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, 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)
============ ===============
December 31, March 31,
1997 1997
------------ ---------------
ASSETS
Property and equipment - (at cost,
net of accumulated depreciation
of $33,318,711 and $29,490,168,
respectively) $109,832,695 $113,446,936
Cash and cash equivalents 1,776,204 1,925,081
Investment in marketable securities 151,912 110,343
Cash held in escrow 4,003,028 3,524,350
Deferred costs (net of accumulated
amortization of $1,302,497 and
$1,153,799, respectively) 2,106,054 2,254,752
Other assets 1,209,256 1,133,002
------------ ------------
Total Assets $119,079,149 $122,394,464
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 71,232,284 $ 71,673,532
Accounts payable and other
liabilities 3,318,462 2,798,335
Due to local general partners and
affiliates 2,807,090 2,964,502
Due to general partners and affiliates 2,184,677 1,684,370
------------ ------------
Total Liabilities 79,542,513 79,120,739
------------ ------------
Minority interests 7,883,929 7,946,451
------------ ------------
Partners' Capital:
Limited partners (72,896 BACs
issued and outstanding) 32,009,808 35,649,218
General partners (364,189) (327,427)
Unrealized gain on marketable
securities 7,088 5,483
------------ ------------
Total Partners' Capital 31,652,707 35,327,274
------------ ------------
Total Liabilities and Partners'
Capital $119,079,149 $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 Nine Months Ended
December 31, December 31,
------------------------- -------------------------
1997 1996 1997 1996
------------------------- -------------------------
REVENUES
Rental income $3,067,935 $3,012,651 $9,128,388 $8,922,295
Other 331,391 304,591 995,008 952,787
----------- ----------- ----------- -----------
3,399,326 3,317,242 10,123,396 9,875,082
----------- ----------- ----------- -----------
EXPENSES
General and
administrative 484,733 466,794 1,569,678 1,491,647
General and
administrative-
related parties
(Note 2) 380,635 272,430 1,131,041 773,710
Operating and
other 297,477 317,050 964,313 981,819
Repairs and
maintenance 540,135 583,528 1,520,363 1,605,697
Real estate taxes 229,949 212,059 679,426 665,016
Insurance 103,118 111,507 325,217 340,265
Financial,
principally
interest 1,235,825 1,241,200 3,673,469 3,752,337
Depreciation and
amortization 1,302,814 1,388,381 3,977,241 4,106,502
----------- ----------- ----------- -----------
4,574,686 4,592,949 13,840,748 13,716,993
----------- ----------- ----------- -----------
Loss before
minority
interest (1,175,360) (1,275,707) (3,717,352) (3,841,911)
Minority interest
in loss of
subsidiary
partnerships 12,748 14,550 41,180 45,811
----------- ----------- ----------- -----------
Net loss $(1,162,612) $(1,261,157) $(3,676,172) $(3,796,100)
=========== =========== =========== ===========
Net loss -
limited partners $(1,150,986) $(1,248,545) $(3,639,410) $(3,758,139)
=========== =========== =========== ===========
Number of BACs
outstanding 72,896 72,896 72,896 72,896
=========== =========== =========== ===========
Net loss per BAC $ (15.79) $ (17.13) $ (49.93) $ (51.55)
=========== =========== =========== ===========
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 (3,676,172) (3,639,410) (36,762) 0
Change in net
unrealized gain
on marketable
securities 1,605 0 0 1,605
----------- ----------- --------- ------
Partners' capital -
December 31, 1997 $31,652,707 $32,009,808 $(364,189) $7,088
=========== =========== ========= ======
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,
-------------------------------
1997 1996
-------------------------------
Cash flows from operating activities:
Net loss $(3,676,172) $(3,796,100)
----------- -----------
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 3,977,241 4,106,502
Minority interest in loss of
subsidiaries (41,180) (45,811)
(Increase) decrease in other assets (76,254) 92,491
Increase in accounts payable
and other liabilities 520,127 176,491
Increase in cash held in escrow (478,678) (524,166)
Increase in due to general partners
and affiliates 500,307 161,413
Increase in due to local general
partners and affiliates 18,024 14,700
Decrease in due to local general
partners and affiliates (175,436) (375,940)
----------- -----------
Net cash provided by (used in)
operating activities 567,979 (190,420)
----------- -----------
Cash flows from investing activities:
Improvements to property and
equipment (214,302) (83,599)
Increase in marketable securities (39,964) 0
----------- -----------
Net cash used in investing
activities (254,266) (83,599)
----------- -----------
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,
------------------------------
1997 1996
------------------------------
Cash flows from financing activities:
Repayments of mortgage notes (441,248) (428,871)
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest (21,342) (170,396)
---------- ----------
Net cash used in financing
activities (462,590) (599,267)
---------- ----------
Net decrease in cash and cash
equivalents (148,877) (873,286)
Cash and cash equivalents at
beginning of period 1,925,081 2,243,763
---------- ----------
Cash and cash equivalents at
end of period $1,776,204 $1,370,477
========== ==========
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, 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 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 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 $13,000 and $15,000 and, $41,000 and $46,000 for the
three and nine months ended December 31, 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 December 31, 1997, the results of operations for
7
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Notes to Consolidated Financial Statements
December 31, 1997
(Unaudited)
the three and nine months ended December 31, 1997 and 1996 and cash flows for
the nine months ended December 31, 1997 and 1996. However, the operating results
for the nine months ended December 31, 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 nine months ended
December 31, 1997 and 1996 were as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------ -----------------------
1997 1996 1997 1996
------------------------ -----------------------
Partnership
management fees (a) $169,000 $ 50,000 $507,000 $150,000
Expense
reimbursement (b) 41,500 57,791 119,652 131,726
Property
management fees (c) 153,135 148,639 453,389 443,984
Local
administrative
fee (d) 17,000 16,000 51,000 48,000
-------- -------- ---------- --------
$380,635 $272,430 $1,131,041 $773,710
======== ======== ========== ========
(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
8
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Notes to Consolidated Financial Statements
December 31, 1997
(Unaudited)
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 $2,033,0000 and $1,526,000 were accrued and unpaid as of December
31, 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
$225,246 and $206,311 and, $657,375 and $621,267 for the three and nine months
ended December 31, 1997 and 1996, respectively. Of these fees $153,135 and
$148,639 and, $453,389 and $443,984, respectively, were incurred to affiliates
of the subsidiary partnership for the three and nine months ended December 31,
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.
9
<PAGE>
FREEDOM TAX CREDIT PLUS L.P.
AND CONSOLIDATED PARTNERSHIPS
Notes to Consolidated Financial Statements
December 31, 1997
(Unaudited)
Note 3 - Commitments and Contingencies
There were no changes and/or additions to the disclosure regarding the
subsidiary partnership which was included in the 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 nine months ended December 31, 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. As of December 31, 1997 approximately
$430,000 remains in the reserve.
During the nine months ended December 31, 1997 and 1996, the distributions
received from the Local Partnerships approximated $12,000 and $114,000,
respectively. 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, 1997, cash and cash equivalents of the
Partnership and its forty-two consolidated Local Partnerships decreased
approximately $149,000 due to improvements to property and equipment ($214,000),
an increase in marketable securities ($40,000), a decrease in capitalization of
consolidated subsidiaries attributable to minority interest ($21,000) and
repayments of mortgage notes ($441,000) which exceeded cash provided by
operating activities ($568,000). Included in the adjustments to reconcile the
net loss to cash provided by operating activities is depreciation and
amortization ($3,977,000).
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. The tax credits are attached to the project for a period of ten years and
are transferable with the property during the remainder of
11
<PAGE>
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 nine months ended December 31, 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% for
both the three and nine months ended December 31, 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 3% and 2% for the three and
nine months ended December 31, 1997 as compared to the corresponding periods in
1996.
General and administrative-related parties expenses increased approximately
$108,000 and $357,000 for the three and nine months ended December 31, 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
On November 25, 1997, an affiliate of Related Freedom Associates L.P.
("RFA"), a general partner of the Partnership, purchased 100% of the stock of
Freedom GP Inc. ("FGP"), the other general partner of the Partnership (the
"Transfer"). Pursuant to the Partnership's Amended and Restated Partnership
Agreement, the consent of the limited partners was not required to approve the
Transfer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K - A report on form 8-K dated November 25,
1997 was filed by the Partnership on December 5, 1997 which
reported in Item 1. the Transfer referred to in Item 5. Other
Information of this form 10-Q.
<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: January 30, 1998
By: /s/ Alan P. Hirmes
------------------------------------
Alan P. Hirmes, Vice President
(Principal Financial Officer)
Date: January 30, 1998
By: /s/ Glenn F. Hopps
------------------------------------
Glenn F. Hopps, Treasurer
(Principal Accounting Officer)
and
By: FREEDOM GP INC.,
a General Partner
Date: January 30, 1998
By: /s/ Alan P. Hirmes
------------------------------------
Alan P. Hirmes, Vice President
(Principal Financial Officer)
Date: January 30, 1998
By: /s/ Glenn F. Hopps
------------------------------------
Glenn F. Hopps, Treasurer
(Principal Accounting 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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,931,144
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,209,256
<PP&E> 143,151,406
<DEPRECIATION> 33,318,711
<TOTAL-ASSETS> 119,079,149
<CURRENT-LIABILITIES> 79,542,513
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 39,536,636
<TOTAL-LIABILITY-AND-EQUITY> 119,079,149
<SALES> 0
<TOTAL-REVENUES> 10,123,396
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 10,167,279
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,673,469
<INCOME-PRETAX> (3,717,352)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,717,352)
<EPS-PRIMARY> (49.93)
<EPS-DILUTED> 0
</TABLE>
