<PAGE> 1
Filed Pursuant to Rule 424(b)(3)
File 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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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.
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
----------- ----------------
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 by October 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.
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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.
Construction of Aspen Grove is anticipated to begin in November 1996.
The Operating General Partners anticipate that construction of the first
building will be completed in April 1997 with completion of the final
building in October 1997 and occupancy will occur as follows:
Number of Units Rent-Up
--------------- -------
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; (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
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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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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:
<TABLE>
<CAPTION>
PROJECTED PROJECTED
BASIC GOVERNMENT PERMANENT MORTGAGE
PARTNERSHIP LOCATION OF NUMBER MONTHLY(1) ASSISTANCE MORTGAGE INTEREST
NAME PROPERTY OF UNITS RENTS ANTICIPATED LOAN(2) RATE
- ----------- ----------- -------- ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
ASPEN GROVE MIDDLETOWN, 84 $388-$398-2BR FHTC ONLY $1,994,068 7.75%
LIMITED OHIO $460-3BR
PARTNERSHIP
</TABLE>
<TABLE>
<CAPTION>
ANNUAL
REPLACEMENT
RESERVE MANAGEMENT MANAGEMENT
AMOUNT AGENT FEE
- ----------- --------------- --------------
<S> <C> <C>
$ 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 OPERATING
PARTNERSHIP CAPITAL CASH PARTNERS' DEFICIT PARTNERSHIP'S
NAME CONTRIBUTION FLOW/BACKEND CONTRIBUTION GUARANTEE CREDIT BASE
----------- ------------ ------------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASPEN GROVE $1,774,900 99/99/50 $100 UNLIMITED IN $3,499,656
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.
</TABLE>
<TABLE>
<CAPTION>
FUND'S
APPROXIMATE ASSET
AVERAGE DEVELOPMENT ANNUAL MANAGEMENT
ANNUAL FEE/OTHER PARTNERSHIP FEE TO MCD
ANTICIPATED DISTRIBUTIONS MANAGEMENT FREEDOM
FEDERAL TO OPERATING FEE TO ADVISORS,
CREDIT GPS OPERATING GPS INC.
---------- ------------ ------------- --------
<S> <C> <C> <C> <C>
$288,594 $262,124 GREATER OF 1/2% 1% OF GROSS
OF 1% OF GROSS CASH RECEIPTS
REVENUES OR FROM OPERATIONS
OR $2,000
ANNUALLY
</TABLE>
(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 amortization 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.
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