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: 0-18405
American Tax Credit Properties II L.P.
(Exact name of Registrant as specified in its charter)
Delaware 13-3495678
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
Richman Tax Credit Properties II L.P.
599 West Putnam Avenue, 3rd Floor
Greenwich, Connecticut 06830
(Address of principal executive offices) (ZipCode)
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 II 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 II L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
June 29, March 30,
Notes 1999 1999
----- ------------- -------------
ASSETS
Cash and cash equivalents $ 1,189,573 $ 739,118
Investments in bonds available-for-sale 2 3,090,808 3,699,324
Investment in local partnerships 3 12,496,932 12,905,421
Interest receivable 50,256 65,900
------------- -------------
$ 16,827,569 $ 17,409,763
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 680,570 $ 645,210
Payable to general partner 608,256 585,806
Other 48,600 48,600
------------- -------------
1,337,426 1,279,616
------------- -------------
Commitments and contingencies 3
Partners' equity (deficit)
General partner (337,612) (331,942)
Limited partners (55,746 units of limited partnership
interest outstanding) 15,853,535 16,414,878
Accumulated other comprehensive income (loss), net 2 (25,780) 47,211
------------- -------------
15,490,143 16,130,147
------------- -------------
$ 16,827,569 $ 17,409,763
============= =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 29, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Notes 1999 1998
----- ---------- ----------
REVENUE
Interest $ 60,942 $ 83,384
Other income from local partnerships 6,132 388
---------- ----------
TOTAL REVENUE 67,074 83,772
---------- ----------
EXPENSES
Administration fees 74,826 74,826
Management fees 74,826 74,826
Professional fees 22,997 24,598
Printing, postage and other 9,324 12,478
---------- ----------
TOTAL EXPENSES 181,973 186,728
---------- ----------
Loss from operations (114,899) (102,956)
Equity in loss of investment in local partnerships 3 (452,114) (619,233)
---------- ----------
NET LOSS (567,013) (722,189)
Other comprehensive income (loss) 2 (72,991) 18,056
---------- ----------
COMPREHENSIVE LOSS $ (640,004) $ (704,133)
========== ==========
NET LOSS ATTRIBUTABLE TO
General partner $ (5,670) $ (7,222)
Limited partners (561,343) (714,967)
---------- ----------
$ (567,013) $ (722,189)
========== ==========
NET LOSS per unit of limited partnership interest (55,746
units of limited partnership interest)
$ (10.07) $ (12.83)
========== ==========
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 29, 1999 AND 1998
(UNAUDITED)
<S> <C> <C>
1999 1998
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 112,111 $ 89,864
Cash paid for
administration fees (52,376) (52,379)
management fees (52,376)
professional fees (16,896) (12,347)
printing, postage and other expenses (2,515) (20,081)
------------ -----------
Net cash provided by (used in) operating activities (12,052) 5,057
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in local partnerships (71,237)
Cash distributions and other income from local partnerships 33,744 124,915
Maturities/redemption of bonds 500,000 33,000
------------ -----------
Net cash provided by investing activities 462,507 157,915
------------ -----------
Net increase in cash and cash equivalents 450,455 162,972
Cash and cash equivalents at beginning of period 739,118 513,536
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,189,573 $ 676,508
============ ===========
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain (loss) on investments in bonds available-for-sale, net $ (72,991) $ 18,056
============ ===========
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
See reconciliation of net loss to net cash provided by (used in) operating
activities on page 6.
</TABLE>
See Notes to Financial Statements.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF CASH FLOWS - (Continued)
THREE MONTHS ENDED JUNE 29, 1999 AND 1998
(UNAUDITED)
<S> <C> <C>
1999 1998
----------- -----------
RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
Net loss $ (567,013) $ (722,189)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities
Equity in loss of investment in local partnerships 452,114 619,233
Distributions from local partnerships classified as other income (6,132) (388)
Loss on redemption of bonds 9,992
Amortization of net premium on investments in bonds 35,277 7,619
Accretion of zero coupon bonds (9,744) (9,743)
Decrease in interest receivable 15,644 8,604
Increase in payable to general partner 22,450 74,826
Increase in accounts payable and accrued expenses 35,360 27,095
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (12,052) $ 5,057
=========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II 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
Within one year $ 112,051 $ 1,478 $ - $ 113,529
After one year through five years 861,321 17,564 (3,891) 874,994
After five years through ten years 1,447,532 19,307 (45,578) 1,421,261
After ten years 123,997 119 - 124,116
------------- ------------- ------------- -------------
2,544,901 38,468 (49,469) 2,533,900
------------- ------------- ------------- -------------
U.S. Treasury debt securities
After five years through ten years 531,862 - (16,531) 515,331
------------- ------------- ------------- -------------
U.S. government and agency securities
After five years through ten years 39,825 1,752 - 41,577
------------- ------------- ------------- -------------
$ 3,116,588 $ 40,220 $ (66,000) $ 3,090,808
============= ============= ============= =============
</TABLE>
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 1999
(UNAUDITED)
3. Investment in Local Partnerships
The Partnership owns limited partnership interests in fifty Local Partnerships
representing capital contributions in the aggregate amount of $45,972,983. As of
March 31, 1999, the Local Partnerships have outstanding mortgage loans payable
totaling approximately $90,513,000 and accrued interest payable on such loans
totaling approximately $5,277,000 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:
<TABLE>
<S> <C>
Investment in Local Partnerships as of March 30, 1999 $ 12,905,421
Investment in Local Partnerships 71,237
Equity in loss of investment in local partnerships (452,114)*
Cash distributions received from Local Partnerships (33,744)
Cash distributions classified as other income from local partnership 6,132
-------------
Investment in Local Partnerships as of June 29, 1999 $ 12,496,932
=============
</TABLE>
* Effective October 1, 1998, in an attempt to avoid potential adverse tax
consequences, the Partnership and the local general partners of 2000-2100
Christian Street Associates ("2000 Christian Street") and Christian Street
Associates Limited Partnership ("Christian Street") agreed to equally share
the funding of operating deficits through June 30, 2000 in the case of
Christian Street and through September 30, 2000 in the case of 2000
Christian Street (the respective "Funding Agreements"), whereby either
party's obligation may be cancelled in the event the anticipated annualized
operating deficit exceeds $168,000 in the case of Christian Street and
$132,000 in the case of 2000 Christian Street. The Partnership has made
advances of $16,370 and $10,867 under the Funding Agreements to 2000
Christian Street and Christian Street, respectively, during the three
months ended June 29, 1999 and recorded them as investment in Local
Partnerships. The Local General Partner made advances of $6,500 and $15,000
to 2000 Christian Street and Christian Street, respectively, during the
three months ended June 29, 1999.
As a result of increasing deficits and declining occupancy, Forest Village
Housing Partnership ("Forest Village") filed for protection under Chapter
11 of the federal Bankruptcy Code in the United States Bankruptcy Court,
Western District of Washington (the "Court") on March 25, 1999. As of June
1999, the first and second mortgages are nine and seven months in arrears,
respectively. In addition, the Partnership made an advance of $44,000
during June 1999 in order to pay for needed maintenance for vacant dwelling
units, and recorded it as investment in Local Partnerships. Forest Village
has filed a draft plan of reorganization (the "Plan"). In the event that
the Plan is confirmed, it is anticipated that the Partnership will make
additional advances to make needed capital improvements to the Property.
There can be no assurance that the Court will confirm the Plan.
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
$371,302 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 II 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 $ 3,756,323 $ 3,806,606
Rents receivable 612,750 585,071
Escrow deposits and reserves 5,516,925 5,572,647
Land 4,180,673 4,180,673
Buildings and improvements (net of accumulated
depreciation of $48,158,275 and $46,950,143) 92,643,299 93,551,328
Intangible assets (net of accumulated amortization
of $1,079,691 and $1,050,154) 1,599,257 1,623,218
Other 1,209,948 1,125,436
------------- -------------
$ 109,519,175 $ 110,444,979
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,353,105 $ 1,368,829
Due to related parties 4,346,700 4,488,367
Mortgage loans 90,512,535 90,801,660
Notes payable 2,552,912 2,382,595
Accrued interest 5,277,006 5,065,190
Other 725,028 649,750
------------- -------------
104,767,286 104,756,391
------------- -------------
Partners' equity (deficit)
American Tax Credit Properties II L.P.
Capital contributions, net of distributions 44,961,647 44,985,009
Cumulative loss (31,904,191) (31,452,077)
------------- -------------
13,057,456 13,532,932
------------- -------------
General partners and other limited partners, including
ATCP & ATCP III
Capital contributions, net of distributions 3,266,109 3,283,927
Cumulative loss (11,571,676) (11,128,271)
------------- -------------
(8,305,567) (7,844,344)
------------- -------------
4,751,889 5,688,588
------------- -------------
$ 109,519,175 $ 110,444,979
============= =============
</TABLE>
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II 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 $ 5,043,682 $ 5,089,713
Interest and other 167,779 127,000
------------- -------------
TOTAL REVENUE 5,211,461 5,216,713
------------- -------------
EXPENSES
Administrative 861,031 865,536
Utilities 775,106 794,989
Operating, maintenance and other 1,046,350 923,294
Taxes and insurance 566,502 595,745
Financial (including amortization of $29,537 and $20,865) 1,649,477 1,634,755
Depreciation 1,208,514 1,296,862
------------- -------------
TOTAL EXPENSES 6,106,980 6,111,181
------------- -------------
NET LOSS $ (895,519) $ (894,468)
============= =============
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties II L.P. $ (452,114) $ (619,233)
General partners and other limited partners, including
ATCP & ATCP III, which includes $371,302 and $204,845 of
Partnership loss in excess of investment (443,405) (275,235)
------------- -------------
$ (895,519) $ (894,468)
============= =============
</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.
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 II 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 II 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/redemption of bonds
and distributions from Local Partnerships and utilized cash for operating
expenses and investments in 2000-2100 Christian Street Associates ("2000
Christian Street") and Christian Street Associates Limited Partnership
("Christian Street") and Forest Village Housing Partnership ("Forest Village")
(see Local Partnership Matters below). Cash and cash equivalents and investments
in bonds available-for-sale decreased, in the aggregate, by approximately
$158,000 during the three months ended June 29, 1999 (which includes a net
unrealized loss on investments in bonds of approximately $73,000, amortization
of net premium on investments in bonds of approximately $35,000 and accretion of
zero coupon bonds of approximately $10,000). 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 $452,114 and cash distributions
received from Local Partnerships of $33,744 (exclusive of distributions from
Local Partnerships of $6,132 classified as other income from local
partnerships), partially offset by investments in Local Partnerships of
$71,237). Accounts payable and accrued expenses includes deferred administration
fees of $608,256, and payable to general partner represents deferred management
fees in the accompanying balance sheet as of June 29, 1999.
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 $567,013 and $722,189, respectively. The decrease in
net loss is primarily attributable to a decrease in equity in loss of investment
in local partnerships of approximately $167,000, which is primarily the result
of an increase in the nonrecognition of losses in excess of Registrant's
investment in Local Partnerships in accordance with the equity method of
accounting, partially offset by a decrease in interest revenue of approximately
$22,000. Other comprehensive income (loss) for the three months ended June 29,
1999 and 1998 resulted from a net unrealized gain (loss) on investments in bonds
available-for-sale of $(72,991) and $18,056, respectively.
The Local Partnerships' net loss of approximately $896,000 for the three months
ended March 31, 1999 was attributable to rental and other revenue of
approximately $5,211,000, exceeded by operating and interest expenses (including
interest on non-mandatory debt) of approximately $4,869,000 and approximately
$1,238,000 of depreciation and amortization expense. The Local Partnerships' net
loss of approximately $894,000 for the three months ended March 31, 1998 was
attributable to rental and other revenue of approximately $5,217,000, exceeded
by operating and interest expenses (including interest on non-mandatory debt) of
approximately $4,793,000 and approximately $1,318,000 of depreciation and
amortization expense. The results of operations of the Local Partnerships for
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Local Partnership Matters
the three months ended March 31, 1999 are not necessarily indicative of the
results that may be expected in future periods.
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"). In addition, certain of the Local
Partnerships have entered into agreements with the relevant state tax credit
agencies whereby the Local Partnerships must maintain the low-income nature of
the Properties for a period which exceeds the Compliance Period, regardless of
any sale of the Properties by the Local Partnerships after 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. Through December 31,
1998, none of the Local Partnerships have suffered an event of recapture of
Low-income Tax Credits.
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. Seven Local Partnerships' Section 8 contracts, certain of
which cover only certain rental units, 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. Substantially all 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.
Christian Street and 2000 Christian Street, which Local Partnerships have
certain common general partner interests and a common first mortgage lender,
have experienced ongoing operating deficits. Under terms of the partnership
agreements, the Local General Partners have exceeded their respective operating
deficit guarantees and have advanced approximately $1,095,000, in aggregate, to
Christian Street and 2000 Christian Street. The Local General Partners
approached the lender and are attempting to restructure the loans; however the
lender indicated that in connection with any such restructuring, the respective
Local Partnerships would be responsible for certain costs, which may be
significant. There can be no assurance that any such restructuring will be
achieved. Christian Street and 2000 Christian Street have allocated
approximately 8.5 years of Low-income Tax Credits to Registrant through December
31, 1998. Accordingly, if the Local General Partners cease to fund the operating
deficits, Registrant would likely incur substantial recapture of Low-income Tax
Credits. Effective October 1,
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
1998, in an attempt to avoid potential adverse tax consequences, Registrant and
the Local General Partners of Christian Street and 2000 Christian Street agreed
to equally share the funding of operating deficits through June 30, 2000 in the
case of Christian Street and through September 30, 2000 in the case of 2000
Christian Street (the respective "Funding Agreements"), whereby either party's
obligation may be cancelled in the event the anticipated annualized operating
deficit exceeds $168,000 in the case of Christian Street and $132,000 in the
case of 2000 Christian Street. The Local General Partners of Christian Street
and 2000 Christian Street have agreed to cause the management agent to accrue
and defer its management fees during the period of the agreements. The accrued
management fees will not be included when determining the operating deficits.
Christian Street and 2000 Christian Street reported a combined operating deficit
of approximately $35,000 excluding accrued management fees for the three months
ended March 31, 1999. Registrant and the Local General Partners have funded
$32,870 and $16,500, respectively, to 2000 Christian Street and $31,867 and
$25,000, respectively, to Christian Street, under the terms of the Funding
Agreements through June 29, 1999. The Local General Partners had also informed
Registrant that Christian Street and 2000 Christian Street are current under
their respective first mortgage obligations. Payments on the mortgage and real
estate taxes are current. Registrant's investment balances in Christian Street
and 2000 Christian Street, after cumulative equity losses, became zero during
the year ended March 30, 1997. Of Registrant's total annual Low-income Tax
Credits, approximately 9% is allocated from Christian Street and 2000 Christian
Street, and are scheduled to expire in 2000.
As a result of increasing deficits and declining occupancy, Forest Village filed
for protection under Chapter 11 of the federal Bankruptcy Code in the United
States Bankruptcy Court, Western District of Washington (the "Court") on March
25, 1999. As of June 1999, the first and second mortgages are nine and seven
months in arrears, respectively. In addition, Registrant made an advance of
$44,000 during June 1999 in order to pay for needed maintenance for vacant
dwelling units. Forest Village has filed a draft plan of reorganization (the
"Plan"). In the event that the Plan is confirmed, it is anticipated that
Registrant will make additional advances to make needed capital improvements to
the Property. There can be no assurance that the Court will confirm the Plan.
Registrant's investment balance in Forest Village, after cumulative equity
losses, became zero during the year ended March 30, 1995. Of Registrant's total
annual Low-income Tax Credits, approximately 1% is allocated from Forest
Village.
The terms of the partnership agreement of Batesville Family, L.P. ("Batesville")
require the management agent to defer property management fees in order to avoid
a default under the mortgage. Batesville reported an operating deficit of
approximately $6,000 for the three months ended March 31, 1999, which includes
property management fees of approximately $1,000. Payments on the mortgage and
real estate taxes are current. Registrant's investment balance in Batesville,
after cumulative equity losses, became zero during the year ended March 30,
1998. Of Registrant's total annual Low-income Tax Credits, less than 1% is
allocated from Batesville.
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.
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 such
investments 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,
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 3. Quantitative and Qualitative Disclosure About Market Risk (continued)
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 II L.P.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As a result of increasing deficits and declining occupancy, Forest
Village Housing Partnership ("Forest Village") filed for protection
under Chapter 11 of the federal Bankruptcy Code in the United States
Bankruptcy Court, Western District of Washington on March 25, 1999.
Forest Village has filed a draft plan of reorganization.
Registrant is not aware of any other material legal proceedings.
Item 2. Changes in Securities
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
None
<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.
AMERICAN TAX CREDIT PROPERTIES II L.P.
(a Delaware limited partnership)
By: Richman Tax Credit Properties II L.P.,
General Partner
by: Richman Tax Credits 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 has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN TAX CREDIT PROPERTIES II L.P.
(a Delaware limited partnership)
By: Richman Tax Credit Properties II L.P.,
General Partner
by: Richman Tax Credits 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)
<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> 0000842314
<NAME> American Tax Credit Properties, II L.P.
<MULTIPLIER> 1000
<CURRENCY> 1.00
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-2000
<PERIOD-START> MAR-31-1999
<PERIOD-END> JUN-29-1999
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<SECURITIES> 3,091
<RECEIVABLES> 50
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0
0
<COMMON> 0
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<INCOME-PRETAX> (567)
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<EPS-BASIC> (10.07)
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</TABLE>
