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 September 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>
September 30, March 31,
1999 1999
<S> <C> <C>
ASSETS
Property and equipment, net of
accumulated depreciation
of $76,060,673 and $72,210,811,
respectively $163,709,759 $167,205,538
Cash and cash equivalents 3,100,116 3,334,363
Cash held in escrow 8,605,964 6,902,143
Deferred costs, net of accumulated
amortization of $3,602,985
and $3,485,317, respectively 3,827,529 3,751,361
Other assets 3,832,691 4,333,107
Total assets $183,076,059 $185,526,512
LIABILITIES AND PARTNERS' CAPITAL
Mortgage notes payable $119,565,326 $116,033,679
Accounts payable and other
liabilities 8,272,916 9,521,924
Due to local general partners and
affiliates 9,831,407 10,045,549
Due to general partners and affiliates 8,360,054 7,383,024
Due to selling partners 2,133,201 3,579,455
Total liabilities 148,162,904 146,563,631
Minority interest 3,693,334 4,017,226
Commitments and contingencies (Note 5)
Partners' capital (deficit)
Limited partners (115,917.5 BACs
issued and outstanding) 31,938,306 35,626,882
General partners (718,485) (681,227)
Total partners' capital (deficit) 31,219,821 34,945,655
Total liabilities and partners'
capital (deficit) $183,076,059 $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 Six Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues
Rentals, net $ 6,451,367 $ 6,512,131 $12,868,560 $12,868,144
Other 143,304 131,782 317,796 255,224
Total revenue 6,594,671 6,643,913 13,186,356 13,123,368
Expenses
General and
administrative 1,536,395 1,701,454 3,120,606 3,302,159
General and
administrative-
related parties
(Note 2) 656,715 657,669 1,292,411 1,309,869
Repairs and
maintenance 1,130,756 1,196,306 2,068,068 2,327,107
Operating 699,619 690,073 1,551,922 1,595,698
Taxes 261,219 262,774 541,008 550,033
Insurance 259,480 278,893 554,134 562,705
Interest 2,003,930 1,928,749 3,988,203 3,883,756
Depreciation and
amortization 2,028,009 1,997,120 3,967,530 3,986,552
Total expenses 8,576,123 8,713,038 17,083,882 17,517,879
Loss before
minority interest (1,981,452) (2,069,125) (3,897,526) (4,394,511)
Minority interest
in loss of
subsidiaries 56,314 109,609 171,692 253,336
Net loss $ (1,925,138) $ (1,959,516) $ (3,725,834) $ (4,141,175)
Net loss-limited
partners $ (1,905,887) $ (1,939,921) $ (3,688,576) $ (4,099,763)
Number of BACs
outstanding 115,917.5 115,917.5 115,917.5 115,917.5
Net loss per BAC $ (16.44) $ (16.74) $ (31.82) $ (35.37)
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 (3,725,834) (3,688,576) (37,258)
Partners' capital
(deficit) -
September 30, 1999 $31,219,821 $31,938,306 $(718,485)
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>
Six Months Ended
September 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,725,834) $(4,141,175)
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities:
Depreciation and amortization 3,967,530 3,986,552
Minority interest in loss of
subsidiaries (171,692) (253,336)
Decrease in other assets 500,416 85,148
Increase in cash held
in escrow (1,469,879) (579,683)
Decrease in accounts payable and
other liabilities (1,249,008) (491,617)
Increase in due to general partners
and affiliates 977,030 957,137
Increase in due to local general
partners and affiliates 383,991 837,078
Decrease in due to local general
partners and affiliates (598,133) (237,822)
Total adjustments 2,340,255 4,303,457
Net cash (used in) provided by
operating activities (1,385,579) 162,282
Cash flows from investing activities:
Acquisitions of property and
equipment (354,083) (224,265)
Increase in cash held in escrow (233,942) (121,929)
Net cash used in investing activities (588,025) (346,194)
Cash flows from financing activities:
Increase in deferred costs (193,836) (1,642)
Repayments of mortgage notes (2,333,353) (723,742)
Proceeds of mortgage notes 5,865,000 0
(Decrease) increase in due to selling
partners (1,446,254) 3,750
Decrease in capitalization
of consolidated subsidiaries
attributable to minority
interest (152,200) (111,501)
Net cash provided by (used in)
financing activities 1,739,357 (833,135)
Net decrease in cash and
cash equivalents (234,247) (1,017,047)
Cash and cash equivalents at
beginning of period 3,334,363 4,177,583
Cash and cash equivalents at
end of period $ 3,100,116 $ 3,160,536
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 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 II 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
each of the subsidiary partnerships.
For financial reporting purposes, the Partnership's fiscal quarter
ends September 30. The Partnership's fiscal quarter ends Septem-
ber 30 in order to allow adequate time for the subsidiaries' finan-
cial statements to be prepared and consolidated. All subsidiary
partnerships have fiscal quarters ending June 30. Accounts of the
subsidiary partnerships have been adjusted for intercompany
transactions from July 1 through September 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 $134,000 and
$127,000 and $274,000 and $259,000 for the three and six months
ended September 30, 1999 and 1998, respectively. The Partner-
ship's investment in each subsidiary partnership 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 each of the General Partners, the
accompanying unaudited financial statements contain all adjust-
ments (consisting only of normal recurring adjustments) necessary
to present fairly the financial position of the Partnership as of Sep-
tember 30, 1999, the results of operations for the three and six
months ended September 30, 1999 and 1998 and cash flows for the
six months ended September 30, 1999 and 1998. However, the
operating results for the six months ended September 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 and six months
ended September 30, 1999 and 1998 were as follows:
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Partnership manage-
ment fees (a) $ 374,000 $ 374,000 $ 748,000 $ 748,000
Expense reimburse-
ment (b) 35,100 47,883 60,430 92,859
Property manage-
ment fees incurred
to affiliates of the
General Partners (c) 89,268 87,585 178,536 175,171
Local administrative
fee (d) 12,000 13,000 24,000 26,000
Total general and
administrative-
General Partners 510,368 522,468 1,010,966 1,042,030
Property manage-
ment fees incurred
to affiliates of the
subsidiary
partnerships'
general
partners (c) 146,347 135,201 281,445 267,839
Total general
and administrative-
related parties $ 656,715 $ 657,669 $1,292,411 $1,309,869
</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 $6,118,000 and $5,370,000
were accrued and unpaid as of September 30, 1999 and March 31,
1999, respectively. Without the General Partners' continued ac-
crual without payment, the Partnership will not be in a position to
meet its obligations. The General Partners have continued allow-
ing the accrual without payment of these amounts but are under
no obligation 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 $421,686 and $413,351 and $817,635 and $819,121 for
the three and six months ended September 30, 1999 and 1998,
respectively. Of these fees $235,615 and $222,786 and $459,981
and $443,010 were incurred to affiliates of the Local General Part-
ners. Included in amounts incurred to affiliates of the Local Gen-
eral Partners are $89,268 and $87,585 and $178,536 and $175,171
for the three and six months ended September 30, 1999 and 1998,
respectively, which were also incurred to affiliates of the Partner-
ship.
(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 - Subsequent Event
Campeche Isle Apartments L.P. ("Campeche")
On October 6, 1999, Campeche refinanced its existing indebted-
ness by borrowing $4,125,000 from Lehman Brothers Bank, FSB.
The loan bears interest at the rate of 8.02% per annum, and ma-
tures on November 1, 2006. Campeche's prior mortgage indebt-
edness in the principal amount of approximately $4,000,000 to-
gether with $25,000 in accrued interest was repaid. Additional
funds in the amount of $100,000 were added to the mortgage es-
crow.
Note 5 - 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 six months ended Sep-
tember 30, 1999, distributions received from operations of the
Local Partnerships were approximately $6,300.
As of September 30, 1999 the Partnership has invested all of the
net proceeds in twenty-seven Local Partnerships. Approximately
$350,000 of the purchase price remains to be paid (none of which
is being held in escrow).
During the six months ended September 30, 1999, cash and cash
equivalents decreased approximately $234,000. This decrease was
due to cash used in operating activities ($1,386,000), acquisitions
of property and equipment ($354,000), a decrease in capitalization
of consolidated subsidiaries attributable to minority interest
($152,000), a decrease in due to selling partners ($1,446,000), an
increase in cash held in escrow relating to investing activities
($234,000) and an increase in deferred costs ($194,000) which ex-
ceeded net proceeds of mortgage notes ($3,532,000). Included in
the adjustments to reconcile the net loss to cash used in operating
activities is depreciation and amortization ($3,968,000).
Partnership management fees owed to the General Partners
amounting to approximately $6,118,000 and $5,370,000 were ac-
crued and unpaid as of September 30, 1999 and March 31, 1999,
respectively. Without the General Partners 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 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 and six months ended Septem-
ber 30, 1999 consisted primarily of the results of the Partnership's
investment in twenty-seven Local Partnerships.
Rental income decreased approximately 1% and increased less
than 1% for the three and six months ended September 30, 1999 as
compared to the corresponding periods in 1998.
Other income increased approximately $12,000 and $63,000 for the
three and six months ended September 30, 1999 as compared to
the corresponding periods in 1998 primarily due to legal settle-
ments received by two Local Partnerships.
Total expenses, excluding repairs and maintenance remained
fairly consistent with a decrease of approximately 1% for both the
three and six months ended September 30, 1999 as compared to
the corresponding periods in 1998.
Repairs and maintenance decreased approximately $259,000 for
the six months ended September 30, 1999 as compared to the cor-
responding 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: November 1, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: November 1, 1999
By: /s/ Glenn F. Hopps
Glenn F. Hopps,
Treasurer
(principal accounting officer)
and
By: LIBERTY GP II INC.,
a General Partner
Date: November 1, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: November 1, 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: November 1, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: November 1, 1999
By: /s/ Glenn F. Hopps
Glenn F. Hopps,
Treasurer
(principal accounting officer)
and
By: Liberty GP II Inc.,
its General Partner
Date: November 1, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: November 1, 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> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 11,706,080
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,832,691
<PP&E> 239,770,432
<DEPRECIATION> 76,060,673
<TOTAL-ASSETS> 183,076,059
<CURRENT-LIABILITIES> 26,464,377
<BONDS> 121,698,527
0
0
<COMMON> 0
<OTHER-SE> 34,913,155
<TOTAL-LIABILITY-AND-EQUITY> 183,076,059
<SALES> 0
<TOTAL-REVENUES> 13,186,356
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13,095,679
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,988,203
<INCOME-PRETAX> (3,897,526)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,725,834)
<EPS-BASIC> (31.82)
<EPS-DILUTED> 0
</TABLE>
