<PAGE>
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, 2000
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
--- ---
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PART I - Financial Information
Item 1. Financial Statements
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
============= =============
JUNE 30, MARCH 31,
2000 2000
------------- -------------
<S> <C> <C>
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $39,613,818and $38,264,393,
respectively $142,942,412 $144,177,016
Cash and cash equivalents 1,897,346 2,256,497
Cash held in escrow 9,276,711 9,140,249
Deferred costs, net of accumulated
amortization of $1,032,406
and $956,312, respectively 1,991,977 2,025,646
Other assets 1,696,278 1,763,384
------------- -------------
Total assets $157,804,724 $159,362,792
============= =============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage notes payable $ 98,929,700 $ 92,458,812
Construction note payable 0 6,740,018
Accounts payable and other liabilities 8,895,270 9,058,332
Due to local general partners and
affiliates 5,592,417 5,821,007
Due to general partner and affiliates 3,799,955 3,542,200
------------- -------------
Total liabilities 117,217,342 117,620,369
------------- -------------
Minority interest 6,404,861 6,412,604
------------- -------------
Partners' capital (deficit):
Limited partners (76,786 BACs
issued and outstanding) 34,523,570 35,659,395
General partner (341,049) (329,576)
------------- -------------
Total partners' capital (deficit) 34,182,521 35,329,819
------------- -------------
Total liabilities and partners'
capital (deficit) $157,804,724 $159,362,792
============= =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
2
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INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
==================
THREE MONTHS ENDED
JUNE 30,
------------------
2000 1999
------------------
<S> <C> <C>
Revenues
Rental income $ 4,848,972 $ 4,818,924
Other income 114,226 133,256
------------ ------------
4,963,198 4,952,180
------------ ------------
Expenses
General and administrative 906,563 842,439
General and administrative-
related parties (Note 2) 511,262 489,347
Repairs and maintenance 822,523 716,882
Operating 672,228 677,355
Taxes 326,974 336,514
Insurance 211,729 209,375
Financial, principally interest 1,241,441 1,268,676
Depreciation and amortization 1,425,519 1,471,149
---------- ----------
Total expenses 6,118,239 6,011,737
---------- ----------
Net loss before minority interest (1,155,041) (1,059,557)
Minority interest in loss of
subsidiaries 7,743 4,895
------------ ------------
Net loss $(1,147,298) $(1,054,662)
============ ==============
Net loss - limited partners $(1,135,825) $(1,044,115)
============ ==============
Number of BACs outstanding 76,786 76,786
============ =============
Net loss per BAC $ (14.79) $ (13.60)
============= =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
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INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Capital (Deficit)
(Unaudited)
<TABLE>
<CAPTION>
================================
LIMITED GENERAL
TOTAL PARTNERS PARTNER
--------------------------------
<S> <C> <C> <C>
Partners' capital
(deficit)
April 1, 2000 $35,329,819 $35,659,395 $(329,576)
Net loss (1,147,298) (1,135,825) (11,473)
----------- ----------- ---------
Partners' capital
(deficit)
June 30,
2000 $34,182,521 $34,523,570 $(341,049)
========== ========== =========
</TABLE>
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)
<TABLE>
<CAPTION>
=========================
THREE MONTHS ENDED
JUNE 30,
-------------------------
2000 1999
-------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,147,298) $(1,054,662)
------------ ------------
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 1,425,519 1,471,149
Minority interest in loss of
subsidiaries (7,743) (4,895)
Increase in due to general
partner and affiliates 257,755 275,482
(Decrease) increase in accounts
payable and other liabilities (163,062) 482,389
Decrease (increase) in other assets 67,106 (80,899)
(Increase) decrease in cash held
in escrow (204,162) 162,318
----------- -----------
Total adjustments 1,375,413 2,305,544
----------- -----------
Net cash provided by
operating activities 228,115 1,250,882
----------- -----------
Cash flows from investing activities:
Increase in property and
equipment (114,821) (630,328)
Decrease in cash held in escrow 67,700 63,000
Increase in due to local general
partners and affiliates 19,511 1,478
Decrease in due to local general
partners and affiliates (248,101) (228,861)
------------ -----------
Net cash used in
investing activities (275,711) (794,711)
------------- -------------
</TABLE>
5
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INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
=========================
THREE MONTHS ENDED
JUNE 30,
-------------------------
2000 1999
-------------------------
<S> <C> <C>
Cash flows from financing activities:
Proceeds from mortgage notes payable 6,889,970 0
Repayment of mortgage notes (419,082) (419,576)
Repayment of construction loan
payable (6,740,018) 0
Increase in deferred costs (42,425) 0
----------- ---------
Net cash used in financing activities (311,555) (419,576)
----------- ---------
Net (decrease) increase in cash
and cash equivalents (359,151) 36,595
Cash and cash equivalents at
beginning of period 2,256,497 1,781,472
----------- ---------
Cash and cash equivalents at
end of period $1,897,346 $1,818,067
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
6
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INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(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.
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 intercompany 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 subsidiaries
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 $6,000 and $5,000 for the three months ended June 30,
2000 and 1999, 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
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INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(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,
2000.
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 June
30, 2000 and the results of operations and cash flows for the three months ended
June 30, 2000 and 1999. However, the operating results for the three months
ended June 30, 2000 may not be indicative of the results for the year.
8
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INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
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.
The costs incurred to related parties for the three months ended June 30, 2000
and 1999 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
--------------------
2000 1999
--------------------
<S> <C> <C>
Partnership management fees (a) $ 220,000 $ 220,000
Expense reimbursement (b) 31,741 23,000
Local administrative fee (c) 20,000 18,000
---------- ----------
Total general and administrative-
General Partner 271,741 261,000
---------- ----------
Property management fees incurred
to affiliates of the subsidiary
partnerships' general partners 239,521 228,347
---------- ----------
Total general and administrative-
related parties $ 511,262 $ 489,347
========== ==========
</TABLE>
(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 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 $2,519,000 and $2,299,000 were accrued and unpaid as of June 30,
2000 and March 31, 2000. Without the General Partner's
9
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INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
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.
(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 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) 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 prorata share of
profits, losses and tax credits.
Note 3 - Mortgage Note Payable
P.S. 157 ASSOCIATES, L.P. ("P.S. 157")
On March 14, 2000, P.S. 157 refinanced its construction loans and converted them
into three permanent mortgage loans. The first loan, with a principal balance of
$1,834,000, bears interest at 7.97% and required monthly payments of principal
and interest through maturity by March 1, 2015. The second loan, with a
principal balance of $2,838,070, bears interest at 1% and requires monthly
payments of principal and interest for the first 15 years; principal and
interest at 6.875% payable monthly for 1 year and then principal and interest at
.113% payable monthly through maturity on March 1, 2030. The third loan, with a
principal balance of $2,217,900, bears interest at 1% with no payments due until
April 1, 2016. The construction loan in the amount of $6,740,018 was paid off.
10
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
Note 4 - Commitments and Contingencies
There were no material changes and/or additions to disclosures regarding the
subsidiary partnerships which were included in the Partnership's Annual Report
on Form 10-K for the period ended March 31, 2000.
11
<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 cash distributions from the
operations of the Local Partnerships. These funds, which remain immaterial, are
available to meet obligations of the Partnership.
As of June 30, 2000, the Partnership has invested all of its net proceeds in
twenty-eight Local Partnerships. Approximately $292,000 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 decreased approximately $360,000 during the three months
ended June 30, 2000 due to repayments of mortgage and construction loans payable
($7,159,000), an increase in deferred costs ($42,000), acquisition of property
and equipment ($115,000) and a net decrease in due to local general partners and
affiliates ($229,000) which exceeded a decrease in cash held in escrow ($68,000)
relating to investing activities, proceeds from mortgage notes payable
($6,890,000) and cash provided by operating activities ($228,000). Included in
the adjustments to reconcile the net loss to cash flow provided by operations is
depreciation and amortization ($1,426,000).
The working capital reserve at June 30, 2000 was approximately $30,000.
Cash distributions received from the Local Partnerships remain relatively,
immaterial. Distributions of approximately $46,000 and $14,000 were received
during the three months ended June 30, 2000 and 1999, respectively. However,
management expects that the distributions received from the Local Partnerships
will increase, 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 $2,519,000 and $2,299,000 were accrued and unpaid as of June 30,
2000 and March 31, 2000, respectively (see Note 2). Without the General
Partner's advances and continued accrual without payment of certain fees and
expense reimbursements, the Partnership will
12
<PAGE>
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 mortgage notes payable, see Note 3 to the financial
statements.
For a discussion of contingencies affecting certain Local Partnerships, see Note
4 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 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 carrying amount.
RESULTS OF OPERATIONS
The Partnership's results of operations for the three months ended June 30, 2000
and 1999 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.
13
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Rental income remained fairly consistent with an increase of approximately 1%
for the three months ended June 30, 2000 as compared to the corresponding period
in 1999.
Other income decreased approximately $19,000 for the three months ended June 30,
2000 as compared to the corresponding period in 1999 primarily due to lease
cancellation fees and late fees received in the first quarter of 1999 at three
Local Partnerships.
Total expenses, excluding repairs and maintenance remained fairly consistent
with an increase of less than 1% for the three months ended June 30, 2000 as
compared to the corresponding period in 1999.
Repairs and maintenance increased approximately $106,000 for the three months
ended June 30, 2000 as compared to the corresponding period in 1999 primarily
due to an increase in cleaning contracts and decorating expenses at one Local
Partnership and an increase in trash removal and repairs payroll at a second
Local Partnership.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
14
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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., 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
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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: July 25, 2000
By:/s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
Senior Vice President
(principal financial officer)
Date: July 25, 2000
By:/s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(principal accounting officer)
