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, 2000
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
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
BALANCE SHEETS
(UNAUDITED)
June 29, March 30,
Notes 2000 2000
----- ---- ----
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents 2 $ 316,167 $ 61,363
Investments in bonds available-for-sale 2 1,993,188 2,255,521
Investment in local partnerships 3 2,404,844 2,595,453
Interest receivable 40,415 49,489
------------ -------------
$ 4,754,614 $ 4,961,826
============ =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $62,307 $52,548
Payable to general partner 164,414 74,659
------------ -------------
226,721 127,207
------------ -------------
Commitments and contingencies 3
Partners' equity (deficit)
General partner (321,081) (318,046)
Limited partners (41,286 units of limited partnership
interest outstanding) --------------- 5,083,367
4,782,874
Accumulated other comprehensive income, net 2 66,100 69,298
------------ -------------
4,527,893 4,834,619
------------ -------------
$ 4,754,614 $ 4,961,826
============ =============
See Notes to Financial Statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 29, 2000 AND 1999
(UNAUDITED)
Notes 2000 1999
----- ---- ----
REVENUE
<S> <C> <C> <C>
Interest $ 47,723 $ 47,769
Other income from local partnerships 3 - 7,500
----------- ------------
TOTAL REVENUE 47,723 55,269
----------- ------------
EXPENSES
Administration fees 45,931 45,931
Management fee 43,867 43,867
Professional fees 12,246 56,715
Printing, postage and other 9,829 9,284
----------- ------------
TOTAL EXPENSES 111,873 155,797
----------- ------------
Loss from operations (64,150) (100,528)
Equity in loss of investment in local partnerships 3 (239,378) (203,917)
----------- ------------
NET LOSS (303,528) (304,445)
Other comprehensive loss, net 2 (3,198) (55,232)
----------- ------------
COMPREHENSIVE LOSS $ (306,726) $ (359,677)
=========== ============
NET LOSS ATTRIBUTABLE TO
General partner $ (3,035) $ (3,044)
Limited partners (300,493) (301,401)
----------- ------------
$ (303,528) $ (304,445)
=========== ============
NET LOSS per unit of limited partnership interest
(41,286 units of limited partnership interest) $ (7.28) $ (7.30)
=========== ============
See Notes to Financial Statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 29, 2000 AND 1999
(UNAUDITED)
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Interest received 58,931 $ 60,202
Cash paid for
administration fees - (38,191)
professional fees - (80,135)
printing, postage and other expenses (12,358) (9,284)
---------- ---------
Net cash provided by (used in) operating activities 46,573 (67,408)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash distributions and other income from local partnerships 16,675 12,500
Advances to Local Partnerships (65,444)
Investments in bonds (includes $386 of accrued interest in 1998) (257,558)
Maturities/redemptions of bonds 257,000 284,180
---------- ---------
Net cash provided by (used in) investing activities 208,231 39,122
---------- ---------
Net increase in cash and cash equivalents 254,804 (28,286)
Cash and cash equivalents at beginning of period 61,363 86,232
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 316,167 $ 57,946
========= =========
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized loss on investments in bonds available-for-sale, net $ (3,198) $ (55,232)
========= =========
</TABLE>
See reconciliation of net loss to net cash provided by (used in) operating
activities on page 6.
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF CASH FLOWS - (Continued)
THREE MONTHS ENDED JUNE 29, 2000 AND 1999
(UNAUDITED)
2000 1999
---- ----
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
<S> <C> <C>
Net loss $ (303,528) $ (304,445)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities
Equity in loss of investment in local partnerships 239,378 203,917
Distributions from local partnerships classified as other income (7,500)
Amortization of net premium on investments in bonds 6,194 6,845
Accretion of zero coupon bonds (4,059) (4,059)
Increase in payable to general partner 89,755 43,867
Increase (decrease) in accounts payable and accrued expenses 9,759 (15,680)
Decrease in interest receivable 9,074 9,647
------------- ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 46,573 $ (67,408)
============= ============
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 29, 2000
(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, 2000 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, 2000 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, 2000, 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 $ 352,749 $ -- $ (823) $ 351,926
After five years through ten years 336,921 -- 332,965 (3,956)
----------- ---------- ----------- -----------
689,670 -- (4,779) 684,891
----------- ---------- ----------- -----------
U.S. Treasury debt securities
Within one year 101,697 3,850 -- 105,547
After one year through five years 885,389 85,072 -- 970,461
----------- ---------- ----------- -----------
987,086 88,922 -- 1,076,008
----------- ---------- ----------- -----------
U.S. government and agency securities
After five years through ten years 250,332 -- (18,043) 232,289
----------- ---------- ----------- -----------
$ 1,927,088 $ 88,922 $ (22,822) $ 1,993,188
=========== ========== =========== ===========
</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 restricted cash and cash
equivalents of approximately $257,000. As of August 10, 2000, no amounts
have been drawn under the terms of the letter of credit.
7
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 2000
(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, 2000, the Local Partnerships have outstanding
mortgage loans payable totaling approximately $72,496,000 and accrued
interest payable on such loans totaling approximately $4,039,000, 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, 2000, the investment in Local
Partnerships activity consists of the following:
Investment in Local Partnerships as of March 30, 2000 $ 2,595,453
Equity in loss of investment in local partnerships (239,378)*
Cash distributions received from Local Partnerships (16,675)
Advances to local partnerships 65,444
Investment in Local Partnerships as of June 29, 2000 $2,404,844
==========
* 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
$554,892 for the three months ended March 31, 2000 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, 2000 and December 31, 1999 and the combined unaudited statements of
operations of the Local Partnerships for the three months ended March 31,
2000 and 1999 are reflected on pages 9 and 10, respectively.
8
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 2000
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of March 31, 2000
and December 31, 1999 are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,426,778 $ 1,459,390
Rents receivable 317,297 301,752
Escrow deposits and reserves 3,076,477 3,044,082
Land 3,850,061 3,850,061
Buildings and improvements (net of accumulated depreciation
of $41,618,364 and $40,669,508) 64,462,935 65,367,834
Intangible assets (net of accumulated amortization of $663,629
and $647,133) 1,681,285 1,697,780
Other 950,497 829,251
------------- -------------
$ 75,765,330 $ 76,550,150
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,414,989 $ 1,436,510
Due to related parties 5,359,785 5,238,017
Mortgage loans 72,495,576 72,661,234
Notes payable 1,084,607 1,086,384
Accrued interest 4,038,848 3,920,983
Other 448,027 318,438
------------- -------------
84,841,832 84,661,566
------------- -------------
Partners' equity (deficit)
American Tax Credit Properties L.P.
Capital contributions, net of distributions 33,892,000 33,975,428
Cumulative loss (30,616,288) (30,376,910)
------------- -------------
3,275,712 3,598,518
------------- -------------
General partners and other limited partners, including
ATCP II Capital contributions, net of distributions 509,267 509,267
Cumulative loss (12,861,481) (12,219,201)
------------- -------------
(12,352,214) (11,709,934)
------------- -------------
(9,076,502) (8,111,416)
------------- -------------
$ 75,765,330 $ 76,550,150
============= =============
</TABLE>
9
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 2000
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the
three months ended March 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
REVENUE
<S> <C> <C>
Rental $ 3,830,624 $ 3,794,930
Interest and other 102,090 58,536
------------- ------------
TOTAL REVENUE 3,932,714 3,853,466
------------- ------------
EXPENSES
Administrative 542,340 541,047
Utilities 353,419 329,335
Operating, maintenance and other 893,812 718,659
Taxes and insurance 449,628 431,880
Financial (including amortization of $16,496 and $16,573) 1,623,655 1,615,788
Depreciation 951,518 947,476
------------- -------------
TOTAL EXPENSES 4,814,372 4,584,185
------------- -------------
NET LOSS $ (881,658) $ (730,719)
============= =============
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties L.P. $ (239,378) $ (203,917)
General partners and other limited partners, including ATCP II,
which includes $622,987 and $515,514 of Partnership loss in
excess of investment (642,280) (526,802)
------------- -------------
$(881,658) $ (730,719)
============= =============
</TABLE>
The combined results of operations of the Local Partnerships for the three
months ended March 31, 2000 are not necessarily indicative of the results
that may be expected for an entire operating period.
10
<PAGE>
AMERICAN TAX CREDIT PROPERTIES L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 2000
(UNAUDITED)
3. Investment in Local Partnerships (continued)
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. MHFA has recently adopted a plan to
recapitalize several of the ODL program properties with funds to be contributed
from the admission of a new limited partner, and MHFA has commissioned an
institutional broker (the "Broker") to identify such a new limited partner.
However, MHFA has communicated with Cobbet (confirmed by letter dated February
7, 2000) that Cobbet has not been included in MHFA's current recapitalization
program because Cobbet is party to a project based Section 8 contract. However,
MHFA has communicated that Cobbet is free to identify a new limited partner,
independent of MHFA's process, with the intention similar to that of the
recapitalization plan. In the February 7, 2000 letter, MHFA provided Cobbet
until March 3, 2000 to notify MHFA of its desire to modify its mortgage loan by
paying the required fee (which as a practical matter would require a
recapitalization investor) and made no reference in the letter to the previous
discussion in which MHFA indicated that Cobbet could locate a separate
recapitalization investor. Cobbet has replied to MHFA, indicating its desire to
locate a recapitalization investor. The Local General Partners have contacted
the Broker, which has indicated that a private investor may be interested in a
recapitalization plan for Cobbet. On August 7, 2000, the General Partners of
Cobbett met with MHFA to discuss future capital improvements. A contribution
payment of $300,000 by the Partnership to help fund the capital improvements and
the proposed recapitalization was encouraged by MHFA. MHFA approved all of the
items on the agenda and was strongly encouraging concerning their participation
in the recapitalization plan. If such a plan were 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 that a plan will be implemented, and if not, MHFA is likely 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.
The Partnership advanced $65,444 during the three month period ended June 29,
2000 to South Drexel to fund an operating deficit which includes making
necessary capital improvements to the property and keeping mortgage payments
current. The advance has been recorded as investment in local partnerships in
the accompanying balance sheet as of June 29, 2000.
4. Additional Information
Additional information, including the audited March 30, 2000 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, 2000 on file with the Securities
and Exchange Commission.
11
<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, 2000, American Tax Credit Properties L.P. (the "Registrant") has
not experienced a significant change in financial condition as compared to March
30, 2000. 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, 2000,
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 $7,500
during the three months ended June 29, 2000 (which includes a net unrealized
gain on investments in bonds of approximately $66,000, amortization of net
premium on investments in bonds of approximately $6,100 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, 2000, 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, 2000 of $239,378 and cash distributions received
from Local Partnerships of $16,675. Payable to general partner in the
accompanying balance sheet as of June 29, 2000 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, 2000 and 1999
resulted in net losses of $303,528 and $304,445, respectively. Other
comprehensive loss for the three months ended June 29, 2000 and 1999 resulted
from a net unrealized loss on investments in bonds available-for-sale of $3,198
and $55,232, respectively.
The Local Partnerships' net loss of approximately $813,000 for the three months
ended March 31, 2000 was attributable to rental and other revenue of
approximately $3,933,000, exceeded by operating and interest expenses (including
interest on non-mandatory debt) of approximately $3,778,000 and approximately
$968,000 of depreciation and amortization expenses. 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.
12
<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)
non-mandatory debt) of approximately $3,909,000 and approximately $1,025,000 of
depreciation and amortization expenses.
The results of operations of the Local Partnerships for the three months ended
March 31, 2000 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 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 "Ten Year Credit Period"). The Ten Year
Credit Period has been fully exhausted by virtually all of the Properties as of
March 31, 2000 and will be fully exhausted by all of the Properties as of
December 31, 2000. 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
have generated substantially all of the Low-income Tax Credits allocated to
limited partners as of March 31, 2000.
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. Since
October 1997, the United States Department of Housing and Urban Development
("HUD") has issued a series of directives related to project based Section 8
contracts that define owners' notification responsibilities, advise owners of
project based Section 8 properties of what their options are regarding the
renewal of Section 8 contracts, provide guidance and procedures to owners,
management agents, contract administrators and HUD staff concerning renewal of
Section 8 contracts, provide policies and procedures on setting renewal rents
and handling renewal rent adjustments and provide 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 renewal under applicable HUD
guidelines.
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, 2000, 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 above 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.
13
<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 September 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 that 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. MHFA has recently
adopted a plan to recapitalize several of the ODL program properties with funds
to be contributed from the admission of a new limited partner, and MHFA has
commissioned an institutional broker (the "Broker") to identify such a new
limited partner. However, MHFA has communicated with Cobbet (confirmed by letter
dated February 7, 2000) that Cobbet has not been included in MHFA's current
recapitalization program because Cobbet is party to a project based Section 8
contract. However, MHFA has communicated that Cobbet is free to identify a new
limited partner, independent of MHFA's process, with the intention similar to
that of the recapitalization plan. In the February 7, 2000 letter, MHFA provided
Cobbet until March 3, 2000 to notify MHFA of its desire to modify its mortgage
loan by paying the required fee (which as a practical matter would require a
recapitalization investor) and made no reference in the letter to the previous
discussion in which MHFA indicated that Cobbet could locate a separate
recapitalization investor. Cobbet has replied to MHFA, indicating its desire to
locate a recapitalization investor. The Local General Partners have contacted
the Broker, which has indicated that a private investor may be interested in a
recapitalization plan for Cobbet. On August 7, 2000, the General Partners of
Cobbett met with MHFA to discuss future capital improvements. A contribution
payment of $300,000 by the Partnership to help fund the capital improvements and
the proposed recapitalization was encouraged by MHFA. MHFA approved all of the
items on the agenda and was strongly encouraging concerning their participation
in the recapitalization plan. If such a plan were 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.
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
that a plan will be implemented, and if not, MHFA is likely 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. Registrant's
investment balance in Cobbet, after cumulative equity losses, became zero during
the year ended March 30, 1994. Cobbet generated approximately $19 per Unit per
year of credits to the limited partners upon the expiration of its Low-income
Tax Credit allocation in 1999.
4611 South Drexel Limited Partnership ("South Drexel") reported an operating
deficit of approximately $77,000 for the three months ended March 31, 2000
resulting from deferred unit maintenance and required capital improvements.
Registrant advanced approximately $65,000 during the three month period ended
June 29, 2000. Payments on the mortgage and real estate taxes are current.
Registrant's investment balance in South Drexel, after cumulative equity losses,
became zero during the year ended March 30, 1996. South Drexel will have
generated approximately $2 per Unit per year of credits to the limited partners
upon the expiration of its Low-income Tax Credit allocation in 2000.
Cityside Apartments L.P. ("Cityside") reported an operating deficit of
approximately $36,000 for the three months ended March 31, 2000 due to declining
occupancy and deferred unit maintenance and required capital improvements.
Payments on the mortgage and real estate taxes are current. Registrant's
investment balance in South Drexel, after cumulative equity losses, became zero
during the year ended March 30, 1996.
14
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Year 2000
Registrant successfully completed a program to ensure Year 2000 readiness. As a
result, Registrant had no Year 2000 problems that affected its business, results
of operations or financial condition.
15
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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 the lender 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. Although
meetings have been ongoing, as of the date of this report, a plan has
not been formalized.
Item 6. Exhibits and Reports on Form 8-K
None
16
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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 14, 2000 /s/ Richard Paul Richman
------------------------------------------
by: Richard Paul Richman
President, Chief Executive Officer and
Director of the general partner of the
General Partner
Dated: August 14, 2000 /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)
17
