CENTURY PACIFIC TAX CREDIT HOUSING FUND II
1 E. STOW ROAD
MARLTON, NEW JERSEY 08053
VIA U.S. Mail and FAX (202)942-9635
April 11, 2005
United States Security and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Mail Stop 0409
Attention: Cicely Luckey, Senior Staff Accountant
RE: Century Pacific Tax Credit Housing Fund - II
Form 10-K for the fiscal year ended March 31, 2004
Filed January 25, 2005
File No. 033-24537
Dear Ms. Luckey:
We are responding to the letter from the United States Securities and Exchange
Commission dated March 3, 2005 regarding the above referenced filing.
Notes to the Financial Statements, pages F-7 - F-14
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Note 1. Summary of Significant Accounting Policies, pages F-7 - F-8
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Investments in Operating Partnerships, page F-7
1. We note that you accounted for your investments in Laurel-Clayton
Limited Partnership using the equity method. Supplementally, advise us
how you determined that you do not control the Laurel-Clayton Limited
Partnership in light of your 60% economic interest. Reference is made
to paragraphs 9 and 10 of SOP 78-9. Additionally, please tell us how
you evaluated your interest in this limited partnership under FIN 46R.
Response:
Paragraphs 9 and 10 of SOP 78-9 state:
"The rights and obligations of the general partners in a limited
partnership are different from those of the limited partners. Some believe that
general partners should be deemed to have the controlling interest in a limited
partnership. However, if limited partners have important rights, such as the
right to replace the general partner or partners, approve the sale or
refinancing of principal assets, or approve the acquisition of principal
partnership assets, the partnership may not be under the control, directly or
indirectly, of the general partnership interests. The division believes that the
general partners are in control and should account for their investments in
accordance with the recommendations in paragraph .07 only if the substance of
the partnership or other agreements provides for control by the general
partners.
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
1 E. STOW ROAD
MARLTON, NEW JERSEY 08053
The division believes that if the substance of the partnership
arrangement is such that the general partners are not in control of the major
operating and financial policies of the partnership, a limited partner may be in
control. An example could be a limited partner holding over 50 percent of the
total partnership interest. A controlling limited partner should be guided in
accounting for its investment by the principles for investments in subsidiaries.
Noncontrolling limited partners should account for their investments by the
equity method and should be guided by the provisions in paragraph 19 of APB
Opinion 18, as discussed in paragraphs .06 and .07, or by the cost method, as
discussed in paragraph .08, as appropriate."
Century Pacific Tax Credit Housing Fund-II's (the "Registrant") investment in
Laurel-Clayton Limited Partnership ("Laurel-Clayton") is a 60% limited partner
interest. In its capacity as a limited partner in Laurel-Clayton, the Registrant
does not have rights normally associated with a controlling entity. With respect
to its investment in Laurel-Clayton, the Registrant does not have the right to
replace the general partner, except for specific instances of the general
partner failing to fulfill its fiduciary responsibilities as the general
partner. The Registrant also does not have the right to approve the sale or
refinancing of the principal assets of Laurel-Clayton, nor does the Registrant
have the right to influence the operations of Laurel-Clayton. On this basis, the
Registrant is deemed to not control Laurel-Clayton, when considering the
qualitative factors outlined in SOP 78-9, paragraphs 9 and 10.
In applying the guidance under FIN 46R, as prescribed in paragraph 8, a business
need not be evaluated to determine if it is a VIE unless one of the following
conditions exist:
a. The reporting enterprise, its related parties, or both participated
significantly in the design or redesign of the entity, and the entity
is neither a joint venture nor a franchisee.
b. The entity is designed so that substantially all of its activities
either involve or are conducted on behalf of the reporting enterprise
and its related parties.
c. The reporting enterprise and its related parties provide more than
half of the total of the equity, subordinated debt, and other forms of
subordinated financial support to the entity based on an analysis of
the fair values of the interests in the entity.
d. The activities of the entity are primarily related to securitizations,
other forms of asset-backed financings, or single-lessee leasing
arrangements.
Neither the Registrant (as the reporting enterprise), nor its related parties,
participated in the design of Laurel-Clayton (as the entity).
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
1 E. STOW ROAD
MARLTON, NEW JERSEY 08053
Laurel-Clayton is not designed so that substantially all of its activities
either involve or are conducted on behalf of the Registrant.
Neither the Registrant nor its related parties provide more than half of the
total equity and other subordinated financial support to Laurel-Clayton.
Laurel-Clayton has negative equity at March 31, 2004, and zero subordinated debt
to the Registrant, therefore, the Registrant has not provided more than half of
the total equity and subordinated financial support to Laurel-Clayton.
The activities of Laurel-Clayton are not related to securitizations.
On the basis of the above, Laurel-Clayton does not meet the criteria for
consideration as a VIE with respect to the Registrant.
Note 5. Investments in Operating Partnerships, pages F-11 - F-13
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2. In a supplemental response, please tell us what consideration you gave
to including complete audited financial statements, including audited
statements of partners' capital, cash flows, and footnotes for the
Laurel-Clayton Limited Partnership. Reference is made to Rule 3-09 of
Regulation S-X.
Response:
Upon review of Rule 3-09 of Regulation S-X, the Registrant meets
certain criteria of the rule. Specifically, at March 31, 2004, the
Registrant `s proportionate share of the total assets of
Laurel-Clayton was approximately $9.5 million, (60% of reported assets
of $15.8 million) which was more than 20% of total assets of the
Registrant. As a result the Registrant will amend the originally filed
Form 10-K, originally filed on January 25, 2005, to include the
information as above as required under Rule 3-09 of Regulation S-X.
We will do this within 30 business days of receiving the SEC's
comments related to these explanations.
3. In a supplemental response, please tell us how your operating
partnership accounted for the sale of the Washington Courts Apartment
property.
Response:
The operating partnership accounted for the sale of the Washington
Courts Apartment property as a non-extraordinary item. On that basis,
no share of extraordinary income from equity investments was recorded
by the Registrant.
In evaluating the impact to its financial statements, the Registrant
did not consider the possibility of providing equity in the net loss of
operating partnerships offset by equity in the extraordinary gain of
operating partnerships to be a significant reporting issue, and
therefore, treated the entire operating activity as non-extraordinary.
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
1 E. STOW ROAD
MARLTON, NEW JERSEY 08053
In connection with responding to your comments, it is acknowledged that
o The Registrant is responsible for the adequacy and accuracy of the
disclosure in the filings;
o Staff comments or changes to disclosure in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filings; and,
o The Registrant may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.
Sincerely,
Mr. James V. Bleiler
Chief Financial Officer
cc: Michael D. Byrnes, CPA, Asher & Company, Ltd.