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 June 30, 1999
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 Securi-
ties 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>
<TABLE>
PART I - Financial Information
Item 1. Financial Statements
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
June 30, March 31,
1999 1999
<S> <C> <C>
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $33,957,345 and $32,535,934
respectively $148,783,681 $149,574,764
Cash and cash equivalents 1,818,067 1,781,472
Cash held in escrow 8,820,303 9,045,621
Deferred costs, net of accumulated
amortization of $1,575,950
and $1,526,212, respectively 2,527,601 2,577,339
Other assets 2,071,676 1,990,777
Total assets $164,021,328 $164,969,973
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 94,017,066 $ 94,436,642
Construction note payable 6,740,018 6,740,018
Accounts payable and other
liabilities 8,063,751 7,581,362
Due to local general partners and
affiliates 6,147,751 6,375,134
Due to general partner
and affiliates 2,377,079 2,101,597
Total liabilities 117,345,665 117,234,753
Minority interest 6,596,275 6,601,170
Partners' capital:
Limited partners (76,786 BACs
issued and outstanding) 40,361,469 41,405,584
General partner (282,081) (271,534)
Total partners' capital 40,079,388 41,134,050
Total liabilities and
partners' capital $164,021,328 $164,969,973
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1999 1998*
<S> <C> <C>
Revenues
Rental income $ 4,818,924 $ 4,826,666
Other income 133,256 148,838
4,952,180 4,975,504
Expenses
General and administrative 842,439 1,011,104
General and administrative-
related parties (Note 2) 489,347 497,910
Repairs and maintenance 716,882 772,366
Operating 677,355 644,602
Taxes 336,514 331,055
Insurance 209,375 201,176
Financial, principally interest 1,268,676 1,293,970
Depreciation and amortization 1,471,149 1,534,564
Total expenses 6,011,737 6,286,747
Net loss before minority interest (1,059,557) (1,311,243)
Minority interest in loss
of subsidiaries 4,895 22,857
Net loss $(1,054,662) $(1,288,386)
Net loss - limited partners $(1,044,115) $(1,275,502)
Number of BACs outstanding 76,768 76,768
Net loss per BAC $ (13.60) $ (16.62)
*Reclassified for comparative purposes.
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Capital
(Deficit)
(Unaudited)
<CAPTION>
Limited General
Total Partners Partner
<S> <C> <C> <C>
Partners' capital (deficit)
April 1, 1999 $41,134,050 $41,405,584 $(271,534)
Net loss (1,054,662) (1,044,115) (10,547)
Partners' capital (deficit)
June 30, 1999 $40,079,388 $40,361,469 $(282,081)
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1999 1998*
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,054,662) $(1,288,386)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 1,471,149 1,534,564
Minority interest in loss of
subsidiaries (4,895) (22,857)
Increase in due to general
partner and affiliates 275,482 198,196
Increase (decrease) in accounts
payable and other liabilities 482,389 (237,410)
Increase in other assets (80,899) (66,879)
Decrease (increase) in cash
held in escrow 162,318 (93,619)
Total adjustments 2,305,544 1,311,995
Net cash provided by
operating activities 1,250,882 23,609
Cash flows from investing activities:
(Increase) decrease in property and
equipment (630,328) 366,553
Decrease in cash held in escrow 63,000 5,320
Increase in due to local general
partners and affiliates 1,478 545,685
Decrease in due to local general
partners and affiliates (228,861) (164,838)
Net cash (used in) provided by
investing activities (794,711) 752,720
Cash flows from financing activities:
Proceeds from mortgage note payable 0 2,257,500
Repayment of mortgage notes (419,576) (3,561,496)
Increase in deferred costs 0 (104,559)
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest 0 219,081
Net cash used in financing
activities (419,576) (1,189,474)
Net increase (decrease) in cash
and cash equivalents 36,595 (413,145)
Cash and cash equivalents at
beginning of period 1,781,472 2,149,895
Cash and cash equivalents at
end of period $ 1,818,067 $ 1,736,750
Supplemental disclosures of
noncash investing and
financing activities:
Decrease in mortgage notes payable
of $1,350,000 and increase in due to
local general partners and affiliates
of $9,010 as contribution by minority
interest shareholders $ 0 $ 1,340,990
Decrease in property and equipment
of $400,000 and increase in due to
local general partners and affiliates
of $675,000 as distribution to minority
interest shareholders 0 1,075,000
*Reclassified for comparative purposes.
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999
(Unaudited)
Note 1 - General
The consolidated financial statements include the accounts of In-
dependence 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 in-
terest in the subsidiary partnerships.
For financial reporting purposes, the Partnership's fiscal quarter
ends June 30. All subsidiaries have fiscal quarters ending March
31. Accounts of the subsidiaries have been adjusted for intercom-
pany transactions from April 1 through June 30. The Partnership's
fiscal quarter ends June 30 in order to allow adequate time for the
subsidiaries financial statements to be prepared and consolidated.
All intercompany accounts and transactions with the subsidiary
partnerships have been eliminated in consolidation.
Increases (decreases) in the capitalization of consolidated subsidi-
aries attributable to minority interest arise from cash contributions
and cash distributions to the minority interest partners.
Losses attributable to minority interest which exceed the minority
interests' investment in a subsidiary have been charged to the
Partnership. Such losses aggregated approximately $5,000 and $0
for the three months ended June 30, 1999 and 1998, respectively.
The Partnership's investment in each subsidiary is equal to the
respective subsidiary's partners' equity less minority interest capi-
tal, if any. In consolidation, all subsidiary partnership losses are
included in the Partnership's capital account except for losses allo-
cated to minority interest capital.
Certain information and note disclosure normally included in
financial statements prepared in accordance with generally ac-
cepted accounting principles has been omitted or condensed.
These condensed financial statements should be read in conjunc-
tion with the financial statements and notes thereto included in the
Partnership's Annual Report on Form 10-K for the period ended
March 31, 1999.
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 adjust-
ments (consisting only of normal recurring adjustments) necessary
to present fairly the financial position of the Partnership as of June
30, 1999 and the results of operations and cash flows for the three
months ended June 30, 1999 and 1998. However, the operating
results for the three months ended June 30, 1999 may not be in-
dicative of the results for the year.
Note 2 - Related Party Transactions
An affiliate of the General Partner, Independence SLP L.P., has
either a 0.1% or 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 Partnerships.
<TABLE>
The costs incurred to related parties for the three months ended
June 30, 1999 and 1998 were as follows:
<CAPTION>
Three Months Ended
June 30,
1999 1998
<S> <C> <C>
Partnership management fees (a) $ 220,000 $ 220,000
Expense reimbursement (b) 23,000 28,000
Property management fees incurred
to affiliates of the General Partner (c) 0 9,216
Local administrative fee (d) 18,000 19,000
Total general and administrative-
General Partner 261,000 276,216
Property management fees incurred
to affiliates of the subsidiary
partnerships' general partners (c) 228,347 221,694
Total general and administrative-
related parties $ 489,347 $ 497,910
</TABLE>
(a) The General Partner is entitled to receive a partnership man-
agement 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 Part-
nership. Subject to the foregoing limitation, the partnership man-
agement 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 have been, and
will continue to 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 $1,639,000 and $1,419,000 were ac-
crued and unpaid as of June 30, 1999 and March 31, 1999, respec-
tively. Without the General Partner's advances and continued
accrual without payment of certain fees and expense reimburse-
ments, the Partnership will not be in a position to meet its obliga-
tions. The General Partner has continued advancing and allowing
the accrual without payment of these amounts but is under no
obligation to continue to do so.
(b) The Partnership reimburses the General Partner and its affili-
ates for actual Partnership operating expenses incurred by the
General Partner and its affiliates on the Partnership's behalf. The
amount of reimbursement from the Partnership is limited by the
provisions of the Partnership Agreement. Another affiliate of the
General 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 subsidi-
ary partnerships general partners amounted to $228,347 and
$230,910 for the three months ended June 30, 1999 and 1998, re-
spectively. Included in amounts incurred to affiliates of the sub-
sidiary partnerships general partners were $0 and $9,216 for the
three months ended June 30, 1999 and 1998, respectively, which
were also incurred to an affiliate of the General Partner.
(d) Independence SLP L.P. is entitled to receive a local adminis-
trative fee of up to $2,500 per year from each subsidiary partner-
ship.
Pursuant to the Partnership Agreement and the Local Partnership
Agreements, the General Partner and Independence SLP L.P. re-
ceived their prorata share of profits, losses and tax credits.
Note 3 - Commitments and Contingencies
Old Public Limited Partnership
The Old Public Limited Partnership had experienced a decline in
operations which necessitated the removal of the Local General
Partner and replacement of the property management agent. On
March 23, 1998, the Local General Partner was replaced by New
Texas Associates, Inc. and Continental Property Management, LLC
was hired as management agent. At the present time, net operat-
ing income is not sufficient to fully service the existing debt.
During May 1998, the Partnership was notified that there was to be
a sale of a real estate tax lien that had been placed on the property
due to non-payment of the real estate taxes relating to 1995 and
1996. Through June 30, 1999, the Partnership has advanced ap-
proximately $50,000 in order to prevent the sale of the real estate
tax liens, and to bring the real estate taxes current through 1997.
On July 9, 1998, the lender notified the Partnership that the mort-
gage loan was in default. On November 11, 1998, a Notice of Fore-
closure was served on the Local Partnership by the lender. On
November 19, 1998, the Local Partnership filed for protection un-
der chapter 11 in the United States Bankruptcy Court Southern
District of New York. On February 25, 1999, the venue was moved
from Southern District of New York to United States District Court
for the Middle District of Tennessee, Columbia Division, but the
record was not transferred until April 14, 1999. On June 3, 1999
the Bankruptcy Court for the Middle District issued a cash num-
ber. On June 29, 1999, the secured creditor, First National Bank of
Pulaski, Tennessee, filed a motion for Relief from Stay which the
Partnership is currently contesting. The Partnership intends to
pursue all available options as well as preserve the tax benefits
received.
<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 include cash distribu-
tions from the operations of the Local Partnerships. These funds
are available to meet obligations of the Partnership.
As of June 30, 1999, the Partnership has invested all of its net pro-
ceeds in twenty-eight Local Partnerships. Approximately $297,000
of the purchase price remains to be paid to the Local Partnerships
(all of which is held in escrow).
Cash and cash equivalents of the Partnership and its twenty-eight
consolidated subsidiary partnerships increased approximately
$37,000 during the three months ended June 30, 1999 due to cash
provided by operating activities ($1,251,000) and a decrease in cash
held in escrow ($63,000) which exceeded acquisition of property
and equipment ($630,000), repayments of mortgage notes
($420,000) and a net decrease in due to Local General Partners and
affiliates ($227,000). Included in the adjustments to reconcile the
net loss to cash provided by operating activities is a depreciation
and amortization of $1,471,000.
The working capital reserve at June 30, 1999 was approximately
$6,000.
Cash distributions received from the Local Partnerships remain
relatively, immaterial. Distributions of approximately $14,000 and
$40,000 were received during the three months ended June 30,
1999 and 1998, respectively. However, management expects that
the distributions received from the Local Partnerships will in-
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 $1,639,000 and $1,419,000 were ac-
crued and unpaid as of June 30, 1999 and March 31, 1999, respec-
tively (see Note 2). Without the General Partner's advances and
continued accrual without payment of certain fees and expense
reimbursements, the Partnership will not be in a position to meet
its obligations. The General Partner has continued advancing and
allowing the accrual without payment of these amounts but is
under no obligation to continue to do so.
For a discussion of contingencies affecting certain Local Partner-
ships, 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 fi-
nancial 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. How-
ever, the geographic diversification of the portfolio may not pro-
tect 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 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, which are not included in the financial statement car-
rying amount.
Results of Operations
The Partnership's results of operations for the three months ended
June 30, 1999 and 1998 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 expenses being divided
among operations, depreciation and mortgage interest.
Rental income remained fairly consistent with a decrease of less
than 1% for the three months ended June 30, 1999 as compared to
the corresponding period in 1998.
Other income decreased approximately $16,000 for the three
months ended June 30, 1999 as compared to the corresponding
period in 1998 primarily due to a refund of management fees re-
ceived in 1998 at one Local Partnership.
Total expenses, excluding general and administrative remained
fairly consistent with a decrease of approximately 2% for the three
months ended June 30, 1999 as compared to the corresponding
period in 1998.
General and administrative expenses decreased approximately
$169,000 for the three months ended June 30, 1999 as compared to
the corresponding period in 1998 primarily due to costs associated
with the refinancing of a mortgage note in the first quarter of 1998
at one Local Partnership.
Year 2000 Compliance
The Partnership utilizes the computer services of an affiliate of the
General Partner. The affiliate of the General Partner has upgraded
their computer information systems to be year 2000 compliant.
The most likely worst case scenario that the General Partner faces
is that computer operations will be suspended for a few days to a
week commencing on January 1, 2000. The Partnership contin-
gency plan is to have (i) a complete backup done on December 31,
1999 and (ii) both electronic and printed reports generated for all
critical data up to and including December 31, 1999.
In regard to third parties, the General Partner is in the process of
evaluating the potential adverse impact that could result from the
failure of material service providers to be year 2000 compliant. A
detailed survey and assessment was sent to material third parties
in the fourth quarter of 1998. The Partnership has received assur-
ances from a majority of the material service providers with which
it interacts that they have addressed the year 2000 issues and is
evaluating these assurances for their adequacy and accuracy. In
cases where the Partnership has not received assurances from third
parties, it is initiating further mail and/or phone correspondence.
The Partnership relies heavily on third parties and is vulnerable to
the failures of third parties to address their year 2000 issues. There
can be no assurance given that the third parties will adequately
address their year 2000 issues.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - This information is incorporated by
reference to the discussion of Old Public in Commitments and
Contingencies contained in Item 1.
Item 2. Changes in Securities and Use of Proceeds - 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:
(3A) Form of Amended and Restated Agreement of
Limited Partnership of Independence Tax Credit Plus L.P., at-
tached 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 per-
taining to the Partnership's acquisition of Local Partnership Inter-
ests*
(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 Inde-
pendence 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.
<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: August 2, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Senior Vice President
(principal financial officer)
Date: August 2, 1999
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 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> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 10,638,370
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,071,676
<PP&E> 182,741,026
<DEPRECIATION> 33,957,345
<TOTAL-ASSETS> 164,021,328
<CURRENT-LIABILITIES> 16,588,581
<BONDS> 100,757,084
0
0
<COMMON> 0
<OTHER-SE> 46,675,663
<TOTAL-LIABILITY-AND-EQUITY> 164,021,328
<SALES> 0
<TOTAL-REVENUES> 4,952,180
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,743,061
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,268,676
<INCOME-PRETAX> 0
<INCOME-TAX> (1,059,557)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,059,557)
<EPS-BASIC> (13.60)
<EPS-DILUTED> 0
</TABLE>
