SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR
- - ------ 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
- - ------ 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-20638
PATRIOT TAX CREDIT PROPERTIES L.P.,
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3519080
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- - -------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
N/A
---
Former name, former address and
former fiscal year, if changed since last report
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 X No ____
<PAGE>
PART I - Financial Information
Item 1. Financial Statements
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(Unaudited)
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
------------ ------------
<S> <C> <C>
ASSETS
Investment in property:
Land $ 4,005,633 $ 4,005,633
Buildings and improvements 75,042,825 75,041,752
Accumulated depreciation (16,531,247) (15,450,304)
------------ ------------
Net investment in property 62,517,211 63,597,081
Cash and cash equivalents 337,476 573,775
Cash and cash equivalents
held in escrow 1,725,842 1,550,131
Deferred financing costs, net 2,724,652 2,861,272
Other assets 262,083 253,554
------------ ------------
Total Assets $ 67,567,264 $ 68,835,813
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 45,391,214 $ 45,632,851
Accrued interest payable 1,620,610 1,492,961
Other accrued expenses
and liabilities 2,207,972 1,411,705
Due to general partners and
affiliates of local partnerships 2,558,522 2,558,522
Development fees payable 1,579,709 1,579,709
Construction costs payable 605,358 605,358
Real estate taxes payable 441,741 498,390
Due to general partner and
its affiliates 285,229 59,930
------------ ------------
Total liabilities 54,690,355 53,839,426
------------ ------------
Minority interest in local
partnerships 2,475,992 2,872,312
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
Consolidated Statements of Financial Condition
(continued)
(Unaudited)
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
----------- -----------
PARTNERS' CAPITAL
<S> <C> <C>
Limited partners (38,125 BUC$
issued and outstanding) 9,600,191 11,314,733
General partner (1 BUC
issued and outstanding) 800,726 809,342
----------- -----------
Total Partners' Capital 10,400,917 12,124,075
----------- -----------
Total Liabilities and Partners'
Capital $67,567,264 $68,835,813
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Rental income $ 2,124,828 $ 2,098,850 $ 4,093,893 $ 4,173,273
Other income 147,068 92,738 296,441 230,766
Interest income 4,098 3,435 8,723 9,098
----------- ----------- ----------- -----------
2,275,994 2,195,023 4,399,057 4,413,137
----------- ----------- ----------- -----------
Expenses
Interest 1,124,453 1,052,941 2,175,642 2,140,709
Depreciation and
amortization 606,870 612,825 1,217,563 1,236,453
Operating and other 159,864 167,213 379,061 382,058
Taxes and insurance 280,295 281,942 571,039 581,395
Repairs and
maintenance 566,255 370,170 931,046 739,536
General and
administrative 492,281 477,121 951,316 896,625
Partnership
management fees 60,422 81,311 118,732 161,683
Property
management fees 88,270 86,416 173,778 174,659
----------- ----------- ----------- -----------
3,378,710 3,129,939 6,518,177 6,313,118
----------- ----------- ----------- -----------
Loss before minority
interest (1,102,716) (934,916) (2,119,120) (1,899,981)
Minority interest in
loss of
local partnerships 193,015 166,412 395,962 336,466
----------- ----------- ----------- -----------
Net loss $ (909,701) $ (768,504) $(1,723,158) $(1,563,515)
=========== =========== =========== ===========
Allocation of Net Loss
Limited partners $ (905,152) $ (760,819) $(1,714,542) $(1,547,880)
=========== =========== =========== ===========
General partner $ (4,549) $ (7,685) $ (8,616) $ (15,635)
=========== =========== =========== ===========
Net loss per limited
partner BUC $ (23.74) $ (19.96) $ (44.97) $ (40.60)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Capital
(Unaudited)
<TABLE>
<CAPTION>
Limited General
BUC$ Partners Partner Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Partners' capital
March 31, 1998 38,126 $ 11,314,733 $ 809,342 $ 12,124,075
Net loss 0 (1,714,542) (8,616) (1,723,158)
------------ ------------ ------------ ------------
Partners' capital-
September 30, 1998 38,126 $ 9,600,191 $ 800,726 $ 10,400,917
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,723,158) $(1,563,515)
----------- -----------
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,217,563 1,236,453
Minority interest in loss of
local partnerships (395,962) (336,466)
Increase in cash held in escrow (175,711) (609,843)
(Decrease) increase in real estate
taxes payable (56,649) 331,071
Increase in accrued interest payable 127,649 75,836
Increase in other assets (8,529) (30,964)
Increase in other liabilities 796,267 245,810
Increase in due to General Partner
and its affiliates 225,299 0
----------- -----------
Total adjustments 1,729,927 911,897
----------- -----------
Net cash provided by (used in)
operating activities 6,769 (651,618)
----------- -----------
Cash flows from investing activities:
Investment in property (1,073) (143,309)
----------- -----------
Cash flows from financing activities:
Payments of mortgage notes (241,637) (241,658)
Advances pursuant to operating
deficit guaranties 0 919,639
Distribution to minority interest (358) 0
----------- -----------
Net cash (used in) provided by
financing activities (241,995) 677,981
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(continued)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30,
1998 1997
----------- -----------
<S> <C> <C>
Net decrease in cash and cash
equivalents (236,299) (116,946)
Cash and cash equivalents at
beginning of period 573,775 839,134
----------- -----------
Cash and cash equivalents at
end of period $ 337,476 $ 722,188
=========== ===========
Supplemental disclosure of cash flow information:
Non-cash Financing activity:
Capital contribution resulting
from forgiveness of debt by
general partner and its affiliates $ 0 $ 1,048,871
=========== ===========
Interest paid $ 2,047,993 $ 2,039,886
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1998
(Unaudited)
Note 1 - General
These consolidated financial statements have been prepared without audit. In the
opinion of management, the consolidated financial statements contain all
adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the financial position of Patriot Tax Credit Properties L.P. (the
"Partnership") as of September 30, 1998, the results of operations for the three
and six months ended September 30, 1998 and 1997 and cash flows for the six
months ended September 30, 1998 and 1997. However, the operating results for the
interim periods may not be indicative of the results expected for a full year.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements and
notes thereto included in the Partnership's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the year ended March 31, 1998.
Also, certain balances from prior periods have been reclassified to conform with
the current financial statement presentation.
The Partnership invests in partnerships (the "Local Partnerships") which own the
properties. The financial statements of the Local Partnerships consolidated
herein are for the six month periods ended June 30, and occupancy rates are as
of June 30.
Prior to October 1, 1997, the general partner of the Partnership was Prudential
Bache Properties, Inc. ("PBP") and commencing on October 1, 1997, the general
partner has been RCC Partners 96, L.L.C. (the "New GP"). PBP and the New GP are
sometimes referred to as the "General Partner" or "General Partners" as the
context requires.
8
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1998
(Unaudited)
Note 2 - Related Parties
During their respective ownership periods, the General Partners and their
affiliates have performed 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 Partners and their 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. In order to assist in the transition
from PBP to the New GP as General Partner, the New GP engaged PBP to perform
certain of the forgoing services and paid PBP from amounts which would otherwise
be payable to the New GP pursuant to the terms of the Partnership Agreement.
These services terminated March 31, 1998. The costs and expenses incurred to the
General Partner were:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Management fees $ 60,422 $ 81,311 $118,732 $161,683
Local administrative
fees 5,062 5,062 10,124 10,124
General and adminis-
trative 30,036 34,000 48,283 42,552
-------- -------- -------- --------
$ 95,520 $120,373 $177,139 $214,359
======== ======== ======== ========
</TABLE>
At September 30, 1998, the properties owned by four of the Local Partnerships
are managed by a Local General Partner or its affiliates. Five of the Local
Partnerships general partners are owned by affiliates of the New GP.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership invested in eight Local Partnerships that are owners of
affordable multi-family residential complexes. The Local Partnerships are
operated in accordance with the rules and regulations under Section 42 of the
Internal Revenue Code in order to protect the related tax credits. The
Partnership's primary source of funds is rental revenues which are fully
utilized at the property level. The Partnership is dependent upon the support of
the General Partner and certain of its affiliates in order to meet its
obligations at the Partnership level. The General Partner and these affiliates
have agreed to continue such support for the foreseeable future.
At the Local Partnership level, the Local General Partner at Papillion Heights
has made a guarantee with respect to the Local Partnerships which, under certain
circumstances, require their funding cash flow deficits pursuant to the deficit
guaranty agreement. These operating deficit advances do not bear interest and
are repayable by the Local Partnership in accordance with the respective Local
Partnership agreement. 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 Summer Creek Villas Local Partnership continues to experience severe cash
flow deficits. The maximum funding obligation of the Local General Partner for
the initial guaranty period under the Summer Creek Villas operating deficit
guaranty agreement (which expired on December 31, 1996) was $3,392,000, of which
$2,742,000 was funded. Of the total funded, the Local General Partner has
elected to treat $1,933,000 as non-repayable advances. The Local General Partner
is also obligated to fund operating deficits during a second guaranty period
which commenced August 1996 and expires July 1999. The maximum funding
obligation during this second guaranty period is $924,000. Through September 30,
1998, the entire obligation has been funded pursuant to this second guaranty
period. As of September 30, 1998, the financial statements of the Partnership
include approximately $809,000 as "Due to general partners and affiliates of
local partnerships" for the two guaranty periods under the Summer Creek Villas
operating deficit guaranty agreement due to the three-month lag in re-
10
<PAGE>
cording the financial information of the Local Partnerships. The Local General
Partner is currently reviewing different alternatives to improve property cash
flow and reduce operating deficits. Also the management agent has been replaced
so as to implement a new strategy for increasing property performance.
The Local Partnerships have generated net operating income before debt service
and depreciation of $1,531,000 and $1,736,000 for the six months ended September
30, 1998 and 1997, respectively. Debt service payments (principal and interest)
made during the same periods were $2,289,000 and $2,282,000, respectively.
Management has been in contact with all the Local Partnerships in the southeast
region and does not anticipate any significant increases to repairs and
maintenance due to the effect of Hurricane georges on the portfolio.
Results of Operations
The operating results of the Local Partnerships consolidated herein are for the
six month periods ended June 30. Information disclosed below with respect to
each Local Partnership is consistent with this method of presentation.
Rental income increased $26,000 and decreased $79,000 for the three and six
months ended September 30, 1998 as compared to 1997. The increase for the three
months is primarily due to an increase in occupancy at Summer Creek Villas. The
decrease for the six months is primarily due to a decrease in occupancy at Hill
Top Homes partially offset by an increase in occupancy at Summer Creek Villas.
Other income increased $54,000 and $66,000 for the three and six months ended
September 30, 1998 as compared to 1997 due to an increase in application and
termination fees received at Summer Creek Villas for screening new tenants.
Repairs and maintenance increased $196,000 and $192,000 for the three and six
months ended September 30, 1998 as compared to 1997 due to repavement of the
parking lot, carpet replacement, and landscaping performed at Summer Creek
Villas.
Partnership management fees decreased approximately $21,000 and $43,000 for the
three and six months ended September 30, 1998 as compared to 1997 primarily due
to a reduction of the fee
11
<PAGE>
for participating interest of the invested assets from 0.5% to 0.375% annually.
Property Information
Occupancies at the Local Partnerships were as follows:
<TABLE>
<CAPTION>
June 30,
1998 1997
---- ----
<S> <C> <C>
Property
Hubbard's Ridge 87% 93%
Cutler Canal II 95 93
Diamond Street 92 96
Papillion Heights 98 96
Hill Top Homes 82 97
Summer Creek Villas 96 82
Brookland Park Plaza 96 99
Compton Townhouses 92 100
</TABLE>
(Occupancies are calculated by dividing occupied units by total available
units.)
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.
There were no significant changes in occupancies at the above properties as of
October 4, 1998, except for an increase in the occupancy rate to 92% at Hill Top
Homes and 100% at Diamond Street.
Year 2000 Compliance
The Partnership utilizes the computer services of an affiliate of the General
Partner. The affiliate of the General Partner is in the process of upgrading its
computer information systems to be year 2000 compliant and beyond. The Year 2000
compliance issue concerns the inability of a computerized system to accurately
record dates after 1999. The affiliate of the General Partner recently underwent
a conversion of its financial systems applications and is in the process of
upgrading and testing the in house software and hardware inventory. The
workstations that experienced problems from this process were corrected with an
upgrade patch. The affiliate of the General Partner has incurred costs of
approximately $1,000,000 to date and estimates the total costs to be
approximately $2,000,000. These costs are not being charged to the Part-
12
<PAGE>
nership. In regard to third parties, the Partnership's General Partner is in the
process of evaluating the potential adverse impact that could result from the
failure of material service providers to be year 2000 compliant. A detailed
survey and assessment of third party readiness will be sent to material third
parties in the fourth quarter of 1998. The results of the surveys will be
compiled in early 1999. No estimate can be made at this time as to the impact of
the readiness of such third parties. The Partnership's General Partner plans to
have these issues fully assessed by early 1999, at which time the risks will be
addressed and a contingency plan will be implemented if necessary.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Description:
Agreement of Limited Partnership as adopted on May 3, 1989 and
Amendments thereto dated May 25, 1989 and June 21, 1989 (1)
Form of Amended and Restated Agreement of Limited Partnership
(included in Prospectus as Exhibit A)(2)
Form of Purchase and Sale Agreement pertaining to the
Partnership's Acquisition of Local Partnership Interests (2)
Form of Amended and Restated Agreement of Local Limited
Partnership of Local Partnerships (2)
Amendment to Certificate of Limited Partnership dated October
1, 1997 (3)
Amendment Number 1 to Prudential-Bache Tax Credit Properties
L.P. Amended and Restated Agreement of Limited Partnership, dated October 1,
1997 (3)
Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K - None
(1) Filed as a exhibit to Pre-Effective Amendment No. 1 to
Form S-11 Registration Statement (No. 33-28571) (the "Registration Statement")
and incorporated herein by reference.
14
<PAGE>
(2) Filed as an exhibit to Pre-Effective Amendment No. 2 to Form
S-11 Registration Statement and incorporated herein by reference.
(3) Filed as an exhibit to Registrant's Current Report on Form
8-K dated October 1, 1997 and incorporated herein by reference.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PATRIOT TAX CREDIT PROPERTIES L.P.
(Registrant)
By: RCC PARTNERS 96, L.L.C.,
General Partner
Date: November 11, 1998
By: /s/ Alan P. Hirmes
--------------------------------
Alan P. Hirmes
Senior Vice President and
Chief Financial Officer
Date: November 11, 1998
By: /s/ Glenn F. Hopps
--------------------------------
Glenn F. Hopps
Treasurer and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the financial
statements for Patriot Tax Credit Properties L.P. and is qualified in its
entirety by reference to such financial statements
</LEGEND>
<CIK> 0000850184
<NAME> Patriot Tax Credit Properties L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,063,318
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 262,083
<PP&E> 79,048,458
<DEPRECIATION> 16,531,247
<TOTAL-ASSETS> 67,567,264
<CURRENT-LIABILITIES> 9,299,141
<BONDS> 45,391,214
0
0
<COMMON> 0
<OTHER-SE> 10,400,917
<TOTAL-LIABILITY-AND-EQUITY> 67,567,264
<SALES> 0
<TOTAL-REVENUES> 4,399,057
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,342,535
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,175,642
<INCOME-PRETAX> (1,723,158)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,723,158)
<EPS-PRIMARY> (44.97)
<EPS-DILUTED> 0
</TABLE>
