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 30, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-24660
LIBERTY TAX CREDIT PLUS II L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3458180
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securi-
ties 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 requirements for
the past 90 days. Yes X No ____
<PAGE>
<TABLE>
PART I - Financial Information
Item 1. Financial Statements
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
June 30, March 31,
1999 1999
<S> <C> <C>
ASSETS
Property and equipment, net of
accumulated depreciation
of $74,103,705 and $72,210,811,
respectively $165,492,221 $167,205,538
Cash and cash equivalents 2,516,320 3,334,363
Cash held in escrow 8,328,911 6,902,143
Deferred costs, net of accumulated
amortization of $3,531,944
and $3,485,317, respectively 3,896,938 3,751,361
Other assets 4,340,668 4,333,107
Total assets $184,575,058 $185,526,512
LIABILITIES AND PARTNERS' CAPITAL
Mortgage notes payable $119,866,825 $116,033,679
Accounts payable and other
liabilities 8,080,917 9,521,924
Due to local general partners and
affiliates 9,842,332 10,045,549
Due to general partners and affiliates 7,734,352 7,383,024
Due to selling partners 2,131,326 3,579,455
Total liabilities 147,655,752 146,563,631
Minority interest 3,774,347 4,017,226
Commitments and contingencies (Note 4)
Partners' capital (deficit)
Limited partners (115,917.5 BACs
issued and outstanding) 33,844,193 35,626,882
General partners (699,234) (681,227)
Total partners' capital (deficit) 33,144,959 34,945,655
Total liabilities and partners'
capital (deficit) $184,575,058 $185,526,512
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1999 1998
<S> <C> <C>
Revenues
Rentals, net $ 6,417,193 $ 6,356,013
Other 174,492 123,442
Total revenue 6,591,685 6,479,455
Expenses
General and administrative 1,584,211 1,600,705
General and administrative-
related parties (Note 2) 635,696 652,200
Repairs and maintenance 937,312 1,130,801
Operating 852,203 905,625
Taxes 279,789 287,259
Insurance 294,654 283,812
Interest 1,984,273 1,955,007
Depreciation and amortization 1,939,521 1,989,432
Total expenses 8,507,759 8,804,841
Loss before minority interest (1,916,074) (2,325,386)
Minority interest in loss of
subsidiaries 115,378 143,727
Net loss $(1,800,696) $(2,181,659)
Net loss-limited partners $(1,782,689) $(2,159,842)
Number of BACs outstanding 115,917.5 115,917.5
Net loss per BAC $ (15.38) $ (18.63)
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Capital
(Deficit)
(Unaudited)
<CAPTION>
Limited General
Total Partners Partners
<S> <C> <C> <C>
Partners' capital
(deficit) -
April 1, 1999 $34,945,655 $35,626,882 $(681,227)
Net loss (1,800,696) (1,782,689) (18,007)
Partners' capital
(deficit) -
June 30, 1999 $33,144,959 $33,844,193 $(699,234)
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,800,696) $(2,181,659)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 1,939,521 1,989,432
Minority interest in loss of
subsidiaries (115,378) (143,727)
(Increase) decrease in other assets (7,561) 83,079
Increase in cash held
in escrow (1,197,224) (311,997)
Decrease in accounts payable and
other liabilities (1,441,007) (683,871)
Increase in due to general partners
and affiliates 351,328 471,974
Increase in due to local general
partners and affiliates 365,497 732,462
Decrease in due to local general
partners and affiliates (568,714) (43,823)
Total adjustments (673,538) 2,093,529
Net cash used in operating
activities (2,474,234) (88,130)
Cash flows from investing activities:
Acquisitions of property and
equipment (179,577) (83,947)
Increase in cash held in escrow (229,544) (70,885)
Net cash used in investing
activities (409,121) (154,832)
Cash flows from financing activities:
Increase in deferred costs (192,204) 0
Repayments of mortgage notes (2,031,854) (378,658)
Proceeds of mortgage notes 5,865,000 0
(Decrease) increase in due to selling
partners (1,448,129) 1,875
Decrease in capitalization
of consolidated subsidiaries
attributable to minority
interest (127,501) (111,500)
Net cash provided by (used in)
financing activities 2,065,312 (488,283)
Net decrease in cash and
cash equivalents (818,043) (731,245)
Cash and cash equivalents at
beginning of period $ 3,334,363 $ 4,177,583
Cash and cash equivalents at
end of period $ 2,516,320 $ 3,446,338
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999
(Unaudited)
Note 1 - General
The consolidated financial statements include the accounts of
Liberty Tax Credit Plus II L.P. (the "Partnership") and 27 subsidi-
ary partnerships ("subsidiaries", "subsidiary partnerships" or "Lo-
cal Partnerships") in which the Partnership is the limited partner.
Through the rights of the Partnership and/or Related Credit Prop-
erties III L.P., a Delaware limited partnership, Liberty Associates II
L.P., a Delaware limited partnership, or Liberty GP II Inc., a Dela-
ware corporation (each a "General Partner" and collectively, the
"General Partners"), which General Partners have a contractual
obligation to act on behalf of the Partnership, to remove the gen-
eral partner of the subsidiary partnerships (each a "Local General
Partner), and to approve certain major operating and financial
decisions, the Partnership has a controlling financial interest in the
subsidiary partnerships.
For financial reporting purposes, the Partnership's fiscal quarter
ends June 30. The Partnership's fiscal quarter ends March 31 in
order to allow adequate time for the subsidiaries' financial state-
ments to be prepared and consolidated. All subsidiary partner-
ships have fiscal quarters ending June 30. Accounts of the sub-
sidiary partnerships have been adjusted for intercompany transac-
tions from April 1 through June 30.
All intercompany accounts and transactions have been eliminated
in consolidation.
Increases (decreases) in the capitalization of consolidated subsidi-
ary partnerships attributable to minority interest arise from cash
contributions from and cash distributions to the minority interest
partners.
Losses attributable to minority interests which exceed the minority
interests' investment in a subsidiary partnership have been
charged to the Partnership. Such losses aggregated $140,000 and
$132,000 for the three months ended June 30, 1999 and 1998, re-
spectively. The Partnership's investment in each subsidiary part-
nership is equal to the respective subsidiary partnership's partners'
equity less minority interest capital, if any. In consolidation, all
subsidiary partnership losses are included in the Partnership's
capital account except for losses allocated to minority interest
capital.
The books and records of the Partnership are maintained on the
accrual basis in accordance with generally accepted accounting
principles. In the opinion of the general partners of the Partner-
ship (the "General Partners"), the accompanying unaudited finan-
cial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial
position of the Partnership as of June 30, 1999 and the results of
operations and cash flows for the three months ended June 30,
1999 and 1998. However, the operating results for the three
months ended June 30, 1999 may not be indicative of the results
for the year.
Certain information and note disclosures normally included in
financial statements prepared in accordance with generally ac-
cepted accounting principles have been omitted or condensed.
These consolidated financial statements should be read in conjunc-
tion with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K for the year ended
March 31, 1999.
Note 2 - Related Party Transactions
One of the General Partners has a 1% interest as a special limited
partner in each of the subsidiary partnerships. An affiliate of the
General Partners also has a minority interest in certain subsidiary
partnerships.
<TABLE>
The costs incurred to related parties for the three months ended
June 30, 1999 and 1998 were as follows:
<CAPTION>
Three Months Ended
June 30,
1999 1998
<S> <C> <C>
Partnership management fees (a) $ 374,000 $ 374,000
Expense reimbursement (b) 25,330 44,976
Property management fees incurred
to affiliates of the General Partners (c) 89,268 87,586
Local administrative fee (d) 12,000 13,000
Total general and administrative-
General Partners 500,598 519,562
Property management fees incurred
to affiliates of the subsidiary
partnerships' general partners (c) 135,098 132,638
Total general and administrative-
related parties $ 635,696 $ 652,200
</TABLE>
(a) The General Partners are entitled to receive a partnership
management fee, after payment of all Partnership expenses, which
together with the annual local administrative fees will not exceed
a maximum of 0.5% per annum of invested assets (as defined in
the Partnership Agreement), for administering the affairs of the
Partnership. The partnership management fee, subject to the fore-
going limitation, will be determined by the General Partners in
their sole discretion based upon their review of the Partnership's
investments. Partnership management fees owed to the General
Partners amounting to approximately $5,744,000 and $5,370,000
were accrued and unpaid as of June 30, 1999 and March 31, 1999,
respectively. Without the General Partner's continued accrual
without payment, the Partnership will not be in a position to meet
its obligations. The General Partners have continued allowing the
accrual without payment of these amounts but are under no obli-
gation to do so.
(b) The Partnership reimburses the General Partners and their
affiliates for actual Partnership operating expenses incurred by the
General Partners and their affiliates on the Partnership's behalf.
The amount of reimbursement from the Partnership is limited by
the provisions of the Partnership Agreement. Another affiliate of
the General Partners performs asset monitoring for the Partner-
ship. These services include site visits and evaluations of the sub-
sidiary partnerships' performance.
(c) Property management fees incurred by subsidiary partnerships
amounted to $395,949 and $405,770 for the three months ended
June 30, 1999 and 1998, respectively. Of these fees $224,366 and
$220,224 were incurred to affiliates of the Local General Partners.
Included in amounts incurred to affiliates of the Local General
Partners are $89,268 and $87,586 for the three months ended June
30, 1999 and 1998, respectively, which were also incurred to affili-
ates of the Partnership.
(d) Liberty Associates II L.P., a special limited partner of the sub-
sidiary partnerships, is entitled to receive a local administrative fee
of up to $2,500 per year from each subsidiary partnership.
Note 3 - Mortgage Note Payable
Rolling Green L.P. ("Rolling Green")
On February 1, 1999, Rolling Green refinanced its existing indebt-
edness by borrowing $5,865,000 from the United States Depart-
ment of Housing and Urban Development ("HUD"). The loan
bears interest at the rate of 6.85% per annum, and matures on
March 1, 2034. Rolling Green's prior mortgage indebtedness in
the principal amount of approximately $1,671,000 and a purchase
money note of $1,450,000 along with $1,695,000 in accrued interest
were repaid. Additional funds in the amount of $1,049,000 were
added to the mortgage escrow.
Note 4 - Commitments and Contingencies
There were no material changes and/or additions to disclosures
regarding the subsidiary partnerships which were included in the
Partnership's Annual Report on Form 10-K for the period ended
March 31, 1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Con-
dition and Results of Operations
Liquidity and Capital Resources
The Partnership's primary sources of funds are rental revenues
which are fully utilized at the property level and cash distributions
from the operations of the Local Partnerships in which the Part-
nership has invested. These sources of funds are available to meet
obligations of the Partnership. During the three months ended
June 30, 1999, distributions received from operations of the Local
Partnerships were $6,300.
As of June 30, 1999 the Partnership has invested all of the net pro-
ceeds in twenty-seven Local Partnerships. Approximately
$368,000 of the purchase price remains to be paid (none of which
is being held in escrow).
During the three months ended June 30, 1999, cash and cash
equivalents decreased approximately $818,000. This decrease was
due to cash used in operating activities ($2,474,000), acquisitions
of property and equipment ($180,000), a decrease in capitalization
of consolidated subsidiaries attributable to minority interest
($128,000), a decrease in due to selling partners ($1,448,000), an
increase in cash held in escrow relating to investing activities
($230,000) and an increase in deferred costs ($192,000), which
exceeded net proceeds of mortgage notes ($3,833,000). Included in
the adjustments to reconcile the net loss to cash used in operating
activities is depreciation and amortization ($1,940,000).
Partnership management fees owed to the General Partners
amounting to approximately $5,744,000 and $5,370,000 were ac-
crued and unpaid as of June 30, 1999 and March 31, 1999, respec-
tively. Without the General Partners continued accrual without
payment, the Partnership will not be in a position to meet its obli-
gations. The General Partners have continued allowing the ac-
crual without payment of these amounts but are under no obliga-
tion to continue to do so.
Management is not aware of any trends or events, commitments
or uncertainties which have not otherwise been disclosed, that will
or are likely to impact liquidity in a material way. Management
believes the only impact would be from laws that have not yet
been adopted. The portfolio is diversified by the location of the
properties around the United States so that if one area of the coun-
try is experiencing downturns in the economy, the remaining
properties in the portfolio may be experiencing upswings. How-
ever, the geographic diversification of the portfolio may not pro-
tect against a general downturn in the national economy. The
Partnership has fully invested the proceeds of its offerings in 27
Local Partnerships, all of which fully have their tax credits in
place. The tax credits are attached to the project for a period of ten
years and are transferable with the property during the remainder
of such ten year period. If the General Partners determined that a
sale of a property is warranted, the remaining tax credits would
transfer to the new owner, thereby adding value to the property
on the market, which are not included in the financial statement
carrying amount.
Results of Operations
Results of operations for the three months ended June 30, 1999
consisted primarily of the results of the Partnership's investment
in twenty-seven Local Partnerships.
Rental income increased approximately 1% for the three months
ended June 30, 1999 as compared to the corresponding period in
1998 primarily due to rental rate increases.
Other income increased approximately $51,000 for the three
months ended June 30, 1999 as compared to the corresponding
period in 1998 primarily due to legal settlements received by two
Local Partnerships.
Total expenses, excluding repairs and maintenance remained
fairly consistent with a decrease of approximately 1% for the three
months ended June 30, 1999 as compared to the corresponding
period in 1998.
Repairs and maintenance decreased approximately $193,000 for
the three months ended June 30, 1999 as compared to the corre-
sponding period in 1998 primarily due to repairs required by a
loan agreement at one Local Partnership in 1998, and the exterior
painting of the building at a second Local Partnership in 1998.
Year 2000 Compliance
The Partnership utilizes the computer services of an affiliate of the
General Partner. The affiliate of the General Partner has upgraded
its computer information systems to be year 2000 compliant. The
most likely worst case scenario that the General Partner faces is
that computer operations will be suspended for a few days to a
week commencing on January 1, 2000. The Partnership contin-
gency plan is to have (i) a complete backup done on December 31,
1999 and (ii) both electronic and printed reports generated for all
critical data up to and including December 31, 1999.
In regard to third parties, the General Partner is in the process of
evaluating the potential adverse impact that could result from the
failure of material service providers to be year 2000 compliant. A
detailed survey and assessment was sent to material third parties
in the fourth quarter of 1998. The Partnership has received assur-
ances from a majority of the material service providers with which
it interacts that they have addressed the year 2000 issues and is
evaluating these assurances for their adequacy and accuracy. In
cases where the Partnership has not received assurances from
third parties, it is initiating further mail and/or phone correspon-
dence. The Partnership relies heavily on third parties and is vul-
nerable to the failures of third parties to address their year 2000
issues. There can be no assurance given that the third parties will
adequately address their year 2000 issues.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
None.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceeding - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K - No reports on Form 8-K were
filed during the quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
LIBERTY TAX CREDIT PLUS II L.P.
(Registrant)
By: RELATED CREDIT PROPERTIES II L.P.,
a General Partner
By: Related Credit Properties II Inc.,
its General Partner
Date: August 11, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: August 11, 1999
By: /s/ Glenn F. Hopps
Glenn F. Hopps,
Treasurer
(principal accounting officer)
and
By: LIBERTY GP II INC.,
a General Partner
Date: August 11, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: August 11, 1999
By: /s/ Glenn F. Hopps
Glenn F. Hopps,
Treasurer
(principal accounting officer)
and
BY: LIBERTY ASSOCIATES II, L.P.
a General Partner
BY: Related Credit Properties II, Inc.,
its General Partner
Date: August 11, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: August 11, 1999
By: /s/ Glenn F. Hopps
Glenn F. Hopps,
Treasurer
(principal accounting officer)
and
By: Liberty GP II Inc.,
its General Partner
Date: August 11, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: August 11, 1999
By: /s/ Glenn F. Hopps
Glenn F. Hopps,
Treasurer
(principal accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted
from the financial statements for Liberty Tax Credit Plus II L.P.
and is qualified in its entirety by reference to such financial state-
ments
</LEGEND>
<CIK> 0000832141
<NAME> Liberty Tax Credit Plus II L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 10,845,231
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,340,668
<PP&E> 239,595,926
<DEPRECIATION> 74,103,705
<TOTAL-ASSETS> 184,575,058
<CURRENT-LIABILITIES> 25,657,601
<BONDS> 121,998,151
0
0
<COMMON> 0
<OTHER-SE> 36,919,306
<TOTAL-LIABILITY-AND-EQUITY> 184,575,058
<SALES> 0
<TOTAL-REVENUES> 6,591,685
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,523,486
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,984,273
<INCOME-PRETAX> (1,916,074)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,800,696)
<EPS-BASIC> (15.38)
<EPS-DILUTED> 0
</TABLE>
