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 December 31, 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
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
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
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Consolidated Balance Sheets
(Unaudited)
============ ============
December 31, March 31,
1996 1996*
----------- ------------
Property and equipment - (at cost,
net of accumulated depreciation
of $28,302,605 and $24,353,844,
respectively) $114,283,906 $118,149,068
Cash and cash equivalents 1,370,477 2,243,763
Investment in marketable securities 109,808 115,961
Cash held in escrow 4,035,176 3,511,010
Deferred costs (net of accumulated
amortization of $1,104,921 and
$947,180, respectively) 2,303,630 2,461,371
Other assets 1,049,852 1,142,343
-------------------------
Total Assets $123,152,849 $127,623,516
=========== ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 71,820,742 $ 72,249,613
Accounts payable and other
liabilities 2,692,364 2,515,873
Due to local general partners and
affiliates 3,024,280 3,385,520
Due to general partners and
affiliates (Note 2) 1,121,255 959,842
-------------------------
Total Liabilities 78,658,641 79,110,848
Minority interests 7,714,301 7,930,508
-------------------------
Partners' Capital:
Limited partners (72,896 BAC's
issued and outstanding) 37,087,854 40,845,993
General partners (312,895) (274,934)
Unrealized gain on marketable
securities 4,948 11,101
------------------------
Total Partners' Capital 36,779,907 40,582,160
Total Liabilities and Partners'
Capital $123,152,849 $127,623,516
============ ============
* Reclassified for comparative purposes
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
<TABLE>
<CAPTION>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Consolidated Statements of Operations
(Unaudited)
==================== =======================
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------- -----------------------
1996 1995* 1996 1995*
---------------------- -----------------------
<S> <C> <C> <C> <C>
Revenues
Rental income $ 3,012,651 $ 2,969,083 $ 8,922,295 $ 8,746,368
Other (principally
interest) 304,591 331,825 952,787 981,443
----------- ----------- ----------- -----------
3,317,242 3,300,908 9,875,082 9,727,811
----------- ----------- ----------- -----------
Expenses
General and
administrative 483,465 415,128 1,508,318 1,406,547
General and
administrative-
related parties
(Note 2) 255,759 287,686 757,039 880,690
Operating and
other 317,050 310,344 981,819 892,044
Repairs and
maintenance 583,528 571,356 1,605,697 1,419,744
Real estate taxes 212,059 218,125 665,016 634,153
Insurance 111,507 111,616 340,265 329,793
Financial,
principally
interest 1,241,200 1,244,107 3,752,337 3,685,315
Depreciation and
amortization 1,388,381 1,372,135 4,106,502 4,156,416
----------- ----------- ----------- -----------
4,592,949 4,530,497 13,716,993 13,404,702
----------- ----------- ----------- -----------
Loss before minority
interest (1,275,707) (1,229,589) (3,841,911) (3,676,891)
Minority interest in
loss of subsidiary
partnerships 14,550 14,114 45,811 42,639
----------- ----------- ----------- -----------
Net loss $(1,261,157) $(1,215,475) $(3,796,100) $(3,634,252)
=========== =========== =========== ===========
Net loss - limited
partners $(1,248,545) $(1,203,320) $(3,758,139) $(3,597,909)
=========== =========== =========== ===========
Number of BACs
outstanding 72,896 72,896 72,896 72,896
=========== =========== =========== ===========
Net loss per
BAC $ (17.13) $ (16.51) $ (51.55) $ (49.36)
=========== =========== =========== ===========
</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 (3,796,100) (3,758,139) (37,961) 0
Change in net
unrealized gain
on marketable
securities (6,153) 0 0 (6,153)
---------- ----------- -------- -------
Partners' capital-
December 31,
1996 $36,779,907 $37,087,854 $(312,895) $ 4,948
=========== =========== ========= =======
</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 in Cash and Cash Equivalents
(Unaudited)
===================
Nine Months Ended
December 31,
-------------------
1996 1995
-------------------
Cash flows from operating activities:
Net loss $(3,796,100) $(3,634,252)
---------- ----------
Adjustments to reconcile net loss
to net cash (used in)
provided by operating activities:
Depreciation and amortization 4,106,502 4,156,416
Minority interest in loss of
subsidiaries (45,811) (42,639)
Decrease (increase) in other assets 92,491 (218,468)
Increase in accounts payable and
other liabilities 176,491 304,452
Increase in cash held in escrow (524,166) (441,506)
Increase in due to general partners
and affiliates 161,413 293,283
Increase in due to local general partners
and affiliates 14,700 615
Decrease in due to local general
partners and affiliates (375,940) (139,133)
---------- ----------
Net cash (used in) provided by
operating activities (190,420) 278,768
---------- ----------
Cash flows from investing activities:
Acquisition of property and
equipment (83,599) (13,090)
---------- ----------
Net cash used in investing
activities (83,599) (13,090)
---------- ----------
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Consolidated Statements of Cash Flows
Decrease in Cash and Cash Equivalents
(continued)
(Unaudited)
=================
Nine Months Ended
December 31,
-----------------
1996 1995
-----------------
Cash flows from financing activities:
Repayments of mortgage notes (428,871) (443,235)
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest (170,396) (195,128)
------- -------
Net cash used in financing
activities (599,267) (638,363)
-------- -------
Net decrease in cash and cash
equivalents (873,286) (372,685)
Cash and cash equivalents at
beginning of period 2,243,763 2,421,179
--------- ---------
Cash and cash equivalents at
end of period $1,370,477 $2,048,494
========= =========
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Notes to Consolidated Financial Statements
December 31, 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. Through the rights of the Partnership and/or the General Partner, which
General Partner has a contractual obligation to act on behalf of the
Partnership, to remove the general partner of the subsidiary local partnerships
and to approve certain major operating and financial decisions, the Partnership
has a controlling financial interest in the subsidiary local partnerships.
The Partnership's fiscal quarter ends December 31. All subsidiaries have fiscal
quarters ending September 30. Accounts of the subsidiaries have been adjusted
for intercompany transactions from October 1 through December 31.
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 and $46,000 and $43,000 for the
three and nine months ended December 31, 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.
7
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Notes to Consolidated Financial Statements
December 31, 1996
(Unaudited)
Note 1 - General (continued)
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 December
31, 1996, the Partnership has not recorded any provisions for loss on 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 December 31, 1996, the results of operations for the three and
nine months ended December 31, 1996 and 1995 and its cash flows for the nine
months ended December 31, 1996 and 1995. However, the operating results for the
nine months ended December 31, 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.
8
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Notes to Consolidated Financial Statements
December 31, 1996
(Unaudited)
Note 2 - Related Party Transactions
The costs incurred to related parties for the three and nine months ended
December 31, 1996 and 1995 were as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
----------------------- ----------------------
1996 1995 1996 1995
----------------------- ----------------------
Partnership
management
fees (a) $ 50,000 $100,000 $150,000 $300,000
Expense
reimburse-
ment (b) 57,791 39,019 131,726 104,085
Property
management
fees (c) 131,968 131,667 427,313 425,605
Local adminis-
trative fee (d) 16,000 17,000 48,000 51,000
------- ------- -------- --------
$255,759 $287,686 $757,039 $880,690
======= ======= ======= =======
(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 from working capital reserves or 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). Partnership management fees owed to the General Partners
amounting to approximately $1,000,000 and $850,000 were accrued and unpaid as of
December 31, 1996 and March 31, 1996, respectively.
(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 lim-
9
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Notes to Consolidated Financial Statements
December 31, 1996
(Unaudited)
Note 2 - Related Party Transactions (continued)
ited 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
$206,311 and $195,289 and $621,267 and $601,066 for the three and nine months
ended December 31, 1996 and 1995, respectively. Of these fees $123,178 and
$121,458 and $401,237 and $398,864 were incurred to affiliates of the subsidiary
partnerships for the three and nine months ended December 31, 1996 and 1995,
respectively. In addition, $19,903 and $24,470 and $62,936 and $69,525 were
incurred to affiliates of the Related General Partner for the three and nine
months ended December 31, 1996 and 1995, respectively. Of such amounts incurred
to affiliates of the Related General Partner, $11,113 and $14,261 and $36,860
and $42,784 for the three and nine months ended December 31, 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.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Con-
dition 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 nine months ended December 31, 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 $2,551,000 (3.8% of gross equity
raised) was initially established. Approximately $661,000 remains in the reserve
as of December 31, 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 nine months ended December 31, 1996 and 1995, the distributions
received from the Local Partnerships approximated $114,000 and $124,000. 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 nine months ended December 31, 1996, cash and cash equivalents of the
Partnership and its forty-two consolidated Local Partnerships decreased
approximately $873,000 primarily due to cash used in operating activities
($190,000), acquisition of property and equipment ($84,000), a decrease in the
capitalization of consolidated subsidiaries attributable to minority interest
($170,000) and repayments of mortgage loans ($429,000). Included in the
adjustments to reconcile the net loss to cash used in operating activities is
depreciation and amortization ($4,107,000).
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
11
<PAGE>
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.
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 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 exceeded estimated fair value. Through
December 31, 1996, the Partnership has not recorded any provisions for loss on
impairment of assets or reduction to estimated fair value.
The results of operations for the three and nine months ended December 31, 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 increases of approximately 1%
and 2% for the three and nine months ended December 31, 1996, respectively, as
compared to the corresponding periods in 1995, primarily due to rental rate
increases.
12
<PAGE>
Total expenses excluding general and administrative, general and
administrative-related parties, operating and other, and repairs and maintenance
remained fairly consistent with increases of less than 1% and approximately 1%
for the three and nine months ended December 31, 1996 as compared to the
corresponding periods in 1995.
General and administrative expenses increased approximately $68,000 for the
three months ended December 31, 1996 as compared to the corresponding period in
1995 primarily due to an incentive management fee paid to the general partner at
one Local Partnership, the change at a second Local Partnership from an
affiliated property manager to one which is not an affiliate as well as small
increases at three Local Partnerships.
General and administrative-related parties expenses decreased approximately
$124,000 for the nine months ended December 31, 1996 as compared to the
corresponding period in 1995 primarily due to a decrease in partnership
management fees.
Operating expenses increased approximately $90,000 for the nine months ended
December 31, 1996 as compared to the corresponding period in 1995 primarily due
to an increase in utilities at four Local Partnerships.
Repairs and maintenance increased approximately $186,000 for the nine months
ended December 31, 1996, as compared to the corresponding period in 1995. This
increase is primarily due to an increase in painting expenses at three Local
Partnerships, parking lot and asphalt repairs as well as carpet replacement at a
fourth Local Partnership and plumbing repairs and parking lot repairs at a fifth
Local Partnership.
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:
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K - No reports on Form 8-K were
filed during the quarter.
14
<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: February 13, 1997
By:/s/ Alan Hirmes
---------------
Alan Hirmes, Vice President
(Principal Financial Officer)
Date: February 13, 1997
By:/s/ Richard A. Palermo
----------------------
Richard A. Palermo, Treasurer
(Principal Accounting Officer)
and
By: FREEDOM G.P. INC.,
a General Partner
Date: February 13, 1997
By:/s/ Paul L. Abbott
------------------
Paul L. Abbott, President
15
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,515,461
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,353,482
<PP&E> 142,586,511
<DEPRECIATION> 28,302,605
<TOTAL-ASSETS> 123,152,849
<CURRENT-LIABILITIES> 78,658,641
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 44,494,208
<TOTAL-LIABILITY-AND-EQUITY> 123,152,849
<SALES> 0
<TOTAL-REVENUES> 9,875,082
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,964,656
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,752,337
<INCOME-PRETAX> (3,841,911)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,841,911)
<EPS-PRIMARY> (51.55)
<EPS-DILUTED> 0
</TABLE>
