UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 June 30, 2002
OR
- ------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 33-89968
INDEPENDENCE TAX CREDIT PLUS L.P. IV
(Exact name of registrant as specified in its charter)
Delaware 13-3809869
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- --------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
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 such
filing requirements for the past 90 days. Yes X No ____
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
June 30, March 31,
2002 2002
----------- -----------
(Unaudited)
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $10,044,855 and $9,458,063,
respectively $71,341,722 $71,923,788
Cash and cash equivalents 2,221,007 2,461,056
Cash held in escrow 3,288,269 3,087,693
Deferred costs, net of accumulated
amortization of $331,076 and
$311,350, respectively 848,040 867,766
Other assets 472,366 425,486
----------- -----------
Total assets $78,171,404 $78,765,789
=========== ===========
2
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
June 30, March 31,
2002 2002
----------- -----------
(Unaudited)
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage notes payable $36,661,523 $36,739,830
Accounts payable and other
liabilities 7,000,828 6,663,234
Due to local general partners and
affiliates 2,593,287 2,777,814
Due to general partner and affiliates 1,447,058 1,346,115
----------- -----------
Total liabilities 47,702,696 47,526,993
----------- -----------
Minority interest 2,235,935 2,244,151
----------- -----------
Partners' capital (deficit):
Limited partners (45,844 BACs
issued and outstanding) 28,357,979 29,112,232
General partner (125,206) (117,587)
----------- -----------
Total partners' capital (deficit) 28,232,773 28,994,645
----------- -----------
Total liabilities and partners'
capital (deficit) $78,171,404 $78,765,789
=========== ===========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(Unaudited)
Three Months Ended
June 30,
-----------------------------
2002 2001
-----------------------------
Revenues
Rental income $ 1,385,664 $ 1,360,723
Other income (principally interest
income) 51,925 99,350
----------- -----------
Total revenues 1,437,589 1,460,073
----------- -----------
Expenses
General and administrative 396,277 419,249
General and administrative -
related parties 147,477 152,324
Repairs and maintenance 219,407 223,061
Operating 169,571 230,324
Taxes 44,952 43,838
Insurance 62,500 67,021
Interest 560,975 618,793
Depreciation and amortization 606,518 624,395
----------- -----------
Total expenses 2,207,677 2,379,005
----------- -----------
Loss before minority interest (770,088) (918,932)
Minority interest in loss of
subsidiary partnerships 8,216 7,566
----------- -----------
Net loss $ (761,872) $ (911,366)
=========== ===========
Net loss - limited partners $ (754,253) $ (902,252)
=========== ===========
Number of BACs outstanding 45,844 45,844
=========== ===========
Net loss per BAC $ (16.45) $ (19.68)
========== ===========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Condensed Statement of Changes in Partners' Capital (Deficit)
For the Three Months Ended June 30, 2002
(Unaudited)
Limited General
Total Partners Partner
------------------------------------------------
Partners' capital
(deficit) - April 1,
2002 $28,994,645 $29,112,232 $ (117,587)
Net loss (761,872) (754,253) (7,619)
----------- ----------- -----------
Partners' capital
(deficit) -
June 30, 2002 $28,232,773 $28,357,979 $ (125,206)
=========== =========== ===========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
Three Months Ended
June 30,
-----------------------------
2002 2001
-----------------------------
Cash flows from operating activities:
Net loss $ (761,872) $ (911,366)
----------- -----------
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 606,518 624,395
Minority interest in loss of
subsidiary partnerships (8,216) (7,566)
Increase in cash held in escrow (200,576) (309,654)
Increase in other assets (46,880) (92,761)
Increase in accounts payable
and other liabilities 337,594 588,427
Increase in due to local general
partners and affiliates 0 5,312
Decrease in due to local general
partners and affiliates (24,999) (69,715)
Increase (decrease) in due to general
partner and affiliates 100,943 (104,231)
----------- -----------
Total adjustments 764,384 634,207
----------- -----------
Net cash provided by (used in)
operating activities 2,512 (277,159)
----------- -----------
6
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(Unaudited)
(continued)
Three Months Ended
June 30,
-----------------------------
2002 2001
-----------------------------
Cash flows from investing activities:
Increase in property and equipment (4,726) (1,727)
Increase in due to local general
partners and affiliates 120,797 41,319
Decrease in due to local general
partners and affiliates (280,325) (44,095)
----------- -----------
Net cash used in investing activities (164,254) (4,503)
----------- -----------
Cash flows from financing activities:
Proceeds from mortgage notes 0 332
Repayments of mortgage notes (78,307) (20,872)
Increase in deferred costs 0 (60,014)
----------- -----------
Net cash used in financing
activities (78,307) (80,554)
----------- -----------
Net decrease in cash and cash
equivalents (240,049) (362,216)
Cash and cash equivalents at
beginning of period 2,461,056 3,705,003
----------- -----------
Cash and cash equivalents at
end of period $ 2,221,007 $ 3,342,787
=========== ===========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
7
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
June 30, 2002
(Unaudited)
Note 1 - General
The consolidated financial statements include the accounts of Independence Tax
Credit Plus L.P. IV (the "Partnership") and fourteen other limited partnerships
("subsidiary partnerships", "subsidiaries" or "Local Partnerships") owning
affordable apartment complexes that are eligible for the low-income housing tax
credit, some of which apartment complexes may also be eligible for the historic
rehabilitation tax credit. The general partner of the Partnership is Related
Independence L.L.C., a Delaware limited liability company (the "General
Partner"). Through the rights of the Partnership and/or an affiliate of the
General Partner, which affiliate 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 subsidiary partnerships.
For financial reporting purposes, the Partnership's fiscal quarter ends June 30.
All subsidiaries have fiscal quarters ending March 31. Accounts of the
subsidiaries have been adjusted for intercompany transactions from April 1
through June 30. The Partnership's fiscal quarter ends June 30 in order to allow
adequate time for the subsidiaries' financial statements to be prepared and
consolidated.
All intercompany accounts and transactions with the subsidiary partnerships have
been eliminated in consolidation.
Losses attributable to minority interests which exceed the minority interests'
investment in a subsidiary have been charged to the Partnership. Such losses
aggregated approximately $19,000 and $3,000 for the three months ended June 30,
2002 and 2001, respectively. The Partnership's investment in each subsidiary is
equal to the respective subsidiary's partners' equity less minority interest
capital, if any. In consolidation, all subsidiary partnership losses are
included in the Partnership's capital account except for losses allocated to
minority interest capital.
8
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
June 30, 2002
(Unaudited)
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted or condensed. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K for the year ended March 31, 2002.
The books and records of the Partnership are maintained on the accrual basis of
accounting in accordance with generally accepted accounting principles. In the
opinion of the General Partner of the Partnership, the accompanying unaudited
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position of the
Partnership as of June 30, 2002 and its results of operations and its cash flows
for the three months ended June 30, 2002 and 2001. However, the operating
results for the three months ended June 30, 2002 may not be indicative of the
results for the entire year.
9
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
June 30, 2002
(Unaudited)
Note 2 - Related Party Transactions
An affiliate of the General Partner has a .01% interest as a special limited
partner in each of the Local Partnerships.
The costs incurred to related parties for the three months ended June 30, 2002
and 2001 were as follows:
Three Months Ended
June 30,
-----------------------------
2002 2001
-----------------------------
Partnership management fees (a) $ 84,280 $ 83,742
Expense reimbursement (b) 27,761 34,875
Local administrative fee (c) 12,000 11,000
----------- -----------
Total general and administrative-
General Partner 124,041 129,617
----------- -----------
Property management fees incurred
to affiliates of the subsidiary partner-
ships' general partners (d) 23,436 22,707
----------- -----------
Total general and administrative -
related parties $ 147,477 $ 152,324
=========== ===========
(a) The General Partner is entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the annual local
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. Subject to the foregoing limitation, the partnership
management fee will be determined by the General Partner in its sole discretion
based upon its review of the Partnership's investments. Unpaid partnership
management fees for any year will be accrued without interest and will be
payable from working capital reserves or to the extent of available funds after
the Partnership has made distributions to the limited partners of sale or
refinancing proceeds equal to their original capital contributions plus a 10%
priority return thereon (to the extent not theretofore paid out of cash flow).
Partnership management fees owed to the General Partner amounting to
approximately $1,040,000 and $955,000 were accrued and unpaid as of June 30,
2002 and March 31, 2002, respectively.
10
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
June 30, 2002
(Unaudited)
(b) The Partnership reimburses the General Partner and its affiliates for actual
Partnership operating expenses incurred by the General Partner and its
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 Partner performs asset monitoring for the Partnership.
These services include site visits and evaluations of the subsidiary
partnerships' performance.
(c) Independence SLP IV L.P., a special limited partner of the subsidiary
partnerships, is entitled to receive a local administrative fee of up to $5,000
per year from each subsidiary partnership.
(d) Property management fees incurred by the Local Partnerships amounted to
$89,047 and $83,972 for the three months ended June 30, 2002 and 2001,
respectively. Of these fees $23,436 and $22,707 were incurred to affiliates of
the subsidiary partnerships' general partners.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
- -------------------------------
The Partnership's primary sources of funds include (i) interest earned on Gross
Proceeds which are invested in tax-exempt money market instruments pending final
payments to Local Partnerships and (ii) working capital reserves and interest
earned thereon. All these sources of funds are available to meet obligations of
the Partnership.
As of June 30, 2002, the Partnership has invested approximately $37,814,000
(including approximately $1,161,000 classified as a loan repayable from
sale/refinancing proceeds in accordance with the Contribution Agreement and not
including acquisition fees of approximately $1,771,000) of net proceeds in
fourteen Local Partnerships of which approximately $1,829,000 remains to be paid
to the Local Partnerships (including approximately $741,000 being held in
escrow) as certain benchmarks, such as occupancy level, must be attained prior
to the release of the funds. During the three months ended June 30, 2002,
nothing was paid to the Local Partnerships. The Partnership is not acquiring
additional properties, but the Partnership may be required to fund potential
purchase price adjustments based on tax credit adjustor clauses.
For the three months ended June 30, 2002, cash and cash equivalents of the
Partnership and its fourteen consolidated Local Partnerships decreased
approximately $240,000. This decrease was due to an increase in property and
equipment ($5,000), repayments of mortgage notes ($78,000) and a net decrease in
due to local general partners and affiliates relating to investing activities
($160,000) which exceeded cash provided by operating activities ($3,000).
Included in the adjustments to reconcile the net loss to cash provided by
operating activities is depreciation and amortization of approximately $607,000.
The Partnership has established a working capital reserve from funds available
for investment, which includes amounts which may be required for potential
purchase price adjustments based on tax credit adjustor clauses. At June 30,
2002, there is approximately $402,000 in the working capital reserves. The
General Partner believes that these reserves, plus any cash distributions
received from the operations of the Local Partnerships, will be sufficient to
fund the Partnership's ongoing operations for the foreseeable future not
including fees owed to the General Partner. Cash distributions from the Local
Partnerships will be relatively immaterial. During the three months ended June
30, 2002, there have been no cash distributions received from the Local
Partnerships.
12
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 diversified 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 tax credits will be attached to the project for a
period of ten years, and will be transferable with the property during the
remainder of such ten-year period. If the General Partner determined that a sale
of a property is warranted, the remaining tax credits would transfer to the new
owner, thereby adding value to the property on the market, which is not included
in the financial statement carrying amount.
Results of Operations
- ---------------------
The results of operations for the three months ended June 30, 2002 and 2001
continued to be in the form of rental income with corresponding expenses divided
among operations, depreciation and mortgage interest.
Rental income increased approximately 2% for the three months ended June 30,
2002 as compared to the corresponding period in 2001, primarily due to rental
rate increases.
Other income decreased approximately $47,000 for the three months ended June 30,
2002 as compared to the corresponding period in 2001, primarily due to smaller
cash and cash equivalent balances earning interest at two Local Partnerships and
at the Partnership level.
Total expenses, excluding operating, remained fairly consistent, with a decrease
of approximately 5% for the three months ended June 30, 2002 as compared to the
corresponding period in 2001.
Operating expenses decreased approximately $61,000 for the three months ended
June 30, 2002 as compared to the corresponding period in 2001, primarily due to
a decrease in fuel costs at three Local Partnerships and an underaccural in 2000
at a fourth Local Partnership.
13
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - 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
(a) Exhibits
(4) Form of Amended and Restated Agreement of Limited Partnership
of the Partnership (attached to the Prospectus as Exhibit A)*
(10A) Form of Subscription Agreement (attached to the Prospectus
as Exhibit B)*
(10B) Form of Escrow Agreement between the Partnership and the
Escrow Agent**
(10C) Form of Purchase and Sales Agreement pertaining to the
Partnership's acquisition of Local Partnership Interests**
(10D) Form of Amended and Restated Agreement of Limited
Partnership of Local Partnerships**
* Incorporated herein by reference to the final Prospectus as
filed pursuant to Rule 424 under the Securities Act of 1933.
** Filed as an exhibit to the Registration Statement on Form S-11
of the Partnership (File No. 33-89968) and incorporated herein by reference
thereto.
(b) Reports on Form 8-K - No reports on Form 8-K were filed
during the quarter.
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INDEPENDENCE TAX CREDIT PLUS L.P. IV
(Registrant)
By: RELATED INDEPENDENCE L.L.C.,
General Partner
Date: July 25, 2002
By:/s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Member
(principal executive and financial officer)
Date: July 25, 2002
By:/s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(principal accounting officer)