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 December 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: 0-17619
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 ___.
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AMERICAN TAX CREDIT PROPERTIES L.P.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Table of Contents Page
<S> <C>
Balance Sheets as of December 30, 1996 (Unaudited) and March 30, 1996 3
(Unaudited)
Statements of Operations for the three and nine month periods ended December 30,
1996 (Unaudited) and December 30, 1995 (Unaudited) 4
Statements of Cash Flows for the nine months ended December 30, 1996 (Unaudited)
and December 30, 1995 (Unaudited) 5
Notes to Financial Statements as of December 30, 1996 (Unaudited) 7
</TABLE>
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<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
BALANCE SHEETS
DECEMBER 30, 1996 AND MARCH 30, 1996
(UNAUDITED)
December 30, March 30,
Notes 1996 1996
----- ------------------- --------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 284,491 $ 397,120
Investments in bonds available-for-sale 2 2,956,323 3,112,049
Investment in local partnerships 3 8,012,587 9,464,434
Interest receivable 60,590 66,580
------------- ------------
$ 11,313,991 $ 13,040,183
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 39,577 $ 57,961
Payable to general partner 43,861
------------- ---------------
39,577 101,822
------------- ---------------
Partners' equity (deficit)
General partner (254,775) (238,223)
Limited partners (41,286 units of limited partnership interest
outstanding) 11,347,148 12,985,812
Unrealized gain on investments in bonds available-for-sale, net 2 182,041 190,772
------------- ---------------
11,274,414 12,938,361
------------- -------------
$ 11,313,991 $ 13,040,183
============ ============
</TABLE>
See Notes to Financial Statements.
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<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF OPERATIONS
THREE AND NINE MONTH PERIODS ENDED DECEMBER 30, 1996 AND 1995
(UNAUDITED)
Three Months Nine Months Three Months Nine Months
Ended December Ended December Ended December Ended December
30, 1996 30,1996 30,1995 30,1995
Notes
----- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE
Interest $ 65,924 $ 195,616 $ 68,025 $ 205,763
Other income from local partnerships 1,222 1,222 5,000
---------------- ---------------- ---------------- ---------------
TOTAL REVENUE 67,146 196,838 68,025 210,763
---------------- ---------------- ---------------- ---------------
EXPENSES
Administration fees 45,931 137,793 45,931 137,793
Management fee 43,866 131,600 43,866 131,600
Professional fees 90,627 131,960 40,165 65,050
Printing, postage and other 7,363 17,604 4,554 20,724
----------------- ----------------- ----------------- -----------------
TOTAL EXPENSES 187,787 418,957 134,516 355,167
---------------- ---------------- --------------- ----------------
Loss from operations (120,641) (222,119) (66,491) (144,404)
Equity in loss of investment in local
partnerships 3 (415,297) (1,433,097) (325,482) (1,387,700)
---------------- ---------------- --------------- --------------
NET LOSS $ (535,938) $ (1,655,216) $ (391,973) $(1,532,104)
================ =============== =============== ==============
NET LOSS ATTRIBUTABLE TO
General partner $ (5,359) $ (16,552) $ (3,920) $ (15,321)
Limited partners (530,579) (1,638,664) (388,053) (1,516,783)
----------------- --------------- ---------------- -------------
$ (535,938) $ (1,655,216) $ (391,973) $(1,532,104)
================= ================= ================= ===============
NET LOSS per unit of limited partnership
interest (41,286 units of limited
partnership interest) $ (12.85)$ (39.69) $ (9.40)$ (36.74)
================= ================= ================= ================
</TABLE>
See Notes to Financial Statements.
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<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
------------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 214,823 $ 227,067
Cash paid for
administration fees (145,534) (145,534)
management fee (175,461) (175,461)
professional fees (145,583) (70,361)
printing, postage and other expenses (14,624) (16,412)
--------------- ----------------
Net cash used in operating activities (266,379) (180,701)
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash distributions from local partnerships 18,750 64,500
Maturity/redemption of bonds 135,000 134,000
-------------- ---------------
Net cash provided by investing activities 153,750 198,500
-------------- ---------------
Net increase (decrease) in cash and cash equivalents (112,629) 17,799
Cash and cash equivalents at beginning of period 397,120 342,688
-------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 284,491 $ 360,487
============== ==============
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain (loss) on investments in bonds available-for-sale, net $ (8,731) $ 215,376
================ ===============
- ------------------------------------------------------------------------------------------------------------------------------------
See reconciliation of net loss to net cash used in operating activities on page
6.
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS - (Continued)
NINE MONTHS ENDED DECEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
-------------------- ------------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES
Net loss $ (1,655,216) $ (1,532,104)
Adjustments to reconcile net loss to net cash used in operating activities
Equity in loss of investment in local partnerships 1,433,097 1,387,700
Gain on redemption of investments in bonds available-for-sale (2,008)
Amortization of net premium on investments in bonds 24,223 23,842
Accretion of zero coupon bonds (12,228) (12,227)
Decrease in payable to general partner (43,861) (43,861)
Decrease in accounts payable and accrued expenses (18,384) (8,740)
Decrease in interest receivable 5,990 6,697
------------- --------------
NET CASH USED IN OPERATING ACTIVITIES $ (266,379) $ (180,701)
============= ==============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 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 December 30, 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 and nine month periods ended December 30, 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 December 30, 1996, certain information concerning investments in
bonds available-for-sale is as follows:
Gross unrealized Gross
Amortized gains unrealized Estimated
Description and maturity cost losses fair value
<S> <C> <C> <C> <C>
Corporate debt securities
Within one year $ 75,515 $ 914 $ -- $ 76,429
After one year through five years 184,086 2,074 -- 186,160
After five years through ten years 987,661 8,737 (10,873) 985,525
After ten years 101,501 -- (5,930) 95,571
-------------- --------------- -------------- ------------
1,348,763 11,725 (16,803) 1,343,685
-------------- --------------- -------------- ------------
U.S. Treasury debt securities
Within one year 52,963 633 -- 53,596
After one year through five years 242,441 22,947 -- 265,388
After five years through ten years 936,303 175,063 -- 1,111,366
--------------- --------------- -------------- ------------
1,231,707 198,643 -- 1,430,350
-------------- --------------- -------------- -------------
U.S. government and agency securities
After ten years 193,812 -- (11,524) 182,288
--------------- --------------- --------------- --------------
$ 2,774,282 $ 210,368 $ (28,327) $ 2,956,323
=============== ============== ============== =============
</TABLE>
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<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 1996
(UNAUDITED)
3. Investment in Local Partnerships
The Partnership owns limited partnership interests in nineteen Local
Partnerships representing capital contributions in the aggregate amount of
$34,510,290. As of September 30, 1996, the Local Partnerships have
outstanding mortgage loans payable totaling approximately $83,208,000 and
accrued interest payable on such loans totaling approximately $4,857,000,
which are secured by security interests and liens common to mortgage loans
on the Local Partnerships' real property and other assets.
For the nine months ended December 30, 1996, the investment in Local
Partnerships activity consists of the following:
<S> <C> <C>
Investment in Local Partnerships as of March 30, 1996 $ 9,464,434
Equity in loss of investment in Local Partnerships for the
nine months ended
March 31, 1996 $ (467,398)
June 30, 1996 (550,402)
September 30, 1996 (415,297) (1,433,097) (A)
------------------
Cash distributions received from Local Partnerships during
the nine months ended December 30, 1996 (18,750)
---------------
Investment in Local Partnerships as of December 30, 1996 $ 8,012,587
===============
</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
for the three and nine month periods ended September 30, 1996 was
$684,788 and $2,025,199, 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
September 30, 1996 and December 31, 1995 and the combined unaudited
statements of operations of the Local Partnerships for the three and nine
month periods ended September 30, 1996 and 1995 are reflected on pages 9
and 10, respectively.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 1996
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of September 30,
1996 and December 31, 1995 are as follows:
September 30, December 31,
1996 1995
----------------- ----------------
<S> <C> <C>
ASSETS
Cash and other investments $ 1,399,949 $ 1,304,492
Rental receivable 227,465 165,626
Escrow deposits and reserves 3,235,247 3,640,218
Land 4,476,955 4,476,955
Buildings and improvements (net of accumulated
depreciation of $30,811,304 and $27,836,776) 86,361,270 88,484,487
Intangible assets (net of accumulated amortization of
$811,931 and $736,962) 1,954,733 2,029,039
Other 696,573 862,904
------------- -------------
$ 98,352,192 $ 100,963,721
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,085,606 $ 1,175,581
Due to related parties 5,285,131 5,144,533
Mortgage loans 83,207,780 83,354,276
Notes payable 1,017,151 1,017,151
Accrued interest 4,857,479 3,744,233
Other 2,104,761 2,103,775
------------- --------------
97,557,908 96,539,549
------------- --------------
Partners' equity (deficit) American Tax Credit Properties L.P.
Capital contributions, net of distributions 33,971,389 34,007,639
Cumulative loss (25,958,802) (24,525,705)
------------- --------------
8,012,587 9,481,934
------------- --------------
General partners and other limited partners, including ATCP II
Capital contributions, net of distributions 290,230 362,230
Cumulative loss (7,508,533) (5,419,992)
------------- --------------
(7,218,303) (5,057,762)
------------- --------------
794,284 4,424,172
------------- --------------
$ 98,352,192 $ 100,963,721
============= =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 1996
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the
three and nine month periods ended September 30, 1996 and 1995 are as
follows:
Three Months Nine Months Three Months Nine Months
Ended September 30, Ended September 30, Ended September 30, Ended September 30,
1996 1996 1995 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 4,061,202 $ 11,921,773 $ 4,148,731 $ 11,732,139
Interest and other 62,906 166,246 88,411 208,749
--------------- --------------- --------------- ---------------
TOTAL REVENUE 4,124,108 12,088,019 4,237,142 11,940,888
------------- ------------- ------------- --------------
EXPENSES
Administrative 541,236 1,661,745 571,781 1,673,643
Utilities 244,298 978,730 257,933 919,300
Operating, maintenance and other 858,101 2,468,628 860,545 2,367,181
Taxes and insurance 671,077 1,686,163 433,080 1,328,845
Interest (including amortization of
$24,988, $74,969, $107,116 and $155,172) 1,944,095 5,839,863 2,008,753 5,787,849
Depreciation 985,250 2,974,528 973,839 2,921,143
-------------- -------------- -------------- --------------
TOTAL EXPENSES 5,244,057 15,609,657 5,105,931 14,997,961
------------- ------------- ------------- --------------
NET LOSS $ (1,119,949) $ (3,521,638) $ (868,789) $ (3,057,073)
============= ============= ============= =============
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties L.P. $ (415,297) $ (1,433,097) $ (325,482) $ (1,387,700)
General partners and other limited
partners, including ATCP II, which
includes $684,788, $2,025,199,
$503,008 and $1,605,659 of American
Tax Credit Properties L.P. loss in
excess of investment (704,652) (2,088,541) (543,307) (1,669,373)
-------------- -------------- -------------- --------------
$ (1,119,949) $ (3,521,638) $ (868,789) $ (3,057,073)
============= ============= ============= =============
</TABLE>
The combined results of operations of the Local Partnerships for the three
and nine month periods ended September 30, 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)
DECEMBER 30, 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
the 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 moved the Bankruptcy Court for relief from the
bankruptcy stay. In response, the Bankruptcy Court modified the automatic
stay to allow the lender to commence a foreclosure action. On August 27,
1996 the lender filed its Complaint to Foreclose Mortgage and Securities
Interests in the Circuit Court for Dade County, Florida. Shortly
thereafter, the B & V Local Partnership filed its response to the
Complaint. In addition, the lender has moved the Bankruptcy Court for a
complete dismissal of the bankruptcy proceeding. The Bankruptcy Court
denied this motion provided that a plan of reorganization was filed on
behalf of the B & V Local Partnership by September 17, 1996. On September
17, 1996, both the lender and the Partnership filed proposed plans of
reorganization and accompanying disclosure statements. Subsequently, the
Bankruptcy Court determined the value of the property, which determination
rendered the plan of reorganization filed by the Partnership infeasible.
Therefore, only the lender filed an amended disclosure statement and plan
of reorganization on January 24, 1997. The Bankruptcy Court has scheduled a
hearing for February 20, 1997 to consider the sufficiency of the lender's
amended disclosure statement. The lender has recently sought further
modification of the automatic stay issued by the Bankruptcy Court to
further proceed with the pending foreclosure action in State court. The
Bankruptcy Court has not yet considered this requested relief. As a result
of these recent developments the Mediation has been postponed.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 1996
(UNAUDITED)
3. Investment in Local Partnerships (continued)
Because a disaster of this scale is an unusual event and 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 rental
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
also result in recapture or the inability to utilize future Low-income Tax
Credits. 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 plus interest thereon (representing
approximately $5 per Unit) and will be unable to utilize future Low-income
Tax Credits associated with such apartments (representing approximately $5
per Unit) for the period January, 1996 through 1998. Because of these
recent events, including those associated with the lender and the
bankruptcy proceeding, it is highly questionable that the B & V Local
Partnership will eventually be successful in 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 (representing approximately $25 per Unit) and a reduction of future
Low-income Tax Credits associated with the B & V Local Partnership
(representing approximately $10 per Unit). As of February 12, 1997, 52
rental units are completed and occupied. The Low-income Tax Credits with
respect to the B & V Local Partnership are scheduled to expire in 1998. The
Partnership's investment balance in the B & V Local Partnership, after the
allocation of cumulative equity losses, is zero as of December 30, 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 rental 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 had not
commenced making such payments. As a result, the lender has declared a
default under the terms of the mortgage and on December 9, 1996 the lender
commenced a foreclosure action. On January 14, 1997, by agreement of the B
& V Phase I Local Partnership and the lender, the Court issued an order
directing the B & V Phase I Local Partnership to make mortgage payments to
the lender accruing since December, 1996 and to thereafter make monthly
mortgage payments to the lender. The partnerships investment balance in the
B & V Phase I Local Partnership, after the allocation of cumulative equity
losses, is zero as of December 30, 1996.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 1996
(UNAUDITED)
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.
<PAGE>
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 December 30, 1996, Registrant has not experienced a significant change in
financial condition as compared to March 30, 1996. Principal changes in assets
are comprised of periodic transactions and adjustments and anticipated equity in
loss from operations of the Local Partnerships. During the nine months ended
December 30, 1996, Registrant received cash from interest earnings and
distributions from Local Partnerships and utilized cash for operating expenses.
During the nine months ended December 30, 1996, Registrant recorded a net
unrealized loss on bonds available-for-sale of approximately $9,000, resulting
in a net unrealized gain of approximately $182,000 reflected in Registrant's
partners' equity (deficit) as of December 30, 1996. In addition, during the nine
months ended December 30, 1996, Registrant recorded amortization of net premium
on investments in bonds of approximately $24,000, which was partially offset by
accretion of zero coupon bonds of approximately $12,000. In addition, during the
nine months ended December 30, 1996, Registrant received $135,000 from the
maturity of investments in bonds held for working capital purposes. During the
nine months ended December 30, 1996, the investment in Local Partnerships
decreased as a result of Registrant's equity in the Local Partnerships' net loss
for the nine months ended September 30, 1996 of $1,433,097 and cash
distributions received from Local Partnerships of $18,750.
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. 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 nine months ended September 30, 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. Most of
the Local Partnerships are effectively operating at or near break even levels,
although certain 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. However, 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 nine months ended September 30, 1996 which includes property management
fees of approximately $11,000. Accordingly, the net operating deficit was
approximately $10,000. The Local General Partner of the South Drexel Local
Partnership has advances of approximately $24,000 outstanding. Of Registrant's
total annual Low-income Tax Credits, approximately 1.12% is allocated from the
South Drexel Local Partnership.
The operating information of Dunbar Limited Partnership No. 2 reflects a deficit
of approximately $50,000 for the nine months ended September 30, 1996 due to an
unanticipated one-time charge in connection with past years' real estate taxes
of approximately $110,000. The results of operations for future periods are not
expected to be adversely affected as a result of such one-time charge.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The terms of the partnership agreement of Erie Associates Limited Partnership
(the "Erie Local Partnership") require the Local General Partners of the Erie
Local Partnership to cause the management agent to defer property management
fees in order to avoid a default under the mortgage. The Erie Local Partnership
incurred an operating deficit of approximately $7,000 for the nine months ended
September 30, 1996 which includes property management fees of approximately
$5,000. Accordingly, the net operating deficit was approximately $2,000. The
Erie Local Partnership is operating pursuant to an amended and restated note
(the "Amended Note") dated December 1, 1994 which matures on December 31, 1997.
The original financing called for Mandatory Debt Service of $7,647 per month,
while the Amended Note requires monthly Mandatory Debt Service of $5,883. The
Local General Partners of the Erie Local Partnership report that as of February
12, 1997, the Erie Local Partnership is three months in arrears under the terms
of the Amended Note, that a default has been declared by the lender and that
discussions are currently being held with the lender in an attempt to
restructure the loan. Of Registrant's total annual Low-income Tax Credits,
approximately 2.40% is allocated from the Erie Local Partnership.
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 the 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 moved the Bankruptcy
Court for relief from the bankruptcy stay. In response, the Bankruptcy Court
modified the automatic stay to allow the lender to commence a foreclosure
action. On August 27, 1996 the lender filed its Complaint to Foreclose Mortgage
and Securities Interests in the Circuit Court for Dade County, Florida. Shortly
thereafter, the B & V Local Partnership filed its response to the Complaint. In
addition, the lender has moved the Bankruptcy Court for a complete dismissal of
the bankruptcy proceeding. The Bankruptcy Court denied this motion
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
provided that a plan of reorganization was filed on behalf of the B & V Local
Partnership by September 17, 1996. On September 17, 1996, both the lender and
Registrant filed proposed plans of reorganization and accompanying disclosure
statements. Subsequently, the Bankruptcy Court determined the value of the
property, which determination rendered the plan of reorganization filed by
Registrant infeasible. Therefore, only the lender filed an amended disclosure
statement and plan of reorganization on January 24, 1997. The Bankruptcy Court
has scheduled a hearing for February 20, 1997 to consider the sufficiency of the
lender's amended disclosure statement. The lender has recently sought further
modification of the automatic stay issued by the Bankruptcy Court to further
proceed with the pending foreclosure action in State court. The Bankruptcy Court
has not yet considered this requested relief. As a result of these recent
developments the Mediation has been postponed.
Because a disaster of this scale is an unusual event and 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 rental
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 also result in recapture or the inability to utilize
future Low-income Tax Credits. 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 plus interest thereon (representing
approximately $5 per Unit) and will be unable to utilize future Low-income Tax
Credits associated with such apartments (representing approximately $5 per Unit)
for the period January, 1996 through 1998. Because of these recent events,
including those associated with the lender and the bankruptcy proceeding, it is
highly questionable that the B & V Local Partnership will eventually be
successful in 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 (representing approximately $25 per Unit) and
a reduction of future Low-income Tax Credits associated with the B & V Local
Partnership (representing approximately $10 per Unit). As of February 12, 1997,
52 rental units are completed and occupied. Registrant's investment balance in
the B & V Local Partnership, after the allocation of cumulative equity losses,
is zero as of December 30, 1996. Of Registrant's total annual Low-income Tax
Credits (prior to the loss of rental units taken through eminent domain),
approximately 6.4% is allocated from the B & V Local Partnership. The Low-income
Tax Credits with respect to the B & V Local Partnership are scheduled to expire
in 1998.
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 rental 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 had not commenced making such
payments. As a result, the
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
lender has declared a default under the terms of the mortgage and on December 9,
1996 the lender commenced a foreclosure action. On January 14, 1997, by
agreement of the B & V Phase I Local Partnership and the lender, the Court
issued an order directing the B & V Phase I Local Partnership to make mortgage
payments to the lender accruing since December, 1996 and to thereafter make
monthly mortgage payments to the lender. Registrant's investment balance in the
B & V Phase I Local Partnership, after the allocation of cumulative equity
losses, is zero as of December 30, 1996. Of Registrant's total annual Low-income
Tax Credits, approximately 1.3% is allocated from the B & V Phase I Local
Partnership.
Although Cobbet Hill Associates Limited Partnership (the "Cobbet Local
Partnership") is current on its mortgage obligation and does not reflect
operating deficits for the nine months ended September 30, 1996, brick has
fallen off the parapet of the building which needs to be repaired. The first
mortgage lender has declared a default pending restoration of the brick. The
Cobbet Local Partnership's property management has met with the lender and
presented a plan of action which has been orally accepted by the lender and the
lender is preparing the necessary documentation for the parties to proceed. The
remediation is expected to occur over approximately 120 days and the property
will remain in technical default until the work is completed.
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. In addition, the operating results herein are not necessarily the same
for tax reporting. Registrant accounts for its investment 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 certain 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.
Three Months Ended December 30, 1996
For the three months ended December 30, 1996, Registrant had a net loss of
approximately $536,000, which included an equity in loss of investment in Local
Partnerships of approximately $415,000 for the three months ended September 30,
1996. Nonrecognition of losses in excess of Registrant's investment in certain
Local Partnerships during the period was approximately $685,000. Registrant's
loss from operations for the three months ended December 30, 1996 of
approximately $121,000 was attributable to interest revenue of approximately
$66,000 and other income from Local Partnerships of approximately $1,000,
exceeded by operating expenses of approximately $188,000. Interest revenue 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 $1,120,000 for the three
months ended September 30, 1996 was attributable to rental and other revenue of
approximately $4,124,000, exceeded by operating and interest expenses (including
Non-Mandatory Interest) of approximately $4,234,000 and approximately $1,010,000
of depreciation and amortization expenses.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Three Months Ended December 30, 1995
For the three months ended December 30, 1995, Registrant had a net loss of
approximately $392,000, which included an equity in loss of investment in Local
Partnerships of approximately $326,000 for the three months ended September 30,
1995. Nonrecognition of losses in excess of Registrant's investment in certain
Local Partnerships during the period was approximately $503,000. Registrant's
loss from operations for the three months ended December 30, 1995 of
approximately $66,000 was attributable to interest revenue of approximately
$68,000, exceeded by operating expenses of approximately $134,000.
The Local Partnerships' net loss of approximately $869,000 for the three months
ended September 30, 1995 was attributable to rental and other revenue of
approximately $4,237,000, exceeded by operating and interest expenses (including
Non-Mandatory Interest) of approximately $4,025,000 and approximately $1,081,000
of depreciation and amortization expenses.
Nine Months Ended December 30, 1996
For the nine months ended December 30, 1996, Registrant had a net loss of
approximately $1,655,000, which included an equity in loss of investment in
Local Partnerships of approximately $1,433,000 for the nine months ended
September 30, 1996. Nonrecognition of losses in excess of Registrant's
investment in certain Local Partnerships during the period was approximately
$2,025,000. Registrant's loss from operations for the nine months ended December
30, 1996 of approximately $222,000 was attributable to interest revenue of
approximately $196,000 and other income from Local Partnerships of approximately
$1,000, exceeded by operating expenses of approximately $419,000. Interest
revenue 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 $3,522,000 for the nine months
ended September 30, 1996 was attributable to rental and other revenue of
approximately $12,088,000, exceeded by operating and interest expenses
(including Non-Mandatory Interest) of approximately $12,561,000 and
approximately $3,049,000 of depreciation and amortization expenses.
Nine Months Ended December 30, 1995
For the nine months ended December 30, 1995, Registrant had a net loss of
approximately $1,532,000, which included an equity in loss of investment in
Local Partnerships of approximately $1,388,000 for the nine months ended
September 30, 1995. Nonrecognition of losses in excess of Registrant's
investment in certain Local Partnerships during the period was approximately
$1,606,000. Registrant's loss from operations for the nine months ended December
30, 1995 of approximately $144,000 was attributable to interest revenue of
approximately $206,000 and other income from Local Partnerships of $5,000,
exceeded by operating expenses of approximately $355,000.
The Local Partnerships' net loss of approximately $3,057,000 for the nine months
ended September 30, 1995 was attributable to rental and other revenue of
approximately $11,941,000, exceeded by operating and interest expenses
(including Non-Mandatory Interest) of approximately $11,922,000 and
approximately $3,076,000 of depreciation and amortization expenses.
Three and Nine Month Periods Ended December 30, 1996 v.
Three and Nine Month Periods Ended December 30, 1995
Registrant's operations for the three months ended December 30, 1996 resulted in
a net loss of approximately $536,000 as compared to a net loss of approximately
$392,000 for the same period in 1995. The increase in net loss is primarily
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
attributable to (i) an increase in the equity in loss of investment in Local
Partnerships of approximately $90,000, which is primarily the result of a
decrease in the operating revenues and an increase in the operating expenses of
the Local Partnerships, partially offset by an increase in the nonrecognition of
losses in excess of Registrant's investment in certain Local Partnership of
approximately $182,000 in accordance with the equity method of accounting and
(ii) an increase in professional fees which is primarily the result of expenses
incurred in connection with the B & V Local Partnership and the B & V Phase I
Local Partnership (see discussion above). Although the Local Partnerships' total
operating expenses have increased for the three months ended September 30, 1996
as compared to the 1995 period, it is not unusual for certain operating expenses
to fluctuate among quarterly periods while other operating expenses are expected
to be more stable.
Registrant's operations for the nine months ended December 30, 1996 resulted in
a net loss of approximately $1,655,000 as compared to a net loss of
approximately $1,532,000 for the same period in 1995. The increase in net loss
is primarily attributable to (i) an increase in the equity in loss of investment
in Local Partnerships of approximately $45,000, which is primarily the result of
an increase in the operating revenues exceeded by an increase in the operating
expenses of the Local Partnerships, partially offset by an increase in the
nonrecognition of losses in excess of Registrant's investment in certain Local
Partnerships of approximately $420,000 in accordance with the equity method of
accounting and (ii) an increase in professional fees which is primarily the
result of expenses incurred in connection with the B & V Local Partnership and
the B & V Phase I Local Partnership (see discussion above). Although the Local
Partnerships' total operating expenses have increased for the nine months ended
September 30, 1996 as compared to the 1995 period, they are comparable to the
total operating expenses incurred during the year ended December 31, 1995.
<PAGE>
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 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. The Court had previously 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, but remanded HUD to review the rent computations
used in determining the base rent component. The Court has since ruled
in favor of HUD and the local general partner of the Federal Local
Partnership has notified the Court of its intention to file an appeal
in both rulings. 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)
Item 1. Legal Proceedings (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
None; see Item 5 regarding mortgage defaults of certain Local
Partnerships.
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 mortgagee of the first mortgage underlying
the B & V Local Partnership has declared a default due to circumstances
arising from the considerable damage sustained to the property
resulting from Hurricane Andrew in August, 1992. 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 (prior to the loss of rental
units taken through eminent domain), 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.
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 had not commenced making such payments.
As a result, the lender has declared a default under the terms of the
mortgage and commenced a foreclosure action.
As discussed in Part I, Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations, the local general
partners of the Erie Associates Limited Partnership (the "Erie Local
Partnership")
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Part II - OTHER INFORMATION (continued)
Item 5. Other Information (continued)
report that as of February 12, 1997, the Erie Local Partnership is
three months in arrears under the terms of its mortgage, that a default
has been declared by the lender and that discussions are currently
being held with the lender to restructure the loan.
As discussed in Part I, Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations, the local general
partners of Cobbett Hill Associates Limited Partnership (the "Cobbet
Local Partnership") report that the first mortgage lender has declared
a default pending restoration of the building's parapet. The Cobbet
Local Partnership's property management has met with the lender and
presented a plan of action which has been orally accepted by the
lender. The property will remain in technical default until the work is
completed.
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: February 13, 1997 /s/ Richard Paul Richman
------------------ ------------------------
Richard Paul Richman
President, Chief Executive Officer and
Director of the general partner of the
General Partner
Date: February 13, 1997 /s/ Neal Ludeke
------------------ ---------------
Neal Ludeke
Vice President and Treasurer of the general partner
of the General Partner
(Principal Financial and Accounting
Officer of Registrant)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the quarter ended December 30, 1996 Form 10Q Balance Sheets and Statements of
Operations and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000830159
<NAME> American Tax Credit Properties, I L.P.
<MULTIPLIER> 1000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-30-1997
<PERIOD-START> MAR-31-1996
<PERIOD-END> DEC-30-1996
<EXCHANGE-RATE> 1.00 0
<CASH> 284
<SECURITIES> 2,956
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0
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