<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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>
===============================
June 30, March 31,
2000 2000
------------------------------
<S> <C> <C>
ASSETS
Investment in property:
Land $ 4,005,633 $ 4,005,633
Buildings and improvements 75,578,978 75,557,527
Accumulated depreciation (20,318,314) (19,762,979)
----------- -----------
Net investment in property 59,266,297 59,800,181
----------- -----------
Cash and cash equivalents 1,031,297 956,906
Cash and cash equivalents
held in escrow 1,209,166 1,283,893
Deferred financing costs, net
of accumulation of $2,977,631
and $2,917,228, respectively 2,253,152 2,313,555
Other assets 367,904 307,786
----------- -----------
Total assets $ 64,127,816 $ 64,662,321
=========== ===========
</TABLE>
2
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
(continued)
<TABLE>
<CAPTION>
==============================
June 30, March 31,
2000 2000
------------------------------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 44,452,498 $ 44,569,822
Accrued interest payable 1,858,661 1,818,537
Other accrued expenses
and liabilities 2,070,887 2,019,849
Due to General Partners and
affiliates of Local Partnerships 3,034,198 3,057,164
Development fees payable 1,450,709 1,450,709
Real estate taxes payable 190,981 124,014
Due to General Partner and
its affiliates 4,651,292 3,866,475
----------- -----------
Total liabilities 57,709,226 56,906,570
----------- -----------
Minority interest in local
partnerships 1,384,521 1,737,300
----------- -----------
PARTNERS' CAPITAL
Limited partners (38,125 BUC$
issued and outstanding) 4,260,177 5,239,637
General partner (1 BUC$
issued and outstanding) 773,892 778,814
----------- -----------
Total partners' capital 5,034,069 6,018,451
----------- -----------
Total liabilities and partners'
capital $ 64,127,816 $ 64,662,321
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
===========================
Three Months Ended
June 30,
---------------------------
2000 1999*
---------------------------
<S> <C> <C>
Revenues
Rental income $ 1,996,177 $ 1,973,582
Other income 136,249 98,445
Interest income 7,469 3,002
---------- ----------
2,139,895 2,075,029
---------- ----------
Expenses
Interest 1,093,455 1,047,024
Depreciation and amortization 615,738 605,376
Operating and other 180,990 204,645
Taxes and insurance 278,430 272,758
Repairs and maintenance 692,003 416,607
General and administrative 478,666 436,901
Partnership management fees 59,014 59,014
Property management fees 78,358 84,656
---------- ----------
Total expenses 3,476,654 3,126,981
---------- ----------
Loss before minority interest and
extraordinary item (1,336,759) (1,051,952)
Minority interest in loss of
local partnerships 352,377 248,701
---------- ----------
Loss before extraordinary item (984,382) (803,251)
Extraordinary item - forgiveness of
indebtedness income (Note 3) 0 605,358
---------- ----------
Net loss $ (984,382) $ (197,893)
========== ==========
Loss before extraordinary item -
limited partners $ (979,460) $ (799,235)
Extraordinary item - limited partners 0 602,331
---------- ----------
Net loss - limited partners $ (979,460) $ (196,904)
========== ==========
</TABLE>
4
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(continued)
<TABLE>
<CAPTION>
============================
Three Months Ended
June 30,
----------------------------
2000 1999*
----------------------------
<S> <C> <C>
Number of limited partnership
units outstanding 38,125 38,125
=========== ===========
Loss before extraordinary item
per limited partnership unit $ (25.69) $ (20.96)
Extraordinary item per limited
partnership unit 0 15.80
----------- -----------
Net loss per limited
partnership unit $ (25.69) $ (5.16)
=========== ===========
</TABLE>
*Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
5
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PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN
PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
Limited General
Total Partners Partner BUC$
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Partners' capital
April 1, 2000 $6,018,451 $5,239,637 $778,814 38,126
Net loss-Three
Months ended
June 30, 2000 (984,382) (979,460) (4,922) 0
--------- --------- ------- ------
Partners' capital-
June 30, 2000 $5,034,069 $4,260,177 $773,892 38,126
========= ========= ======= ======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
=============================
Three Months Ended
June 30,
-----------------------------
2000 1999
-----------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (984,382) $ (197,893)
--------- ---------
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities:
Forgiveness of debt (Note 3) 0 (605,358)
Depreciation and amortization 615,738 605,376
Minority interest in loss of
local partnerships (352,377) (248,701)
Decrease (increase) in cash held
in escrow 74,727 (51,879)
Increase (decrease) in real estate
taxes payable 66,967 (78,610)
Increase in accrued interest payable 40,124 36,080
(Increase) decrease in other assets (60,118) 50,471
Increase in other liabilities 51,038 302,231
--------- ---------
Total adjustments 436,099 9,610
--------- ---------
Net cash (used in) provided by
operating activities (548,283) (188,283)
--------- ---------
Cash flows from investing activities:
Investment in property (21,451) (37,188)
--------- ---------
Cash flows from financing activities:
Payments of mortgage notes (117,324) (132,767)
Distribution to minority interest (402) (590)
Advances from General Partner 784,817 88,303
Decrease in due to Local General
Partners and affiliates of Local
Partnerships, General Partner and
its affiliates (22,966) 300,042
--------- ---------
Net cash provided by (used in)
financing activities 644,125 254,988
--------- ---------
</TABLE>
7
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
<TABLE>
<CAPTION>
=============================
Three Months Ended
June 30,
-----------------------------
2000 1999
-----------------------------
<S> <C> <C>
Net increase in cash and
cash equivalents 74,391 29,517
Cash and cash equivalents at
beginning of period 956,906 254,539
--------- ---------
Cash and cash equivalents at
end of period $1,031,297 $ 284,056
========= =========
Supplemental disclosure of cash flow
information:
Non-cash Financing activity:
Interest paid $ 825,038 $1,010,944
========= =========
Supplemental disclosures of
non-cash financing activity:
Forgiveness of debt (Note 4)
Decrease in construction
costs payable $ 0 $ 605,358
</TABLE>
See accompanying notes to consolidated financial statements.
8
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES ON CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
Note 1 - General
These consolidated financial statements have not been audited. 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 June 30, 2000 and the results of operations and cash flows for the three
months ended June 30, 2000 and 1999. 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, 2000.
The Partnership invests in partnerships (the "Local Partnerships") which own the
properties. The financial statements of the Local Partnerships consolidated
herein are for the three month period ended March 31, and occupancy rates are as
of March 31.
Prior to October 1, 1997, the general partner of the Partnership was Prudential
Bache Properties, Inc. ("PBP") since 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.
9
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PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES ON CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
Note 2 - Related Parties
The General Partner and its affiliates have performed and will continue to
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 to the
General Partner were:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------
2000 1999
-----------------------
<S> <C> <C>
Partnership Management fees (a) $ 59,014 $ 59,014
Property Management fees 18,351 29,321
Local administrative fees 5,062 5,062
General and administrative 24,022 14,909
-------- --------
$ 106,449 $ 108,306
======== ========
</TABLE>
(a) A management fee for managing the affairs of the Partnership equal to 0.375%
of invested assets is payable from operations and reserves to the General
Partner and its affiliates. Partnership management fees owed to the General
Partner amounting to approximately $562,000 and $503,000 were accrued and unpaid
as of June 30, 2000 and March 31, 2000, respectively. Without the General
Partner's continued accrual without payment of certain fees and expense
reimbursements, the Partnership will not be in a position to meet its financial
obligations. The General Partner has continued allowing the accrual without
payment of these amounts but is under no obligation to continue do so.
At June 30, 2000, the properties owned by five of the Local Partnerships are
managed by a Local General Partner or its affiliates.
During the three months ended June 30, 2000, the General Partner and its
affiliates advanced approximately $780,000 to the Partnership and as
10
<PAGE>
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES ON CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
of June 30, 2000 and March 31, 2000, total advances outstanding are
approximately $4,647,000 and $3,867,000, respectively. The advances are
unsecured, non-interest bearing and due on demand.
Note 3 - Extraordinary Item-Forgiveness of Indebtedness Income
RMB LIMITED PARTNERSHIP ("HUBBARDS RIDGE")
During the three months ended June 30, 1999 it was determined that construction
costs payable in the amount of $605,358 would not be paid and such amounts were
subsequently written off and recorded as forgiveness of indebtedness income on
the consolidated statements of operations of the Partnership.
11
<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. Without the
General Partner's continued accrual without payment of certain fees and expense
reimbursements, the Partnership will not be in a position to meet its
obligations. The General Partner has continued allowing the accrual without
payment of these amounts but is under no obligation to continue do so.
SUMMER CREEK VILLAS LOCAL PARTNERSHIP ("SUMMER CREEK VILLAS")
The Summer Creek Villas has experienced significant declining occupancy levels
over the course of the last few years, which has resulted in recurring losses
from operations and has adversely affected the liquidity of Summer Creek Villas.
In addition to the decline in occupancy levels, Summer Creek Villas' operations
are further impeded by the inability to raise rents sufficiently to pay for the
increase in operating costs. Summer Creek Villas has been unable to obtain
maximum rents due to the competitive market and the fact that the rents in the
surrounding area are at market rate, competitive to the Project. This problem is
further compounded by the increased costs in marketing the property to
effectively compete in the sub market. Further, rent levels are restricted based
on county median income levels, which limit the maximum income that a
prospective resident can earn and maximum rents that the Project is allowed to
charge. The Summer Creek Villas has been obligated, since 1996 to repay
significant amounts of principal on its mortgage.
During the three months ended June 30, 2000, in an effort to improve occupancy,
the Summer Creek Villas invested approximately $697,000 to improve the physical
condition of the property. Such improvements primarily consisted of painting and
pressure cleaning of roofs, landscaping, and individual unit upgrades. As of
July 2, 2000, occupancy has increased to 89%.
12
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Effective January 1, 1999, Summer Creek Villas entered into a funding agreement
with its Class C local limited partner which provides for a series of loans to
be made to Summer Creek Villas in each of the years 2000, 2001 and 2002, in
amounts not to exceed $2,000,000 in the aggregate. Although no formal agreements
have been reached with the other partners, additional loans from the Partnership
(the Class A limited partnership) are expected to be obtained in accordance with
the loans to be provided under the funding agreement. Total loans made through
June 30, 2000 to fund operating deficits total $3,916,761 which comprise;
$3,216,761 from the Partnership which was eliminated in consolidation and
$700,000 from the Class C local limited partner. Management expects to obtain
additional funding from the partners in the coming two years.
These loans, if obtained, are expected to enable the Summer Creek Villas to
continue operations and make payments on its mortgage while management endeavors
to improve occupancy rates and rental rates to sufficient levels to sustain
operations independent of such funding.
The Local General Partner has been considering the possibility of restructuring
the Summer Creek Villas' debt, however, as of June 30, 2000, no definitive
agreements have been reached. Additionally, the Summer Creek Villas expects that
the anticipated project shortfall in 2001 will be approximately $2,000,000.
Loans from the Funding Agreement will be used to pay for approved expenditures
and shortfalls.
Summer Creek Villas' ability to continue its operations is dependent upon
management achieving the plans described in the foregoing paragraphs. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Any adjustments would be
limited solely to this subsidiary's financial statements included herein.
RESULTS OF OPERATIONS
The operating results of the Local Partnerships consolidated herein are for the
three months periods ended June 30, 2000. Information disclosed below with
respect to each Local Partnership is consistent with this method of
presentation.
Rental income increased approximately $23,000 for the three months ended June
30, 2000 as compared to the corresponding period in 1999, primarily due to
rental rate increases.
Other income increased approximately $38,000 for the three months ended June 30,
2000 as compared to the corresponding period in 1999
13
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due to a increase in application fees, termination fees and tenant damage fees
received at Summer Creek Villas.
Interest income increased approximately $4,000 for the three months ended June
30, 2000 as compared to the corresponding period in 1999 due to an increase in
escrow balances at two Local Partnerships.
Operating and Other decreased approximately $24,000 for the three months ended
June 30, 2000 as compared to corresponding period in 1999 due to decrease in
water and sewer charges at Summer Creek Villas.
Repairs and maintenance increased approximately $275,000 for the three months
ended June 30, 2000 as compared to the corresponding period in 1999 primarily
due to the rehabilitation of apartments at Summer Creek Villas.
PROPERTY INFORMATION
Occupancies at the Local Partnerships were as follows:
<TABLE>
<CAPTION>
March 31,
-----------------------
2000 1999
-----------------------
<S> <C> <C>
Property
Hubbard's Ridge 97% 95%
Cutler Canal II 97 97
Diamond Street 92 94
Papillion Heights 89 94
Hill Top Homes 92 93
Summer Creek Villas 63 70
Brookland Park Plaza 97 99
Compton Townhouses 100 95
</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.
Summer Creek Villas experienced a 7% decrease in occupancy rate for the three
month period ended June 30, 2000 as compared with the corresponding period in
1999. This
14
<PAGE>
decrease was primarily due to an increase in evictions necessary to stabilize
the tenant profile of the property. Other than Summer Creek Villas, none of the
above properties experienced significant decreases in occupancy rates.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
15
<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).
(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.
16
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(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.
(b) Reports on Form 8-K-No reports on Form 8-K were filed during the
quarter.
17
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PATRIOT TAX CREDIT PROPERTIES L.P.
(Registrant)
By: RCC PARTNERS 96, L.L.C.,
General Partner
Date: August 2, 2000
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Member, President
and Chief Executive and
Financial Officer
Date: August 2, 2000
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps
Treasurer and
Chief Accounting Officer
