<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended March 31, 1997
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: 0-20638
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3519080
- --------------------------------------------------------------------------------
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
One Seaport Plaza, New York, New York 10292-0116
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 214-1016
Securities registered pursuant to Section 12(b) of the Act:
None
- --------------------------------------------------------------------------------
Securities registered pursuant to section 12(g) of the Act:
Beneficial Unit Certificates
- --------------------------------------------------------------------------------
(Title of class)
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 such
filing requirements for the past 90 days. Yes _CK_ No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ CK ]
DOCUMENTS INCORPORATED BY REFERENCE
Pre-Effective Amendment No. 1 to Registration Statement on Form S-11 (File
No. 33-28571)
Pre-Effective Amendment No. 2 to Registration Statement on Form S-11 (File
No. 33-28571)
Annual Report to Limited Partners for the year ended March 31, 1997 is
incorporated by reference into Parts II and IV of this Annual Report on Form
10-K
Index to exhibits can be found on page 10.
<PAGE>
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
(a limited partnership)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1 Business..................................................... 3
Item 2 Properties................................................... 5
Item 3 Legal Proceedings............................................ 6
Item 4 Submission of Matters to a Vote of Limited Partners.......... 6
PART II
Item 5 Market for Registrant's BUC$ and Related Limited Partner
Matters.................................................... 6
Item 6 Selected Financial Data...................................... 7
Item 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 7
Item 8 Financial Statements and Supplementary Data.................. 7
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 7
PART III
Item 10 Directors and Executive Officers of the Registrant........... 7
Item 11 Executive Compensation....................................... 9
Item 12 Security Ownership of Certain Beneficial Owners and
Management................................................. 9
Item 13 Certain Relationships and Related Transactions............... 9
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form
8-K
Financial Statements and Financial Statement Schedules....... 10
Exhibits..................................................... 10
Reports on Form 8-K.......................................... 10
SIGNATURES............................................................... 14
</TABLE>
2
<PAGE>
PART I
Item 1. Business
General
Prudential-Bache Tax Credit Properties L.P. (the 'Registrant'), a Delaware
limited partnership, was formed on May 3, 1989 and will terminate on December
31, 2029 unless terminated sooner under the provisions of the Amended and
Restated Agreement of Limited Partnership (the 'Partnership Agreement'). The
Registrant was formed to invest in low-income, multi-family residential
complexes ('Apartment Complexes' or 'Properties') and, to a lesser extent, in
historic apartment complexes undergoing rehabilitation ('Historic Complexes' or
'Properties') through the acquisition of interests (the 'Local Partnership
Interests') in local partnerships (the 'Local Partnerships') that are the owners
of the Properties. These investments were made with proceeds from the initial
sale of 38,125 Beneficial Unit Certificates ('BUC$'). The Registrant's fiscal
year for tax and financial reporting purposes ends on December 31 and March 31,
respectively.
The primary objectives of the Registrant are to provide the limited partners
with low-income housing tax credits allowed under Section 42 of the Internal
Revenue Code of 1986, as amended ('Housing Tax Credits') over the credit period
for each Property in which the Registrant has invested and to a lesser extent,
historic rehabilitation tax credits allowed under Section 48(g) of the Internal
Revenue Code of 1986, as amended. The Registrant invested only in Local
Partnerships that owned Properties which qualified for Housing Tax Credits. No
properties were acquired from any entity in which Prudential-Bache Properties,
Inc. or any affiliate had an interest. The Registrant's investments are composed
of limited partnership interests in Local Partnerships owning then newly
constructed or existing structures that have undergone substantial
rehabilitation. The Local Partnerships in which the Registrant has invested must
be operated in accordance with the low-income housing rules and regulations to
protect the related tax credits. It is not expected that any of the Local
Partnerships in which the Registrant has invested will generate any significant
cash flow to provide distributions to the limited partners.
The Registrant expects that in order to avoid recapture of Housing Tax
Credits, its holding period with respect to each Local Partnership Interest will
be at least as long as the 15-year compliance period and may be substantially
longer.
Each Property in which the Registrant invested is substantially mortgaged.
However, the aggregate indebtedness did not exceed 85% of the appraised fair
market value of any Property at the time of acquisition. The first mortgage
financing encumbering the Properties was arranged by the general partner of the
Local Partnership (the 'Local General Partner') owning the Properties prior to
the time the Registrant became a limited partner therein.
The Registrant acquired its Local Partnership Interest in each Local
Partnership by purchasing it directly from the existing limited and/or general
partner of the Local Partnership. In each of the Registrant's investments, the
Local General Partner of the Local Partnership owning the complex was required
to provide personal guarantees and/or establish cash escrows, financial bonds
and/or letters of credit to protect the Registrant against, among other things,
the failure to meet certain operating criteria.
The Registrant is engaged solely in the business of investing in Local
Partnerships that own Properties; therefore, presentation of industry segment
information is not applicable. For more information regarding the Properties,
see Item 2 Properties. For more information regarding the Registrant's
operations, see Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations.
One Property had rental income which exceeded 15% of the Registrant's total
revenue. Rental income from Palm Beach Apartments Ltd. ('Summer Creek Villas')
as a percentage of the Registrant's total revenue was 43.8%, 47.5% and 47.9%
during the years ended March 31, 1997, 1996 and 1995, respectively.
No single tenant accounted for 10% or more of the Registrant's total revenue
for any of the three years in the period ended March 31, 1997.
3
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General Partner
The general partner of the Registrant is Prudential-Bache Properties, Inc.
(the 'General Partner' or 'PBP'). P.B. Tax Credit S.L.P. ('PBSLP'), an affiliate
of the General Partner, acts as Special Limited Partner of each Local
Partnership, entitling it to certain rights with respect to the operation and
management of each Local Partnership.
On December 19, 1996, PBP and Related Capital Company ('RCC') entered into an
agreement for the purchase by RCC or its affiliates of PBP's general partner
interests in the Registrant and certain other associated interests. The
agreement is subject to numerous conditions including the settlement of the
class action litigation (In re Prudential Securities Inc. Limited Partnerships
Litigation, MDL No. 1005) (the 'Class Action') against affiliates of RCC and the
approval of the sale and withdrawal of PBP as the sole general partner of the
Registrant by the court overseeing the Class Action. Following consummation of
the transaction, RCC or its affiliate will become the general partner of the
Registrant. On December 31, 1996, the court overseeing the Class Action issued a
preliminary approval order with respect to the settlement of the Class Action,
which provides, in part, that pending final approval of the settlement of the
Class Action, class members (including the limited partners and unitholders
(collectively, the 'Limited Partners') of the Registrant) are prohibited from,
among other things, transferring their partnership interests unless the
transferee agrees to be bound by the terms of the settlement of the Class
Action. There can be no assurance that the conditions to the closing of the
proposed transaction will be satisfied nor as to the time frame in which a
closing may occur.
In June 1997, an Information Statement was mailed to Limited Partners of
record as of December 24, 1996 advising them of these proposed changes together
with a Notice of the Class Action and the terms of the settlement with RCC in
the Class Action. A hearing will be held on August 28, 1997 in the U.S.
Courthouse, 40 Centre Street, New York, New York, 10007, to determine the
reasonableness and fairness of the settlement.
Competition
The General Partner has formed various entities to engage in businesses that
may be competitive with the Registrant.
The Registrant's business is affected by competition to the extent that the
underlying Properties from which it derives tax credits may be subject to
competition relating to rental rates and amenities from comparable neighboring
properties.
Employees
The Registrant has no employees. Management and administrative services for
the Registrant are performed by the General Partner and its affiliates pursuant
to the Partnership Agreement. See Notes C and F to the consolidated financial
statements in the Registrant's Annual Report to Limited Partners for the year
ended March 31, 1997 ('Registrant's Annual Report') which is filed as an exhibit
hereto.
Pending Legislation
The United States Department of Housing and Urban Development ('HUD')
previously released a proposal entitled the American Community Partnerships Act
('ACPA'). The ACPA is HUD's blueprint for providing for the nation's housing
needs in an era of static or decreasing budget authority. Two key proposals in
the ACPA that could affect the Local Partnerships are a discontinuation of
project-based Section 8 subsidy payments and an attendant reduction in debt on
properties that were supported by the Section 8 payments. The ACPA calls for a
transition during which the project-based Section 8 payments would be converted
to a tenant-based voucher system. Any Federal Housing Administration ('FHA')
insured debt would then be 'marked-to market', that is, revalued in light of the
reduced income stream.
Several industry sources have commented to HUD and Congress that in the event
the ACPA was fully enacted in its present form, the reduction in mortgage
indebtedness would be considered taxable income to owners such as the limited
partners in the Partnership. Legislative relief has been proposed to exempt
'marked-to-market' debt from cancellation of indebtedness income treatment. At
present, there are several
4
<PAGE>
bills pending in Congress to address this tax relief issue. Additionally, in the
interim, HUD has agreed to annual extensions of any expiring project-based
Section 8 contracts, but there is no guarantee that such extensions will be
available in the future.
Item 2. Properties
As of March 31, 1997, the Registrant holds interests in Local Partnerships
which own the following Properties which continue to be operated in a manner to
qualify for tax credits:
<TABLE>
<CAPTION>
REGISTRANT'S
LOW-INCOME
HOUSING
TAX CREDIT
RENTS OCCUPANCY RATE FOR THE
NUMBER AS OF AS OF YEAR ENDED
PROPERTY (a) OF UNITS JUNE 16, 1997 JUNE 16, 1997 DECEMBER 31, 1996
- -------------------------------- --------- ------------- -------------- -----------------
<S> <C> <C> <C> <C>
RMB Limited Partnership
(Hubbard's Ridge)
Garland, TX 196 $385-$549 92% $ 395,768
Cutler Canal II Associates, Ltd.
Miami, FL 216 347-604 93 896,701
Diamond Street Venture
Philadelphia, PA 48 476-536 96 282,288
Papillion Heights Apartments
L.P.
Papillion, NE 48 370-440 100 173,661
Hill Top Homes Apartments
Limited Partnership
Arlington, TX 171 460-660 96 616,546
Palm Beach Apartments, Ltd.
(Summer Creek Villas)
West Palm Beach, FL 770 519-708 85 2,241,161
Brookland Park Plaza
Limited Partnership
Richmond, VA 77 511 99 429,237
Compton Townhouses
Limited Partnership
Cincinnati, OH 39 615 100 205,620
-----------------
$ 5,240,982
-----------------
-----------------
(a) At March 31, 1997, the Registrant holds a 66.5% interest in Summer Creek Villas, a 98% interest in
Hubbard's Ridge, Hill Top Homes and Compton Townhouses and a 98.99% interest in Cutler Canal II,
Diamond Street, Papillion Heights and Brookland Park Plaza.
- --------------------------------------------------------------------------------------------------------
</TABLE>
Hubbard's Ridge is comprised of seven separate three-story buildings on
approximately 6.5 acres. The buildings are wood-framed structures on
post-tensioned flat slab on grade foundations and have white stucco exteriors
with asphalt shingles on sloped roofs. Each building contains an average of 28
units. The unit mix consists of 164 one-bedroom units ranging in size from 657
square feet to 783 square feet and 32 two-bedroom units ranging in size from
1,145 square feet to 1,167 square feet.
The Cutler Canal II property is comprised of 216 units in 13 two-story
garden-style residential buildings on approximately 9.4 acres. It borders on a
Metro-Dade Water Management District Canal on the east with approximately 1,200
square feet of frontage giving certain units waterfront views. Each building has
a
5
<PAGE>
laundry room and two storage rooms. There are three basic floor plans with sizes
ranging from 700 square feet for a one-bedroom apartment to 1,100 square feet
for a three-bedroom unit.
The Diamond Street property consists of 48 units in 16 buildings. The
buildings are three-story brownstone row houses with historic features and
similar layouts. Of the 48 apartment units, 46 are two-bedroom apartment units
and two are efficiency apartment units.
The Papillion Heights property consists of two buildings, each containing 24
units. The buildings are 2 1/2 stories of wood frame and brick exterior with
pitched roofs. Of the total 48 apartment units, two are one-bedroom units and 46
are two-bedroom units.
The Hill Top Homes property is comprised of a two-story building surrounded
by 13 one-story fourplexes which are brick with wood siding and pitched roofs.
The buildings are surrounded by a security gate of brick columns and wrought
iron fencing with a guard house at the entrance. The unit distribution mix
includes 171 apartment units of which 18 are three-bedroom/one bath apartment
units each containing approximately 925 square feet, 52 two-bedroom/two bath
apartment units each containing approximately 1,100 square feet, 98
two-bedroom/one bath apartment units each containing approximately 936 square
feet and three one-bedroom/one bath apartment units each containing
approximately 1,000 square feet.
Summer Creek Villas consists of 61 concrete block and stucco buildings
housing 770 apartment units situated on approximately 60 acres of
residential-planned unit development zoned land. 182 of the units are
one-bedroom/one-bath apartments, each containing 570 square feet; 372 are
two-bedroom/one-bath apartments, each containing 773 square feet; 144 are
three-bedroom/two-bath apartments, each containing 980 square feet; and 72 are
three-bedroom/two-bath villa units, each containing 1,050 square feet.
The Brookland Park Plaza property is an existing three-level brick building
and is a registered historic landmark. The building is comprised of stucco and
brick exterior and a sloped red glazed tile roof. It is a 77-unit development
with 68,564 net rentable square feet. All 77 units are one-bedroom apartment
units each of which contains approximately 890 square feet. Each unit contains a
refrigerator, range, carpeting and air-conditioning. Brookland Park Plaza also
maintains a community room for tenants.
The Compton Townhouses consist of six two-story buildings containing a total
of 39 townhouse units. Four of the buildings contain six units; one building has
seven units; and one has eight units. All units have three bedrooms and
two-and-one-half baths. Total gross building area is 52,595 square feet; net
rentable area is 47,814 square feet. The average net area of the subject units
is 1,226 square feet.
For additional information describing the Registrant's properties, see Item 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Schedule III--Real Estate and Accumulated Depreciation.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Limited Partners
None
PART II
Item 5. Market for Registrant's BUC$ and Related Limited Partner Matters
As of June 1, 1997, there were 2,259 holders of record owning 38,125 BUC$.
Additionally, the General Partner holds one BUC. A significant secondary market
for BUC$ has not developed, and it is not expected that one will develop in the
future. There are also certain restrictions set forth in the Partnership
Agreement limiting the ability of a limited partner to transfer BUC$. In
addition, as noted in Item 1 Business above, pending final approval of the
settlement of the Class Action, limited partners are prohibited from
transferring their partnership interests unless the transferee agrees to be
bound by the terms of the settlement of the Class Action. Consequently, holders
of BUC$ may not be able to liquidate their investments in the event of an
emergency or for any other reason.
6
<PAGE>
There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Partnership Agreement; however, the Registrant has paid no distributions from
operations or otherwise since inception. No distributions are anticipated in the
foreseeable future.
Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the consolidated financial statements of
the Registrant and the notes thereto on pages 2 through 25 of the Registrant's
Annual Report which is filed as an exhibit hereto.
<TABLE>
<CAPTION>
Year ended March 31,
-------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Rental and other income $ 9,775,005 $ 9,783,022 $ 9,031,174 $ 9,212,457 $ 8,938,787
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Interest income $ 41,291 $ 49,257 $ 47,693 $ 75,242 $ 93,419
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Interest expense $ 4,428,530 $ 4,448,986 $ 4,474,229 $ 4,462,589 $ 4,236,927
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Depreciation and
amortization expense $ 2,517,547 $ 2,549,449 $ 2,640,262 $ 2,615,469 $ 2,692,891
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Provision for loss on
impairment of assets $ -- $ -- $ 2,700,000 $ -- $ --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Loss before minority
interest $(2,920,508) $(2,587,393) $(6,271,864) $(3,341,362) $(3,415,486)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Minority interest in loss
of local partnerships $ 409,993 $ 421,144 $ 608,088 $ 496,042 $ 476,756
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net loss $(2,510,515) $(2,166,249) $(5,663,776) $(2,845,320) $(2,938,730)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net loss per limited
partner BUC $ (65.19) $ (56.25) $ (147.07) $ (73.89) $ (76.31)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total assets $70,502,375 $72,944,919 $76,174,392 $81,370,985 $90,042,295
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Mortgage notes payable $46,099,028 $46,387,992 $46,529,512 $46,661,471 $46,797,027
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 26 through 28 of the
Registrant's Annual Report which is filed as an exhibit hereto.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements are incorporated by reference to pages
2 through 25 of the Registrant's Annual Report which is filed as an exhibit
hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The
Registrant is managed by the General Partner.
The Registrant, the Registrant's General Partner and its directors and
executive officers, and any persons holding more than ten percent of the
Registrant's BUC$ are required to report their initial ownership of such
7
<PAGE>
BUC$ and any subsequent changes in that ownership to the Securities and Exchange
Commission on Forms 3, 4 and 5. Such executive officers, directors and persons
who own greater than ten percent of the Registrant's BUC$ are required by
Securities and Exchange Commission regulations to furnish the Registrant with
copies of all Forms 3, 4 and 5 they file. All of these filing requirements were
satisfied on a timely basis. In making these disclosures, the Registrant has
relied solely on written representations of the General Partner, directors and
executive officers and persons who own greater than ten percent of the
Registrant's BUC$, if any, or copies of the reports they have filed with the
Securities and Exchange Commission during and with respect to its most recent
fiscal year.
Prudential-Bache Properties, Inc.
The directors and executive officers of PBP and their positions with regard
to managing the Registrant are as follows:
<TABLE>
<CAPTION>
Name Position
<S> <C>
Brian J. Martin President, Chief Executive Officer,
Chairman of the Board of Directors and Director
Barbara J. Brooks Vice President--Finance and Chief Financial Officer
Eugene D. Burak Vice President and Chief Accounting Officer
Chester A. Senior Vice President
Piskorowski
Frank W. Giordano Director
Nathalie P. Maio Director
</TABLE>
BRIAN J. MARTIN, age 46, is the President, Chief Executive Officer, Chairman
of the Board of Directors and a Director of PBP. He is a Senior Vice President
of Prudential Securities Incorporated ('PSI'), an affiliate of PBP. Mr. Martin
also serves in various capacities for other affiliated companies. Mr. Martin
joined PSI in September 1980. Mr. Martin is a member of the Pennsylvania Bar.
BARBARA J. BROOKS, age 48, is the Vice President-Finance and Chief Financial
Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in
various capacities for other affiliated companies. She has held several
positions within PSI since 1983. Ms. Brooks is a certified public accountant.
EUGENE D. BURAK, age 52, is a Vice President of PBP. He is a First Vice
President of PSI. Prior to joining PSI in September 1995, he was a management
consultant for three years and was with Equitable Capital Management Corporation
from March 1990 to May 1992. Mr. Burak is a certified public accountant.
CHESTER A. PISKOROWSKI, age 54, is a Senior Vice President of PBP. He is a
Senior Vice President of PSI and is the Senior Manager of the Specialty Finance
Asset Management area. Mr. Piskorowski has held several positions within PSI
since April 1972. Mr. Piskorowski is a member of the New York and Federal Bars.
FRANK W. GIORDANO, age 55, is a Director of PBP. He is a Senior Vice
President and Senior Counsel of PSI. Mr. Giordano also serves in various
capacities for other affiliated companies. He has been with PSI since July 1967.
NATHALIE P. MAIO, age 46, is a Director of PBP. She is a Senior Vice
President and Deputy General Counsel of PSI and supervises non-litigation legal
work for PSI. She joined PSI's Law Department in 1983; presently she also serves
in various capacities for other affiliated companies.
Thomas F. Lynch, III ceased to serve as President, Chief Executive Officer,
Chairman of the Board of Directors and Director of Prudential-Bache Properties,
Inc. effective May 2, 1997. Effective May 2, 1997, Brian J. Martin was elected
President, Chief Executive Officer, Chairman of the Board of Directors and
Director of Prudential-Bache Properties, Inc.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and executive officers have
indefinite terms.
8
<PAGE>
Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to directors and officers of the General Partner for its services.
Certain executive officers and directors of the General Partner receive
compensation from affiliates of the General Partner, not from the Registrant,
for services performed for various affiliated entities, which may include
services performed for the Registrant; however, the General Partner believes
that any compensation attributable to services performed for the Registrant is
immaterial. See Item 13 Certain Relationships and Related Transactions for
information regarding compensation to the General Partner.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of June 1, 1997, no director or executive officer of PBP owns directly or
beneficially any interest in the voting securities of PBP.
As of June 1, 1997, no director or executive officer of PBP owns directly or
beneficially any of the BUC$ issued by the Registrant.
As of June 1, 1997, no limited partner beneficially owns more than five
percent (5%) of the BUC$ issued by the Registrant.
Item 13. Certain Relationships and Related Transactions
The Registrant has and will continue to have certain relationships with the
General Partner and its affiliates. However, there have been no direct financial
transactions between the Registrant and the directors or executive officers of
the General Partner.
Reference is made to Notes A, C, F and G to the consolidated financial
statements in the Registrant's Annual Report which is filed as an exhibit
hereto, which identify the related parties and discuss the services provided by
these parties and the amounts paid or payable for their services.
9
<PAGE>
PART IV
<TABLE>
<CAPTION>
Page
in
Annual
Report
-------
<C> <C> <S> <C>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements and Independent Auditors'
Report--Incorporated by reference to Registrant's
Annual Report which is filed as an exhibit hereto
Financial Statements:
Independent Auditors' Report 2
Consolidated Statements of Financial Condition--March
31, 1997 and 1996 18
Consolidated Statements of Operations--Three years
ended March 31, 1997 19
Consolidated Statements of Changes in Partners'
Capital--Three years ended March 31, 1997 19
Consolidated Statements of Cash Flows--Three years
ended March 31, 1997 20
Notes to Consolidated Financial Statements 21
2. Financial Statement Schedules and Independent Auditors'
Report on Schedules
Independent Auditors' Report on Schedules
Schedules:
III--Real Estate and Accumulated Depreciation at March
31, 1997
All other schedules have been omitted because they are
not applicable or the required information is
included in the consolidated financial statements or
the notes thereto.
3. Exhibits
Description:
Agreement of Limited Partnership as adopted on May 3,
1989 and Amendments thereto dated May 25, 1989 and
June 21, 1989*
Form of Amended and Restated Agreement of Limited
Partnership (included in Prospectus as Exhibit A)**
Certificate of Limited Partnership as filed on May 3,
1989 and Amendments thereto dated May 25, 1989 and
June 21, 1989*
Form of Purchase and Sale Agreement pertaining to the
Partnership's Acquisition of Local Partnership
Interests**
Form of Amended and Restated Agreement of Local Limited
Partnership of Local Partnerships**
Annual Report to Limited Partners for the year ended
March 31, 1997 (with the exception of the
information and data incorporated by reference to
Items 7 and 8 of this Annual Report on Form 10-K, no
other information or data appearing in the
Registrant's Annual Report is deemed to be filed as
part of this report) (filed herewith)
Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
Current Report on Form 8-K dated December 19, 1996, as
filed with the Securities and Exchange Commission on
January 10, 1997, relating to Item 5 regarding the
entering into of an agreement for the sale of the
General Partner's interests in the Registrant and
certain other associated interests.
</TABLE>
- ------------------
* Filed as an exhibit to Pre-Effective Amendment No. 1 to Form S-11
Registration Statement
(No. 33-28571) and incorporated herein by reference.
** Filed as an exhibit to Pre-Effective Amendment No. 2 to Form S-11
Registration Statement
(No. 33-28571) and incorporated herein by reference.
10
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
TO THE PARTNERS OF
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
(A Delaware Limited Partnership):
In connection with our audit of the consolidated financial statements of
Prudential-Bache Tax Credit Properties L.P. and Subsidiaries included in this
Form 10-K, we have also audited supporting Schedule III for the year ended March
31, 1997. In our opinion, based on our audit and the reports of the other
auditors, the consolidated schedule presents fairly, when read in conjunction
with the related consolidated financial statements, the financial data required
to be set forth therein.
ANCHIN, BLOCK & ANCHIN LLP
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
June 11, 1997
11
<PAGE>
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
Schedule III--Real Estate and Accumulated Depreciation
March 31, 1997
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------------------------------------------------------------------------------------------------------
Gross
Amounts At
Which
Carried At
Close Of
Initial Cost Period(5)
--------------------------- Costs Capitalized ----------
Buildings Subsequent to Acquisition(7)
- ------------------------- ------------ and -------------------------------
Description (4)(6) Encumbrances Land Improvements Improvements Carrying Costs Land
- ------------------------- ------------ ---------- ------------ ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Apartment Complexes:
RMB Limited
Partnership(1)
(Hubbard's Ridge)
Garland, TX $ 1,934,623 $ 107,237 $ 965,136 $ 3,732,973 $ 185,180 $ 107,237
Cutler Canal II
Associates, Ltd.(2)
Miami, FL 5,982,895 807,071 1,388,350 8,861,278 67,728 807,071
Diamond Street Venture(3)
Philadelphia, PA 3,017,829 9,729 234,465 2,352,712 273,218 9,729
Papillion Heights
Apartments L.P.(1)
Papillion, NE 1,033,084 63,329 1,816,598 255,218 66,552 63,329
Hill Top Homes
Apartments L.P.(1)
Arlington, TX 3,643,632 553,841 3,690,150 3,542,729 316,368 553,841
Palm Beach Apartments,
Ltd.(1)
(Summer Creek Villas)
West Palm Beach, FL 26,614,668 2,396,876 10,578,563 25,557,883 1,876,795 2,396,876
Brookland Park Plaza
L.P.(1)
Richmond, VA 2,499,200 50,000 109,850 5,907,565 376,165 50,000
Compton Townhouses
L.P.(1)
Cincinnati, OH 1,373,097 17,550 476,708 1,923,171 28,203 17,550
------------ ---------- ------------ ------------ -------------- ----------
$46,099,028 $4,005,633 $19,259,820 $52,133,529 $3,190,209 $4,005,633
------------ ---------- ------------ ------------ -------------- ----------
------------ ---------- ------------ ------------ -------------- ----------
<CAPTION>
Column E Column F Column G Column H Column I
------------------------- ------------ ------------- ---------- ------------------------
Gross Amounts At Which Life on which
Carried At Close Of Period(5) Depreciation in
---------------------------- Date Latest Consolidated
Buildings and Accumulated Construction Date Statement of Operations
Description (4)(6) Improvements Total Depreciation Completed Acquired is computed
- ------------------------- ------------ ----------- -------------- ------------- ---------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Apartment Complexes:
RMB Limited
Partnership(1)
(Hubbard's Ridge)
Garland, TX $ 4,883,289 $ 4,990,526 $1,192,388 5/90 12/89 30
Cutler Canal II
Associates, Ltd.(2)
Miami, FL 10,317,356 11,124,427 1,573,623 1/91 1/90 40
Diamond Street Venture(3)
Philadelphia, PA 2,860,395 2,870,124 789,098 12/90 1/90 40
Papillion Heights
Apartments L.P.(1)
Papillion, NE 2,138,318 2,201,647 398,418 12/90 4/90 27.5
Hill Top Homes
Apartments L.P.(1)
Arlington, TX 7,549,247 8,103,088 1,254,076 12/90 6/90 30
Palm Beach Apartments,
Ltd.(1)
(Summer Creek Villas)
West Palm Beach, FL 38,013,241 40,410,117 5,934,623 8/91 6/90 40
Brookland Park Plaza
L.P.(1)
Richmond, VA 6,393,630 6,443,630 1,491,822 12/90 7/90 27.5
Compton Townhouses
L.P.(1)
Cincinnati, OH 2,428,082 2,445,632 649,784 6/92 1/92 40
------------ ----------- -----------
$74,583,558 $78,589,191 $13,283,832
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
(1) First mortgage
(2) Includes first and second mortgages
(3) Includes first, second and third mortgages
(4) At March 31, 1997, the Registrant holds a 66.5% interest in the Local
Partnership of Summer Creek Villas, a 98% interest in Hubbard's Ridge, Hill
Top Homes and Compton Townhouses and a 98.99% interest in Cutler Canal II,
Diamond Street, Papillion Heights and Brookland Park Plaza.
(5) The cost basis of Land and Buildings and Improvements for federal income tax
purposes as of December 31, 1996 is $80,495,274.
(6) The Registrant believes the properties are adequately insured.
(7) Costs Capitalized Subsequent to Acquisition include a write-down of
$2,700,000 for Diamond Street Venture recorded as of March 31, 1995.
12
<PAGE>
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
SCHEDULE III--Real Estate and Accumulated Depreciation
(Continued)
<TABLE>
<CAPTION>
Year ended March 31
---------------------------------------------
1997 1996 1995
----------- ----------- ---------------
<S> <C> <C> <C>
NOTE A--RECONCILIATIONS
AMOUNT AT WHICH REAL ESTATE IS CARRIED:
Balance at beginning of period......................... $78,589,191 $78,589,191 $81,195,661
Additions (deductions) during the period
Improvements...................................... -- -- 93,530
Write-downs during year (1)....................... -- -- (2,700,000)
----------- ----------- ---------------
Balance at end of period............................... $78,589,191 $78,589,191 $78,589,191
----------- ----------- ---------------
----------- ----------- ---------------
ACCUMULATED DEPRECIATION:
Balance at beginning of period......................... $11,073,281 $ 8,863,867 $ 6,594,015
Depreciation...................................... 2,210,551 2,209,414 2,269,852
----------- ----------- ---------------
Balance at end of period............................... $13,283,832 $11,073,281 $ 8,863,867
----------- ----------- ---------------
----------- ----------- ---------------
</TABLE>
- ---------------
(1) Refer to Notes B and D to the consolidated financial statements for
additional information.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Prudential-Bache Tax Credit Properties L.P.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Eugene D. Burak Date: June 30, 1997
----------------------------------------
Eugene D. Burak
Vice President and Chief Accounting
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the General Partner) and on
the dates indicated.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Brian J. Martin Date: June 30, 1997
----------------------------------------
Brian J. Martin
President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
By: /s/ Barbara J. Brooks Date: June 30, 1997
----------------------------------------
Barbara J. Brooks
Vice President-Finance and Chief
Financial Officer
By: /s/ Eugene D. Burak Date: June 30, 1997
----------------------------------------
Eugene D. Burak
Vice President
By: /s/ Frank W. Giordano Date: June 30, 1997
----------------------------------------
Frank W. Giordano
Director
By: /s/ Nathalie P. Maio Date: June 30, 1997
----------------------------------------
Nathalie P. Maio
Director
14
<PAGE>
March 31,
1997
- --------------------------------------------------------------------------------
Prudential-Bache Annual
Tax Credit Report
Properties L.P.
<PAGE>
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
LETTER TO THE LIMITED PARTNERS
FOR THE YEAR ENDED MARCH 31, 1997
1
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE PARTNERS OF
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
(A Delaware Limited Partnership):
We have audited the accompanying consolidated statements of financial
condition of Prudential-Bache Tax Credit Properties L.P. and Subsidiaries as of
March 31, 1997 and 1996 and the related consolidated statements of operations,
changes in partners' capital and cash flows for the years ended March 31, 1997,
1996 and 1995. These consolidated financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits. We did not audit the financial
statements of the consolidated subsidiaries, which statements reflect total
assets of $70,274,405 and $72,647,170 as of March 31, 1997 and 1996,
respectively, and total revenues of $9,809,626, $9,821,070 and $9,061,869 for
the years ended March 31, 1997, 1996 and 1995, respectively. These statements
were audited by other auditors whose reports thereon have been furnished to us,
and our opinion, insofar as it relates to the amounts included for the
consolidated subsidiaries, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits and
the reports of other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Prudential-Bache Tax Credit
Properties L.P. and Subsidiaries at March 31, 1997 and 1996, and the results of
their operations and their cash flows for the years ended March 31, 1997, 1996
and 1995, in conformity with generally accepted accounting principles.
ANCHIN, BLOCK & ANCHIN LLP
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
June 11, 1997
2
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
RMB Limited Partnership
We have audited the accompanying balance sheets of RMB LIMITED PARTNERSHIP (a
Texas Limited Partnership) as of December 31, 1996 and 1995, and the related
statements of operations, partner's equity (deficit) and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RMB LIMITED PARTNERSHIP as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.
DICKEY & WOLF, LLC
Certified Public Accountants
Harrisonville, MO
January 27, 1997
3
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Cutler Canal II Associates, Ltd.
We have audited the accompanying balance sheets of Cutler Canal II Associates,
Ltd. as of December 31, 1996 and 1995, and the related statements of operations,
partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cutler Canal II Associates,
Ltd. as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
REZNICK FEDDER & SILVERMAN
Charlotte, North Carolina
January 20, 1997
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Cutler Canal II Associates, Ltd.
We have audited the accompanying balance sheets of Cutler Canal II Associates,
Ltd. as of December 31, 1995 and 1994, and the related statements of operations,
partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cutler Canal II Associates,
Ltd. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
REZNICK FEDDER & SILVERMAN
Charlotte, North Carolina
January 19, 1996
5
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners of
Diamond Street Venture (a Limited Partnership)
Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Diamond Street Venture (a
Limited Partnership) as of December 31, 1996 and 1995, and the related
statements of loss, changes in partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diamond Street Venture (a
Limited Partnership) at December 31, 1996 and 1995, and the results of its
operations, changes in partners' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.
J.H. WILLIAMS & CO., LLP
Kingston, Pennsylvania
February 14, 1997
6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners of
Diamond Street Venture (a Limited Partnership)
Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Diamond Street Venture (a
Limited Partnership) as of December 31, 1995 and 1994, and the related
statements of income, changes in partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diamond Street Venture (a
Limited Partnership) at December 31, 1995 and 1994, and the results of its
operations, changes in partners' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.
J.H. WILLIAMS & CO., LLP
Kingston, Pennsylvania
February 8, 1996
7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Papillion Heights Apartments, L.P.
(A Limited Partnership)
Springfield, Missouri
We have audited the accompanying balance sheets of Papillion Heights Apartments,
L.P. (a limited partnership), as of December 31, 1996 and 1995, and the related
statements of operations, partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Papillion Heights Apartments,
L.P. (a limited partnership) as of December 31, 1996 and 1995, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
COHEN, COVEY AND SCHULTZ, P.C.
January 31, 1997
8
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners of
Papillion Apartments, L.P.
We have audited the accompanying balance sheets of Papillion Apartments, L.P., a
limited partnership as of December 31, 1994, and the related statements of
operations, changes in partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Papillion Apartments, L.P. as
of December 31, 1994, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
SANDRA K. CLAXTON
Certified Public Accountant
March 13, 1995
9
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Hill Top Homes Apartments Limited Partnership
We have audited the accompanying balance sheets of HILL TOP HOMES APARTMENTS
LIMITED PARTNERSHIP (a Texas Limited Partnership), as of December 31, 1996 and
1995, and the related statements of operations, partners' equity/(deficit) and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HILL TOP HOMES APARTMENTS
LIMITED PARTNERSHIP as of December 31, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
DICKEY & WOLF, LLC
Certified Public Accountants
Harrisonville, MO
January 27, 1997
10
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Palm Beach Apartments, Ltd.
We have audited the accompanying balance sheets of Palm Beach Apartments, Ltd.
as of December 31, 1996 and 1995, and the related statements of operations,
partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Palm Beach Apartments, Ltd. as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
REZNICK FEDDER & SILVERMAN
Charlotte, North Carolina
January 24, 1997, Except for Note F, as to which the
date is February 28, 1997
11
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Palm Beach Apartments, Ltd.
We have audited the accompanying balance sheets of Palm Beach Apartments, Ltd.
as of December 31, 1995 and 1994, and the related statements of operations,
partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Palm Beach Apartments, Ltd. as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
REZNICK FEDDER & SILVERMAN
Charlotte, North Carolina
January 19, 1996
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Brookland Park Plaza Limited
Partnership
We have audited the accompanying balance sheet of Brookland Park Plaza Limited
Partnership as of December 31, 1996, and the related statements of profit and
loss (on HUD Form No. 92410), partners' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brookland Park Plaza Limited
Partnership as of December 31, 1996, and the results of its operations, the
changes in partners' equity and cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 19 through 24
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
In accordance with Government Auditing Standards and the 'Consolidated Audit
Guide for Audits of HUD Programs,' we have also issued reports dated February 6,
1997 on our consideration of Brookland Park Plaza Limited Partnership's internal
control structure and on its compliance with specific requirements applicable to
major HUD programs, affirmative fair housing, and laws and regulations
applicable to the financial statements.
REZNICK FEDDER & SILVERMAN
Federal Employer
Identification Number:
52-1088612
Bethesda, Maryland
February 6, 1997
Audit Principal: Renee G. Scruggs
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Brookland Park Plaza Limited
Partnership
We have audited the accompanying balance sheet of Brookland Park Plaza Limited
Partnership as of December 31, 1995, and the related statements of profit and
loss (on HUD Form No. 92410), partners' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brookland Park Plaza Limited
Partnership as of December 31, 1995, and the results of its operations, the
changes in partners' equity and cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 19 through 24
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued reports
dated February 8, 1996 on our consideration of Brookland Park Plaza Limited
Partnership's internal control structure and on its compliance with specific
requirements applicable to major HUD programs, affirmative fair housing, and
laws and regulations applicable to the financial statements.
REZNICK FEDDER & SILVERMAN
Federal Employer
Identification Number:
52-1088612
Bethesda, Maryland
February 8, 1996
Audit Principal: Renee G. Scruggs
14
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Brookland Park Plaza
Limited Partnership
We have audited the accompanying balance sheet of Brookland Park Plaza Limited
Partnership as of December 31, 1994, and the related statements of profit and
loss (on HUD Form No. 92410), partners' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brookland Park Plaza Limited
Partnership as of December 31, 1994, and the results of its operations, the
changes in partners' equity and cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 18 through 23
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
REZNICK FEDDER & SILVERMAN
Federal Employer
Identification Number:
52-1088612
Bethesda, Maryland
February 17, 1995
Audit Principal: Renee G. Scruggs
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Compton Townhouses Limited Partnership
(An Ohio Limited Partnership)
We have audited the accompanying balance sheet of Compton Townhouses Limited
Partnership (An Ohio Limited Partnership), as of December 31, 1996 and 1995, and
the related statements of operations, partners' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Compton Townhouses Limited
Partnership (An Ohio Limited Partnership), as of December 31, 1996 and 1995, and
the results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
SPAETH & BATTERBERRY, LTD.
February 3, 1997
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Compton Townhouses Limited Partnership
(An Ohio Limited Partnership)
We have audited the accompanying balance sheet of Compton Townhouses Limited
Partnership (An Ohio Limited Partnership), as of December 31, 1995 and 1994, and
the related statements of operations, partners' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Compton Townhouses Limited
Partnership (An Ohio Limited Partnership), as of December 31, 1995 and 1994, and
the results of its operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
SPAETH & BATTERBERRY, LTD.
January 24, 1996
17
<PAGE>
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31,
----------------------------
1997 1996
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
ASSETS
Investment in property:
Land $ 4,005,633 $ 4,005,633
Buildings and improvements 74,583,558 74,583,558
Accumulated depreciation (13,283,832) (11,073,281)
------------ -----------
Net investment in property 65,305,359 67,515,910
Cash and cash equivalents 839,134 1,012,131
Cash and cash equivalents held in escrow 903,486 613,065
Deferred financing costs, net 3,136,727 3,386,089
Organizational costs, net 11,422 69,056
Other assets 306,247 348,668
------------ -----------
Total assets $ 70,502,375 $72,944,919
------------ -----------
------------ -----------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Mortgage notes payable $ 46,099,028 $46,387,992
Accrued interest payable 1,266,943 1,044,112
Other accrued expenses and liabilities 1,265,302 1,346,458
Due to general partners and affiliates of local partnerships 1,654,598 1,457,195
Development fees payable 1,579,709 1,579,709
Construction costs payable 605,358 605,358
Real estate taxes payable 118,195 87,289
Due to General Partner and its affiliates 848,543 451,599
------------ -----------
Total liabilities 53,437,676 52,959,712
------------ -----------
Minority interest in local partnerships 3,302,224 3,712,217
------------ -----------
Contingencies
Partners' capital (deficit)
Limited partners (38,125 BUC$ issued and outstanding) 13,966,449 16,451,859
General partner (1 BUC issued and outstanding) (203,974) (178,869)
------------ -----------
Total partners' capital 13,762,475 16,272,990
------------ -----------
Total liabilities and partners' capital $ 70,502,375 $72,944,919
------------ -----------
------------ -----------
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements
18
<PAGE>
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended March 31,
-----------------------------------------
1997 1996 1995
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
REVENUES
Rental income $ 8,480,496 $ 8,796,928 $ 8,453,789
Other income 1,294,509 986,094 577,385
Interest income 41,291 49,257 47,693
----------- ----------- -----------
9,816,296 9,832,279 9,078,867
----------- ----------- -----------
EXPENSES
Interest 4,428,530 4,448,986 4,474,229
Depreciation and amortization 2,517,547 2,549,449 2,640,262
Operating and other 2,049,212 1,887,060 1,806,207
Taxes and insurance 1,210,641 1,180,035 1,165,434
Repairs and maintenance 1,399,907 1,299,154 1,396,627
General and administrative 356,553 349,069 398,312
Property management fees 481,839 445,054 426,984
Partnership management fees 292,575 260,865 342,676
Provision for loss on impairment of assets -- -- 2,700,000
----------- ----------- -----------
12,736,804 12,419,672 15,350,731
----------- ----------- -----------
Loss before minority interest (2,920,508) (2,587,393) (6,271,864)
Minority interest in loss of local partnerships 409,993 421,144 608,088
----------- ----------- -----------
Net loss $(2,510,515) $(2,166,249) $(5,663,776)
----------- ----------- -----------
----------- ----------- -----------
ALLOCATION OF NET LOSS
Limited partners $(2,485,410) $(2,144,587) $(5,607,138)
----------- ----------- -----------
----------- ----------- -----------
General partner $ (25,105) $ (21,662) $ (56,638)
----------- ----------- -----------
----------- ----------- -----------
Net loss per limited partner BUC $ (65.19) $ (56.25) $ (147.07)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- -------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
LIMITED GENERAL
BUC$ PARTNERS PARTNER TOTAL
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Partner's capital (deficit)--March 31, 1994 38,126 $24,203,584 $(100,569) $24,103,015
Net loss -- (5,607,138 ) (56,638 ) (5,663,776)
------ ------------ --------- -----------
Partner's capital (deficit)--March 31, 1995 38,126 18,596,446 (157,207 ) 18,439,239
Net loss -- (2,144,587 ) (21,662 ) (2,166,249)
------ ------------ --------- -----------
Partners' capital (deficit)--March 31, 1996 38,126 16,451,859 (178,869 ) 16,272,990
Net loss -- (2,485,410 ) (25,105 ) (2,510,515)
------ ------------ --------- -----------
Partners' capital (deficit)--March 31, 1997 38,126 $13,966,449 $(203,974) $13,762,475
------ ------------ --------- -----------
------ ------------ --------- -----------
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements
19
<PAGE>
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended March 31,
-------------------------------------------
1997 1996 1995
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(2,510,515) $ (2,166,249) $ (5,663,776)
----------- ------------ ------------
Adjustments to reconcile net loss to net cash
provided by (used in) in operating activities:
Depreciation and amortization 2,517,547 2,549,449 2,640,262
Minority interest in loss of local partnerships (409,993) (421,144) (608,088)
Forgiveness of debt (154,500) (154,500) --
Decrease (increase) in cash held in escrow (290,421) 662,504 (147,951)
Increase (decrease) in real estate taxes payable 30,906 (378,829) 305,023
Increase in accrued interest payable 222,831 54,071 236,961
Decrease (increase) in other assets 42,421 (172,003) 63,660
Increase (decrease) in other liabilities 667,691 (121,302) 37,881
Provision for loss on impairment of assets -- -- 2,700,000
----------- ------------ ------------
Total adjustments 2,626,482 2,018,246 5,227,748
----------- ------------ ------------
Net cash provided by (used in) operating activities 115,967 (148,003) (436,028)
----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in property -- -- (93,530)
----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on mortgage notes (288,964) (141,520) (131,959)
Advances from local general partners 100,000 100,000 733,132
Payments for loans from local general partners (100,000) -- (105,767)
----------- ------------ ------------
Net cash provided by (used in) financing activities (288,964) (41,520) 495,406
----------- ------------ ------------
Net decrease in cash and cash equivalents (172,997) (189,523) (34,152)
Cash and cash equivalents at beginning of year 1,012,131 1,201,654 1,235,806
----------- ------------ ------------
Cash and cash equivalents at end of year $ 839,134 $ 1,012,131 $ 1,201,654
----------- ------------ ------------
----------- ------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 4,136,059 $ 4,325,996 $ 4,170,797
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements
20
<PAGE>
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. General
Prudential-Bache Tax Credit Properties L.P., a Delaware limited partnership
(the 'Partnership'), was formed on May 3, 1989, and will terminate on December
31, 2029, unless terminated sooner under the provisions of the Amended and
Restated Agreement of Limited Partnership (the 'Partnership Agreement'). The
Partnership was formed to invest as a limited partner in other partnerships
('Local Partnerships') owning apartment complexes ('Apartment Complexes' or
'Properties') that are eligible for the low-income housing tax credit or the
historic rehabilitation tax credit. The general partner of the Partnership,
Prudential-Bache Properties, Inc. (the 'General Partner' or 'PBP'), is not
affiliated with a general partner of any Local Partnership ('Local General
Partner'). P.B. Tax Credit S.L.P. ('PBSLP'), an affiliate of the General
Partner, acts as special limited partner of each Local Partnership entitling it
to certain rights with respect to the operation and management of each Local
Partnership. At March 31, 1997, the Partnership has investments in eight Local
Partnerships.
On December 19, 1996, PBP and Related Capital Company ('RCC') entered into an
agreement for the purchase by RCC or its affiliates of PBP's general partner
interests in the Partnership and certain other associated interests. The
agreement is subject to numerous conditions including the settlement of the
class action litigation (In re Prudential Securities Inc. Limited Partnerships
Litigation, MDL No. 1005) (the 'Class Action') against affiliates of RCC and the
approval of the sale and withdrawal of PBP as the sole general partner of the
Partnership by the court overseeing the Class Action. Following consummation of
the transaction, RCC or its affiliate will become the general partner of the
Partnership. On December 31, 1996, the court overseeing the Class Action issued
a preliminary approval order with respect to the settlement of the Class Action,
which provides, in part, that pending final approval of the settlement of the
Class Action, class members (including the limited partners and unitholders
(collectively, the 'Limited Partners') of the Partnership) are prohibited from,
among other things, transferring their partnership interests unless the
transferee agrees to be bound by the terms of the settlement of the Class
Action. There can be no assurance that the conditions to the closing of the
proposed transaction will be satisfied nor as to the time frame in which a
closing may occur.
In June 1997, an Information Statement was mailed to Limited Partners of
record as of December 24, 1996 advising them of these proposed changes together
with a Notice of the Class Action and the terms of the settlement with RCC in
the Class Action. A hearing will be held on August 28, 1997 in the U.S.
Courthouse, 40 Centre Street, New York, New York, 10007, to determine the
reasonableness and fairness of the settlement.
B. Summary of Significant Accounting Policies
Basis of accounting and principles of consolidation
The books and records of the Partnership are maintained on the accrual basis
of accounting in accordance with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partner to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The financial statements of the Local Partnerships consolidated herein are
for the twelve month periods ended December 31. Intercompany transactions with
Local Partnerships are eliminated.
Minority interest in local partnerships represents the minority partners'
share of the net assets of the Local Partnerships.
Certain balances for prior years have been reclassed to conform with the
current year's financial statement presentation.
21
<PAGE>
Investment in property
The impairment of properties to be held and used is determined to exist when
estimated amounts recoverable through future operations on an undiscounted basis
are below the properties' carrying value. If a property is determined to be
impaired, it is recorded at the lower of its carrying value or its estimated
fair value. As a result of this accounting policy, a $2,700,000 provision for
loss on impairment of assets was recorded for the year ended March 31, 1995. No
additional provisions were required for the years ended March 31, 1996 and 1997.
The determination of estimated fair value is based not only upon future cash
flows, which rely upon estimates and assumptions including expense growth,
occupancy and rental rates, and tax credits, but also upon market capitalization
and discount rates as well as other market indicators. The General Partner
believes that the estimates and assumptions used are appropriate in evaluating
the carrying amount of the Partnership's properties. However, changes in market
conditions and circumstances may occur in the near term which would cause these
estimates and assumptions to change, which, in turn, could cause the amounts
ultimately realized upon the sale or other disposition of the properties to
differ materially from their estimated fair value. Such changes may also require
write-downs in future years.
The cost of buildings and improvements is depreciated using the straight-line
method over their estimated useful lives which range from 27.5 to 40 years.
Cash and cash equivalents
Cash and cash equivalents include money market funds whose cost approximates
market value.
Cash and cash equivalents held in escrow
Cash and cash equivalents held in escrow include restricted funds held for
payment of real estate taxes and insurance, tenant security deposits and
replacement reserves.
Taxes
The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the partners. The Partnership may be subject to other state and
local taxes in jurisdictions in which it operates. For income tax purposes, the
Partnership's year ends on December 31.
Profit and loss allocations/distributions
Net income or loss is allocated 99% to the limited partners and 1% to the
General Partner.
Distributions of cash may be made in accordance with the Partnership
Agreement and, if made, are allocated 99% to the limited partners and 1% to the
General Partner. As of March 31, 1997, no distributions have been paid.
Operating deficit guaranties
Pursuant to certain operating deficit guaranty agreements, Local General
Partners are required to fund operating deficits, as defined in the Local
Partnership agreements, incurred during the period commencing with the
break-even date, as defined in the Local Partnership agreements, and ending on
the third anniversary of the break-even date. These advances are non-interest
bearing.
C. Costs, Fees and Expenses
Deferred financing costs
Deferred financing costs include amounts paid for services rendered in
arranging the financing for the Local Partnerships. These costs were capitalized
and are being amortized over the lives of the related debt. The accumulated
amortization as of March 31, 1997 and 1996 is $2,094,056 and $1,844,694,
respectively.
Organizational costs
Costs incurred to organize the Partnership, including but not limited to
legal and accounting, are considered organizational costs. These costs have been
capitalized and are being amortized on a straight-line basis over a 60-month
period. The accumulated amortization as of March 31, 1997 and 1996 is $514,485
and $456,851, respectively.
22
<PAGE>
Management fees
Each individual property has a managing agent who performs the necessary
functions in operating the property. The property management fee is equal to a
percentage of the annual gross revenues of a property paid in consideration of
the property management services provided (See Note G).
The General Partner is entitled to receive a management fee, payable from
operations and reserves, in an amount not to exceed the difference between .5%
per annum of Invested Assets (as defined in the Partnership Agreement) and the
local administrative fee payable to PBSLP. This management fee is for
administering the affairs of the Partnership (See Note F). Unpaid portions of
the management fee for any year accrue without interest.
General and administrative
The Partnership reimburses the General Partner and its affiliates for actual
Partnership operating expenses payable by or allocable to the Partnership (See
Note F). The Partnership also pays amounts directly to unrelated third parties
for certain operating expenses.
D. Investment in Property
The Partnership's Properties and related debt at March 31 were:
<TABLE>
<CAPTION>
Net investment in property Mortgage notes payable
--------------------------- ---------------------------
Description (a) 1997 1996 1997 1996
<S> <C> <C> <C> <C>
- -------------------------------------- ----------- ----------- ----------- -----------
Apartment Complexes:
RMB Limited Partnership
(Hubbard's Ridge)
Garland, TX $ 3,798,138 $ 3,975,405 $ 1,934,623 $ 1,950,493
Cutler Canal II Associates, Ltd.
Miami, FL 9,550,804 9,833,407 5,982,895 6,008,536
Diamond Street Venture (b)
Philadelphia, PA 2,081,026 2,193,006 3,017,829 3,031,298
Papillion Heights Apartments L.P.
Papillion, NE 1,803,229 1,856,525 1,033,084 1,041,976
Hill Top Homes Apartments L.P.
Arlington, TX 6,849,012 7,055,930 3,643,632 3,695,985
Palm Beach Apartments, Ltd.
(Summer Creek Villas)
West Palm Beach, FL 34,475,494 35,498,673 26,614,668 26,750,000
Brookland Park Plaza L.P.
Richmond, VA 4,951,808 5,187,960 2,499,200 2,519,227
Compton Townhouses L.P.
Cincinnati, OH 1,795,848 1,915,004 1,373,097 1,390,477
----------- ----------- ----------- -----------
$65,305,359 $67,515,910 $46,099,028 $46,387,992
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
(a) The Partnership holds a 66.5% interest in Summer Creek Villas, a 98%
interest in Hubbard's Ridge, Hill Top Homes and Compton Townhouses and a
98.99% interest in Cutler Canal II, Diamond Street, Papillion Heights and
Brookland Park Plaza.
(b) The investment in property relating to the Diamond Street Venture was
reduced by $2,700,000 as of March 31, 1995 representing a provision for
loss on impairment of the asset.
23
<PAGE>
E. Mortgage Notes Payable
Mortgage notes are collateralized (on a recourse basis) by land, buildings
and improvements and leases related thereto. Annual principal payment
requirements for each of the next five years ending December 31, the date at
which the Local Partnerships are consolidated, and thereafter are as follows:
<TABLE>
<S> <C>
1997 $ 461,764
1998 508,232
1999 559,335
2000 616,491
2001 679,431
Thereafter 43,273,775
-----------
$46,099,028
-----------
-----------
</TABLE>
Mortgage notes consist of both first mortgages and support loans (second and
third mortgages). First mortgages amounting to $41,159,028 bear interest at
rates ranging from 6.25% to 10.75% and have final maturities ranging from
December 1, 2006 to May 1, 2031. First mortgages include $26,750,000 in the form
of a guaranteed bond bearing interest at 10.451% (including a .125% service fee
payable to an affiliate of the Local General Partner) maturing on June 20, 2008.
The support loans include two loans totalling $2,440,000 maturing on May 1, 2016
and December 15, 2029, the latter of which bears interest at 1%, and the former
being non-interest bearing, and a $2,500,000 loan bearing interest at a maximum
rate of 9% and maturing on January 16, 2005. The $2,500,000 loan includes a base
interest rate of 3% and an additional interest rate of 6%. The base interest
rate is payable annually from Project Income, as defined in the loan agreement,
and can be deferred if Project Income is inadequate. The additional interest is
payable from Project Income, if available, and only after payment of a
cumulative annual 12% return on capital to the limited partners of the Local
Partnership. Currently, only the base interest rate is being paid; however, the
additional interest of 6% continues to be accrued in the accompanying
consolidated financial statements.
At March 31, 1997 and 1996, the estimated fair values of the mortgage notes
payable were approximately $51,700,000 and $52,500,000, respectively. These
estimates were based upon the present value of expected cash flows discounted at
rates currently available to the Local Partnerships for similar loans. Fair
value estimates are made at a specific point in time, based on relevant market
information, and are subjective in nature and involve uncertainties and matters
of significant judgment. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Local Partnerships would pay upon
maturity or disposition of the loans.
F. Related Parties
The General Partner and its affiliates perform services for the Partnership
which include, but are not limited to: accounting and financial management,
registrar, transfer and assignment functions, asset management, investor
communications, printing and other administrative services. The General Partner
and its affiliates receive management fees and reimbursements for general and
administrative costs incurred in connection with these services, the amount of
which is limited by the provisions of the Partnership Agreement. The costs and
expenses incurred were:
<TABLE>
<CAPTION>
Year ended March 31
----------------------------------
1997 1996 1995
<S> <C> <C> <C>
-------- -------- --------
Management fees $292,575 $260,865 $342,676
Local administrative fees 51,979 15,250 15,250
General and administrative 83,514 88,541 75,080
-------- -------- --------
$428,068 $364,656 $433,006
-------- -------- --------
-------- -------- --------
</TABLE>
A portion of the management fees paid to the General Partner is remitted to
an affiliate of the Local General Partner of five of the Local Partnerships. The
General Partner has deferred the receipt of its management fees since January 1,
1995 and has deferred the receipt of the reimbursement of general and
administrative costs (excluding printing costs) incurred on behalf of the
Partnership since April 1, 1996. As of March 31, 1997, Due to General Partner
and its affiliates includes $637,935 relating to management fees payable and
$75,879 relating to reimbursement of general and administrative costs.
24
<PAGE>
PBSLP acts as special limited partner of each Local Partnership and is
entitled to receive up to $2,750 per year from each Local Partnership as a local
administrative fee. As of March 31, 1997, $134,729 in fees have been accrued;
however, no fees have been paid to date. The increased amount during the year
ended March 31, 1997 reflects underaccruals from prior years. The local
administrative fees are included in Property Management Fees.
Pursuant to the agreement entered into by PBP and RCC on December 19, 1996
and subject to the conditions to the closing of the proposed transaction being
satisfied, all amounts due to the General Partner as noted in the preceding two
paragraphs (excluding printing costs of $8,149 as of March 31, 1997) will be
forgiven by PBP (See Note A).
The Partnership maintains an account with the Prudential Tax Free Money Fund,
an affiliate of PBP, for investment of its available cash in short-term
instruments.
Prudential Securities Incorporated ('PSI'), an affiliate of PBP, owns 56 BUC$
at March 31, 1997.
G. General Partners and Affiliates of Local Partnerships
Certain Local General Partners and their affiliates provided services in
connection with the construction, financing and development of the Apartment
Complexes. Interest is accrued on certain loans made by two of the Local General
Partners. Additionally, six of the Local Partnerships are managed by a Local
General Partner or its affiliates. The costs were:
<TABLE>
<CAPTION>
Year ended March 31
----------------------------------
1997 1996 1995
<S> <C> <C> <C>
-------- -------- --------
Interest $ 69,280 $ 69,280 $ 78,417
Management fees 394,228 394,719 374,564
-------- -------- --------
$463,508 $463,999 $452,981
-------- -------- --------
-------- -------- --------
</TABLE>
Due to general partners and affiliates of local partnerships includes amounts
payable for accrued interest, advances, property management fees and operating
loans made in accordance with operating deficit guaranty agreements. During the
years ended March 31, 1997 and 1996, Summer Creek Villas received from its Local
General Partner $778,000 and $255,000, respectively, of operating deficit
guaranty payments. The Local General Partner elected to treat $678,000 of the
amount received during the year ended March 31, 1997 and all of the amount
received during the year ended March 31, 1996 as non-repayable advances and
recorded the amounts as other income during the respective years. Additionally,
during the year ended March 31, 1996, Summer Creek Villas received from its
Local General Partner a $100,000 working capital advance which was repaid in
January 1996. As of March 31, 1997, two properties, Summer Creek Villas and
Papillion Heights, remain subject to an operating deficit guaranty.
At March 31, 1997 and 1996, construction costs of $605,358 were payable to an
affiliate of one of the Local General Partners.
At March 31, 1997 and 1996, development fees of $1,579,709 were payable to
various Local General Partners.
25
<PAGE>
PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Prudential-Bache Tax Credit Properties L.P. (the 'Partnership') invested in
eight Local Partnerships that are owners of low-income multi-family residential
complexes. The Local Partnerships are operated in accordance with the low-income
housing rules and regulations in order to protect the related tax credits. The
Partnership's primary sources of funds are rental revenues (which are fully
utilized at the property level) and, to a lesser extent, interest earned on
working capital reserves. A working capital reserve ($89,000 at March 31, 1997)
is maintained to fund operations and contingencies of the Partnership. The
working capital reserve is invested in a tax-free money fund. Based on the
reduced level of the Partnership's working capital reserve, the General Partner
has deferred the receipt of its management fee since January 1, 1995 and the
reimbursement of general and administrative costs (excluding printing costs)
incurred on behalf of the Partnership since April 1, 1996 (See Note F to the
consolidated financial statements).
At the Local Partnership level, certain Local General Partners and/or their
affiliates have made guaranties with respect to the Local Partnerships which,
under certain circumstances, require their funding cash flow deficits pursuant
to deficit guaranty agreements. These operating deficit advances do not bear
interest and are repayable by the Local Partnership in accordance with the
respective Local Partnership agreement. As of March 31, 1997, there are still
operating deficit guaranty agreements in effect at Summer Creek Villas and
Papillion Heights.
The Summer Creek Villas Local Partnership continues to experience severe cash
flow deficits. The maximum funding obligation of the Local General Partner under
the Summer Creek Villas operating deficit guaranty agreement which expired on
December 31, 1996 was $3,392,000, of which $1,653,000 was funded through
December 31, 1996. Of the total funded, the Local General Partner has elected to
treat $933,000 as non-repayable advances. On February 28, 1997, the Local
General Partner advanced Summer Creek Villas an additional $165,000 pursuant to
the operating deficit guaranty agreement expiring December 31, 1996. The Local
General Partner is also obligated to fund operating deficits during a second
guaranty period commencing August 1996 and expiring July 1999. The maximum
funding obligation during this second guaranty period is $924,000. Through June
1997, a total of $755,000 has been funded pursuant to this second guaranty
period. As of March 31, 1997, the financial statements of the Partnership
include $720,000 as 'Due to general partners and affiliates of local
partnerships' under the Summer Creek Villas operating deficit guaranty agreement
due to the three-month lag in recording the financial information of the Local
Partnerships.
The Papillion Heights operating deficit guaranty agreement is in effect until
such date that the net operating income is sufficient to cover 115% of the debt
service for twelve consecutive months, as defined. Of the $170,000 maximum
funding obligation, $40,000 has been funded to date. The Partnership's financial
statements as of March 31, 1997 also reflect payables of $150,000 under
operating deficit guaranty agreements at Hubbard's Ridge and Hill Top Homes,
which have expired.
In addition, Brookland Park Plaza currently has a loan outstanding for
$618,000 with the Virginia Housing Development Authority. This loan is
non-interest bearing and is forgiven at the rate of 25% per year commencing with
the year ended March 31, 1996, assuming that the Local Partnership complies with
all conditions as set forth in the loan agreement. Accordingly, $155,000 was
recorded as other income in each of the years ended March 31, 1997 and 1996.
The Local Partnerships have generated net operating income before debt
service of $4,489,000, $4,816,000 and $4,043,000 for each of the three years
ended March 31, 1997, 1996 and 1995, respectively. Debt service payments
(interest and principal) made during the same periods were $4,425,000,
$4,468,000 and $4,303,000, respectively.
26
<PAGE>
<PAGE>
Results of Operations
The operating results of the Local Partnerships consolidated herein are for
the twelve-month periods ended December 31. Information disclosed below with
respect to each Local Partnership is consistent with this method.
Fiscal 1997 vs. Fiscal 1996
Rental income decreased $316,000 for the year ended March 31, 1997 as
compared to 1996 primarily due to decreases of $225,000, $66,000 and $41,000 at
Summer Creek Villas, Cutler Canal II and Diamond Street, respectively, due to
lower occupancies.
Other income (consisting primarily of application fees, forfeited security
deposits and operating deficit guarantees) increased $308,000 for the year ended
March 31, 1997 as compared to 1996. The variance was mainly due to the election
by the Summer Creek Villas Local General Partner to treat $678,000 and $255,000
of the operating deficit guaranty payments it made to the Local Partnership for
the years ended March 31, 1997 and 1996, respectively, as non-repayable
advances. These amounts were recorded on the financial statements as other
income during the respective years. This increase was offset by the decrease in
other income at Papillion Heights of $106,000 mainly due to a $94,000 adjustment
recorded in the year ended March 31, 1996 relating to an operating deficit
guaranty agreement.
Operating and other expenses increased $162,000 for the year ended March 31,
1997 as compared to 1996. The variance was primarily due to increases of
$142,000 and $37,000 at Summer Creek Villas and Hubbard's Ridge, respectively,
as a result of bad debt expense relating to uncollected rents.
Repairs and maintenance increased $101,000 for the year ended March 31, 1997
as compared to 1996 primarily due to increases at Hubbard's Ridge, Cutler Canal
II and Hill Top Homes of $47,000, $30,000 and $18,000, respectively, as a result
of an increase in general maintenance and carpet replacement costs.
Fiscal 1996 vs. Fiscal 1995
Rental income increased $343,000 for the year ended March 31, 1996 as
compared to 1995 primarily due to increases of $221,000 and $33,000 at Summer
Creek Villas and Hubbard's Ridge, respectively, as a result of higher rental
rates. Additionally, rental income at Hill Top Homes increased $69,000 as a
result of higher average occupancies.
Other income increased $409,000 for the year ended March 31, 1996 as compared
to 1995. The variance was mainly due to increases in other income at Summer
Creek Villas, Brookland Park Plaza and Papillion Heights of $188,000, $155,000
and $104,000, respectively. The variance at Summer Creek Villas was mainly due
to the election by its Local General Partner to treat the operating deficit
guaranty payment of $255,000 it made to the Local Partnership for the year ended
March 31, 1996 as a non-repayable advance. This amount was recorded on the
financial statements as other income. No amount had been treated as a
non-repayable advance in the prior year. At Brookland Park Plaza, an amount of
$155,000 was recorded as other income due to the partial forgiveness of a
non-interest bearing loan. See Liquidity and Capital Resources above for further
information. The variance at Papillion Heights was mainly due to a $94,000
adjustment relating to an operating deficit guaranty agreement recorded in the
year ended March 31, 1996.
Operating expenses increased $81,000 for the year ended March 31, 1996 as
compared to 1995 primarily due to increases in utilities and bad debt expense at
Hill Top Homes.
Repairs and maintenance expense decreased $97,000 for the year ended March
31, 1996 as compared to 1995 primarily due to lower property maintenance and
carpet replacement expenses at Summer Creek Villas of $133,000 partially offset
by an increase of $42,000 at Hill Top Homes primarily as a result of carpet
replacement costs.
General and administrative expenses decreased $49,000 for the year ended
March 31, 1996 as compared to 1995 primarily due to lower professional fees at
Summer Creek Villas.
Partnership management fees decreased $82,000 for the year ended March 31,
1996 as compared to 1995 as a result of a reversal of an accrual from prior
periods.
27
<PAGE>
Property information
The Partnership currently holds interests in eight Local Partnerships. The
following schedule gives specific details about the related Properties.
<TABLE>
<CAPTION>
PARTNERSHIP'S
GROSS CARRYING LOW-INCOME
VALUE OF OCCUPANCY HOUSING TAX
PROPERTY AT RATE AT CREDIT FOR THE
MARCH 31, NUMBER DECEMBER 31, YEAR ENDED
PROPERTY (a) 1997 OF UNITS 1996(b) DECEMBER 31, 1996
- ------------------------------- ----------------- --------- ------------ -----------------
<S> <C> <C> <C> <C>
RMB Limited Partnership
(Hubbard's Ridge)
Garland, TX $ 4,990,526 196 78% $ 395,768
Cutler Canal II Associates,
Ltd.
Miami, FL 11,124,427 216 84 896,701
Diamond Street Venture
Philadelphia, PA 2,870,124 48 90 282,288
Papillion Heights Apartments
L.P.
Papillion, NE 2,201,647 48 92 173,661
Hill Top Homes Apartments L.P.
Arlington, TX 8,103,088 171 91 616,546
Palm Beach Apartments, Ltd.
(Summer Creek Villas)
West Palm Beach, FL 40,410,117 770 80 2,241,161
Brookland Park Plaza L.P.
Richmond, VA 6,443,630 77 100 429,237
Compton Townhouses L.P.
Cincinnati, OH 2,445,632 39 97 205,620
----------------- -----------------
$78,589,191 $ 5,240,982
----------------- -----------------
----------------- -----------------
</TABLE>
(a) At March 31, 1997, the Partnership holds a 66.5% interest in Summer Creek
Villas, a 98% interest in Hubbard's Ridge, Hill Top Homes and Compton
Townhouses and a 98.99% interest in Cutler Canal II, Diamond Street,
Papillion Heights and Brookland Park Plaza.
(b) Occupancies are calculated by dividing occupied units by total available
units.
There were no significant changes in occupancies at the above properties as
of June 16, 1997 except for increases at Hubbard's Ridge and Cutler Canal II to
92% and 93%, respectively.
Net operating income before debt service of the Local Partnerships for each
of the years in the three-year period ended March 31, 1997 was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Hubbard's Ridge $ 192,000 $ 292,000 $ 260,000
Cutler Canal II 471,000 560,000 630,000
Diamond Street 54,000 102,000 60,000
Papillion Heights 113,000 214,000 106,000
Hill Top Homes 328,000 357,000 381,000
Summer Creek Villas 2,796,000 2,793,000 2,211,000
Brookland Park Plaza 377,000 351,000 242,000
Compton Townhouses 158,000 147,000 153,000
---------- ---------- ----------
$4,489,000 $4,816,000 $4,043,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
* * * *
28
<PAGE>
OTHER INFORMATION
The Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission is available to limited partners without charge upon written
request to:
Prudential-Bache Tax Credit Properties L.P.
c/o Prudential-Bache Properties, Inc.
Client Services Department
P.O. Box 2016
New York, New York 10272-2016
29
<PAGE>
Peck Slip Station
BULK RATE
P.O. Box 2016
U.S. POSTAGE
New York, NY 10272
PAID
Automatic Mail
CREDIT1/171801
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for P-B Tax Credit Properties, L.P.
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000850184
<NAME> P-B Tax Credit Properties, L.P.
<MULTIPLIER> 1
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> MAR-31-1997
<PERIOD-TYPE> 12-MOS
<CASH> 839,134
<SECURITIES> 0
<RECEIVABLES> 306,247
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,197,016
<PP&E> 78,589,191
<DEPRECIATION> 13,283,832
<TOTAL-ASSETS> 70,502,375
<CURRENT-LIABILITIES> 10,640,872
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13,762,475
<TOTAL-LIABILITY-AND-EQUITY> 70,502,375
<SALES> 9,816,296
<TOTAL-REVENUES> 9,816,296
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,308,274
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,428,530
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,510,515)
<EPS-PRIMARY> (65.19)
<EPS-DILUTED> 0
</TABLE>
