UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended December 30, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the transition period from to ___________
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Commission file number: 0-18405
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American Tax Credit Properties II L.P.
-----------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3495678
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Richman Tax Credit Properties II L.P.
599 West Putnam Avenue, 3rd Floor
Greenwich, Connecticut 06830
- -------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 869-0900
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.
Yes X No .
----- -----
AMERICAN TAX CREDIT PROPERTIES II L.P.
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
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Table of Contents Page
----------------- ----
Balance Sheets............................................................3
Statements of Operations..................................................4
Statements of Cash Flows..................................................5
Notes to Financial Statements.............................................7
2
AMERICAN TAX CREDIT PROPERTIES II L.P.
BALANCE SHEETS
(UNAUDITED)
December 30, March 30,
Notes 2001 2001
----- ----------- -----------
ASSETS
Cash and cash equivalents $ 135,857 $ 81,216
Investments in bonds 2 2,824,168 3,155,194
Investment in local partnerships 3 7,908,202 9,037,289
Interest receivable 38,138 45,050
----------- -----------
$10,906,365 $12,318,749
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 692,972 $ 734,858
Payable to general partner and affiliates 887,914 855,501
Other liabilities 27,600 34,600
----------- -----------
1,608,486 1,624,959
----------- -----------
Commitments and contingencies 3
Partners' equity (deficit)
General partner (400,518) (386,180)
Limited partners (55,746 units of
limited partnership interest
outstanding) 9,625,877 11,045,331
Accumulated other income, net 2 72,520 34,639
----------- -----------
9,297,879 10,693,790
----------- -----------
$10,906,365 $12,318,749
=========== ===========
See Notes to Financial Statements.
3
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
December 30, December 30, December 30, December 30,
Notes 2001 2001 2000 2000
----- ----------- ----------- ----------- -----------
REVENUE
Interest $ 55,351 $ 164,190 $ 60,196 $ 183,919
Other income from local 3 23,624 1,812
partnerships ---------- ----------- ---------- -----------
TOTAL REVENUE 55,351 187,814 60,196 185,731
---------- ----------- ---------- -----------
EXPENSES
Administration fees 74,827 224,480 74,827 224,480
Management fees 74,827 224,480 74,827 224,480
Professional fees 21,650 49,455 18,137 74,289
Printing, postage and other 8,602 27,802 14,207 38,320
---------- ----------- ---------- -----------
TOTAL EXPENSES 179,906 526,217 181,998 561,569
---------- ----------- ---------- -----------
Loss from operations (124,555) (338,403) (121,802) (375,838)
Equity in loss of investment
in local partnerships 3 (119,357) (1,095,389) (136,241) (973,303)
---------- ----------- ---------- -----------
NET LOSS (243,912) (1,433,792) (258,043) (1,349,141)
Other comprehensive income (loss) 2 (39,150) 37,881 45,739 84,854
---------- ----------- ---------- -----------
COMPREHENSIVE LOSS $ (283,062) $(1,395,911) $(212,304) $(1,264,287)
========== =========== ========= ===========
NET LOSS ATTRIBUTABLE TO
General partner $ (2,439) $ (14,338) $ (2,580) $ (13,491)
Limited partners (241,473) (1,419,454) (255,463) (1,335,650)
---------- ----------- ---------- -----------
$ (243,912) $(1,433,792) $ (258,043) $(1,349,141)
============ ============ ============ ===========
NET LOSS per unit of limited
partnership interest
(55,746 units of limited
partnership interest) $ (4.33) $ (25.46) $ (4.58) $ (23.96)
============ ============ ============ ===========
See Notes to Financial Statements.
4
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 30, 2001 AND 2000
(UNAUDITED)
2001 2000
--------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 141,807 $ 161,492
Cash used for local partnerships for deferred (7,000) (7,000)
expenses
Cash paid for
administration fees (254,410) (228,889)
management fees (187,137) (187,137)
professional fees (61,711) (82,974)
printing, postage and other expenses (32,432) (21,463)
---------- ----------
Net cash used in operating activities (400,883) (365,971)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in local partnerships (161,865) (184,834)
Cash distributions from local partnerships 219,187 80,359
Maturities/redemptions and sales of bonds 398,202 226,791
Investment in bonds (includes accrued interest (306,142)
of $5,844) ---------- ----------
Net cash provided by (used in) investing
activities 455,524 (183,826)
--------- ---------
Net increase (decrease) in cash and cash 54,641 (549,797)
equivalents
Cash and cash equivalents at beginning of period 81,216 641,463
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 135,857 $ 91,666
========= =========
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain on investments in bonds, net $ 37,881 $ 84,854
========= =========
- -------------------------------------------------------------------------------
See reconciliation of net loss to net cash used in operating activities on page
6.
See Notes to Financial Statements.
5
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF CASH FLOWS - (Continued)
NINE MONTHS ENDED DECEMBER 30, 2001 AND 2000
(UNAUDITED)
2001 2000
---- ----
RECONCILIATION OF NET LOSS TO NET CASH USED IN
OPERATING ACTIVITIES
Net loss $(1,433,792) $(1,349,141)
Adjustments to reconcile net loss to net cash used
in operating activities
Equity in loss of investment in local
partnerships 1,095,389 973,303
Distributions from local partnerships
classified as other income (23,624) (1,812)
Gain on redemption of bonds (4,918)
Amortization of net premium on investments
in bonds 5,069 4,730
Accretion of zero coupon bonds (29,446) (29,445)
Decrease in interest receivable 6,912 2,288
Increase in payable to general partner and
affiliates 32,413 32,934
Increase (decrease) in accounts payable and
accrued expenses (41,886) 8,172
Decrease in other liabilities (7,000) (7,000)
---------- -----------
NET CASH USED IN OPERATING ACTIVITIES $ (400,883) $ (365,971)
========== ===========
See Notes to Financial Statements.
6
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 2001
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. They do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. The results of operations are impacted significantly by the
combined results of operations of the Local Partnerships, which are provided
by the Local Partnerships on an unaudited basis during interim periods.
Accordingly, the accompanying financial statements are dependent on such
unaudited information. In the opinion of the General Partner, the financial
statements include all adjustments necessary to present fairly the financial
position as of December 30, 2001 and the results of operations and cash flows
for the interim periods presented. All adjustments are of a normal recurring
nature. The results of operations for the three and nine month periods ended
December 30, 2001 are not necessarily indicative of the results that may be
expected for the entire year.
Certain prior period Local Partnership balances in Note 3 have been
reclassified to conform to the current period classification.
2. Investments in Bonds
As of December 30, 2001, certain information concerning investments in bonds
is as follows:
Gross Gross
Amortized unrealized unrealized Estimated
Description and maturity cost gains losses fair value
------------------------ --------- ---------- ---------- ----------
Corporate debt securities
Within one year $ 200,529 $ 7,465 $ -- $ 207,994
After one year through
five years 1,907,708 74,185 (23,380) 1,958,513
----------- ----------- ----------- -----------
2,108,237 81,650 (23,380) 2,166,507
----------- ----------- ----------- -----------
U.S. Treasury debt securities
After five years through
ten years 629,836 13,592 -- 643,428
----------- ----------- ----------- -----------
U.S. government and agency securities
After one year through
five years 13,575 658 -- 14,233
----------- ----------- ----------- -----------
$ 2,751,648 $ 95,900 $ (23,380) $ 2,824,168
=========== ========== =========== ===========
7
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 2001
(UNAUDITED)
3. Investment in Local Partnerships
The Partnership owns limited partnership interests in fifty Local
Partnerships representing capital contributions in the aggregate amount of
$46,994,071, which includes advances made to certain Local Partnerships. As
of September 30, 2001, the Local Partnerships have outstanding mortgage loans
payable totaling approximately $87,325,000 and accrued interest payable on
such loans totaling approximately $6,820,000, which are secured by security
interests and liens common to mortgage loans on the Local Partnerships' real
property and other assets.
For the nine months ended December 30, 2001, the investment in local
partnerships activity consists of the following:
Investment in local partnerships as of March
30, 2001 $ 9,037,289
Advances to Local Partnerships 161,865
Equity in loss of investment in local
partnerships (1,095,389)*
Cash distributions received from Local
Partnerships (219,187)
Cash distributions from Local Partnerships
classified as other income 23,624
-----------
Investment in local partnerships as of December
30, 2001 $ 7,908,202
===========
* 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. The amount of
such excess losses applied to other partners' capital was $1,418,754 for the
nine months ended September 30, 2001 as reflected in the combined statement of
operations of the Local Partnerships reflected herein Note 3.
Effective October 1, 1998, in an attempt to avoid potential adverse tax
consequences, the Partnership and the local general partners of 2000-2100
Christian Street Associates ("2000 Christian Street") and Christian Street
Associates Limited Partnership ("Christian Street") agreed to equally share the
funding of operating deficits through June 30, 2000 in the case of Christian
Street and through September 30, 2000 in the case of 2000 Christian Street (the
respective "Funding Agreements"). The Funding Agreements have been extended
through June 30, 2002. Under the terms of the Funding Agreements, the
Partnership has advanced $164,840 as of December 30, 2001, of which $60,269 was
advanced during the nine months then ended, and has recorded such advances as
investment in local partnerships.
8
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 2001
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of September 30,
2001 and December 31, 2000 are as follows:
September 30, December 31,
2001 2000
-------------- -------------
ASSETS
Cash and cash equivalents $ 2,120,852 $ 3,332,561
Rents receivable 527,542 440,713
Escrow deposits and reserves 5,765,978 5,516,361
Land 4,180,673 4,180,673
Buildings and improvements (net of
accumulated depreciation of $60,337,557
and $56,806,969) 83,933,564 86,143,179
Intangible assets (net of accumulated
amortization of $1,238,192 and $1,171,094) 1,456,258 1,436,987
Other assets 1,282,623 1,140,790
------------- -------------
$ 99,267,490 $ 102,191,264
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,994,965 $ 1,813,276
Due to related parties 3,965,414 4,008,867
Mortgage loans 87,324,887 88,273,451
Notes payable 2,272,172 2,115,382
Accrued interest 6,820,377 6,274,662
Other liabilities 724,733 683,883
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103,102,548 103,169,521
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Partners' equity (deficit)
American Tax Credit Properties II L.P.
Capital contributions, net of
distributions 45,498,780 45,514,198
Cumulative loss (35,906,212) (34,810,823)
------------- -------------
9,592,568 10,703,375
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General partners and other limited partners
Capital contributions, net of distributions 3,088,308 3,118,133
Cumulative loss (16,515,934) (14,799,765)
------------- -------------
(13,427,626) (11,681,632)
------------- -------------
(3,835,058) (978,257)
------------- -------------
$ 99,267,490 $ 102,191,264
============= =============
9
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 2001
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the three
and nine month periods ended September 30, 2001 and 2000 are as follows:
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2001 2001 2000 2000
------------ ------------ ------------ ------------
REVENUE
Rental $ 5,288,822 $ 15,815,011 $ 5,206,136 $ 15,492,971
Interest and other 116,040 441,740 134,914 398,729
------------ ------------ ------------ ------------
Total Revenue 5,404,862 16,256,751 5,341,050 15,891,700
------------ ------------ ------------ ------------
EXPENSES
Administrative 844,813 2,568,160 846,154 2,701,078
Utilities 671,246 2,640,263 575,692 1,928,020
Operating and maintenance 1,180,799 3,579,404 1,438,157 4,026,709
Taxes and insurance 725,423 2,042,619 585,665 1,755,474
Financial 1,566,646 4,638,545 1,554,577 4,695,368
Depreciation and amortization 1,230,263 3,599,318 1,191,952 3,643,738
------------ ------------ ------------ ------------
Total Expenses 6,219,190 19,068,309 6,192,197 18,750,387
------------ ------------ ------------ ------------
NET LOSS $ (814,328) $ (2,811,558) $ (851,147) $ (2,858,687)
============ ============ ============ ============
NET LOSS ATTRIBUTABLE TO
American Tax Credit $ (119,357) $ (1,095,389) $ (136,241) $ (973,303)
Properties II L.P.
General partners and
other limited partners,
which includes $592,937,
$1,418,754, $591,263 and
$1,581,599 of Partnership
loss in excess of investment (694,971) (1,716,169) (714,906) (1,885,384)
------------ ------------ ------------ ------------
$ (814,328) $ (2,811,558) $ (851,147) $ (2,858,687)
============ ============ ============ ============
The combined results of operations of the Local Partnerships for the three and
nine month periods ended September 30, 2001 are not necessarily indicative of
the results that may be expected for an entire operating period.
4. Additional Information
Additional information, including the audited March 30, 2001 Financial
Statements and the Organization, Purpose and Summary of Significant
Accounting Policies, is included in the Partnership's Annual Report on Form
10-K for the fiscal year ended March 30, 2001 on file with the Securities and
Exchange Commission.
10
AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Material Changes in Financial Condition
As of December 30, 2001, American Tax Credit Properties II L.P. (the
"Registrant") has not experienced a significant change in financial condition as
compared to March 30, 2001. Principal changes in assets are comprised of
periodic transactions and adjustments and anticipated equity in loss from
operations of the local partnerships (the "Local Partnerships") which own
low-income multifamily residential complexes (the "Properties") which qualify
for the low-income tax credit in accordance with Section 42 of the Internal
Revenue Code (the "Low-income Tax Credit"). During the nine months ended
December 30, 2001, Registrant received cash from interest revenue,
maturities/redemptions and sales of bonds and distributions from Local
Partnerships and utilized cash for operating expenses and investments in certain
Local Partnerships (see Local Partnership Matters below). Cash and cash
equivalents and investments in bonds decreased, in the aggregate, by
approximately $276,000 during the nine months ended December 30, 2001 (which
includes a net unrealized gain on investments in bonds of approximately $38,000,
amortization of net premium on investments in bonds of approximately $5,000 and
accretion of zero coupon bonds of approximately $29,000). 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. During the nine months ended December 30, 2001, the investment in local
partnerships decreased as a result of Registrant's equity in the Local
Partnerships' net loss for the nine months ended September 30, 2001 of
$1,095,389 and cash distributions received from Local Partnerships of $195,563
(exclusive of distributions from Local Partnerships of $23,624 classified as
other income), partially offset by investments in certain Local Partnerships of
$161,865 (see discussion below under Local Partnership Matters). Accounts
payable and accrued expenses includes deferred administration fees of $618,740,
and payable to general partner represents deferred administration and management
fees in the accompanying balance sheet as of December 30, 2001.
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
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. 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 3 to Registrant's financial
statements include the operating results of all Local Partnerships, 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. Accordingly, cumulative losses and cash
distributions in excess of the investment 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 three months ended December 30, 2001 and 2000
resulted in net losses of $243,912 and $258,043, respectively. Other
comprehensive income (loss) for the three months ended December 30, 2001 and
2000 resulted from a net unrealized gain (loss) on investments in bonds of
$(39,150) and $45,739, respectively.
The Local Partnerships' net loss of approximately $814,000 for the three months
ended September 30, 2001 was attributable to rental and other revenue of
approximately $5,405,000, exceeded by operating and interest expense (including
interest on non-mandatory debt) of approximately $4,989,000 and approximately
$1,230,000 of depreciation and amortization expense. The Local Partnerships' net
loss of approximately $851,000 for the three months ended September 30, 2000 was
attributable to rental and other revenue of approximately $5,341,000, exceeded
by operating and interest expense (including interest on non-mandatory debt) of
approximately $5,000,000 and approximately $1,192,000 of depreciation and
amortization expense. The results of operations of the Local Partnerships for
the three months ended September 30, 2001 are not necessarily indicative of the
results that may be expected in future periods.
11
AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Registrant's operations for the nine months ended December 30, 2001 and 2000
resulted in net losses of $1,433,792 and $1,349,141, respectively. The increase
in net loss is primarily attributable to an increase in equity in loss of
investment in local partnerships of approximately $122,000, which is primarily
the result of an increase in the net operating losses of those Local
Partnerships in which Registrant continues to have an investment balance. Other
comprehensive income for the nine months ended December 30, 2001 and 2000
resulted from a net unrealized gain on investments in bonds of $37,881 and
$84,854, respectively.
The Local Partnerships' net loss of approximately $2,812,000 for the nine months
ended September 30, 2001 was attributable to rental and other revenue of
approximately $16,257,000, exceeded by operating and interest expense (including
interest on non-mandatory debt) of approximately $15,470,000 and approximately
$3,599,000 of depreciation and amortization expense. The Local Partnerships' net
loss of approximately $2,859,000 for the nine months ended September 30, 2000
was attributable to rental and other revenue of approximately $15,891,000,
exceeded by operating and interest expense (including interest on non-mandatory
debt) of approximately $15,106,000 and approximately $3,644,000 of depreciation
and amortization expense. The results of operations of the Local Partnerships
for the nine months ended September 30, 2001 are not necessarily indicative of
the results that may be expected in future periods.
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 Tear Credit Period"). The Ten Year
Credit Period was fully exhausted by all of the Properties as of December 31,
2001. 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").
In addition, certain of the Local Partnerships have entered into agreements with
the relevant state tax credit agencies whereby the Local Partnerships must
maintain the low-income nature of the Properties for a period which exceeds the
Compliance Period, regardless of any sale of the Properties by the Local
Partnerships after 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. Through December 31, 2001, none of the Local Partnerships have
reported an event of recapture of Low-income Tax Credits.
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. Six Local Partnerships'
Section 8 contracts, certain of which cover only certain rental units, 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.
12
AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The Local Partnerships have various financing structures which include (i)
required debt service payments ("Mandatory Debt Service") and (ii) debt service
payments which 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 nine months ended September 30, 2001, revenue
from operations of the Local Partnerships has generally been sufficient to cover
operating expenses and Mandatory Debt Service. Substantially all 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.
Christian Street Associates Limited Partnership ("Christian Street") and
2000-2100 Christian Street Associates ("2000 Christian Street"), which Local
Partnerships have certain common general partner interests and a common first
mortgage lender, have experienced ongoing operating deficits. Under terms of the
partnership agreements, the Local General Partners exceeded their respective
operating deficit guarantees and, as of September 30, 1998, had advanced in
excess of $1,000,000 in the aggregate to Christian Street and 2000 Christian
Street. The Local General Partners approached the lender with the intention to
restructure the loans; however the lender indicated that in connection with any
such restructuring, the respective Local Partnerships would be responsible for
certain costs, which may be significant. If the Local General Partners were to
cease funding the operating deficits, Registrant would likely incur substantial
recapture of Low-income Tax Credits. Effective October 1, 1998, in an attempt to
avoid potential adverse tax consequences, Registrant and the Local General
Partners agreed to equally share the funding of operating deficits through June
30, 2000 in the case of Christian Street and through September 30, 2000 in the
case of 2000 Christian Street (the respective "Funding Agreements"). The Funding
Agreements have been extended through June 30, 2002. The Local General Partners
agreed to cause the management agent to accrue and defer its management fees
during the period of the Funding Agreements and the accrued management fees are
excluded when determining the operating deficits. Christian Street and 2000
Christian Street reported a combined operating deficit of approximately
$105,000, excluding accrued management fees of approximately $32,000, for the
nine months ended September 30, 2001. Under the terms of the Funding Agreements,
Registrant has advanced $164,840 as of December 30, 2001, of which $60,269 was
advanced during the nine months then ended. Payments on the mortgages and real
estate taxes are current. Registrant's investment balances in Christian Street
and 2000 Christian Street, after cumulative equity losses, became zero during
the year ended March 30, 1997. Christian Street and 2000 Christian Street
generated approximately $8.2 and approximately $4.4 per Unit per year to the
limited partners upon the expiration of their Low-income Tax Credit allocations
in 2000 and 2001, respectively.
During the nine months ended September 30, 2001, Ann Ell Apartments Associates,
Ltd. ("Ann Ell") reported an operating deficit of approximately $51,000.
Registrant has made cumulative advances to Ann Ell of $342,545 as of December
30, 2001, of which $81,027 was advanced during the nine months then ended.
Payments on the mortgage and real estate taxes are current. Registrant's
investment balance in Ann Ell, after cumulative equity losses, became zero
during the year ended March 30, 1994. Ann Ell generated approximately $1.7 per
Unit per year to the limited partners upon the expiration of its Low-income Tax
Credit allocation in 2001.
The terms of the partnership agreement of College Avenue Apartments Limited
Partnership ("College Avenue") require the management agent to defer property
management fees in order to avoid a default under the mortgage. College Avenue
reported an operating deficit of approximately $25,000 for the nine months ended
September 30, 2001, which includes property management fees of approximately
$10,000. Registrant advanced $11,150 in June 2001. Payments on the mortgage and
real estate taxes are current. Registrant's investment balance in College
Avenue, after cumulative equity losses, became zero during the year ended March
30, 1999. College Avenue generated approximately $1.2 per Unit per year to the
limited partners upon the expiration of its Low-income Tax Credit allocation in
2000.
13
AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 3. 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
2008, 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.
14
AMERICAN TAX CREDIT PROPERTIES II L.P.
PART II - OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
-----------------
Registrant is not aware of any material legal proceedings.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN TAX CREDIT PROPERTIES II L.P.
(a Delaware limited partnership)
By: Richman Tax Credit Properties II L.P.,
General Partner
by: Richman Tax Credits Inc.,
general partner
Dated: February 13, 2002 /s/ Richard Paul Richman
-----------------------------------------
by: Richard Paul Richman
President, Chief Executive Officer and
Director of the general partner of the
General Partner
Dated: February 13, 2002 /s/ Neal Ludeke
-----------------------------------------
by: Neal Ludeke
Vice President and Treasurer of the
general partner
Of the General Partner
(Principal Financial and Accounting
Officer of Registrant)
16