Item 1. Business.
General
Liberty Tax Credit Plus L.P. (the "Partnership") is a limited partnership which was formed under the laws of the State of Delaware on June 26, 1987. Since November 25, 1997, the general partners of the Partnership have been Related Credit Properties L.P., a Delaware limited partnership (the "Related General Part- ner") and Liberty Associates III L.P., a Delaware limited part- nership ("Liberty Associates", and together with the Related General Partner the "General Partners"). The Related General Partner is also the special limited partner of the Partnership. The general partner of the Related General Partner is Related Credit Properties Inc., a Delaware corporation. The general partner of Liberty Associates is the Related General Partner. On November 25, 1997, affiliates of the Related General Partner and Liberty GP Inc. ("LGP"), then the general partners of the Partnership, entered into a Purchase Agreement pursuant to which the Related General Partner purchased LGP's general partner in- terest in the Partnership (the "Transfer"). In addition to the Transfer, the Related General Partner also acquired LGP's spe- cial limited partner interest in the Partnership and its general partner interest in Liberty Associates. Prior to the Transfer, Liberty Associates was an affiliate of Lehman Brothers.
On November 20, 1987, the Partnership commenced a public offer- ing (the "Offering") of Beneficial Assignment Certificates ("BACs") representing assignments of limited partnership inter- ests in the Partnership ("Limited Partnership Interests"), pur- suant to a prospectus dated November 20, 1987, as supplemented by the supplements thereto dated January 14, 1988 and March 14, 1988 (as so supplemented the, "Prospectus"). As of April 4, 1988 (the date on which the Partnership held the final closing of the sale of BACs and on which the Offering was terminated), the Partnership had received $79,937,500 of gross proceeds of the Offering from 5,525 investors.
The Partnership was formed to invest, as a limited partner, in other limited partnerships (referred to herein as "Local Part- nerships", "subsidiaries" or "subsidiary partnerships") which own leveraged low and moderate-income multifamily residential complexes ("Apartment Complexes" or "Properties") that are eli- gible for the low-income housing tax credit ("Tax Credit") en- acted in the Tax Reform Act of 1986, and to a lesser extent in Local Partnerships owning Properties ("Rehabilitation Projects") that are eligible for the historic rehabilitation tax credit (together with Housing Tax Credits, "Tax Credits"). The Part- nership's investment in each Local Partnership represents a 20% to 98% interest in each of the Local Partnerships. As of March 15, 1999, the Partnership had acquired interests in 31 Local Partnerships and does not anticipate making any additional in- vestments. See Item 2, Properties, below.
Liberty Associates is the Special Limited Partner in all 31 Lo- cal Partnerships, as well as a general partner of the Partner- ship. Liberty Associates has certain rights and obligations in its role as Special Limited Partner, which permit this affiliate of the Partnership to exercise control over the management and policies of the Local Partnerships.
The investment objectives of the Partnership are to:
1. Entitle qualified BACs holders to substantial low-income Tax Credits (and potentially rehabilitation tax credits) over the period of the Partnership's entitlement to claim Tax Credits (for each Property, ten years from the date of investment or, if later, the date the Property is placed in service.)
2. Participate in any capital appreciation in the value of the Properties and provide distributions of sale or refinancing pro- ceeds upon the disposition of the Properties.
3. Preserve and protect the Partnership's capital.
4. Provide cash distributions when available from the opera- tions of Apartment Complexes and Rehabilitation Projects.
5. Allocate passive losses to individual BACs holders to offset passive income that they may realize from rental real estate in- vestments and other passive activities, and allocate passive losses to corporate BACs holders to offset active business in- come.
One of the Partnership's objectives is to entitle qualified BACs holders to Tax Credits over the period of the Partnership's en- titlement to claim Tax Credits (for each Property, generally ten years from the date of investment or, if later, the date the Property is leased to qualified tenants; referred to herein as the "Tax Credit Period"). Each of the Local Partnerships in which the Partnership has acquired an interest has been allo- cated by respective state credit agencies the authority to rec- ognize Tax Credits during the Tax Credit Period provided that the Local Partnership satisfies the rent restriction, minimum set-aside and other requirements for recognition of the Tax Credits at all times during the 15-year period commencing at the beginning of the Credit Period. Once a Local Partnership has become eligible to recognize Tax Credits or historic rehabilita- tion tax credits, it may lose such eligibility and suffer an event of "recapture" if its Property fails to remain in compli- ance with the Tax Credit requirements. None of the Local Part- nerships in which the Partnership has acquired an interest has suffered an event of recapture.
As of March 15, 1999, the Partnership has not met its investment objective of providing cash distributions from the operations of the Properties. Cash distributions received from the Local Partnerships have been relatively immaterial. The Partnership does not anticipate providing cash distributions to BACs holders in circumstances other than refinancings or sales. Accordingly, at this time there can be no assurance that the Partnership will achieve each of its investment objectives.
The Partnership is subject to the risks incident to potential losses arising from the management and ownership of improved real estate. The Partnership can also be affected by poor eco- nomic conditions generally. However no more than 20% of the Properties are located in any single state. There are also sub- stantial risks associated with owning properties receiving gov- ernment assistance, for example the possibility that Congress may not appropriate funds to enable HUD to make rental assis- tance payments. HUD also restricts annual cash distributions to partners based on operating results and a percentage of the own- ers' equity contribution. The Partnership cannot sell or sub- stantially liquidate its investments in subsidiary partnerships during the period that the subsidy agreements are in existence, without HUD's approval. Furthermore, there may not be market demand for apartments at full market rents when the rental as- sistance contracts expire.
Competition The real estate business is highly competitive and substantially all of the Properties acquired by the Partnership are subject to active competition from similar properties in their respective vicinities. In addition, various other limited partnerships may, in the future, be formed by the General Partners and/or their affiliates to engage in businesses which may be competi- tive with the Partnership.
Employees The Partnership does not have any direct employees. All serv- ices are performed for the Partnership by its General Partners and their affiliates. The General Partners receive compensation in connection with such activities as set forth in Items 11 and 13. In addition, the Partnership reimburses the General Part- ners and certain of their affiliates for expenses incurred in connection with the performance by their employees of services for the Partnership in accordance with the Partnership's Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement").
Item 2.
Item 2. Properties.
The Partnership has acquired an interest as a limited partner in 31 Local Partnerships. Set forth below is a schedule of these Local Partnerships including certain information concerning the properties (the "Local Partnership Schedule"). Further informa- tion concerning those Local Partnerships and their Properties, including any encumbrances affecting the Properties, may be found in Item 14, Schedule III.
Except for the seven Local Partnerships listed below, the fol- lowing is the allocation of ownership percentage for each of the Local Partnerships:
General Partner 1% Special Limited Partner 1% Limited Partner - Liberty Tax Credit Plus L.P. 98%
The general partners of the Local Partnerships in which the Partnership invests ("Local General Partners") were generally required, pursuant to a Development Deficit Guaranty Agreement, to fund deficits incurred during the development stage of the Local Partnerships and/or to undertake to repurchase the Part- nership's interest in the Local Partnership if construction was not completed substantially on time and on budget. A develop- ment deficit is incurred when costs to rehabilitate, finance and pay all other operating expenses of a Local Partnership exceed the proceeds of the mortgage note, capital contribution and rental receipts prior to completion of the development of the Local Partnership. Development deficit payments were made with- out right of repayment.
The General Partners generally required that the Local General Partners undertake an obligation, pursuant to an Operating Defi- cit Guaranty Agreement, to fund operating deficits (up to a stated maximum amount) of the Local Partnership during a limited period of time (generally three years) following the Partner- ship's investment. In each case, the operating deficits were funded by Operating Loans which bore interest and which could be repaid only out of 50% of available cash flow or out of avail- able net sale or refinancing proceeds.
Additionally, the Local General Partners were generally required to enter into a Rent-Up Guaranty Agreement, whereby the Local General Partner agreed to pay liquidated damages if predeter- mined occupancy rates were not achieved. These payments were to be made without right of repayment. In most instances, if rental achievement was not met by a specified date, the Local General Partner was also required to pay to the Local Partner- ship, a return of capital, and interest thereon, as stated in the Local Partnership's partnership agreement. Security for these agreements was generally provided in the form of letters of credit and/or escrow deposits provided by the Local General Partner.
All development deficit, rent-up and operating deficit guaran- tees with respect to the Properties have expired.
Tax Credits with respect to a given Property are available for a ten-year Tax Credit Period that commences when the property is leased to qualified tenants. However, the annual Tax Credits available in the year in which the Apartment Complex is placed in service must be prorated based upon the months remaining in the year. The amount of the annual Tax Credits not available in the first year will be available in the eleventh year. In cer- tain cases, the Partnership acquired its interest in a Local Partnership after the Local Partnership had placed its Apartment Complex in service. In these cases, the Partnership may be al- located Tax Credits only beginning in the month following the month in which it acquired its interest and Tax Credits allo- cated in any prior period would not be available to the Partner- ship.
All leases are generally for periods not greater than one to two years and no tenant occupies more than 10% of the rentable square footage.
Commercial tenants (to which average rental per square foot ap- plies) comprise less than 5% of the rental revenues of the Local Partnership. Maximum rents for the residential units are deter- mined annually by HUD and reflect increases/decreases in con- sumer price indices in various geographic areas. Market condi- tions, however, determine the amount of rent actually charged.
Management continuously reviews the physical state of the Prop- erties and budgets improvements when required, which are gener- ally funded from cash flow from operations or release of re- placement reserve escrows.
Management continuously reviews the insurance coverage of the Properties and believes such coverage is adequate.
See Item 1. Business, above for the general competitive condi- tions to which the Properties described above are subject.
Real estate taxes are calculated using rates and assessed valua- tions determined by the township or city in which the property is located. Such taxes have approximated 1% of the aggregate cost of the properties as shown in Schedule III to the financial statements included herein.
Item 3.
Item 3. Legal Proceedings.
This information is incorporated by reference to the discussions of Regent Street and Robin Housing in the Results of Operations of Certain Local Partnerships contained in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Security Holder Matters.
The Partnership has issued 15,987.5 Limited Partnership Inter- ests, each representing a $5,000 capital contribution to the Partnership, for aggregate Gross Proceeds of $79,937,500. All of the issued and outstanding Limited Partnership Interests have been issued to Liberty Credit Assignor Inc. (the "Assignor Lim- ited Partner"), which has in turn issued BACs to the purchasers thereof for an aggregate purchase price of $79,937,500. Each BAC represents all of the economic and virtually all of the own- ership rights attributable to a Limited Partnership Interest held by the Assignor Limited Partner. BACs may be converted into Limited Partnership Interests at no cost to the holder (other than the payment of transfer costs not to exceed $100), but Limited Partnership Interests so acquired are not thereafter convertible into BACs.
Neither the BACs nor the Limited Partnership Interests are traded on any established public trading market. Because of the provisions of the Revenue Act of 1987, unless there are further changes in such law, the Partnership does not intend to include the BACs for quotation on NASDAQ or for listing on any national or regional stock exchange or any other established securities market. The Revenue Act of 1987 contained provisions which have an adverse impact on investors in "publicly traded partner- ships." Accordingly, the General Partners have imposed limited restrictions on the transferability of the BACs and the Limited Partnership Interests in secondary market transactions. The re- strictions should prevent a public trading market from develop- ing and may adversely affect the ability of an investor to liq- uidate his or her investment quickly. It is expected that such procedures will remain in effect until such time, if ever, as further revision of the Revenue Act of 1987 may permit the Part- nership to lessen the scope of the restrictions.
The Partnership has 5,525 registered holders of an aggregate of 15,987.5 BACs, as of June 1, 1999.
All of the Partnership's general partnership interests, repre- senting an aggregate capital contribution of $2,000, are held by the two General Partners.
Certain Local Partnerships are subject to HUD restrictions which limit annual cash distributions to partners and restrict the Lo- cal Partnerships from selling or otherwise liquidating their as- sets, without HUD's approval, during the period that the agree- ment with HUD is in existence.
There are no material legal restrictions in the Partnership Agreement on the ability to make distributions.
The Partnership has made no distributions to the BAC holders as of March 15, 1999. The Partnership does not anticipate provid- ing cash distributions to its Limited Partners in circumstances other than refinancing or sales proceeds.
There continues to be a number of requests for the list of BAC holders of limited partners such as BAC holders of the Partner- ship. Often these requests are made by a person who, only a short time before making the request, acquired merely a small number of BACs in the Partnership and seeks the list for an im- proper purpose, a purpose that is not in the best interest of the Partnership or is harmful to the Partnership. In order to best serve and protect the interests of the Partnership and all of its investors, the General Partners of the Partnership have adopted a policy with respect to requests for the Partnership's list of BAC holders. This policy is intended to protect inves- tors from unsolicited and coercive offers to acquire BAC hold- ers' interests and does not limit any other rights the General Partners may have under the Partnership Agreement or applicable law.
During the years ended March 15, 1995 through 1999, total assets decreased primarily due to depreciation, partially offset by net additions to property and equipment.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Con- dition and Results of Operations.
Liquidity and Capital Resources
The Partnership's primary sources of funds are the cash distri- butions from operations of the Local Partnerships in which the Partnership has invested. These sources are available to meet obligations of the Partnership. During the years ended March 15, 1999, 1998 and 1997, such distributions amounted to approxi- mately $2,141,000, $132,000 and $208,000, respectively. To date, the General Partners and their affiliates have advanced funds totaling approximately $9,000, $119,000 and $118,000 at March 15, 1999, 1998 and 1997, respectively, to meet the Part- nership's third party obligations. In addition, certain fees and expense reimbursements owed to the General Partners amount- ing to approximately $4,089,000, $3,553,000 and $2,281,000 were accrued and unpaid as of March 15, 1999, 1998 and 1997, respec- tively. In particular partnership management fees owed to the General Partners amounting to approximately $4,014,000 and $3,126,000 were accrued and unpaid as of March 15, 1999 and March 15, 1998, respectively. Furthermore expense reimburse- ments and asset monitoring fees owed to the General Partners amounting to approximately $75,000 and $404,000 were accrued and unpaid as of March 15, 1999 and March 15, 1998, respectively. The General Partners have continued advancing and allowing the accrual without payment of these amounts but are under no obli- gation to do so. The Partnership used a portion of the refi- nancing proceeds received from the Bayridge Associates, L.P. mortgage refinancing (see below) to pay down some of the out- standing amounts owed to the General Partners. The General Partners believe the remaining proceeds will be adequate for the Partnership's current operating needs and plan to invest the re- serves in short-term investments.
During the year ended March 15, 1999, cash and cash equivalents of the Partnership increased approximately $972,000. This in- crease was primarily due to cash provided by operating activi- ties ($2,868,000), a net increase in due to Local General Part- ners and affiliates from financing activities ($626,000) and net proceeds from mortgage notes ($1,706,000) which exceeded an in- crease in cash held in escrow for investing activities ($880,000), improvements to property and equipment ($1,014,000), an increase in deferred costs ($135,000) and a decrease in capi- talization of consolidated subsidiaries attributable to minority interest ($2,221,000). Included in the adjustments to reconcile the net loss to cash provided by operating activities is depre- ciation and amortization ($9,693,000).
A working capital reserve of approximately $1,364,000 and $32,000 remained unused at March 15, 1999 and 1998, respec- tively.
In April 1998, Bayridge Associates, L.P. ("Bayridge") refinanced its mortgage note payable of $6,150,000. The new mortgage note in the amount of $10,600,000 paid off the former mortgage note and paid a cash flow distribution from refinancing proceeds of approximately $1,904,000 to the Partnership. In order to repay the mortgage loan due to Travelers prior to its maturity date, Bayridge was obligated to pay a prepayment penalty to Travelers, in the amount of $510,075. This amount, along with the remain- ing unamortized deferred loan costs relating to that loan, was charged to operations in 1998 and is reflected in the accompany- ing statements of operations as an extraordinary loss from re- tirement of debt (see Note 10). The new mortgage bears interest at the rate of 6.96% per annum and is payable in monthly in- stallments of $70,238 which includes principal and interest. Any remaining principal and interest shall be due and payable May 1, 2008.
The Partnership is not expected to have access to additional sources of financing.
In September 1997, Congress enacted the Multi-Family Assisted Housing Reform and Affordability Act of 1997 ("MAHRA") which provides for the renewal of Section 8 Housing Assistance Pay- ments Contracts ("Section 8 Contracts") to be based upon market rentals instead of the above-market rentals which is generally the case under existing Section 8 Contracts. As a result, Sec- tion 8 Contracts that are renewed in the future in projects in- sured by the Federal Housing Administration ("FHA") may not pro- vide sufficient cash flow to permit owners of properties to meet the debt service requirements of these existing FHA-insured mortgages. MAHRA also provides for the restructuring of these mortgage loans so that the annual debt service on the restruc- tured loan (or loans) can be supported by Section 8 rents estab- lished at the market rents. The restructured loans will be held by the current lender or another lender. There can be no assur- ance that a property owner will be permitted to restructure its mortgage indebtedness pursuant to the new rules implementing MAHRA or that an owner, or the holder of the mortgage, would choose to restructure the mortgage if it were able to partici- pate. MAHRA went into effect on September 11, 1998 when interim regulations implementing the program were published. It should be noted that there are many uncertainties as to the economic and tax impact on a property owner because of the combination of the reduced Section 8 contract rents and the restructuring of the existing FHA-insured mortgage loan under MAHRA.
On October 21, 1998, President Clinton signed the fiscal year 1999 Departments of Veteran Affairs, Housing and Urban Develop- ment and Independent Agencies Appropriation Legislation into law. The bill provides, among other things, that owners of a property that was eligible for prepayment had to give notice of such prepayment to HUD tenants and to the chief executive of the state or local government for the jurisdiction in which the housing is located. The notice must be provided not less than 150 days, but not more than 270 days, before such payment. Moreover, the owner may not increase the rent charged to tenants for a period of 60 days following such prepayment. The bill also provides for tenant-based vouchers for eligible tenants (generally below 80% of area median income) at the true compara- ble market rents for unassisted units in order to protect cur- rent residents from substantial increases in rent.
For a discussion of contingencies affecting certain Local Part- nerships, see Results of Operations of Certain Local Partner- ships below. Since the maximum loss the Partnership would be liable for is its net investment in the respective Local Part- nerships, the resolution of the existing contingencies is not anticipated to impact future results of operations, liquidity or financial condition in a material way. However, the Partner- ship's loss of its investment in a Local Partnership will elimi- nate the ability to generate future Tax Credits from such Local Partnership and may also result in recapture of Tax Credits if the investment is lost before expiration of the credit period.
Except as described above, management is not aware of any trends or events, commitments or uncertainties which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. Management believes the only impact would be from laws that have not yet been adopted. The portfolio is diversi- fied by the location of the properties around the United States so that if one area of the country is experiencing downturns in the economy, the remaining properties in the portfolio may be experiencing upswings. However, the geographic diversification of the portfolio may not protect against a general downturn in the national economy. The Partnership has fully invested the proceeds of the Offering in 31 Local Partnerships, all of which fully have their Tax Credits in place. The Tax Credits are at- tached to the property for a period of ten years and are trans- ferable with the property during the remainder of such ten year period. If the General Partners determined that a sale of the Partnership's interest in a property was warranted, the remain- ing Tax Credits would transfer to the new owner, thereby adding significant value to the property on the market, which is not included in the financial statement carrying amount.
Results of Operations
Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and ex- penses, construction period interest and any other costs in- curred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renew- als and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and ac- cumulated depreciation are eliminated from the assets and accu- mulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undis- counted basis are below depreciated cost. At that time property investments themselves are reduced to estimated fair value (gen- erally using discounted cash flows) when the property is consid- ered to be impaired and the depreciated cost exceeds estimated fair value.
At the time management commits to a plan to dispose of assets, said assets are adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as prop- erty and equipment-held for sale and are not depreciated.
Through March 15, 1999, the Partnership has not recorded any loss on impairment of assets or reduction to estimated fair value.
The following is a summary of the results of operations of the Partnership for the years ended March 15, 1999, 1998 and 1997 (the 1998, 1997 and 1996 Fiscal Years, respectively).
The Partnership's revenues continue to consist primarily of the results of the Partnership's investment in consolidated Local Partnerships. Twenty one of the Local Partnerships receive HUD Section 8 subsidies which serve to stabilize the revenues of these Local Partnerships. The majority of the Local Partnership income continues to be in the form of rental income with the corresponding expenses being divided among operations, deprecia- tion, and mortgage interest.
The net loss for the 1998, 1997 and 1996 Fiscal Years totaled $8,258,765 and $7,175,085 and $7,618,131, respectively. The 1998 Fiscal Year is net of extraordinary loss of $530,379.
The Partnership continues to meet the investment objective of generating Housing Tax Credits to qualified BACs holders. To date all of the Local Partnerships have remained in compliance with the Tax Credit requirements, and therefore none has suf- fered an event of recapture of Tax Credits. The Partnership generated $7,723,298, $11,058,148 and $11,001,671 in Tax Credits during the 1998, 1997 and 1996 Fiscal Years, respectively.
1998 vs. 1997 Rental income increased approximately 1% for the 1998 Fiscal Year as compared to the corresponding period in 1997 primarily due to annual rental rate increases.
Other income increased approximately $177,000 for the 1998 Fis- cal Year as compared to the corresponding period in 1997 primar- ily due to fire insurance proceeds received by one Local Part- nership as well as an increase in interest income from higher cash and cash equivalent balances at the Partnership due to a distribution received from the Bayridge refinancing in April 1998 which was invested in short-term investments.
Total expenses remained fairly consistent for the 1998 Fiscal Year as compared to the corresponding period in 1997 with an in- crease of approximately 3%.
An extraordinary loss from retirement of debt was recorded in the 1998 Fiscal Year (see Note 10).
1997 vs. 1996
Rental income increased approximately 1% for the 1997 Fiscal Year as compared to the corresponding period in 1996 primarily due to annual rental rate increases.
Other income decreased approximately $355,000 for the 1997 Fis- cal Year as compared to the corresponding period in 1996 primar- ily due to a refund of overpaid property taxes at Bayridge Asso- ciates in the 1996 Fiscal Year and a HUD reimbursement for va- cancy losses at Shiloh Grove in the 1996 Fiscal Year.
Total expenses remained fairly consistent for the 1997 Fiscal Year as compared to the corresponding period in 1996 with a de- crease of approximately 1%.
Results of Operations of Certain Local Partnerships
Redwood Villa Associates, L.P. Redwood Villa Associates ("Redwood") has sustained operating losses since its inception. For the 1998 Fiscal Year, Redwood experienced a loss of $234,467, including $219,563 of deprecia- tion and $4,553 of amortization and at December 31, 1998 had a working capital deficiency of $595,115 and a deficit in part- ners' equity of $734,151. These conditions raise substantial doubt about Redwood's ability to continue as a going concern. Redwood's continuation as a going concern is dependent upon its ability to achieve profitable operations or obtain future capi- tal contributions from the partners. Management, whenever pos- sible, plans to reduce operating costs to achieve profitable op- erations. The financial statements for the 1998, 1997 and 1996 Fiscal Years for Redwood have been prepared assuming that Red- wood will continue as a going concern. The Partnership's in- vestment in Redwood at March 15, 1999 and 1998 was reduced to zero by prior years' losses and the minority interest balance was approximately $406,000 and $408,000, respectively. Red- wood's net loss after minority interest amounted to approxi- mately $233,000, $226,000 and $203,000 for the 1998, 1997 and 1996 Fiscal Years, respectively.
Walnut Park Plaza Associates Walnut Park Plaza Associates ("Walnut Park") has sustained re- curring losses from operations. At December 31, 1997, Walnut Park had not made certain payments required under the terms of the Bond Indenture and, as a result, is in default. On April 9, 1996, Walnut Park entered into an interim agreement with E.A.Moos ("Moos"), Walnut Park's bondholders, which expired Oc- tober 15, 1996 subject to certain defined extension and termina- tion provisions. Moos and Walnut Park continued to operate un- der the terms of the interim agreement until the bonds were sold on October 31, 1997 to Municipal Capital Appreciation Partners, ILP ("MCAPI"), at which time the interim agreement expired. The interim agreement primarily allowed Moos to select an interim and permanent replacement property manager, to formulate a pro- posal to replace the general partner, and to possibly restruc- ture the indebtedness of the project. On April 29, 1997, an agreement was signed which provides for, among other things, the transfer of the general partner interest to RCC Partners '96 LLC ("RCC"), an affiliate of the General Partners. Upon transfer of the general partner interest to RCC, amounts due to the former general partner and its affiliates totaling $693,340 were for- given, resulting in a contribution to the subsidiary partners' capital. Through the rights of the Partnership and/or a General Partner, which General Partner has a contractual obligation to act on behalf of the Partnership to approve certain major oper- ating and financial decisions, the Partnership continues to have a controlling financial interest in Walnut Park. Walnut Park's continued existence is dependent on improving the financial op- erations of Walnut Park, the ultimate resolution of the default of certain obligations under the terms of the Bond Indenture, or the refinancing of the Bond Indenture. Contingent upon the out- come of the aforementioned items, Walnut Park may be unable to continue as a going concern in its present form. The Partner- ship's investment in Walnut Park at March 15, 1999 and March 15, 1998 was reduced to zero by prior years' losses and the minority interest balance amounted to approximately $1,122,000 and $1,125,000, respectively. Walnut Park's net loss after minority interest amounted to approximately $312,000, $511,000 and $541,000 for the 1998, 1997 and 1996 Fiscal Years, respectively.
Robin Housing Associates Robin Housing Associates ("Robin Housing") is a defendant in a personal injury lawsuit. Robin Housing's insurance carrier in- tends to defend Robin Housing vigorously. Management believes that the insurance coverage is adequate to cover any liability arising from this action. Since it is too premature to make an evaluation of the amount or range of Robin Housing's potential loss, it is management's opinion that no accrual for potential losses is currently warranted in the financial statements. The maximum loss which the Partnership would be liable for is its net investment in Robin Housing amounting to approximately $453,000. The Partnership's investment in Robin Housing was ap- proximately $453,000 and $577,000 at March 15, 1999 and 1998, respectively, and the minority interest balance was approxi- mately $0 and $68,000, respectively. Robin Housing's net loss after minority interest amounted to approximately $115,000, $91,000 and $115,000 for the 1998, 1997 and 1996 Fiscal Years, respectively.
Willoughby-Wyckoff Housing Associates The financial statements for Willoughby-Wyckoff Housing Associ- ates ("Willoughby") have been prepared on the basis that it will continue as a going concern, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. There are certain condi- tions that raise substantial doubt about Willoughby's ability to continue as a going concern. Willoughby has had operating losses, operating cash flow deficiencies, and equity deficien- cies. Management plans to continue to minimize costs within its control and seek additional funding sources to supplement proj- ect operations. Continuance of Willoughby as a going concern is dependent upon Willoughby's ability to obtain additional funding to supplement project operations and enable Willoughby to meet its obligations as they become due. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Partnership's investment in Wil- loughby at March 15, 1999 and 1998 was reduced to zero by prior years' losses and the minority interest balance was approxi- mately $274,000 and $276,000 respectively. Willoughby's net loss after minority interest amounted to approximately $220,000, $141,000 and $276,000 for the 1998, 1997 and 1996 Fiscal Years.
Year 2000 Compliance
The Partnership utilizes the computer services of affiliates of the General Partners. The affiliates of the General Partners have upgraded their computer information systems to be year 2000 compliant. The year 2000 compliance issue concerns the inabil- ity of a computerized system to accurately record dates after December 31, 1999. The affiliates of the General Partners re- cently underwent a conversion of their financial systems appli- cations and upgraded all of their non-compliant in-house soft- ware and hardware inventory. The work stations that experienced problems from the testing process were corrected with an upgrade patch. The costs incurred by the affiliates of the General Partners are not being charged to the Partnership. The most likely worst case scenario that the General Partners face is that computer operations will be suspended for a few days to a week commencing on January 1, 2000. The Partnership contingency plan is to have (i) a complete backup done on December 31, 1999 and (ii) both electronic and printed reports generated for all critical data up to and including December 31, 1999.
In regard to third parties, the General Partner is in the proc- ess of evaluating the potential adverse impact that could result from the failure of material service providers to be year 2000 compliant. A detailed survey and assessment was sent to mate- rial third parties in the fourth quarter of 1998. The Partner- ship has received assurances from a majority of the material service providers with which it interacts that they have ad- dressed the year 2000 issues and is evaluating these assurances for their adequacy and accuracy. In cases where the Partnership has not received assurances from third parties, it is initiating further mail and/or phone correspondence. The Partnership re- lies heavily on third parties and is vulnerable to the failures of third parties to address their year 2000 issues. There can be no assurance given that the third parties will adequately ad- dress their issues.
Other
There continues to be a number of requests for the list of lim- ited partners such as BAC holders of the Partnership. Often these requests are made by a person who, only a short time be- fore making the request, acquired merely a small number of BACs in the Partnership and seeks the list for an improper purpose, a purpose that is not in the best interest of the Partnership or is harmful to the Partnership. In order to best serve and pro- tect the interests of the Partnership and all of its investors, the General Partners of the Partnership have adopted a policy with respect to requests for the Partnership's list of BAC hold- ers. This policy is intended to protect investors from unsolic- ited and coercive offers to acquire BAC holders' interests and does not limit any other rights the General Partners may have under the Partnership Agreement or applicable law.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable.
Item 8.
Item 8. Financial Statements and Supplementary Data. 							 Sequential 						 Page (a) 1. Consolidated Financial Statements
Independent Auditors' Report 			 18
Consolidated Balance Sheets at March 15, 1999 and 1998 				 95
Consolidated Statements of Operations for the Years Ended March 15, 1999, 1998 and 1997 			 96
Consolidated Statements of Changes in Partners' (Deficit) Capital for the Years Ended March 15, 1999, 1998 and 1997 							 97
Consolidated Statements of Cash Flows for the Years Ended March 15, 1999, 1998 and 1997 			 98
Notes to Consolidated Financial Statements 	 100
INDEPENDENT AUDITORS' REPORT To the Partners of Liberty Tax Credit Plus L.P. and Subsidiaries (A Delaware Limited Partnership)
We have audited the consolidated balance sheets of Liberty Tax Credit Plus L.P. (A Delaware Limited Partnership) and Subsidiar- ies as of March 15, 1999 and 1998, and the related consolidated statements of operations, changes in partners' (deficit) capi- tal, and cash flows for the years ended March 15, 1999, 1998 and 1997 (the 1998, 1997 and 1996 Fiscal Years, respectively). These financial statements are the responsibility of the Part- nership's management. Our responsibility is to express an opin- ion on these financial statements based on our audits. We did not audit the financial statements for 30 (Fiscal 1998, 1997 and 1996) subsidiary partnerships whose losses aggregated $6,144,896 (Fiscal 1998), $7,098,332 (Fiscal 1997) and $5,837,225 (Fiscal 1996) and whose assets constituted 93% and 95% of the Partner- ship's assets at March 15, 1999 and 1998, respectively, pre- sented in the accompanying consolidated financial statements. The financial statements for these subsidiary partnerships were audited by other auditors whose reports thereon have been fur- nished to us and our opinion expressed herein, insofar as it re- lates to the amounts included for these subsidiary partnerships, is based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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, based upon our audits, and the reports of the other auditors referred to above, the accompanying consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Lib- erty Tax Credit Plus L.P. and Subsidiaries at March 15, 1999 and 1998 and the results of their operations and their cash flows for the years ended March 15, 1999, 1998 and 1997, in conformity with generally accepted accounting principles.
As discussed in Note 11(a), the consolidated financial state- ments include the financial statements of three subsidiary part- nerships with significant contingencies and uncertainties re- garding their continuing operations. During the 1998 Fiscal Year, these subsidiary partnerships incurred significant operat- ing losses and one is in default on its mortgage obligation. These conditions raise substantial doubt about the subsidiary partnerships' abilities to continue as going concerns. The fi- nancial statements of these three subsidiary partnerships were prepared assuming that each will continue as a going concern. The three subsidiary partnerships' losses aggregated $771,697 (Fiscal 1998), $887,146 (Fiscal 1997) and $1,027,546 (Fiscal 1996) and their assets aggregated $16,073,230 and $16,967,227 at March 15, 1999 and 1998, respectively. Management's plans re- garding these matters are also discussed in Note 11(a). The ac- companying consolidated financial statements do not include any adjustments that might result from the outcome of these uncer- tainties.
TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI, LLP New York, New York May 25, 1999
LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 1999
NOTE 1 - General
Liberty Tax Credit Plus L.P., a Delaware limited partnership (the "Partnership"), was organized on June 26, 1987, but had no activity until October 1, 1987 (which date is considered to be inception for financial accounting purposes). The Partnership had no operations until commencement of the public offering on November 20, 1987.
The Partnership's business is to invest as a limited partner in other limited partnerships ("Local Partnerships" or "subsidiar- ies" or "subsidiary partnerships") owning leveraged apartment complexes that are eligible for the low-income housing tax credit ("Tax Credit") enacted in the Tax Reform Act of 1986, and to a lesser extent in Local Partnerships owning properties that are eligible for the historic rehabilitation tax credit. As of March 15, 1999, the Partnership has invested in 31 subsidiary partnerships and does not anticipate making any additional in- vestments.
Since November 25, 1997, the general partners of the Partnership have been Related Credit Properties L.P., a Delaware limited partnership (the "Related General Partner") and Liberty Associ- ates III L.P., a Delaware limited partnership ("Liberty Associ- ates"), and together with the Related General Partner (the "Gen- eral Partners"). The Related General Partner is also the spe- cial limited partner of the Partnership. The general partner of the Related General Partner is Related Credit Properties Inc., a Delaware corporation. The general partner of Liberty Associates is the Related General Partner. On November 25, 1997, affili- ates of the Related General Partner and Liberty GP Inc. ("LGP"), then the general partners of the Partnership, entered into a Purchase Agreement pursuant to which the Related General Partner purchased LGP's general partner interest in the Partnership (the "Transfer"). In addition to the Transfer, the Related General Partner also acquired LGP's special limited partner interest in the Partnership and its general partner interest in Liberty As- sociates. Prior to the Transfer, Liberty Associates was an af- filiate of Lehman Brothers.
The terms of the Partnership's Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement") provide, among other things, that net profits or losses and distributions of cash flow are, in general, allocated 99% to the limited partners and BACs holders and 1% to the General Partners.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Consolidation
The consolidated financial statements include the accounts of the Partnership and 31 subsidiary partnerships in which the Partnership is a limited partner. Through the rights of the Partnership and/or a General Partner, which General Partner has a contractual obligation to act on behalf of the Partnership, to remove the general partner of the subsidiary partnerships and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidi- ary partnerships. All intercompany accounts and transactions with the subsidiary partnerships have been eliminated in con- solidation.
For financial reporting purposes the Partnership's fiscal year ends on March 15. The Partnership's fiscal year ends on March 15, in order to allow adequate time for the subsidiaries finan- cial statements to be prepared and consolidated. The books and records of the Partnership are maintained on the accrual basis of accounting, in accordance with generally accepted accounting principles ("GAAP"). All subsidiaries have calendar year ends. Accounts of the subsidiary partnerships have been adjusted for intercompany transactions from January 1 through March 15.
Increases (decreases) in the capitalization of consolidated sub- sidiary partnerships attributable to minority interest arise from cash contributions from and cash distributions to the mi- nority interest partners.
The Partnership's investment in each subsidiary partnership is equal to the respective subsidiary partnership's partners' eq- uity less minority interest capital, if any. Losses attribut- able to minority interests which exceed the minority interests' investment in subsidiary partnerships have been charged to the Partnership. Such losses aggregated approximately $226,000, $147,000 and $157,000 for the years ended March 15, 1999, 1998 and 1997, respectively. In consolidation, all subsidiary part- nership losses are included in the Partnership's capital account except for losses allocated to minority interest capital.
b) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks, and investments in short-term highly liquid instruments pur- chased with original maturities of three months or less.
c) Property and Equipment
Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and ex- penses, construction period interest and any other costs in- curred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renew- als and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and ac- cumulated depreciation are eliminated from the assets and accu- mulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undis- counted basis are below depreciated cost. At that time property investments themselves are reduced to estimated fair value (gen- erally using discounted cash flows) when the property is consid- ered to be impaired and the depreciated cost exceeds estimated fair value.
At the time management commits to a plan to dispose of assets, said assets are adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as prop- erty and equipment-held for sale and are not depreciated.
Through March 15, 1999, the Partnership has not recorded any loss on impairment of assets or reduction to estimated fair value.
d) Organization and Offering Costs
Costs incurred to organize the Partnership including but not limited to legal, accounting, and registration fees are consid- ered deferred organization expenses. These costs have been capitalized and are being amortized over a 60-month period. Costs incurred to sell BACs, including brokerage and the nonac- countable expense allowance, are considered selling and offering expenses. These costs are charged directly to limited partners' capital (Note 8).
e) Income Taxes
The Partnership is not required to provide for, or pay, any fed- eral income taxes. Net income or loss generated by the Partner- ship is passed through to the partners and is required to be re- ported by them. The Partnership may be subject to state and lo- cal taxes in jurisdictions in which it operates. For income tax purposes, the Partnership has a fiscal year ending December 31 (Note 9).
f) Loss Contingencies
The Partnership records loss contingencies as a charge to income when information becomes available which indicates that it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated.
g) Use of Estimates
The preparation of financial statements in conformity with gen- erally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly actual results could dif- fer from those estimates.
NOTE 3 - Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments (all of which are held for non-trading purposes) for which it is practicable to estimate that value:
Cash and Cash Equivalents and Cash Held in Escrow The carrying amount approximates fair value.
Mortgage Notes Payable The fair value of mortgage notes payable is estimated, where practicable, based on the borrowing rate currently available for similar loans.
(*) Management believes it is not practical to estimate the fair value of the mortgage notes payable because mortgage pro- grams with similar characteristics are not currently available to the partnerships.
The carrying amount of other financial instruments that require such disclosure approximates fair value.
Included in property and equipment are $6,859,371 of acquisition fees paid to the general partners and $952,737 of acquisition expenses. In addition, as of March 15, 1999, buildings and im- provements include $2,870,719 of capitalized interest.
In connection with the development or rehabilitation of the properties, the subsidiary partnerships have incurred devel- oper's fees of $23,360,275 to the local general partners and af- filiates. Such fees have been included in the cost of property and equipment.
Depreciation expense for the years ended March 15, 1999, 1998 and 1997 amounted to $9,408,973, $8,827,632 and $8,575,413, re- spectively.
During the year ended March 15, 1997, accumulated depreciation on dispositions amounting to $122,314 was written off.
Amortization of deferred costs for the years ended March 15, 1999, 1998 and 1997 amounted to $283,688, $285,814 and $298,389, respectively.
During the years ended March 15, 1999 and 1998, deferred costs of $142,821 and $41,350 and accumulated amortization of $122,314 and $41,350 were written off.
NOTE 7 - Mortgage Notes Payable
The mortgage notes are payable in aggregate monthly installments of approximately $1,014,000 including principal and interest at rates varying from 1% to 12% per annum, through 2029. Each sub- sidiary partnership's mortgage note payable is collateralized by the land and buildings of the respective subsidiary partnership and the assignment of certain subsidiary partnership's rents and leases and is without further recourse.
Annual principal payment requirements as of March 15, 1999 for each of the next five fiscal years and thereafter are as fol- lows:
Fiscal Year Ending Amount
1999 $ 2,985,052 2000 3,279,078 2001 3,565,542 2002 9,802,223 2003 5,154,055 Thereafter 133,438,374
$158,224,324
See Note 11 for other subsidiary partnerships' financing activi- ties.
NOTE 8 - Related Party Transactions
An affiliate of the General Partners has a 1% interest as a spe- cial limited partner, in each of the subsidiary partnerships. An affiliate of the General Partners also has a minority inter- est in certain subsidiary partnerships.
The costs incurred to related parties for the years ended March 15, 1999, 1998 and 1997 were as follows:
(a) The General Partners are entitled to receive a partnership management fee, after payment of all Partnership expenses, which together with the local annual administrative fees will not ex- ceed a maximum of 0.5% per annum of invested assets (as defined in the Partnership Agreement) for administering the affairs of the Partnership. The partnership management fee, subject to the foregoing limitation, will be determined by the General Partners in their sole discretion based upon their review of the Partner- ship's investments. Partnership management fees owed to the General Partners amounting to approximately $4,014,000 and $3,126,000 were accrued and unpaid as of March 15, 1999 and March 15, 1998, respectively.
(b) The Partnership reimburses the General Partners and their affiliates for actual Partnership operating expenses incurred by the General Partners and their affiliates on the Partnership's behalf. The amount of reimbursement from the Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the General Partners performs asset monitoring for the Partnership. These services include site visits and evalua- tions of the subsidiary partnerships' performance. Expense re- imbursements and asset monitoring fees owed to Related Credit Properties L.P. amounting to approximately $75,000 and $404,000 were accrued and unpaid as of March 15, 1999 and March 15, 1998, respectively.
The General Partners have continued advancing funds and allowing for the accrual without payment of the amounts set forth in (a) and (b) but are under no obligation to do so.
(c) Property management fees incurred by subsidiary partner- ships amounted to $1,883,977, $1,815,645 and $1,851,991 for the years ended March 15, 1999, 1998 and 1997, respectively. Of these fees $1,289,487, $1,160,288 and $1,265,395 were incurred to affiliates of the subsidiary partnerships' general partners. In addition, $91,224, $84,609 and $80,510 was incurred to af- filiates of the Partnership.
(d) Liberty Associates III L.P., the special limited partner of the subsidiary partnerships, is entitled to receive a local ad- ministrative fee of up to $2,500 per year from each subsidiary partnership.
The General Partners of the Partnership were allocated approxi- mately $83,000, $71,000 and $69,000 of passive losses for the years ended March 15, 1999, 1998 and 1997, respectively.
(e) Liberty Associates III L.P. received cash distributions of approximately $2,000, $3,500 and $1,900 during the years ended March 15, 1999, 1998 and 1997, respectively.
Liberty Associates III L.P. was allocated Low-Income Housing Tax Credits of approximately $2,200, for each of the taxable years ended March 15, 1999, 1998 and 1997, respectively.
B) Guarantees
The general partners of Bayridge Associates Limited Partnership ("Bayridge"), a subsidiary partnership, agreed to provide guar- antees of up to $1,000,000 to fund debt service deficiencies in the event certain debt coverage and debt service ratios were not met for specified periods of time. As of March 15, 1999, no guarantees have been funded. The Debt Coverage Guaranty Agree- ment provides for the security to be reduced to a $100,000 let- ter of credit provided by the Bayridge general partners.
NOTE 10 - Extraordinary item
In April 1998, Bayridge refinanced its mortgage note payable of $6,150,000. The new mortgage note in the amount of $10,600,000 paid off the former mortgage note and paid a cash flow distribu- tion from refinancing proceeds of approximately $1,904,000 to the Partnership. In order to repay the mortgage loan due to Travelers prior to its maturity date, Bayridge was obligated to pay a prepayment penalty to Travelers, in the amount of $510,075. This amount, along with the remaining unamortized de- ferred loan costs relating to that loan, was charged to opera- tions in 1998 and is reflected in the accompanying statements of operations as an extraordinary loss from retirement of debt. The new mortgage bears interest at the rate of 6.96% per annum and is payable in monthly installments of $70,238 which includes principal and interest. Any remaining principal and interest shall be due and payable May 1, 2008.
NOTE 11 - Commitments and Contingencies
a) Subsidiary Partnership - Going Concern
Three subsidiary partnerships, Redwood Villa Associates, Wil- loughby-Wyckoff Housing Associates and Walnut Park Plaza Associ- ates have significant contingencies and uncertainties regarding their continuing operations which raise substantial doubt about their abilities to continue as going concerns. The financial statements of these three subsidiary partnerships were prepared assuming that each will continue as a going concern.
Redwood Villa Associates, L.P. Redwood Villa Associates ("Redwood") has sustained operating losses since its inception. For the 1998 Fiscal Year, Redwood experienced a loss of $234,467, including $219,563 of deprecia- tion and $4,553 of amortization and at December 31, 1998 had a working capital deficiency of $595,115 and a deficit in part- ners' equity of $734,151. These conditions raise substantial doubt about Redwood's ability to continue as a going concern. Redwood's continuation as a going concern is dependent upon its ability to achieve profitable operations or obtain future capi- tal contributions from the partners. Management, whenever pos- sible, plans to reduce operating costs to achieve profitable op- erations. The financial statements for the 1998, 1997 and 1996 Fiscal Years for Redwood have been prepared assuming that Red- wood will continue as a going concern. The Partnership's in- vestment in Redwood at March 15, 1999 and 1998 was reduced to zero by prior years' losses and the minority interest balance was approximately $406,000 and $408,000, respectively. Red- wood's net loss after minority interest amounted to approxi- mately $233,000, $226,000 and $203,000 for the 1998, 1997 and 1996 Fiscal Years, respectively.
Willoughby-Wyckoff Housing Associates The financial statements for Willoughby-Wyckoff Housing Associ- ates ("Willoughby") have been prepared on the basis that it will continue as a going concern, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the ordinary course of business. There are certain condi- tions that raise substantial doubt about Willoughby's ability to continue as a going concern. Willoughby has had operating losses, operating cash flow deficiencies, and equity deficien- cies. Management plans to continue to minimize costs within their control and seek additional funding sources to supplement project operations. Continuance of Willoughby as a going con- cern is dependent upon Willoughby's ability to obtain additional funding to supplement project operations and enable Willoughby to meet its obligations as they become due. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. The Partnership's invest- ment in Willoughby at March 15, 1999 and 1998 was reduced to zero by prior years' losses and the minority interest balance was approximately $274,000 and $276,000 respectively. Wil- loughby's net loss after minority interest amounted to approxi- mately $220,000, $141,000 and $276,000 for the 1998, 1997 and 1996 Fiscal Years.
Walnut Park Plaza Associates Walnut Park Plaza Associates ("Walnut Park") has sustained re- curring losses from operations. At December 31, 1997, Walnut Park had not made certain payments required under the terms of the Bond Indenture and, as a result, is in default. On April 9, 1996, Walnut Park entered into an interim agreement with E.A.Moos ("Moos"), Walnut Park's bondholders, which expired Oc- tober 15, 1996 subject to certain defined extension and termina- tion provisions. Moos and Walnut Park continued to operate un- der the terms of the interim agreement until the bonds were sold on October 31, 1997 to Municipal Capital Appreciation Partners, ILP ("MCAPI"), at which time the interim agreement expired. The interim agreement primarily allowed Moos to select an interim and permanent replacement property manager, to formulate a pro- posal to replace the general partner, and to possibly restruc- ture the indebtedness of the project. On April 29, 1997, an agreement was signed which provides for, among other things, the transfer of the general partner interest to RCC Partners '96 LLC ("RCC"), an affiliate of the General Partners. Upon transfer of the general partner interest to RCC, amounts due to the former general partner and its affiliates totaling $693,340 were for- given, resulting in a contribution to the subsidiary partners' capital. Through the rights of the Partnership and/or a General Partner, which General Partner has a contractual obligation to act on behalf of the Partnership to approve certain major oper- ating and financial decisions, the Partnership continues to have a controlling financial interest in Walnut Park. Walnut Park's continued existence is dependent on improving the financial op- erations of Walnut Park, the ultimate resolution of the default of certain obligations under the terms of the Bond Indenture, or the refinancing of the Bond Indenture. Contingent upon the out- come of the aforementioned items, Walnut Park may be unable to continue as a going concern in its present form. The Partner- ship's investment in Walnut Park at March 15, 1999 and March 15, 1998 was reduced to zero by prior years' losses and the minority interest balance amounted to approximately $1,122,000 and $1,125,000, respectively. Walnut Park's net loss after minority interest amounted to approximately $312,000, $511,000 and $541,000 for the 1998, 1997 and 1996 Fiscal Years, respectively.
b) Subsidiary Partnership - Other
Robin Housing Associates Robin Housing Associates ("Robin Housing") is a defendant in a personal injury lawsuit. Robin Housing's insurance carrier in- tends to defend Robin Housing vigorously. Management believes that the insurance coverage is adequate to cover any liability arising from this action. Since it is too premature to make an evaluation of the amount or range of Robin Housing's potential loss, it is management's opinion that no accrual for potential losses is currently warranted in the financial statements. The maximum loss which the Partnership would be liable for is its net investment in Robin Housing amounting to approximately $453,000. The Partnership's investment in Robin Housing was ap- proximately $453,000 and $577,000 at March 15, 1999 and 1998, respectively, and the minority interest balance was approxi- mately $0 and $68,000, respectively. Robin Housing's net loss after minority interest amounted to approximately $115,000, $91,000 and $115,000 for the 1998, 1997 and 1996 Fiscal Years, respectively.
c) Lease Commitment
One of the subsidiary partnerships entered into a forty-year ground lease for the land on which the building is built. As stipulated in the lease, the subsidiary partnership agrees to pay all real estate taxes, license and permit fees, among other charges that may be assessed upon the land or improvements. At December 31, 1998, the subsidiary partnership was committed to minimum future rentals on the noncancellable lease in the amount of $60,000 a year through 2028. The lease payments are payable from available cash and at December 31, 1998, the subsidiary partnership has accrued lease payments of $304,647.
d) Uninsured Cash and Cash Equivalents
The Partnership maintains its cash and cash equivalents in vari- ous banks. Accounts at each bank are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. As of March 15, 1999, uninsured cash and cash equivalents approximated $1,820,000.
e) Letter of Credit
One subsidiary partnership was contingently liable at December 31, 1998 for the following open letter of credit:
Debt service $600,000
f) Year 2000 Compliance
The Partnership utilizes the computer services of affiliates of the General Partners. The affiliates of the General Partners have upgraded their computer information systems to be year 2000 compliant. The year 2000 compliance issue concerns the inabil- ity of a computerized system to accurately record dates after December 31, 1999. The affiliates of the General Partners re- cently underwent a conversion of their financial systems appli- cations and upgraded all of their non-compliant in-house soft- ware and hardware inventory. The work stations that experienced problems from the testing process were corrected with an upgrade patch. The costs incurred by the affiliates of the General Partners are not being charged to the Partnership. The most likely worst case scenario that the General Partners face is that computer operations will be suspended for a few days to a week commencing on January 1, 2000. The Partnership contingency plan is to have (i) a complete backup done on December 31, 1999 and (ii) both electronic and printed reports generated for all critical data up to and including December 31, 1999.
In regard to third parties, the General Partner is in the proc- ess of evaluating the potential adverse impact that could result from the failure of material service providers to be year 2000 compliant. A detailed survey and assessment was sent to mate- rial third parties in the fourth quarter of 1998. The Partner- ship has received assurances from a majority of the material service providers with which it interacts that they have ad- dressed the year 2000 issues and is evaluating these assurances for their adequacy and accuracy. In cases where the Partnership has not received assurances from third parties, it is initiating further mail and/or phone correspondence. The Partnership re- lies heavily on third parties and is vulnerable to the failures of third parties to address their year 2000 issues. There can be no assurance given that the third parties will adequately ad- dress their issues.
g) Other
The Partnership is subject to the risks incident to potential losses arising from the management and ownership of improved real estate. The Partnership can also be affected by poor eco- nomic conditions generally, however no more than 20% of the properties are located in any single state. There are also sub- stantial risks associated with owning properties receiving gov- ernment assistance, for example the possibility that Congress may not appropriate funds to enable HUD to make rental assis- tance payments. HUD also restricts annual cash distributions to partners based on operating results and a percentage of the own- ers' equity contribution. The Partnership cannot sell or sub- stantially liquidate its investments in subsidiary partnerships during the period that the subsidy agreements are in existence, without HUD's approval. Furthermore, there may not be market demand for apartments at full market rents when the rental as- sistance contracts expire.
h) Tax Credits
The Partnership and BAC holders began recognizing Tax Credits with respect to the Properties when the Credit Period for such Property commenced. Because of the time required for the acqui- sition, completion and rent-up of Properties, the amount of Tax Credits per BAC gradually increases over the first three years of the Partnership. Tax Credits not recognized in the first three years will be recognized in the 11th through 13th years. For the 1998, 1997 and 1996 tax years, Tax Credits of $7,723,298, $11,058,148 and $11,001,671 were generated.
A portion of the Tax Credits could be subject to recapture in future years if (i) a Local Partnership ceases to meet qualifi- cation requirements, (ii) there is a decrease in the qualified basis of the Projects, or (iii) there is a greater than one- third reduction in the taxpayer's interest in the Project at any time during the 15-year Compliance Period that began with the first tax year of the Credit Period.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Ac- counting and Financial Disclosure.
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no directors or officers. The Partnership's affairs are managed and controlled by the General Partners. Certain information concerning the directors and executive offi- cers of Related Credit Properties, Inc., the general partner of the Related General Partner (which, in turn, is the general partner of Liberty Associates), who may be deemed directors or executive officers of the Partnership is set forth below.
Related Credit Properties Inc.
Name Position
Stephen M. Ross Director
J. Michael Fried President and Director
Alan P. Hirmes Senior Vice President
Stuart J. Boesky Vice President
Glenn F. Hopps Treasurer
Teresa Wicelinski Secretary
STEPHEN M. ROSS, 59, is President, Director and shareholder of The Related Realty Group, Inc., the general partner of The Re- lated Companies, L.P. He graduated from the University of Michigan School of Business Administration with a Bachelor of Science degree and from Wayne State University School of Law with a Juris Doctor degree. Mr. Ross then received a Master of Laws degree in taxation from New York University School of Law. He joined the accounting firm of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York, where he worked for two large Wall Street investment banking firms in their real estate and corporate finance departments. Mr. Ross formed the predecessor of The Related Companies, L.P. in 1972 to develop, manage, finance and acquire subsidized and conventional apart- ment developments.
J. MICHAEL FRIED, 55, is the sole shareholder of one of the gen- eral partners of Related Capital Company ("Capital"), a real es- tate finance and acquisition affiliate of Related. In that ca- pacity, he is responsible for all of Capital's syndication, fi- nance, acquisition and investor reporting activities. Mr. Fried practiced corporate law in New York City with the law firm of Proskauer Rose Goetz & Mendelsohn from 1974 until he joined Capital in 1979. Mr. Fried graduated from Brooklyn Law School with a Juris Doctor degree, magna cum laude; from Long Island University Graduate School with a Master of Science degree in Psychology; and from Michigan State University with a Bachelor of Arts degree in History.
ALAN P. HIRMES, 44, has been a Certified Public Accountant in New York since 1978. Prior to joining Capital in October 1983, Mr. Hirmes was employed by Weiner & Co., Certified Public Ac- countants. Mr. Hirmes is also a Vice President of Capital. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts degree.
STUART J. BOESKY, 43, practiced real estate and tax law in New York City with the law firm of Shipley & Rothstein from 1984 un- til February 1986 when he joined Capital. From 1983 to 1984 Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow, Richard & Rothstein and from 1978 to 1980 was a consultant spe- cializing in real estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan State University with a Bachelor of Arts degree and from Wayne State School of Law with a Juris Doctor degree. He then received a Master of Laws degree in Taxation from Boston University School of Law.
GLENN F. HOPPS, 36, joined Related in December, 1990, and prior to that date was employed by Marks Shron & Company and Weiss- barth, Altman and Michaelson, certified public accountants. Mr. Hopps graduated from New York State University at Albany with a Bachelor of Science Degree in Accounting.
TERESA WICELINSKI, 33, joined Related in June 1992, and prior to that date was employed by Friedman, Alpren & Green, certified public accountants. Ms. Wicelinski graduated from Pace Univer- sity with a Bachelor of Arts Degree in Accounting.
Item 11.
Item 11. Executive Compensation.
The Partnership has no officers or directors. The Partnership does not pay or accrue any fees, salaries or other forms of com- pensation to directors or executive officers of the General Partners for their services. However, under the terms of the Amended and Restated Agreement of Limited Partnership of the Partnership, the Partnership has entered into certain arrange- ments with the General Partners and their affiliates, which pro- vide for compensation to be paid to the General Partners and their affiliates. Such arrangements include (but are not lim- ited to) agreements to pay nonrecurring Acquisition Fees, a non- accountable Acquisition Expense allowance, a partnership manage- ment fee and an accountable expense reimbursement. The General Partners are entitled, in the aggregate, to 1% of all cash dis- tributions and an additional 15% of distributions from net sale or refinancing proceeds after the BACs holders have received distributions of such proceeds equal to their original capital contributions plus a 10% return thereon (to the extent not pre- viously paid out of cash flow). Certain directors and executive officers of the General Partners receive compensation from the General Partners and their affiliates for services performed for various affiliated entities which may include services performed for the Partnership. Such compensation may be based in part of the performance of the Partnership. See also Note 8 to the Fi- nancial Statements, which is incorporated in this Item 11 by reference thereto.
Tabular information concerning salaries, bonuses and other types of compensation payable to executive officers has not been in- cluded in this annual report. As noted above, the Partnership has no executive officers. The levels of compensation payable to the General Partners and/or their affiliates is limited by the terms of the Partnership Agreement and may not be increased therefrom on a discretionary basis.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Liberty Associates III L.P. holds a 1% limited partnership in- terest in each Local Partnership.
No person is known by the Partnership to be the beneficial owner of more than 5% percent of the Limited Partnership Interests and/or the BACs; and none of the General Partners nor any direc- tor or executive officer of any of the General Partners owns any Limited Partnership Interests or BACs.
On November 25, 1997, affiliates of the Related General Partner and LGP, then the general partners of the Partnership, entered into a Purchase Agreement pursuant to which the Transfer was ef- fected. In addition to the Transfer, the Related General Part- ner also acquired LGP's special limited partner interest in the Partnership and its general partner interest in Liberty Associ- ates. Prior to the Transfer, Liberty Associates was an affili- ate of Lehman Brothers.
Item 13.
Item 13. Certain Relationships and Related Transactions.
The Partnership has and will continue to have certain relation- ships with the General Partners and their affiliates, as dis- cussed in Item 11 and also Note 8 to the Financial Statements in Item 8 above, which is incorporated herein by reference thereto and as set forth above. However, there have been no direct fi- nancial transactions between the Partnership and the directors and executive officers of the General Partners.
PART IV
Item 14.
Item 14.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Sequential Page (a) 1. Financial Statements
Independent Auditors' Report 					 18
Consolidated Balance Sheets at March 15, 1999 and 1998 95
Consolidated Statements of Operations for the Years Ended March 15, 1999, 1998 and 1997 				 96
Consolidated Statements of Changes in Partners' (Deficit) Capital for the Years Ended March 15, 1999, 1998 and 1997 				 97
Consolidated Statements of Cash Flows for the Years Ended March 15, 1999, 1998 and 1997 				 98
Notes to Consolidated Financial Statements 		 100
(a) 2. Financial Statement Schedules
Independent Auditors' Report 				 121
Schedule I - Condensed Financial Information of Registrant 							 122
Schedule III - Real Estate and Accumulated Depreciation 							 125
All other schedules have been omitted because the required information is included in the financial statements and notes thereto or they are not applicable or not required.
(a) 3. Exhibits
(21) Subsidiaries of the Registrant - the Local Part- nerships set forth in Item 2 may be considered subsidiar- ies of the Registrant 					 118
(27) Financial Data Schedule (filed herewith) 	 128
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (continued)
Jurisdiction (c) Subsidiaries of the Registrant (Exhibit 21) of Organization
B & C Housing Associates, L.P. 				OK State Street 86 Associates, L.P. 			DE Fox Glenn Investors, L.P. 					PA Shiloh-Grove L.P. (Mt. Vernon) 				OH Silver Blue Lake Apartments, LTD. 			FL Lancaster Towers Associates, LTD. 			DE West Kinney Associates, L.P. 				NJ Autumn Park Associates, L.P. 				OR Regent Street Associates, L.P. 				PA Magnolia Arms Associates, L.P. 				FL Greenleaf Associates, L.P. 				MS Alameda Towers Associates, L.P. 				PR Dixie Apartment Associates, LTD. 			FL Ludlam Gardens Apartments, LTD. 				FL Grove Parc Associates, L.P. (Woodlawn) 		IL 2108 Bolton Drive Associates, L.P. 			DE Apple Creek Housing Associates, LTD. 			CO Redwood Villa Associates 					CA Charles Drew Court Associates, L.P. 			NJ Walnut Park Plaza Associates, L.P. 			PA Bayridge Associates, L.P. 					OR United-Pennsylvanian, L.P. 				PA 2051 Grand Concourse Associates, L.P. 			NY Concourse Artists Housing Associates, L.P. 		NY Willoughby/Wycoff Housing Associates, L.P. 		NY Robin Housing Associates, L.P. 				NY Lund Hill Associates, L.P. 				DE Tanglewood Apartments, L.P. 				MS Quality Hill Historic District-Phase II-A, L.P. 	MS Penn Alto Associates, L.P. 				PA Sartain School Venture, L.P. 				PA
(d) Not applicable
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Secu- rities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LIBERTY TAX CREDIT PLUS L.P. (Registrant)
	By:	RELATED CREDIT PROPERTIES L.P., 		a General Partner
		By:	Related Credit Properties Inc., 			its General Partner
Date: June 7, 1999 			By:	/s/ J. Michael Fried 				J. Michael Fried 				President, Chief Executive Officer 				and Director 				(Principal Executive Officer)
	By:	LIBERTY ASSOCIATES III, L.P., 		a General Partner
		By:	Related Credit Properties L.P., 			its General Partner
		By:	Related Credit Properties Inc., 			its General Partner
Date: June 7, 1999 			By:	/s/ J. Michael Fried 				J. Michael Fried 				President, Chief Executive Officer 				and Director 				(Principal Executive Officer)
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 and in the capacities and on the dates indicated:
Signature Title 	 Date
	President, Chief Executive Officer 	(principal executive officer) and 	Director of Related Credit 	Properties Inc., general partner of 	Related Credit Properties L.P. 	(a General Partner of Registrant) 	which is also the general partner of /s/ J. Michael Fried	Liberty Associates III, L.P. J. Michael Fried	(a General Partner of Registrant)	June 7, 1999
	Senior Vice President, (principal 	financial officer) of Related Credit 	Properties Inc., general partner of 	Related Credit Properties L.P. 	(a General Partner of Registrant) 	which is also the general partner of /s/ Alan P. Hirmes	Liberty Associates III, L.P. Alan P. Hirmes	(a General Partner of Registrant)	June 7, 1999
	Treasurer (principal accounting 	officer) of Related Credit 	Properties Inc., general partner of 	Related Credit Properties L.P. 	(a General Partner of Registrant) 	which is also the general partner of /s/ Glenn F. Hopps	Liberty Associates III, L.P. Glenn F. Hopps	(a General Partner of Registrant)	June 7, 1999
	Director of Related Credit 	Properties Inc., a general partner of 	Related Credit Properties L.P. 	(a General Partner of Registrant) 	which is also the general partner of /s/ Stephen M. Ross	Liberty Associates III, L.P. Stephen M. Ross	(a General Partner of Registrant)	June 7, 1999
INDEPENDENT AUDITORS' REPORT
To the Partners of Liberty Tax Credit Plus L.P. and Subsidiaries (A Delaware Limited Partnership)
In connection with our audits of the consolidated financial statements of Liberty Tax Credit Plus L.P. and Subsidiaries in- cluded in the Form 10-K as presented in our opinion dated May 25, 1999 on page 18 based on the reports of other auditors, we have also audited supporting Schedule I for the 1998, 1997 and 1996 Fiscal Years and Schedule III at March 15, 1999. In our opinion, and based on the reports of the other auditors (certain of which were modified due to the uncertainty of these subsidi- ary partnerships' abilities to continue in existence), these consolidated schedules present fairly, when read in conjunction with the related consolidated financial statements, the finan- cial data required to be set forth therein.
As discussed in Note 11(a), the consolidated financial state- ments include the financial statements of three subsidiary part- nerships with significant contingencies and uncertainties re- garding their continuing operations. During the 1998 Fiscal Year, these subsidiary partnerships incurred significant operat- ing losses and one is in default on its mortgage obligation. These conditions raise substantial doubt about the subsidiary partnerships' abilities to continue as going concerns. The fi- nancial statements of these three subsidiary partnerships were prepared assuming that each will continue as a going concern. The three subsidiary partnerships' losses aggregated $771,697 (Fiscal 1998), $887,146 (Fiscal 1997) and $1,027,546 (Fiscal 1996) and their assets aggregated $16,073,230 and $16,967,227 at March 15, 1999 and 1998, respectively. Management's plans re- garding these matters are also discussed in Note 11(a). The ac- companying consolidated financial statements do not include any adjustments that might result from the outcome of these uncer- tainties.
TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI, LLP
New York, New York May 25, 1999
LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Summarized condensed financial information of registrant (not including consolidated subsidiary partnerships):
LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT
LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT