Item 1. Business
Formation
American Tax Credit Properties L.P. ("Registrant"), a Delaware limited partnership, was formed on February 12, 1988 to invest primarily in leveraged 4low-income multifamily residential complexes (the "Property" or "Properties") that qualify for the low-income tax credit in accordance with Section 42 of the Internal Revenue Code (the "Low-income Tax Credit"), through the acquisition of limited partnership equity interests in partnerships (the "Local Partnership" or "Local Partnerships") that are the owners of the Properties. Registrant invested in nineteen such Properties including one Property which also qualifies for the historic rehabilitation tax credit in accordance with Section 48(g) of the Internal Revenue Code of 1986 (the "Historic Rehabilitation Tax Credit"). Registrant considers its activity to constitute a single industry segment.
Richman Tax Credit Properties L.P. (the "General Partner"), a Delaware limited partnership, was formed on February 10, 1988 to act as the general partner of Registrant. The general partners of the General Partner are Richard Paul Richman and Richman Tax Credit Properties Inc. ("Richman Tax"), a Delaware corporation that is wholly-owned by Richard Paul Richman. Richman Tax is an affiliate of The Richman Group, Inc. ("Richman Group"), a Delaware corporation founded by Richard Paul Richman in 1988.
The Amendment No. 2 to the Registration Statement on Form S-11 was filed with the Securities and Exchange Commission (the "Commission") on April 29, 1988 pursuant to the Securities Act of 1933 under Registration Statement File No. 33-20391, and was declared effective on May 4, 1988. Reference is made to the prospectus dated May 6, 1988, as supplemented by Supplement No. 1 and Supplement No. 2 dated August 11, 1988 and September 20, 1988, respectively, filed with the Commission pursuant to Rule 424(b)(3) under the Securities Act of 1933 (the "Prospectus"). Pursuant to Rule 12b-23 of the Commission's General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the description of Registrant's business set forth under the heading "Investment Objectives and Policies" at pages 51 through 75 of the Prospectus is incorporated herein by reference.
On May 11, 1988, Registrant commenced, through Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), the offering of up to 50,000 units of limited partnership interest ("Unit") at $1,000 per Unit to investors. On August 19, 1988 and November 15, 1988, the closings for 23,603 and 17,683 Units, respectively, took place, amounting to aggregate limited partners' capital contributions of $41,286,000.
Competition
Pursuant to Rule 12b-23 of the Commission's General Rules and Regulations promulgated under the Exchange Act, the description of Registrant's competition, general risks, tax risks and partnership risks set forth under the heading "Risk Factors" at pages 21 through 35 of the Prospectus is incorporated herein by reference.
Employees
Registrant employs no personnel and incurs no payroll costs. All management activities of Registrant are conducted by the General Partner. An affiliate of the General Partner employs individuals who perform the management activities of Registrant. This entity also performs similar services for other affiliates of the General Partner.
Tax Reform Act of 1986, Revenue Act of 1987, Technical and Miscellaneous Revenue Act of 1988, Omnibus Budget Reconciliation Act of 1989, Omnibus Budget Reconciliation Act of 1990, Tax Extension Act of 1991, Omnibus Budget Reconciliation Act of 1993, Uruguay Round Agreements Act, Tax and Trade Relief Extension Act of 1998, Tax and Trade Relief Extension Act of 1999, Community Renewal Tax Relief Act of 2000 and Economic Growth and Tax Relief Reconciliation Act of 2001 (collectively the "Tax Acts")
Registrant is organized as a limited partnership and is a "pass through" tax entity which does not, itself, pay federal income tax. However, the partners of Registrant who are subject to federal income tax may be affected by the Tax Acts. Registrant will consider the effect of certain aspects of the Tax Acts on the partners when making decisions regarding its investments. Registrant does not anticipate that the Tax Acts will currently have a material adverse impact on Registrant's business operations, capital resources and plans or liquidity.
Item 2.
Item 2. Properties
The executive offices of Registrant and the General Partner are located at 599 West Putnam Avenue, 3rd floor, Greenwich, Connecticut 06830. Registrant does not own or lease any properties. Registrant pays no rent; all charges for leased space are borne by an affiliate of the General Partner.
Registrant's primary objective is to provide Low-income Tax Credits to limited partners generally over a ten year period. The relevant state tax credit agency has allocated each of Registrant's Local Partnerships an amount of Low-income Tax Credits, which are generally available for a ten year period from the year the Property is placed in service (the "Ten Year Credit Period"). The Ten Year Credit Period has been fully exhausted by all of the Properties as of December 31, 2000. The required holding period of each Property, in order to avoid Low-income Tax Credit recapture, is fifteen years from the year in which the Low-income Tax Credits commence on the last building of the Property (the "Compliance Period"). The Properties must satisfy various requirements including rent restrictions and tenant income limitations (the "Low-income Tax Credit Requirements") in order to maintain eligibility for the recognition of the Low-income Tax Credit at all times during the Compliance Period. Once a Local Partnership has become eligible for the Low-income Tax Credit, it may lose such eligibility and suffer an event of recapture if its Property fails to remain in compliance with the Low-income Tax Credit Requirements. In April 1997, B & V, Ltd. ("B & V") suffered its final event of recapture of Low-income Tax Credits due to a hurricane which substantially damaged the property owned by such Local Partnership and the failure of the property to be fully-rebuilt, primarily due to the non-performance of the insurance company and the resulting foreclosure action taken by the lender. In May 1998, B & V Phase I, Ltd. ("B & V Phase I") suffered an event of recapture of Low-income Tax Credits resulting from the same hurricane and a resulting foreclosure. Due to delays in the reconstruction of the complex, B & V Phase I was unable to comply with the terms of its agreement with the lender. In April 1998, Erie Associates Limited Partnership ("Erie") suffered an event of recapture as a result of a foreclosure sale directed by the lender, due to accumulated arrearages under the terms of the mortgage.
Although Registrant generally owns a 98.9%-99% limited partnership interest ("Local Partnership Interest") in the Local Partnerships, Registrant and American Tax Credit Properties II L.P. ("ATCP II"), a Delaware limited partnership and an affiliate of Registrant, together, in the aggregate, own a 99% Local Partnership Interest in Santa Juanita Limited Dividend Partnership L.P. ("Santa Juanita"); the ownership percentages of Registrant and ATCP II of Santa Juanita are 34.64% and 64.36%, respectively.
Many of the Local Partnerships receive rental subsidy payments, including payments under Section 8 of Title II of the Housing and Community Development Act of 1974 ("Section 8") (see descriptions of subsidies on page 5). The subsidy agreements expire at various times during and after the Compliance Periods of the Local Partnerships. Since October 1997, the United States Department of Housing and Urban Development ("HUD") has issued a series of directives related to project based Section 8 contracts that define owners' notification responsibilities, advise owners of project based Section 8 properties of what their options are regarding the renewal of Section 8 contracts, provide guidance and procedures to owners, management agents, contract administrators and HUD staff concerning renewal of Section 8 contracts, provide policies and procedures on setting renewal rents and handling renewal rent adjustments and provide the requirements and procedures for opting-out of a Section 8 project based contract. Registrant cannot reasonably predict legislative initiatives and governmental budget negotiations, the outcome of which could result in a reduction in funds available for the various federal and state administered housing programs including the Section 8 program. Such changes could adversely affect the future net operating income and debt structure of any or all Local Partnerships currently receiving such subsidy or similar subsidies. Two Local Partnerships' Section 8 contracts are currently subject to renewal under applicable HUD guidelines. In addition, two Local Partnerships have entered into restructuring agreements, resulting in both a lower rent subsidy and lower mandatory debt service with no anticipated adverse impact to the operating results of the Properties.
Item 2. Properties (continued)
Item 2. Properties (continued)
(1) Description of subsidies:
(a) Section 8 of Title II of the Housing and Community Development Act of 1974 allows qualified low-income tenants to pay thirty percent of their monthly income as rent with the balance paid by the federal government.
(b) The Local Partnership's debt structure includes a principal or interest payment subsidy.
(c) The city of Chicago Housing Authority allows qualified low-income tenants to receive rental certificates.
(d) The Local Partnership's Section 8 contracts are currently subject to renewal under applicable HUD guidelines.
(e) The Local Partnership has entered into a restructuring agreement of its Section 8 contracts and debt structure under applicable HUD guidelines.
(2) Reflects amount attributable to Registrant only.
(3) The property was lost through lender's foreclosure. The Local Partnership has no underlying assets and liabilities and is not included in the combined balance sheets of the Local Partnerships as of December 31, 2000 and 1999 in Note 5 to the financial statements.
Item 3.
Item 3. Legal Proceedings
Registrant is not aware of any material legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of the limited partners of Registrant during the fourth quarter of the fiscal year covered by this report.
PART II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Security Holder Matters
Market Information and Holders
There is no established public trading market for Registrant's Units. Accordingly, accurate information as to the market value of a Unit at any given date is not available. The number of owners of Units as of May 31, 2001 was 2,334, holding 41,286 Units.
Merrill Lynch follows internal guidelines for providing estimated values of limited partnerships and other direct investments reported on client account statements. Pursuant to such guidelines, estimated values for limited partnership interests reported on Merrill Lynch client account statements (such as Registrant's Units) are provided to Merrill Lynch by independent valuation services. These estimated values are based on financial and other information available to the independent services (i) on the prior August 15th for reporting on December year-end and subsequent client account statements through the following May's month-end client account statements and (ii) on March 31st for reporting on June month-end and subsequent client account statements through the November month-end client account statements of the same year. In addition, Registrant may provide an estimate of value to Unit holders from time to time in Registrant's reports to limited partners. The estimated values provided by the independent services and Registrant, which may differ, are not market values and Unit holders may not be able to sell their Units or realize either amount upon a sale of their Units. In addition, Unit holders may not realize such estimated values upon the liquidation of Registrant.
Distributions
Registrant owns a limited partnership interest in Local Partnerships that are the owners of Properties that are leveraged and receive government assistance in various forms of rental and debt service subsidies. The distribution of cash flow generated by the Local Partnerships may be restricted, as determined by each Local Partnership's financing and subsidy agreements. Accordingly, Registrant does not anticipate that it will provide significant cash distributions to its partners. There were no cash distributions to the partners during the years ended March 30, 2001 and 2000.
Low-income Tax Credits and Historic Rehabilitation Tax Credits (together, the "Tax Credits"), which are subject to various limitations, may be used by partners to offset federal income tax liabilities. The Tax Credits per Unit generated by Registrant and allocated to the limited partners for the tax years ended December 31, 2000 and 1999 and the cumulative Tax Credits, net of recaptured Low-income Tax Credits, allocated from inception through December 31, 2000 are as follows:
Historic Net Rehabilitation Low-income Tax Credits Tax Credits ----------- ----------- Tax year ended December 31, $ -- $ 2.57 Tax year ended December 31, -- 47.13
Cumulative totals $ 71.88 $ 1,454.28
Registrant has generated total Tax Credits from investments in Local Partnerships of approximately $1,526 per Unit through December 31, 2000, net of circumstances which have given rise to, and notwithstanding future circumstances which may give rise to, recapture and loss of future benefits (see Part I, Item 2 - Properties and Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, herein). The Ten Year Credit Period for all of the Properties has been fully exhausted as of December 31, 2000.
Item 6.
Item 6. Selected Financial Data
The information set forth below presents selected financial data of Registrant. Additional detailed financial information is set forth in the audited financial statements included under Part II, Item 8 herein.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Capital Resources and Liquidity
Registrant admitted limited partners in two closings with aggregate limited partners' capital contributions of $41,286,000. In connection with the offering of the sale of units, Registrant incurred organization and offering costs of approximately $4,781,000 and established a working capital reserve of approximately $2,271,000. The remaining net proceeds of approximately $34,234,000 (the "Net Proceeds") were available to be applied to the acquisition of limited partnership interests in local partnerships (the "Local Partnerships") that own low-income multifamily residential complexes (the "Property" or "Properties") that qualify for the low-income tax credit in accordance with Section 42 of the Internal Revenue Code (the "Low-income Tax Credit"); one Local Partnership owns a Property that also qualifies for the historic rehabilitation tax credit in accordance with Section 48 (g) of the Internal Revenue Code of 1986. The Net Proceeds were utilized in acquiring an interest in nineteen Local Partnerships.
As of March 30, 2001, Registrant has cash and cash equivalents and investments in bonds totaling $1,904,979, which is available for operating expenses of Registrant and circumstances which may arise in connection with the Local Partnerships. As of March 30, 2001, Registrant's investments in bonds represent corporate bonds of $229,411, U.S. Treasury bonds of $1,331,548 and U.S. government agency bonds of $266,431 with various maturity dates ranging from 2001 to 2007. Registrant acquired such investments in bonds with the intention of utilizing proceeds generated by such investments to meet its annual obligations. Future sources of Registrant funds are expected primarily from interest earned on working capital and limited cash distributions from Local Partnerships.
During the year ended March 30, 2001, Registrant received cash from interest revenue, redemptions/maturities and sales of bonds and distributions from Local Partnerships and utilized cash for operating expenses, investments in bonds and advances to certain Local Partnerships (see Local Partnership Matters below). Cash and cash equivalents and investments in bonds decreased, in the aggregate, by approximately $412,000 during the year ended March 30, 2001 (which includes a net unrealized gain on investments in bonds of approximately $40,000, the amortization of net premium on investments in bonds of approximately $22,000 and the accretion of zero coupon bonds of approximately $16,000). Notwithstanding circumstances that may arise in connection with the Properties, Registrant does not expect to realize significant gains or losses on its investments in bonds, if any.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
During the year ended March 30, 2001, the investment in local partnerships decreased as a result of Registrant's equity in the Local Partnerships' net loss for the year ended December 31, 2000 of $1,227,326 and cash distributions received from Local Partnerships of $92,182 (exclusive of distributions from Local Partnerships of $27,475 classified as other income), partially offset by investments in Local Partnerships of $311,351. Payable to general partner in the accompanying balance sheets as of March 30, 2001 and 2000 represents accrued management and administration fees.
Results of Operations
Registrant's operating results are dependent upon the operating results of the Local Partnerships and are significantly impacted by the Local Partnerships' policies. In addition, the operating results herein are not necessarily the same for tax reporting. Registrant accounts for its investment in local partnerships in accordance with the equity method of accounting. Accordingly, the investment is carried at cost and is adjusted for Registrant's share of each Local Partnership's results of operations and by cash distributions received. Equity in loss of each investment in Local Partnership allocated to Registrant is generally recognized to the extent of Registrant's investment balance in each Local Partnership. Equity in loss in excess of Registrant's investment balance in a Local Partnership is allocated to other partners' capital in any such Local Partnership, except to the extent that Registrant has an outstanding commitment to fund future amounts on behalf of a Local Partnership. As a result, the reported equity in loss of investment in local partnerships is expected to decrease as Registrant's investment balances in the respective Local Partnerships become zero. The combined statements of operations of the Local Partnerships reflected in Note 5 to Registrant's financial statements include the operating results of those Local Partnerships still operating as of the dates indicated, irrespective of Registrant's investment balances.
Cumulative losses and cash distributions in excess of investment in local partnerships may result from a variety of circumstances, including a Local Partnership's accounting policies, subsidy structure, debt structure and operating deficits, among other things. In addition, the carrying value of Registrant's investment in local partnerships may be reduced if the carrying value is considered to exceed the estimated value derived by management (which contemplates remaining Low-income Tax Credits and potential residual value, among other things) ("Local Partnership Carrying Value"). Accordingly, cumulative losses and cash distributions in excess of the investment or an adjustment to an investment's carrying value are not necessarily indicative of adverse operating results of a Local Partnership. See discussion below under Local Partnership Matters regarding certain Local Partnerships currently operating below economic break even levels.
Registrant's operations for the years ended March 30, 2001, 2000 and 1999 resulted in net losses of $1,468,424, $1,370,463 and $2,543,362, respectively. The decrease in net loss from 1999 to 2000 is primarily attributable to a decrease in equity in loss of investment in local partnerships of approximately $1,187,000. Equity in loss of investment in local partnerships has fluctuated over the last three years as a result of (i) Registrant adjusting the Local Partnership Carrying Value in connection with its investments in Cityside Apartments, L.P. and Hilltop North Associates, A Virginia Limited Partnership ("Hilltop") during the year ended March 30, 1999 by $596,586 and $423,919, respectively, (ii) gains resulting from foreclosure actions in connection with B & V Phase I, Ltd. ("B & V Phase I") and Erie Associates Limited Partnership ("Erie") and (iii) changes in the net operating losses of those Local Partnerships in which Registrant continues to have an investment balance.
The Local Partnerships' loss from operations of approximately $3,610,000 for the year ended December 31, 2000 includes depreciation and amortization expense of approximately $3,906,000 and interest on non-mandatory debt of approximately $674,000, and does not include principal payments on permanent mortgages of approximately $770,000. The Local Partnerships' loss from operations of approximately $3,320,000 for the year ended December 31, 1999 includes depreciation and amortization expense of approximately $3,868,000 and interest on non-mandatory debt of approximately $665,000, and does not include principal payments on permanent mortgages of approximately $724,000. The Local Partnerships' loss from operations of approximately $3,608,000 for the year ended December 31, 1998 includes depreciation and amortization expense of approximately $3,891,000 and interest on non-mandatory debt of approximately $610,000, and does not include principal payments on permanent mortgages of approximately $621,000. The results of operations of the Local Partnerships for the year ended December 31, 2000 are not necessarily indicative of the results that may be expected in future periods.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Local Partnership Matters
Registrant's primary objective is to provide Low-income Tax Credits to limited partners generally over a ten year period. The relevant state tax credit agency has allocated each of Registrant's Local Partnerships an amount of Low-income Tax Credits, which are generally available for a ten year period from the year the Property is placed in service (the "Ten Year Credit Period"). The Ten Year Credit Period has been fully exhausted by all of the Properties as of December 31, 2000. The required holding period of each Property, in order to avoid Low-income Tax Credit recapture, is fifteen years from the year in which the Low-income Tax Credits commence on the last building of the Property (the "Compliance Period"). The Properties must satisfy various requirements including rent restrictions and tenant income limitations (the "Low-income Tax Credit Requirements") in order to maintain eligibility for the recognition of the Low-income Tax Credit at all times during the Compliance Period. Once a Local Partnership has become eligible for the Low-income Tax Credit, it may lose such eligibility and suffer an event of recapture if its Property fails to remain in compliance with the Low-income Tax Credit Requirements.
The Properties are principally comprised of subsidized and leveraged low-income multifamily residential complexes located throughout the United States and Puerto Rico. Many of the Local Partnerships receive rental subsidy payments, including payments under Section 8 of Title II of the Housing and Community Development Act of 1974 ("Section 8"). The subsidy agreements expire at various times during and after the Compliance Periods of the Local Partnerships. Since October 1997, the United States Department of Housing and Urban Development ("HUD") has issued a series of directives related to project based Section 8 contracts that define owners' notification responsibilities, advise owners of project based Section 8 properties of what their options are regarding the renewal of Section 8 contracts, provide guidance and procedures to owners, management agents, contract administrators and HUD staff concerning renewal of Section 8 contracts, provide policies and procedures on setting renewal rents and handling renewal rent adjustments and provide the requirements and procedures for opting-out of a Section 8 project based contract. Registrant cannot reasonably predict legislative initiatives and governmental budget negotiations, the outcome of which could result in a reduction in funds available for the various federal and state administered housing programs including the Section 8 program. Such changes could adversely affect the future net operating income and debt structure of any or all Local Partnerships currently receiving such subsidy or similar subsidies. Two Local Partnerships' Section 8 contracts are currently subject to renewal under applicable HUD guidelines. In addition, two Local Partnerships have entered into restructuring agreements, resulting in both a lower rent subsidy and lower mandatory debt service with no anticipated adverse impact to the operating results of the Properties.
The Local Partnerships have various financing structures which include (i) required debt service payments ("Mandatory Debt Service") and (ii) debt service payments that are payable only from available cash flow subject to the terms and conditions of the notes, which may be subject to specific laws, regulations and agreements with appropriate federal and state agencies ("Non-Mandatory Debt Service or Interest"). During the year ended December 31, 2000, revenue from operations of the Local Partnerships has generally been sufficient to cover operating expenses and Mandatory Debt Service. Most of the Local Partnerships are effectively operating at or above break even levels, although certain Local Partnerships' operating information reflects operating deficits that do not represent cash deficits due to their mortgage and financing structure and the required deferral of property management fees. However, as discussed below, certain Local Partnerships' operating information indicates below break even operations after taking into account their mortgage and financing structure and any required deferral of property management fees.
Hilltop North Associates, A Virginia Limited Partnership ("Hilltop") reported an operating deficit of approximately $110,000 for the year ended December 31, 2000. Due to ongoing operating deficits, the Local General Partner approached Registrant concerning the co-funding of such deficits. As of March 30, 2001, Registrant has advanced approximately $56,000, of which approximately $13,000 was advanced during the year then ended. The Local General Partner has been conducting discussions with the local housing authority and HUD in an effort to resolve what the Local General Partner considers to be excessive tenant, maintenance and other requirements placed on the Property by the local housing authority which have resulted in unduly high levels of operating expenses. Payments on the mortgage and real estate taxes are current. Registrant's investment balance in Hilltop, after cumulative equity losses and an adjustment to the investment's carrying value, became zero during the year ended March 30, 1999. Hilltop generated approximately $6.6 per Unit per year of credits to the limited partners upon the expiration of its Low-income Tax Credit allocation in 1999.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Cobbet Hill Associates Limited Partnership ("Cobbet") was originally financed with a first mortgage with mandatory monthly payment terms with the Massachusetts Housing Finance Agency) ("MHFA") and a second mortgage with MHFA under the State Housing Assistance for Rental Production Program (the "SHARP Operating Loan") whereby proceeds would be advanced monthly as an operating subsidy (the "Operating Subsidy Payments"). The terms of the SHARP Operating Loan called for declining Operating Subsidy Payments over its term (not more than 15 years). However, due to the economic condition of the Northeast region in the early 1990's, MHFA instituted an operating deficit loan (the "ODL") program that supplemented the scheduled reduction in the Operating Subsidy Payments. Effective October 1, 1997, MHFA announced its intention to eliminate the ODL program, such that Cobbet no longer receives the ODL, without which Cobbet is unable to make the full Mandatory Debt Service payments on its first mortgage. MHFA notified Cobbet and, to the Local General Partners' knowledge, other ODL recipients as well, that MHFA considers such mortgages to be in default. MHFA adopted a plan to recapitalize several of the ODL program properties with funds to be contributed from the admission of a new limited partner, and MHFA commissioned an institutional broker (the "Broker") to identify such a new limited partner. However, MHFA communicated with Cobbet (confirmed by letter dated February 7, 2000) that Cobbet was not included in MHFA's recapitalization program because Cobbet is party to a project based Section 8 contract. However, MHFA communicated that Cobbet was free to identify a new limited partner, independent of MHFA's process, with the intention similar to that of the recapitalization plan. In the February 7, 2000 letter, MHFA provided Cobbet until March 3, 2000 to notify MHFA of its desire to modify its mortgage loan by paying the required fee (which as a practical matter would require a recapitalization investor) and made no reference in the letter to the previous discussion in which MHFA indicated that Cobbet could locate a separate recapitalization investor. Cobbet replied to MHFA, indicating its desire to locate a recapitalization investor. The Local General Partners contacted the Broker, which indicated that a private investor may be interested in a recapitalization plan for Cobbet. On August 7, 2000, the General Partners of Cobbet met with MHFA to discuss future capital improvements. A contribution payment of $300,000 was offered by Registrant to help fund the capital improvements, with $150,000 to be advanced currently (all of which has been advanced by Registrant as of March 30, 2001) and $50,000 to be advanced annually over each of the next three years. MHFA approved all of the items on the agenda and indicated a strong interest in pursuing a recapitalization of Cobbet. In January 2001, MHFA notified Cobbet in writing as to whether Cobbet was willing to participate in another recapitalization plan (notwithstanding Cobbet's project based Section 8 contract) which MHFA may pursue and in February 2001 Cobbet replied to MHFA that it is so interested. If such a plan were implemented, such new limited partner would receive a substantial portion of the annual allocation of Cobbet's tax losses upon such partner's admission, plus cash flows and residuals, if any. Registrant and the Local General Partners would retain a sufficient interest in Cobbet to avoid recapture of Low-income Tax Credits. There can be no assurance that a plan will be implemented, and if not, MHFA is likely to retain its rights under the loan documents. The future financial viability of Cobbet is highly uncertain. The Property's historic tax credit was allocated in 1988 and all of the Low-income Tax Credits have been allocated since 1989. Registrant's investment balance in Cobbet, after cumulative equity losses, became zero during the year ended March 30, 1994. Cobbet generated approximately $19.2 per Unit per year of credits to the limited partners upon the expiration of its Low-income Tax Credit allocation in 1999.
4611 South Drexel Limited Partnership ("South Drexel") reported an operating deficit of approximately $237,000 for the year ended December 31, 2000 due to high vacancies resulting from deferred unit maintenance and required capital improvements. As of March 30, 2001, Registrant has advanced approximately $297,000, of which approximately $148,000 was advanced during the year then ended, and it is expected that Registrant will make additional advances to make needed capital improvements to the property in an effort to achieve stabilized occupancy. Payments on the mortgage and real estate taxes are current. Registrant's investment balance in South Drexel, after cumulative equity losses, became zero during the year ended March 30, 1996. South Drexel generated approximately $1.7 per Unit per year of credits to the limited partners upon the expiration of its Low-income Tax Credit allocation in 2000.
Grove Park Housing, A California Limited Partnership ("Grove Park") reported an operating deficit of approximately $42,000 for the year ended December 31, 2000 due to declining occupancy resulting from deferred unit maintenance and required capital improvements. Payments on the mortgage and real estate taxes are current. Registrant's investment balance in Grove Park, after cumulative equity losses, became zero during the year ended March 30, 1995. Grove Park generated approximately $7.6 per Unit per year of credits to the limited partners upon the expiration of its Low-income Tax Credit allocation in 1999.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
Inflation
Inflation is not expected to have a material adverse impact on Registrant's operations during its period of ownership of the Local Partnership Interests.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk
Registrant has invested a significant portion of its working capital reserves in corporate bonds, U.S. Treasury instruments and U.S. government and agency securities. The market value of such investments is subject to fluctuation based upon changes in interest rates relative to each investment's maturity date. Since Registrant's investments in bonds have various maturity dates through 2007, the value of such investments may be adversely impacted in an environment of rising interest rates in the event Registrant decides to liquidate any such investment prior to its maturity. Although Registrant may utilize reserves to assist an under performing Property, it otherwise intends to hold such investments to their respective maturities. Therefore, Registrant does not anticipate any material adverse impact in connection with such investments.
AMERICAN TAX CREDIT PROPERTIES L.P.
Item 8.
Item 8. Financial Statements and Supplementary Data
Page
Independent Auditors' Report.............................................14
Balance Sheets...........................................................15
Statements of Operations.................................................16
Statements of Changes in Partners' Equity (Deficit)......................17
Statements of Cash Flows.................................................18
Notes to Financial Statements............................................20
No financial statement schedules are included because of the absence of the conditions under which they are required or because the information is included in the financial statements or the notes thereto.
Independent Auditors' Report
To the Partners American Tax Credit Properties L.P.
We have audited the accompanying balance sheets of American Tax Credit Properties L.P. as of March 30, 2001 and 2000, and the related statements of operations, changes in partners' equity (deficit) and cash flows for each of the three years in the period ended March 30, 2001. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Tax Credit Properties L.P. as of March 30, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended March 30, 2001, in conformity with generally accepted accounting principles.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland May 17, 2001
AMERICAN TAX CREDIT PROPERTIES L.P. BALANCE SHEETS MARCH 30, 2001 AND 2000
Notes 2001 2000 ----- ------- -------
ASSETS
Cash and cash equivalents 3,9 $ 77,589 $ 61,363 Investments in bonds 4,5,8,9 1,827,390 2,255,521 Investment in local partnerships 5,8 1,587,296 2,595,453 Interest receivable 9 45,265 49,489 ---------- ---------
$3,537,540 $4,961,826 ========== ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 56,896 $ 52,548 Payable to general partner and affiliates 6,8 74,664 74,659 --------- --------- 131,560 127,207 --------- --------- Commitments and contingencies 5,8
Partners' equity (deficit) 2,4
General partner (332,730) (318,046) Limited partners (41,286 units of limited partnership interest outstanding) 3,629,627 5,083,367 Accumulated other comprehensive income, net 109,083 69,298 --------- --------- 3,405,980 4,834,619 --------- --------- $3,537,540 $4,961,826 ========== ==========
See Notes to Financial Statements.
AMERICAN TAX CREDIT PROPERTIES L.P.
STATEMENTS OF OPERATIONS YEARS ENDED MARCH 30, 2001, 2000 and 1999
See Notes to Financial Statements.
AMERICAN TAX CREDIT PROPERTIES L.P. STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
YEARS ENDED MARCH 30, 2001, 2000 and 1999
See Notes to Financial Statements.
AMERICAN TAX CREDIT PROPERTIES L.P. STATEMENTS OF CASH FLOWS YEARS ENDED MARCH 30, 2001, 2000 and 1999
See Notes to Financial Statements.
AMERICAN TAX CREDIT PROPERTIES L.P. STATEMENTS OF CASH FLOWS - (Continued) YEARS ENDED MARCH 30, 2001, 2000 and 1999
See Notes to Financial Statements.
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS MARCH 30, 2001, 2000 and 1999
1. Organization, Purpose and Summary of Significant Accounting Policies
American Tax Credit Properties L.P. (the "Partnership") was formed on February 12, 1988 and the Certificate of Limited Partnership of the Partnership was filed under the Delaware Revised Uniform Limited Partnership Act. There was no operating activity until admission of the limited partners on August 19, 1988. The Partnership was formed to invest primarily in leveraged low-income multifamily residential complexes (the "Property" or "Properties") that qualify for the low-income tax credit in accordance with Section 42 of the Internal Revenue Code (the "Low-income Tax Credit"), through the acquisition of limited partnership equity interests (the "Local Partnership Interests") in partnerships (the "Local Partnership" or "Local Partnerships") that are the owners of the Properties. The Partnership has invested in one Property that also qualifies for the historic rehabilitation tax credit in accordance with Section 48(g) of the Internal Revenue Code of 1986. Richman Tax Credit Properties L.P. (the "General Partner") was formed on February 10, 1988 to act as a general partner of the Partnership.
Basis of Accounting and Fiscal Year
The Partnership's records are maintained on the accrual basis of accounting for both financial reporting and tax purposes. For financial reporting purposes, the Partnership's fiscal year ends March 30 and its quarterly periods end June 29, September 29 and December 30. The Local Partnerships have a calendar year for financial reporting purposes. The Partnership and the Local Partnerships each have a calendar year for income tax purposes.
Investment in Local Partnerships
The Partnership accounts for its investment in local partnerships in accordance with the equity method of accounting, under which the investment is carried at cost and is adjusted for the Partnership's share of each Local Partnership's results of operations and by cash distributions received. Equity in loss of each investment in Local Partnership allocated to the Partnership is generally recognized to the extent of the Partnership's investment balance in each Local Partnership. Equity in loss in excess of the Partnership's investment balance in a Local Partnership is allocated to other partners' capital in any such Local Partnership, except to the extent that the Partnership has an outstanding commitment to fund future amounts on behalf of a Local Partnership. Previously unrecognized equity in loss of any Local Partnership is recognized in the fiscal year in which equity in income is earned by such Local Partnership or additional investment is made by the Partnership. Distributions received subsequent to the elimination of an investment balance for any such investment in a Local Partnership are recorded as other income from local partnerships.
The Partnership regularly assesses the carrying value of its investments in local partnerships. If the carrying value of an investment in a Local Partnership exceeds the estimated value derived by management (which contemplates remaining Low-income Tax Credits and estimated residual value, among other things), the Partnership reduces its investment in any such Local Partnership and includes such reduction in equity in loss of investment in local partnerships.
Advances made to Local Partnerships are recorded as investments in local partnerships. Such advances are considered by the Partnership to be voluntary loans to the respective Local Partnerships and the Partnership may be reimbursed at a future date to the extent such Local Partnerships generate distributable cash flow or receive proceeds from sale or refinancing.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments purchased with an original maturity of three months or less at the date of acquisition to be cash equivalents. Cash and cash equivalents are stated at cost, which approximates market value.
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued)
MARCH 30, 2001, 2000 and 1999
1. Organization, Purpose and Summary of Significant Accounting Policies (continued)
Investments in Bonds
Investments in bonds are classified as available-for-sale and represent investments that the Partnership intends to hold for an indefinite period of time but not necessarily to maturity. Any decision to sell an investment would be based on various factors, including significant movements in interest rates and liquidity needs. Investments in bonds are carried at estimated fair value and unrealized gains or losses are included as items of comprehensive income (loss) and are reported as a separate component of partners' equity (deficit).
Premiums and discounts on investments in bonds are amortized (accreted) using the straight-line method over the life of the investment. Amortized premiums offset interest revenue, while the accretion of discounts and zero coupon bonds are included in interest revenue. Realized gain (loss) on redemption or sale of investments in bonds are included in, or offset against, interest revenue on the basis of the adjusted cost of each specific investment redeemed or sold.
Income Taxes
No provision for income taxes has been made because all income, losses and tax credits are allocated to the partners for inclusion in their respective tax returns. In accordance with Statement of Financial Accounting Standard ("SFAS") No. 109, "Accounting for Income Taxes," the Partnership has included in Note 7 disclosures related to differences in the book and tax bases of accounting.
Reclassifications
Certain prior year Local Partnership balances in Note 5 have been reclassified to conform to the current year presentation.
2. Capital Contributions
On May 11, 1988, the Partnership commenced the offering of units (the "Units") through Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Selling Agent"). On August 19, 1988 and November 15, 1988, under the terms of the Amended and Restated Agreement of Limited Partnership of the Partnership (the "Partnership Agreement"), the General Partner admitted limited partners to the Partnership in two closings. At these closings, subscriptions for a total of 41,286 Units representing $41,286,000 in limited partners' capital contributions were accepted. In connection with the offering of Units, the Partnership incurred organization and offering costs of $4,781,252, of which $75,000 was capitalized as organization costs and $4,706,252 was charged to the limited partners' equity as syndication costs. The Partnership received a capital contribution of $100 from the General Partner.
Net loss is allocated 99% to the limited partners and 1% to the General Partner in accordance with the Partnership Agreement.
3. Cash and Cash Equivalents
As of March 30, 2001, the Partnership has $77,589 in cash and cash equivalents that are deposited in interest-bearing accounts with an institution that is not insured by the Federal Deposit Insurance Corporation.
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 and 1999
4. Investments in Bonds
The Partnership carries its investments in bonds as available-for-sale because such investments are used to facilitate and provide flexibility for the Partnership's obligations, including resolving circumstances that may arise in connection with the Local Partnerships. Such bonds include $257,801 restricted in connection with a Local Partnership's outstanding letter of credit (see Note 8). Investments in bonds are reflected in the accompanying balance sheets at estimated fair value.
As of March 30, 2001, certain information concerning investments in bonds is as follows:
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 and 1999
4. Investments in Bonds (continued)
As of March 30, 2000, certain information concerning investments in bonds is as follows:
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
5. Investment in Local Partnerships
As of March 30, 2001, the Partnership owns a limited partnership interest in the following Local Partnerships:
1. 4611 South Drexel Limited Partnership ("South Drexel"); 2. Blue Hill Housing Limited Partnership; 3. Cityside Apartments, L.P. ("Cityside")*; 4. Cobbet Hill Associates Limited Partnership ("Cobbet")*; 5. Dunbar Limited Partnership; 6. Dunbar Limited Partnership No. 2; 7. Federal Apartments Limited Partnership; 8. Golden Gates Associates; 9. Grove Park Housing, A California Limited Partnership; 10. Gulf Shores Apartments Ltd.; 11. Hilltop North Associates, A Virginia Limited Partnership ("Hilltop"); 12. Madison-Bellefield Associates; 13. Pine Hill Estates Limited Partnership; 14. Santa Juanita Limited Dividend Partnership L.P. ("Santa Juanita"); 15. Vista del Mar Limited Dividend Partnership L.P.; and 16. Winnsboro Homes Limited Partnership.
* An affiliate of the General Partner is a general partner of and/or provides services to the Local Partnership.
Although the Partnership generally owns a 98.9%-99% limited partnership interest in the Local Partnerships, the Partnership and American Tax Credit Properties II L.P. ("ATCP II"), a Delaware limited partnership and an affiliate of the Partnership, together, in the aggregate, own a 99% Local Partnership Interest in Santa Juanita; the ownership percentages of the Partnership and ATCP II of Santa Juanita are 34.64% and 64.36%, respectively.
The Properties are principally comprised of subsidized and leveraged low-income multifamily residential complexes located throughout the United States and Puerto Rico. The required holding period of each Property, in order to avoid Low-income Tax Credit recapture, is fifteen years from the year in which the Low-income Tax Credits commence on the last building of the Property (the "Compliance Period"). The rents of the Properties are controlled by federal and state agencies pursuant to applicable laws and regulations. Under the terms of each of the Local Partnership's partnership agreements, the Partnership has made capital contributions in the aggregate amount of $35,013,709, which includes advances to certain Local Partnerships. As of December 31, 2000, the Local Partnerships have outstanding mortgage loans payable totaling approximately $72,172,000 and accrued interest payable on such loans totaling approximately $4,326,000, which are secured by security interests and liens common to mortgage loans on the Local Partnerships' real property and other assets.
Equity in loss of investment in local partnerships is limited to the Partnership's investment balance in each Local Partnership; any excess is applied to other partners' capital in any such Local Partnership (see Note 1). The amount of such excess losses applied to other partners' capital was $2,283,151, $2,187,634 and $2,305,457 for the years ended December 31, 2000, 1999 and 1998, respectively, as reflected in the combined statements of operations of the Local Partnerships reflected herein Note 5.
As a result of management's assessment of the carrying value of the investment in local partnerships under applicable accounting guidelines (see Note 1), the Partnership reduced its investment in Cityside and Hilltop during the year ended March 30, 1999 by $596,586 and $423,919, respectively. Such losses are included in equity in loss of investment in local partnerships in the accompanying statement of operations of the Partnership for the year ended March 30, 1999.
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 and 1999
5. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of December 31, 2000 and 1999 are as follows:
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 and 1999
5. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the years ended December 31, 2000, 1999 and 1998 are as follows:
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 and 1999
5. Investment in Local Partnerships (continued)
Investment activity with respect to each Local Partnership for the year ended March 30, 2001 is as follows:
(1) Additional equity in loss of investment is not allocated to the Partnership until equity in income is earned or additional investment is made by the Partnership. (2) The Partnership's equity in loss of an investment in a Local Partnership is limited to the remaining investment balance. (3) The Partnership's investment balance is negative as a result of an outstanding commitment of the Partnership on behalf of the Local Partnership (see Note 1).
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 and 1999
5. Investment in Local Partnerships (continued)
Investment activity with respect to each Local Partnership for the year ended March 30, 2000 is as follows:
(1) Additional equity in loss of investment is not allocated to the Partnership until equity in income is earned or additional investment is made by the Partnership. (2) The Partnership has adjusted the investment's carrying value in accordance with applicable accounting guidelines.
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 and 1999
5. Investment in Local Partnerships (continued)
Property information for each Local Partnership as of December 31, 2000 is as follows:
Property information for each Local Partnership as of December 31, 1999 is as follows:
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 and 1999
5. Investment in Local Partnerships (continued)
The summary of property activity during the year ended December 31, 2000 is as follows:
B & V Phase I, Ltd. ("B & V Phase I") owned a 97-unit, Section 8 assisted apartment complex located in Homestead, Florida. Prior to the Partnership's investment during the year ended March 30, 1995, B & V Phase I was damaged by Hurricane Andrew in August 1992. Since May 1, 1996, all 97 of the rental units were complete and occupied. Pursuant to an agreement with the lender, B & V Phase I was to commence paying debt service in January 1995 which was to coincide with the completion of construction. However, due to construction delays, B & V Phase I had not commenced making such payments. The lender declared a default under the terms of the mortgage and, on December 9, 1996 the lender commenced a foreclosure action. After pursuing various legal efforts that were ultimately unsuccessful because alternative sources of financing could not be secured, the property was transferred to the lender in May 1998. As a result, the combined statement of operations of the Local Partnerships for the year ended December 31, 1998 presented herein Note 5 does not include the results of operations of B & V Phase I with the exception of an extraordinary gain recognized on the extinguishment of debt in the amount of $2,467,526. The Partnership's investment balance in B & V Phase I, after cumulative equity losses, became zero during the year ended March 30, 1995, therefore the aforementioned transfer had no effect on the financial position, results of operations or cash flows of the Partnership.
Erie Associates Limited Partnership ("Erie"), which was in the tenth year of the Low-income Tax Credit period, was subject to an amended and restated note (the "Amended Note") dated December 1, 1994 (which matured on December 1, 1997) and was entitled to a project-based rental subsidy under Chapter 707 of the Acts of 1966 of the Commonwealth of Massachusetts. The original financing called for mandatory debt service of $7,647 per month, while the Amended Note required monthly mandatory debt service of $5,883. The Local General Partners had reported that Erie was several months in arrears under the terms of the Amended Note, that a default was declared by the lender and that discussions were being held with the lender. While negotiations were ongoing, the lender conducted a foreclosure sale of the property in April 1998. The Partnership made an offer to repurchase the property and acquire the Amended Note in order to avoid adverse tax consequences but was ultimately unsuccessful. As a result, the combined statement of operations of the Local Partnerships for the year ended December 31, 1998 presented herein Note 5 does not include the results of operations of Erie with the exception of an extraordinary gain recognized on the extinguishment of debt in the amount of $704,103. The Partnership's investment balance in Erie, after cumulative equity losses, became zero during the year ended March 30, 1998, therefore the aforementioned transfer had no effect on the financial position, results of operations or cash flows of the Partnership.
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 and 1999
5. Investment in Local Partnerships (continued)
Cobbet was originally financed with a first mortgage with mandatory monthly payment terms with the Massachusetts Housing Finance Agency ("MHFA") and a second mortgage with MHFA under the State Housing Assistance for Rental Production Program (the "SHARP Operating Loan") whereby proceeds would be advanced monthly as an operating subsidy (the "Operating Subsidy Payments"). The terms of the SHARP Operating Loan called for declining Operating Subsidy Payments over its term (not more than 15 years). However, due to the economic condition of the Northeast region in the early 1990's, MHFA instituted an operating deficit loan (the "ODL") program that supplemented the scheduled reduction in the Operating Subsidy Payments. Effective October 1, 1997, MHFA announced its intention to eliminate the ODL program, such that Cobbet no longer receives the ODL, without which Cobbet is unable to make the full mandatory debt service payments on its first mortgage. MHFA notified Cobbet and, to the Local General Partners' knowledge, other ODL recipients as well, that MHFA considers such mortgages to be in default. MHFA adopted a plan to recapitalize several of the ODL program properties with funds to be contributed from the admission of a new limited partner, and MHFA commissioned an institutional broker (the "Broker") to identify such a new limited partner. However, MHFA communicated with Cobbet (confirmed by letter dated February 7, 2000) that Cobbet was not included in MHFA's recapitalization program because Cobbet is party to a project based Section 8 contract. However, MHFA communicated that Cobbet was free to identify a new limited partner, independent of MHFA's process, with the intention similar to that of the recapitalization plan. In the February 7, 2000 letter, MHFA provided Cobbet until March 3, 2000 to notify MHFA of its desire to modify its mortgage loan by paying the required fee (which as a practical matter would require a recapitalization investor) and made no reference in the letter to the previous discussion in which MHFA indicated that Cobbet could locate a separate recapitalization investor. Cobbet replied to MHFA, indicating its desire to locate a recapitalization investor. The Local General Partners contacted the Broker, which indicated that a private investor may be interested in a recapitalization plan for Cobbet. On August 7, 2000, the Local General Partners met with MHFA to discuss future capital improvements. A contribution payment of $300,000 was offered by the Partnership to help fund the capital improvements, with $150,000 to be advanced currently and $50,000 to be advanced annually over each of the next three years. MHFA approved all of the items on the agenda and indicated a strong interest in pursuing a recapitalization of Cobbet. In January 2001, MHFA notified Cobbet in writing as to whether Cobbet was willing to participate in another recapitalization plan (notwithstanding Cobbet's project based Section 8 contract) which MHFA may pursue and in February 2001 Cobbet replied to MHFA that it is so interested. If such a plan were implemented, such new limited partner would receive a substantial portion of the annual allocation of Cobbet's tax losses upon such partner's admission, plus cash flows and residuals, if any. The Partnership and the Local General Partners would retain a sufficient interest in Cobbet to avoid recapture of Low-income Tax Credits. There can be no assurance that a plan will be implemented, and if not, MHFA is likely to retain its rights under the loan documents. The Partnership's investment balance in Cobbet, after cumulative equity losses, became zero during the year ended March 30, 1994. As of March 30, 2001, the Partnership has advanced $150,000, all of which has been recorded as investment in local partnerships in the accompanying balance sheet as of March 30, 2001.
The Partnership advanced $148,484 and $138,193 during the years ended March 30, 2001 and 2000, respectively, to South Drexel to fund operating deficits which includes making necessary capital improvements to the property. The advances have been recorded as investment in local partnerships in the accompanying balance sheets.
The Partnership advanced $12,867 and $43,343 during the years ended March 30, 2001 and 2000, respectively, to Hilltop to fund operating deficits which includes making necessary capital improvements to the property. The advances have been recorded as investment in local partnerships in the accompanying balance sheets.
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 and 1999
6. Transactions with General Partner and Affiliates
For the years ended March 30, 2001, 2000 and 1999, the Partnership paid and/or incurred the following amounts to the General Partner and/or affiliates in connection with services provided to the Partnership:
For the years ended December 31, 2000, 1999 and 1998, the Local Partnerships paid and/or incurred the following amounts to the General Partner and/or affiliates in connection with services provided to the Local Partnerships:
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
7. Taxable Loss
A reconciliation of the financial statement net loss of the Partnership for the years ended March 30, 2001, 2000 and 1999 to the tax return net loss for the years ended December 31, 2000, 1999 and 1998 is as follows:
The differences between the investment in local partnerships for tax return and financial reporting purposes as of December 31, 2000 and 1999 are as follows:
Payable to general partner in the accompanying balance sheets represents accrued management and administration fees not deductible for tax purposes pursuant to Internal Revenue Code Section 267.
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
8. Commitments and Contingencies
Pursuant to the Partnership Agreement, the Partnership incurs an annual management fee ("Management Fee") in the amount of $175,466 payable to the General Partner for its services in connection with the management of the affairs of the Partnership. the Partnership incurred a Management Fee of $175,466 for each of the three years ended March 30, 2001. Unpaid Management Fees in the amount of $43,861 are recorded as payable to general partner and affiliates in the accompanying balance sheets as of March 30, 2001 and 2000.
In addition, pursuant to the Partnership Agreement, the Partnership is authorized to contract for administrative services provided to the Partnership. From the inception of the Partnership through November 23, 1999, such administrative services were provided by ML Fund Administrators Inc. ("MLFA"), an affiliate of the Selling Agent, pursuant to an Administrative Services Agreement. MLFA resigned the performance of its basic services under the Administrative Services Agreement effective November 23, 1999, with certain transitional services continued through April 30, 2000. The General Partner transitioned the administrative services to an affiliate of the General Partner without any changes to the terms of the Administrative Services Agreement. Pursuant to such agreement, the Partnership incurs an annual administration fee ("Administration Fee") in the amount of $152,758 and an annual additional administration fee ("Additional Administration Fee") in the amount of $30,965 for administrative services provided to the Partnership, subject to certain provisions of the Partnership Agreement. The Partnership incurred an Administration Fee and an Additional Administration Fee in the amounts of $152,758 and $30,965, respectively, for each of the three years ended March 30, 2001. Such amounts are aggregated and reflected under the caption administration fees in the accompanying statements of operations. Unpaid Administration Fees in the amount of $30,803 and $30,798 are included in payable to general partner and affiliates in the accompanying balance sheets as of March 30, 2001 and 2000, respectively.
The rents of the Properties, many of which receive rental subsidy payments, including payments under Section 8 of Title II of the Housing and Community Development Act of 1974 ("Section 8"), are subject to specific laws, regulations and agreements with federal and state agencies. The subsidy agreements expire at various times during and after the Compliance Periods of the Local Partnerships. Since October 1997, the United States Department of Housing and Urban Development ("HUD") has issued a series of directives related to project based Section 8 contracts that define owners' notification responsibilities, advise owners of project based Section 8 properties of what their options are regarding the renewal of Section 8 contracts, provide guidance and procedures to owners, management agents, contract administrators and HUD staff concerning renewal of Section 8 contracts, provide policies and procedures on setting renewal rents and handling renewal rent adjustments and provide the requirements and procedures for opting-out of a Section 8 project based contract. The Partnership cannot reasonably predict legislative initiatives and governmental budget negotiations, the outcome of which could result in a reduction in funds available for the various federal and state administered housing programs including the Section 8 program. Such changes could adversely affect the future net operating income and debt structure of any or all Local Partnerships currently receiving such subsidy or similar subsidies. Two Local Partnerships' Section 8 contracts are currently subject to renewal under applicable HUD guidelines. In addition, two Local Partnerships have entered into restructuring agreements, resulting in both a lower rent subsidy and lower mandatory debt service with no anticipated adverse impact to the operating results of the Properties.
In connection with Cobbet's financing, the Partnership has provided collateral to secure a letter of credit in the amount of $242,529, which had been established for the purpose of covering future operating deficits, if any, of Cobbet. The lender may draw directly from the letter of credit to fund any operating deficits that exist and upon any default by Cobbet with respect to any of the obligations under the loan agreement. At the end of a 12-month period in which the property achieves positive cash flow, the undrawn balance in the letter of credit and any amounts advanced under a separate operating guaranty (not an obligation of the Partnership) shall be released or reduced at the written request of Cobbet by $114,315. Thereafter, in any subsequent 12-month period in which there is positive cash flow, the same amount may be released. These releases will only be made so long as Cobbet has complied with the conditions set forth by the lender as provided in the loan agreement.
AMERICAN TAX CREDIT PROPERTIES L.P. NOTES TO FINANCIAL STATEMENTS - (Continued) MARCH 30, 2001, 2000 AND 1999
9. Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." The estimated fair value amounts have been determined using available market information, assumptions, estimates and valuation methodologies.
Cash and cash equivalents
The carrying amount approximates fair value.
Investments in bonds
Fair value is estimated based on market quotes provided by an independent service as of the balance sheet dates.
Interest receivable
The carrying amount approximates fair value due to the terms of the underlying investments.
The estimated fair value of the Partnership's financial instruments as of March 30, 2001 and 2000 are disclosed elsewhere in the financial statements.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Registrant has no officers or directors. The General Partner manages Registrant's affairs and has general responsibility and authority in all matters affecting its business. The responsibilities of the General Partner are currently carried out by Richman Tax. The executive officers and directors of Richman Tax are:
Served in present Name capacity since(1) Position held - ---- ----------------- -------------
Richard Paul Richman February 10, 1988 President and Director David A. Salzman April 29, 1994 Vice President Neal Ludeke February 10, 1988 Vice President and Treasurer Gina S. Scotti February 10, 1988 Secretary
(1) Director holds office until his successor is elected and qualified. All officers serve at the pleasure of the Director.
Richard Paul Richman, age 53, is the sole Director and President of Richman Tax. Mr. Richman is the President and principal stockholder of Richman Group. Mr. Richman is involved in the syndication, development and management of residential property. Mr. Richman is also a director of Wilder Richman Resources Corp., an affiliate of Richman Tax and the general partner of Secured Income L.P., a director of Wilder Richman Historic Corporation, an affiliate of Richman Tax and the general partner of Wilder Richman Historic Properties II, L.P., a director of Richman Tax Credits Inc., an affiliate of Richman Tax and the general partner of the general partner of American Tax Credit Properties II L.P., a director of Richman Housing Credits Inc., an affiliate of Richman Tax and the general partner of the general partner of American Tax Credit Properties III L.P. and a director of Richman American Credit Corp., an affiliate of Richman Tax and the manager of American Tax Credit Trust, a Delaware statutory business trust.
David A. Salzman, age 40, is a Vice President of Richman Tax and minority stockholder of Richman Group. Mr. Salzman is responsible for the acquisition and development of residential real estate for syndication as a Vice President of acquisitions of Richman Group.
Neal Ludeke, age 43, is a Vice President and Treasurer of Richman Tax. Mr. Ludeke, a Vice President and the Treasurer of Richman Group, is engaged primarily in the syndication, asset management and finance operations of Richman Group. In addition, Mr. Ludeke is a Vice President and the Treasurer of Richman Asset Management, Inc. ("RAM"), an affiliate of Richman Tax. Mr. Ludeke's responsibilities in connection with RAM include various partnership management functions.
Gina S. Scotti, age 45, is the Secretary of Richman Tax. Ms. Scotti is a Vice President and the Secretary of Richman Group. As the Director of Investor Services, Ms. Scotti is responsible for communications with investors.
Item 11.
Item 11. Executive Compensation
Registrant has no officers or directors. Registrant does not pay the officers or director of Richman Tax any remuneration. During the year ended March 30, 2001, Richman Tax did not pay any remuneration to any of its officers or its director.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Dominion Capital Inc., having the mailing address P.O. Box 26532, Richmond, Virginia 23261, is the owner of 2,800 Units, representing approximately 6.8% of all such Units. As of May 31, 2001, no person or entity, other than Dominion Capital Inc., was known by Registrant to be the beneficial owner of more than five percent of the Units. Richman Tax is wholly-owned by Richard Paul Richman.
Item 13.
Item 13. Certain Relationships and Related Transactions
The General Partner and certain of its affiliates are entitled to receive certain fees and reimbursement of expenses and have received/earned fees for services provided to Registrant as described in Notes 6 and 8 to the audited financial statements included in Item 8 - "Financial Statements and Supplementary Data" herein.
Transactions with General Partner and Affiliates
The net tax losses and net Low-income Tax Credits generated by Registrant during the year ended December 31, 2000 allocated to the General Partner were $37,982 and $1,071, respectively. The net tax losses and net Low-income Tax Credits generated by the General Partner during the year ended December 31, 2000 (from the allocation of Registrant discussed above) and allocated to Richman Tax were $25,828 and $726, respectively.
Indebtedness of Management
No officer or director of the General Partner or any affiliate of the foregoing was indebted to Registrant at any time during the year ended March 30, 2001.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1) Financial Statements
See Item 8 - "Financial Statements and Supplementary Data."
(2) Financial Statement Schedules
No financial statement schedules are included because of the absence of the conditions under which they are required or because the information is included in the financial statements or the notes thereto.
(3) Exhibits
Incorporated by Exhibit Reference to
3.1 Certificate of Limited Exhibit 3.2 to Amendment Partnership of Registrant No. 2 to the Registration Statement on Form S-11 dated April 29, 1988 (File No. 33-20391)
10.1 4611 South Drexel Limited Exhibit 10.3 to Form 10-Q Partnership Agreement of Limited Report Partnership dated December 30, 1989 (File No. 0-17619)
10.2 B & V, Ltd. Fourth Amended and Exhibit 10.3 to Form 8-K Restated Agreement and Report Certificate of Limited Partnership dated January 17, 1989 (File No. 33-20391)
10.3 B & V Phase I, Ltd. Amended and Exhibit 10.1 to Form 10-Q Restated Agreement of Limited Report Partnership dated September 29, 1994 (File No. 0-17619)
10.4 B & V Phase I, Ltd. Assignment of Exhibit 10.4 to Form 10-K Partnership Interests, Assumption Report of Responsibilities, and dated March 30, 1997 Waiver of Conditions (File No. 0-17619)
10.5 Blue Hill Housing Limited Exhibit 10.7 to Form 8-K Partnership Amended and Restated Report Agreement and Certificate of dated January 17, 1989 Limited Partnership (File No. 33-20391)
10.6 Cityside Apartments, L.P. Amended Exhibit 10.3 to Form 10-K and Restated Agreement of Limited Report Partnership dated March 30, 1990 (File No. 0-17619)
10.7 Amendment No. 1 to Cityside Exhibit 10.4 to Form 10-K Apartments, L.P. Amended and Report Restated Agreement of Limited dated March 30, 1992 Partnership (File No. 0-17619)
10.8 Amendment No. 2 to Cityside Exhibit 10.5 to Form 10-K Apartments, L.P. Amended and Report Restated Agreement of Limited dated March 30, 1992 Partnership (File No. 0-17619)
Incorporated by Exhibit Reference to
10.9 Amendment No. 3 to Cityside Exhibit 10.6 to Form 10-K Apartments, L.P. Amended and Report Restated Agreement of Limited dated March 30, 1992 Partnership (File No. 0-17619)
10.10 Cobbet Hill Associates Limited Exhibit 10.4 to Form 10-K Partnership Amended and Restated Report Agreement and Certificate of dated March 30, 1990 Limited Partnership (File No. 0-17619)
10.11 Cobbet Hill Associates Limited Exhibit 10.8 to Form 10-K Partnership First Amendment to Report Amended and Restated Agreement dated March 30, 1993 and Certificate of Limited (File No. 0-17619) Partnership
10.12 Cobbet Hill Associates Limited Exhibit 10.9 to Form 10-K Partnership Second Amendment to Report the Amended and Restated dated March 30, 1993 Agreement and Certificate of (File No. 0-17619) Limited Partnership
10.13 Dunbar Limited Partnership Second Exhibit 10.5 to Form 10-K Amended and Restated Agreement of Report Limited Partnership dated March 30, 1990 (File No. 0-17619)
10.14 Dunbar Limited Partnership No. 2 Exhibit 10.6 to Form 10-K Second Amended and Restated Report Agreement of Limited Partnership dated March 30, 1990 (File No. 0-17619)
10.15 Erie Associates Limited Exhibit 10.2 to Form 10-K Partnership Amended and Restated Report Agreement and Certificate of dated March 30, 1989 Limited Partnership (File No. 33-20391)
10.16 Federal Apartments Limited Exhibit 10.8 to Form 10-K Partnership Amended and Restated Report Agreement of Limited Partnership dated March 30, 1990 (File No. 0-17619)
10.17 First Amendment to Federal Exhibit 10.14 to Form Apartments Limited Partnership 10-K Report Amended and Restated Agreement of dated March 30, 1993 Limited Partnership (File No. 0-17619)
10.18 Second Amendment to Federal Exhibit 10.15 to Form Apartments Limited Partnership 10-K Report Amended and Restated Agreement of dated March 30, 1993 Limited Partnership (File No. 0-17619)
10.19 Golden Gates Associates Amended Exhibit 10.1 to Form 8-K and Restated Agreement of Limited Report Partnership dated January 17, 1989 (File No. 33-20391)
10.20 Grove Park Housing, A California Exhibit 10.10 to Form 10-K Limited Partnership Amended and Report dated March 30, 1990 Restated Agreement of Limited (File No. 0-17619) Partnership
Incorporated by Exhibit Reference to
10.21 Gulf Shores Apartments Ltd. Exhibit 10.3 to Form 10-K Amended and Restated Agreement Report and Certificate of Limited dated March 30, 1989 Partnership (File No. 33-20391)
10.22 Hilltop North Associates, A Exhibit 10.12 to Form Virginia Limited Partnership 10-K Report Amended and Restated Agreement of dated March 30, 1990 Limited Partnership (File No. 0-17619)
10.23 Madison-Bellefield Associates Exhibit 10.2 to Form 8-K Amended and Restated Agreement Report and Certificate of Limited dated January 17, 1989 Partnership (File No. 33-20391)
10.24 Amended and Restated Articles of Exhibit 10.2 to Form 10-Q Partnership in Commendam of Pine Report Hill Estates Limited Partnership dated December 30, 1989 (File No. 0-17619)
10.25 Santa Juanita Limited Dividend Exhibit 10.4 to Form 10-Q Partnership Amended and Restated Report Agreement of Limited Partnership dated December 30, 1989 (File No. 0-17619)
10.26 Second Amendment of Limited Exhibit 10.23 to Form Partnership of Santa Juanita 10-K Report dated March Limited Dividend Partnership and 30, 1994 Amendment No. 2 to the Amended (File No. 0-17619) and Restated Agreement of Limited Partnership
10.27 Amendment No. 1 to Santa Juanita Exhibit 10.1 to Form 10-Q Limited Dividend Partnership L.P. Report Amended and Restated Agreement of dated September 29, 1995 Limited Partnership (File No. 0-17619) (Replaces in its entirety Exhibit 10.24 hereof.)
10.28 Amendment No. 2 to Santa Juanita Exhibit 10.2 to Form 10-Q Limited Dividend Partnership L.P. Report Amended and Restated Agreement of dated September 29, 1995 Limited Partnership (File No. 0-17619)
10.29 Vista Del Mar Limited Dividend Exhibit 10.1 to Form 10-K Partnership Amended and Restated Report Agreement and Certificate of dated March 30, 1989 Limited Partnership (File No. 33-20391)
10.30 Certificate of Amendment of Exhibit 10.25 to Form Limited Partnership of Vista Del 10-K Report dated March Mar Limited Dividend Partnership 30, 1994 and Amendment No. 1 to the (File No. 0-17619) Amended and Restated Agreement and Certificate of Limited Partnership
10.31 Amendment No. 1 to Vista del Mar Exhibit 10.3 to Form 10-Q Limited Dividend Partnership L.P. Report dated September 29, Amended and Restated Agreement of 1995 (File No. 0-17619) Limited Partnership (Replaces in its entirety Exhibit 10.28 hereof.)
10.32 Amendment No. 2 to Vista del Mar Exhibit 10.4 to Form 10-Q Limited Dividend Partnership L.P. Report dated September 29, Amended and Restated Agreement of 1995 (File No. 0-17619) Limited Partnership
Incorporated by Exhibit Reference to
10.33 Amended and Restated Articles of Exhibit 10.1 to Form 10-Q Partnership in Commendam of Report Winnsboro Homes Limited dated December 30, 1989 Partnership (File No. 0-17619)
10.34 The B & V, Ltd. Exhibit 10.2 to Form 10-Q Investment Agreement Report dated September 29, 1994 (File No. 0-17619) 10.35 The B & V Phase I, Ltd. Exhibit 10.3 to Form 10-Q Investment Agreement Report dated September 29, 1994 (File No. 0-17619)
99.22 Pages 21 through 35, 51 through Exhibit 28 to Form 10-K 75 and 89 through 91 of Report Prospectus dated March 30, 1989 filed pursuant to Rule 424(b) (File No. 33-20391) (3)under the Securities Act of
99.23 Pages 16 through 19 of Prospectus Exhibit 28.2 to Form 10-K dated May 6, 1989 filed pursuant Report March 30, 1990 to Rule 424(b)(3) under the dated (File No. 0-17619) March 30, 1990
99.24 Supplement No. 1 dated August 11, Exhibit 28.3 to Form 10-K 1988 to Prospectus Report dated March 30, 1991 (File No. 0-17619) 99.25 Supplement No. 2 dated September Exhibit 28.4 to Form 10-K 20, 1988 to Prospectus Report dated March 30, 1991 (File No. 0-17619)
99.26 December 31, 1992 financial Exhibit 28.26 to Form 10-K statements of Cityside Report Apartments, L.P. pursuant to dated March 30, 1993 Title 17, Code of Federal (File No. 0-17619) Regulations, Section 210.3-09
99.27 December 31, 1993 financial Exhibit 99.27 to Form 10-K statements of Cityside Report dated March 30, 1994 Apartments, L.P. pursuant to (File No. 0-17619) Title 17, Code of Federal Regulations, Section 210.3-09
99.28 December 31, 1994 financial Exhibit 99.28 to Form 10-K statements of Cityside Report dated March 30, 1995 Apartments, L.P. pursuant to (File No. 0-17619) Title 17, Code of Federal Regulations, Section 210.3-09
99.29 December 31, 1995 financial Exhibit 99.29 to Form 10-K statements of Cityside Report dated March 30, 1996 Apartments, L.P. pursuant to (File No. 0-17619) Title 17, Code of Federal Regulations, Section 210.3-09
99.30 December 31, 1996 financial Exhibit 99.30 to Form 10-K statements of Cityside Report dated March 30, 1997 Apartments, L.P. pursuant to (File No. 0-17619) Title 17, Code of Federal Regulations, Section 210.3-09
99.31 December 31, 1997 financial Exhibit 99.31 to Form 10-K statements of Cityside Report dated March 30, 1998 Apartments, L.P. pursuant to (File No. 0-17619) Title 17, Code of Federal Regulations, Section 210.3-09
99.32 December 31, 1997 financial Exhibit 99.32 to Form 10-K statements of Blue Hill Housing Report dated March 30, 1998 Limited Partnership pursuant to (File No. 0-17619) Title17, Code of Federal Regulations, Section 210.3-09
Incorporated by Exhibit Reference to
99.33 December 31, 1998 financial Exhibit 99.33 to Form 10-K statements of Blue Hill Housing Report dated March 30, 1999 Limited Partnership pursuant to (File No. 0-17619) Title17, Code of Federal Regulations, Section 210.3-09
99.34 December 31, 1999 financial Exhibit 99.34 to Form 10-K statements of Blue Hill Housing Report dated March 30, 2000 Limited Partnership pursuant to (File No. 0-17619) Title17, Code of Federal Regulations, Section 210.3-09
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Registrant during the last quarter of the period covered by this report.
(c) Exhibits
See (a)(3) above.
(d) Financial Statement Schedules
See (a)(2) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
AMERICAN TAX CREDIT PROPERTIES L.P. (a Delaware limited partnership)
By: Richman Tax Credit Properties L.P., General Partner
by: Richman Tax Credit Properties Inc., general partner
Dated: June 28, 2001 /s/ Richard Paul Richman ------------- ------------------------------------------ by: Richard Paul Richman President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.