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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-24652
FREEDOM TAX CREDIT PLUS L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3533987)
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
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
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>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
June 30, March 31,
1996 1996*
------------ ------------
<S> <C> <C>
Property and equipment - (at cost, net of accumulated depreciation
of $25,668,138 and $24,353,844, respectively) $116,847,870 $118,149,068
Cash and cash equivalents 1,610,654 2,243,763
Investment in marketable securities 111,681 115,961
Cash held in escrow 3,748,245 3,511,010
Deferred costs (net of accumulated amortization of $1,000,545 and
$947,180, respectively) 2,408,006 2,461,371
Other assets 1,072,078 1,142,343
------------ ------------
Total Assets $125,798,534 $127,623,516
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 72,125,323 $ 72,249,613
Accounts payable and other liabilities 2,404,098 2,515,873
Due to local general partners and affiliates 3,169,193 3,385,520
Due to general partners and affiliates (Note 2) 998,354 959,842
------------ ------------
Total Liabilities 78,696,968 79,110,848
Minority interests 7,795,597 7,930,508
------------ ------------
Partners' Capital:
Limited partners (72,896 BAC's
issued and outstanding) 39,586,801 40,845,993
General partners (287,653) (274,934)
Unrealized gain on marketable securities 6,821 11,101
------------ ------------
Total Partners' Capital 39,305,969 40,582,160
------------ ------------
Total Liabilities and Partners' Capital $125,798,534 $127,623,516
============ ============
</TABLE>
* Reclassified for comparative purposes
See accompanying notes to consolidated financial statements.
-2-
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------------
1996 1995*
------------ ------------
<S> <C> <C>
Revenues
Rental income $ 2,946,970 $ 2,898,356
Other (principally interest) 307,231 317,159
------------ ------------
3,254,201 3,215,515
------------ ------------
Expenses
General and administrative 546,174 488,953
General and administrative-related parties (Note 2) 250,271 285,205
Operating and other 331,502 308,804
Repairs and maintenance 471,133 390,709
Real estate taxes 229,863 210,653
Insurance 121,944 118,580
Financial, principally interest 1,223,024 1,222,166
Depreciation and amortization 1,367,659 1,413,143
------------ ------------
4,541,570 4,438,213
------------ ------------
Loss before minority interest (1,287,369) (1,222,698)
------------ ------------
Minority interest in loss of subsidiary partnerships 15,458 14,346
------------ ------------
Net loss $ (1,271,911) $ (1,208,352)
============ ============
Number of BACs outstanding 72,896 72,896
============ ============
Net loss Limited Partners $ (1,259,192) $ (1,196,268)
============ ============
Net loss per BAC $ (17.27) $ (16.41)
============ ============
</TABLE>
* Reclassified for comparative purposes
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
Net unrealized
Gain (Loss) on
Limited General Marketable
Total Partners Partners Securities
------------ ----------- --------- --------------
<S> <C> <C> <C> <C>
Partners' capital - April 1, 1996 $40,582,160 $40,845,993 $(274,934) $11,101
Net loss (1,271,911) (1,259,192) (12,719) 0
Change in net unrealized gain
in marketable securities (4,280) 0 0 (4,280)
----------- ----------- --------- -------
Partners' capital - June 30, 1996 $39,305,969 $39,586,801 $(287,653) $ 6,821
=========== =========== ========= =======
</TABLE>
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,271,911) $(1,208,352)
----------- -----------
Adjustments to reconcile net loss to net cash used in
erating activities:
Depreciation and amortization 1,367,659 1,413,143
Minority interest in loss of subsidiaries (15,458) (14,346)
Decrease (increase) in other assets 70,265 (140,237)
Decrease in accounts payable and other liabilities (111,775) (42,503)
Increase in cash held in escrow (237,235) (180,073)
Increase in due to general partners 38,512 58,057
Decrease in due to local general partners and affiliates (216,327) (1,328)
----------- -----------
Net cash used in operating activities (376,270) (115,639)
----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (13,096) (371)
----------- -----------
Net cash used in investing activities (13,096) (371)
----------- -----------
Cash flows from financing activities:
Repayments of mortgage notes (124,290) (125,428)
Decrease in capitalization of consolidated subsidiaries
attributable to minority interest (119,453) (9,875)
----------- -----------
Net cash used in financing activities (243,743) (135,303)
----------- -----------
Net decrease in cash and cash equivalents (633,109) (251,313)
Cash and cash equivalents at beginning of period 2,243,763 2,421,179
----------- -----------
Cash and cash equivalents at end of period $ 1,610,654 $ 2,169,866
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 1 - General
The consolidated financial statements include the accounts of
Freedom Tax Credit Plus L.P. ("the Partnership") and 42 subsidiary partnerships
("subsidiary partnerships" or "Local Partnerships") in which the Partnership is
a limited partner. All intercompany accounts and transactions with the
subsidiary partnerships have been eliminated in consolidation.
The Partnership's fiscal quarter ends December 31. All
subsidiaries have fiscal quarters ending June 30. Accounts of the subsidiaries
have been adjusted for intercompany transactions from April 1 through June 30.
All intercompany accounts and transactions have been eliminated in
consolidation.
Increases (decreases) in the capitalization of consolidated
subsidiaries attributable to minority interest arise from cash contributions and
cash distributions to the minority interest partners.
Losses attributable to minority interests which exceed the
minority interests' investment in a subsidiary have been charged to the
Partnership. Such losses aggregated approximately $15,000 and $14,000 for the
three months ended June 30, 1996 and 1995, respectively. The Partnership's
investment in each subsidiary is generally equal to the respective subsidiary's
partners' equity less minority interest capital, if any.
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Asset and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.
Effective April 1, 1996, the Partnership adopted SFAS No. 121, consistent with
the required adoption period.
Property and equipment are carried at the lower of depreciated
cost or estimated amounts recoverable through future operations and ultimate
disposition of the property. Cost includes the purchase price, acquisition fees
and expenses, and any other costs incurred in acquiring the properties. As
required by SFAS 121, a provision for loss on impairment of assets is recorded
when estimated amounts recoverable through future operations and sale of the
property on an undiscounted basis are below depreciated cost. However,
depreciated cost, adjusted for such reductions in value, if any, may be greater
than the fair value. Property investments themselves are reduced to estimated
fair value (generally using discounted cash flows) when the property is
considered to be impaired and the depreciated cost exceeds estimate fair value.
Through June 30, 1996, the Partnership has not recorded and provisions for loss
in impairment of assets or reduction to estimated fair value.
The books and records of the Partnership are maintained on the
accrual basis of accounting in accordance with generally accepted accounting
principles. In the opinion of the general partners of the Partnership, the
accompanying unaudited financial statements contain all adjustments (consisting
only of normal recurring adjustments) necessary to present fairly the financial
position of the Partnership as of June 30, 1996 and the results of operations
and its cash flows for the three months ended June 30, 1996 and 1995. However,
the operating results for the three months ended June 30, 1996 may not be
indicative of the results for the year.
Certain information and note disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted or condensed. These condensed financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Partnership's Annual Report on Form 10-K for the period ended
March 31, 1996.
-6-
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 2 - Related Party Transactions
The costs incurred to related parties for the three months
ended June 30, 1996 and 1995 were as follows:
Three Months Ended
June 30,
-------------------
1996 1995
-------- --------
Partnership management fees (a) $ 50,000 $100,000
Expense reimbursement (b) 39,694 32,233
Property management fees (c) 144,577 135,972
Local administrative fee (d) 16,000 17,000
-------- --------
$250,271 $285,205
======== ========
(a) The General Partners are entitled to receive a Partnership
Management Fee, after payment of all Partnership expenses, which together with
the Annual Local Administrative Fees will not exceed a maximum of 0.5% per annum
of Invested Assets (as defined in the Partnership Agreement), for administering
the affairs of the Partnership. Subject to the foregoing limitation, the
partnership management fee will be determined by the General Partners in their
sole discretion based upon their review of the Partnership's investment. Unpaid
Partnership Management Fees for any year will be accrued without interest and
will be payable only to the extent of available funds after the Partnership has
made distributions to the Limited Partners and BACs holders of sale or
refinancing proceeds equal to their original Capital Contributions plus a 10%
Priority Return thereon (to the extent not theretofore paid out of Cash Flow).
(b) The Partnership reimburses the General Partners and their
affiliates for actual Partnership operating expenses incurred by the General
Partners and their affiliates on the Partnership's behalf. The amount of
reimbursement from the Partnership is limited by the provisions of the
Partnership Agreement. Another affiliate of the General Partners performs asset
monitoring for the Partnership. These services include site visits and
evaluations of the subsidiary partnerships' performance.
(c) Property management fees incurred by subsidiary partnerships
amounted to $205,000 and $194,000 for the three months ended June 30, 1996 and
1995, respectively. Of these fees $136,000 and $128,000 were incurred to
affiliates of the subsidiary partnerships for the three months ended June 30,
1996 and 1995, respectively. In addition, $21,000 and $22,000 were incurred to
affiliates of the Related General Partner for the three months ended June 30,
1996 and 1995, respectively. Of such amounts incurred to affiliates of the
Related General Partner, $12,000 and $14,000 for the three months ended June 30,
1996 and 1995, respectively, are also included in amounts incurred to affiliates
of the subsidiary partnerships because they are incurred to affiliates of both.
(d) Freedom SLP L.P., a special limited partner of the subsidiary
partnerships is entitled to receive an annual local administrative fee of up to
$2,500 per year from each subsidiary partnership.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
- - -------------------------------
The Partnership's primary source of funds was from the proceeds of
its public offering. During the three months ended June 30, 1996, the primary
sources of liquidity included working capital reserves, interest earned on
working capital reserves and distributions received from the Local Partnerships.
A working capital reserve of approximately $2,551,360 (3.8% of
gross equity raised) was initially established. Approximately $793,000 remains
in the reserve as of June 30, 1996 and the balance was previously used to pay
operating expenses of the Partnership including Partnership management fees
payable to the General Partners.
During the three months ended June 30, 1996 and 1995, the
distributions received from the Local Partnerships approximated $113,000 and
$21,000. Cash distributions from Local Partnerships are not expected to reach a
level sufficient to permit cash distributions to BACs holders. These
distributions as well as the working capital reserves referred to in the
preceding paragraph will be used to meet the operating expenses of the
Partnership.
During the three months ended June 30, 1996, cash and cash
equivalents of the Partnership and its forty two consolidated Local Partnerships
decreased approximately $633,000 primarily as a result of cash used in operating
activities ($376,000), acquisition of property and equipment ($13,000), a
decrease in the capitalization of Local Partnerships attributable to minority
interest ($119,000) and repayments of mortgage loans ($124,000). Included in the
adjustments to reconcile the net loss to cash flow from operations is
depreciation and amortization in the amount of $1,367,659.
Management is not aware of any trends or events, commitments or
uncertainties, which have not otherwise been disclosed, that will or are likely
to impact liquidity in a material way. Management believes the only impact would
be from laws that have not yet been adopted. The portfolio is diversified by the
location of the properties around the United States so that if one area of the
country is experiencing downturns in the economy, the remaining properties in
the portfolio may not be experiencing downswings. However, the geographic
diversification of the portfolio may not protect against a general downturn in
the national economy. The Partnership has fully invested the proceeds of its
offering in 42 local partnerships, all of which fully have their tax credits in
place. The tax credits are attached to the project for a period of ten years and
are transferable with the property during the remainder of the ten year period.
If trends in the real estate market warranted the sale of a property, the
remaining tax credits would transfer to the new owner; thereby adding
significant value to the property on the market. However, the geographic
diversifications of the portfolio may not protect against a general downturn in
the national economy.
Results of Operations
- - ---------------------
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Asset and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.
Effective April 1, 1996, the Partnership adopted SFAS No. 121, consistent with
the required adoption period.
Property and equipment are carried at the lower of depreciated
cost or estimated amounts recoverable through future operations and ultimate
disposition of the property. Cost includes the purchase price, acquisition fees
and expenses, and any other costs incurred in acquiring the properties. As
required by SFAS 121, a provision for loss on impairment of assets is recorded
when estimated amounts recoverable through future operations and sale of
-8-
<PAGE>
the property on an undiscounted basis are below depreciated cost. However,
depreciated cost, adjusted for such reductions in value, if any, may be greater
than the fair value. Property investments themselves are reduced to estimated
fair value (generally using discounted cash flows) when the property is
considered to be impaired and the depreciated cost exceeds estimate fair value.
Through June 30, 1996, the Partnership has not recorded and provisions for loss
in impairment of assets or reduction to estimated fair value.
The results of operations for the three months ended June 30, 1996
continues to be in the form of rental income with corresponding expenses divided
among operations, depreciation and mortgage interest.
Rental income has remained fairly consistent with an increase of
less than 2% for the three months ended June 30, 1996 as compared to the
corresponding period in 1995, primarily due to rental rate increases.
Total expenses excluding general and administrative, general and
administrative- related parties and repairs and maintenance remained fairly
constant with an increase of less than 1% for the three months ended June 30,
1996 as compared to the corresponding periods in 1995.
General and administrative expenses increased approximately
$57,000 for the three months ended June 30, 1996 as compared to the
corresponding period in 1995 primarily due to an overaccrual at March 31, 1995
which was reversed in the first quarter as well as small increases at five Local
Partnerships.
General and administrative-related parties expenses decreased
approximately $35,000 for the three months ended June 30, 1996 as compared to
the corresponding period in 1995 primarily due to a decrease in Partnership
management fees in 1996 as compared to 1995.
Repairs and maintenance increased approximately $80,000 for the
three months ended June 30, 1996, as compared to the corresponding period in
1995. This increase is primarily due to an increase in landscaping expenses and
carpeting replacement at two Local Partnerships as well as small increases at
four other Local Partnerships.
-9-
<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:
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter.
-10-
<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.
FREEDOM TAX CREDIT PLUS L.P.
----------------------------
(Registrant)
By: RELATED FREEDOM ASSOCIATES L.P.,
a General Partner
By: RELATED FREEDOM ASSOCIATES INC.,
a General Partner
Date: August 13, 1996
By: /s/ Alan Hirmes
---------------
Alan Hirmes, Vice President
Date: August 13, 1996
By: /s/ Lawrence J. Lipton
----------------------
Lawrence J. Lipton, Treasurer
(Principal Financial and Accounting Officer)
and
By: FREEDOM G.P. INC.,
a General Partner
Date: August 13, 1996
By: /s/ Paul L. Abbott
------------------
Paul L. Abbott, President
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Freedom Tax Credit Plus L.P. and is
qualified in its entirety by reference to such
financial statements
</LEGEND>
<CIK> 0000854926
<NAME> Freedom Tax Credit Plus L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,476,671
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,478,273
<PP&E> 142,516,008
<DEPRECIATION> 25,668,138
<TOTAL-ASSETS> 125,802,814
<CURRENT-LIABILITIES> 78,696,968
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 47,101,566
<TOTAL-LIABILITY-AND-EQUITY> 125,802,814
<SALES> 0
<TOTAL-REVENUES> 3,254,201
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,318,546
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,223,024
<INCOME-PRETAX> (1,287,369)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,287,369)
<EPS-PRIMARY> (17.27)
<EPS-DILUTED> 0
</TABLE>
