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, 1997
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)
------------- ------------
September 30, March 31,
1997 1997
------------- ------------
ASSETS
Property and equipment - (at cost,
net of accumulated depreciation
of $32,067,123 and $29,490,168,
respectively) $110,962,202 $113,446,936
Cash and cash equivalents 1,489,340 1,925,081
Investment in marketable securities 151,146 110,343
Cash held in escrow 3,915,279 3,524,350
Deferred costs (net of accumulated
amortization of $1,251,271 and
$1,153,799, respectively) 2,157,280 2,254,752
Other assets 1,351,283 1,133,002
------------ ------------
Total Assets $120,026,530 $122,394,464
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 71,381,115 $ 71,673,532
Accounts payable and other
liabilities 3,101,731 2,798,335
Due to local general partners and
affiliates 2,801,211 2,964,502
Due to general partners and affiliates 2,019,599 1,684,370
------------ ------------
Total Liabilities 79,303,656 79,120,739
------------ ------------
Minority interests 7,908,320 7,946,451
------------ ------------
Partners' Capital:
Limited partners (72,896 BACs
issued and outstanding) 33,160,794 35,649,218
General partners (352,563) (327,427)
Unrealized gain on marketable
securities 6,323 5,483
------------ ------------
Total Partners' Capital 32,814,554 35,327,274
------------ ------------
Total Liabilities and Partners'
Capital $120,026,530 $122,394,464
============ ============
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Consolidated Statements of Operations
(Unaudited)
-------------------------- --------------------------
Three Months Ended Six Months Ended
September 30, September 30,
-------------------------- --------------------------
1997 1996 1997 1996
-------------------------- --------------------------
Revenues
Rental income $ 3,012,960 $ 2,962,674 $ 6,060,453 $ 5,909,644
Other 349,677 340,965 663,617 648,196
----------- ----------- ----------- -----------
3,362,637 3,303,639 6,724,070 6,557,840
----------- ----------- ----------- -----------
Expenses
General and
administrative 517,049 470,076 1,084,945 1,024,853
General and
administrative-
related parties
(Note 2) 369,927 259,612 750,406 501,280
Operating and
other 328,193 333,267 666,836 664,769
Repairs and
maintenance 526,570 551,036 980,228 1,022,169
Real estate
taxes 216,925 223,094 449,477 452,957
Insurance 109,186 106,814 222,099 228,758
Financial,
principally
interest 1,207,778 1,288,113 2,437,644 2,511,137
Depreciation
and
amortization 1,339,165 1,350,462 2,674,427 2,718,121
----------- ----------- ----------- -----------
4,614,793 4,582,474 9,266,062 9,124,044
----------- ----------- ----------- -----------
Loss before
minority
interest (1,252,156) (1,278,835) (2,541,992) (2,566,204)
Minority
interest in
loss of
subsidiary
partnerships 13,934 15,803 28,432 31,261
----------- ----------- ----------- -----------
Net loss $(1,238,222) $(1,263,032) $(2,513,560) $(2,534,943)
=========== =========== =========== ===========
Net loss -
limited
partners $(1,225,839) $(1,250,402) $(2,488,424) $(2,509,594)
----------- ----------- ----------- -----------
Number of BACs
outstanding 72,896 72,896 72,896 72,896
----------- ----------- ----------- -----------
Net loss per BAC $ (16.82) $ (17.15) $ (34.14) $ (34.42)
=========== =========== =========== ===========
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)
Net
Unrealized
Gain on
Limited General Marketable
Total Partners Partners Securities
----------- ----------- --------- ----------
Partners' capital-
April 1, 1997 $35,327,274 $35,649,218 $(327,427) $5,483
Net loss (2,513,560) (2,488,424) (25,136) 0
Change in net
unrealized gain
on marketable
securities 840 0 0 840
----------- ----------- --------- ------
Partners' capital-
September 30, 1997 $32,814,554 $33,160,794 $(352,563) $6,323
=========== =========== ========= ======
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)
==========================
Six Months Ended
September 30,
--------------------------
1997 1996
--------------------------
Cash flows from operating activities:
Net loss $(2,513,560) $(2,534,943)
----------- -----------
Adjustments to reconcile net loss
to net cash used in
operating activities:
Depreciation and amortization 2,674,427 2,718,121
Minority interest in loss of
subsidiaries (28,432) (31,261)
(Increase) decrease in other assets (218,281) 246,214
Increase (decrease) in accounts payable
and other liabilities 303,396 (235,710)
Increase in cash held in escrow (390,929) (286,752)
Increase in due to general partners
and affiliates 335,229 75,220
Increase in due to local general
partners and affiliates 11,568 15,800
Decrease in due to local general
partners and affiliates (174,859) (379,599)
----------- -----------
Net cash used in
operating activities (1,441) (412,910)
----------- -----------
Cash flows from investing activities:
Improvements to property and
equipment (92,221) (33,951)
Increase in marketable securities (39,963) 0
----------- -----------
Net cash used in investing
activities (132,184) (33,951)
=========== ===========
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)
----------------------------
Six Months Ended
September 30,
----------------------------
1997 1996
----------------------------
Cash flows from financing activities:
Repayments of mortgage notes (292,417) (258,121)
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest (9,699) (170,396)
----------- -----------
Net cash used in financing
activities (302,116) (428,517)
----------- -----------
Net decrease in cash and cash
equivalents (435,741) (875,378)
Cash and cash equivalents at
beginning of period 1,925,081 2,243,763
----------- -----------
Cash and cash equivalents at
end of period $ 1,489,340 $ 1,368,385
=========== ===========
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Notes to Consolidated Financial Statements
September 30, 1997
(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 an affiliate of a General
Partner, which affiliate 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 partnerships.
The Partnership's fiscal quarter ends September 30. All subsidiaries have fiscal
quarters ending June 30. Accounts of the subsidiaries have been adjusted for
intercompany transactions from July 1 through September 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 from 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 $14,000 and $16,000 and, $28,000 and $31,000 for the
three and six months ended September 30, 1997 and 1996, respectively. The
Partnership's investment in each subsidiary is generally equal to the respective
subsidiary's partners' equity less minority interest capital, if any.
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 September 30, 1997, the results of operations for
7
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
the three and six months ended September 30, 1997 and 1996 and cash flows for
the six months ended September 30, 1997 and 1996. However, the operating results
for the six months ended September 30, 1997 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,
1997.
Certain prior year amounts have been reclassified to conform to current year's
presentation.
Note 2 - Related Party Transactions
The costs incurred to related parties for the three and six months ended
September 30, 1997 and 1996 were as follows:
Three Months Ended Six Months Ended
September 30, September 30,
---------------------- ----------------------
1997 1996 1997 1996
---------------------- ----------------------
Partnership
management
fees (a) $169,000 $ 50,000 $338,000 $100,000
Expense
reimburse-
ment (b) 20,589 34,241 78,152 73,935
Property
management
fees (c) 163,338 159,371 300,254 295,345
Local
administrative
fee (d) 17,000 16,000 34,000 32,000
-------- -------- -------- --------
$369,927 $259,612 $750,406 $501,280
======== ======== ======== ========
(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
8
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
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 $1,864,000 and $1,526,000
were accrued and unpaid as of September 30, 1997 and March 31, 1997,
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 limited by the provisions of the Partnership Agreement. Another
affiliate of the Related General Partner 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
$213,391 and $210,212 and, $432,129 and $414,956 for the three and six months
ended September 30, 1997 and 1996, respectively. Of these fees $163,338 and
$159,371 and, $300,254 and $295,345, respectively, were incurred to affiliates
of the subsidiary partnership for the three and six months ended September 30,
1997 and 1996, respectively.
(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.
Note 3 - Commitments and Contingencies
There were no changes and/or additions to the disclosure regarding the
subsidiary partnership which was included in the
9
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
Partnership's Annual Report on Form 10-K for the period ended March 31, 1997.
10
<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 six months ended September 30, 1997, 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 $466,000 remains in the reserve
as of September 30, 1997 and the balance was previously used to pay operating
expenses of the Partnership including Partnership management fees payable to the
General Partners.
During the six months ended September 30, 1997 and 1996, the distributions
received from the Local Partnerships approximated $11,000 and $114,000. 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 six months ended September 30, 1997, cash and cash equivalents of the
Partnership and its forty-two consolidated Local Partnerships decreased
approximately $436,000 due to cash used in operating activities ($1,000),
improvements to property and equipment ($92,000), an increase in marketable
securities ($40,000), a decrease in capitalization of consolidated subsidiaries
attributable to minority interest ($10,000) and repayments of mortgage notes
($292,000). Included in the adjustments to reconcile the net loss to cash used
in operating activities is depreciation and amortization ($2,674,000).
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 credits in
place.
11
<PAGE>
The tax credits are attached to the project for a period of ten years and
are transferable with the property during the remainder of such ten year period.
If the General Partners determined that a sale of property is warranted, the
remaining tax credits would transfer to the new owner, thereby adding value to
the property on the market, which are not included in the financial statement
carrying amount.
Results of Operations
The results of operations for the three and six months ended September 30, 1997
continues to be in the form of rental income with corresponding expenses divided
among operations, depreciation and mortgage interest.
Rental income remained fairly consistent with increases of approximately 2% and
3% for the three and six months ended September 30, 1997 as compared to the
corresponding periods in 1996 primarily due to rental rate increases.
Total expenses excluding general and administrative-related parties remained
fairly consistent with decreases of approximately 2% and 1% for the three and
six months ended September 30, 1997 as compared to the corresponding periods in
1996.
General and administrative-related parties expenses increased approximately
$110,000 and $249,000 for the three and six months ended September 30, 1997 as
compared to the corresponding periods in 1996 primarily due to an increase in
partnership management fees payable to the General Partners.
12
<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
Paul L. Abbott ceased to serve as President, Chief Executive Officer and
Chief Financial Officer of Freedom GP Inc., effective September 1, 1997.
Effective September 1, 1997, Doreen D. Odell was elected President, Chief
Executive Officer and Chief Financial Officer of Freedom GP Inc.
Affiliates of Related Freedom Associates L.P. and Freedom GP Inc.,
general partners of the Partnership, have entered into a Purchase Agreement
pursuant to which Freedom GP Inc. agreed to sell and an affiliate of Related
Freedom Associates L.P. agreed to purchase 100% of the stock of Freedom GP Inc.
(the "Transfer"). Pursuant to the Partnership Agreement, the consent of Limited
Partners is not required to approve the Transfer. The Partnership, Related
Freedom Associates L.P. and Freedom GP Inc. intend to consummate the Transfer no
later than December 31, 1997. There can be no assurance, however, when or if the
Transfer will be consummated.
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.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FREEDOM TAX CREDIT PLUS L.P.
(Registrant)
By: RELATED FREEDOM ASSOCIATES L.P.,
a General Partner
By: RELATED FREEDOM ASSOCIATES INC.,
General Partner
Date: November 13, 1997
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes, Vice President
(Principal Financial Officer)
Date: November 13, 1997
By: /s/ Richard A. Palermo
----------------------
Richard A. Palermo, Treasurer
(Principal Accounting Officer)
and
By: FREEDOM GP INC.,
a General Partner
Date: November 13, 1997
By: /s/ Doreen D. Odell
-------------------
Doreen D. Odell, President,
Chief Executive Officer and
Chief Financial Officer
<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> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,555,765
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,351,283
<PP&E> 143,029,325
<DEPRECIATION> 32,067,123
<TOTAL-ASSETS> 120,026,530
<CURRENT-LIABILITIES> 79,303,656
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,722,874
<TOTAL-LIABILITY-AND-EQUITY> 120,026,530
<SALES> 0
<TOTAL-REVENUES> 6,724,070
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,828,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,437,644
<INCOME-PRETAX> (2,541,992)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,541,992)
<EPS-PRIMARY> (34.14)
<EPS-DILUTED> 0
</TABLE>
