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 September 30, 1997
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-20476
INDEPENDENCE TAX CREDIT PLUS L.P.
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3589920
- ------------------------------- ----------------
(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
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
============= ============
September 30, March 31,
1997 1997
------------- ------------
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $24,189,368 and $21,272,068,
respectively $159,008,608 $161,897,905
Cash and cash equivalents 2,335,291 2,087,057
Cash held in escrow 8,561,648 8,777,109
Deferred costs, net of accumulated
amortization of $1,341,246 and
$1,189,037 respectively 2,799,818 2,943,927
Other assets 1,642,535 1,742,839
------------ ------------
Total assets $174,347,900 $177,448,837
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 98,281,167 $ 99,092,259
Construction note payable 6,740,018 6,740,018
Accounts payable and other
liabilities 7,084,648 6,814,714
Due to local general partners and
affiliates 6,035,078 6,341,448
Due to general partner and
affiliates 788,006 760,510
------------ ------------
Total liabilities 118,928,917 119,748,949
------------ ------------
Minority interest 6,572,574 6,695,280
------------ ------------
Partners' capital:
Limited partners (76,786 BACs
issued and outstanding) 49,040,819 51,177,436
General partner (194,410) (172,828)
------------ ------------
Total partners' capital 48,846,409 51,004,608
------------ ------------
Total liabilities and partners' capital $174,347,900 $177,448,837
============ ============
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
========================= =========================
Three Months Ended Six Months Ended
September 30, September 30,
------------------------- -------------------------
1997 1996* 1997 1996*
------------------------- -------------------------
Revenues
Rental income $4,674,552 $4,714,448 $9,379,232 $9,405,558
Other income 142,856 134,206 277,885 262,706
---------- ---------- --------- ---------
4,817,408 4,848,654 9,657,117 9,668,264
--------- --------- --------- ---------
Expenses
General and
administrative 846,648 841,098 1,630,483 1,665,167
General and
administrative-
related parties
(Note 2) 282,031 298,838 573,651 582,764
Repairs and
maintenance 733,133 637,102 1,336,338 1,219,029
Operating and
other 632,948 637,881 1,322,616 1,284,602
Taxes 533,912 354,866 821,735 659,425
Insurance 221,408 205,293 427,717 393,394
Financial,
principally
interest 1,206,707 1,278,390 2,643,828 2,609,857
Depreciation and
amortization 1,526,841 1,547,282 3,069,509 3,085,374
--------- --------- ---------- ----------
5,983,628 5,800,750 11,825,877 11,499,612
--------- --------- ---------- ----------
Net loss before
minority interest (1,166,220) (952,096) (2,168,760) (1,831,348)
Minority interest in
loss of subsidiary
partnerships 3,405 8,256 10,561 15,302
----------- ---------- ----------- -----------
Net loss $(1,162,815) $ (943,840) $(2,158,199) $(1,816,046)
========== ========= ========== ==========
Net loss - limited
partners $(1,151,187) $ (934,402) $(2,136,617) $(1,797,886)
========== ========= ========== ===========
Net loss per
BAC $ (14.99) $ (12.16) $ (27.82) $ (23.41)
========== ========== =========== ===========
*Reclassified for comparative purposes
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Capital
(Unaudited)
==================================================
Limited General
Total Partners Partner
--------------------------------------------------
Partners' capital-
April 1, 1997 $51,004,608 $51,177,436 $(172,828)
Net loss (2,158,199) (2,136,617) (21,582)
----------- ---------- ---------
Partners' capital-
September 30, 1997 $48,846,409 $49,040,819 $(194,410)
=========== ========== =========
See Accompanying Notes to Consolidated Financial Statements
4
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
==============================
Six Months Ended
September 30,
------------------------------
1997 1996
------------------------------
Cash flows from operating activities:
Net loss $(2,158,199) $(1,816,046)
---------- ----------
Adjustments to reconcile net loss to
net cash provided by
operating activities:
Depreciation and amortization 3,069,509 3,085,374
Minority interest in loss of
subsidiaries (10,561) (15,302)
Increase (decrease) in due to general
partner and affiliates 27,496 (15,935)
Increase (decrease) in accounts
payable and other liabilities 269,934 (67,743)
Decrease in other assets 100,304 19,328
Increase in cash held in escrow (411,975) (920,718)
---------- ----------
Total adjustments 3,044,707 2,085,004
---------- ----------
Net cash provided by operating
activities 886,508 268,958
---------- ----------
Cash flows from investing activities:
Improvements to property and
equipment (28,003) (85,574)
Decrease in cash held in escrow 627,436 322,393
Increase in due to local general
partners and affiliates 99,463 2,958
Decrease in due to local general
partners and affiliates (405,833) (166,078)
---------- ----------
Net cash provided by
investing activities 293,063 73,699
---------- ----------
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(continued)
(Unaudited)
============================
Six Months Ended
September 30,
----------------------------
1997 1996
----------------------------
Cash flows from financing activities:
Repayment of mortgage notes (811,092) (843,031)
Increase in deferred costs (8,100) 0
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest (112,145) (18,296)
---------- ----------
Net cash used in financing
activities (931,337) (861,327)
---------- ----------
Net increase (decrease) in cash
and cash equivalents 248,234 (518,670)
Cash and cash equivalents at
beginning of period 2,087,057 2,395,044
--------- ---------
Cash and cash equivalents at
end of period $2,335,291 $1,876,374
========= =========
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 1 - General
The consolidated financial statements include the accounts of Independence Tax
Credit Plus L.P. (the "Partnership") and 28 other limited partnerships
("subsidiary partnerships", "subsidiaries" or "Local Partnerships") owning
affordable apartment complexes that are eligible for the low-income housing tax
credit. Some of such apartment complexes may also be eligible for the
rehabilitation investment credit for certified historic structures. The general
partner of the Partnership is Related Independence Associates L.P., a Delaware
limited partnership (the "General Partner"). Through the rights of the
Partnership and/or an affiliate of the 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 with the subsidiary partnerships 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 $8,000 and $14,000 and $14,000 and $25,000 for the
three and six months ended September 30, 1997 and 1996, respectively. The
Partnership's investment in each subsidiary is equal to the respective
subsidiary's partners' equity less minority interest capital, if any. In
consolidation, all subsidiary partnership losses are included in the
Partnership's capital account except for losses allocated to minority interest
capital.
7
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
Certain information and note disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
has 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.
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 Partner, 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 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.
Note 2 - Related Party Transactions
An affiliate of the General Partner, Independence SLP L.P., has up to a 1%
interest as a special limited partner in each of the Local Partnerships. An
affiliate of the General Partner also has a minority interest in certain local
limited partnerships.
8
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
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) $ 12,500 $ 25,000 $ 25,000 $ 50,000
Expense
reimburse-
ment (b) 21,957 28,331 63,943 49,485
Property manage-
ment fees (c) 225,574 227,507 440,708 447,279
Local adminis-
trative fee (d) 22,000 18,000 44,000 36,000
-------- -------- -------- --------
$282,031 $298,838 $573,651 $582,764
======= ======= ======= =======
*Reclassified for comparative purposes
(a) The General Partner is 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 Partner in its sole discretion
based upon its review of the Partnership's investments. 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 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 Partner amounting to approximately $514,000 and $489,000 were
accrued and unpaid as of September 30, 1997 and March 31, 1997, respectively.
(b) The Partnership reimburses the General Partner and its affiliates for actual
Partnership operating expenses incurred by the General Partner and its
affiliates on the Partnership's behalf. The
9
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
amount of reimbursement from the Partnership is limited by the provisions of the
Partnership Agreement. Another affiliate of the 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 to affiliates of the subsidiary
partnerships amounted to $225,574 and $227,507 and $440,708 and $447,279 for the
three and six months ended September 30, 1997 and 1996, respectively. Included
in amounts incurred to affiliates of the subsidiary partnerships were $7,602 and
$13,301 and $19,786 and $31,545 for the three and six months ended September 30,
1997 and 1996, respectively, which were also incurred to an affiliate of the
General Partner.
(d) Independence SLP L.P. is entitled to receive a local administrative fee of
up to $2,500 per year from each subsidiary partnership.
Pursuant to the Partnership Agreement and the Local Partnership Agreements,
the General Partner and Independence SLP L.P. received their pro-rata share of
profits, losses and tax credits.
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 include (i) working capital reserves
and interest earned thereon, and (ii) cash distributions from the operations of
the Local Partnerships. All these sources of funds are available to meet
obligations of the Partnership.
As of September 30, 1997, the Partnership has invested approximately $59,710,000
(not including acquisition fees of approximately $4,500,000) of net proceeds in
twenty-eight Local Partnerships of which approximately $360,000 remains to be
paid to the Local Partnerships (which is being held in escrow) as certain
benchmarks, such as occupancy level, must be attained prior to the release of
the funds. During the six months ended September 30, 1997, approximately
$627,000 was paid from escrow. The Partnership does not intend to acquire
additional properties, however, the Partnership may be required to fund
potential purchase price adjustments based on tax credit adjustor clauses.
Cash and cash equivalents of the Partnership and its twenty-eight consolidated
subsidiary partnerships increased approximately $248,000 during the six months
ended September 30, 1997 primarily due to cash provided by operating activities
($887,000) and a decrease in cash held in escrow for investing activities
($627,000) which exceeded repayments of mortgage notes ($811,000), improvements
to property and equipment ($28,000), a decrease in capitalization of
consolidated subsidiaries attributable to minority interest ($112,000) and a net
decrease in due to local general partners and affiliates ($306,000). Included in
the adjustments to reconcile the net loss to cash provided by operations is
depreciation and amortization of approximately $3,070,000.
An original working capital reserve of approximately $1,536,000 (2% of Gross
Proceeds raised) was established from the Partnership's funds available for
investment. The working capital reserve at September 30, 1997 and March 31, 1997
was approximately $62,000 and $181,000, respectively, which includes amounts
which may be required for the potential purchase price adjustments based on tax
credit adjustor clauses.
Cash distributions received from the Local Partnerships remain relatively
immaterial. Distributions of approximately $23,000 and $62,000 were received
during the six months ended September 30, 1997 and 1996, respectively. However,
management expects that the distributions received from the Local Partnerships
will in-
11
<PAGE>
crease, although not to a level sufficient to permit providing cash
distributions to BACs holders. These distributions as well as the working
capital reserves referred to in the above paragraph will be used to meet the
operating expenses of the Partnership.
Partnership management fees owed to the General Partner amounting to
approximately $514,000 and $489,000 were accrued and unpaid as of September 30,
1997 and March 31, 1997, respectively.
For a discussion of a contingency affecting a certain Local Partnership, see
Note 3 to the financial statements. Since the maximum loss the Partnership would
be liable for is its net investment in the Local Partnership, the resolution of
the existing contingency is not anticipated to impact future results of
operations, liquidity or financial condition in a material way. However, the
Partnership's loss of its investment in a Local Partnership will eliminate the
ability to generate future tax credits from such Local Partnership and may also
result in recapture of tax credits if the investment is lost before the
expiration of the compliance period.
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 be experiencing upswings. 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 28 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 such ten year
period. If the General Partner determined that a sale of a 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 Partnership's results of operations for the three and six months ended
September 30, 1997 and 1996 consisted primarily of the results of the
Partnership's investment in twenty-eight Local Partnerships. The majority of
Local Partnership income continues to be in the form of rental income with the
corresponding ex-
12
<PAGE>
penses being divided among operations, depreciation and mortgage interest.
Rental income remained fairly consistent with decreases of approximately 1% and
less than 1% for the three and six months ended September 30, 1997 as compared
to the corresponding periods in 1996 primarily due to rental rate decreases.
Total expenses excluding repairs and maintenance and taxes remained fairly
consistent with a decrease of approximately 2% and an increase of less than 1%
for the three and six months ended September 30, 1997 as compared to the
corresponding periods in 1996.
Repairs and maintenance increased approximately $96,000 for the three months
ended September 30, 1997 as compared to the corresponding period in 1996
primarily due to the installation of fire escapes at one Local Partnership and
elevator repairs, repairs to security cameras and the refurbishment of vacant
apartments at another Local Partnership.
Taxes increased approximately $179,000 and $162,000 for the three and six months
ended September 30, 1997 as compared to the corresponding periods in 1996
primarily due to an underaccrual of real estate taxes at one Local Partnership
in 1996.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The litigation described in Note 3 to the financial statements
contained in Part I, Item 1 of this Quarterly Report on Form 10-Q is
incorporated herein by reference.
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
As set forth in Schedule 13D filed by Lehigh Tax Credit Partners L.L.C.
("Lehigh") and Lehigh Tax Credit Partners, Inc. (the "Managing Member" of
Lehigh) on August 25, 1997 with the Securities and Exchange Commission, Lehigh
acquired, on August 15, 1997, pursuant to a tender offer on Schedule 14D-1 that
was commenced on May 30, 1997, 6,758.475 Beneficial Assignment Certificates
("BACs") representing assignments of limited partnershp interests in the
Partnership. Lehigh and the Managing Member are affiliates of the General
Partner. Pursuant to a letter agreement dated May 28, 1997 among the
Partnership, Lehigh and the General Partner (the "Standstill Agreement"), Lehigh
agreed that, prior to May 28, 2007 (the "Standstill Expiration Date"), it will
not and it will cause certain affiliates not to (i) seek to propose to enter
into, directly or indirectly, any merger, consolidation, business combination,
sale or acquisition of assets, liquidation, dissolution or other similar
transaction involving the Partnership, (ii) form, join or otherwise participate
in a "group" (within the meaning of Section 13(d)(3) of the Securities and
Exchange Act of 1934, as amended) with respect to any voting securities of the
Partnership, except that those affiliates bound by the Standstill Agreement will
not be deemed to have violated it and formed a "group" solely by acting in
accordance with the Standstill Agreement, (iii) disclose in writing to any third
party any intention, plan or arrangement inconsistent with the terms of the
Standstill Agreement, or (iv) loan money to, advise, assist or encourage any
person in connection with any action inconsistent with the terms of the
Standstill Agreement. By the terms of the Standstill Agreement, Lehigh also
agreed to vote its BACs in the same manner as a majority of all voting BACs
holders; provided, however, Lehigh is entitled to vote its BACs as it determines
with regard to any proposal (i) to remove the General Partner as a general
partner of the Partnership or (ii) concerning the reduction of any fees,
profits, distributions or allocations for the benefit of the General Partner or
its affiliates.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(3A) Form of Amended and Restated Agreement of Limited
Partnership of Independence Tax Credit Plus L.P., attached to the Prospectus
as Exhibit A*
(3B) Amended and Restated Certificate of Limited Partnership
of Independence Tax Credit Plus L.P.*
(10A) Form of Subscription Agreement attached to the
Prospectus as Exhibit B*
(10B) Form of Purchase and Sales Agreement pertaining to the
Partnership's acquisition of Local Partnership Interests*
(10C) Form of Amended and Restated Agreement of Limited
Partnership of Local Partnerships*
(27) Financial Data Schedule (filed herewith).
*Incorporated herein as an exhibit by reference to exhibits
filed with Pre-Effective Amendment No. 1 to the Independence Tax Credit Plus
L.P. Registration Statement on Form S-11 (Registration No. 33-37704)
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter.
15
<PAGE>
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.
INDEPENDENCE TAX CREDIT PLUS L.P.
---------------------------------
(Registrant)
By: RELATED INDEPENDENCE
ASSOCIATES L.P., General Partner
By: RELATED INDEPENDENCE
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)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the financial
statements for Independence Tax Credit Plus L.P. and is qualified in its
entirety by reference to such financial statements
</LEGEND>
<CIK> 0000869615
<NAME> Independence Tax Credit Plus L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 10,896,939
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,642,535
<PP&E> 183,197,976
<DEPRECIATION> 24,189,368
<TOTAL-ASSETS> 174,347,900
<CURRENT-LIABILITIES> 13,907,732
<BONDS> 105,021,185
0
0
<COMMON> 0
<OTHER-SE> 55,418,983
<TOTAL-LIABILITY-AND-EQUITY> 174,347,900
<SALES> 0
<TOTAL-REVENUES> 9,657,117
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,182,049
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,643,828
<INCOME-PRETAX> (2,168,760)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,168,760)
<EPS-PRIMARY> (27.82)
<EPS-DILUTED> 0
</TABLE>
