UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission file number: 0-17619
American Tax Credit Properties L.P.
-----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3458875
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Richman Tax Credit Properties L.P.
599 West Putnam Avenue, 3rd Floor
Greenwich, Connecticut 06830
- --------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 869-0900
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes X No .
--- ---
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Table of Contents Page
Balance Sheets.................................................................3
Statements of Operations.......................................................4
Statements of Cash Flows.......................................................5
Notes to Financial Statements..................................................7
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 29, March 30,
Notes 1999 1999
----- ----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 57,946 $ 86,232
Investments in bonds available-for-sale 2 2,621,629 2,706,269
Investment in local partnerships 3 3,419,982 3,628,899
Interest receivable 47,358 57,005
----------- -----------
$ 6,146,915 $ 6,478,405
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 76,018 $ 91,698
Payable to general partner 87,728 43,861
----------- -----------
163,746 135,559
----------- -----------
Commitments and contingencies 3
Partners' equity (deficit)
General partner (307,385) (304,341)
Limited partners (41,286 units of limited partnership
interest outstanding) 6,138,724 6,440,125
Accumulated other comprehensive income, net 2 151,830 207,062
----------- -----------
5,983,169 6,342,846
----------- -----------
$ 6,146,915 $ 6,478,405
=========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 29, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Notes 1999 1998
----- ---------- ----------
<S> <C> <C> <C>
REVENUE
Interest $ 47,769 $ 54,294
Other income from local partnerships 3 7,500 2,475
---------- ----------
TOTAL REVENUE 55,269 56,769
---------- ----------
EXPENSES
Administration fees 45,931 45,931
Management fee 43,867 43,867
Professional fees 56,715 19,627
Printing, postage and other 9,284 12,830
---------- ----------
TOTAL EXPENSES 155,797 122,255
---------- ----------
Loss from operations (100,528) (65,486)
Equity in loss of investment in local partnerships 3 (203,917) (345,111)
---------- ----------
NET LOSS (304,445) (410,597)
Other comprehensive loss, net 2 (55,232) (5,045)
---------- ----------
COMPREHENSIVE LOSS $ (359,677) $ (415,642)
========== ==========
NET LOSS ATTRIBUTABLE TO
General partner $ (3,044) $ (4,106)
Limited partners (301,401) (406,491)
---------- ----------
$ (304,445) $ (410,597)
========== ==========
NET LOSS per unit of limited partnership interest
(41,286 units of limited partnership interest) $ (7.30) $ (9.85)
========== ==========
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 29, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 60,202 $ 59,547
Cash paid for
administration fees (38,191) (38,190)
professional fees (80,135) (8,377)
printing, postage and other expenses (9,284) (12,831)
----------- -----------
Net cash provided by (used in) operating activities (67,408) 149
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash distributions and other income from local partnerships 12,500 2,475
Investments in bonds (includes $386 of accrued interest in 1998) (257,558) (260,814)
Maturities/redemptions of bonds 284,180
----------- -----------
Net cash provided by (used in) investing activities 39,122 (258,339)
----------- -----------
Net decrease in cash and cash equivalents (28,286) (258,190)
Cash and cash equivalents at beginning of period 86,232 388,431
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 57,946 $ 130,241
=========== ===========
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized loss on investments in bonds available-for-sale, net $ (55,232) $ (5,045)
=========== ===========
</TABLE>
See reconciliation of net loss to net cash provided by (used in) operating
activities on page 8.
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS - (Continued)
THREE MONTHS ENDED JUNE 29, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES
Net loss $ (304,445) $ (410,597)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities
Equity in loss of investment in local partnerships 203,917 345,111
Distributions from local partnerships classified as other income (7,500) (2,475)
Amortization of net premium on investments in bonds 6,845 8,303
Accretion of zero coupon bonds (4,059) (4,058)
Increase in payable to general partner 43,867 43,867
Increase (decrease) in accounts payable and accrued expenses (15,680) 18,990
Decrease in interest receivable 9,647 1,008
------------ ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (67,408) $ 149
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 29, 1999
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
They do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. The results of
operations are impacted significantly by the combined results of operations of
the Local Partnerships, which are provided by the Local Partnerships on an
unaudited basis during interim periods. Accordingly, the accompanying financial
statements are dependent on such unaudited information. In the opinion of the
General Partner, the financial statements include all adjustments necessary to
present fairly the financial position as of June 29, 1999 and the results of
operations and cash flows for the interim periods presented. All adjustments are
of a normal recurring nature. The results of operations for the three months
ended June 29, 1999 are not necessarily indicative of the results that may be
expected for the entire year.
2. Investments in Bonds Available-For-Sale
As of June 29, 1999, 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 five years $ 150,994 $ 3,447 $ - $ 154,441
After five years through ten years 761,485 20,299 (1,155) 780,629
After ten years 61,999 84 - 62,083
------------ ------------ ------------ ------------
974,478 23,830 (1,155) 997,153
------------ ------------ ------------ ------------
U.S. Treasury debt securities
Within one year 257,419 - (260) 257,159
After one year through five years 1,003,893 141,563 - 1,145,456
------------ ------------ ------------ ------------
1,261,312 141,563 (260) 1,402,615
------------ ------------ ------------ ------------
U.S. government and agency securities
After five years through ten years 234,009 - (12,148) 221,861
------------ ------------ ------------ ------------
$ 2,469,799 $ 165,393 $ (13,563) $ 2,621,629
============ ============ ============ ============
</TABLE>
The Partnership has provided collateral for a standby letter of credit in the
amount of $242,529 issued in connection with Cobbet Hill Associates Limited
Partnership ("Cobbet") under the terms of the financing documents whereby the
lender has required security for future operating deficits, if any, of Cobbet.
The letter of credit is secured by the Partnership's investment in a U.S.
Treasury bond with an estimated fair value of $257,159 as of June 29, 1999. As
of August 10, 1999, no amounts have been drawn under the terms of the letter of
credit.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1999
(UNAUDITED)
3. Investment in Local Partnerships
The Partnership originally acquired limited partnership interests in Local
Partnerships representing capital contributions in the aggregate amount of
$34,520,823. As of March 31, 1999, the Local Partnerships have outstanding
mortgage loans payable totaling approximately $73,009,000 and accrued interest
payable on such loans totaling approximately $3,496,000, which are secured by
security interests and liens common to mortgage loans on the Local Partnerships'
real property and other assets.
For the three months ended June 29, 1999, the investment in Local Partnerships
activity consists of the following:
Investment in Local Partnerships as of March 30, 1999 $ 3,628,899
Equity in loss of investment in local partnerships (203,917)*
Cash distributions received from Local Partnerships (12,500)
Cash distributions classified as other income from local
partnerships 7,500
------------
Investment in Local Partnerships as of June 29, 1999 $ 3,419,982
============
* Equity in loss of investment in local partnerships is limited to the
Partnership's investment balance in each Local Partnership; any excess is
applied to other partners' capital in any such Local Partnership. The
amount of such excess losses applied to other partners' capital was
$515,514 for the three months ended March 31, 1999 as reflected in the
combined statement of operations of the Local Partnerships reflected herein
Note 3.
The combined unaudited balance sheets of the Local Partnerships as of March 31,
1999 and December 31, 1998 and the combined unaudited statements of operations
of the Local Partnerships for the three months ended March 31, 1999 and 1998 are
reflected on pages 11 and 12, respectively.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1999
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of March 31, 1999 and
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,067,636 $ 950,402
Rents receivable 193,179 158,840
Escrow deposits and reserves 2,829,457 2,902,738
Land 3,850,061 3,850,061
Buildings and improvements (net of accumulated depreciation of
$37,864,612 and $36,919,031) 67,940,750 68,839,045
Intangible assets (net of accumulated amortization of $597,728 and
$581,155) 1,735,686 1,752,259
Other 856,360 717,846
------------- ------------
$ 78,473,129 $ 79,171,191
============= ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,006,915 $ 1,012,318
Due to related parties 5,117,638 5,102,192
Mortgage loans 73,008,761 73,082,152
Notes payable 1,101,353 1,103,781
Accrued interest 3,496,407 3,396,688
Other 320,668 311,163
------------- ------------
84,051,742 84,008,294
------------- ------------
Partners' equity (deficit)
American Tax Credit Properties L.P.
Capital contributions, net of distributions 33,920,697 33,929,447
Cumulative loss (29,505,185) (29,301,268)
------------- ------------
4,415,512 4,628,179
------------- ------------
General partners and other limited partners, including ATCP II
Capital contributions, net of distributions 507,226 509,267
Cumulative loss (10,501,351) (9,974,549)
------------- ------------
(9,994,125) (9,465,282)
------------- ------------
(5,578,613) (4,837,103)
------------- ------------
$ 78,473,129 $ 79,171,191
============= ============
</TABLE>
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1999
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the three
months ended March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
REVENUE
Rental $ 3,794,930 $ 3,963,455
Interest and other 58,536 51,849
------------ ------------
TOTAL REVENUE 3,853,466 4,015,304
------------ ------------
EXPENSES
Administrative 541,047 613,818
Utilities 329,335 376,501
Operating, maintenance and other 718,659 723,535
Taxes and insurance 431,880 494,501
Financial (including amortization of $16,573 and $16,684) 1,615,788 1,717,292
Depreciation 947,476 1,008,876
------------ ------------
TOTAL EXPENSES 4,584,185 4,934,523
------------ ------------
NET LOSS $ (730,719) $ (919,219)
============ ============
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties L.P. $ (203,917) $ (345,111)
General partners and other limited partners, including
ATCP II, which includes $515,514 and $558,106 of Partnership
loss in excess of investment (526,802) (574,108)
------------ ------------
$ (730,719) $ (919,219)
============ ============
</TABLE>
The combined results of operations of the Local Partnerships for the three
months ended March 31, 1999 are not necessarily indicative of the results that
may be expected for an entire operating period.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1999
(UNAUDITED)
3. Investment in Local Partnerships (continued)
After pursuing various legal efforts which were ultimately unsuccessful, the
property of B & V Phase I, Ltd. ("B & V Phase I") was transferred to the lender
in May 1998. In addition, while negotiations were ongoing, the lender conducted
a foreclosure sale of the property of Erie Associates Limited Partnership
("Erie") in April 1998. As a result, the combined statement of operations of the
Local Partnerships for the three months ended March 31, 1999, presented herein
Note 3, does not include the results of operations of B & V Phase I and Erie.
Cobbet 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 Cobbet no longer
receives the ODL, without which Cobbet is unable to make the full mandatory debt
service payments on its first mortgage. MHFA has notified Cobbet and, to the
Local General Partners' knowledge, other ODL recipients as well, that MHFA
considers such mortgages to be in default. The Local General Partners have
agreed to a plan, with modifications proposed by MHFA, to recapitalize Cobbet
from capital to be received from the admission of a new limited partner. As of
the date of this report, MHFA has not executed the plan. If the plan were to be
implemented, such new limited partner would receive a substantial portion of the
annual allocation of Cobbet's tax losses upon such partner's admission, plus
cash flows and residuals, if any. The Partnership and the Local General Partners
would retain a sufficient interest in Cobbet to avoid recapture of Low-income
Tax Credits. There can be no assurance the plan will be implemented, and if not,
MHFA would be expected to retain its rights under the loan documents. The
Partnership's investment balance in Cobbet, after cumulative equity losses,
became zero during the year ended March 30, 1994.
4. Additional Information
Additional information, including the audited March 30, 1999 Financial
Statements and the Organization, Purpose and Summary of Significant Accounting
Policies, is included in the Partnership's Annual Report on Form 10-K for the
fiscal year ended March 30, 1999 on file with the Securities and Exchange
Commission.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Material Changes in Financial Condition
As of June 29, 1999, American Tax Credit Properties L.P. (the "Registrant") has
not experienced a significant change in financial condition as compared to March
30, 1999. Principal changes in assets are comprised of periodic transactions and
adjustments and anticipated equity in loss from operations of the local
partnerships (the "Local Partnerships") which own low-income multifamily
residential complexes (the "Properties") which qualify for the low-income tax
credit in accordance with Section 42 of the Internal Revenue Code (the
"Low-income Tax Credit"). During the three months ended June 29, 1999,
Registrant received cash from interest revenue, maturities/redemptions of bonds
and distributions from Local Partnerships and utilized cash for operating
expenses and investments in bonds. Cash and cash equivalents and investments in
bonds available-for-sale decreased, in the aggregate, by approximately $113,000
during the three months ended June 29, 1999 (which includes a net unrealized
loss on investments in bonds of approximately $55,000, amortization of net
premium on investments in bonds of approximately $7,000 and accretion of zero
coupon bonds of approximately $4,000). 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. During the
three months ended June 29, 1999, the investment in Local Partnerships decreased
as a result of Registrant's equity in the Local Partnerships' net loss for the
three months ended March 31, 1999 of $203,917 and cash distributions received
from Local Partnerships of $12,500 (exclusive of distributions from Local
Partnerships of $7,500 classified as other income from local partnerships).
Payable to general partner in the accompanying balance sheet as of June 29, 1999
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. Accordingly, 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 3 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 three months ended June 29, 1999 and 1998
resulted in net losses of $304,445 and $410,597, respectively. The decrease in
net loss is primarily attributable to a decrease in equity in loss of investment
in Local Partnerships of approximately $141,000, which is primarily the result
of decreases in the net operating losses of those Local Partnerships in which
Registrant continues to have an investment balance, partially offset by an
increase in professional fees of approximately $37,000 in connection with
certain Local Partnership matters. Other comprehensive loss for the three months
ended June 29, 1999 and 1998 resulted from a net unrealized loss on investments
in bonds available-for-sale of $55,232 and $5,045, respectively.
The Local Partnerships' net loss of approximately $731,000 for the three
months ended March 31, 1999 was attributable to rental and other revenue of
approximately $3,853,000, exceeded by operating and interest expenses (including
interest on non-mandatory debt) of approximately $3,620,000 and approximately
$964,000 of depreciation and amortization expenses. The Local Partnerships' net
loss of approximately $919,000 for the three months ended March 31, 1998 was
attributable to rental and other revenue of approximately $4,015,000, exceeded
by operating and interest expenses (including interest on non-mandatory debt) of
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of Operations (continued)
approximately $3,909,000 and approximately $1,025,000 of depreciation and
amortization expenses. The Local Partnerships' net loss, adjusted to reflect
those Local Partnerships currently owned of approximately $831,000 for the three
months ended March 31, 1998 was attributable to rental and other revenue of
approximately $3,848,000, exceeded by operating and interest expenses (including
interest on non-mandatory debt) of approximately $3,694,000 and approximately
$984,000 of depreciation and amortization expenses.
The results of operations of the Local Partnerships for the three months ended
March 31, 1999 are not necessarily indicative of the results that may be
expected in future periods.
Local Partnership Matters
Registrant's primary objective is to provide Low-income Tax Credits to limited
partners generally over a ten year period. 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. The Local Partnerships will have generated substantially all of
the Low-income Tax Credits allocated to limited partners by December 31, 1999.
The Properties are principally comprised of subsidized and leveraged low-income
multifamily residential complexes located throughout the United States and
Puerto Rico. 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"). 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") was given the 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. In October 1998, HUD issued a directive
related to project based Section 8 contracts expiring during HUD's fiscal year
1999 which defines owners' notification responsibilities, advises owners of
project based Section 8 properties of what their options are regarding the
renewal of Section 8 contracts, provides guidance and procedures to owners,
management agents, contract administrators and HUD staff on renewing Section 8
contracts, provides guidance on setting renewal rents and handling renewal rent
increases and provides the requirements and procedures for opting-out of a
Section 8 project based contract. 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 currently
subject to annual year-to-year renewals.
The Local Partnerships have various financing structures which include (i)
required debt service payments ("Mandatory Debt Service") and (ii) debt service
payments which are payable only from available cash flow subject to the terms
and conditions of the notes, which may be subject to specific laws, regulations
and agreements with appropriate federal and state agencies ("Non-Mandatory Debt
Service or Interest"). During the three months ended March 31, 1999, revenue
from operations of the Local Partnerships have generally been sufficient to
cover 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.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Local Partnership Matters (continued)
In connection with certain repairs required by the lender (the Massachusetts
Housing Finance Agency) ("MHFA") of Cobbet Hill Associates Limited Partnership
("Cobbet"), 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 Cobbet has notified MHFA of such completion, Cobbet has not
received the anticipated notice from MHFA that the default has been cured.
Cobbet 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
Cobbet no longer receives the ODL, without which Cobbet is unable to make the
full Mandatory Debt Service payments on its first mortgage. MHFA has notified
Cobbet and, to the Local General Partners' knowledge, other ODL recipients as
well, that MHFA considers such mortgages to be in default. The Local General
Partners have agreed to a plan, with modifications proposed by MHFA, to
recapitalize Cobbet from capital to be received from the admission of a new
limited partner. As of the date of this report, MHFA has not executed the plan.
If the plan were to be implemented, such new limited partner would receive a
substantial portion of the annual allocation of Cobbett's tax losses upon such
partner's admission, plus cash flows and residuals, if any. Registrant and the
Local General Partners would retain a sufficient interest in Cobbet to avoid
recapture of Low-income Tax Credits. There can be no assurance the plan will be
implemented, and if not, MHFA would be expected to retain its rights under the
loan documents. The future financial viability of Cobbet is highly uncertain.
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. Registrant's investment balance in Cobbet, after cumulative
equity losses, became zero during the year ended March 30, 1994.
The terms of the partnership agreement of Hilltop require the management agent
to defer property management fees in order to avoid a default under the
mortgage. Although Hilltop reported near break even operations for the three
months ended March 31, 1999, Hilltop reported a significant operating deficit in
1998 resulting primarily from costs associated with tenant turnover and a
dispute regarding the administration of the Section 8 contract by the local
housing authority. The Local General Partner has been conducting discussions
with the local housing authority in an effort to resolve what the Local General
Partner considers to be excessive requirements placed on the Property by the
local housing authority. Payments on the mortgage and real estate taxes are
current. Registrant's investment balance in Hilltop, after cumulative equity
losses and an adjustment to the investment's carrying value, became zero during
the year ended March 30, 1999. All of the Low-Income Tax Credits have been
allocated since 1989 and are scheduled to expire in 1999. Of Registrant's total
annual Low-income Tax Credits, approximately 6% is allocated from Hilltop.
Year 2000 Compliance
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a two
digit year is commonly referred to as the year 2000 compliance ("Y2K") issue. As
the year 2000 approaches, such systems may be unable to accurately process
certain data-based information. Many businesses may need to upgrade existing
systems or purchase new ones to correct the Y2K issue. Registrant has performed
an assessment of its computer software and hardware and believes it has made the
necessary upgrades in an effort to ensure compliance. However, there can be no
assurance that the systems of other entities on which Registrant relies,
including the Local Partnerships which report to Registrant on a periodic basis
for the purpose of Registrant's reporting to its investors, will be timely
converted. Registrant has corresponded with the Local Partnerships to ensure
their awareness of the Y2K issue and has requested details regarding their
efforts to ensure compliance. The total cost associated with Y2K implementation
is not expected to materially impact Registrant's financial position or results
of operations in any given year. However, there can be no assurance that a
failure to convert by Registrant or another entity would not have a material
adverse impact on Registrant.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Registrant has invested a significant portion of its working capital reserves in
corporate bonds and U.S. Treasury instruments. The market value of Registrant's
investments in bonds is subject to fluctuation based upon changes in interest
rates relative to each investment's maturity date. Since Registrant's
investments in bonds have various maturity dates through 2023, the value of such
investments may be adversely impacted in an environment of rising interest rates
in the event Registrant decides to liquidate any such investment prior to its
maturity. Although Registrant may utilize reserves to assist an underperforming
Property, it otherwise intends to hold such investments to their respective
maturities. Therefore, Registrant does not anticipate any material adverse
impact in connection with such investments.
The Properties are generally located where there is a demand for low-income
housing. Accordingly, there is a significant likelihood that new low-income
housing properties could be built in the general vicinity of the respective
Properties. As a result, the respective Properties' ability to operate at high
occupancy levels is subject to competition from newly built low-income housing.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
Registrant is not aware of any material legal proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None; see Item 5 regarding mortgage defaults of a Local Partnership.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
As discussed in Part I, Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations, Cobbet Hill
Associates Limited Partnership ("Cobbet") is unable to make the full
mandatory debt service payments on its first mortgage as a result of
the lender's elimination of its operating deficit loan program. The
lender has notified Cobbet that it considers such mortgages to be in
default. The local general partners have agreed to a plan, with
modifications proposed by the lender, to recapitalize Cobbet. As of
the date of this report, the lender has not executed the plan.
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AMERICAN TAX CREDIT PROPERTIES L.P.
(a Delaware limited partnership)
by: Richman Tax Credit Properties L.P.,
General Partner
by: Richman Tax Credit Properties Inc.,
General Partner
Dated: August 13, 1999 /s/ Richard Paul Richman
--------------------------------------
by: Richard Paul Richman
President, Chief Executive Officer and
Director of the general partner of the
General Partner
Dated: August 13, 1999 /s/ Neal Ludeke
--------------------------------------
by: Neal Ludeke
Vice President and Treasurer of the
general partner of the General Partner
(Principal Financial and Accounting
Officer of Registrant)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AMERICAN TAX CREDIT PROPERTIES L.P.
(a Delaware limited partnership)
by: Richman Tax Credit Properties L.P.,
General Partner
by: Richman Tax Credit Properties Inc.,
General Partner
Dated: August 13, 1999 /s/ Richard Paul Richman
----------------------------------------
Richard Paul Richman
President, Chief Executive Officer and
Director of the general partner of the
General Partner
Dated: August 13, 1999 /s/ Neal Ludeke
----------------------------------------
Neal Ludeke
Vice President and Treasurer of the
general partner of the General Partner
(Principal Financial and Accounting
Officer of Registrant)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the quarter ended June 29, 1999 Form 10-Q 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.
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-2000
<PERIOD-START> MAR-31-1999
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0
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</TABLE>
