<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
Registration No. 33-95448
NOVEMBER 25, 1996
SUPPLEMENT NO. 1 TO PROSPECTUS FOR
MCD FREEDOM TAX CREDIT FUND L.P.
JANUARY 31, 1996
(SUPPLEMENT IDENTIFYING POTENTIAL INVESTMENT)
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This Supplement is part of, and should be read in conjunction with,
the Prospectus of MCD Freedom Tax Credit Fund L.P. (the "Fund"). Capitalized
terms used herein but not defined have the meanings ascribed to them in the
Prospectus.
STATUS OF OFFERING
As of November 1, 1996, the Fund received orders for a total of 1,034
Units ($1,034,000). Neither the General Partner nor any Affiliates of the Fund
have been paid any fees out of the proceeds of the offering as of November 1,
1996. Because the Fund has not received orders for the minimum of 2,000 Units,
no proceeds from the offering have been released from escrow, no Units have been
issued and, consequently, no investors have been admitted to the Fund.
ANTICIPATED INVESTMENT IN OPERATING PARTNERSHIP
The Fund anticipates acquiring a limited partnership interest in
Aspen Grove Limited Partnership (the "Specified Operating Partnership") in
accordance with the "Investment Objectives and Acquisition Policies" of the Fund
as set forth in the Prospectus. A significant portion of the funds invested by
the Fund in the Specified Operating Partnership will be used to pay fees and
expenses of the Operating General Partners of the Specified Operating
Partnership. (See "Terms of Investment in Specified Operating Partnership" in
this Supplement.)
The Fund will endeavor to invest in Operating Partnerships with a
goal of generating tax credits for allocation to investors, upon completion and
occupancy of all Tax Credit Properties, averaging approximately $130 to $150 per
Unit annually, which would be the equivalent of an approximate 13% to 15% annual
Federal Housing Tax Credit as a percentage of capital invested, for the ten year
credit period applicable to each Tax Credit Property in which the Fund invests.
(See "Who Should Invest" and "Investment Objectives and Acquisition Policies" in
the Prospectus.) This assumes: (a) the applicability of current tax law and
regulations and current interpretations of such law and regulations by the
courts; (b) each of such Tax Credit Properties is occupied with qualifying
individuals throughout the 15-Year Compliance Period; and (c) Unit holders are
unable to use any passive tax losses generated by the Fund. These investment
objectives do not represent yield or return on investment.
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Assuming: (a) the Specified Operating Partnership is the only
Operating Partnership in which the Fund invests, (b) the Specified Operating
Partnership has no value at the end of the 15-Year Compliance Period applicable
to investments of the Fund, and (c) that investors do not use for tax purposes
the assumed loss of the investor's entire Capital Contribution, the equivalent
tax-free internal rate of return would be approximately 7.06%, exclusive of any
Cash Available For Distribution. Conversely, if the Specified Operating
Partnership appreciates in value, such increased value can be recognized through
sale of the Specified Operating Partnership Interest or the sale or refinancing
of the Tax Credit Property (even though the restrictions and compliance
requirements of the Federal Housing Tax Credit Program will continue to apply to
such Tax Credit Property at that time), and investors receive distributions from
such sales in excess of their respective Capital Contributions, the equivalent
tax-free internal rate of return will exceed 7.06%.
The Fund's investment in the Specified Operating Partnership will be
consistent with the provisions of the Prospectus relating to investments in
Operating Partnerships generally. (See, particularly, "Investment Objectives and
Acquisition Policies" and "Sharing Arrangements: Profits, Credits, Losses, Cash
Available for Distribution and Residuals.")
THE FUND HAS IDENTIFIED THE OPERATING PARTNERSHIP INTEREST SPECIFIED
BELOW AS A POTENTIAL INVESTMENT BY THE FUND.
While the General Partner believes that the Fund is reasonably likely
to acquire an interest in the Specified Operating Partnership described below,
the Fund may not be able to do so as a result of additional information or
changes in circumstances or if the Fund does not sell a minimum of 2,000 Units
prior to January 31, 1997. Before any acquisition is made, the General Partner
will continue and complete its due diligence review as to the Specified
Operating Partnership and the related Tax Credit Property. This process will
include the review and analysis of information concerning, among other matters,
market competition and environmental factors. If any significant adverse
information is obtained by the General Partner in connection with such review
and analysis, either action will be taken to mitigate the adverse factor(s), or
the acquisition will not be made. If an interest in the Specified Operating
Partnership is acquired, the terms may differ materially from those described
below. Accordingly, investors should not rely on the ability of the Fund to
invest in the Specified Operating Partnership described below or under the
described investment terms in deciding whether to invest in the Fund.
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The Specified Operating Partnership in which an Interest is currently
expected to be acquired and the Operating General Partners of the Specified
Operating Partnership are as follows:
Partnership General Partners
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Aspen Grove Limited Partnership Miller-Valentine Apartments II, Ltd.
Associated Land Group, Inc.
St. Mary's Development Corporation
Permanent Mortgage Loan financing for the Tax Credit Property
described above is being or will be provided as described below. It is
anticipated that all of the dwelling units in the Tax Credit Property will be
eligible for Federal Housing Tax Credits. It is anticipated that construction of
the Tax Credit Property described in this Supplement will begin in November 1996
and be fully completed in December 1997. Delays in construction could occur with
respect to the Tax Credit Property, which could result in delay or reduction in
achieving Federal Housing Tax Credits. (See "Risk Factors--Tax Risks Associated
with the Investments" in the Prospectus.) The Tax Credit Property described in
this Supplement does not currently have any tenants. The General Partner
believes that the Tax Credit Property has or will have adequate property
insurance.
INFORMATION RELATING TO SPECIFIED OPERATING PARTNERSHIP
GENERAL
Aspen Grove Apartments (the "Project") will, when constructed,
consist of seven frame buildings containing 84 newly constructed apartments,
including 70 two-bedroom, 800 square foot units and 14 three-bedroom, 900 square
foot units. The Project will be developed in Middletown, Ohio, which is located
approximately 20 miles south of Dayton, Ohio. The Project site consists of
approximately 7 acres of land. Individual units will be air-conditioned and will
include a range, refrigerator, dishwasher, carpeting, drapes or blinds, and a
patio or porch. Fifty percent, or 42 units, will be marketed as special need
units for elderly households. The complex will offer a rental office, laundry
facilities, playground area/tot lot, clubhouse, picnic area and open
recreational areas. The proposed monthly rent for the units is $388-$398 for the
two-bedroom units and $460 for the three-bedroom units.
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Construction of Aspen Grove is anticipated to begin in November 1996.
The Operating General Partners anticipate that construction will be completed in
April 1997 and occupancy will occur as follows:
Number of Units Rent-Up
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10 April 1997
10 May 1997
9 June 1997
9 July 1997
9 August 1997
9 September 1997
9 October 1997
9 November 1997
10 December 1997
The Operating General Partners of the Specified Operating Partnership
are Miller Valentine Apartments II, Ltd., Associated Land Group, Inc. and St.
Mary's Development Corporation. Miller Valentine Apartments II, Ltd., Associated
Land Group, Inc. will unconditionally guarantee: (i) to fund all deficits until
the Project has achieved three consecutive months of break-even and thereafter
in an amount equal to $350,000 in the aggregate for the three-year period
commencing on the date of the Fund's last installment of its Capital
Contribution; (ii) to fund any operating deficits for a period of three years up
to a maximum amount of $350,000 in the aggregate for the three-year period
commencing on the date of the Fund's last installment of its Capital
Contribution; and (iii) to fund all construction cost overruns as a non-interest
bearing loan to be repaid from sale or refinancing proceeds.
It is anticipated that the Fund will acquire a 99% limited
partnership interest in the Specified Operating Partnership in exchange for
$1,774,900. Miller-Valentine Apartments II, Ltd. and Associated Land Group, Inc.
will provide a fixed price construction contract for $3,831,668 and the
construction completion guarantee described above. It is currently anticipated
that the Project will be completed and placed in service no later than December
31, 1998.
It is anticipated that the Fund will fund 60% of its equity
commitment when (i) the Project has received a certificate of occupancy for all
units and (ii) the Specified Operating Partnership has received a permanent
non-recourse mortgage loan commitment. The mortgage loan must contain a fixed
interest rate with at least a twenty-five year amortization period, at least a
fifteen year term, and provide a minimum debt service coverage of 1.15. The
remaining 40% of the Fund's equity contribution will be made in phases as the
Project is leased up.
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<TABLE>
INFORMATION CONCERNING THE SPECIFIED OPERATING PARTNERSHIP AND THE TAX CREDIT PROPERTY
The following table sets forth certain information relating to
the Specified Operating Partnership and the Tax Credit Property in which the
Fund anticipates making an investment:
<CAPTION>
BASIC GOVERNMENT
PARTNERSHIP LOCATION OF NUMBER MONTHLY(1) ASSISTANCE
NAME PROPERTY OF UNITS RENTS ANTICIPATED
- ----------- ----------- -------- ------------- -----------
<S> <C> <C> <C> <C>
ASPEN GROVE MIDDLETOWN, 84 $388-$398-2BR FHTC ONLY
LIMITED OHIO $460-3BR
PARTNERSHIP
<CAPTION>
PROJECTED PROJECTED ANNUAL
PERMANENT MORTGAGE REPLACEMENT
MORTGAGE INTEREST RESERVE MANAGEMENT MANAGEMENT
LOAN(2) RATE AMOUNT AGENT FEE
- ---------- --------- ----------- ------------ ----------
<C> <C> <C> <C> <C>
$1,994,068 7.75% $12,600 ASSOCIATED LAND 5% OF GROSS
MANAGEMENT, INC. CASH RECEIPTS
</TABLE>
TERMS OF INVESTMENT IN THE SPECIFIED OPERATING PARTNERSHIP
The following table sets forth certain information relating to
the Fund's proposed investment in the Tax Credit Property described above:
<TABLE>
<CAPTION>
(3)
OWNERSHIP
INTEREST (%)
PROFITS,
LOSSES & OPERATING
FUND CREDITS/NET GENERAL OPERATING
PARTNERSHIP CAPITAL CASH PARTNERS' DEFICIT
NAME CONTRIBUTION FLOW/BACKEND CONTRIBUTION GUARANTEE
- ----------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C>
ASPEN GROVE $1,774,900 99/99/50 $100 UNLIMITED IN
LIMITED AMOUNT UNTIL
PARTNERSHIP THE SPECIFIED
OPERATING
PARTNERSHIP HAS
ACHIEVED BREAK-
EVEN FOR 3
CONSECUTIVE MONTHS,
THEREAFTER $350,000
IN THE AGGREGATE FOR
3 YEARS AFTER THE
FUND'S LAST INSTALL-
MENT OF ITS CAPITAL
CONTRIBUTION.
<CAPTION>
FUND'S
APPROXIMATE ASSET
AVERAGE DEVELOPMENT ANNUAL MANAGEMENT
ANNUAL FEE/OTHER PARTNERSHIP FEE TO MCD
OPERATING ANTICIPATED DISTRIBUTIONS MANAGEMENT FREEDOM
PARTNERSHIP'S FEDERAL TO OPERATING FEE TO ADVISORS,
CREDIT BASE CREDIT GPS OPERATING GPS INC.
----------- ---------- ------------ -------------- -----------
<C> <C> <C> <C> <C>
$3,499,656 $288,594 $262,124 GREATER OF 1/2% 1% OF GROSS
OF 1% OF GROSS CASH RECEIPTS
REVENUES OR FROM OPERATIONS
$2,000 ANNUALLY
<FN>
(1) Exclusive of utilities.
(2) The terms of the anticipated Permanent First Mortgage loan in the
amount of $1,994,068 are expected to include a term of 25 years, an
interest rate of 7.75% and payments of principal and interest on the
basis of a 25 year amoritization schedule.
(3) Cash flow will be allocated 100% to the General Partners during the
construction of the project property and for the period through
April 30, 1999.
</TABLE>
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