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 December 31, 1999
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-37704-03
INDEPENDENCE TAX CREDIT PLUS L.P. II
(Exact name of registrant as specified in its charter)
Delaware 13-3646846
(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. II
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
December 31, March 31,
1999 1999
<S> <C> <C>
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $15,415,619 and $12,842,757,
respectively $92,621,437 $95,123,555
Cash and cash equivalents 1,096,977 1,051,505
Cash held in escrow 2,826,461 2,487,110
Deferred costs, net of accumulated
amortization of $455,654
and $385,360, respectively 354,918 425,212
Other assets 742,727 757,455
Total assets $97,642,520 $99,844,837
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage notes payable $58,827,696 $59,105,602
Accounts payable and other
liabilities 1,521,635 1,304,205
Accrued interest 7,265,436 6,449,318
Due to local general partners and
affiliates 1,840,037 1,839,744
Due to general partner and
affiliates 1,337,239 851,420
Total liabilities 70,792,043 69,550,289
Minority interest 140,144 152,233
Commitments and contingencies (Note 3)
Partners' capital (deficit):
Limited partners (58,928 BACs
issued and outstanding) 26,967,179 30,364,841
General partner (256,846) (222,526)
Total partners' capital (deficit) 26,710,333 30,142,315
Total liabilities and partners'
capital (deficit) $97,642,520 $99,844,837
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1999 1998* 1999 1998
<S> <C> <C> <C> <C>
Revenues
Rental income $ 1,960,848 $ 1,916,298 $ 5,859,105 $ 5,659,621
Other income 88,198 88,178 167,313 188,836
Total revenues 2,049,046 2,004,476 6,026,418 5,848,457
Expenses
General and
administrative 501,765 583,533 1,477,480 1,517,601
General and
administrative-
related parties
(Note 2) 249,650 232,818 706,467 704,335
Repairs and
maintenance 487,965 408,779 1,327,436 1,209,607
Operating 232,626 169,088 643,505 572,775
Taxes 133,479 124,232 493,487 500,575
Insurance 126,900 122,559 356,649 383,904
Financial 819,722 792,045 1,818,402 1,790,321
Depreciation and
amortization 880,198 889,156 2,643,156 2,665,420
Total expenses 3,432,305 3,322,210 9,466,582 9,344,538
Loss before
minority
interest (1,383,259) (1,317,734) (3,440,164) (3,496,081)
Minority interest
in loss of
subsidiary
partnerships 2,676 2,315 8,182 8,062
Net loss $(1,380,583) $(1,315,419) $(3,431,982) $(3,488,019)
Net loss-limited
partners $(1,366,777) $(1,302,265) $(3,397,662) $(3,453,139)
Number of BACs
outstanding 58,928 58,928 58,928 58,928
Net loss per BAC $ (23.20) $ (22.10) $ (57.66) $ (58.60)
*Reclassified for comparative purposes.
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
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 $30,142,315 $30,364,841 $(222,526)
Net loss (3,431,982) (3,397,662) (34,320)
Partners' capital
(deficit) -
December 31, 1999 $26,710,333 $26,967,179 $(256,846)
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Decrease in Cash and Cash Equivalents
(Unaudited)
<CAPTION>
Nine Months Ended
December 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,431,982) $(3,488,019)
Adjustments to reconcile net loss to
net cash provided by
operating activities:
Depreciation and amortization 2,643,156 2,665,420
Minority interest in loss of
subsidiaries (8,182) (8,062)
Increase in accounts payable and
other liabilities 217,430 (66,806)
Increase in accrued interest 816,118 757,255
Decrease in cash held in escrow 16,084 298,874
Decrease (increase) in other assets 14,728 (17,462)
Increase in due to local general
partners and affiliates 20,434 90,247
Decrease in due to local general
partners and affiliates (41,624) (17,019)
Increase in due to
general partner and affiliates 485,819 369,735
Total adjustments 4,163,963 4,072,182
Net cash provided by operating activities 731,981 584,163
Cash flows from investing activities:
Improvements to property and equipment (70,744) (102,341)
Increase in cash held in escrow (355,435) (326,086)
Decrease in due to local general
partners and affiliates (5,415) (12,901)
Net cash used in investing activities (431,594) (441,328)
Cash flows from financing activities:
Principal payments of mortgage notes (277,906) (289,584)
Increase in due to local
general partner and affiliates 26,898 4,000
Decrease in due to local
general partner and affiliates 0 (20,905)
Decrease in capitalization
of consolidated subsidiaries
attributable to minority interest (3,907) (20,198)
Net cash used in financing activities (254,915) (326,687)
Net increase (decrease) in cash and
cash equivalents 45,472 (183,852)
Cash and cash equivalents at
beginning of period 1,051,505 2,651,208
Cash and cash equivalents at
end of period $1,096,977 $2,467,356
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999
(Unaudited)
Note 1 - General
The consolidated financial statements include the accounts of
Independence Tax Credit Plus L.P. II (the "Partnership") and 15
other limited partnerships ("subsidiary partnerships", "subsidiar-
ies" or "Local Partnerships") owning leveraged apartment com-
plexes 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 affili-
ate of the General Partner, which affiliate has a contractual obliga-
tion 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 December 31. The Partnership's fiscal quarter ends Decem-
ber 31, in order to allow adequate time for the subsidiary partner-
ships financial statements to be prepared and consolidated. All
subsidiaries have fiscal quarters ending September 30. Accounts
of the subsidiary partnerships have been adjusted for intercom-
pany transactions from October 1 through December 31.
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
from and cash distributions to the minority interest partners.
Such losses aggregated approximately $10,000 and $9,000 and
$22,000 and $21,000 for the three and nine months ended Decem-
ber 31, 1999 and 1998, respectively. The Partnership's investment
in each subsidiary is equal to the respective subsidiary's partners'
equity less minority interest capital, if any. Losses attributable to
minority interests which exceed the minority interests' investment
in a subsidiary partnership have been charged to the Partnership.
In consolidation, all subsidiary partnership losses are included in
the Partnership's capital account except for losses allocated to
minority interest capital.
Certain information and note disclosures normally included in
financial statements prepared in accordance with generally ac-
cepted accounting principles have 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 of the
Partnership, the accompanying unaudited financial statements
contain all adjustments (consisting only of normal recurring ad-
justments) necessary to present fairly the financial position of the
Partnership as of December 31, 1999, the results of operations for
the three and nine months ended December 31, 1999 and 1998 and
cash flows for the nine months ended December 31, 1999 and
1998. However, the operating results for the nine months ended
December 31, 1999 may not be indicative of the results for the
year.
Note 2 - Related Party Transactions
An affiliate of the General Partner has a .01% interest as a special
limited partner in each of the Local Partnerships.
<TABLE>
The costs incurred to related parties for the three and nine months
ended December 31, 1999 and 1998 were as follows:
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Partnership manage-
ment fees (a) $136,500 $136,500 $409,500 $409,500
Expense reimburse-
ment (b) 39,295 25,000 74,896 79,955
Local administra-
tive fee (c) 8,000 8,000 24,000 24,000
Total general and
administrative-
General Partner 183,795 169,500 508,396 513,455
Property manage-
ment fees incurred
to affiliates of the
subsidiary
partnerships'
general partners (d) 65,855 63,318 198,071 190,880
Total general and
administrative-
related parties $249,650 $232,818 $706,467 $704,335
</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
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 invest-
ments. 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 of sale or refinanc-
ing 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 $1,068,000 and $659,000 were
accrued and unpaid as of December 31, 1999 and March 31, 1999,
respectively. Without the General Partners' advances and contin-
ued accrual without payment of certain fees and expense reim-
bursements, the Partnership will not be in a position to meet its
obligations. The General Partners have continued advancing and
allowing the accrual without payment of these amounts but are
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) Independence SLP L.P., a special limited partner of the sub-
sidiary partnerships, is entitled to receive a local administrative fee
of up to $5,000 per year from each subsidiary partnership.
(d) Property management fees incurred by the Local Partnerships
amounted to $148,978 and $151,482 and $452,799 and $437,259 for
the three and nine months ended December 31, 1999 and 1998,
respectively. Of these fees, $65,855 and $63,318 and $198,071 and
$190,880 were incurred to affiliates of the subsidiary partnerships'
general partners.
Note 3 - 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, 1999.
<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 working capital
reserves, interest earned on working capital reserves and distribu-
tions received from the Local Partnerships.
As of December 31, 1999, the Partnership has invested all of its net
proceeds in fifteen Local Partnerships. Approximately $890,000 of
the purchase price remains to be paid to the Local Partnerships
(including approximately $631,000 being held in escrow).
For the nine months ended December 31, 1999, cash and cash
equivalents of the Partnership and its fifteen consolidated Local
Partnerships increased approximately $45,000. This increase is
attributable to cash provided by operating activities ($732,000) and
a net increase in due to local general partners and affiliates for
financing and investing activities ($21,000) which exceeded im-
provements to property and equipment ($71,000), an increase in
cash held in escrow from investing activities ($355,000), principal
payments of mortgage notes ($278,000) and a decrease in capitali-
zation of consolidated subsidiaries attributable to minority interest
($4,000). Included in the adjustments to reconcile the net loss to
cash provided by operating activities is depreciation and amorti-
zation of approximately $2,643,000.
At December 31, 1999, there is approximately $186,000 in the
working capital reserves. For the nine months ended December
31, 1999 and 1998, the Partnership did not receive any distribu-
tions. Management anticipates receiving distributions in the fu-
ture, although not to a level sufficient to permit providing cash
distributions to the BACs holders.
Partnership management fees owed to the General Partner
amounting to approximately $1,068,000 and $659,000 were ac-
crued and unpaid as of December 31, 1999 and March 31, 1999,
respectively. Without the General Partners' advances and contin-
ued accrual without payment of certain fees and expense reim-
bursements, the Partnership will not be in a position to meet its
obligations. The General Partners have continued advancing and
allowing the accrual without payment of these amounts but are
under no obligation to continue to do so (see Note 2).
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
respective Local Partnerships, the resolution of the existing con-
tingencies 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 Lo-
cal Partnership and may also result in recapture of Tax Credits, if
the investment is lost before the expiration of the compliance pe-
riod.
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 coun-
try 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 fifteen
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 re-
mainder of such ten-year period. If the General Partner deter-
mined 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 nine
months ended December 31, 1999 and 1998 consisted primarily of
the results of the Partnership's investment in fifteen consolidated
Local Partnerships. The majority of Local Partnership income
continues to be in the form of rental income with the correspond-
ing expenses being divided among operations, depreciation and
mortgage interest.
Rental income increased approximately 2% and 4% for the three
and nine months ended December 31, 1999 as compared to the
corresponding periods in 1998 primarily due to rental rate in-
creases as well as an increase in occupancy at two Local Partner-
ships.
Other income decreased approximately $22,000 for the nine
months ended December 31, 1999 as compared to the corre-
sponding period in 1998 primarily due to an insurance refund
received at one Local Partnership in 1998.
Total expenses, excluding general and administrative, repairs and
maintenance and operating remained fairly consistent with an
increase of approximately 2% and a decrease of less than 1% for
the three and nine months ended December 31, 1999 as compared
to the corresponding periods in 1998.
General and administrative decreased approximately $82,000 for
the three months ended December 31, 1999 as compared to the
corresponding period in 1998 primarily due to a decrease in ac-
counting fees due to a cost certification performed at one Local
Partnership in 1998 and a reduction in management personnel at a
second Local Partnership in 1999.
Repairs and maintenance increased approximately $79,000 for the
three months ended December 31, 1999 as compared to the corre-
sponding period in 1998 primarily due to carpet repair and inte-
rior painting at one Local Partnership, graffiti removal and van-
dalism repairs at a second Local Partnership as well as small in-
creases at a third Local Partnership.
Operating increased approximately $64,000 and $71,000 for the
three and nine months ended December 31, 1999 as compared to
the corresponding periods in 1998 primarily due to underaccrual
of meter charges by one Local Partnership in 1998, as well as an
increased share of utility charges at a second Local Partnership in
1999.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
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) Agreement of Limited Partnership of Inde-
pendence Tax Credit Plus L.P. II as adopted on February 11, 1992*
(3B) Form of Amended and Restated Agreement of
Limited Partnership of Independence Tax Credit Plus L.P. II, at-
tached to the Prospectus as Exhibit A**
(3C) Certificate of Limited Partnership of Independ-
ence Tax Credit Plus L.P. II as filed on February 11, 1992*
(10A) Form of Subscription Agreement attached to
the Prospectus as Exhibit B**
(10B) Escrow Agreement between Independence Tax
Credit Plus L.P. II and Bankers Trust Company*
(10C) Form of Purchase and Sales Agreement per-
taining to the Partnership's acquisition of Local Partnership Inter-
ests*
(10D) 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 Post-Effective Amendment No. 4 to the Regis-
tration Statement on Form S-11 (Registration No. 33-37704)
**Incorporated herein as an exhibit by reference to
exhibits filed with Post-Effective Amendment No. 8 to the Regis-
tration 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 quar-
ter.
<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. II
(Registrant)
By: RELATED INDEPENDENCE
ASSOCIATES L.P., General Partner
By: RELATED INDEPENDENCE
ASSOCIATES INC., General Partner
Date: February 7, 2000
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: February 7, 2000
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. II and is qualified in its entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000907045
<NAME> Independence Tax Credit Plus L.P. II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 3,923,438
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 742,727
<PP&E> 108,037,056
<DEPRECIATION> 15,415,619
<TOTAL-ASSETS> 97,642,520
<CURRENT-LIABILITIES> 11,964,347
<BONDS> 58,827,696
0
0
<COMMON> 0
<OTHER-SE> 26,850,477
<TOTAL-LIABILITY-AND-EQUITY> 97,642,520
<SALES> 0
<TOTAL-REVENUES> 6,026,418
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,648,180
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,818,402
<INCOME-PRETAX> (3,440,164)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,431,982)
<EPS-BASIC> (57.66)
<EPS-DILUTED> 0
</TABLE>
