UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended
March 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period from
______ to ____________
0-17619
(Commission File Number)
American Tax Credit Properties L.P.
(Exact name of registrant as specified in its governing instruments)
Delaware 13-3458875
(State or other jurisdiction of (I.R.S. Employer Identification No.)
organization)
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
--------------
Securities registered pursuant to Section 12(b) of the Act:
None None
(Title of each Class) (Name of each exchange on which registered)
Securities registered pursuant
to Section 12(g) of the Act:
Units of Limited Partnership Interest
- ------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
Registrant has no voting stock.
Documents incorporated by reference:
Part I - pages 21 through 35 and 51 through 75 of the prospectus dated May 6,
1988, as supplemented by Supplement No. 1 and Supplement No. 2 dated August 11,
1988 and September 20, 1988, respectively, filed pursuant to Rule 424(b)(3)
under the Securities Act of 1933.
<PAGE>
PART I
Item 1. Business
Formation
American Tax Credit Properties L.P. ("Registrant"), a Delaware limited
partnership, was formed on February 12, 1988 to invest primarily in leveraged
low-income multifamily residential complexes (the "Property" or "Properties")
which qualify for the low-income tax credit established by Section 42 of the
Internal Revenue Code (the "Low-income Tax Credit"), through the acquisition of
limited partnership equity interests in partnerships (the "Local Partnership" or
"Local Partnerships") that are the owners of the Properties. Registrant invested
in nineteen such Properties including one Property which also qualifies for the
historic rehabilitation tax credit in accordance with Section 48(g) of the
Internal Revenue Code of 1986 (the "Historic Rehabilitation Tax Credit").
Registrant considers its activity to constitute a single industry segment.
Richman Tax Credit Properties L.P. (the "General Partner"), a Delaware limited
partnership, was formed on February 10, 1988 to act as the general partner of
Registrant. The general partners of the General Partner are Richard Paul Richman
and Richman Tax Credit Properties Inc. ("Richman Tax"), a Delaware corporation
which is wholly-owned by Richard Paul Richman. Richman Tax is an affiliate of
The Richman Group, Inc. ("Richman Group"), a Delaware corporation founded by
Richard Paul Richman in 1988.
The Amendment No. 2 to the Registration Statement on Form S-11 was filed with
the Securities and Exchange Commission (the "Commission") on April 29, 1988
pursuant to the Securities Act of 1933 under Registration Statement No.
33-20391, and was declared effective on May 4, 1988. Reference is made to the
prospectus dated May 6, 1988, as supplemented by Supplement No. 1 and Supplement
No. 2 dated August 11, 1988 and September 20, 1988, respectively, filed with the
Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 (the
"Prospectus"). Pursuant to Rule 12b-23 of the Commission's General Rules and
Regulations promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the description of Registrant's business set forth under
the heading "Investment Objectives and Policies" at pages 51 through 75 of the
Prospectus is incorporated herein by reference.
On May 11, 1988, Registrant commenced, through Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch"), the offering of up to 50,000 units of
limited partnership interest ("Unit") at $1,000 per Unit. On August 19, 1988 and
November 15, 1988, the closings for 23,603 and 17,683 Units, respectively, took
place, amounting to aggregate limited partners' capital contributions of
$41,286,000.
Competition
Pursuant to Rule 12b-23 of the Commission's General Rules and Regulations
promulgated under the Exchange Act, the description of Registrant's competition,
general risks, tax risks and partnership risks set forth under the heading "Risk
Factors" at pages 21 through 35 of the Prospectus is incorporated herein by
reference.
Employees
Registrant employs no personnel and incurs no payroll costs. All management
activities of Registrant are conducted by the General Partner. An affiliate of
the General Partner employs individuals who perform the management activities of
Registrant. This entity also performs similar services for other affiliates of
the General Partner.
<PAGE>
Item 1. Business (continued)
Tax Reform Act of 1986, Revenue Act of 1987, Technical and Miscellaneous Revenue
Act of 1988, Omnibus Budget Reconciliation Act of 1989, Omnibus Budget
Reconciliation Act of 1990, Tax Extension Act of 1991, Omnibus Budget
Reconciliation Act of 1993, Uruguay Round Agreements Act and Taxpayer Relief Act
of 1997 (collectively the "Tax Acts")
Registrant is organized as a limited partnership and is a "pass through" tax
entity which does not, itself, pay Federal income tax. However, the partners of
Registrant who are subject to Federal income tax may be affected by the Tax
Acts. Registrant will consider the effect of certain aspects of the Tax Acts on
the partners when making decisions regarding its investments. Registrant does
not anticipate that the Tax Acts will currently have a material adverse impact
on Registrant's business operations, capital resources and plans or liquidity.
Item 2. Properties
The executive offices of Registrant and the General Partner are located at 599
West Putnam Avenue, 3rd floor, Greenwich, Connecticut 06830. Registrant does not
own or lease any properties. Registrant pays no rent; all charges for leased
space are borne by an affiliate of the General Partner.
Registrant's primary objective is to provide Low-income Tax Credits to limited
partners generally over a ten year period. The relevant state tax credit agency
has allocated each of Registrant's Local Partnerships an amount of Low-income
Tax Credits, which are generally available for a ten year period from the year
the Property is placed in service. The required holding period of each Property,
in order to avoid Low-income Tax Credit recapture, is fifteen years from the
year in which the Low-income Tax Credits commence on the last building of the
Property (the "Compliance Period"). The Properties must satisfy various
requirements including rent restrictions and tenant income limitations (the
"Low-income Tax Credit Requirements") in order to maintain eligibility for the
recognition of the Low-income Tax Credit at all times during the Compliance
Period. Once a Local Partnership has become eligible for the Low-income Tax
Credit, it may lose such eligibility and suffer an event of recapture if its
Property fails to remain in compliance with the Low-income Tax Credit
Requirements. In April 1997, B & V, Ltd. suffered its final event of recapture
of Low-income Tax Credits due to a hurricane which substantially damaged the
property owned by such Local Partnership and the failure of the property to be
fully-rebuilt, primarily due to the non-performance of the insurance company and
the resulting foreclosure action taken by the lender. In May 1998, B & V Phase
I, Ltd. (the "B & V Phase I Local Partnership") suffered an event of recapture
of Low-income Tax Credits resulting from the same hurricane and a resulting
foreclosure (see Part I, Item 3 - Legal Proceedings herein). Due to delays in
the reconstruction of the complex, the B & V Phase I Local Partnership was
unable to comply with the terms of its agreement with the lender. In April 1998,
Erie Associates Limited Partnership suffered a potential event of recapture as a
result of a foreclosure sale directed by the lender, due to accumulated
arrearages under the terms of the mortgage (see Part II, Item 7 Management's
Discussion and Analysis of Financial Condition and Results of Operations
herein).
Although Registrant generally owns a 98.9%-99% limited partnership interest
("Local Partnership Interest") in the Local Partnerships, Registrant and
American Tax Credit Properties II L.P. ("ATCP II"), a Delaware limited
partnership and an affiliate of Registrant, together, in the aggregate, acquired
a 99% Local Partnership Interest in Santa Juanita Limited Dividend Partnership
L.P. (the "Santa Juanita Local Partnership"); the ownership percentages of
Registrant and ATCP II of the Santa Juanita Local Partnership are 34.64% and
64.36%, respectively.
Many of the Local Partnerships receive rental subsidy payments, including
payments under Section 8 of Title II of the Housing and Community Development
Act of 1974 ("Section 8") (see descriptions of subsidies on pages 5 and 6). The
subsidy agreements expire at various times during and after the Compliance
Periods of the Local Partnerships. In October 1997, Congress passed the
Multifamily Assisted Housing and Reform and Affordability Act whereby the United
States Department of Housing and Urban Development ("HUD") has been given
authority to renew certain project based Section 8 contracts expiring during
HUD's fiscal year 1998, where requested by an owner, for an additional one year
term generally at or below current rent levels, subject to certain guidelines.
HUD has additional programs (the "Restructuring Program") which, in general,
provide for restructuring rents and/or mortgages where rents may be adjusted to
market
<PAGE>
Item 2. Properties (continued)
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. Four Local
Partnerships' Section 8 contracts are scheduled to expire in 1998.
<TABLE>
<CAPTION>
Mortgage
loans
Name of Local Partnership Number payable as of Subsidy
Name of apartment complex of Capital December 31, (see footnotes)
rental contribution 1997
Apartment complex location units
<S> <C> <C> <C> <C>
4611 South Drexel Limited Partnership
South Drexel Apartments
Chicago, Illinois 44 $ 352,433 $ 1,362,810 (1d)
B & V, Ltd.
Homestead Apartments
Homestead, Florida 158 2,050,795 (3) -- (4)
B & V Phase I, Ltd.
Gardens of Homestead
Homestead, Florida 97 140,000 (3) 2,638,947 (1a)
Blue Hill Housing Limited Partnership
Blue Hill Housing
Grove Hall, Massachusetts 144 4,506,082 6,527,094 (1a)
Cityside Apartments, L.P.
Cityside Apartments
Trenton, New Jersey 126 6,098,990 7,802,632 (1a)
Cobbet Hill Associates Limited
Partnership
Cobbet Hill Apartments 117 4,910,942 13,638,653 (1a&c)
Lynn, Massachusetts
Dunbar Limited Partnership
Spring Grove Apartments
Chicago, Illinois 100 1,518,229 3,998,205 (1a&e)
Dunbar Limited Partnership No. 2
Park View Apartments
Chicago, Illinois 102 1,701,849 4,578,433 (1a&e)
Erie Associates Limited Partnership
Erie Apartments
Springfield, Massachusetts 18 755,736 914,034 (1b)
Federal Apartments Limited Partnership
Federal Apartments
Fort Lauderdale, Florida 164 2,832,224 5,255,821 (1a)
</TABLE>
Item 2. Properties (continued)
<TABLE>
<CAPTION>
<PAGE>
Mortgage
loans
Name of Local Partnership Number payable as of Subsidy
Name of apartment complex of Capital December 31, (see footnotes)
rental 1997
Apartment complex location units contribution
<S> <C> <C> <C> <C>
Golden Gates Associates
Golden Gates
Brooklyn, New York 85 $879,478 $4,640,520 (1c)
Grove Park Housing, A California
Limited Partnership Grove Park
Apartments 104 1,634,396 6,902,010 (1a)
Garden Grove, California
Gulf Shores Apartments Ltd.
Morgan Trace Apartments
Gulf Shores, Alabama 50 352,693 1,489,807 (1c)
Hilltop North Associates, A Virginia
Limited Partnership Hilltop North
Apartments 160 1,414,524 3,309,917 (1a)
Richmond, Virginia
Madison-Bellefield Associates
Bellefield Dwellings
Pittsburgh, Pennsylvania 158 1,047,744 3,579,463 (1a)
Pine Hill Estates Limited Partnership
Pine Hill Estates
Shreveport, Louisiana 110 613,499 2,425,687 (1a&e)
Santa Juanita Limited Dividend
Partnership L.P.
Santa Juanita Apartments 45 313,887 (2) 1,508,243 (1a)
Bayamon, Puerto Rico
Vista del Mar Limited Dividend
Partnership L.P.
Vista del Mar Apartments 152 3,097,059 5,335,087 (1a)
Fajardo, Puerto Rico
Winnsboro Homes Limited Partnership
Winnsboro Homes
Winnsboro, Louisiana 50 289,730 1,211,824 (1a&e)
------------------------------
$ 34,510,290 $ 77,119,187
============= ==============
</TABLE>
(1) Description of Subsidies:
(a) Section 8 of Title II of the Housing and Community Development
Act of 1974 allows qualified low-income tenants to pay thirty
percent of their monthly income as rent with the balance paid by
the federal government.
(b) Chapter 707 of the Acts of 1966 of the Commonwealth of
Massachusetts allows qualified low-income tenants to pay a
portion of their rent with the balance paid by Worcester Housing
Authority.
(c) The Local Partnership's debt structure includes a principal or
interest payment subsidy.
Item 2. Properties (continued)
(d) The City of Chicago Housing Authority allows qualified low-income
tenants to receive rental certificates.
(e) The Local Partnership's Section 8 contract is scheduled
to expire in 1998.
(2) The capital contribution reflects Registrant's obligation only.
(3) In August 1992, the property sustained considerable damage by
Hurricane Andrew. See Part II, Item 7 Management's Discussion and
Analysis of Financial Condition and Results of Operations
included herein for further information.
(4) As of March 30, 1998, the Local Partnership has no underlying
assets and liabilities and is not included in the combined
balance sheet of the Local Partnerships as of December 31, 1997
in Note 5 to the financial statements.
Item 3. Legal Proceedings
The B & V Phase I Local Partnership was damaged by Hurricane Andrew in August
1992. Since May 1, 1996, all 97 of the rental units were complete and occupied.
Pursuant to 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 complied with this order. 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. On 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. On September 10, 1997, the B & V Phase I Local
Partnership filed a plan of reorganization with the Bankruptcy Court and on
October 28, 1997 the Bankruptcy Court issued an order approving the Disclosure
Statement filed in connection therewith and setting a timetable for confirming
the plan. The plan of reorganization was confirmed on or about December 9, 1997.
Because alternative sources of financing could not be secured, the property was
transferred to the lender in May 1998.
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 alleged 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 contended that Stonebridge is not entitled to such payment.
The Court ruled in favor of the Federal Local Partnership and Stonebridge has
appealed the ruling.
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 alleged 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
- --------------------------------------------------------------------------------
Item 3. Legal Proceedings (continued)
- --------------------------------------------------------------------------------
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 sought payment of the
difference in rents dating from 1988 to the present and recovery of all legal
fees. The Court had previously ruled in favor of the defendants and the Federal
Local Partnership's subsequent appeals were denied.
A former tenant of Gulf Shores Apartments Ltd. (the "Gulf Shores Local
Partnership") had brought suit against the Gulf Shores Local Partnership, among
others, in connection with an alleged wrongful eviction. The former tenant's
suit, which sought 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 had the right to file for reinstatement of the suit within ninety days of
the dismissal. The Gulf Shores Local Partnership has reported that this suit has
been dismissed and that a subsequent appeal has been denied.
Registrant is not aware of any other material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the limited partners of Registrant
during the fourth quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity
and Related Security Holder Matters
Market Information and Holders
There is no established public trading market for Registrant's Units.
Accordingly, accurate information as to the market value of a Unit at any given
date is not available. The number of owners of Units as of May 20, 1998 was
2,603, holding 41,286 Units.
Merrill Lynch follows internal guidelines for providing estimated values of
limited partnerships and other direct investments reported on client account
statements. Pursuant to such guidelines, estimated values for limited
partnership interests reported on Merrill Lynch client account statements (such
as Registrant's Units) are provided to Merrill Lynch by independent valuation
services. These estimated values are based on financial and other information
available to the independent services (1) on the prior August 15th for reporting
on December year-end and subsequent client account statements through the
following May month-end client account statements and (2) on the prior March
31st for reporting on June through November month-end client account statements
of the same year. Merrill Lynch clients may contact their Merrill Lynch
Financial Consultants or telephone the number provided to them on their account
statements to obtain a general description of the methodology used by the
independent valuation services to determine their estimates of value. In
addition, Registrant may provide an estimate of value to Unit holders from time
to time in Registrant's reports to limited partners. The estimated values
provided by the independent services and Registrant, which may differ, are not
market values and Unit holders may not be able to sell their Units or realize
either amount upon a sale of their Units. In addition, Unit holders may not
realize such estimated values upon the liquidation of Registrant's assets over
its remaining life.
Distributions
Registrant owns a limited partnership interest in Local Partnerships that are
the owners of Properties which are leveraged and receive government assistance
in various forms of rental and debt service subsidies. The distribution of cash
flow generated by the Local Partnerships may be restricted, as determined by
each Local Partnership's financing and subsidy agreements. Accordingly,
Registrant does not anticipate that it will provide significant annual cash
distributions to its partners. There were no cash distributions to the partners
during the years ended March 30, 1998 and 1997.
Low-income Tax Credits and Historic Rehabilitation Tax Credits (together, the
"Tax Credits"), which are subject to various limitations, may be used by
partners to offset Federal income tax liabilities. The Tax Credits per Unit
generated by Registrant and allocated to the limited partners for the tax years
ended December 31, 1997 and 1996 and the cumulative Tax Credits allocated from
inception through December 31, 1997 are as follows:
<TABLE>
<CAPTION>
Historic Net
Rehabilitation Low-income
Tax Credits Tax
Credits
<S> <C> <C>
Tax year ended December $ -- $ 98.94
31, 1997
Tax year ended December -- 139.27
31, 1996
Cumulative totals $ 71.88 $ 1,298.22
</TABLE>
Registrant expects to generate total Tax Credits from investments in Local
Partnerships of approximately $1,545 per Unit through December 31, 1999, net of
circumstances which have given rise to recapture and loss of future benefits
(see Part I, Item 2 - Properties and Part II, Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations, herein).
Item 6. Selected Financial Data
The information set forth below presents selected financial data of Registrant.
Additional detailed financial information is set forth in the audited financial
statements included under Part II, Item 8 herein.
<TABLE>
<CAPTION>
Years
Ended March 30,
1998 1997 1996 1995 1994
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest and other $ 261,201 $ 259,193 $ 274,591 $ 289,248 $ 291,695
============= ======================================= ============
revenue
Equity in loss of
investment in $(1,484,136) $(2,049,756) $(2,240,958) $(2,319,646) $(3,817,612)
local partnership ============ =========== =========== =========== ===========
Net loss $(1,684,224) $(2,384,219) $(2,425,508) $(2,498,880) $(4,002,184)
=========== =========== =========== =========== ===========
Net loss per unit of
limited $ (40.39) $ (57.17) $ (58.11) $ (59.92) $ (95.97)
partnership ====================================================================
interest
As of
March 30,
1998 1997 1996 1995 1994
-----------------------------------------------------------------
Total assets $ 9,011,845 $10,611,961 $13,040,183 $15,370,194 $17,766,222
============= =========== =========== =========== ===========
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Capital Resources and Liquidity
Registrant admitted limited partners in two closings with aggregate limited
partners' capital contributions of $41,286,000. In connection with the offering
of the sale of Units, Registrant incurred organization and offering costs of
approximately $4,781,000 and established a working capital reserve of
approximately $2,271,000. The remaining net proceeds of approximately
$34,234,000 (the "Net Proceeds") were available to be applied to the acquisition
of limited partnership interests in local partnerships (the "Local
Partnerships") which own low-income multifamily residential complexes (the
"Property" or "Properties") which qualify for the low-income tax credit under
Section 42 of the Internal Revenue Code (the "Low-income Tax Credit"); one Local
Partnership owns a Property which also qualifies for the historic rehabilitation
tax credit in accordance with Section 48 (g) of the Internal Revenue Code of
1986. Any adjustments to the capital contributions made by Registrant to the
Local Partnerships under the terms of the Local Partnerships' partnership
agreements have resulted in an adjustment to Registrant's working capital
reserve. Registrant has utilized Net Proceeds, after making any necessary
adjustments, in acquiring an interest in nineteen Local Partnerships.
As of March 30, 1998, Registrant has cash and cash equivalents and investments
in bonds totaling $3,067,026, which is available for operating expenses of
Registrant and circumstances which may arise in connection with the Local
Partnerships. As of March 30, 1998, Registrant's investments in bonds represent
corporate bonds of $1,253,831, U.S. Treasury bonds of $1,212,484 and U.S.
government agency bonds of $212,280 with various maturity dates ranging from
1999 to 2023. Registrant acquired such investments in bonds with the intention
of utilizing proceeds generated by such investments to meet its annual
obligations. Future sources of Registrant funds are expected primarily from
interest earned on working capital and limited cash distributions from Local
Partnerships.
During the year ended March 30, 1998, Registrant received cash from interest
revenue, maturity/redemption and sale of bonds and distributions from Local
Partnerships and utilized cash for operating expenses, investing in bonds, and
providing capital to a Local Partnership. Cash and cash equivalents and
investments in bonds available-for-sale decreased, in the aggregate, by
approximately $101,000 during the year ended March 30, 1998 (which included a
net unrealized gain on investments in bonds of approximately $120,000, the
amortization of net premium on investments in bonds of approximately $29,000 and
the accretion of zero coupon bonds of approximately $16,000). Notwithstanding
circumstances that may arise in connection with the Properties, Registrant does
not expect to realize significant gains or losses on its investments in bonds,
if any.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
During the year ended March 30, 1998, the investment in Local Partnerships
decreased as a result of Registrant's equity in the Local Partnerships' net loss
for the year ended December 31, 1997 of $1,484,136 and cash distributions
received from Local Partnerships of $17,500 (exclusive of distributions from
Local Partnerships of $20,000 classified as other income), partially offset by
capital provided to a Local Partnership of $10,533. Payable to general partner
in the accompanying balance sheet as of March 30, 1998 represents accrued
management fees.
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 each Local
Partnership's results of operations and by 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. Equity in loss in excess of Registrant's investment balance in a
Local Partnership is allocated to other partners' capital in any such Local
Partnership. As a result, the reported 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 5 to Registrant's financial
statements include the operating results of all Local Partnerships, irrespective
of Registrant's investment balances.
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 below under
Local Partnership Matters regarding certain Local Partnerships currently
operating below economic break even levels.
Registrant's operations for the years ended March 30, 1998, 1997 and 1996
resulted in net losses of $1,684,224, $2,384,219 and $2,425,508, respectively.
The decrease in net loss from 1997 to 1998 is primarily attributable to (i) a
decrease in equity in loss of investment in Local Partnerships of approximately
$566,000, which is primarily the result of a decrease in the net operating
losses of those Local Partnerships that continue to have an investment balance
as of December 31, 1997 and (ii) a decrease in professional fees of
approximately $128,000, which is primarily the result of expenses incurred in
connection with B & V Ltd. (the "B & V Local Partnership") and B & V Phase I
Ltd. (the "B & V Phase I Local Partnership"). The decrease in net loss from 1996
to 1997 is primarily attributable to a decrease in equity in loss of investment
in Local Partnerships of approximately $191,000, which is primarily the result
of (i) an increase in the nonrecognition of losses in excess of Registrant's
investment in Local Partnerships of approximately $386,000 (exclusive of losses
incurred from the eminent domain proceeding and the impairment loss in
connection with the B & V Local Partnership), in accordance with the equity
method of accounting partially offset by (ii) an increase in the expenses of the
Local Partnerships, which in the aggregate is partially offset by an increase in
professional fees which is primarily the result of legal expenses incurred in
connection with the B & V Local Partnership and the B & V Phase I Local
Partnership.
The Local Partnerships' loss from operations of approximately $5,434,000 for the
year ended December 31, 1997 includes depreciation and amortization expense of
approximately $4,109,000, interest on non-mandatory debt of approximately
$690,000 and a loss from impairment of long-lived assets of approximately
$744,000, and does not include principal payments on permanent mortgages of
approximately $479,000. The Local Partnerships' loss from operations for the
year ended December 31, 1997 does not include the gain from the extinguishment
of debt of $6,441,935, which is reflected as an extraordinary item. of
approximately $9,901,000 for the year ended December 31, 1996 includes
depreciation and amortization expense of approximately $4,122,000, a loss from
impairment of long-lived assets and eminent domain proceeding of approximately
$4,808,000 and interest on non-mandatory debt of approximately $647,000, and
does not include principal payments on permanent mortgages of approximately
$577,000. The Local Partnership's net loss of approximately $4,837,000 for the
year ended December 31, 1995 includes depreciation and amortization expense of
approximately $4,150,000 and interest on non-mandatory debt of approximately
$492,000, and does not include principal payments on permanent mortgages of
approximately $568,000. The results of operations of the Local Partnerships for
the year ended December 31, 1997 are not necessarily indicative of the results
that may be expected in future periods.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Local Partnership Matters
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 pursuant to subsidy agreements ("HAP Contracts") are subject to
specific laws, regulations and agreements with federal and state agencies. Four
Local Partnerships' HAP Contracts are scheduled to expire in 1998. 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 year ended December 31, 1997, 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' operating
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 any required deferral of
property management fees.
In connection with certain repairs required by the lender (the Massachusetts
Housing Finance Agency) ("MHFA") of Cobbet Hill Associates Limited Partnership
(the "Cobbet Local Partnership"), MHFA drew on a then existing letter of credit
in the amount of $242,529 which had been established for the purpose of covering
future operating deficits, if any. In June 1997, Registrant provided funds to
establish collateral to secure a replacement letter of credit. Although the
repairs have been completed and the Cobbet Local Partnership has notified MHFA
of such completion, the Cobbet Local Partnership has not received the
anticipated notice from MHFA that the default has been cured. The Cobbet Local
Partnership was originally financed with a first mortgage with mandatory monthly
payment terms with MHFA and a second mortgage with MHFA under the State Housing
Assistance for Rental Production Program (the "SHARP Operating Loan") whereby
proceeds would be advanced monthly as an operating subsidy (the "Operating
Subsidy Payments"). The terms of the SHARP Operating Loan called for declining
Operating Subsidy Payments over its term (not more than 15 years). However, due
to the economic condition of the Northeast region in the early 1990's, MHFA
instituted an operating deficit loan (the "ODL") program which supplemented the
scheduled reduction in the Operating Subsidy Payments. Effective October 1,
1997, MHFA announced its intention to eliminate the ODL program, such that the
Cobbet Local Partnership will no longer be receiving the ODL, without which the
Cobbet Local Partnership would be unable to make the full Mandatory Debt Service
payments on its first mortgage. Although MHFA has notified the Cobbet Local
Partnership and, to the Local General Partners' knowledge, other ODL recipients
as well, that MHFA considers the mortgages to be in default, the Local General
Partners have agreed to a plan propose by MHFA to recapitalize the Cobbet Local
Partnership from capital to be received from the admission of a new limited
partner. Such limited partner would receive a substantial portion of the annual
allocation of the Cobbett Local Partnership's tax losses commencing January 1,
1999, plus cash flows and residuals, if any. Registrant and the Local General
Partners would retain a sufficient interest in the Cobbet Local Partnership to
avoid recapture of Low-income Tax Credits. Although the Cobbett Local
Partnership has executed the MHFA documents, there can be no assurance that a
suitable limited partner will be attracted and provide the needed capital
contribution, in which circumstance MHFA would be expected to retain its rights
under the loan documents. The future financial viability of the Cobbet Local
Partnership is highly uncertain. Of Registrant's total annual Low-income Tax
Credits, (prior to the loss of the B & V Local Partnership) approximately 8% is
allocated from the Cobbet Local Partnership. The Property's historic tax credit
was allocated in 1988 and all of the Low-income Tax Credits have been allocated
since 1989 and are scheduled to expire in 1999.
Erie Associates Limited Partnership (the "Erie Local Partnership"), which is in
the tenth year of the Low-income Tax Credit period, is subject to an amended and
restated note (the "Amended Note") dated December 1, 1994 (which matured on
December 1, 1997) and is entitled to a project-based rental subsidy under
Chapter 707 of the Acts of 1966 of the Commonwealth of Massachusetts, which
contract is subject to a year to year renewal. The
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
original financing called for Mandatory Debt Service of $7,647 per month, while
the Amended Note required monthly Mandatory Debt Service of $5,883. The Local
General Partners reported that the Erie Local Partnership was several months in
arrears under the terms of the Amended Note, that a default was declared by the
lender and that discussions were being held with the lender. While negotiations
were ongoing, the lender conducted a foreclosure sale of the property in April
1998. Registrant has been advised by its counsel that the foreclosure sale can
be "unwound" for tax purposes (thereby avoiding any recapture of Low-income Tax
Credit benefits) if, prior to December 31, 1998, the Erie Local Partnership
repurchases the property and Registrant (or a third party) purchases and
reinstates the Amended Note. Registrant has offered to purchase the Amended Note
(provided that the property is reconveyed to the Erie Local Partnership) for the
face amount thereof, but to date, the lender has not agreed. As a result of the
uncertainty of future operating income, the combined financial statements of the
Local Partnerships for the year ended December 31, 1997 include a loss from
impairment of long-lived assets of $744,126, which represents an adjustment of
the real property of the Erie Local Partnership. As a result, Registrant
recognized additional equity in loss of its investment in the Erie Local
Partnership of approximately $99,000 in connection with the aforementioned
impairment and Registrant's investment balance, after the cumulative equity
losses, became zero during the year ended March 30, 1998. In the event
Registrant is unsuccessful in its attempt to purchase the Amended Note and the
property is not reconveyed to the Erie Local Partnership, Registrant estimates a
recapture of Low-income Tax Credits taken through December 1997, including
interest, of approximately $20 per Unit for Unit holders of record as of April
1998 and it would lose the ability to utilize remaining Low-income Tax Credits
of approximately $4 per Unit for 1998. annual Low-income Tax Credits (prior to
the loss of the B & V Local Partnership) approximately 2% is allocated from the
Erie Local Partnership.
Although 4611 South Drexel Limited Partnership (the "South Drexel Local
Partnership") reported above break even operations during the year ended
December 31, 1997, the South Drexel Local Partnership was declared in default of
its first mortgage during December 1997 for failure to make required payments
during the four months then ended. As a result, Registrant removed the original
Local General Partner and the affiliated property management agent. In an effort
to appease the lender, Registrant made a payment to the lender during January
1998 and the mortgage is reportedly current as of June 18, 1998. Although the
original Local General Partner had informed Registrant of its intent to
cooperate with Registrant's removal actions, the original Local General Partner
is now disputing the removal and has not delivered partnership documents and
records despite several requests. The replacement Local General Partner and
Registrant are considering their options, including litigation if necessary.
In December 1988, Registrant acquired a 99% limited partnership interest in the
B & V Local Partnership, which owned a 190-unit complex located in Homestead,
Florida. 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 to reconstruct the complex, and
thus preserve the Low-income Tax Credits. However, delays in the rebuilding of
the complex occurred due to significant 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 was unable to make required mortgage payments, but
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
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 lost the ability to utilize remaining 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 incurred 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 lost the ability to utilize remaining 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 acquired a 99%
limited partnership interest in the B & V Phase I Local Partnership, which
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
owned a 97-unit, Section 8 assisted apartment complex located in Homestead,
Florida, which was acquired from principals of the Local General Partner during
the year ended March 30, 1995. 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. Pursuant to 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 between 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
complied with this order. 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. On 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. On
September 10, 1997, the B & V Phase I Local Partnership filed a plan of
reorganization with the Bankruptcy Court and on October 28, 1997 the Bankruptcy
Court issued an order approving the Disclosure Statement filed in connection
therewith and setting a timetable for confirming the plan. The plan of
reorganization was confirmed on or about December 9, 1997. Because alternative
sources of financing could not be secured, the property was transferred to the
lender in May 1998. Registrant's investment balance in the B & V Phase I Local
Partnership, after cumulative equity losses, became zero during the year ended
March 30, 1996. As a result of the lender's foreclosure, Registrant estimates a
recapture of Low-income Tax Credits taken through December 1997, including
interest, of approximately $3 per Unit for Unit holders of record as of May 1998
and lost the ability to utilize remaining Low-income Tax Credits of
approximately $2 per Unit for 1998.
Inflation
Inflation is not expected to have a material adverse impact on Registrant's
operations during its period of ownership of the Local Partnership Interests.
Adoption of Accounting Standard
Registrant has adopted SFAS No. 128, "Earnings Per Share" and SFAS No. 129,
"Disclosure of Information about Capital Structure." SFAS No. 128 establishes
standards for computing and presenting earnings per share. SFAS No. 129 requires
the disclosure in summary form within the financial statements of the pertinent
rights and privileges of the various securities outstanding. The adoption of
SFAS Nos. 128 and 129 has not materially impacted Registrant's reported
earnings, financial condition, cash flows or presentation of the financial
statements.
Accounting Standard not yet Adopted
On March 31, 1998, Registrant adopted SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. The adoption of SFAS No.
130 is not expected to have a material impact on Registrant's financial position
and results of operations.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 8. Financial Statements and Supplementary Data
Table of Contents
Independent Auditors' Report.................................................
Balance Sheets as of March 30, 1998 and 1997.................................
Statements of Operations for the years ended March 30, 1998, 1997 and 1996..
Statements of Changes in Partners' Equity (Deficit) for the years ended
March 30, 1998, 1997 and 1996............................................
Statements of Cash Flows for the years ended March 30, 1998, 1997 and 1996...
Notes to Financial Statements as of March 30, 1998, 1997 and 1996.............
No financial statement schedules are included because of the absence of the
conditions under which they are required or because the information is included
in the financial statements or the notes thereto.
<PAGE>
Independent Auditors' Report
To the Partners
American Tax Credit Properties L.P.
We have audited the accompanying balance sheets of American Tax Credit
Properties L.P. as of March 30, 1998 and 1997, and the related statements of
operations, changes in partners' equity (deficit) and cash flows for each of the
three years in the period ended March 30, 1998. These financial statements are
the responsibility of the partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Tax Credit
Properties L.P. as of March 30, 1998 and 1997, and the results of its operations
and cash flows for each of the three years in the period ended March 30, 1998,
in conformity with generally accepted accounting principles.
/s/ Reznick Fedder and Silverman
Bethesda, Maryland
May 11, 1997
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
BALANCE SHEETS
MARCH 30, 1998 AND 1997
<TABLE>
<CAPTION>
Notes 1998 1997
----- --------------------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents 3,8,9 $ 388,431 $284,108
Investments in bonds available-for-sale 4,9 2,678,595 2,883,959
Investment in local partnerships 5,8 5,891,075 7,382,178
Interest receivable 9 53,744 61,716
-------------------------
$ 9,011,845 $10,611,961
============= ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses 8 $ 55,400 $ 91,237
Payable to general partner 6,8 43,861 43,861
-------------------------
99,261 135,098
=========================
Commitments and contingencies 8
Partners' equity (deficit) 2,4
General partner (278,907) (262,065)
Limited partners (41,286 units of limited
partnership interest outstanding) 8,958,053 10,625,435
Unrealized gain on investments in bonds 233,438 113,493
available-for-sale, net
-------------------------
8,912,584 10,476,863
-------------------------
$ 9,011,845 $ 10,611,961
============= ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED MARCH 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Notes 1998 1997 1996
----- ---------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Interest $ 241,201 $ 255,496 $ 269,591
Other income from local partnerships 20,000 3,697 5,000
-------------- -----------------------------
TOTAL REVENUE 261,201 259,193 274,591
------------ ------------ -------------
EXPENSES
Administration fees 8 183,723 183,723 183,723
Management fee 6,8 1 75,466 175,466 175,466
Professional fees 75,063 202,897 72,855
Printing, postage and other 27,037 31,570 27,097
------------------------------------------
TOTAL EXPENSES 461,289 593,656 459,141
------------- ------------- -------------
Loss from operations (200,088) (334,463) (184,550)
Equity in loss of investment in 5 (1,484,136) (2,049,756) (2,240,958)
local partnerships ------------ ------------ -----------
NET LOSS $(1,684,224) $(2,384,219) $(2,425,508)
============= ============ ===========
NET LOSS ATTRIBUTABLE TO 2
General partner $ (16,842) $ (23,842)$ (24,255)
Limited partners (1,667,382) (2,360,377) (2,401,253)
----------- ----------- -----------
$(1,684,224) $(2,384,219) $(2,425,508)
=========== ============ ===========
NET LOSS per unit of limited
partnership
interest (41,286 units of
limited partnership interest) $ (40.39) $ (57.17) $ (58.16)
============== ============================
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
YEARS ENDED MARCH 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
on Investments
General Limited in Bonds
Partner Partners Available-For-Sale, Net Total
<S> <C> <C> <C> <C>
Partners' equity (deficit), $ (213,968) $ 15,387,065 $ 101,740 $ 15,274,837
March 30, 1995
Net loss (24,255) (2,401,253) (2,425,508)
Unrealized gain on investments
in bonds available-for-sale, 89,032 89,032
----------------------------------------------------------------
net
Partners' equity (deficit), (238,223) 12,985,812 190,772 12,938,361
March 30, 1996
Net loss (23,842) (2,360,377) (2,384,219)
Unrealized loss on investments
in bonds available-for-sale, (77,279) (77,279)
-----------------------------------------------------------------
net
Partners' equity (deficit), (262,065) 10,625,435 113,493 10,476,863
March 30, 1997
Net loss (16,842) (1,667,382) (1,684,224)
Unrealized gain on investments
in bonds available-for-sale, 119,945 119,945
-----------------------------------------------------------------
net
Partners' equity (deficit), $ (278,907) $ 8,958,053 $ 233,438 $ 8,912,584
=================================================================
March 30, 1998
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 263,267 $ 276,171 $ 286,108
Cash paid for
administration fees (183,723) (183,723) (183,723)
management fee (175,466) (175,466) (175,466)
professional fees (99,428) (184,832) (66,611)
printing, postage and other expenses (38,509) (16,359) (26,876)
------------ ------------ ------------
Net cash used in operating activities (233,859) (284,209) (166,568)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash distributions and other income from local 37,500 36,197 87,000
partnerships
Investment in local partnership (10,533)
Maturity/redemption and sale of bonds 568,432 135,000 134,000
Investment in bonds (includes $1,301 of accrued (257,217)
interest) ------------ ----------- ----------
Net cash provided by investing activities 338,182 171,197 221,000
------------ ----------- -----------
Net increase (decrease) in cash and cash 104,323 (113,012) 54,432
equivalents
Cash and cash equivalents at beginning of year 284,108 397,120 342,688
------------ ------------ -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 388,431 $ 284,108 $ 397,120
=========== =========== ===========
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain (loss) on investments in bonds $ 119,945 $ (77,279) $ 89,032
available-for-sale, net ============ ============ ===========
- --------------------------------------------------------------------------------
See reconciliation of net loss to net cash used in operating activities
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS - (Continued)
YEARS ENDED MARCH 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------
<S> <C> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH USED
IN OPERATING ACTIVITIES
Net loss $ (1,684,224) $ (2,384,219) $ (2,425,508)
Adjustments to reconcile net loss to net
cash used in operating activities
Equity in loss of investment in local 1,484,136 2,049,756 2,240,958
partnerships
Distributions from local partnerships (20,000) (3,697) (5,000)
classified as other income
Gain on redemption of investments in (2,008)
bonds available-for-sale
Amortization of net premium on 28,576 32,114 33,043
investments in bonds
Accretion of zero coupon bonds (15,783) (16,303) (16,303)
Decrease in interest receivable 9,273 4,864 1,785
Increase (decrease) in accounts payable (35,837) 33,276 6,465
--------------------------------------------
and accrued expenses
NET CASH USED IN OPERATING ACTIVITIES $ (233,859) $ (284,209) $ (166,568)
============= ============= =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS
MARCH 30, 1998, 1997 AND 1996
1. Organization, Purpose and Summary of Significant Accounting Policies
American Tax Credit Properties L.P. (the "Partnership") was formed on
February 12, 1988 and the Certificate of Limited Partnership of the
Partnership was filed under the Delaware Revised Uniform Limited Partnership
Act. There was no operating activity until admission of the limited partners
on August 19, 1988. The Partnership was formed to invest primarily in
leveraged low-income multifamily residential complexes (the "Property" or
"Properties") which qualify for the low-income tax credit established by
Section 42 of the Internal Revenue Code (the "Low-income Tax Credit"),
through the acquisition of limited partnership equity interests (the "Local
Partnership Interests") in partnerships (the "Local Partnership" or "Local
Partnerships") that are the owners of the Properties. The Partnership has
invested in one Property which also qualifies for the historic rehabilitation
tax credit in accordance with Section 48(g) of the Internal Revenue Code of
1986. Richman Tax Credit Properties L.P. (the "General Partner") was formed
on February 10, 1988 to act as the general partner of the Partnership.
Basis of Accounting and Fiscal Year
The Partnership's records are maintained on the accrual basis of accounting
for both financial reporting and tax purposes. For financial reporting
purposes, the Partnership's fiscal year ends March 30 and its quarterly
periods end June 29, September 29 and December 30. The Local Partnerships
have a calendar year for financial reporting purposes. The Partnership and
the Local Partnerships each have a calendar year for income tax purposes.
The Partnership 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 the Partnership's share of each Local
Partnership's results of operations and by cash distributions received.
Equity in loss of each investment in Local Partnership allocated to the
Partnership is recognized to the extent of the Partnership's investment
balance in each Local Partnership. Equity in loss in excess of the
Partnership's investment balance in a Local Partnership is allocated to other
partners' capital in any such Local Partnership. Previously unrecognized
equity in loss of any Local Partnership is recognized in the fiscal year in
which equity in income is earned by such Local Partnership. Distributions
received subsequent to the elimination of an investment balance for any such
investment in a Local Partnership are recorded as other income from Local
Partnerships.
The Partnership regularly assesses its investments in Local Partnerships for
the existence of impairment. If an investment in a Local Partnership is
considered to be permanently impaired, the Partnership reduces its investment
in any such Local Partnership and includes such reduction in equity in loss
of investment in Local Partnerships.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Adoption of Accounting Standard
The Partnership has adopted Statement of Financial Accounting Standard ("SFAS")
No. 128, "Earnings Per Share" and SFAS No. 129, "Disclosure of Information about
Capital Structure." SFAS No. 128 establishes standards for computing and
presenting earnings per share. SFAS No. 129 requires the disclosure in summary
form within the financial statements of the pertinent rights and privileges of
the various securities outstanding. The adoption of SFAS Nos. 128 and 129 has
not materially impacted the Partnership's reported earnings, financial
condition, cash flows or presentation of the financial statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
1. Organization, Purpose and Summary of Significant Accounting Policies
(continued)
Accounting Standard not yet Adopted
On March 31, 1998, the Partnership adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. The
adoption of SFAS No. 130 is not expected to have a material impact on the
Partnership's financial position and results of operations.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Partnership considers all
highly liquid investments purchased with an original maturity of three months
or less at the date of acquisition to be cash equivalents. Cash and cash
equivalents are stated at cost which approximates market value.
Investments in Bonds Available-For-Sale
Investments in bonds classified as available-for-sale represent investments
that the Partnership intends to hold for an indefinite period of time but not
necessarily to maturity. Any decision to sell an investment classified as
available-for-sale would be based on various factors, including significant
movements in interest rates and liquidity needs. Investments in bonds
available-for-sale are carried at estimated fair value and unrealized gains
or losses are reported as a separate component of partners' equity (deficit).
Premiums and discounts on investments in bonds available-for-sale are
amortized (accreted) using the straight-line method over the life of the
investment. Amortized premiums offset interest revenue, while the accretion
of discounts and zero coupon bonds are included in interest revenue.
Realized gain (loss) on redemption or sale of investments in bonds
available-for-sale are included in, or offset against, interest revenue on
the basis of the adjusted cost of each specific investment redeemed or sold.
Income Taxes
No provision for income taxes has been made because all income, losses and
tax credits are allocated to the partners for inclusion in their respective
tax returns. In accordance with SFAS No. 109, "Accounting for Income Taxes,"
the Partnership has included in Note 7 certain disclosures related to
differences in the book and tax bases of accounting.
Reclassifications
Certain reclassifications of amounts have been made to conform to the current
year presentation.
2. Capital Contributions
On May 11, 1988, the Partnership commenced the offering of units (the
"Units") through Merrill Lynch, Pierce, Fenner & Smith Incorporated (the
"Selling Agent"). On August 19, 1988 and November 15, 1988, under the terms
of the Amended and Restated Agreement of Limited Partnership of the
Partnership (the "Partnership Agreement"), the General Partner admitted
limited partners to the Partnership in two closings. At these closings,
subscriptions for a total of 41,286 Units representing $41,286,000 in limited
partners' capital contributions were accepted. In connection with the
offering of Units, the Partnership incurred organization and offering costs
of $4,781,252, of which $75,000 was capitalized as organization costs and
$4,706,252 was charged to the limited partners' equity as syndication costs.
The Partnership received a capital contribution of $100 from the General
Partner.
Net loss is allocated 99% to the limited partners and 1% to the General
Partner in accordance with the Partnership Agreement.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
3. Cash and Cash Equivalents
As of March 30, 1998, the Partnership has $388,431 in cash and cash
equivalents which are deposited in interest-bearing accounts with an
institution which is not insured by the Federal Deposit Insurance
Corporation. Such cash and cash equivalents includes $242,529 considered
restricted in connection with a Local Partnership's outstanding letter of
credit (see Note 8).
4. Investments in Bonds Available-For-Sale
The Partnership carries its investments in bonds as available-for-sale
because such investments are used to facilitate and provide flexibility for
the Partnership's obligations, including resolving circumstances which may
arise in connection with the Local Partnerships. Investments in bonds
available-for-sale are reflected in the accompanying balance sheets at
estimated fair value.
As of March 30, 1998, certain information concerning investments in bonds
available-for-sale is as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
Description and maturity cost gains losses fair
value
<S> <C> <C> <C> <C>
Corporate debt securities
After one year through $ 331,817 $ 9,134 $ (169) $ 340,782
five years
After five years through 773,429 39,963 -- 813,392
ten years
After ten years 101,334 -- (1,677) 99,657
-----------------------------------------------
1,206,580 49,097 (1,846) 1,253,831
------------------------------------------------
U.S. Treasury debt
securities
After one year through 514,237 83,844 -- 598,081
five years
After five years through 510,669 103,734 -- 614,403
ten years ------------------------------------------------
1,024,906 187,578 -- 1,212,484
------------------------------------------------
U.S. government and agency
securities
After five years through 213,671 -- (1,391) 212,280
ten years ------------------------------------------------
$ 2,445,157 $ 236,675 $ (3,237) $2,678,595
============-===================================
</TABLE>
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
4. Investments in Bonds Available-For-Sale (continued)
As of March 30, 1997, certain information concerning investments in bonds
available-for-sale is as follows:
<TABLE>
<CAPTION>
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$ 774$ -- $ 75,774
After one year through 183,352 91 (280) 183,163
five years
After five years through 985,179 170 (20,292) 965,057
ten years
After ten years 101,467 -- (6,940) 94,527
------------------------------------------------
1,344,998 1,035 (27,512) 1,318,521
------------------------------------- ----------
U.S. Treasury debt
securities
Within one year 53,000 182 -- 53,182
After one year through 510,635 57,915 -- 568,550
five years
After five years through 663,945 103,839 -- 767,784
ten years ------------------------ ----------------------
1,227,580 161,936 1,389,516
------------------------ ----------------------
U.S. government and agency
securities
After ten years 197,888 -- (21,966) 175,922
------------------------------------------------
$ 2,770,466 $ 162,971 $ (49,478)$ 2,883,959
============ ========== ======================
</TABLE>
5. Investment in Local Partnerships
As of March 30, 1998, the Partnership owns a limited partnership interest in
the following Local Partnerships:
1. 4611 South Drexel Limited Partnership;
2. B & V Phase I, Ltd. (the "B & V Phase I Local Partnership")*;
3. Blue Hill Housing Limited Partnership;
4. Cityside Apartments, L.P.*;
5. Cobbet Hill Associates Limited Partnership (the "Cobbet Local
Partnership")*;
6. Dunbar Limited Partnership;
7. Dunbar Limited Partnership No. 2;
8. Erie Associates Limited Partnership (the "Erie Local Partnership");
9. Federal Apartments Limited Partnership;
10. Golden Gates Associates;
11. Grove Park Housing, A California Limited Partnership;
12. Gulf Shores Apartments Ltd.;
13. Hilltop North Associates, A Virginia Limited Partnership;
14. Madison-Bellefield Associates;
15. Pine Hill Estates Limited Partnership;
16. Santa Juanita Limited Dividend Partnership L.P. (the "Santa Juanita
Local Partnership");
17. Vista del Mar Limited Dividend Partnership L.P.; and
18. Winnsboro Homes Limited Partnership.
* An affiliate of the General Partner is a general partner of and/or
provides services to the Local Partnership.
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
5. Investment in Local Partnerships (continued)
Although the Partnership generally owns a 98.9%-99% limited partnership
interest in the Local Partnerships, the Partnership and American Tax Credit
Properties II L.P. ("ATCP II"), a Delaware limited partnership and an
affiliate of the Partnership, together, in the aggregate, acquired a 99%
Local Partnership Interest in the Santa Juanita Local Partnership; the
ownership percentages of the Partnership and ATCP II of the Santa Juanita
Local Partnership are 34.64% and 64.36%, respectively.
The Properties are principally comprised of subsidized and leveraged
low-income multifamily residential complexes located throughout the United
States and Puerto Rico. The required holding period of each Property, in
order to avoid Low-income Tax Credit recapture, is fifteen years from the
year in which the Low-income Tax Credits commence on the last building of the
Property (the "Compliance Period"). The rents of the Properties are
controlled by federal and state agencies pursuant to applicable laws and
regulations. Under the terms of each of the Local Partnership's partnership
agreements, the Partnership made capital contributions in the aggregate
amount of $34,510,290. As of December 31, 1997, the Local Partnerships have
outstanding mortgage loans payable totaling approximately $77,119,000 and
accrued interest payable on such loans totaling approximately $4,959,000,
which are secured by security interests and liens common to mortgage loans on
the Local Partnerships' real property and other assets.
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 (see Note
1). The amount of such excess losses applied to other partners' capital was
$3,864,303, $7,714,573 and $2,520,695 for the years ended December 31, 1997,
1996 and 1995, respectively, as reflected in the combined statements of
operations of the Local Partnerships reflected herein Note 5.
The combined balance sheets of the Local Partnerships as of December 31, 1997
and 1996 and the combined statements of operations of the Local Partnerships
for the years ended December 31, 1997, 1996 and 1995 are reflected on pages
26 and 27, respectively.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
5. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------------
ASSETS
<S> <C> <C>
Cash and other investments $ 1,219,986 $ 1,218,425
Rents receivable 243,316 260,272
Escrow deposits and reserves 3,044,733 3,133,429
Land 4,075,735 4,416,035
Buildings and improvements (net of accumulated
depreciation of $34,628,370 and $31,649,149) 74,439,165 80,294,613
Intangible assets (net of accumulated
amortization of $640,058 and $836,753) 1,827,938 1,929,248
Other 803,251 965,578
--------------- ------------
$ 85,654,124 $ 92,217,600
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,065,374 $ 1,267,704
Due to related parties 5,376,344 5,291,779
Mortgage loans 77,119,187 83,114,342
Notes payable 1,000,841 1,009,368
Accrued interest 4,959,061 5,014,588
Other 353,188 2,034,144
------------- -----------
89,873,995 97,731,925
------------- -----------
Partners' equity (deficit)
American Tax Credit Properties L.P.
Capital contributions, net of distributions 33,941,389 33,971,389
Cumulative loss (28,059,597) (26,575,461)
------------- ------------
5,881,792 7,395,928
-------------- -----------
General partners and other limited partners,
including ATCP II
Capital contributions, net of distributions 677,937 361,046
Cumulative loss (10,779,600) (13,271,299)
-------------- ------------
(10,101,663) (12,910,253)
-------------- -------------
(4,219,871) (5,514,325)
-------------- -------------
$ 85,654,124 $ 92,217,600
============= =============
</TABLE>
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
5. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the years
ended December 31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------- --------------------------
REVENUE
<S> <C> <C> <C>
Rental $ 16,012,453 $ 16,043,472 $ 15,588,130
Interest and other 288,937 313,515 388,854
TOTAL REVENUE 16,301,390 16,356,987 15,976,984
------------- ------------- -------------
EXPENSES
Administrative 2,425,249 2,471,642 2,343,712
Utilities 1,343,714 1,318,995 1,273,740
Operating, maintenance and 3,672,948 3,596,884 3,358,571
other
Taxes and insurance 1,937,491 2,231,678 1,916,594
Interest (including
amortization of $76,677, 7,579,627 7,807,923 7,951,364
$99,791 and $179,525)
Depreciation 4,032,607 4,022,559 3,970,278
Loss from eminent domain 897,770
proceeding
Loss from impairment of 744,126 3,910,599
------------- -------------- --------------
long-lived assets
TOTAL EXPENSES 21,735,762 26,258,050 20,814,259
------------- ------------- -------------
LOSS FROM OPERATIONS BEFORE
EXTRAORDINARY ITEM (5,434,372) (9,901,063) (4,837,275)
Extraordinary gain on 6,441,935
extinguishment of debt -------------- ------------ ------------
NET INCOME (LOSS) $ 1,007,563 $ (9,901,063) $ (4,837,275)
============= ============ ============
NET INCOME (LOSS)
ATTRIBUTABLE TO
American Tax Credit $ (1,484,136) $ (2,049,756) $ (2,240,958)
Properties L.P.
General partners and other
limited partners, including
ATCP II, which includes
specially allocated
items of revenue to certain
general partners of $6,763,705,
$10,487 and$31,511, and
$3,864,303,$7,714,573 and
$2,520,695 of American Tax Credit
Properties L.P. loss in
excess of investment
2,491,699 (7,851,307) (2,596,317)
------------- ------------- -------------
$ 1,007,563 $ (9,901,063) $ (4,837,275)
============ ============ ============
</TABLE>
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
5. Investment in Local Partnerships (continued)
Investment activity with respect to each Local Partnership for the year ended
March 30, 1998 is as follows:
<TABLE>
<CAPTION>
Cash Cash
Cash distributions distributions
Investment Investment Partnership received classified Investment
in during equity during as income in Local
Local the in loss the during Partnership
Partnership year for the year the year balance as of
balance ended year ended ended March 30, 1998
Name of Local as of March 30, ended March 30, March 30,
Partnership March 30,1997 1998 December 31,1997 1998 1998
<S> <C> <C> <C> <C> <C> <C>
4611 South
Drexel Limited $ $10,533 $(10,533) $-- $-- $--
Partnership
B & V Phase I, -- -- -- (2) -- -- --
Ltd.
Blue Hill
Housing Limited 1,998,263 -- (189,379) -- -- 1,808,884
Partnership
Cityside 2,512,654 -- (532,421) (2,500) -- 1,977,733
Apartments, L.P.
Cobbet Hill
Associates -- -- -- (2) -- -- --
Limited
Partnership
Dunbar Limited 29,617 -- (27,117)(1) (2,500) -- --
Partnership
Dunbar Limited
Partnership No. -- -- -- (2) (2,500) 2,500 --
2
Erie Associates
Limited 217,968 -- (217,968)(1) -- -- --
Partnership
Federal
Apartments -- -- -- (2) (5,000) 5,000 --
Limited
Partnership
Golden Gates -- -- -- (2) (2,500) 2,500 --
Associates
Grove Park
Housing, A
California -- -- -- (2) -- -- --
Limited
Partnership
Gulf Shores -- -- -- (2) -- -- --
Apartments Ltd.
Hilltop North
Associates, A 756,064 -- (155,956) -- -- 600,108
Virginia
Limited
Partnership
Madison-Bellefield
Associates 782,220 -- (67,472) (10,000) -- 704,748
Pine Hill
Estates Limited -- -- -- (2) (10,000) 10,000 --
Partnership
Santa Juanita
Limited 126,730 -- (14,352) -- -- 112,378
Dividend
Partnership L.P.
Vista del Mar
Limited 932,195 -- (244,971) -- -- 687,224
Dividend
Partnership L.P.
Winnsboro Homes
Limited 26,467 -- (23,967)(1) (2,500) -- --
-------------------------------------------------------------------------------
Partnership
$ 7,382,178 $10,533 $(1,484,136) $(37,500) $20,000 $5,891,075
===============================================================================
</TABLE>
(1)The Partnership's equity in loss of an investment in a Local Partnership
is limited to the remaining investment balance.
(2)
Additional equity in loss of investment is not allocated to the
Partnership until equity in income is earned.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
5. Investment in Local Partnerships (continued)
Investment activity with respect to each Local Partnership for the year ended
March 30, 1997 is as follows:
<TABLE>
<CAPTION>
Cash
Investment Cash distributions Investment
in Local Partnership's distributions classified in Local
Partnership equity in received as other Partnership
balance as loss for during the income balance
of March the year year ended during the as of
Name of Local Partnership 30, ended March 30, year ended March 30,
1996 December 31, 1997 March 30, 1997
1997
<S> <C> <C> <C> <C> <C>
4611 South Drexel $ -- $ -- $ -- $ -- $ -- --
Limited Partnership
B & V, Ltd. -- -- (2) -- -- --
B & V Phase I, Ltd. -- -- (2) -- -- --
Blue Hill Housing 2,318,974 (315,711) (5,000) -- 1,998,263
Limited Partnership
Cityside Apartments, L.P. 3,050,781 (533,127) (5,000) -- 2,512,654
Cobbet Hill Associates
Limited Partnership -- -- (2) -- -- --
Dunbar Limited 188,534 (156,417) (2,500) -- 29,617
Partnership
Dunbar Limited 239,102 (236,602) (2,500) -- --
Partnership No. 2 (1)
Erie Associates Limited 316,392 (98,424) -- -- 217,968
Partnership
Federal Apartments 81,022 (81,022)(1) -- -- --
Limited Partnership
Golden Gates Associates -- -- (2) -- -- --
Grove Park Housing, A
California Limited -- -- (2) -- -- --
Partnership
Gulf Shores Apartments -- -- (2) (3,697) 3,697 --
Ltd.
Hilltop North
Associates, A Virginia 858,928 (102,864) -- -- 756,064
Limited Partnership
Madison-Bellefield 837,465 (50,245) (5,000) -- 782,220
Associates
Pine Hill Estates 62,254 (52,254) (1) (10,000) -- --
Limited Partnership
Santa Juanita Limited
Dividend Partnership 150,880 (24,150) -- -- 126,730
L.P.
Vista del Mar Limited
Dividend Partnership 1,293,123 (360,928) -- -- 932,195
L.P.
Winnsboro Homes Limited 66,979 (38,012) (2,500) -- 26,467
------------------------- -------------------------------------------------
Partnership
$ 9,464,434 $ (2,049,756) $ (36,197) $3,697 $7,382,178
=========== ============ ============= ============== =================
</TABLE>
(1)The Partnership's equity in loss of an investment in a Local Partnership
is limited to the remaining investment balance.
(2)
Additional equity in loss of investment is not allocated to the
Partnership until equity in income is earned.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
5. Investment in Local Partnerships (continued)
Property information for each Local Partnership as of December 31, 1997 is
as follows:
<TABLE>
<CAPTION>
Mortgage Buildings Accumulated
Name of Local Partnership loans payable Land and depreciation
improvements
---------------------------------------
<S> <C> <C> <C> <C>
4611 South Drexel Limited Partnership $1,362,810 $ 64,408 $ 1,756,833 $ (488,253)
B & V Phase I, Ltd. 2,638,947 190,830 2,758,628 (845,068)
Blue Hill Housing Limited Partnership 6,527,094 111,325 10,901,190 (3,416,271)
Cityside Apartments, L.P. 7,802,632 131,591 13,785,799 (4,178,545)
Cobbet Hill Associates Limited 13,638,653 504,683 16,089,978 (5,342,860)
Partnership
Dunbar Limited Partnership 3,998,205 117,126 5,661,631 (1,806,293)
Dunbar Limited Partnership No. 2 4,578,433 131,920 6,349,410 (2,091,678)
Erie Associates Limited Partnership 914,034 34,844 1,050,946 (625,762)
Federal Apartments Limited Partnership 5,255,821 279,750 8,397,981 (2,680,492)
Golden Gates Associates 4,640,520 29,585 5,818,392 (2,002,181)
Grove Park Housing, A California 6,902,010 956,952 7,676,667 (2,265,325)
Limited Partnership
Gulf Shores Apartments Ltd. 1,489,807 172,800 1,750,427 (604,448)
Hilltop North Associates, A Virginia
Limited Partnership 3,309,917 240,514 4,803,496 (1,280,404)
Madison-Bellefield Associates 3,579,463 245,000 5,580,759 (1,807,672)
Pine Hill Estates Limited Partnership 2,425,687 40,000 3,867,047 (1,182,796)
Santa Juanita Limited Dividend 1,508,243 228,718 2,321,226 (688,156)
Partnership L.P.
Vista del Mar Limited Dividend 5,335,087 565,689 8,693,087 (2,788,983)
Partnership L.P.
Winnsboro Homes Limited Partnership 1,211,824 30,000 1,804,038 (533,183)
----------------------------------------------------
$ 77,119,187 $4,075,735 $109,067,535 $(34,628,370)
============ ====================== ============
</TABLE>
Property information for each Local Partnership as of December 31, 1996 is
as follows:
<TABLE>
<CAPTION>
Mortgage Buildings Accumulated
Name of Local Partnership loans Land and depreciation
payable improvements
----------------------------------------
<S> <C> <C> <C> <C>
4611 South Drexel Limited Partnership $1,369,445 $ 64,408$ 1,756,833 $ (424,433)
B & V, Ltd. 5,515,812 340,300 2,694,281 (1,049,147)
B & V Phase I, Ltd. 2,638,947 190,830 2,758,628 (741,130)
Blue Hill Housing Limited Partnership 6,552,669 111,325 10,754,736 (3,019,650)
Cityside Apartments, L.P. 7,865,491 131,591 13,785,799 (3,675,441)
Cobbet Hill Associates Limited 13,664,829 504,683 16,011,825 (4,743,438)
Partnership
Dunbar Limited Partnership 4,007,852 117,126 5,583,060 (1,600,232)
Dunbar Limited Partnership No. 2 4,589,191 131,920 6,339,575 (1,869,853)
Erie Associates Limited Partnership 914,034 34,844 1,760,397 (561,621)
Federal Apartments Limited Partnership 5,325,464 279,750 8,359,373 (2,357,531)
Golden Gates Associates 4,656,086 29,585 5,818,392 (1,793,729)
Grove Park Housing, A California 6,928,577 956,952 7,676,667 (1,986,200)
Limited Partnership
Gulf Shores Apartments Ltd. 1,492,554 172,800 1,750,427 (542,921)
Hilltop North Associates, A Virginia 3,335,611 240,514 4,771,684 (1,143,470)
Limited Partnership
Madison-Bellefield Associates 3,652,737 245,000 5,515,361 (1,571,950)
Pine Hill Estates Limited Partnership 2,472,686 40,000 3,842,116 (1,027,128)
Santa Juanita Limited Dividend 1,521,268 228,718 2,320,159 (603,379)
Partnership L.P.
Vista del Mar Limited Dividend 5,376,868 565,689 8,640,411 (2,472,761)
Partnership L.P.
Winnsboro Homes Limited Partnership 1,234,221 30,000 1,804,038 (465,135)
-----------------------------------------------------
$ 83,114,342 $4,416,035 $111,943,762 $(31,649,149)
=====================================================
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
5. Investment in Local Partnerships (continued)
The summary of property activity during the year ended December 31, 1997 is
as follows:
<TABLE>
<CAPTION>
Net change
during the year
Balance as of ended Balance as of
December 31, 1996 December 31,1997 December 31, 1997
----------------- -------------- -----------------
<S> <C> <C> <C>
Land $ 4,416,035 $ (340,300) $ 4,075,735
Buildings and 111,943,762 (2,876,227) 109,067,535
improvements ---------------- ---------------- ----------------
116,359,797 (3,216,527) 113,143,270
Accumulated (31,649,149) (2,979,221) (34,628,370)
depreciation ---------------- ---------------- ----------------
$ 84,710,648 $ (6,195,748) $ 78,514,900
================ ================ ================
</TABLE>
In December 1988, the Partnership acquired a 99% limited partnership interest
in B & V, Ltd. (the "B & V Local Partnership"), which owned a 190-unit
complex located in Homestead, Florida. 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 to reconstruct the complex, and thus preserve the Low-income Tax
Credits. However, delays in the rebuilding of the complex occurred due to
significant 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 was unable to make required mortgage payments, but
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, resulting in the recognition
by the B & V Local Partnership of a loss from impairment of long-lived assets
and eminent domain proceeding of approximately $4,808,000. The remainder of the
complex was ultimately lost in April 1997 when the Bankruptcy Court ordered
title transfer of the Property, resulting in the recognition by the B & V Local
Partnership of a gain on the extinguishment of debt of $6,441,935. The
Partnership's investment balance in the B & V Local Partnership, after
cumulative equity losses, became zero during the year ended March 30, 1995.
Therefore, the aforementioned gain and losses had no impact on the financial
position, results of operations or cash flows of the Partnership.
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
whereby the appraised value of the property was $1,898,600, which resulted in
the recognition of an impairment loss of $3,910,599 included in the combined
statement of operations of the Local Partnerships for the year ended December
31, 1996. As noted above, the Partnership's investment balance in the B & V
Local Partnership became zero during the year ended March 30, 1995.
Accordingly, the aforementioned impairment had no effect on the financial
position, results of operations or cash flows of the Partnership.
As part of the overall plan and arrangement with the Local General Partner of
the B & V Local Partnership (see discussion above), the Partnership acquired
a 99% limited partnership interest in the B & V Phase I Local Partnership,
which owned a 97-unit, Section 8 assisted apartment complex located in
Homestead, Florida, which was acquired from principals of the Local General
Partner during the year ended March 30, 1995. 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. Pursuant to 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.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
5. Investment in Local Partnerships (continued)
On January 14, 1997, by agreement between 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 complied with this order.
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. On
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. On September 10, 1997, the B & V Phase
I Local Partnership filed a plan of reorganization with the Bankruptcy Court
and on October 28, 1997 the Bankruptcy Court issued an order approving the
Disclosure Statement filed in connection therewith and setting a timetable
for confirming the plan. The plan of reorganization was confirmed on or about
December 9, 1997. Because alternative sources of financing could not be
secured, the property was transferred to the lender in May 1998. The
Partnership's investment balance in the B & V Phase I Local Partnership,
after cumulative equity losses, became zero during the year ended March 30,
1996. Accordingly, the aforementioned impairment had no effect on the
financial position, results of operations or cash flows of the Partnership.
The Cobbet Local Partnership was originally financed with a first mortgage with
mandatory monthly payment terms with the Massachusetts Housing Finance Agency
("MHFA") and a second mortgage with MHFA under the State Housing Assistance for
Rental Production Program (the "SHARP Operating Loan") whereby proceeds would be
advanced monthly as an operating subsidy (the "Operating Subsidy Payments"). The
terms of the SHARP Operating Loan called for declining Operating Subsidy
Payments over its term (not more than 15 years). However, due to the economic
condition of the Northeast region in the early 1990's, MHFA instituted an
operating deficit loan (the "ODL") program which supplemented the scheduled
reduction in the Operating Subsidy Payments. Effective October 1, 1997, MHFA
announced its intention to eliminate the ODL program, such that the Cobbet Local
Partnership will no longer be receiving the ODL, without which the Cobbet Local
Partnership would be unable to make the full Mandatory Debt Service payments on
its first mortgage. Although MHFA has notified the Cobbet Local Partnership and,
to the Local General Partners' knowledge, other ODL recipients as well, that
MHFA considers the mortgages to be in default, the Local General Partners have
agreed to a plan proposed by MHFA to recapitalize the Cobbet Local Partnership
from capital to be received from the admission of a new limited partner. Such
limited partner would receive a substantial portion of the annual allocation of
the Cobbett Local Partnership's tax losses commencing January 1, 1999, plus cash
flows and residuals, if any. The Partnership and the Local General Partners
would retain a sufficient interest in the Cobbet Local Partnership to avoid
recapture of Low-income Tax Credits. Although the Cobbett Local Partnership has
executed the MHFA documents, there can be no assurance that a suitable limited
partner will be attracted and provide the needed capital contribution, in which
circumstance MHFA would be expected to retain its rights under the loan
documents. The future financial viability of the Cobbet Local Partnership is
highly uncertain. The Partnership's investment balance in the Cobbett Local
Partnership, after cumulative equity losses, became zero during the year ended
March 30, 1994.
The Erie Local Partnership, which is in the tenth year of the Low-income Tax
Credit period, is subject to an amended and restated note (the "Amended
Note") dated December 1, 1994 (which matured on December 1, 1997) and is
entitled to a project-based rental subsidy under Chapter 707 of the Acts of
1966 of the Commonwealth of Massachusetts, which contract is subject to a
year to year renewal. The original financing called for Mandatory Debt
Service of $7,647 per month, while the Amended Note required monthly
Mandatory Debt Service of $5,883. The Local General Partners reported that
the Erie Local Partnership was several months in arrears under the terms of
the Amended Note, that a default was declared by the lender and that
discussions were being held with the lender. While negotiations were ongoing,
the lender conducted a foreclosure sale of the property in April 1998. The
Partnership has been advised by its counsel that the foreclosure sale can be
"unwound" for tax purposes (thereby avoiding any recapture of Low-income Tax
Credit benefits) if, prior to December 31, 1998, the Erie Local Partnership
repurchases the property and the Partnership (or a third party) purchases and
reinstates the Amended Note. The Partnership has offered to purchase the
Amended Note (provided that the property is reconveyed to the Erie Local
Partnership) for the face amount thereof, but to date, the lender has not
agreed. As a result of the uncertainty of future operating income, the combined
financial statements of the Local Partnerships for the year ended December 31,
1997 include a loss from impairment of long-lived assets of $744,126 which
represents an adjustment of the real property of the Erie Local Partnership. As
the result, the Partnership recognized additional equity in loss of its
investment in the Erie Local Partnership of approximately $99,000 in connection
with the aforementioned impairment.
<PAGE>
- --------------------------------------------------------------------------------
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
6. Transactions with General Partner and Affiliates
For the years ended March 30, 1998, 1997 and 1996, the Partnership paid
and/or incurred the following amounts to the General Partner and/or
affiliates in connection with services provided to the Partnership:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------------
Paid Incurred Paid Incurred Paid Incurred
<S> <C> <C> <C> <C> <C> <C>
Management fee (see $175,466 $175,466 $175,466 $175,466 $175,466 $175,466
Note 8)
</TABLE>
For the years ended December 31, 1997, 1996 and 1995, the Local Partnerships
paid and/or incurred the following amounts to the General Partner and/or
affiliates in connection with services provided to the Local Partnerships:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------
Paid Incurred Paid Incurred Paid Incurred
<S> <C> <C> <C> <C> <C> <C>
Property management $ 84,628 $ 167,376 151,033 157,983 152,220 142,925
fees
Insurance 98,453 101,245 195,321 202,343 162,419 149,673
Advance 74,525 -- -- -- 2,500 --
Property -- -- -- -- 74,900 --
development fees
</TABLE>
The property development fees were capitalized by the Local Partnerships.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
7. Taxable Loss
A reconciliation of the financial statement net loss of the Partnership for
the years ended March 30, 1998, 1997 and 1996 to the tax return net loss for
the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---------------------------------------------
<S> <C> <C> <C>
Financial statement net loss for
the years ended March 30, 1998, $ (1,684,224) $ (2,384,219) $ (2,425,508)
1997 and 1996
Add (less) net transactions occurring between:
January 1, 1995 to March 30, -- -- (52,025)
1995
January 1, 1996 to March 30, -- (40,146) 40,146
1996
January 1, 1997 to March 30, (112,344) 112,344 --
1997
January 1, 1998 to March 30, 40,964 -- --
-------------- --------------- -------------
1998
Adjusted financial statement net
loss for the years ended December (1,755,604) (2,312,021) (2,437,387)
31, 1997, 1996 and 1995
Differences arising from equity
in loss of investment in Local (36,449) (3,435,403) (1,981,297)
Partnerships
Other differences (7,890) (7,010) (11,755)
-------------- -------------- --------------
Tax return net loss for the
years ended December 31, $ (1,799,943) $ (5,754,434) $ (4,430,439)
============ ============ ============
1997, 1996 and 1995
</TABLE>
The differences between the equity in the investment in Local Partnerships
for tax return and financial reporting purposes as of December 31, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------- ---------
<S> <C> <C>
Investment in Local Partnerships - $ 5,886,792 $ 7,395,928
financial reporting
Investment in Local Partnerships - tax (2,203,935) (705,874)
$ 8,090,727 $ 8,101,802
=========== ===========
</TABLE>
Payable to general partner in the accompanying balance sheets represents
accrued management fees deductible for tax purposes pursuant to Internal
Revenue Code Section 267.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
8. Commitments and Contingencies
Pursuant to the Partnership Agreement, the Partnership is required to pay the
General Partner an annual management fee ("Management Fee") in the amount of
$175,466 for its services in connection with the management of the affairs of
the Partnership, subject to certain provisions of the Partnership Agreement.
The Partnership incurred a Management Fee of $175,466 for each of the three
years ended March 30, 1998. An unpaid Management Fee in the amount of $43,861
is recorded as payable to general partner in the accompanying balance sheets
as of March 30, 1998 and 1997.
In addition, pursuant to the Partnership Agreement, the Partnership is
required to pay ML Fund Administrators Inc., an affiliate of the Selling
Agent, an annual administration fee ("Administration Fee") in the amount of
$152,758 and an annual additional administration fee ("Additional
Administration Fee") in the amount of $30,965 for its administrative services
provided to the Partnership, subject to certain provisions of the Partnership
Agreement. The Partnership incurred an Administration Fee and an Additional
Administration Fee in the amounts of $152,758 and $30,965, respectively, for
each of the three years ended March 30, 1998. Such amounts are aggregated and
reflected under the caption administration fees in the accompanying financial
statements. Unpaid Administration Fees in the amount of $7,740 are included
in accounts payable and accrued expenses in the accompanying balance sheets
as of March 30, 1998 and 1997.
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. In October 1997, Congress passed the Multifamily
Assisted Housing and Reform and Affordability Act whereby the United States
Department of Housing and Urban Development ("HUD") has been given authority
to renew certain project based Section 8 contracts expiring during HUD's
fiscal year 1998, where requested by an owner, for an additional one year
term generally at or below current rent levels, subject to certain
guidelines. HUD has additional programs which, in general, provide 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. The Partnership 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. Four Local Partnerships', Section 8 contracts are scheduled to
expire in 1998.
In connection with the Cobbet Local Partnership's financing, the Partnership has
provided collateral to secure a letter of credit in the amount of $242,529 which
had been established for the purpose of covering future operating deficits, if
any, of the Cobbet Local Partnership. The lender may draw directly from the
letter of credit to fund any operating deficits that exist and upon any default
by the Cobbet Local Partnership with respect to any of the obligations under the
loan agreement. At the end of a 12-month period in which the property achieves
positive cash flow, the undrawn balance in the letter of credit and any amounts
advanced under a separate operating guaranty (not an obligation of the
Partnership) shall be released or reduced at the written request of the Cobbet
Local Partnership by $114,315. Thereafter, in any subsequent 12-month period in
which there is positive cash flow, the same amount may be released. These
releases will only be made so long as the Cobbet Local Partnership has complied
with the conditions set forth by the lender as provided in the loan agreement.
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 1998, 1997 AND 1996
9. Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments." The estimated fair value amounts
have been determined using available market information, assumptions,
estimates and valuation methodologies.
Cash and Cash Equivalents
The carrying amount approximates fair value.
Investments in Bonds Available-For-Sale
Fair value is estimated based on market quotes provided by an independent
service as of the balance sheet dates.
Interest Receivable
The carrying amount approximates fair value due to the terms of the
underlying investments.
The estimated fair value of the Partnership's financial instruments as of
March 30, 1998 and 1997 are disclosed elsewhere in the financial statements.
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Registrant has no officers or directors. The General Partner manages
Registrant's affairs and has general responsibility and authority in all matters
affecting its business. The responsibilities of the General Partner are
currently carried out by Richman Tax. The executive officers and directors of
Richman Tax are:
<TABLE>
<CAPTION>
Served in present
Name capacity since 1 Position held
<S> <C> <C>
Richard Paul Richman February 10, 1988 President and Director
David A. Salzman April 29, 1994 Vice President
Neal Ludeke February 10, 1988 Vice President and
Treasurer
Gina S. Scotti February 10, 1988 Secretary
</TABLE>
- -------------------------------------------------------------------------------
1 Director holds office until his successor is elected and qualified. All
officers serve at the pleasure of the Director.
Richard Paul Richman, age 50, is the sole Director and President of Richman Tax.
Mr. Richman is the President and sole stockholder of Richman Group. Mr. Richman
is involved in the syndication and management of residential property. Mr.
Richman is also a director of Wilder Richman Resources Corp., an affiliate of
Richman Tax and the general partner of Secured Income L.P., a director of Wilder
Richman Historic Corporation, an affiliate of Richman Tax and the general
partner of Wilder Richman Historic Properties II, L.P., a director of Richman
Tax Credits Inc., an affiliate of Richman Tax and the general partner of the
general partner of American Tax Credit Properties II L.P., a director of Richman
Housing Credits Inc., an affiliate of Richman Tax and the general partner of the
general partner of American Tax Credit Properties III L.P. and a director of
Richman American Credit Corp., an affiliate of Richman Tax and the manager of
American Tax Credit Trust, a Delaware statutory business trust.
David A. Salzman, age 37, is a Vice President of Richman Tax. Mr. Salzman is
responsible for the acquisition and development of residential real estate for
syndication as a Vice President of acquisitions of Richman Group.
Neal Ludeke, age 40, is a Vice President and Treasurer of Richman Tax. Mr.
Ludeke, a Vice President and the Treasurer of Richman Group, is engaged
primarily in the syndication, asset management and finance operations of Richman
Group. In addition, Mr. Ludeke is a Vice President and the Treasurer of Richman
Asset Management, LLC ("RAM"), an affiliate of Richman Tax. Mr. Ludeke's
responsibilities in connection with RAM include advisory services provided to a
small business investment company and various partnership management functions.
Gina S. Scotti, age 42, is the Secretary of Richman Tax. Ms. Scotti is a Vice
President and the Secretary of Richman Group. As the Director of Investor
Services, Ms. Scotti is responsible for communications with investors.
Item 11. Executive Compensation
Registrant has no officers or directors. Registrant does not pay the officers or
director of Richman Tax any remuneration. During the year ended March 30, 1998,
Richman Tax did not pay any remuneration to any of its officers or its director.
<PAGE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Item 12. Security Ownership of Certain Beneficial Owners and Management
Dominion Capital Inc., having the mailing address P.O. Box 26532, Richmond,
Virginia 23261, is the owner of 2,800 Units, representing approximately 6.8% of
all such Units. As of May 20, 1998, no person or entity, other than Dominion
Capital Inc., was known by Registrant to be the beneficial owner of more than
five percent of the Units. Richman Tax is wholly-owned by Richard Paul Richman.
Item 13. Certain Relationships and Related Transactions
The General Partner and certain of its affiliates are entitled to receive
certain compensation, fees, and reimbursement of expenses and have
received/earned fees for services provided to Registrant as described in Notes 6
and 8 to the audited financial statements included in Item 8 - "Financial
Statements and Supplementary Data" herein.
Transactions with General Partner and Affiliates
The tax losses and net Low-income Tax Credits generated by Registrant during the
year ended December 31, 1997 allocated to the General Partner were $17,999 and
$41,261, respectively. The tax losses and net Low-income Tax Credits generated
by the General Partner during the year ended December 31, 1997 (from the
allocation of Registrant discussed above) and allocated to Richman Tax were
$12,922 and $28,475, respectively.
Indebtedness of Management
No officer or director of the General Partner or any affiliate of the foregoing
was indebted to Registrant at any time during the year ended March 30, 1998.
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1) Financial Statements
See Item 8 - "Financial Statements and Supplementary Data."
(2) Financial Statement Schedules
No financial statement schedules are included because of the absence of
the conditions under which they are required or because the information
is included in the financial statements or the notes thereto.
(3) Exhibits
<TABLE>
<CAPTION>
Incorporated by
Exhibit Reference to
<S> <C> <C>
3.1 Certificate of Limited Exhibit 3.2 to Amendment
Partnership of Registrant No. 2 to the Registration
Statement on Form
S-11 dated April 29, 1988
(File No. 33-20391)
10.1 4611 South Drexel Limited Exhibit 10.3 to Form 10-Q
Partnership Agreement of Limited Report
Partnership dated December 30, 1989
(File No. 0-17619)
10.2 B & V, Ltd. Fourth Amended and Exhibit 10.3 to Form 8-K
Restated Agreement and Report
Certificate of Limited Partnership dated January 17, 1989
(File No. 33-20391)
10.3 B & V Phase I, Ltd. Amended and Exhibit 10.1 to Form 10-Q
Restated Agreement of Limited Report
Partnership dated September 29, 1994
(File No. 0-17619
10.4 B & V Phase I, Ltd. Assignment of Exhibit 10.4 to Form 10-K
Partnership Interests, Assumption Report
of Responsibilities, and dated March 30, 1997
Waiver of Conditions (File No. 0-17619)
10.5 Blue Hill Housing Limited Exhibit 10.7 to Form 8-K
Partnership Amended and Restated Report
Agreement and Certificate of dated January 17, 1989
Limited Partnership (File No. 33-20391)
10.6 Cityside Apartments, L.P. Amended Exhibit 10.3 to Form 10-K
and Restated Agreement of Limited Report
Partnership dated March 30, 1990
(File No. 0-17619
10.7 Amendment No. 1 to Cityside Exhibit 10.4 to Form 10-K
Apartments, L.P. Amended and Report
Restated Agreement of Limited dated March 30, 1992
Partnership (File No. 0-17619)
10.8 Amendment No. 2 to Cityside Exhibit 10.5 to Form 10-K
Apartments, L.P. Amended and Report
Restated Agreement of Limited dated March 30, 1992
Partnership (File No. 0-17619)
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Incorporated by
Exhibit Reference to
<S> <C> <C>
10.9 Amendment No. 3 to Cityside Exhibit 10.6 to Form 10-K
Apartments, L.P. Amended and Report
Restated Agreement of Limited dated March 30, 1992
Partnership
(File No. 0-17619)
10.10 Cobbet Hill Associates Limited Exhibit 10.4 to Form 10-K
Partnership Amended and Restated Report
Agreement and Certificate of dated March 30, 1990
Limited Partnership (File No. 0-17619)
10.11 Cobbet Hill Associates Limited Exhibit 10.8 to Form 10-K
Partnership First Amendment to Report
Amended and Restated Agreement dated March 30, 1993
and Certificate of Limited (File No. 0-17619)
Partnership
10.12 Cobbet Hill Associates Limited Exhibit 10.9 to Form 10-K
Partnership Second Amendment to Report
the Amended and Restated dated March 30, 1993
Agreement and Certificate of (File No. 0-17619)
Limited Partnership
10.13 Dunbar Limited Partnership Second Exhibit 10.5 to Form 10-K
Amended and Restated Agreement of Report
Limited Partnership dated March 30, 1990
(File No. 0-17619)
10.14 Dunbar Limited Partnership No. 2 Exhibit 10.6 to Form 10-K
Second Amended and Restated Report
Agreement of Limited Partnership dated March 30, 1990
(File No. 0-17619)
10.15 Erie Associates Limited Exhibit 10.2 to Form 10-K
Partnership Amended and Restated Report
Agreement and Certificate of dated March 30, 1989
Limited Partnership (File No. 33-20391)
10.16 Federal Apartments Limited Exhibit 10.8 to Form 10-K
Partnership Amended and Restated Report
Agreement of Limited Partnership dated March 30, 1990
(File No. 0-17619)
10.17 First Amendment to Federal Exhibit 10.14 to Form
Apartments Limited Partnership 10-K Report
Amended and Restated Agreement of dated March 30, 1993
Limited Partnership (File No. 0-17619)
10.18 Second Amendment to Federal Exhibit 10.15 to Form
Apartments Limited Partnership 10-K Report
Amended and Restated Agreement of dated March 30, 1993
Limited Partnership (File No. 0-17619)
10.19 Golden Gates Associates Amended Exhibit 10.1 to Form 8-K
and Restated Agreement of Limited Report
Partnership dated January 17, 1989
(File No. 33-20391)
10.20 Grove Park Housing, A California Exhibit 10.10 to Form
Limited Partnership Amended and 10-K Report
Restated Agreement of Limited dated March 30, 1990
Partnership (File No. 0-17619)
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Incorporated by
Exhibit Reference to
<S> <C> <C>
10.21 Gulf Shores Apartments Ltd. Exhibit 10.3 to Form 10-K
Amended and Restated Agreement Report
and Certificate of Limited dated March 30, 1989
Partnership (File No. 33-20391)
10.22 Hilltop North Associates, A Exhibit 10.12 to Form
Virginia Limited Partnership 10-K Report
Amended and Restated Agreement of dated March 30, 1990
Limited Partnership (File No. 0-17619)
10.23 Madison-Bellefield Associates Exhibit 10.2 to Form 8-K
Amended and Restated Agreement Report
and Certificate of Limited dated January 17, 1989
Partnership (File No. 33-20391)
10.24 Amended and Restated Articles of Exhibit 10.2 to Form 10-Q
Partnership in Commendam of Pine Report
Hill Estates Limited Partnership dated December 30, 1989
(File No. 0-17619)
10.25 Santa Juanita Limited Dividend Exhibit 10.4 to Form 10-Q
Partnership Amended and Restated Report
Agreement of Limited Partnership dated December 30, 1989
(File No. 0-17619)
10.26 Second Amendment of Limited Exhibit 10.23 to Form
Partnership of Santa Juanita 10-K Report dated March
Limited Dividend Partnership and 30, 1994
Amendment No. 2 to the Amended (File No. 0-17619)
and Restated Agreement of Limited
Partnership
10.27 Amendment No. 1 to Santa Juanita Exhibit 10.1 to Form 10-Q
Limited Dividend Partnership L.P. Report
Amended and Restated Agreement of dated September 29, 1995
Limited Partnership (File No. 0-17619)
(Replaces in its entirety Exhibit
10.24 hereof.)
10.28 Amendment No. 2 to Santa Juanita Exhibit 10.2 to Form 10-Q
Limited Dividend Partnership L.P. Report
Amended and Restated Agreement of dated September 29, 1995
Limited Partnership (File No. 0-17619)
10.29 Vista Del Mar Limited Dividend Exhibit 10.1 to Form 10-K
Partnership Amended and Restated Report
Agreement and Certificate of dated March 30, 1989
Limited Partnership (File No. 33-20391)
10.30 Certificate of Amendment of Exhibit 10.25 to Form
Limited Partnership of Vista Del 10-K Report dated March
Mar Limited Dividend Partnership 30, 1994
and Amendment No. 1 to the (File No. 0-17619)
Amended and Restated Agreement
and Certificate of Limited
Partnership
10.31 Amendment No. 1 to Vista del Mar Exhibit 10.3 to Form 10-Q
Limited Dividend Partnership L.P. Report
Amended and Restated Agreement of dated September 29, 1995
Limited Partnership (File No. 0-17619)
(Replaces in its entirety Exhibit
10.28 hereof.)
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Incorporated by
<TABLE>
<CAPTION>
Exhibit Reference to
<S> <C> <C>
10.32 Amendment No. 2 to Vista del Mar Exhibit 10.4 to Form 10-Q
Limited Dividend Partnership L.P. Report
Amended and Restated Agreement of dated September 29, 1995
Limited Partnership (File No. 0-17619)
10.33 Amended and Restated Articles of Exhibit 10.1 to Form 10-Q
Partnership in Commendam of Report
Winnsboro Homes Limited dated December 30, 1989
Partnership (File No. 0-17619)
10.34 The B & V, Ltd. Exhibit 10.2 to Form 10-Q
Investment Agreement Report
dated September 29, 1994
(File No. 0-17619)
10.35 The B & V Phase I, Ltd. Exhibit 10.3 to Form 10-Q
Investment Agreement Report
dated September 29, 1994
(File No. 0-17619)
27 Financial Data Schedule
99.22 Pages 21 through 35, 51 through Exhibit 28 to Form 10-K 75 and 89
through 91 of Report Prospectus dated May 6, 1989 dated March 30,
1989 filed pursuant to Rule 424(b)(3) (File No. 33-20391) under the
Securities Act of 1933
99.23 Pages 16 through 19 of Prospectus Exhibit 28.2 to Form 10-K dated
May 6, 1989 filed pursuant Report to Rule 424(b)(3) under the dated
March 30, 1990 Securities Act of 1933 (File No. 0-17619)
99.24 Supplement No. 1 dated August 11, Exhibit 28.3 to Form 10-K
1988 to Prospectus Report
dated March 30, 1991
(File No. 0-17619)
99.25 Supplement No. 2 dated September Exhibit 28.4 to Form 10-K
20, 1988 to Prospectus Report
dated March 30, 1991
(File No. 0-17619)
99.26 December 31, 1992 financial Exhibit 28.26 to Form 10-K
statements of Cityside Report
Apartments, L.P. pursuant to dated March 30, 1993
Title 17, Code of Federal (File No. 0-17619)
Regulations, Section 210.3-09
99.27 December 31, 1993 financial Exhibit 99.27 to Form 10-K
statements of Cityside Report dated March 30, 1994
Apartments, L.P. pursuant to (File No. 0-17619)
Title 17, Code of Federal
Regulations, Section 210.3-09
99.28 December 31, 1994 financial Exhibit 99.28 to Form 10-K
statements of Cityside Report dated March 30, 1995
Apartments, L.P. pursuant to (File No. 0-17619)
Title 17, Code of Federal
Regulations, Section 210.3-09
99.29 December 31, 1995 financial Exhibit 99.29 to Form 10-K
statements of Cityside Report dated March 30, 1996
Apartments, L.P. pursuant to (File No. 0-17619)
Title 17, Code of Federal
Regulations, Section 210.3-09
99.30 December 31, 1996 financial Exhibit 99.30 to Form 10-K
statements of Cityside Report dated March 30, 1997
Apartments, L.P. pursuant to (File No. 0-17619)
Title 17, Code of Federal
Regulations, Section 210.3-09
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
99.31 December 31, 1997 financial
statements of Cityside
Apartments, L.P. pursuant to
Title 17, Code of Federal
Regulations, Section 210.3-09
99.32 December 31, 1997 financial
statements of Blue Hill Housing Limited
Partnership pursuant to
Title17, Code of Federal
Regulations, Section 210.3-09
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Registrant during the last quarter of
the period covered by this report.
(c) Exhibits
See (a)(3) above.
(d) Financial Statement Schedules
See (a)(2) above.
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
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: June 29, 1998 /s/ Richard Paul Richman
------------- ------------------------
by: Richard Paul Richman
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Richard Paul Richman President, Chief June 29, 1998
------------------------ -------------
Executive Officer
and Director of the
general partner
of the General Partner
/s/ Neal Ludeke Vice President and June 29, 1998
--------- -------------
Treasurer of the general
partner of the General
Partner (Principal
Financial and Accounting
Officer of Registrant)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from the year ended March 30, 1998 Form 10K 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 L.P.
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-30-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> MAR-30-1998
<EXCHANGE-RATE> 1.00
<CASH> 388
<SECURITIES> 2,679
<RECEIVABLES> 54
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,012
<CURRENT-LIABILITIES> 99
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,012
<SALES> 0
<TOTAL-REVENUES> 261
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 461
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,684)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,684)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,684)
<EPS-PRIMARY> (40.39)
<EPS-DILUTED> 0
</TABLE>
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
CITYSIDE APARTMENTS, L.P.
DECEMBER 31, 1997, 1996 AND 1995
<PAGE>
Cityside Apartments, L.P.
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS
BALANCE SHEETS
STATEMENTS OF OPERATIONS
STATEMENTS OF PARTNERS' EQUITY
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Cityside Apartments, L.P.
We have audited the accompanying balance sheets of Cityside Apartments,
L.P. as of December 31, 1997 and 1996, and the related statements of operations,
partners' equity and cash flows for the years ended December 31, 1997, 1996 and
1995. These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cityside Apartments, L.P. as
of December 31, 1997 and 1996, and the results of its operations, the changes in
partners' equity and cash flows for the years ended December 31, 1997, 1996 and
1995, in conformity with generally accepted accounting principles.
/s/Reznick Fedder & Silverman
Bethesda, Maryland
May 11, 1998
<PAGE>
<TABLE>
<CAPTION>
Cityside Apartments, L.P.
BALANCE SHEETS
December 31,
ASSETS
1997 1996
<S> <C> <C>
CURRENT ASSETS
Petty cash $ 400 $ 400
Cash in bank - operations 44,040 86,291
Cash in bank - development 1,533 1,437
Tenant accounts receivable 9,900 17,821
Accounts receivable - subsidy 11,392 21,318
Accounts receivable - other 1,008 -
Prepaid taxes and insurance 42,121 39,371
Due from affiliate
32,090 10,499
Total current assets
142,484 177,137
DEPOSITS HELD IN TRUST - FUNDED
Tenant security deposits held
18,876 17,551
RESTRICTED DEPOSITS AND FUNDED RESERVES
Mortgage escrow deposits 70,029 59,469
Reserve for replacements 210,237 180,166
Reserve for painting 47,574 29,117
Rehabilitation escrow 120,869 117,686
Roofing and siding reserve
4,597 64,684
453,306 451,122
RENTAL PROPERTY
Land 99,797 99,797
Buildings and improvements 13,802,871 13,802,871
Building equipment - portable
14,723 14,723
13,917,391 13,917,391
Less accumulated depreciation
4,178,545 3,675,441
9,738,846 10,241,950
OTHER ASSETS
Deposits 3,060 3,060
Mortgage costs, less accumulated
amortization of $102,106 and
$91,267 233,384 244,223
------- -------
236,444 247,283
$ $
10,589,956 11,135,043
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
Cityside Apartments, L.P.
BALANCE SHEETS
December 31,
LIABILITIES AND PARTNERS' EQUITY
1997 1996
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 583 $ 8,490
Accrued interest payable 47,830 48,380
Accrued management fee 4,703 5,652
Accrued P.I.L.O.T. 15,954 22,814
Due to general partners 79,177 79,177
and affiliates
Rent deferred credits 1,319 1,317
Current maturities of
mortgages payable
69,787 62,859
Total current
liabilities 219,353 228,689
--------- ---------
DEPOSITS LIABILITY
Tenant security
deposits (contra) 18,876 17,551
-------- -----------
LONG-TERM DEBT
Mortgages payable, less 7,732,845 7,802,632
current maturities
Accrued interest payable 504,975 431,965
8,237,820 8,234,597
CONTINGENCY - -
PARTNERS' EQUITY 2,113,907 2,654,206
$10,589,956 11,135,043
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Cityside Apartments, L.P.
STATEMENTS OF OPERATIONS
Year ended December 31,
1997 1996 1995
---------------------- ---------
<S> <C> <C> <C>
Revenue
Rental $1,316,457 $1,281,775 $1,285,427
Interest and other
19,992 20,117 29,947
------ ------ ------
1,336,449 1,301,892 1,315,374
--------- --------- ---------
Expenses
Administrative 154,413 167,757 163,402
Utilities 76,924 78,170 71,139
Operating and maintenance 260,973 207,532 153,174
Taxes and insurance 217,939 191,263 182,006
Interest 650,056 681,306 662,020
Depreciation and amortization
513,943 514,376 515,275
------- ------- -------
1,874,248 1,840,404 1,747,016
--------- --------- ---------
$ $ $
== ==
NET LOSS (537,799) (538,512) (431,642)
======== ======== ========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Cityside Apartments, L.P.
STATEMENTS OF PARTNERS' EQUITY
Years ended December 31, 1997, 1996 and 1995
General Limited
Total partner partner
<S> <C> <C> <C>
Partners' equity, December 31, 1994 $ 3,629,360 $ 139,637 $ 3,489,723
Net profit (loss) - 1995 (431,642) 7,298 (438,940)
----------- --------- -----------
Partners' equity, December 31, 1995 3,197,718 146,935 3,050,783
Partner distribution (5,000) -- (5,000)
Net loss - 1996 (538,512) (5,385) (533,127)
----------- --------- -----------
Partners' equity, December 31, 1996 2,654,206 141,550 2,512,656
Partner distribution (2,500) -- (2,500)
Net loss - 1997 (537,799) (5,378) (532,421)
----------- --------- -----------
Partners' equity, December 31, 1997 $ 2,113,907 $ 136,172 $ 1,977,735
=========== ========= ==========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
Cityside Apartments, L.P.
STATEMENTS OF CASH FLOWS
Year Ended December 31,
1997 1996 1995
--------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ $ $
(537,799) (538,512) (431,642)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Depreciation 503,104 503,537 504,436
Amortization 10,839 10,839 10,839
Mortgagor income - 429 -
Mortgagor entity expenses 73,010 - -
Decrease in tenant accounts receivable 7,921 5,801 182
Decrease (increase) in accounts 9,926 (8,675) 3,279
receivable - subsidy
Increase in accounts receivable - (1,008) - -
other
Decrease in accounts receivable - - - 15,118
insurance claims
Decrease (increase) in prepaid (2,750) 3,247 (3,369)
expenses
Decrease (increase) in tenant (1,405) 1,230 -
security deposits - net
Decrease (increase) in mortgage (10,560) 6,494 (8,184)
escrow deposits
Increase (decrease) in accounts (7,083) 3,802 (968)
payable
Decrease in accrued management fee (949) (1,038) (1,046)
Increase (decrease) in accrued (550) 72,513 72,563
interest payable
Increase (decrease) in accrued (6,860) (6,343) 3,219
P.I.L.O.T.
Decrease in accounts payable - fire - - (48,257)
loss
Increase in rent deferred credits 583 675 300
-----------------------------------
Net cash provided by operating 36,419 53,999 116,470
-----------------------------------
activities
Cash flows from investing activities
Deposits to reserve for replacements (30,071) (26,954) (26,880)
Deposits to rehabilitation escrow (3,183) (4,104) (4,233)
Deposits to painting escrow (18,457) (8,057) (633)
Advances on behalf of affiliate (21,591) (10,499) -
Withdrawal from (deposit to) roofing 60,087 (64,684) -
-----------------------------------
and siding reserve
Net cash used in investing (13,215 (114,298) (31,746)
-------------------------- --------
activities
Cash flows from financing activities
Principal payments on mortgages (62,859) (56,620) (50,999)
Distribution to limited partner (2,500) (5,000) -
Repayment of due to general partners (376,330)
-----------------------------------
and affiliates
Net cash used in financing (65,359 (61,620) (427,329)
-------------------------- -------
activities
NET DECREASE IN CASH (42,155) (121,919) (342,605)
Cash, beginning 88,128 210,047 552,652
------------------------- --------
Cash, end $ 45,973$ 88,128$ 210,047
============ ============= ======
Supplemental disclosure of cash flow
information
Cash paid for interest during the year $ 577,597$ 583,837 $ 589,457
============ ============= =======
</TABLE>
See notes to financial statements
<PAGE>
Cityside Apartments, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997, 1996 and 1995
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cityside Apartments, L.P. was organized under the laws of the State of New
Jersey on April 1, 1988 for the purpose of acquiring, constructing, and
operating a low-income residential housing project under Section 221(d)(4) of
the National Housing Act. The project consists of 126 units located in
Trenton, New Jersey and is currently operating under the name of Cityside
Apartments. Cash distributions are limited by agreement between the
partnership and the City of Trenton to $81,884 annually, however, in no event
can the distributions exceed surplus cash as defined by HUD. The project
qualifies for the low-income credit established by the Tax Reform Act of
1986.
Each building of the project has qualified and been allocated low-income
housing credits pursuant to Internal Revenue Code Section 42 ("Section 42")
which regulates the use of the project as to occupant eligibility and unit
gross rent, among other requirements. Each building of the project must meet
the provisions of these regulations during each of fifteen consecutive years
in order to remain qualified to receive the credits.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Rental Property
Land, buildings and improvements are recorded at cost. Depreciation is
provided for in amounts sufficient to relate the cost of depreciable assets
to operations over their estimated service lives using the straight-line
method over a 27.5 year life. Personal property is recorded at cost and is
depreciated over its estimated service life of 5-7 years using accelerated
methods. Improvements are capitalized, while expenditures for maintenance and
repairs are charged to expense as incurred. Upon disposal of depreciable
property, the appropriate property accounts are reduced by the related costs
and accumulated depreciation. The resulting gains and losses are reflected in
the statements of operations.
<PAGE>
Cityside Apartments, L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997, 1996 and 1995
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Amortization
Mortgage costs are amortized over the term of the respective loan using the
straight-line method.
Provision for Doubtful Accounts
The partnership considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts
become uncollectible, they will be charged to operations upon such
determination.
Rental Income
Rental income is recognized as rentals become due. Rental payments received
in advance are deferred until earned. All leases between the partnership and
tenants of the property are operating leases.
Income Taxes
No provision or benefit for income taxes has been included in these financial
statements since taxable income or loss passes through to, and is reportable
by, the partners individually.
NOTE B - PARTNERS' CAPITAL CONTRIBUTIONS
The partnership has four general partners which collectively have a 1%
interest - Trenton Investors, Inc., Landex Corporation, The Richman Group,
Inc. and Altman Properties, Ltd. - and one limited partner, American Tax
Credit Properties, L.P., which has a 99% interest. Total general partner
capital contributions received in prior years were $400. The limited partner
was obligated to make capital contributions of $6,098,988, all of which have
been received.
NOTE C - LONG-TERM DEBT
Mortgage Payable - Greystone Servicing Corporation, Inc.
The partnership is obligated under the terms of a mortgage payable to
Greystone Servicing Corporation, Inc. (subservicer for the Government
National Mortgage Association). The note is insured by the Federal Housing
Administration (FHA) and is collateralized by a first mortgage on the
property. The note bears interest at the rate of 10.5%.
<PAGE>
Cityside Apartments, L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997, 1996 and 1995
NOTE C - LONG-TERM DEBT (Continued)
Mortgage Payable - Greystone Servicing Corporation, Inc. (Continued)
Principal and interest are payable by the partnership in monthly installments
of $53,371 through August 1, 2019. Principal and accrued interest due at
December 31, 1997 and 1996 are $5,466,332 and $47,830, and $5,529,191 and
$48,380, respectively.
Under agreements with the mortgage lender and FHA, the partnership is
required to make monthly escrow deposits for taxes, insurance and replacement
of project assets, and is subject to restrictions as to operating policies,
rental charges, operating expenditures and distributions to partners.
The liability of the partnership under the mortgage is limited to the
underlying value of the real estate collateral plus other amounts deposited
with the lender.
Aggregate annual maturities of the mortgage payable over each of the next
five years are as follows:
<TABLE>
<CAPTION>
<S> <C>
December 31,
1998 $ 69,787
1999 77,478
2000 86,016
2001 95,495
2002 106,018
</TABLE>
Mortgage Payable - City of Trenton
The partnership is obligated under the terms of a mortgage from the City of
Trenton, State of New Jersey. The note bears interest at the rate of 3.125%.
Annual payments of principal and interest, limited to surplus cash as defined
and in accordance with the terms of the agreement, were scheduled to commence
on February 4, 1993. No payments were due in 1997 and 1996 under the terms of
the agreement. All unpaid principal and interest is due and payable on
February 4, 2006, subject to extension to August 1, 2019 at the discretion of
the first mortgagee. Principal and accrued interest due at December 31, 1997
and 1996 are $2,336,300 and $504,975, and $2,336,300 and $431,965,
respectively.
The loan is secured by a second mortgage on the real estate. The liability of
the partnership under the mortgage is limited to the underlying value of the
real estate collateral.
<PAGE>
Cityside Apartments, L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997, 1996 and 1995
NOTE D - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Due to General Partners and Affiliates
As of December 31, 1997 and 1996, the partnership owes the general partners
and certain affiliates $43,326 and $43,326, respectively, for development
fees, construction management fees, and other construction items. The amounts
are noninterest bearing and due on demand.
Partnership Administration Fee
The partnership has entered into a Partnership Administrative Services
agreement with the general partners for their services in managing the
business of the partnership. The annual fee is equal to 50% of net cash flow
available for distribution as defined in the partnership agreement with a
maximum of $250,000 per year. No such fee was incurred during 1997, 1996 and
1995. The cumulative amount payable as of December 31, 1997 and 1996 is
$35,851.
Management Fee
The property is managed by an affiliate of certain of the general partners.
The management fee is 6% of project receipts. The management agent also
receives fees for accounting services provided to the partnership. Management
fees charged to operations during 1997, 1996 and 1995 were $79,577, $76,712
and $77,346, respectively. Accounting fees charged to operations were $6,804
during each of the three years ended December 31. At December 31, 1997 and
1996, $4,703 and $5,652, respectively, in management and accounting fees are
payable.
Insurance
The sole shareholder of an affiliate of one of the general partners provided
debt service financing for the capitalization of LaMere Associates, Inc.
(LaMere). In connection with such debt financing, the shareholder received
20% of the stock of LaMere. LaMere was paid premiums in connection with the
following insurance coverage provided to the project: property, auto,
workmen's compensation, liability and umbrella. In connection with such
insurance coverage, the partnership incurred $60,442, $56,725 and $57,574 in
premiums for the years 1997, 1996 and 1995, respectively.
<PAGE>
Cityside Apartments, L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997, 1996 and 1995
NOTE D - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (Continued)
Shared Project Payroll Costs and Expenses
As approved by the State of New Jersey Department of Community Affairs,
Division of Housing and Community Resources, payroll and all other direct
costs of employment for certain employees are shared between the partnership
and Cityside Apartments, Phase II, L.P., a contiguous project. The projects
share a common management office and therefore share office expenses. Certain
non project specific maintenance expenses are shared between the projects.
These payroll costs and expenses are allocated based on the number of units
in each project. Also approved, the social service director/site manager
provided services to another project the management agent manages. The
partnership was reimbursed by the management agent for the services provided
based on the time spent on the other project.
Computer Services
In accordance with HUD Handbook 4381.5 Rev-2, Paragraph 6.38, the partnership
uses the services of a computer consultant company to provide the following
services: purchase and install personal computers and the related equipment
and software for the project's rental office, provide training and technical
support, and consult on software upgrades. Dynamic Information Services, Inc.
(DIS), which is owned by a relative of an officer of the management company,
is a licensed representative of Project Data Systems, Inc., a nationally
known provider of computer system software for the subsidized housing
industry. DIS derives 40% of its consulting service revenues from third party
clients not affiliated with the management company. In 1997, the partnership
paid $1,640 for equipment representing actual cost, and $420 for training and
technical support services based on billable hours. In 1996, DIS provided no
services to the partnership. In 1995, the partnership paid DIS $183 for
technical support and training services based on billable hours.
NOTE E - PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS
All profits and losses are allocated 1% to the general partners and 99% to
the limited partner.
Distributable cash flow, as defined by the partnership agreement, is
distributable 1% to the general partners and 99% to the limited partner.
However, cash distributions are limited as described in note A.
<PAGE>
Cityside Apartments, L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997, 1996 and 1995
NOTE E - PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS (Continued)
Gain, if any, from a sale, exchange or other disposition is allocable as
follows:
1.To all partners having negative balances in their capital accounts prior to
the distribution of any sale or refinancing proceeds, an amount of such
gain to increase their negative balance to zero.
2.1% to the general partners and 99% to the limited partner until the limited
partner has received an amount equal to its gross capital contribution.
3.The remainder of such gain, if any, 50% to the limited partner and 50% to
the general partners.
Loss from a sale is allocable as follows:
1.To the partners such that after such allocation their respective capital
accounts will be proportionate to their interests.
2.To the partners until each partner's capital account equals their capital
contribution.
3.To the partners to the extent of and in proportion to each partner's
capital account.
4.Any remaining loss is allocated to the partners in accordance with the
manner in which they bear the economic risk of loss.
NOTE F - HOUSING ASSISTANCE PAYMENT CONTRACT AGREEMENT
The Federal Housing Administration (FHA) has contracted with the partnership
under Section 8 of Title II of the Housing and Community Development Act of
1974 to make housing assistance payments to the partnership on behalf of
qualified tenants. The agreements are on a unit-by-unit basis, have a 15-year
term and expire on various dates through May 2005.
<PAGE>
Cityside Apartments, L.P.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997, 1996 and 1995
NOTE G - CONTRACT WITH THE CITY OF TRENTON (IN LIEU OF TAXES)
The partnership has entered into an agreement with the City of Trenton
whereby the partnership pays a service charge in an amount equal to 6.28% of
gross rents as defined in the agreement. During 1997, 1996 and 1995, $83,841,
$82,610 and $82,167, respectively, was charged to operations and $15,954 and
$22,814, respectively, is owed at December 31, 1997 and 1996.
NOTE H - CONTINGENCY
The partnership's low-income housing credits are contingent on its ability to
maintain compliance with applicable sections of Section 42. Failure to
maintain compliance with occupant eligibility, and/or unit gross rent, or to
correct noncompliance within a specified time period could result in
recapture of previously taken tax credits plus interest. In addition, such
potential noncompliance may require an adjustment to the contributed capital
by the limited partner.
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
BLUE HILL HOUSING
LIMITED PARTNERSHIP
DECEMBER 31, 1997, 1996 AND 1995
<PAGE>
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Blue Hill Housing Limited Partnership
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORT
FINANCIAL STATEMENTS
BALANCE SHEETS
STATEMENTS OF PROFIT AND LOSS
STATEMENTS OF PARTNERS' EQUITY
STATEMENTS OF CASH FLOWS
NOTES TO FINANCIAL STATEMENTS
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Partners
Blue Hill Housing Limited Partnership
We have audited the accompanying balance sheets of Blue Hill Housing
Limited Partnership as of December 31, 1997 and 1996, and the related statements
of profit and loss, partners' equity and cash flows for the years ended December
31, 1997, 1996 and 1995. These financial statements are the responsibility of
the partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Blue Hill Housing Limited
Partnership as of December 31, 1997 and 1996, and the results of its operations,
the changes in partners' equity and cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland
January 31, 1998
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Blue Hill Housing Limited Partnership
BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS
1997 1996
<S> <C> <C>
CURRENT ASSETS
Petty cash $ 75 $ 75
Cash and cash equivalents 369,091 250,530
Cash and cash equivalents - partnership 707 5,687
Tenant accounts receivable 4,095 2,968
Prepaid mortgage insurance 27,152 27,263
----------------------
Total current assets 401,120 286,523
DEPOSITS HELD IN TRUST - FUNDED
Tenant security deposits held 37,711 36,000
RESTRICTED DEPOSITS AND FUNDED RESERVES
Mortgage escrow deposits 77,066 72,692
Reserve for replacements 241,862 215,129
Other escrows 106,411 187,080
-------------------------
425,339 474,901
RENTAL PROPERTY
Land 111,325 111,325
Buildings and improvements 10,839,187 10,751,907
Furnishings 62,003 2,829
11,012,515 10,866,061
Less accumulated depreciation 3,416,271 3,019,650
------------ -----------
7,596,244 7,846,411
OTHER ASSET
Mortgage costs, less accumulated
amortization of $105,987 and $94,688 357,283 368,582
-------------------------
$ 8,817,697$ 9,012,417
============ ===========
</TABLE>
(continued)
<PAGE>
- --------------------------------------------------------------------------------
Blue Hill Housing Limited Partnership
- --------------------------------------------------------------------------------
BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
LIABILITIES AND PARTNERS' EQUITY
1997 1996
------------ ---------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 111,431$ 19,071
Accrued interest payable - 55,751 56,153
mortgage
Management fees payable 10,663 9,608
Partnership administrative fee 92,061 78,989
Rent deferred credits 4,004 3,918
Current maturities of mortgage
payables 28,319 25,571
---------------------------
Total current liabilities 302,229 193,310
------------- --------------
DEPOSITS LIABILITY
Tenant security deposits (contra) 36,710 36,000
LONG-TERM DEBT
Mortgage payable, less current 6,498,779 6,527,098
maturities
Development fee payable 98,377 180,518
----------------------------
6,597,156 6,707,616
CONTINGENCY - -
PARTNERS' EQUITY 1,881,602 2,075,491
------------ ------------
$ 8,817,697 $ 9,012,417
============ =============
</TABLE>
See notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
Blue Hill Housing Limited Partnership
- --------------------------------------------------------------------------------
STATEMENTS OF PROFIT AND LOSS
Year ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
------------ ----------- ----------
<S> <C> <C> <C>
Revenue
Rental $2,104,840 1,914,452 2,087,780
Interest and other 37,566 30,997 38,472
-----------------------------------------
2,142,406 1,945,449 2,126,252
----------- ----------- -----------
Expenses
Administrative 290,300 261,456 300,770
Utilities 307,875 283,606 280,783
Operating and maintenance 344,999 382,255 575,190
Taxes and insurance 193,017 179,562 180,237
Interest 670,054 672,924 675,128
Depreciation and amortization 407,921 404,875 405,574
Other 117,129 69,184 8,312
-----------------------------------------
2,331,295 2,253,862 2,425,994
---------- ------------ ------------
NET LOSS $ (188,889)$ (308,413)$ (299,742)
============ ============ =============
</TABLE>
See notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
Blue Hill Housing Limited Partnership
- -------------------------------------------------------------------------------
STATEMENTS OF PARTNERS' EQUITY
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
General Limited
Total partners partners
<S> <C> <C> <C>
Partners' equity, December 31, 1994 $2,683,646 $(84,193) $2,767,839
Net loss - 1995 (299,742) 16,584 (316,326)
-----------------------------------------
Partners' equity, December 31, 1995 2,383,904 (67,609) 2,451,513
Net loss - 1996 (308,413) 7,298 (315,711)
-----------------------------------------
Partners' equity, December 31, 1996 2,075,491 (60,311) 2,135,802
Distribution (5,000) (5,000)
-
Net loss - 1997 (188,889) 490 (189,379)
----------------------- --------------
Partners' equity, December 31, 1997 $1,881,602 (59,821)$ 1,941,423
============= ============ ==============
</TABLE>
See notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
Blue Hill Housing Limited Partnership
- -------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
Year ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
-------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $(188,889) $(308,413) $(299,742)
Adjustments to reconcile net loss
to net cash provided by operating
activities
Depreciation 396,621 393,576 394,275
Amortization 11,299 11,299 11,299
Changes in asset and liability
accounts
(Increase) decrease in assets
Tenant accounts receivable (1,128) (696) 3,560
Prepaid expenses 111 2,476 (2,286)
Tenant security deposits - net (1,002) 5,791 (4,326)
Mortgage escrow deposits (4,373) (974) (4,407)
Increase (decrease) in
liabilities
Accounts payable 2,361 (40,474) 41,566
Accrued interest payable (402) (14) (178)
Management fees payable 1,055 (1,404) 1,786
Rent deferred credits 86 1,066 2,852
Partnership administrative fee 13,072 51,823 27,166
Net cash provided by 228,811 114,056 171,565
------------- -------------------------
operating activities
Cash flows from investing activities
Deposits to reserve for (42,766) (40,654) (42,833)
replacements
Withdrawals from reserve for 16,033 31,983 12,634
replacements
Withdrawal from other escrow - 72,416 63,347
Payment of development fees (82,141) (79,500) (79,400)
Decrease in other escrows 80,669 - -
Investment in buildings and
improvements and furnishings (56,454) - -
----------------------------------------
Net cash used in investing (84,659) (15,755) (46,252)
----------------------------------------
activities
Cash flows from financing activities
Mortgage principal payments (25,571) (23,091) (20,721)
Distributions paid (5,000) - -
--------------------------------------
Net cash used in financing
activities (30,571) (23,091) (20,721)
-------- -------- --------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 113,581 75,210 104,592
Cash and cash equivalents, beginning 256,292 181,082 76,490
------------- ----------------------------
Cash and cash equivalents, end $ 369,873 $256,292 $181,082
============ ============ ==============
Supplemental disclosure of cash flow
information
Cash paid for interest during the $ 670,456 $672,938 $675,306
============ =========== =============
year
</TABLE>
See notes to financial statements
<PAGE>
- --------------------------------------------------------------------------------
Blue Hill Housing Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Blue Hill Housing Limited Partnership was organized under the laws of the
Commonwealth of Massachusetts on November 4, 1987, for the purpose of
acquiring, rehabilitating and operating a low-income residential housing
project under Section 221(d)4 of the National Housing Act. The project
consists of 144 units located in Dorchester, Massachusetts, and is currently
operating under the name of Blue Hill Housing. The project qualifies for the
Low-Income Tax Credit established by the Tax Reform Act of 1986.
Each building of the project has qualified and been allocated low-income
housing credits pursuant to Internal Revenue Code Section 42 ("Section 42")
which regulates the use of the project as to occupant eligibility and unit
gross rent, among other requirements. Each building of the project must meet
the provisions of these regulations during each of 15 consecutive years in
order to remain qualified to receive the credits.
Cash distributions are limited by agreements between the partnership and HUD
to the extent of surplus cash as defined by HUD. If the partnership does not
distribute at least $2,500 annually to the limited partner, the general
partners are obligated to pay such shortfall. The distribution is payable
from partnership cash.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Property and Equipment
Land, buildings and improvements are recorded at cost. Depreciation is
provided for in amounts sufficient to relate the cost of depreciable assets
to operations over their estimated service lives using the straight-line
method over a 27.5-year life. Personal property is recorded at cost and is
depreciated over its estimated service life of five to seven years using
accelerated methods. Improvements are capitalized, while expenditures for
maintenance and repairs are charged to expense as incurred. Upon disposal of
depreciable property, the appropriate property accounts are reduced by the
related costs and accumulated depreciation. The resulting gains and losses
are reflected in the statement of profit and loss.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Blue Hill Housing Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997 and 1996
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Amortization
Mortgage costs are amortized over the term of the mortgage loan using the
effective interest method.
Cash and Cash Equivalents
The partnership invests all cash balances in overnight repurchase agreements
with its bank which are invested in U.S. Treasury Notes. Management considers
highly liquid investments with original maturity dates of 90 days or less to
be cash equivalents.
Provision for Doubtful Accounts
The partnership considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts
become uncollectible, they will be charged to operations when that
determination is made.
Income Taxes
No provision or benefit for income taxes has been included in these financial
statements since taxable income or loss passes through to, and is reportable
by, the partners individually.
Rental Income
Rental income is recognized as rentals become due. Rental payments received
in advance are deferred until earned. All leases between the partnership and
tenants of the property are operating leases.
U.S. Treasury Note
U.S. Treasury notes of $39,791 and $131,580 at December 31, 1997 and 1996,
respectively, are carried at amortized cost, which approximates fair value,
and are classified as held-to-maturity. The U.S. Treasury notes are reflected
in the other escrows account. The notes bear interest at 5.10% - 6.25% and
mature through February 28, 1998.
<PAGE>
- -------------------------------------------------------------------------------
Blue Hill Housing Limited Partnership
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997 and 1996
NOTE B - MORTGAGE PAYABLE
The mortgage note is co-insured by the Federal Housing Administration (FHA)
and collateralized by a deed of trust on the rental property. The note bears
interest at the rate of 10.25%. Principal and interest are payable by the
partnership in monthly installments of $58,002 through October 2029.
Under agreements with the mortgage lender and FHA, the partnership is
required to make monthly escrow deposits for taxes, insurance and replacement
of project assets, and is subject to restrictions as to operating policies,
rental charges, operating expenditures and distributions to partners.
The liability of the partnership under the mortgage note is limited to the
underlying value of the real estate collateral plus other amounts deposited
with the lender.
Aggregate maturities of the mortgage payable for each of the next five years
are as follows:
<TABLE>
<CAPTION>
<S> <C>
December 31, 1998 $ 28,319
1999 31,362
2000 34,732
2001 38,591
2002 42,597
</TABLE>
NOTE C - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Development Fee Payable
The partnership has accrued a development fee payable to the general partners
for services provided during the development and rehabilitation of the
project. This fee was capitalized as part of the rental property during the
year ended December 31, 1989 and is payable from capital contributions, the
operating deficit escrow and interest earned on the escrow. During 1997, 1996
and 1995, $82,141, $79,500 and $79,400, respectively, of this fee was paid.
As of December 31, 1997 and 1996, $98,377 and $180,518, respectively, remains
payable.
<PAGE>
- --------------------------------------------------------------------------------
Blue Hill Housing Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997 and 1996
NOTE C - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (Continued)
Management Fees
The property is managed by affiliates of the general partners, pursuant to a
management agreement approved by HUD. The current management agreement
provides for a management fee of 6% of monthly rental collections. The fee
charged to operations during 1997, 1996 and 1995 was $127,538, $115,165 and
$146,974, respectively. In addition, a reporting fee of $5.25 per unit per
month is charged for bookkeeping and reporting services. The reporting fee
charged to operations during each of the three years ended December 31 was
$9,072. At December 31, 1997 and 1996, $10,663 and $9,608, respectively, in
management fees are payable.
Partnership Administration Fee
The partnership has entered into a Partnership Administrative Services
agreement with the general partners for their services in managing the
business of the partnership. The annual fee is equal to 50% of net cash flow
available for distribution as defined in the partnership agreement with a
maximum of $500,000 per annum. As of December 31, 1997 and 1996, $92,061 and
$78,989 remains payable.
NOTE D - HOUSING ASSISTANCE PAYMENT CONTRACT AGREEMENT
The Federal Housing Administration (FHA) has contracted with the partnership,
under Section 8 of Title II of the Housing and Community Development Act of
1974, to make annual housing assistance payments to the partnership on behalf
of qualified tenants. The agreement expires June 16, 2003.
NOTE E - OPERATING DEFICIT ESCROW
The partnership has entered into an agreement with the Commonwealth of
Massachusetts, Executive Office of Communities and Development (EOCD) in
order to receive its allocation of housing credit dollar amounts pursuant to
Section 42 of the Internal Revenue Code. The agreement requires the
establishment of a reserve to fund operating deficits for a period of five
years from the date of final endorsement of the mortgage. The partnership was
required to deposit into an escrow account $684,507, reduced by an estimate
of interest which will be earned on the account during the deficit period.
The deposit was made prior to final endorsement of the mortgage. As of
December 31, 1997 and 1996, $106,411 and $187,080, respectively, are in
escrow. Annually, the escrow will be released by one-fifth (reduced by any
required funding of operations or to make any replacement required by EOCD).
<PAGE>
Blue Hill Housing Limited Partnership
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1997 and 1996
NOTE F - CONTINGENCY
The project's low-income housing credits are contingent on its ability to
maintain compliance with applicable sections of Section 42. Failure to
maintain compliance with occupant eligibility, and/or unit gross rent, or to
correct noncompliance within a specified time period could result in
recapture of previously taken tax credits plus interest. In addition, such
potential noncompliance may require an adjustment to the contributed capital
by the limited partner.
NOTE G - OTHER MORTGAGOR ENTITY EXPENSES (INCOME)
Other mortgagor entity expenses (income) consist of the following:
<TABLE>
<CAPTION>
1997 1996 1995
---------- --------- -------
<S> <C> <C> <C>
Interest income, other escrow - $(2,405) $(9,805) $(18,854)
partnership cash
Bank charges 913 - -
Partnership administration fee 92,061 78,989 27,166
Neighborhood work center expense 26,560 -
------------- ------------------------
$ 117,129 $ 69,184 $ 8,312
============ =========== =============
</TABLE>
NOTE H - NEIGHBORHOOD NETWORK CENTER
During 1997, pursuant to HUD's approval, the partnership and Elm Hill
Housing, L.P., an affiliate, established a Neighborhood Network Center. Cost
incurred by the partnership amounted to $173,014, of which $146,454 was
capitalized and $26,560 was expensed.
