<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
FOR QUARTER ENDED MARCH 31, 1996
COMMISSION FILE NUMBER 33-27658
NATIONAL TAX CREDIT PARTNERS, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
I.R.S. EMPLOYER IDENTIFICATION NO. 95-4205231
9090 Wilshire Blvd., Suite 201
Beverly Hills, Calif. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Securities Registered Pursuant to
Section 12(b) or 12(g) of the Act
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed with the Commission by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve 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> 2
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Notes to Financial Statements
Balance Sheets, March 31, 1996 and 1995..................... 1
Statements of Operations
Three Months Ended March 31, 1996 and 1995........... 2
Statement of Partners' Equity
Three Months Ended March 31, 1996.................... 3
Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995........... 4
Notes to Financial Statements ............................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 13
Item 6. Exhibits and Reports on Form 8-K........................... 14
Signatures . . . . . . . . . . . . . . ............................. 15
<PAGE> 3
NATIONAL TAX CREDIT PARTNERS, L.P.
(a California limited partnership)
BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
(Unaudited) (Audited)
----------- ---------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS
(Notes 1 and 2) $21,225,824 $21,923,823
CASH AND CASH EQUIVALENTS (Note 1) 357,859 500,282
RESTRICTED CASH 75,000 75,000
=========== ===========
TOTAL ASSETS $21,658,683 $22,499,105
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Accrued fees and expenses due to partners (Notes 4 and 6) $ 3,448,586 $ 3,266,521
Capital contributions payable (Note 3) 441,300 441,300
Accounts payable and accrued expenses 314,253 325,351
----------- -----------
4,204,139 4,033,172
CONTINGENCIES (Note 5)
PARTNERS' EQUITY 17,454,544 18,465,933
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $21,658,683 $22,499,105
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
NATIONAL TAX CREDIT PARTNERS, L.P.
(a California limited partnership)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
INTEREST INCOME $ 6,581 $ 2,436
----------- ---------
OPERATING EXPENSES:
Management fees - partners (Note 4) 173,239 173,239
Legal and accounting 56,470 75,807
General and administrative (Note 4) 34,261 32,418
----------- ---------
Total operating expenses 263,970 281,464
----------- ---------
LOSS FROM PARTNERSHIP OPERATIONS (257,389) (279,028)
EQUITY IN LOSS OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS (Note 2) (754,000) (709,552)
----------- ---------
NET LOSS $(1,011,389) $(988,580)
=========== =========
NET LOSS PER LIMITED
PARTNERSHIP INTEREST (Note 1) $ (42) $ (41)
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
NATIONAL TAX CREDIT PARTNERS, L.P.
(a California limited partnership)
STATEMENT OF PARTNERS' EQUITY (DEFICIENCY)
THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Special
Limited General Limited
Partners Partners Partners Total
-------- --------- ----------- -----------
<S> <C> <C> <C> <C>
PARTNERSHIP INTERESTS,
March 31, 1996 23,899
===========
PARTNERS' EQUITY (DEFICIENCY),
January 1, 1996 $1,000 $(334,164) $18,799,097 $18,465,933
Net loss for the three months
ended March 31, 1996 - (10,114) (1,001,275) (1,011,389)
------ --------- ----------- -----------
PARTNERS' EQUITY (DEFICIENCY),
March 31, 1996 $1,000 $(344,278) $17,797,822 $17,454,544
====== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
NATIONAL TAX CREDIT PARTNERS, L.P.
(a California limited partnership)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,011,389) $(988,580)
Adjustments to reconcile net loss to net cash
used in operating activities:
Equity in losses of limited partnerships
and amortization of acquisition costs 754,000 709,552
Decrease in deposits and other receivables - 15,000
Increase (decrease) in:
Accrued fees and expenses due to partners 182,065 214,779
Accounts payable and accrued expenses (11,098) 35,601
----------- ---------
Net cash used in operating activities (86,422) (13,648)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in investee partnerships:
Capital (contributions) recovery (66,001) 1,563
Capitalized acquisition costs and fees - (13,385)
Distributions recognized as a return of capital 10,000 44,674
----------- ---------
Net cash provided by (used in) investing activities (56,001) 32,852
----------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (142,423) 19,204
CASH AND CASH EQUIVALENTS, beginning of period 500,282 156,175
----------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 357,859 $ 175,379
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the financial
statements is condensed from that which would appear in the annual audited
financial statements. Accordingly, the financial statements included herein
should be reviewed in conjunction with the audited financial statements and
related notes thereto contained in the National Tax Credit Partners, L.P.
(the "Partnership") annual report for the year ended December 31, 1995.
Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year end. The results of operations for the
interim periods presented are not necessarily indicative of the results for
the entire year.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting primarily of normal
recurring accruals) necessary to present fairly the financial position as
of March 31, 1996 and the results of operations and changes in cash flows
for the nine months then ended.
ORGANIZATION
The Partnership, formed under the California Revised Limited Partnership
Act, was organized on March 7, 1989. The Partnership was formed to invest
primarily in other limited partnerships which own or lease and operate
multifamily housing complexes that are eligible for low-income housing tax
credits or, in certain cases, historic rehabilitation tax credits ("Tax
Credits"). The general partner of the Partnership (the "General Partner")
is National Partnership Investments Corp. ("NAPICO"), a California
corporation. The special limited partner of the Partnership (the "Special
Limited Partner") is PaineWebber T.C., Inc., a Delaware corporation.
The Partnership originally registered 14,000 units, consisting of 28,000
Limited Partnership Interests ("LPI"), and warrants to purchase a maximum
of 14,000 Additional Limited Partnership Interests ("ALPI"). The term of
the offering expired in September 1990, at which date the Partnership
raised $59,749,000 from the sale of 16,336 LPI and warrants representing
7,563 ALPI.
The General Partner has a one percent interest in operating profits and
losses of the Partnership. The limited partners will be allocated the
remaining 99 percent interest in proportion to their respective
investments.
The Partnership shall continue in full force and effect until December 31,
2029, unless terminated prior to that, pursuant to the partnership
agreement or law.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
5
<PAGE> 8
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
METHOD OF ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS
The investments in limited partnerships are accounted for using the equity
method. Acquisition, selection and other costs related to the acquisition
of the projects acquired are capitalized as part of the investment accounts
and are being amortized on a straight line basis over the estimated lives
of the underlying assets, which is 30 years. Acquisition, selection and
other costs related to Local Partnerships for which the Partnership has not
consummated its investment, have been expensed currently.
NET LOSS PER LIMITED PARTNERSHIP INTEREST
Net loss per limited partnership interest was computed by dividing the
limited partners' share of net loss by the number of limited partnership
interests outstanding during the year. The number of limited partnership
interests outstanding was 23,899 for the period.
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
INCOME TAXES
No provision has been made for income taxes in the accompanying financial
statements since such taxes, if any, are the liability of the individual
partners.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership currently holds limited partnership interests in 31 local
limited partnerships ("Local Partnerships"), having relinquished its
interest in the Cigar Factory during the period. As a limited partner of
the Local Partnerships, the Partnership does not have authority over
day-to-day management of the Local Partnerships or their properties (the
"Apartment Complexes"). The general partners responsible for management of
the Local Partnerships (the "Local Operating General Partners") are not
affiliated with the General Partner of the Partnership, except as discussed
below.
6
<PAGE> 9
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
At March 31, 1996, the Local Partnership's own residential projects
consisted of 2,786 apartment units.
The Partnership, as a limited partner in each Local Partnership, is
generally entitled to 99 percent of the operating profits and losses of
the Local Partnerships. National Tax Credit, Inc. ("NTC"), an affiliate
of the General Partner, serves either as a special limited partner or
non-managing administrative general partner in which case it receives .01
percent of operating profits and losses of the Local Partnership, or as
the Local Operating General Partner of the Local Partnership in which
case it is entitled to .09 percent of operating profits and losses of the
Local Partnership. The Partnership is also generally entitled to receive
50 percent of the net cash flow generated by the Apartment Complexes,
subject to repayment of any loans made to the Local Partnerships
(including loans provided by NTC or an affiliate), repayment for funding
of development deficit and operating deficit guarantees by the Local
Operating General Partners or their affiliates (excluding NTC and its
affiliates), and certain priority payments to the Local Operating General
Partners other than NTC or its affiliates.
The Partnership's allocable share of losses from Local Partnerships are
recognized in the financial statements until the related investment
account is reduced to a zero balance. Losses incurred after the
investment account is reduced to zero are not recognized.
Distributions from the Local Partnerships are accounted for as a return
of capital until the investment balance is reduced to zero. Subsequent
distributions received will be recognized as income.
The following is a summary of the investment in Local Partnerships as of
March 31, 1996:
<TABLE>
<S> <C>
Balance, beginning of period $21,923,823
Capital contributions to limited partnerships 66,001
Equity in losses of limited partnerships (712,000)
Amortization of capitalized acquisition costs (42,000)
Distributions recognized as a return of capital (10,000)
-----------
Balance, end of period $21,225,824
===========
</TABLE>
Victorian Park
Victorian Park Associates, which owns a 336-unit Apartment Complex located
in Illinois, defaulted on its mortgage in July 1991 principally because it
failed to fund insurance and tax escrows required by the mortgage and the
unaffiliated Local Operating General Partners failed to honor their
obligation under their guarantees to fund such partnership deficits. On
March 25, 1992, the Partnership commenced litigation against the Local
Operating General Partners. On November 13, 1992 the Partnership was
advised that a Chapter 11 petition in bankruptcy was filed by the Local
Operating General Partners on behalf of the Local Partnership and that the
lender, Patrician Mortgage ("Patrician"), had accelerated its mortgage. On
January 7, 1993, the Partnership
7
<PAGE> 10
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
obtained an order compelling the Local Operating General Partners to
perform under their Guarantees, which order was reversed by the U.S. Court
of Appeals for the Seventh Circuit. Victorian Park and Patrician have
notified the Partnership and the Bankruptcy Court that they have reached a
Settlement Agreement which will keep Victorian Park as owner of the
Apartment Complex and preserve all of the Partnership's rights. No
assurances can be given that the settlement will be successfully
implemented or that Victorian Park will not be lost by the Partnership. As
of March 31, 1996, and December 31, 1995 the Partnership's carrying value
of the investment in the Victorian Local Partnership (which represents
approximately 5.7 percent of the Partnership's total equity initially
invested in Local Partnerships) was zero.
Summit I, II and III
The general contractor for three related Local Partnerships, Summit I, II
and III, initiated a lawsuit in December 1992 against the Local
Partnerships and the Partnership seeking damages in the amount of
approximately $600,000 allegedly due pursuant to the respective general
contracts plus damanges for alleged misrepresentation and punitive damages.
The Partnership believes that the general contractor's claims are barred
and/or subject to offset and it has filed responsive pleadings. The
Partnership has not accrued any liability in the accompanying financial
statements as of March 31, 1996. The carrying value of the investments, at
March 31, 1996, in Summit I, Summit II and Summit III totaled approximately
$2,138,000. Summit I, II and III represent 3.2%, 1.4% and 4.6%,
respectively, of NTCP's original portfolio investment.
Cigar Factory
Cigar Factory is a 40 unit historic property located in Norristown,
Pennsylvania in which the Partnership originally invested $400,000 and
received $528,798 of historic tax credits in December 1989. Since
inception, the Cigar Factory has operated at a deficit, which the
unaffiliated Local Operating General Partner funded pursuant to its
guaranty. However, the Local Operating General Partner's guaranty expired
December 31, 1994 and operations in 1995 were insufficient to pay the
insurance and real estate tax impounds as required under the mortgage
documents. Consequently, these impounds have not been paid in 1995. In June
1995, the lender replaced the Local Operating General Partner as the
managing agent with a third party management firm. Since the Partnership
has received all of its tax benefits, there is no incentive to fund a
property with a mortgage that may exceed its value and with a return of
capital to the Partnership that is subordinate to a $600,000 return to the
Local Operating General Partner. For these reasons, the General Partner has
relinquished the Partnership's interests in the Cigar Factory during 1995.
As of the relinquishment date, the Partnership's carrying value of the
investment in the Cigar Factory Local Partnership (which represents
approximately 1.9 percent of the Partnership's total equity initially
invested in Local Partnerships) was zero. As a result, no loss was realized
upon reconveyance of the Partnerships interest to the Operating General
Partner.
Meadows
The Meadows Apartments is a 112-unit building in Ysilanti, Michigan. The
first mortgage loan on the property matures on May 15, 1996 and the
property is delinquent in making its property tax payments. The Partnership
endeavored to negotiate an extension and modification of the first but,
upon the lender's refusal,
8
<PAGE> 11
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
filed a Chapter 11 petition in bankruptcy to avert a foreclosure of the
property. There can be no assurances that the bankruptcy plan will be
confirmed or that property will not be lost to foreclosure. As of March 31,
1996, the carrying value of the investment is zero.
NOTE 3 - CAPITAL CONTRIBUTION PAYABLE
Capital contributions payable represents $70,000 due annually, until paid
in full, for the investment in the Blue Lake Local Partnership. The capital
contributions payable are unsecured and non interest bearing.
NOTE 4 - RELATED-PARTY TRANSACTIONS
Under the terms of the Amended and Restated Agreement of the Limited
Partnership, the Partnership has paid the General Partner and the Special
Limited Partner the following fees:
(a) An annual Partnership management fee in an amount equal to 0.5
percent of invested assets (as defined in the Partnership Agreement)
is payable to the General Partner and Special Limited Partner. For
the three months ended March 31, 1996 approximately $173,000 has
been expensed. The unpaid balance at March 31, 1996 is approximately
$3,449,000.
(b) A property disposition fee is payable to the General Partner in an
amount equal to the lesser of (I) one- half of the competitive real
estate commission that would have been charged by unaffiliated third
parties providing comparable services in the area where the
apartment complex is located, or (ii) 3% of the sales price received
in connection with the sale or disposition of the apartment complex
or local partnership interest, but in no event will the property
disposition fee and all amounts payable to unaffiliated real estate
brokers in connection with any such sale exceed in the aggregate,
the lesser of the competitive rate (as described above) or 6% of
such sale price. Receipt of the property disposition fee will be
subordinated to the distribution of sale or refinancing proceeds by
the Partnership until the limited partners have received
distributions of sale or refinancing proceeds in an aggregate amount
equal to (I) their 10% priority return for any year not theretofore
satisfied (as defined in the partnership agreement) and (ii) an
amount equal to the aggregate adjusted investment (as defined in the
partnership agreement) of the limited partners. No disposition fees
have been paid.
(c) The Partnership reimburses NAPICO for certain expenses. The
reimbursement paid to NAPICO was $8,826 and $8,769 for the three
months ended March 31, 1996 and 1995, respectively, and is included
in general and administrative expenses.
NTC is the Local Operating General Partner in nineteen of the Partnership's 31
Local Partnerships. In addition, NTC is either a special limited partner or an
administrative general partner in the other Local Partnerships.
9
<PAGE> 12
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
NOTE 4 - RELATED-PARTY TRANSACTIONS (CONTINUED)
An affiliate of the General Partner is currently managing two properties
owned by Local Partnerships. The Local Partnerships pay the affiliate
property management fees which have been reduced from 5% to 4.5% of their
gross rental revenues. The amounts paid were $15,353 and $15,588 for the
three months ended March 31, 1996 and 1995, respectively.
NOTE 5 - CONTINGENCIES
The General Partner and the Partnership, are plaintiffs in various lawsuits
and also have been named as defendants in other lawsuits arising from
transactions in the ordinary course of business. In the opinion of
management and the General Partner, the claims will not result in any
material liability to the Partnership.
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires disclosure of fair value
information about financial instruments, when it is practicable to estimate
that value. The operations generated by the investee limited partnerships,
which account for the Partnership's primary source of funds, are subject to
various government rules, regulations and restrictions which make it
impracticable to estimate the fair value of the accrued fees due to
partners. The carrying amount of other assets and liabilities reported on
the balance sheets that require such disclosure approximates fair value due
to their short-term maturity.
10
<PAGE> 13
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The Partnership received proceeds totaling $59,749,000 from the sale of
Limited Partnership Interests, pursuant to a registration statement filed
on Form S-11 which sale commenced in September 1989 and terminated in
September 1990. This amount includes $18,907,500 from the sale of 7,563
Additional Limited Partnership Interests. The proceeds have been used to
invest in Local Partnerships which own and operate Apartment Complexes that
are eligible for Tax Credits.
It is not expected that any of the Local Partnerships in which the
Partnership invested will generate cash from operations sufficient to
provide distributions to the Limited Partners. Such cash from operations,
if any, would first be used to meet operating expenses of the Partnership.
The Partnership's investments are not readily marketable and may be
affected by adverse general economic conditions which, in turn, could
substantially increase the risk of operating losses for the Apartment
Complexes, the Local Partnerships and the Partnership. These problems may
result from a number of factors, many of which cannot be controlled by the
General Partner.
In order to further replenish Partnership reserves, the Partnership
anticipates offering limited partnership interests for sale in two or three
Local Partnerships to investors who would be entitled to receive a portion
of the tax credits otherwise allocable to the Partnership. There is no
assurance that the Partnership will be successful in these sales. If the
offerings were successfully concluded, the net proceeds would be added to
the Partnership's reserves.
RESULTS OF OPERATIONS
In general, in order to avoid recapture of Housing Tax Credits, the
Partnership does not expect that it will dispose of its Local Partnership
Interests or approve the sale by a Local Partnership of any Apartment
Complex prior to the end of the applicable 15-year Compliance Period.
Because of (I) the nature of the Apartment Complexes, (ii) the difficulty
of predicting the resale market for low-income housing 15 or more years in
the future, and (iii) the inability of the Partnership to directly cause
the sale of Apartment Complexes by local general partners, but generally
only to require such local general partners to use their respective best
efforts to find a purchaser for the Apartment Complexes, it is not possible
at this time to predict whether the liquidation of substantially all of the
Partnership's assets and the disposition of the proceeds, if any, in
accordance with the partnership agreement will be able to be accomplished
promptly at the end of the 15-year period. If a Local Partnership is unable
to sell an Apartment Complex, it is anticipated that the Local Operating
General Partner will either continue to operate such Apartment Complex or
take such other actions as the Local Operating General Partner believes to
be in the best interest of the Local Partnership. In addition,
circumstances beyond the control of the General Partner may occur during
the Compliance Period which would require the Partnership to approve the
disposition of an Apartment Complex prior to the end of the Compliance
Period.
Except for interim investments in highly liquid debt investments, the
Partnership's investments consist entirely of interests in other Local
Partnerships owning Apartment Complexes. Funds temporarily not required for
such
11
<PAGE> 14
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
investments in projects are invested in these highly liquid debt
investments earning interest income as reflected in the statement of
operations. These interim investments can be easily converted to cash to
meet obligations as they arise.
The Partnership, as a limited partner in the Local Partnerships in which it
has invested, is subject to the risks incident to the construction,
management, and ownership of improved real estate. The Partnership
investments are also subject to adverse general economic conditions, and
accordingly, the status of the national economy, including substantial
unemployment and concurrent inflation could increase vacancy levels, rental
payment defaults, and operating expenses, which in turn, could
substantially increase the risk of operating losses for the Apartment
Complexes. Certain of the Local Partnerships and their respective Apartment
Complexes are subject to litigation and operating problems. See Part II -
Other Information, Item 1. Legal Proceedings.
The Partnership accounts for its investments in the Local Partnerships on
the equity method, thereby adjusting its investment balance by its
proportionate share of the income or loss of the Local Partnerships.
Distributions received from Local Partnerships are recognized as return of
capital until the investment balance has been reduced to zero or to a
negative amount equal to future capital contributions required. Subsequent
distributions received are recognized as income.
The Partnership's income consists primarily of interest income earned on
certificates of deposit and other temporary investment of funds not
required for investment in Local Partnerships.
Operating expenses consist primarily of recurring general and
administrative expenses and professional fees for services rendered to the
Partnership. In addition, an annual Partnership management fee in an amount
equal to 0.5 percent of invested assets is payable to the General Partner
and Special Limited Partner. To date, however, these partners have not
received a management fee for their continuing management of the
Partnership's affairs.
12
<PAGE> 15
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1996
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of March 31, 1996, NTCP's General Partner was a plaintiff or defendant in
several lawsuits. None of these suits were related to NTCP. In addition, the
Partnership is involved in the following lawsuits arising from transactions in
the ordinary course of business. Although certain of these claims involve
substantial amounts, in the opinion of management, these claims will not result
in any material liability to the Partnership.
Victorian Park Associates, which owns a 336-unit Apartment Complex located in
Illinois, defaulted on its mortgage in July 1991 principally because the
unaffiliated local operating general partners failed to pay $800,000 of real
estate taxes required under their guarantees. On March 25, 1992, the Partnership
commenced litigation National Tax Credit Partners, L.P. v. Havlick, Owings,
United Development et al., Case No. 92C2074 in the United States District Court
for the Northern District of Illinois Eastern Division against the local
operating general partners to enforce its rights. On November 13, 1992 the
Partnership was advised that a Chapter 11 petition in bankruptcy was filed by
the local operating general partners on behalf of the Local Partnership [In re:
Victorian Park Associates, Debtor, Case No. 92- B-25140, Chapter 11] and that
the lender, Patrician Mortgage ("Patrician"), had accelerated its mortgage. On
January 7, 1993, the Partnership obtained an order compelling the Local
Operating General Partners to perform under their Guarantees, which order was
reversed by the U.S. Court of Appeals for the Seventh Circuit. Victorian Park
and Patrician have notified the Partnership and the Bankruptcy Court that they
have reached a Settlement Agreement which will keep Victorian Park as owner of
the Apartment Complex and preserve all of the Partnership's rights. No
assurances can be given that the Plan will be successfully implemented. As of
December 31, 1995, the Partnership's carrying value of the investment in the
Victorian Local Partnership (which represents approximately 5.7% of the
Partnership's total equity initially invested in Local Partnerships) was zero.
In December 1992, Tara Construction, the general contractor for Art Museum
properties (Summit I, II and III), commenced an action in the Court of Common
Pleas, Montgomery County, Pennsylvania Tara Construction v. NTCP et al., (Case
No. 92-23505) against the three Summit Local Partnerships, the Partnership, NTC,
the General partner PaineWebber Incorporated, and a PaineWebber affiliate,
seeking damages of approximately $600,000 allegedly due the general contractor
for work done in connection with the completion of construction plus damages for
alleged misrepresentations and punitive damages. The Partnership believes that
the general contractor's claims are barred and/or subject to offset and it has
filed responsive pleadings. The Partnership has not accrued any liability in the
accompanying financial statements as of March 31, 1996. Tara Construction's
lawsuit has now been dormant for more than two years. The carrying value of the
investments, at December 31, 1995, in Summit I, Summit II and Summit III totaled
approximately $2,138,000. Summit I, II and III represent 3.2%, 1.4% and 4.6%,
respectively, of NTCP's original portfolio investment.
The Meadows Apartments is a 112-unit building in Ysilanti, Michigan. The first
mortgage loan on the property matured on May 15, 1996 and the property is
delinquent in making its property tax payments. Accordingly, the Partnership
endeavored to negotiate an extension and modification of the first but, upon the
lender's refusal, filed a Chapter 11 petition in bankruptcy to avert a
foreclosure of the property. There can be no assurances that the bankruptcy plan
will be confirmed or that property will not be lost to foreclosure. As of March
31, 1996, the carrying value of the investment is zero.
13
<PAGE> 16
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1996
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
The Partnership's three separate lawsuits regarding the Dynes Village Local
Partnership were settled on December 2, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of Item 1 of regulation
S-K.
14
<PAGE> 17
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1996
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.
NATIONAL TAX CREDIT PARTNERS, L.P.
(a California limited partnership)
By: National Partnership Investments Corp.
General Partner
Date:
--------------------------------------
By:
--------------------------------------
Bruce Nelson
President
Date:
--------------------------------------
By:
--------------------------------------
Shawn Horwitz
Executive Vice President and
Chief Financial Officer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) BALANCE
SHEETS, THE STATEMENT OF OPERATIONS, AND STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 432859
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 432859
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,658,683
<CURRENT-LIABILITIES> 314,253
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17454544
<TOTAL-LIABILITY-AND-EQUITY> 21658683
<SALES> 0
<TOTAL-REVENUES> 6581
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1017970
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1011389)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1011389)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1011389)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
