<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the Quarterly Period Ended JUNE 30, 2000
Commission File Number 0-18541
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
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed 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 JUNE 30, 2000
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Notes to Financial Statements
Balance Sheets, June 30, 2000 and December 31, 1999.......................1
Statements of Operations
Six Months Ended June 30, 2000 and 1999...............................2
Statement of Partners' Equity (Deficiency)
Six Months Ended June 30, 2000........................................3
Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999...............................4
Notes to Financial Statements ............................................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ...................................12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................................16
Item 6. Exhibits and Reports on Form 8-K.........................................17
Signatures .......................................................................18
</TABLE>
<PAGE> 3
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
2000 1999
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS
(Notes 1 and 2) $8,621,031 $9,050,981
CASH AND CASH EQUIVALENTS (Note 1) 25,386 63,126
---------- ----------
TOTAL ASSETS $8,646,417 $9,114,107
========== ==========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Accrued fees and expenses due to partners (Notes 4 and 6) $6,441,810 $6,113,629
Capital contributions payable (Note 3) 266,841 266,841
Accounts payable and accrued expenses 180,943 147,262
---------- ----------
6,889,594 6,527,732
CONTINGENCIES (Note 5)
PARTNERS' EQUITY 1,756,823 2,586,375
---------- ----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $8,646,417 $9,114,107
========== ==========
</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
FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST AND OTHER INCOME $ 2,165 $ 770 $ 3,825 $ 1,856
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Management fees - partners (Note 4) 328,180 164,090 346,476 173,238
Legal and accounting 68,810 23,016 61,747 32,261
General and administrative (Note 4) 40,055 22,622 43,148 21,911
---------- ---------- ---------- ----------
Total operating expenses 437,045 209,728 451,371 227,410
---------- ---------- ---------- ----------
LOSS FROM PARTNERSHIP OPERATIONS (434,880) (208,958) (447,546) (225,554)
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED
AS INCOME 98,828 58,004 76,173 49,445
EQUITY IN LOSS OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS (Note 2) (493,500) (247,000) (392,500) (196,250)
---------- ---------- ---------- ----------
NET LOSS $ (829,552) $ (397,954) $ (763,873) $ (372,359)
========== ========== ========== ==========
NET LOSS PER LIMITED
PARTNERSHIP INTEREST (Note 1) $ (34) $ (16) $ (32) $ (15)
========== ========== ========== ==========
</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)
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Special
Limited General Limited
Partners Partners Partners Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PARTNERSHIP INTERESTS 23,899
===========
PARTNERS' EQUITY (DEFICIENCY),
January 1, 2000 $ 1,000 $ (492,960) $ 3,078,335 $ 2,586,375
Net loss for the six
months ended June 30, 2000 -- (8,296) (821,256) (829,552)
----------- ----------- ----------- -----------
PARTNERS' EQUITY (DEFICIENCY),
June 30, 2000 $ 1,000 $ (501,256) $ 2,257,079 $ 1,756,823
=========== =========== =========== ===========
</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
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(829,552) $(763,873)
Adjustments to reconcile net loss to net cash
used in operating activities:
Equity in losses of limited partnerships
and amortization of acquisition costs 493,500 392,500
Increase in:
Accrued fees and expenses due to partners 328,181 346,475
Accounts payable and accrued expenses 33,681 9,479
--------- ---------
Net cash provided by (used in) operating activities 25,810 (15,419)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in investee partnerships:
Capital contributions to limited partnerships (127,850) (106,532)
Distributions recognized as a return of capital 64,300 104,161
--------- ---------
Net cash used in investing activities (63,550) (2,371)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (37,740) (17,790)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 63,126 220,457
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 25,386 $ 202,667
========= =========
</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
JUNE 30, 2000
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, 1999. 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 June 30, 2000, and the results of operations and changes in cash
flows for the six and three 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. Casden Properties Inc. owns a 95.25% economic
interest in NAPICO, with the balance owned by Casden Investment
Corporation ("CIC"). CIC, which is wholly owned by Alan I. Casden, owns
95% of the voting common stock of NAPICO. The special limited partner of
the Partnership (the "Special Limited Partner") is PaineWebber T.C.,
Inc., a Delaware corporation.
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 accounting
principles generally accepted in the United States of America 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)
JUNE 30, 2000
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.
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 periods presented.
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.
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership reviews long-lived assets to determine if there has been
any permanent impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable.
If the sum of the expected future cash flows is less than the carrying
amount of the assets, the Partnership recognizes an impairment loss.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership currently holds limited partnership interests in 31
local limited partnerships ("Local Partnerships"). 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)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
At June 30, 2000, the Local Partnership's own residential projects
consisted of 2,788 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 for
the six months ended June 30, 2000:
<TABLE>
<S> <C>
Balance, beginning of period $ 9,050,981
Capital contributions 127,850
Equity in losses of limited partnerships (458,000)
Amortization of capitalized acquisition costs (35,500)
Distributions recognized as a return of capital (64,300)
-----------
Balance, end of period $ 8,621,031
===========
</TABLE>
7
<PAGE> 10
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
The following are unaudited combined estimated statements of operations
for the six and three months ended June 30, 2000 and 1999 for the
limited partnerships in which the Partnership has investments:
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Rental and other $ 3,509,000 $ 1,754,000 $ 8,848,000 $ 4,424,000
------------ ------------ ------------ ------------
EXPENSES
Depreciation 866,000 433,000 2,162,000 1,081,000
Interest 2,632,000 1,316,000 3,768,000 1,884,000
Operating 812,000 406,000 4,774,000 2,387,000
------------ ------------ ------------ ------------
4,310,000 2,155,000 10,704,000 5,352,000
------------ ------------ ------------ ------------
Net loss $ (801,000) $ (401,000) $ (1,856,000) $ (928,000)
============ ============ ============ ============
</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 the unaffiliated Local Operating General Partners failed to pay
$800,000 of real property taxes required under their guarantees. On
March 25, 1992, the Partnership commenced litigation 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 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. The Local Operating General Partners'
Seventh Amended Plan of Reorganization (the "Plan") was approved.
Pursuant to the Plan, Patrician is required to reissue and/or reduce the
principal on the first mortgage bonds and the Local Operating General
Partners are required to (i) pay $1,000,000 cash to implement the Plan
and (ii) pay an agreed upon monthly guarantee payment. No assurances can
be given that the Plan will be successfully implemented. 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) is
zero.
8
<PAGE> 11
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
Summit I, II and III
The general contractor for three related Local Partnerships, Summit I,
Summit II and Summit 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 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. The lawsuit has been dormant for more
than three years. Occupancy levels at the three related Local
Partnerships, Summit I, II, and III (Wallace, Bergdoll, and Chandler
School located in Philadelphia) were 88%, 78% and 88%, respectively, at
June 30, 2000. At June 30, 2000 , the Summit I, II and III properties
have approximately $230,000 in outstanding property taxes (a portion of
which could result in liens on the properties), utility bills, and other
trade payables. The local general partner is currently attempting to
negotiate discounted payments and/or payment plans for these items
which, if unsuccessful, could result in foreclosure proceedings on all
three properties. The parties are currently engaged in settlement
discussions regarding the default. The Partnership's carrying value of
the investments in Summit I, Summit II and Summit III which
approximately 3.2%, 1.4% and 4.6%, respectively, of the Partnership's
original portfolio investment is zero.
Glenark
Pursuant to the terms of a workout, dated January 11, 1995 (the
"Workout") agreed upon between the parties relating to the resolution of
an existing default under the first mortgage loan encumbering Glenark
Landing, annual payments of $42,800 for a five year term, totaling
$214,000 are due from the Partnership to the Rhode Island Housing and
Mortgage Corporation (the "Lender"). The Partnership stopped making
these payments, and the Lender issued a notice of default with respect
to the Workout on September 24, 1999. The Partnership's carrying value
of the investment in Glenark is zero.
Dynes Village
The Dynes Village Apartments complex is operating at a deficit and the
first mortgage loan encumbering the property was delinquent until it was
brought current by NTCP in November 1997. In addition, the property has
been audited by the IRS with respect to tenant qualifications performed
by the prior local operating general partner. The IRS has disqualified
all future housing tax credits based on what they consider
non-compliance by the prior local operating general partner. As a
result, the Partnership's investment in Dynes Village of $560,766 was
written off in 1997.
Blue Lake
Pursuant to the terms of a loan workout, dated March 25, 1995, NTCP is
required to contribute an additional $266,841 to the local partnership
(see Note 3). In exchange, the debt service on the property is payable
out of net cash flow. The Partnership's investment in Blue Lake is zero.
9
<PAGE> 12
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
Rose City
During 1997, the Oregon Housing and Community Services Department
("Department") inspected Rose City Village Limited Partnership's
compliance with the low-income housing credit provisions of the Internal
Revenue Code, and determined that the Partnership was not in compliance.
The Department filed Form 8823, Low-Income Housing Credit Agencies
Report of Noncompliance, with the Internal Revenue Service. Management
believes the instances of noncompliance are now corrected; however, as
of the date of this report, resolution of this matter by the Department
and the Internal Revenue Service is still outstanding. The effect, if
any, of the noncompliance on the financial statements of the Partnership
cannot be determined at this date. The Partnership's investment in Rose
City is approximately $177,000 at June 30, 2000.
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. No
payments have been made in 2000 or 1999 and a dispute has arisen as to
whether the local partnership is in default under the Workout (see Note
2). The parties are currently engaged in settlement discussions
regarding this dispute.
NOTE 4 - RELATED-PARTY TRANSACTIONS
Under the terms of the Amended and Restated Agreement of the Limited
Partnership, the Partnership is obligated to pay 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 six months ended June 30, 2000 and 1999 approximately
$328,000 has been expensed. The unpaid balance at June 30, 2000
is approximately $6,442,000.
As of December 31, 1999, the fees and expenses due the General
Partner and Special Limited Partner exceeded the Partnership's
cash. The partners, during the forthcoming year, will not demand
payment of amounts due in excess of such cash or such that the
Partnership would not have sufficient operating cash; however,
the Partnership will remain liable for all such amounts.
(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 percent
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
10
<PAGE> 13
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 4 - RELATED-PARTY TRANSACTIONS (CONTINUED)
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 percent
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 percent 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.
NTC is the Local Operating General Partner in sixteen of the
Partnership's 31 Local Partnerships. In addition, NTC is either a
special limited partner or an administrative general partner in each
Local Partnership.
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 percent to 4.5
percent of their gross rental revenues. The amounts paid were
approximately $32,000 for the six months ended June 30, 2000 and 1999,
respectively.
NOTE 5 - CONTINGENCIES
The General Partner and the Partnership, are involved in various
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. 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.
11
<PAGE> 14
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
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.
The Partnership's cash as of June 30, 2000 was approximately $25,000. In
order to replenish NTCP's reserves, NTCP sold to the local general
partner an additional portion and further diluted its limited partner
interest in the Rose City local partnership during 1997. The local
general partner will, accordingly, be entitled to an increased
allocation of cash flow and proceeds from the sale or refinancing of the
property. NTCP will continue to receive its allocable portion of housing
tax credits, subject to the allocation made to the additional limited
partner identified in a prior report, through the ten year credit
period. As a result of this transaction, NTCP received $260,000 during
1997. In addition, NTCP sold to an unrelated party a portion of its
limited partner interest in the Countryview local partnership and
received $625,582 during 1997. The amounts received from these sales are
traded as reductions to the Partnership's investment balance in the
local partnerships.
The Partnership does not have the ability to assess Limited Partners for
additional capital contributions to provide capital if needed by the
Partnership or Local Partnerships. Accordingly, if circumstances arise
that cause the Local Partnerships to require capital in addition to that
contributed by the Partnership and any equity of the local general
partners, the only sources from which such capital needs will be able to
be satisfied (other than the limited reserves available at the
Partnership level) will be (i) third-party debt financing (which may not
be available if, as expected, the Apartment Complexes owned by the Local
Partnerships are already substantially leveraged), (ii) other equity
sources (which could reduce the amount of Tax Credits being allocated to
the Partnership, adversely affect the Partnership's interest in
operating cash flow and/or proceeds of sale or refinancing of the
Apartment Complexes and possibly even result in adverse tax consequences
to the Limited Partners), or (iii) the sale or disposition of Apartment
Complexes. There can be no assurance that any of such sources would be
readily available in sufficient proportions to fund the capital
requirements of the Local Partnerships. If such sources are not
available, the Local Partnerships
12
<PAGE> 15
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
CAPITAL RESOURCES AND LIQUIDITY (CONTINUED)
would risk foreclosure on their Apartment Complexes if they were unable
to renegotiate the terms of their first mortgages and any other debt
secured by the Apartment Complexes, which would have significant adverse
tax consequences to the Limited Partners.
Reserves of the Partnership and reserves of the Local Partnerships may
be increased or decreased from time to time by the General Partner or
the local general partner, as the case may be, in order to meet
anticipated costs and expenses. The amount of cash flow available for
distributions and/or sale as refinancing proceeds, if any, which is
available for distribution to the Limited Partners may be affected
accordingly.
RESULTS OF OPERATIONS
The Partnership was formed to provide various benefits to its Limited
Partners. It is not expected that any of the Local Partnerships in which
the Partnership has invested will generate cash flow sufficient to
provide for distributions to Limited Partners. 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.
In general, in order to avoid recapture of Tax Credits, the Partnership
does not expect that it will voluntarily 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 (although earlier dispositions of Historic Complexes may occur).
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 Compliance Period. If a Local Partnership is unable to sell an
Apartment Complex, it is anticipated that the local general partner will
either continue to operate such Apartment Complex or take such other
actions as the local 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 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.
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<PAGE> 16
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
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 "Legal Proceedings" in Part II and the information which follows.
The Dynes Village Apartments complex is operating at a deficit and the
first mortgage loan encumbering the property was delinquent until it was
brought current by NTCP in November 1997. In addition, the property has
been audited by the IRS with respect to tenant qualifications performed
by the prior local operating general partner. The IRS has disqualified
all future housing tax credits based on what they consider
non-compliance by the prior local operating general partner. The
Partnership's investment in Dynes Village was zero at June 30, 2000.
Pursuant to the terms of a workout, dated January 11, 1995 (the
"Workout") agreed upon between the parties relating to the resolution of
an existing default under the first mortgage loan encumbering Glenark
Landing, annual payments of $42,800 for a five year term, totaling
$214,000, are due to the Rhode Island Housing and Mortgage Finance
Corporation (the "Lender"). The Lender issued a notice of default with
respect to the Workout on September 24, 1999. The Partnership's
investment in Glenark Landing was zero at June 30, 2000.
Pursuant to the terms of a loan workout relating to the Blue Lake Local
Partnership, dated March 25, 1995 (the "Workout"), NTCP is required to
contribute an additional $266,841 to the local partnership. In exchange,
the debt service on the property is payable out of net cash flow. The
Partnership's investment in Blue Lake was zero at June 30, 2000. A
dispute has arisen as to whether the local partnership is in default
under the Workout. The parties are currently engaged in settlement
discussions regarding this dispute.
During 1997, the Oregon Housing and Community Services Department
("Department") inspected Rose City Village Limited Partnership's
compliance with the low-income housing credit provisions of the Internal
Revenue Code, and determined that the Partnership was not in compliance.
The Department filed Form 8823, Low-Income Housing Credit Agencies
Report of Noncompliance, with the Internal Revenue Service.
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<PAGE> 17
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Management believes the instances of noncompliance are now corrected;
however, as of the date of this report, resolution of this matter by the
Department and the Internal Revenue Service is still outstanding. The
effect, if any, of the noncompliance on the financial statements of the
Partnership cannot be determined at this date. The Partnership's
investment in Rose City at June 30, 2000 was $177,000.
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. The management fee represents the
annual recurring fee which will be paid to the General Partner for its
continuing management of Partnership affairs.
15
<PAGE> 18
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of June 30, 2000, the Partnership's General Partner was involved in various
lawsuits. In addition, the Partnership is involved in the following 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.
Victorian Park
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
property taxes required under their guarantees. On March 25, 1992, the
Partnership commenced litigation 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 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. The Local Operating General Partners' Seventh
Amended Plan of Reorganization (the "Plan") was approved. Pursuant to the Plan,
Patrician is required to reissue and/or reduce the principal on the first
mortgage bonds and the Local Operating General Partners are required to (i) pay
$1,000,000 cash to implement the Plan and (ii) pay an agreed upon monthly
guarantee payment. No assurances can be given that the Plan will be successfully
implemented. 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) is 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, 1999 and December 31, 1998.
Tara Construction's lawsuit has been dormant for more than three years.
Occupancy levels at the three related Local Partnerships, Summit I, II, and III
(Wallace, Bergdoll, and Chandler School located in Philadelphia) were 88%, 78%,
and 88%, respectively, at June 30, 2000. The local general partner is currently
attempting to negotiate discounted payments and/or payment plans for outstanding
payables which, if unsuccessful, could result in foreclosure proceedings on all
three properties. In 1996, the aggregate carrying value of the investments in
Summit I, Summit II and Summit III of approximately $2,290,000, was written off.
Summit I, II and III represent 3.2%, 1.4% and 4.6%, respectively, of NTCP's
original portfolio investment.
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<PAGE> 19
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of Item 6 of
regulation S-K and no reports on Form 8-K were filed during the
quarter ended June 30, 2000.
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<PAGE> 20
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
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
/s/ BRUCE NELSON
--------------------------------------
Bruce Nelson
President
Date: August 21, 2000
----------------------------------------
/s/ PAUL PATIERNO
--------------------------------------
Paul Patierno
Chief Financial Officer
Date: August 21, 2000
----------------------------------------
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