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, 1997
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, 1997 (Unaudited) and March 30, 1997 (Unaudited)
Statements of Operations for the three months ended June 29, 1997
(Unaudited) and June 29, 1996 (Unaudited).................................
Statements of Cash Flows for the three months ended
June 29, 1997 (Unaudited) and June 29, 1996 (Unaudited)...................
Notes to Financial Statements as of June 29, 1997 (Unaudited)................
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
BALANCE SHEETS
JUNE 29, 1997 AND MARCH 30, 1997
(UNAUDITED)
June 29, March 30,
Notes 1997 1997
----- ------------------- ------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 121,937 $ 284,108
Investments in bonds available-for-sale 2 3,080,788 2,883,959
Investment in local partnerships 3 7,035,750 7,382,178
Interest receivable 60,242 61,716
---------------- ----------------
$ 10,298,717 $ 10,611,961
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 81,980 $ 91,237
Payable to general partner 87,728 43,861
--------------- ---------------
169,708 135,098
-------------- --------------
Commitments and contingencies 2
Partners' equity (deficit)
General partner (266,008) (262,065)
Limited partners (41,286 units of limited partnership interest
outstanding) 10,235,086 10,625,435
Unrealized gain on investments in bonds available-for-sale, net 2 159,931 113,493
--------------- ---------------
10,129,009 10,476,863
------------- -------------
$ 10,298,717 $ 10,611,961
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 29, 1997 AND 1996
(UNAUDITED)
Notes 1997 1996
----- ---------------- ----------
REVENUE
<S> <C> <C> <C>
Interest $ 62,705 $ 66,360
Other income from local partnership 2,500
-------------- --------------
TOTAL REVENUE 65,205 66,360
-------------- --------------
EXPENSES
Administration fees 45,931 45,931
Management fee 43,867 43,867
Professional fees 21,601 16,525
Printing, postage and other 9,170 6,258
--------------- ---------------
TOTAL EXPENSES 120,569 112,581
-------------- --------------
Loss from operations (55,364) (46,221)
Equity in loss of investment in local partnerships 3 (338,928) (467,398)
------------- -------------
NET LOSS $ (394,292) $ (513,619)
============ ============
NET LOSS ATTRIBUTABLE TO
General partner $ (3,943) $ (5,136)
Limited partners (390,349) (508,483)
------------- -------------
$ (394,292) $ (513,619)
============ ============
NET LOSS per unit of limited partnership interest
(41,286 units of limited partnership interest) $ (9.45) $ (12.32)
=============== ==============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 29, 1997 AND 1996
(UNAUDITED)
1997 1996
-------------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 67,573 $ 75,349
Other income from local partnership 2,500
Cash paid for
administration fees (38,190) (38,190)
professional fees (37,541) (29,500)
printing, postage and other expenses (10,228) (969)
---------- ------------
Net cash provided by (used in) operating activities (15,886) 6,690
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash distributions from local partnerships 7,500 15,000
Maturity/redemption and sale of bonds 103,432 75,000
Investment in bonds, includes $217 of accrued interest paid at
purchase of investment (257,217)
---------- -----------
Net cash provided by (used in) investing activities (146,285) 90,000
---------- -----------
Net increase (decrease) in cash and cash equivalents (162,171) 96,690
Cash and cash equivalents at beginning of period 284,108 397,120
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 121,937 $ 493,810
========= =========
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain (loss) on investments in bonds available-for-sale, net $ 46,438 $ (47,247)
========== =========
- -------------------------------------------------------------------------------
See reconciliation of net loss to net cash provided by (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)
THREE MONTHS ENDED JUNE 29, 1997 AND 1996
(UNAUDITED)
1997 1996
-------------- ------------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
Net loss $ (394,292) $ (513,619)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities
Equity in loss of investment in local partnerships 338,928 467,398
Amortization of net premium on investments in bonds 7,253 7,755
Accretion of zero coupon bonds (4,076) (4,076)
Increase in payable to general partner 43,867 43,867
Increase (decrease) in accounts payable and accrued expenses (9,257) 55
Decrease in interest receivable, includes $217 of accrued interest paid
at purchase of investment in bonds 1,691 5,310
------------- --------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (15,886) $ 6,690
=========== =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 29, 1997
(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, 1997 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 months
ended June 29, 1997 are not necessarily indicative of the results that may
be expected for the entire year.
2. Investments in Bonds Available-For-Sale
As of June 29, 1997, certain information concerning investments in bonds
available-for-sale is as follows:
Gross Gross
Amortized unrealized unrealized Estimated
Description and maturity cost gains losses fair value
------------------------ ------------- --------------- -------------- ----------
<S> <C> <C> <C> <C>
Corporate debt securities
Within one year $ 75,000 $ 160 $ -- $ 75,160
After one year through five years 182,618 1,888 (150) 184,356
After five years through ten years 932,266 7,387 (3,345) 936,308
After ten years 101,434 -- (6,390) 95,044
----------- ------------- ------------- -----------
1,291,318 9,435 (9,885) 1,290,868
----------- ------------ ------------- -----------
U.S. Treasury debt securities
Within one year 320,178 1,687 (2,219) 319,646
After one year through five years 445,451 59,975 -- 505,426
After five years through ten years 661,946 115,643 -- 777,589
----------- ----------- ------------- ------------
1,427,575 177,305 (2,219) 1,602,661
----------- ----------- ------------- -----------
U.S. government and agency securities
After ten years 201,964 -- (14,705) 187,259
------------ ----------- ------------ ------------
$ 2,920,857 $ 186,740 $ (26,809) $ 3,080,788
=========== ========== ============ ===========
</TABLE>
In connection with an agreement with the first mortgage lender of the
Cobbet Hill Associates Limited Partnership (the "Cobbet Local
Partnership"), the Partnership is contingently liable under a standby
letter of credit in the amount of $242,529 which was issued on June 18,
1997 for the purpose of covering potential operating deficits of the Cobbet
Local Partnership. The letter of credit is secured by the Partnership's
investment in a U.S. Treasury bond in the amount of approximately $257,000,
purchased in June 1997.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1997
(UNAUDITED)
3. Investment in Local Partnerships
The Partnership owns a limited partnership interest in nineteen Local
Partnerships representing capital contributions in the aggregate amount of
$34,510,290. As of March 31, 1997, the Local Partnerships have outstanding
mortgage loans payable totaling approximately $83,060,000 and accrued
interest payable on such loans totaling approximately $5,391,000, which are
secured by security interests and liens common to mortgage loans on the
Local Partnerships' real property and other assets.
For the three months ended June 29, 1997, the investment in Local
Partnerships activity consists of the following:
<S> <C>
Investment in Local Partnerships as of March 30, 1997 $ 7,382,178
Equity in loss of investment in Local Partnerships for the
three months ended March 31, 1997 (338,928) (A)
Cash distributions received from Local Partnerships during
the three months ended June 29, 1997 (7,500)
------------
Investment in Local Partnerships as of June 29, 1997 $ 7,035,750
============
</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
$864,539 and $721,823 for the three months ended March 31, 1997 and
1996, 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, 1997 and December 31, 1996 and the combined unaudited statements of
operations of the Local Partnerships for the three months ended March 31,
1997 and 1996 are reflected on pages 9 and 10, respectively.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1997
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of March 31, 1997
and December 31, 1996 are as follows:
March 31, December 31,
1997 1996
------------------- ---------------
<S> <C> <C>
ASSETS
Cash and other investments $ 1,365,186 $ 1,218,425
Rental receivable 275,875 260,272
Escrow deposits and reserves 2,929,177 3,133,429
Land 4,416,035 4,416,035
Buildings and improvements (net of accumulated depreciation of
$32,660,745 and $31,649,149) 79,400,342 80,294,613
Intangible assets (net of accumulated amortization of $861,682 and
$836,753) 1,904,319 1,929,248
Other 1,005,731 965,578
--------------- ---------------
$ 91,296,665 $ 92,217,600
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,419,095 $ 1,267,704
Due to related parties 5,060,780 5,291,779
Mortgage loans 83,059,555 83,114,342
Notes payable 1,008,001 1,009,368
Accrued interest 5,391,413 5,014,588
Other 2,034,574 2,034,144
--------------- --------------
97,973,418 97,731,925
------------- -------------
Partners' equity (deficit)
American Tax Credit Properties L.P.
Capital contributions, net of distributions 33,957,639 33,971,389
Cumulative loss (26,914,389) (26,575,461)
------------ ------------
7,043,250 7,395,928
-------------- --------------
General partners and other limited partners, including ATCP II
Capital contributions, net of distributions 433,071 361,046
Cumulative loss (14,153,074) (13,271,299)
------------- ------------
(13,720,003) (12,910,253)
(6,676,753) (5,514,325)
$ 91,296,665 $ 92,217,600
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1997
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the three months ended March 31, 1997 and 1996
are as follows:
1997 1996
-------------- ------------
<S> <C> <C>
REVENUE
Rental $ 4,053,331 $ 3,946,405
Interest and other 52,851 53,786
-------------- --------------
TOTAL REVENUE 4,106,182 4,000,191
------------ ------------
EXPENSES
Administrative 603,519 578,688
Utilities 434,406 414,238
Operating, maintenance and other 810,143 827,865
Taxes and insurance 526,660 518,144
Interest (including amortization of $24,929 and $25,906) 1,940,561 1,869,494
Depreciation 1,011,596 990,475
------------ --------------
TOTAL EXPENSES 5,326,885 5,198,904
------------ -------------
NET LOSS $ (1,220,703) $ (1,198,713)
=========== ===========
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties L.P. $ (338,928) $ (467,398)
General partners and other limited partners, including ATCP II,
which includes $864,539 and $721,823 of American Tax Credit
Properties L.P. loss in excess of investment (881,775) (731,315)
------------ -------------
$(1,220,703) $ (1,198,713)
===========- ============
</TABLE>
The combined results of operations of the Local Partnerships for the three
months ended March 31, 1997 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, 1997
(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 damage to the complex was
covered by property insurance and the B & V Local Partnership was covered
by rental interruption insurance. It was the intention of the local general
partner of the B & V Local Partnership to reconstruct the complex, and thus
preserve the Low-income Tax Credits. However, delays in the rebuilding of
the complex occurred due to disagreements with the insurance company
concerning selection of the contractor and the costs to rebuild the
complex. In addition, the insurance carrier ceased making rental
interruption insurance payments and subsequently the lender declared a
default. While conducting repairs, which included completing 52 rental
units which were placed in service, the B & V Local Partnership undertook
significant litigious efforts to effect a workout with the lender and cause
the insurance company and contractor to perform under their obligations to
rebuild the complex, which included reorganization plans, bankruptcy
proceedings, binding arbitration and voluntary nonbinding mediation.
Despite such efforts, the complex lost 32 rental units pursuant to a
quick-take eminent domain proceeding in April 1996 and the remainder of the
complex was ultimately lost in April 1997 when the Bankruptcy Court ordered
title transfer of the property. In December 1996, in connection with the
bankruptcy and foreclosure proceedings surrounding the B & V Local
Partnership, the Bankruptcy Court determined the value of the property
owned by the B & V Local Partnership which resulted in the recognition of
an impairment loss which was included in the combined statement of
operations of the Local Partnerships for the year ended December 31, 1996.
Because the Partnership's investment balance in the B & V Local
Partnership, after the cumulative equity losses, became zero during the
year ended March 30, 1995, the aforementioned impairment and loss of the
Property had no effect on the financial position, results of operations or
cash flows of the Partnership for the three months ended June 29, 1997.
However, the Partnership will not utilize the future Low-income Tax Credits
associated with the B & V Local Partnership and limited partners will incur
a tax credit recapture for a portion of previous years' Low-income Tax
Credits because the Property was not held through the entire Compliance
Period.
As part of the overall plan and arrangement with the local general partner
of the B & V Local Partnership (see discussion above), the Partnership owns
a 99% limited partnership interest in the 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, which was acquired from
principals of the local general partner of the B & V Local Partnership
during the year ended March 30, 1995. 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
was 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 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.
Prior to the acquisition, the B & V Phase I Local Partnership was also
damaged by Hurricane Andrew in August 1992. 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. The lender 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 Circuit Court for Dade
County 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 B & V Phase I
Local Partnership has complied with this order and all payments accruing
since December 1996 through August 1997 have been made. On April 18, 1997,
a motion for summary judgment in the lender's foreclosure action was
scheduled to be heard. However, on April 17, 1997, the B & V Phase I Local
Partnership filed a Chapter 11 Bankruptcy Petition with the United States
Bankruptcy Court, District of Connecticut, Bridgeport Division. As of April
25, 1997, the lender filed a motion seeking to change the
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1997
(UNAUDITED)
3. Investment in Local Partnerships (continued)
venue for this case to the Southern District of Florida. Subsequently,
hearings were held in order for the Bankruptcy Court to consider the
lender's motion. In the course of these hearings, the lender and the B & V
Phase I Local Partnership reached a tentative agreement whereby the lender
would withdraw its request to change venue and the B & V Phase I Local
Partnership would agree to submit to the Bankruptcy Court a plan providing
for, among other things, a schedule of buy-out prices to be paid to the
lender at future designated dates. On July 14, 1997, the Bankruptcy Court
approved a stipulation between the lender and the B & V Phase I Local
Partnership which incorporated the tentative agreement. Under the terms of
the stipulation, the plan of reorganization is required to be filed with
the Bankruptcy Court within 60 days of the date of the stipulation unless
extended by the parties. Provided that the Bankruptcy Court accepts the
proposed plan of reorganization and the B & V Phase I Local Partnership is
not required to make debt service payments in excess of current levels, the
Partnership does not anticipate any recapture of Low-income Tax Credits or
interruption in Low-income Tax Credits allocated from the B & V Phase I
Local Partnership through December 31, 1997. The Partnership's investment
balance in the B & V Phase I Local Partnership, after the cumulative equity
losses, became zero during the year ended March 30, 1996.
The Erie Associates Limited Partnership (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 the Erie Local
Partnership is several 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.
4. Additional Information
Additional information, including the audited March 30, 1997 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, 1997 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 June 29, 1997, Registrant has not experienced a significant change in
financial condition as compared to March 30, 1997. 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
months ended June 29, 1997, Registrant received cash from interest earnings and
distributions from Local Partnerships and utilized cash for operating expenses.
In addition, Registrant received approximately $103,000 from the maturity and
sale of investments in bonds and purchased a bond in an amount of $257,217 which
includes accrued interest of $217 paid at purchase. Such new bond serves as
collateral for a standby letter of credit posted on behalf of a Local
Partnership. Cash and cash equivalents and investments in bonds
available-for-sale increased, in the aggregate, by approximately $35,000 during
the three months ended June 29, 1997, which increase includes a net unrealized
gain recorded on investments in bonds of approximately $46,000, the amortization
of net premium on investments in bonds of approximately $7,000 and the accretion
of zero coupon bonds of approximately $4,000. During the three months ended June
29, 1997, the investment in Local Partnerships decreased as a result of
Registrant's equity in the Local Partnerships' net loss for the three months
ended March 31, 1997 of $338,928 and cash distributions received from Local
Partnerships of $7,500.
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, many 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. The United States Department of Housing and Urban
Development ("HUD") has issued notices which implement provisions to renew
certain project based Section 8 contracts expiring during HUD's fiscal year
1997, where requested by an owner, for an additional one year term generally at
or below current rent levels, subject to certain guidelines. HUD has an
additional program (the "Restructuring Program") which, in general, provides for
restructuring rents and/or mortgages where rents may be adjusted to market
levels and mortgage terms may be adjusted based on the reduction in rents,
although there may be instances in which only rents, but not mortgages, are
restructured. 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, whose Section 8 contracts expired during 1996 and were extended
for one year, have applied for treatment under the Restructuring Program during
1997. 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, 1997, revenue from operations 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 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 $9,000
for the three month period ended March 31, 1997 which includes property
management fees of approximately $4,000. Accordingly, the net operating deficit
was approximately $5,000. The Local General Partner of the South Drexel Local
Partnership has advances of approximately $35,000 outstanding. Of Registrant's
total annual Low-income Tax Credits, approximately 1% is allocated from the
South Drexel Local Partnership.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Grove Park Housing, A California Limited Partnership (the "Grove Park Local
Partnership") incurred an operating deficit of approximately $28,000 during the
three months ended March 31, 1997 due primarily to unanticipated repairs and a
temporary vacancy loss. The management agent of the Grove Park Local Partnership
reports improved operations during subsequent months.
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 damage to the complex was covered by property insurance
and the B & V Local Partnership was covered by rental interruption insurance. It
was the intention of the Local General Partner of the B & V Local Partnership to
reconstruct the complex, and thus preserve the Low-income Tax Credits. However,
delays in the rebuilding of the complex occurred due to disagreements with the
insurance company concerning selection of the contractor and the costs to
rebuild the complex. In addition, the insurance carrier ceased making rental
interruption insurance payments and subsequently the lender declared a default.
While conducting repairs, which included completing 52 rental units which were
placed in service, the B & V Local Partnership undertook significant litigious
efforts to effect a workout with the lender and cause the insurance company and
contractor to perform under their obligations to rebuild the complex, which
included reorganization plans, bankruptcy proceedings, binding arbitration and
voluntary nonbinding mediation. Despite such efforts, the complex lost 32 rental
units pursuant to a quick-take eminent domain proceeding in April 1996 and the
remainder of the complex was ultimately lost in April 1997 when the Bankruptcy
Court ordered title transfer of the property. Registrant's investment balance in
the B & V Local Partnership, after the cumulative equity losses, became zero
during the year ended March 30, 1995.
As a result of the eminent domain proceeding by the City of Homestead,
Registrant incurred a recapture of Low-income Tax Credits taken through December
1995 of approximately $5 per Unit and will forego future Low-income Tax Credits
associated with such rental units of approximately $5 per Unit for the period
January 1996 through 1998. As a result of the lender's foreclosure of the 158
rental units, Registrant anticipates a recapture of Low-income Tax Credits taken
through December 1996 of approximately $35 per Unit for Unit holders of record
as of April 1997 and will forego future Low-income Tax Credits associated with
the 158 rental units of approximately $10 per Unit for the period January 1997
through 1998.
As part of the overall plan and arrangement with the Local General Partner of
the B & V Local Partnership (see discussion above), Registrant owns a 99%
limited partnership 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, which was acquired from principals of the Local
General Partner of the B & V Local Partnership during the year ended March 30,
1995. 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 was 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 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. Prior to
the acquisition, the B & V Phase I Local Partnership was also damaged by
Hurricane Andrew in August 1992. 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. The lender 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 Circuit Court for Dade County 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 B & V Phase I Local Partnership has complied with this order and all
payments accruing since December 1996 through August 1997 have been made. On
April 18, 1997, a motion for summary judgment in the lender's foreclosure action
was scheduled to be heard. However, on
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
April 17, 1997, the B & V Phase I Local Partnership filed a Chapter 11
Bankruptcy Petition with the United States Bankruptcy Court, District of
Connecticut, Bridgeport Division. As of April 25, 1997, the lender filed a
motion seeking to change the venue for this case to the Southern District of
Florida. Subsequently, hearings were held in order for the Bankruptcy Court to
consider the lender's motion. In the course of these hearings, the lender and
the B & V Phase I Local Partnership reached a tentative agreement whereby the
lender would withdraw its request to change venue and the B & V Phase I Local
Partnership would agree to submit to the Bankruptcy Court a plan providing for,
among other things, a schedule of buy-out prices to be paid to the lender at
future designated dates. On July 14, 1997, the Bankruptcy Court approved a
stipulation between the lender and the B & V Phase I Local Partnership which
incorporated the tentative agreement. Under the terms of the stipulation, the
plan of reorganization is required to be filed with the Bankruptcy Court within
60 days of the date of the stipulation unless extended by the parties. Provided
that the Bankruptcy Court accepts the proposed plan of reorganization and the B
& V Phase I Local Partnership is not required to make debt service payments in
excess of current levels, Registrant does not anticipate any recapture of
Low-income Tax Credits or interruption in Low-income Tax Credits allocated from
the B & V Phase I Local Partnership through December 31, 1997. However, no
assurances can be made concerning 1998. Registrant's investment balance in the B
& V Phase I Local Partnership, after the cumulative equity losses, became zero
during the year ended March 30, 1996. Of Registrant's total annual Low-income
Tax Credits (prior to the loss of the B & V Local Partnership) approximately 1%
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 three months ended March 31, 1997, brick fell off the
parapet of the building which caused a technical default under the first
mortgage. In connection with the repairs, the Cobbet Local Partnership utilized
a then existing letter of credit in the amount of $242,529 which had been
established for the purpose of covering potential operating deficits. Registrant
has purchased a U.S. Treasury bond in the amount of approximately $257,000 to
secure a replacement letter of credit (discussed above). The repairs are
expected to be completed in September 1997.
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
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 the Erie Local Partnership is several
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. Of Registrant's total annual Low-income Tax Credits, approximately 2% is
allocated from the Erie Local Partnership, which are scheduled to expire
December 1998.
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 which 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. The combined statements of operations of the
Local Partnerships reflected in Note 3 to Registrant's financial statements
include the operating results of all Local Partnerships, regardless of
Registrant's investment balances.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
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.
Three Months Ended June 29, 1997
For the three months ended June 29, 1997, Registrant had a net loss of
approximately $394,000, which included an equity in loss of investment in Local
Partnerships of approximately $339,000 for the three months ended March 31,
1997. Registrant's loss from operations for the three months ended June 29, 1997
of approximately $55,000 was attributable to interest revenue of approximately
$63,000 and other income from a Local Partnership of approximately $3,000,
exceeded by operating expenses of approximately $121,000. Nonrecognition of
losses in excess of Registrant's investment in certain Local Partnership's
during the period was approximately $865,000.
The Local Partnerships' net loss of approximately $1,221,000 for the three
months ended March 31, 1997 was attributable to rental and other revenue of
approximately $4,106,000, exceeded by operating and interest expenses (including
Non-Mandatory Interest) of approximately $4,290,000 and approximately $1,037,000
of depreciation and amortization expenses.
Three Months Ended June 29, 1996
For the three months 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 months ended March 31,
1996. Registrant's loss from operations for the three months 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.
Nonrecognition of losses in excess of Registrant's investment in certain Local
Partnerships during the period was approximately $722,000.
The Local Partnerships' net loss of approximately $1,199,000 for the three
months 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 Months Ended June 29, 1997 v.
Three Months Ended June 29, 1996
Registrant's operations for the three months ended June 29, 1997 resulted in a
net loss of approximately $394,000 as compared to a net loss of approximately
$514,000 for the three months ended June 29, 1996. The decrease in net loss is
primarily attributable to a decrease in the equity in loss of investment in
Local Partnerships of approximately $128,000, which is primarily the result of
the increase in the nonrecognition of losses in excess of Registrant's
investment in Local Partnerships in accordance with the equity method of
accounting.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
B & V Phase I, Ltd. (the "B & V Phase I Local Partnership") was also damaged by
Hurricane Andrew in August 1992. 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. The lender 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 Circuit Court for Dade County 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 B & V Phase I Local Partnership has complied with this order and all
payments accruing during the period from December 1996 through August 1997 have
been made. On April 18, 1997, a motion for summary judgment in the lender's
foreclosure action was scheduled to be heard. However, on April 17, 1997, the B
& V Phase I Local Partnership filed a Chapter 11 Bankruptcy Petition with the
United States Bankruptcy Court, District of Connecticut, Bridgeport Division. As
of April 25, 1997, the lender filed a motion seeking to change the venue for
this case to the Southern District of Florida. Subsequently, hearings were held
in order for the Bankruptcy Court to consider the lender's motion. In the course
of these hearings, the lender and the B & V Phase I Local Partnership reached a
tentative agreement whereby the lender would withdraw its request to change
venue and the B & V Phase I Local Partnership would agree to submit to the
Bankruptcy Court a plan providing for, among other things, a schedule of buy out
prices to be paid to the lender at future designated dates. On July 14, 1997,
the Bankruptcy Court approved a stipulation between the lender and the B & V
Phase I Local Partnership which incorporated the tentative agreement. Under the
terms of the stipulation, the plan of reorganization is required to be filed
with the Bankruptcy Court within 60 days of the date of the stipulation unless
extended by the parties.
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 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' procedures 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 filed 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.
A former tenant of Gulf Shores Apartments Ltd. (the "Gulf Shores Local
Partnership") has brought suit against the Gulf Shores Local Partnership, among
others, in connection with an alleged wrongful eviction. The former tenant's
suit, which seeks damages of $13,000,000, was dismissed on April 22, 1997 as a
result of the former tenant not being present at a court proceeding. The former
tenant has the right to file for reinstatement of the suit within ninety days of
the dismissal. Although the ninety day period has elapsed, the Gulf Shores Local
Partnership has reported that it has not been notified that the plaintiff filed
for reinstatement within the allotted period nor that the suit has been
dismissed.
Registrant is not aware of any other material legal proceedings.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Part II - OTHER INFORMATION (Continued)
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None; see Items 1 and 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 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") report that the Erie Local Partnership is several months
in arrears under the terms of its amended and restated note, that a
default has been declared by the lender and that discussions are
currently being held with the lender.
As discussed in Part I, Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations, the local general
partners of Cobbet 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. Although remediation is underway and is expected to be
completed during September 1997, 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
Dated: August 13, 1997 /s/ Richard Paul Richman
--------------- -------------------------
Richard Paul Richman
President, Chief Executive Officer and
Director of the general partner of the
General Partner
Dated: August 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)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the quarter ended June 29, 1997 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.
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