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: 0-18405
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) (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__
1
<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
2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II L.P.
BALANCE SHEETS
(UNAUDITED)
June 29, March 30,
Notes 2000 2000
----- ---- ----
ASSETS
<S> <C> <C> <C>
Cash and cash equivalents $ 770,948 $ 641,463
Investments in bonds 2 2,877,395 2,979,827
Investment in local partnerships 3 11,349,548 11,739,248
Interest receivable 49,001 46,569
------------- -------------
$ 15,046,892 $ 15,407,107
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 717,638 $ 707,884
Payable to general partner 827,572 738,627
Other 41,600 41,600
------------- -------------
1,586,810 1,488,111
------------- -------------
Commitments and contingencies 3
Partners' equity (deficit)
General partner (357,071) (352,423)
Limited partners (55,746 units of limited partnership
interest outstanding) 13,927,140 14,387,277
Accumulated other comprehensive income (loss), net 2 (109,987) (115,858)
------------- -------------
13,460,082 13,918,996
------------- -------------
$ 15,046,892 $ 15,407,107
============= =============
See Notes to Financial Statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 29, 2000 AND 1999
(UNAUDITED)
Notes 2000 1999
----- ---- ----
REVENUE
<S> <C> <C> <C>
Interest $ 61,439 $ 60,942
Other income from local partnerships 1,812 6,132
----------- ----------
TOTAL REVENUE 63,251 67,074
----------- ----------
EXPENSES
Administration fees 74,823 74,826
Management fees 74,823 74,826
Professional fees 24,121 22,997
Printing, postage and other 7,424 9,324
----------- ----------
TOTAL EXPENSES 181,191 181,973
----------- ----------
Loss from operations (117,940) (114,899)
Equity in loss of investment in local partnerships 3 (346,845) (452,114)
----------- ----------
NET LOSS (464,785) (567,013)
Other comprehensive income (loss) 2 5,871 (72,991)
----------- ----------
COMPREHENSIVE LOSS $ (458,914) $ (640,004)
=========== =============
NET LOSS ATTRIBUTABLE TO
General partner $(4,648) $(5,670)
Limited partners (460,137) (561,343)
----------- ----------
$ (464,785) $ (567,013)
=========== =============
NET LOSS per unit of limited partnership interest (55,746
units of limited partnership interest) $ (8.25) $ (10.07)
========== =============
See Notes to Financial Statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II 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 $ 60,874 $ 112,111
Cash paid for
administration fees (8,120) (52,376)
management fees (52,379) (52,376)
professional fees (10,365) (16,896)
printing, postage and other expenses (11,633) (2,515)
------------- -----------
Net cash used in operating activities (21,623) (12,052)
------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in local partnerships (71,237)
Cash distributions and other income from local partnerships 44,667 33,744
Maturities/redemption of bonds 106,441 500,000
------------- -----------
Net cash provided by investing activities 151,108 462,507
------------- -----------
Net increase in cash and cash equivalents 129,485 450,455
Cash and cash equivalents at beginning of period 641,463 739,118
------------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 770,948 $ 1,189,573
============ ===========
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain (loss) on investments in bonds available-for-sale, net $ 5,871 $ (72,991)
============ ===========
</TABLE>
See reconciliation of net loss to net cash used in operating activities on page
6.
See Notes to Financial Statements.
5
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II 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 USED IN OPERATING ACTIVITIES
<S> <C> <C>
Net loss $(464,785) $(567,013)
Adjustments to reconcile net loss to net cash used in operating activities
Equity in loss of investment in local partnerships 346,845 452,114
Distributions from local partnerships classified as other income (1,812) (6,132)
Loss on redemption of bonds 9,960 9,992
Amortization of net premium on investments in bonds 1,646 35,277
Accretion of zero coupon bonds (9,744) (9,744)
Decrease (increase) in interest receivable (2,432) 15,644
Increase in payable to general partner 88,945 22,450
Increase in accounts payable and accrued expenses 9,754 35,360
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES $ (21,623) $ (12,052)
========= =========
See Notes to Financial Statements.
</TABLE>
6
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II 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
------------------------ ---- ----- ------ ----------
Corporate debt securities
<S> <C> <C> <C> <C>
Within one year $ 201,567 $ $ (1026) $ 200,541
After one year through five years 638,237 12,122 (6,166) 644,193
After five years through ten years 1,462,764 2,643 (87,238) 1,378,169
After ten years 85,116 (3,494) 81,622
-------------- -------------- ------------- --------------
2,387,684 14,765 (97,924) 2,304,525
-------------- -------------- ------------- --------------
U.S. Treasury debt securities
After five years through ten years 571,052 (27,532) 543,520
-------------- -------------- ------------- --------------
U.S. government and agency securities
After five years through ten years 28,646 704 29,350
-------------- -------------- ------------- --------------
$ 2,987,382 $ 15,469 $ (125,456) $ 2,877,395
============== ============== ============= ==============
</TABLE>
7
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
JUNE 29, 2000
(UNAUDITED)
3. Investment in Local Partnerships
The Partnership owns limited partnership interests in fifty Local
Partnerships representing capital contributions in the aggregate amount of
$46,600,825. As of March 31, 2000, the Local Partnerships have outstanding
mortgage loans payable totaling approximately $91,480,000 and accrued
interest payable on such loans totaling approximately $5,995,000 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 $11,739,248
Equity in loss of investment in local partnerships (346,845)
Cash distributions received from Local Partnerships (44,667)
Cash distributions classified as other income
from local partnership 1,812
-----------
Investment in Local Partnerships as of June 29, 2000 $11,349,548
===========
*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
$458,739 for the three months ended March 31, 2000 as reflected in the
combined statement of operations of the Local Partnerships reflected
herein Note 3.
As a result of increasing deficits and declining occupancy caused by
deteriorating physical conditions, 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. Forest Village filed a plan of reorganization (the "Plan") which was
confirmed by the Court on December 14, 1999. The terms of the Plan call for
the Partnership to provide up to $500,000, all of which has been advanced
as of June 29, 2000, which Forest Village can utilize to pay certain
obligations including all first mortgage arrears and certain secured and
unsecured creditors and to make necessary repairs to the complex. The Plan
also recasts the second mortgage and cumulative arrears over a new 30 year
amortization period that will reduce Forest Village's mandatory debt
service by approximately $77,000 per annum. The first mortgage is now
current. In addition to the $500,000 noted above, the Partnership advanced
$20,593 to Forest Village during the three months ended June 29, 2000, all
of which has been recorded as investment in local partnerships. $534,500 of
such amounts advanced by the Partnership accrue interest at 8.5% and are
repayable out of net cash flow from the operations of the property. No
interest has been recorded by the Partnership during the year ended June
29, 2000.
Effective October 1, 1998, in an attempt to avoid potential adverse tax
consequences, the Partnership and the local general partners of 2000
Christian Street 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 cumulative advances of $40,489
and $46,353 under the Funding Agreements to 2000 Christian Street and
Christian Street, respectively, as of June 29, 2000 and has recorded such
advances as investment in local partnerships.
York Park has been informally notified by Baltimore County (the "County")
that due to recently enacted legislation, the County may elect to execute
its rights of eminent domain and acquire the property during 2001. As of
June 2000, the County has not provided an offer for the property; however,
the County is aware that its intention to exercise eminent domain rights
would result in adverse tax consequences for the owners as a result of York
Park not holding the property through the Compliance Period. The management
of York Park intends to contest the decision of the County and/or negotiate
a sale price that would cover the resulting recapture of Low-income Tax
Credits. However, the outcome of management's efforts is highly uncertain.
8
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II 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 $ 3,292,722 $ 3,273,341
Rents receivable 1,038,926 1,733,810
Escrow deposits and reserves 5,211,643 5,252,052
Land 4,180,673 4,180,673
Buildings and improvements (net of accumulated
depreciation of $52,859,788 and $51,665,678) 88,857,868 89,910,362
Intangible assets (net of accumulated amortization
of $1,154,945 and $1,210,963) 1,504,033 1,526,385
Other 1,538,946 1,302,924
----------------- -----------------
$ 105,624,811 $ 107,159,547
================= =================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,506,442 $ 1,862,090
Due to related parties 4,106,168 4,152,464
Mortgage loans 89,178,803 89,499,287
Notes payable 2,301,611 2,363,472
Accrued interest 5,995,868 5,825,921
Other 729,706 754,902
----------------- -----------------
103,818,598 104,458,136
----------------- -----------------
Partners' equity (deficit)
American Tax Credit Properties II L.P.
Capital contributions, net of distributions 44,889,984 44,891,790
Cumulative loss (33,217,453) (32,870,608)
----------------- -----------------
11,672,531 12,021,182
----------------- -----------------
General partners and other limited partners, including
ATCP & ATCP III
Capital contributions, net of distributions 3,233,343 3,248,862
Cumulative loss (13,099,661) (12,548,633)
----------------- -----------------
(9,866,318) (9,299,771)
----------------- -----------------
1,806,213 2,721,411
----------------- -----------------
$ 105,624,811 $ 107,179,547
================= =================
</TABLE>
9
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II 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 $ 4,979,563 $ 5,043,682
Interest and other 130,849 167,779
------------- -----------
Total Revenue 5,110,412 5,211,461
------------- -----------
EXPENSES
Administrative 867,694 861,031
Utilities 734,775 775,106
Operating, maintenance and other 1,024,269 1,046,350
Taxes and insurance 590,336 566,502
Financial (including amortization of $22,353 and $29,537) 1,609,932 1,649,477
Depreciation 1,181,279 1,208,514
------------- -----------
Total Expenses 6,008,285 6,106,980
------------- -----------
NET LOSS $ (897,873) $ (895,519)
============= ===========
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties II L.P. $ (346,845) $ (452,114)
General partners and other limited partners, including ATCP &
ATCP III, which includes $458,739 and $371,302 of Partnership
loss in excess of investment (551,028) (443,405)
------------- -----------
$ (897,873) $ (895,519)
============= ===========
</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.
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.
10
<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, 2000, American Tax Credit Properties II 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/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 increased, in the aggregate, by approximately
$27,000 during the three months ended June 29, 2000 (which includes a net
unrealized gain on investments in bonds of approximately $6,000, amortization of
net premium on investments in bonds of approximately $2,000 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, 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 $346,845 and cash distributions
received from Local Partnerships of $42,855 (exclusive of distributions from
Local Partnerships of $1,812 classified as other income from local
partnerships),. Accounts payable and accrued expenses includes deferred
administration fees of $773,472, and payable to general partner represents
deferred management fees in the accompanying balance sheet as of June 29, 2000.
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 $464,785 and $567,013, respectively. The decrease in
net loss is primarily attributable to a decrease in equity in loss of investment
in local partnerships of approximately $102,000, 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. Other comprehensive income (loss) for the three months ended June
29, 2000 and 1999 resulted from a net unrealized gain (loss) on investments in
bonds available-for-sale of $5,871 and $(72,991), respectively.
The Local Partnerships' net loss of approximately $898,000 for the three months
ended March 31, 2000 was attributable to rental and other revenue of
approximately $5,110,000, exceeded by operating and interest expenses (including
interest on non-mandatory debt) of approximately $4,804,653 and approximately
$1,203,632 of depreciation and amortization expense. The Local Partnerships' net
loss of approximately $896,000 for the three months ended March 31, 2000 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 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.
11
<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
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 Tear Credit Period"). The Ten Year
Credit Period is expected to be exhausted by the Local Partnerships as of
December 31, 2001. 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, 1999, none of the Local Partnerships
have suffered an event of recapture of Low-income Tax Credits. The Local
Partnerships will have generated substantially all of the Low-income Tax Credits
allocated to limited partners by December 31, 2001.
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. Seven Local Partnerships'
Section 8 contracts, certain of which cover only certain rental units, 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. Substantially all 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.
York Park Associates Limited Partnership ("York Park") has been informally
notified by Baltimore County (the "County") that due to recently enacted
legislation, the County may elect to execute its rights of eminent domain and
acquire the property during 2001. As of June 2000, the County has not provided
an offer for the property; however, the County is aware that its intention to
exercise eminent domain rights would result in adverse tax consequences for the
owners as a result of York Park not holding the property through the Compliance
Period. Although the property recently received a superior rating from the
Maryland Community Development Administration, because the County's intent is
public knowledge, management of the property expects higher rates of tenant
turnover and more difficulty attracting replacement tenants. The management of
York Park intends to contest the decision of the County and/or negotiate a sale
price that would cover the resulting recapture of Low-income Tax Credits.
However, the outcome of management's efforts is highly uncertain. Of
Registrant's total annual Low-income Tax Credits, approximately 5% is allocated
from York Park.
12
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
As a result of increasing deficits and declining occupancy caused by
deteriorating physical conditions, 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. Forest Village filed a plan of reorganization (the
"Plan") which was confirmed by the Court on December 14, 1999. The terms of the
Plan call for Registrant to provide up to $500,000, all of which has been funded
as of June 29, 2000, which Forest Village can utilize to pay certain obligations
including all first mortgage arrears and certain secured and unsecured creditors
and to make necessary repairs to the complex. The Plan also recasts the second
mortgage and cumulative arrears over a new 30 year amortization period that will
reduce Forest Village's mandatory debt service by approximately $77,000 per
annum. The first mortgage is current. In addition to the $500,000 noted above,
the Partnership advanced $20,593 to Forest Village during the three months ended
June 29, 2000. 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.
Christian Street Associates Limited Partnership ("Christian Street") and
2000-2100 Christian Street Associates ("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, as of September 30, 1998, had
advanced in excess of $1,000,000 in the aggregate to Christian Street and 2000
Christian Street. The Local General Partners approached the lender with the
intention 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. Christian Street and
2000 Christian Street have allocated approximately 9.5 years of Low-income Tax
Credits to Registrant through December 31, 1999. 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,
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 Funding Agreements. The
accrued management fees are excluded when determining the operating deficits.
Christian Street and 2000 Christian Street reported a combined operating deficit
of approximately $23,000, excluding accrued management fees of approximately
$10,500, for the three months ended March 31, 2000. Under the terms of the
Funding Agreements, Registrant has funded $40,489 and $46,353 to 2000 Christian
Street and Christian Street, respectively, as of June 29, 2000. 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. Christian Street and 2000
Christian Street will have generated approximately $8 and approximately $4 per
Unit per year to the limited partners upon the expiration of their Low-income
Tax Credit allocations in 2000 and 2001, respectively.
Cityside Apartments L.P. ("Cityside") reported an operating deficit of
approximately $57,000 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 Cityside, after cumulative equity losses, became zero
during the year ended March 30, 1996.
The terms of the partnership agreement of College Avenue Apartments Limited
Partnership ("College Avenue") require the management agent to defer property
management fees in order to avoid a default under the mortgage. College Avenue
reported an operating deficit of approximately $7,000 for the three months ended
March 31, 2000. Payments on the mortgage and real estate taxes are current.
Registrant's investment balance in College Avenue, after cumulative equity
losses, became zero during the year ended March 30, 1999. Of Registrant's total
annual income Low-income Tax Credits, less than 1% is allocated from College
Avenue.
13
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AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The terms of the partnership agreement of Trenton Heights Apartments L.P.
("Trenton Heights") require the management agent to defer property management
fees in order to avoid a default under the mortgage. During the three months
ended March 31, 2000, Trenton Heights incurred an operating deficit of
approximately $4,300. Payments on the mortgage and real estate taxes are
current. Registrant's investment balance in Trenton Heights, after cumulative
equity losses, became zero during the year ended March 30, 1999. Of Registrant's
total annual Low-income Tax Credits, less than 1% is allocated from Trenton
Heights.
Year 2000 Compliance
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.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Registrant has invested a significant portion of its working capital reserves in
corporate bonds, U.S. Treasury instruments and U.S. government and agency
securities. 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 under performing Property, it otherwise intends to hold such
investments to their respective maturities. Therefore, Registrant does not
anticipate any material adverse impact in connection with such investments.
14
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
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
15
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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 11, 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 11, 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)
16
