbitration rather than through a bankruptcy proceeding. Accordingly, the B & V
Local Partnership has commenced an action directly against the contractor and
the contractor's bonding company. Each of the parties (the B & V Local
Partnership, the insurance company, the contractor and the contractor's bonding
company) agreed to a voluntary nonbinding mediation process (the "Mediation").
In addition, the City of Homestead had filed an action in order to take four
buildings comprising 32 rental units by eminent domain proceeding. Effective
April, 1996, the City of Homestead was awarded such buildings pursuant to a
quick-take proceeding and in June, 1996, the B & V Local Partnership accepted a
settlement offer from the City of Homestead in the amount of $280,000 plus legal
costs. Subject to lender approval, the B & V Local Partnership intended to
utilize such proceeds toward the rehabilitation of remaining rental units.
However, the lender has recently expressed that it is not in favor of utilizing
the proceeds for such purposes. In addition, the lender has requested relief
from the bankruptcy stay, to which the B & V Local Partnership objected.
Subsequently, the lender petitioned the bankruptcy court for a complete
dismissal of the bankruptcy proceeding, for which a hearing is scheduled for
late August, 1996. As a result of these recent developments concerning the
lender's position, the Mediation was postponed. As a result of the quick-take of
the 32 rental units by the City of Homestead, the Partnership will incur a
recapture of Low-income Tax Credits taken through December, 1995 of
approximately $163,000 (representing approximately $4 per Unit) and will be
unable to utilize future Low-income Tax Credits associated with such apartments
of approximately $188,000 (representing approximately $5 per Unit) for the
period January, 1996 through 1998. Because of the outstanding matters, including
those associated with the lender and the bankruptcy proceeding, there can be no
assurance that the Local General Partner of the B & V Local Partnership will
eventually be successful in implementing this plan and reconstructing the
remaining rental units. If it is not successful, the partners of the Partnership
could suffer additional partial recapture of previous Low-income Tax Credits and
a reduction of future Low-income Tax Credits generated by the B & V Local
Partnership. As of August 1, 1996, 52 rental units are completed and occupied. A
disaster of this scale is an unusual event. Because the magnitude of destruction
caused by Hurricane Andrew in Southern Florida has limited precedent it is not
possible to determine at this time the final economic impact resulting from
Hurricane Andrew on the B & V Local Partnership, even if reconstructed.
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1996
(UNAUDITED)
3.Investment in Local Partnerships (continued)
The General Partner has taken the position that temporary vacancies do not
result in either a loss or delay of Low-income Tax Credits while attempts to
conduct repairs are being made and, except for the units taken through eminent
domain, the Partnership may continue to utilize the Low-income Tax Credits
without interruption. However, the Partnership's tax professionals have informed
the Partnership that, based upon a 1995 revenue procedure, the Internal Revenue
Service could challenge the position taken by the Partnership concerning the
uninterrupted utilization of the Low-income Tax Credits, with respect to rental
units not completed, as of December 31, 1994. In addition, if any of the rental
units were to be sold or not reconstructed, it would result in a reduction of
future Low-income Tax Credits and partial recapture of previous Low-income Tax
Credits with respect to those rental units. In addition, the management agent
was notified on June 14, 1996 by the monitoring agent for the Florida Housing
Finance Agency that, as a result of rental units not in service, a portion of
the property is considered to be in non-compliance which could result in
additional recapture or the inability to utilize future Low-income Tax Credits.
Of the Partnership's total annual Low-income Tax Credits, approximately $387,000
was allocated from the B & V Local Partnership (prior to the loss of rental
units taken through eminent domain) which represent approximately 6.4% of the
total annual Low-income Tax Credits. Although these matters are complicated and
the law is unclear, the Partnership has calculated an estimate of the potential
effect to limited partners, exclusive of the rental units discussed above in
connection with the eminent domain proceeding, of approximately $39 per Unit
representing recapture of Low-income Tax Credits on rental units not rebuilt and
approximately $8 per Unit per annum representing the loss of future Low-income
Tax Credits through 1998. The Low-income Tax Credits with respect to the B & V
Local Partnership are scheduled to expire in 1998.
The B & V Local Partnership has deferred the recognition of the proceeds of the
rental interruption insurance (principally received in 1993) (see discussion
above), while recognizing expenses currently. In addition, the B & V Local
Partnership is not recognizing full depreciation expense while the complex is in
the process of being reconstructed. The Partnership's investment balance in the
B & V Local Partnership, after the allocation of cumulative equity losses, is
zero as of June 29, 1996.
As part of the overall plan and arrangement with the Local General Partner of
the B & V Local Partnership (see discussion above), during the year ended March
30, 1995, the Partnership acquired a 98% limited partnership equity interest in
B & V Phase I, Ltd. (the "B & V Phase I Local Partnership"), which owns a
97-unit, Section 8 assisted apartment complex located in Homestead, Florida,
from principals of the Local General Partner of the B & V Local Partnership. The
purpose of acquiring an interest in the B & V Phase I Local Partnership was to
mitigate potential adverse consequences of a loss of Low-income Tax Credits in
the event that the rebuilding of the apartment complex owned by the B & V Local
Partnership is not completed. Under the terms of the limited partnership
agreement between the Partnership and the B & V Phase I Local Partnership, the
Partnership made its full capital contribution of $140,000 (by utilizing
reserves) in October, 1994 with total Low-income Tax Credits expected to be
allocated to the Partnership over the period 1994 through 1998 of approximately
$499,000. In August, 1992, the B & V Phase I Local Partnership was also damaged
by Hurricane Andrew. Since May 1, 1996, all 97 of the units were complete and
occupied. Under an agreement with the lender, the B & V Phase I Local
Partnership was to commence paying debt service in January, 1995 which was to
coincide with the completion of construction. However, due to construction
delays, the B & V Phase I Local Partnership has not commenced making such
payments. As a result, the lender has declared a default under the terms of the
mortgage and the Local General Partner of the B & V Phase I Local Partnership is
having discussions with the lender regarding a loan restructuring. The
Partnership's investment balance in the B & V Phase I Local Partnership, after
the allocation of cumulative equity losses, is zero as of June 29, 1996.
4.Additional Information
Additional information, including the audited March 30, 1996 Financial
Statements and the Organization, Purpose and Summary of Significant Accounting
Policies, is included in the Partnership's Annual Report on Form 10-K for the
fiscal year ended March 30, 1996 on file with the Securities and Exchange
Commission.
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Material Changes in Financial Condition.
As of June 29, 1996, Registrant has not experienced a significant change in
financial condition as compared to March 30, 1996. Principal changes in assets
are comprised of quarterly periodic transactions and adjustments and anticipated
equity in loss from operations of the Local Partnerships. During the three month
period ended June 29, 1996, Registrant received cash from interest earnings and
distributions from Local Partnerships and utilized cash for normal operating
expenses. During the three month period ended June 29, 1996, Registrant recorded
a net unrealized loss on bonds available-for-sale of approximately $47,000,
resulting in a net unrealized gain of approximately $144,000 reflected in
Registrant's partners' equity (deficit) as of June 29, 1996. In addition, during
the three month period ended June 29, 1996, Registrant recorded amortization of
net premium on investments in bonds of approximately $8,000, which was partially
offset by accretion of zero coupon bonds of approximately $4,000. In addition,
during the three month period ended June 29, 1996, Registrant received $75,000
from the maturity of investments in bonds held for working capital purposes.
During the three month period ended June 29, 1996, the Investment in Local
Partnerships decreased as a result of Registrant's equity in the Local
Partnerships' net loss for the three month period ended March 31, 1996 of
$467,398 and by cash distributions received from Local Partnerships of $15,000.
The Properties are principally comprised of subsidized and leveraged low-income
multifamily residential complexes located throughout the United States and
Puerto Rico. The rents of the Properties, virtually all of which receive rental
subsidy payments, including payments under Section 8 of Title II of the Housing
and Community Development Act of 1974 ("Section 8"), are subject to specific
laws, regulations and agreements with federal and state agencies. The subsidy
agreements expire at various times during and after the Compliance Periods of
the Local Partnerships. Registrant cannot reasonably predict legislative
initiatives and governmental budget negotiations, the outcome of which could
result in a reduction in funds available for the various federal and state
administered housing programs including the Section 8 program. Such changes
could adversely affect the future net operating income and debt structure of any
or all Local Partnerships currently receiving such subsidy or similar subsidies.
Two Local Partnerships' Section 8 contracts are scheduled to expire in 1997
after being extended for one year and one Local Partnership's Section 8 contract
is scheduled to expire during 1996. In addition, the Local Partnerships have
various financing structures which include (i) required debt service payments
("Mandatory Debt Service") and (ii) debt service payments which are payable only
from available cash flow subject to the terms and conditions of the notes, which
may be subject to specific laws, regulations and agreements with appropriate
federal and state agencies ("Non-Mandatory Debt Service or Interest"). During
the three month period ended March 31, 1996, revenue from operations, Local
General Partner advances and reserves of the Local Partnerships have generally
been sufficient to cover the operating expenses and Mandatory Debt Service.
Certain Local Partnerships are effectively operating at or near break even
levels, although such Local Partnerships' accounting information reflects
operating deficits that do not represent cash deficits due to their mortgage and
financing structure and the required deferral of property management fees. As
discussed below, certain Local Partnerships' operating information indicates
below break even operations after taking into account their mortgage and
financing structure and the required deferral of property management fees.
The terms of the partnership agreement of 4611 South Drexel Limited Partnership
(the "South Drexel Local Partnership") require the Local General Partner of the
South Drexel Local Partnership to cause the management agent to defer property
management fees in order to avoid a default under the mortgages. The South
Drexel Local Partnership incurred an operating deficit of approximately $21,000
for the period ended March 31, 1996, which includes property management fees of
approximately $4,000. Accordingly, the net operating deficit was approximately
$17,000. The Local General Partner of the South Drexel Local Partnership reports
that all required payments under the mortgages and real estate taxes are
current.
Registrant acquired a 99% limited partnership interest in B & V, Ltd. (the "B &
V Local Partnership"), a 190-unit complex located in Homestead, Florida in
December, 1988. In August, 1992, much of Homestead, Florida was devastated by
Hurricane Andrew and the Property owned by the B & V Local Partnership sustained
substantial damage. The City of Homestead has taken, but has not acted upon,
administrative action threatening to demolish approximately 100 rental units in
the B & V complex unless reconstruction immediately commences. If demolished,
the rebuilding of all such rental units would be subject to changes in zoning by
the City of Homestead and the results of litigation remedies being pursued by
the B & V Local Partnership, discussed below. The damage to the complex is
covered by property insurance. The Local General Partner of the B & V Local
Partnership, on behalf of the B & V Local Partnership and at the insistence of
the insurance company, entered into a contract with a particular contractor to
repair the damage. After some delay the insurance company funded insurance
proceeds to rebuild the complex and repairs commenced; however, on or about
March 30, 1994, the contractor discontinued the repair work due to a dispute
concerning costs and the refusal of the insurance company to advance additional
funds. The insurance carrier has ceased making rental interruption insurance
payments and the lender has declared a default. The Local General Partner of the
B & V Local Partnership has taken the position that the insurance company has
defaulted under its obligations to fully fund the reconstruction of the property
and make required rental interruption insurance payments. Accordingly, the B & V
Local Partnership is pursuing a lawsuit against the insurance company in State
court. The Local General Partner of the B & V Local Partnership had agreed with
the lender and Registrant to effect a plan of action. The objectives of the plan
were to seek the protection of the bankruptcy court, stop the City of
Homestead's demolition process, complete reconstruction of the buildings,
preserve the Low-income Tax Credits and avoid foreclosure by working with the
lender and allowing the B & V Local Partnership to pursue litigation remedies
against the insurance companies. According to the plan of action, the B & V
Local Partnership filed a petition of bankruptcy under Chapter 11 of the
Bankruptcy Code on November 21, 1994. The bankruptcy court decided to have the
action against the contractor and its bonding company settled in binding
arbitration rather than through a bankruptcy proceeding. Accordingly, the B & V
Local Partnership has commenced an action directly against the contractor and
the contractor's bonding company. Each of the parties (the B & V Local
Partnership, the insurance company, the contractor and the contractor's bonding
company) agreed to a voluntary nonbinding mediation process (the "Mediation").
In addition, the City of Homestead had filed an action in order to take four
buildings comprising 32 rental units by eminent domain proceeding. Effective
April, 1996, the City of Homestead was awarded such buildings pursuant to a
quick-take proceeding and in June, 1996, the B & V Local Partnership accepted a
settlement offer from the City of Homestead in the amount of $280,000 plus legal
costs. Subject to lender approval, the B & V Local Partnership intended to
utilize such proceeds toward the rehabilitation of remaining rental units.
However, the lender has recently expressed that it is not in favor of utilizing
the proceeds for such purposes. In addition, the lender has requested relief
from the bankruptcy stay, to which the B & V Local Partnership objected.
Subsequently, the lender petitioned the bankruptcy court for a complete
dismissal of the bankruptcy proceeding, for which a hearing is scheduled for
late August, 1996. As a result of these recent developments concerning the
lender's position, the Mediation was postponed. As a result of the quick-take of
the 32 rental units by the City of Homestead, Registrant will incur a recapture
of Low-income Tax Credits taken through December, 1995 of approximately $163,000
(representing approximately $4 per Unit) and will be unable to utilize future
Low-income Tax Credits associated with such apartments of approximately $188,000
(representing approximately $5 per Unit), for the period January, 1996 through
1998. Because of the outstanding matters, including those associated with the
lender and the bankruptcy proceeding, there can be no assurance that the Local
General Partner of the B & V Local Partnership will eventually be successful in
implementing this plan and reconstructing the remaining rental units. If it is
not successful, the partners of Registrant could suffer additional partial
recapture of previous Low-income Tax Credits and a reduction of future
Low-income Tax Credits generated by the B & V Local Partnership. As of August 1,
1996, 52 rental units are completed and occupied. A disaster of this scale is an
unusual event. Because the magnitude of destruction caused by Hurricane Andrew
in Southern Florida has limited precedent it is not possible to determine at
this time the final economic impact resulting from Hurricane Andrew on the B & V
Local Partnership, even if reconstructed.
The General Partner has taken the position that temporary vacancies do not
result in either a loss or delay of Low-income Tax Credits while attempts to
conduct repairs are being made and, except for the units taken through eminent
domain, Registrant may continue to utilize the Low-income Tax Credits without
interruption. However, Registrant's tax professionals have informed Registrant
that, based upon a 1995 revenue procedure, the Internal Revenue Service could
challenge the position taken by Registrant concerning the uninterrupted
utilization of the Low-income Tax Credits, with respect to rental units not
completed as of December 31, 1994. In addition, if any of the rental units were
to be sold or not reconstructed, it would result in a reduction of future
Low-income Tax Credits and partial recapture of previous Low-income Tax Credits
with respect to those rental units. In addition, the management agent was
notified on June 14, 1996 by the monitoring agent for the Florida Housing
Finance Agency that, as a result of rental units not in service, a portion of
the property is considered to be in non-compliance which could result in
additional recapture or the inability to utilize future Low-income Tax Credits.
Of Registrant's total annual Low-income Tax Credits, approximately $387,000 was
allocated from the B & V Local Partnership (prior to the loss of rental units
taken through eminent domain) which represents approximately 6.4% of the total
annual Low-income Tax Credits. Although these matters are complicated and the
law is unclear, Registrant has calculated an estimate of the potential effect to
limited partners, exclusive of the rental units discussed above in connection
with the eminent domain proceeding, of approximately $39 per Unit representing
recapture of Low-income Tax Credits on rental units not rebuilt and
approximately $8 per Unit per annum representing the loss of future Low-income
Tax Credits through 1998. The Low-income Tax Credits with respect to the B & V
Local Partnership are scheduled to expire in 1998.
The B & V Local Partnership has deferred the recognition of the proceeds of the
rental interruption insurance (principally received in 1993) (see discussion
above), while recognizing expenses currently. In addition, the B & V Local
Partnership is not recognizing full depreciation expense while the complex is in
the process of being reconstructed. Registrant's investment balance in the B & V
Local Partnership, after the allocation of cumulative equity losses, is zero as
of June 29, 1996.
As part of the overall plan and arrangement with the Local General Partner of
the B & V Local Partnership (see discussion above), during the year ended March
30, 1995, Registrant acquired a 98% limited partnership equity interest in B & V
Phase I, Ltd. (the "B & V Phase I Local Partnership"), which owns a 97-unit,
Section 8 assisted apartment complex located in Homestead, Florida, from
principals of the Local General Partner of the B & V Local Partnership. The
purpose of acquiring an interest in the B & V Phase I Local Partnership was to
mitigate potential adverse consequences of a loss of Low-income Tax Credits in
the event that the rebuilding of the apartment complex owned by the B & V Local
Partnership is not completed. Under the terms of the limited partnership
agreement between Registrant and the B & V Phase I Local Partnership, Registrant
made its full capital contribution of $140,000 (by utilizing reserves) in
October, 1994 with total Low-income Tax Credits expected to be allocated to
Registrant over the period 1994 through 1998 of approximately $499,000. In
August, 1992, the B & V Phase I Local Partnership was also damaged by Hurricane
Andrew. Since May 1, 1996, all 97 of the units were complete and occupied. Under
an agreement with the lender, the B & V Phase I Local Partnership was to
commence paying debt service in January, 1995 which was to coincide with the
completion of construction. However, due to construction delays, the B & V Phase
I Local Partnership has not commenced making such payments. As a result, the
lender has declared a default under the terms of the mortgage and the Local
General Partner of the B & V Phase I Local Partnership is having discussions
with the lender regarding a loan restructuring. Registrant's investment balance
in the B & V Phase I Local Partnership, after the allocation of cumulative
equity losses, is zero as of June 29, 1996. Of Registrant's total annual
Low-income Tax Credits, approximately 1.3% is allocated from the B & V Phase I
Local Partnership.
Results of Operations.
Registrant's operating results are dependent upon the operating results of the
Local Partnerships and are significantly impacted by the Local Partnerships'
policies. Registrant accounts for its Investments in Local Partnerships in
accordance with the equity method of accounting. Under the equity method of
accounting, the investment is carried at cost and is adjusted for Registrant's
share of the Local Partnership's results of operations and by any cash
distributions received. Equity in loss of each Investment in Local Partnership
allocated to Registrant is recognized to the extent of Registrant's investment
balance in each Local Partnership. Any equity in loss in excess of Registrant's
investment balance in a Local Partnership is allocated to other partners'
capital in each such Local Partnership. As a result, the equity in loss of
Investment in Local Partnerships is expected to decrease as Registrant's
investment balances in the respective Local Partnerships become zero.
Cumulative losses and cash distributions in excess of Investment in Local
Partnerships may result from a variety of circumstances, including a Local
Partnership's accounting policies, subsidy structure, debt structure and
operating deficits, among other things. Accordingly, cumulative losses and cash
distributions in excess of the investment are not necessarily indicative of
adverse operating results of a Local Partnership. See discussion above under
Material Changes in Financial Condition regarding the Local Partnerships
currently operating below economic break even levels. In the case of the B & V
Local Partnership, losses have been exacerbated due to consequences resulting
from Hurricane Andrew. Such results may be reversed in a future period, pending
the outcome of the reconstruction of the complex and results of the litigation
discussed above.
Three Month Period Ended June 29, 1996.
For the three month period ended June 29, 1996, Registrant had a net loss of
approximately $514,000, which included an equity in loss of Investment in Local
Partnerships of approximately $467,000 for the three month period ended March
31, 1996. Registrant's loss from operations for the three month period ended
June 29, 1996 of approximately $47,000 was attributable to interest revenue of
approximately $66,000, exceeded by operating expenses of approximately $113,000.
Interest income for future periods is expected to decline as investments in
bonds mature and are utilized for Registrant's operating expenses.
The Local Partnerships' net loss of approximately $1,199,000 for the three month
period ended March 31, 1996 was attributable to rental and other revenue of
approximately $4,000,000, exceeded by operating and interest expenses (including
Non-Mandatory Interest) of approximately $4,183,000 and approximately $1,016,000
of depreciation and amortization expenses.
Three Month Period Ended June 29, 1995.
For the three month period ended June 29, 1995, Registrant had a net loss of
approximately $654,000, which included an equity in loss of Investment in Local
Partnerships of approximately $618,000 for the three month period ended March
31, 1995. Registrant's loss from operations for the three month period ended
June 29, 1995 of approximately $36,000 was attributable to interest revenue of
approximately $74,000 and other income from Local Partnerships of approximately
$3,000, exceeded by operating expenses of approximately $113,000.
The Local Partnerships' net loss of approximately $1,205,000 for the three month
period ended March 31, 1995 was attributable to rental and other revenue of
approximately $3,797,000, exceeded by operating and interest expenses (including
Non-Mandatory Interest) of approximately $4,004,000 and approximately $998,000
of depreciation and amortization expenses.
Three Month Period Ended June 29, 1996 versus Three Month Period Ended June 29,
1995.
Registrant's operations for the three month period ended June 29, 1996 resulted
in a net loss of approximately $514,000 as compared to a net loss of
approximately $654,000 for the same period in 1995. The decrease in net loss is
primarily attributable to a decrease in the equity in loss of Investment in
Local Partnerships of approximately $150,000, which is primarily the result of
an increase in the nonrecognition of losses in excess of Registrant's investment
in certain Local Partnerships of approximately $142,000 in accordance with the
equity method of accounting, as discussed above.
AMERICAN TAX CREDIT PROPERTIES L.P.
Part II - OTHER INFORMATION.
Item 1. Legal Proceedings.
As discussed in Part I, Item 1 - Financial Statements and Part
I, Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations included herein, B & V, Ltd. (the "B & V Local
Partnership") sustained considerable damage in August, 1992 due to Hurricane
Andrew. Although the B & V Local Partnership was insured for property damage and
rental interruption, the insurance company has not fully performed under its
coverage obligation. Because of this circumstance and due to its limited
resources, the B & V Local Partnership filed a voluntary petition of bankruptcy
under Chapter 11 of the Bankruptcy Code on November 21, 1994 in order to have a
court address matters concerning the insurance company, the contractor and the
contractor's bonding company. The petition was filed in the United States
Bankruptcy Court, Southern District of Florida, Miami. The B & V Local
Partnership was authorized to continue in the management and control of its
business and property as debtor-in-possession under the Bankruptcy Code. Because
the construction contract provides for disputes to be remedied through binding
arbitration, the bankruptcy court decided to have the action against the
contractor and its bonding company settled in binding arbitration rather than
through a bankruptcy proceeding. Accordingly, the B & V Local Partnership has
commenced an action directly against the contractor and the contractor's bonding
company.
In connection with the foregoing, the B & V Local Partnership
is a defendant in a lawsuit brought by the contractor alleging non-payment for
repairs of approximately $120,000. The local general partner of the B & V Local
Partnership denies that any amounts are due and has counterclaimed that the
contractor breached its contract by rendering inadequate services and causing
the B & V Local Partnership to incur substantial expense to remedy the defects.
In connection with the reconstruction of the complex, the B & V Local
Partnership has countersued the contractor and the contractor's bonding company
for damages to the B & V Local Partnership's property. In addition, the B & V
Local Partnership has brought an action against its insurance carrier for delays
in settling its property damage claim. It is not possible at this time to
determine the final economic impact resulting from Hurricane Andrew and the
above stated legal proceedings on the B & V Local Partnership and Registrant.
On March 5, 1990, Stonebridge Associates ("Stonebridge") filed
a lawsuit against Federal Apartments Limited Partnership (the "Federal Local
Partnership") for repayment of an unsecured, non-interest bearing note in the
amount of $96,000. The suit was filed in the First Judicial District Court in
Caddo Parish, Louisiana. The suit alleges that the defendant was required to pay
down such note upon the receipt of the second installment of the capital
contribution obligation from Registrant. Such capital contribution payment was
made by Registrant to the Federal Local Partnership on December 27, 1989. The
Federal Local Partnership contends that Stonebridge is not entitled to such
payment.
On December 16, 1993, the Federal Local Partnership filed a
lawsuit against Henry Cisneros (in his capacity as Secretary of the United
States Department of Housing and Urban Development ("HUD") and the Housing
Authority of the City of Fort Lauderdale, Florida ("FLHA") for violating the
Administrative Procedure Act. The suit was filed in the United States District
Court, Southern District of Florida (the "Court"). The suit alleges that the
defendants used an incorrect figure for debt service in determining the base
rent component of the Federal Local Partnership's Housing Assistance Payments
Contract rents, resulting in rents at a level insufficient to service the
Federal Local Partnership's co-insured first mortgage and, as a further result,
the amount of the maximum insurable first mortgage was reduced and the local
general partner of the Federal Local Partnership had to provide approximately
$1,299,000 to the Federal Local Partnership. The Federal Local Partnership seeks
payment of the difference in rents dating from 1988 to the present and recovery
of all legal fees. The local general partner of the Federal Local Partnership
estimates that the annual difference in rents resulting from the defendants'
methods is approximately $180,000. Although the Court has ruled that HUD acted
within its authority in denying certain change orders incurred in connection
with the development of the property owned by the Federal Local Partnership, the
Court also remanded HUD to review the rent computations used in determining the
base rent component. The local general partner of the Federal Local Partnership
expects to appeal the Court's ruling regarding the change orders, the impact of
which is approximately $60,000 per year according to the local general partner.
The Federal Local Partnership is unable to determine at this time the final
amounts that may be recoverable from HUD and/or FLHA.
AMERICAN TAX CREDIT PROPERTIES L.P.
Part II - OTHER INFORMATION (Continued)
The principal shareholder of the local general partner of
Grove Park Housing, A California Limited Partnership (the "Grove Park Local
Partnership") recently pled guilty to criminal charges of mail fraud, submitting
a false statement to HUD and obstructing a HUD audit in connection with alleged
misappropriation of funds. Registrant is not aware of any charges of alleged
misappropriation related to the local general partner's management of the Grove
Park Local Partnership.
Registrant is not aware of any other material legal
proceedings.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
As discussed in Part I, Item 1 - Financial Statements and Part
I, Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations, the mortgagee of the first mortgage underlying the B & V
Local Partnership has declared a default due to circumstances arising from the
damage to the property resulting from Hurricane Andrew in August, 1992.
As discussed in Part I, Item 1 - Financial Statements and Part I, Item 2 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations, pursuant to an agreement with the lender, B & V Phase I, Ltd. (the
"B & V Phase I Local Partnership") was to commence paying debt service in
January, 1995 which was to coincide with the completion of construction.
However, due to construction delays, the B & V Phase I Local Partnership has not
commenced making such payments. As a result, the lender has declared a default
under the terms of the mortgage loan and the local general partner of the B & V
Phase I Local Partnership is conducting discussions with the lender regarding a
loan restructuring.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
As discussed in Part I, Item 1 - Financial Statements and Part
I, Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations, the B & V Local Partnership sustained considerable damage
in August, 1992 due to Hurricane Andrew. The General Partner has taken the
position that temporary vacancies do not result in either a loss or delay of
Low-income Tax Credits while attempts to conduct repairs are being made and,
based on circumstances to date, Registrant may continue to utilize the
Low-income Tax Credits without interruption. However, Registrant's tax
professionals have informed Registrant that, based upon a 1995 revenue
procedure, the Internal Revenue Service could challenge the position taken by
Registrant concerning the uninterrupted utilization of the Low-income Tax
Credits, with respect to units not completed, after December 31, 1994. Of
Registrant's total Low-income Tax Credits, approximately 6.4% is allocated from
the B & V Local Partnership. A disaster of this scale is an unusual event.
Because the magnitude of destruction caused by Hurricane Andrew in Southern
Florida has limited precedent it is not possible to determine at this time the
final economic impact resulting from Hurricane Andrew on the B & V Local
Partnership, even if reconstructed. .
Item 6. Exhibits and Reports on Form 8-K.
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AMERICAN TAX CREDIT PROPERTIES L.P.
(a Delaware limited partnership)
By: Richman Tax Credit Properties L.P.,
General Partner
by: Richman Tax Credit Properties Inc.,
general partner
Date: August 13, 1996 /s/ Richard Paul Richman
Richard Paul Richman
President, Chief Executive Officer and
Director of the general partner of the
General Partner
Date: August 13, 1996 /s/ Neal Ludeke
Neal Ludeke
Vice President and Treasurer of the general partner
of the General Partner
(Principal Financial and Accounting
Officer of Registrant)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000830159
<NAME> ATCP 1
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Mar-30-1997
<PERIOD-START> Mar-31-1996
<PERIOD-END> Jun-29-1996
<EXCHANGE-RATE> 1.000
<CASH> 494
<SECURITIES> 2,986
<RECEIVABLES> 61
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,523
<CURRENT-LIABILITIES> 146
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 12,523
<SALES> 0
<TOTAL-REVENUES> 66
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (514)
<INCOME-TAX> 0
<INCOME-CONTINUING> (514)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (514)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
