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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 33-37724
INDEPENDENCE TAX CREDIT PLUS L.P. II
--------------------------------------------------------
(Exact name of registrant as specified in their charter)
Delaware 13-3646846
---------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
--------------
Limited Partnership Interests and Beneficial Assignment Certificates
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 |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
DOCUMENTS INCORPORATED BY REFERENCE
None
Page 1 of 78
PART I
Item 1. Business.
General
Independence Tax Credit Plus L.P. II (the "Partnership") is a limited
partnership which was formed under the laws of the State of Delaware on February
11, 1992. The General Partner of the Partnership is Related Independence
Associates L.P., a Delaware limited partnership (the "General Partner"). The
general partner of the General Partner is Related Independence Associates Inc.,
a Delaware corporation.
On January 19, 1993 the Partnership commenced a public offering (the
"Offering") of Beneficial Assignment Certificates ("BACs") representing
assignments of limited partnership interests in the Partnership ("Limited
Partnership Interests"), managed by Related Equities Corporation (the "Dealer
Manager"), pursuant to a prospectus dated January 19, 1993, (the "Prospectus").
As of March 31, 1996 the Partnership has received $58,928,000 of Gross
Proceeds of the Offering from 3,853 investors ("BACs holders"). The Offering was
terminated on April 7, 1994. (Item 8, "Financial Statements and Supplementary
Data," Note 10).
The Partnership's business is primarily to invest in other partnerships
("Local Partnerships") owning apartment complexes ("Apartment Complexes" or
"Properties") that are eligible for the low-income housing tax credit ("Housing
Tax Credit") enacted in the Tax Reform Act of 1986, some of which may also be
eligible for the historic rehabilitation tax credit ("Historic Tax Credit";
together with Housing Tax Credits, "Tax Credits"). The Partnership's investment
in each Local Partnership represents 98.99% of the partnership interests in the
Local Partnership. As of March 31, 1996 the Partnership acquired interests in
fifteen Local Partnerships and does not anticipate making any additional
investments. As of March 31, 1996, approximately $46,996,000 (not including
acquisition fees of approximately $3,502,000) of net proceeds has been invested
in fifteen Local Partnerships of which approximately $9,640,000 remains to be
paid to the Local Partnerships, as certain benchmarks such as occupancy levels
must be attained prior to the release of such funds.
The Partnership has been formed to invest in low income Apartment Complexes
that are eligible for the Housing Tax Credit enacted in the Tax Reform Act of
1986. Some Apartment Complexes may also be eligible for Historic Rehabilitation
Tax Credits ("Historic Complexes"). The investment objects of the Partnership
are described below.
1. Entitle qualified Beneficial Assignment Certificates ("BACs") holders to
Housing Tax Credits over the Credit Period with respect to each Apartment
Complex.
2. Preserve and protect the Partnership's capital.
3. Participate in any capital appreciation in the value of the Properties
and provide distributions of Sale or Refinancing Proceeds upon the disposition
of the Properties.
4. Allocate passive losses to individual BACs holders to offset passive
income that they may realize from rental real estate investments and other
passive activities, and allocate passive losses to corporate BACs holders to
offset business income.
One of the Partnership's objectives is to entitle qualified BACs holders to
Housing Tax Credits over the period of the Partnership's entitlement 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 "Credit Period"). Each of the Local Partnerships in which the
Partnership has acquired an interest has been allocated by the relevant state
credit agencies the authority to recognize Tax Credits during the Credit Period
provided that the Local Partnership satisfies the rent restriction, minimum
set-aside and other requirements for recognition of the Tax
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Credits at all times during such period. Once a Local Partnership has become
eligible to recognize Tax Credits, it may lose such eligibility and suffer an
event of "recapture" if its Property fails to remain in compliance with the Tax
Credit requirements. None of the Local Partnerships in which the partnership has
acquired an interest has suffered an event of recapture.
There can be no assurance that the Partnership will achieve its investment
objectives as described above.
Competition
The real estate business is highly competitive and substantially all of the
properties acquired and to be acquired by the Partnership are expected to have
active competition from similar properties in their respective vicinities. The
Partnership will compete in the acquisition of properties with many other
entities engaged in real estate investment activities, some of which have
greater assets than the Partnership. In addition, the number of entities and the
amount available for investment in properties of a type suitable for investment
by the Partnership may increase, resulting in increased competition for such
investments and possible increases in the prices to be paid. In addition,
various other limited partnerships may, in the future, be formed by the General
Partner and/or its affiliates to engage in businesses which may be competitive
with the Partnership.
Employees
The Partnership does not have any direct employees. All services are
performed for the Partnership by the General Partner and their affiliates. The
General Partner receives compensation in connection with such activities as set
forth in Items 11 and 13. In addition, the Partnership reimburses the General
Partner and certain of its 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 and Certificate of Limited
Partnership (the "Partnership Agreement").
Item 2. Properties.
The Partnership holds a 98.99% limited partnership interest in fifteen
Local Partnerships as of March 31, 1996. Set forth below is a schedule of the
Local Partnerships including certain information concerning their respective
Apartment Complexes (the "Local Partnership Schedule"). Further information
concerning these Local Partnerships and their properties may be found in
Schedule III to the financial statements which are included herein.
Local Partnership Schedule
Percentage of Units Occupied at May 1,
Name and Location --------------------------------------
(Number of Units) Date Acquired 1996 1995 1994 1993
- ----------------- ------------- ---- ---- ---- ----
Lincoln Renaissance
Reading, PA (52) April 1993 98% 100% 0%(1) 0%*
United Germano-Millgate
Limited Partnership
Chicago, IL (350) October 1993 98% 98% 64%*(1)
Mansion Court Associates
Philadelphia, PA (30) November 1993 100% 100% 47%(1)
Derby Run Associates, L.P.
Hampton, VA (160) February 1994 95% 96% 0%*
-3-
Percentage of Units Occupied at May 1,
Name and Location --------------------------------------
(Number of Units) Date Acquired 1996 1995 1994 1993
- ----------------- ------------- ---- ---- ---- ----
Renaissance Plaza '93
Associates , L.P.
Baltimore, MD (95) February 1994 98% 83%(1) 0%*
Tasker Village Associates
Philadelphia, PA (28) May 1994 100% 0%(1) 0%*
Martha Bryant Manor, L.P.
Los Angeles, CA (77) September 1994 0%* 0%*
Colden Oaks
Limited Partnership
Los Angeles, CA (38) September 1994 97% 100%
Brynview Terrace, L.P.
Los Angeles, CA (8) September 1994 0%* 0%*
NLEDC, L.P.
Los Angeles, CA (43) September 1994 93%(1) 0%*
Creative Choice
Homes VI, Ltd.
Miami, FL (102) September 1994 98% 0%*
P&P Homes for the
Elderly, L.P.
Los Angeles, CA (107) September 1994 0%* 0%*
Clear Horizons
Limited Partnership
Shreveport, LA (84) December 1994 95% 100%
Neptune Venture, L.P.
Neptune Township, NJ (99) April 1995 35%(1)
Affordable Green Associates L.P.
New York, NY (41) April 1995 100%
*Properties still in construction phase
(1) Properties are in rent-up phase.
The Partnership invested in Local Partnerships owning existing Apartment
Complexes which receive either Federal or state subsidies. HUD through FHA,
administers a variety of subsidies for low- and moderate-income housing. FmHA
administers similar housing programs for non-urban areas. The Federal programs
generally provide one or a combination of the following forms of assistance: (i)
mortgage loan insurance, (ii) rental subsidies, (iii) reduction of mortgage
interest payments.
i) HUD provides mortgage insurance for rental housing projects pursuant to
a number of sections of Title II of the National Housing Act ("NHA"), including
Section 236, Section 221(d)(4), Section 221(d)(3) and Section 220. Under all of
these programs, HUD will generally provide insurance equal to 100% of
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the total replacement cost of the project to non-profit owners and 90% of the
total replacement cost to limited-distribution owners. Mortgages are provided by
institutions approved by HUD, including banks, savings and loan companies and
local housing authorities. Section 221(d)(4) of NHA provides for federal
insurance of private construction and permanent mortgage loans to finance new
construction of rental apartment complexes containing five or more units. The
most significant difference between the 221(d)(4) program and the 221(d)(3)
program is the maximum amount of the loan which may be obtained. Under the
221(d)(3) program, non-profit sponsors may obtain a permanent mortgage equal to
100% of the total replacement cost; no equity contribution is required of a
non-profit sponsor. In all other respects the 221(d)(3) program is substantially
similar to the 221(d)(4) program.
ii) Many of the tenants in HUD insured projects receive some form of rental
assistance payments, primarily through the Section 8 Housing Assistance Payments
Program (the "Section 8 Program"). Apartment Complexes not receiving assistance
through the Section 8 Program ("Section 8 Payments") will generally have
limitations on the amounts of rent which may be charged. One requirement imposed
by HUD regulations effective for apartment complexes initially approved for
Section 8 payments on or after November 5, 1979 is to limit the amount of the
owner's annual cash distributions from operations to 10% of the owner's equity
investment in an apartment complex if the apartment complex is intended for
occupancy by families and to 6% of the owner's equity investment in an apartment
complex intended for occupancy by elderly persons. The owner's equity investment
in the apartment complex is 10% of the project's replacement cost as determined
by HUD.
iii) As well as providing mortgage insurance, the Section 236 program also
provides an interest credit subsidy which reduces the cost of debt service on a
project mortgage, thereby enabling the owner to charge the tenants lower rents
for their apartments. Interest credit subsidy payments are made monthly by HUD
directly to the mortgagee of the project. Each payment is in an amount equal to
the difference between (i) the monthly interest payment required by the terms of
the mortgage to pay principal, interest and the annual mortgage insurance
premium and (ii) the monthly payment which would have been required for
principal and interest if the mortgage loan bore interest at the rate of 1%.
These payments are credited against the amounts otherwise due from the owner of
the project, who makes monthly payments of the balance.
All leases are generally for periods not exceeding one to two years and no
tenant occupies more than 10% of the rentable square footage.
Rents from commercial tenants (to which average rental per square foot
applies) comprise less than 5% of the rental revenues of the Partnership. Rents
for the residential units are determined annually by HUD and reflect increases
in consumer price indices in various geographic areas.
Management continuously reviews the physical state of the properties and
budgets improvements when required which are generally funded from cash flow
from operations or release of replacement reserve escrows. No improvements are
expected to require additional financing.
Management continuously reviews the insurance coverage of the properties
and believes such coverage is adequate.
See Item 1, Business, above for the general competitive conditions to which
the properties described above are subject.
Real estate taxes are calculated using rates and assessed valuations
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.
In connection with investments in development-stage Apartment Complexes,
the General Partner generally requires that the general partners of the Local
Partnerships ("Local General Partners") provide completion guarantees and/or
undertake to repurchase the Partnership's interest in the Local Partnership if
construction or rehabilitation is not completed substantially on time or on
budget ("Development Deficit Guarantees"). The Development Deficit Guarantees
generally also require the Local General Partner to provide any funds necessary
to
-5-
cover net operating deficits of the Local Partnership until such time as the
Apartment Complex has achieved break-even operations. The General Partner
generally requires that the Local General Partners undertake an obligation to
fund operating deficits of the Local Partnership (up to a stated maximum amount)
during a limited period of time (typically three to five years) following the
achievement of break-even operations ("Operating Deficit Guarantees"). Under the
terms of the Development and Operating Deficit Guarantees, amounts funded will
be treated as Operating Loans which will not bear interest and which will be
repaid only out of 50% of available cash flow or out of available net sale or
refinancing proceeds. In some instances, the Local General Partners are required
to undertake an obligation to comply with a Rent-Up Guaranty Agreement, whereby
the Local General Partner agrees to pay liquidating damages if predetermined
occupancy rates are not achieved. These payments are made without right of
repayment. In cases where the General Partner deems it appropriate, the
obligations of a Local General Partner under the Development Deficit, Operating
Deficit and/or Rent-Up Guarantees are secured by letters of credit and/or cash
escrow deposits.
Housing Tax Credits with respect to a given Apartment Complex are available
for a ten-year period that commences when the property is placed into service.
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 Credit not available in the first year
will be available in the eleventh year. In certain 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
allocated Tax Credits only beginning in the month following the month in which
it acquired its interest and Tax Credits allocated in any prior period are not
available to the Partnership.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
-6-
PART II
Item 5. Market for the Registrant's Common Equity and Related Security Holder
Matters.
As of March 31, 1996, the Partnership had issued and outstanding 58,928
Limited Partnership Interests, each representing a $1,000 capital contribution
to the Partnership, or an aggregate capital contribution of $58,928,000 before
volume discounts of $2,000. All of the issued and outstanding Limited
Partnership Interests have been issued to Independence Assignor Inc. (the
"Assignor Limited Partner"), which has in turn issued 58,928 BACs to the
purchasers thereof for an aggregate purchase price of $58,928,000 reduced by
volume discounts of $2,000. Each BAC represents all of the economic and
virtually all of the ownership 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 trading market. 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 partnerships." Accordingly, the General Partner plans to impose limited
restrictions on the transferability of the BACs and the Limited Partnership
Interests in secondary market transactions. Implementation of the restrictions
should prevent a public trading market from developing and may adversely affect
the ability of an investor to liquidate 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 Partnership to lessen
the scope of the restrictions.
As of March 31, 1996 the Partnership has approximately 3,853 registered
holders of an aggregate of 58,928 BACs.
All of the Partnership's general partnership interests, representing an
aggregate capital contribution of $1,000 are held by the General Partner.
There are no material legal restrictions in the Partnership's Amended and
Restated Agreement of Limited Partnership (the "Partnership Agreement") on the
ability of the Partnership to make distributions.
The Partnership has made no distributions to the BAC holders as of March
31, 1996. The Partnership does not anticipate providing cash distributions to
its BAC holders other than from net refinancing or sales proceeds.
-7-
Item 6. Selected Financial Data.
The information set forth below presents selected financial data of the
Partnership. There were no operations prior to commencement of the Offering of
BACs on January 19, 1993 through the year ended March 31, 1993. Additional
financial information is set forth in the audited financial statements in Item 8
hereof.
Year Ended March 31
-----------------------------------------
OPERATIONS 1996 1995 1994
----------- ----------- -----------
Revenues $ 5,325,045 $ 2,433,861 $ 643,475
Operating expenses 8,277,953 3,634,184 911,326
----------- ----------- -----------
Loss before minority interest (2,952,908) (1,200,323) (267,851)
Minority interest in loss
of subsidiaries 8,519 7,106 1,404
----------- ----------- -----------
Net loss $(2,944,389) $(1,193,217) $ (266,447)
=========== =========== ===========
Net loss per weighted
average BAC $ (49.47) $ (20.06) $ (7.69)
=========== =========== ===========
March 31
------------------------------------------------------
FINANCIAL POSITION 1996 1995 1994 1993
------------ ------------ ------------ ------------
Total assets $116,928,522 $104,107,965 $ 69,285,916 $ 5,385,138
============ ============ ============ ============
Total liabilities $ 68,086,980 $ 52,049,809 $ 17,077,396 $ 829,838
============ ============ ============ ============
Minority interest $ 750,595 $ 1,022,820 $ 859,064 $ 0
============ ============ ============ ============
Total partners' capital $ 48,090,947 $ 51,035,336 $ 51,349,456 $ 4,555,300
============ ============ ============ ============
During the years ended March 31, 1996, 1995 and 1994, total assets and
liabilities increased primarily due to the continued acquisition of Local
Partnerships. Property and equipment increased approximately $37,000,000,
$22,000,000 and $22,000,000 for the years ended March 31, 1996, 1995 and 1994,
respectively. Construction in progress decreased approximately $4,000,000 for
the year ended March 31, 1996 and increased approximately $19,000,000 and
$5,000,000 for the years ended March 31, 1995 and 1994, respectively. Mortgage
notes increased approximately $16,000,000, $9,000,000 and $12,000,000 for the
years ended March 31, 1996, 1995 and 1994, respectively. Construction notes
increased approximately $18,000,000 and 1,000,000 for the years ended March 31,
1995 and 1994, respectively. Due to local general partners and affiliates
increased approximately $6,000,000 and $1,000,000 for the years ended March 31,
1995 and 1994, respectively (Note 8). For the year ended March 31, 1996, the
increase in Property and equipment and construction in progress was partially
funded by capital contributions made to the Local Partnerships resulting in a
decrease in cash and cash equivalents. For the year ended March 31, 1993, there
was also an increase in assets due to capital contributions which were not fully
expended. For the year ended March 31, 1996, minority interest decreased due to
distributions received by the local general partners. Minority interest
increased due to capital contributions from local general partners for the years
ended March 31, 1995 and 1994.
Cash Distributions
The Partnership has made no distributions to the BAC holders as of March
31, 1996.
-8-
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
The Partnership's primary source of funds was the proceeds of its offering.
Other sources of funds include interest earned on such proceeds which will be
invested in tax-exempt money market instruments pending acquisition of Local
Partnerships and a working capital reserve. The offering terminated as of April
7, 1994. The Partnership has received $58,928,000 (including volume discounts of
$2,000) in gross proceeds for BACs pursuant to a public offering resulting in
net proceeds available for investment of approximately $46,848,000 after volume
discounts, payment of sales commissions, acquisition fees and expenses,
organization and offering expenses and establishment of a working capital
reserve.
As of March 31, 1996, the Partnership has invested approximately
$46,996,000 (not including acquisition fees of approximately $3,502,000) of net
proceeds in fifteen Local Partnerships of which approximately $9,640,000 remains
to be paid (including approximately $1,243,000 being held in escrow) as certain
benchmarks, such as occupancy level, must be attained prior to the release of
the funds. Two of the Local Partnerships were acquired during the Fiscal Year
Ended March 31, 1996 for a combined purchase price of approximately $10,837,000
(not including acquisition fees of approximately $818,000), of which
approximately $392,000 remains to be paid. The Partnership does not intend to
acquire additional properties. During the year ended March 31, 1996,
approximately $16,787,000 was paid, including purchase price adjustments (of
which approximately $2,675,000 was released from escrow). An additional
$1,405,000 was placed into escrow for purchase price payments during the year
ended March 31, 1996. Although the Partnership will not be acquiring additional
properties, the Partnership may be required to fund potential purchase price
adjustments based on tax credit adjustor clauses. Such adjustments resulted in a
net increase in purchase price of approximately $750,000 during the year ended
March 31, 1996.
During the year ended March 31, 1996 cash and cash equivalents decreased
approximately $15,398,000 primarily attributable to the acquisition of the two
Local Partnerships and construction activity at twelve Local Partnerships. This
is reflected in the increase in property and quipment ($10,422,000),
construction in progress ($22,579,000), a decrease in accounts payable and other
liabilities relating to investing activities ($1,111,000) and repayment of
amounts due to Local General Partners and affiliates ($271,000), principal
payments of construction and mortgage loans in addition to distributions to
Local General Partners of ($264,000) partially offset by construction loan and
permanent mortgage financing of ($17,006,000) and a decrease in cash held in
escrow for investing activities ($1,607,000). Cash provided by operating
activities was $1,678,000 during the year ended March 31 1996. Included in the
adjustments to reconcile the net loss to cash flow from operations is
depreciation and amortization of approximately $2,161,000.
An original working capital reserve of approximately $1,473,000 (2.5% of
gross equity) has been established from the Partnership's funds available for
investment. At March 31, 1996, approximately $567,000 of this reserve remains
unused. During the Fiscal Year ended March 31, 1996 part of this reserve was
used to pay a net increase in purchase price adjustments to the Local
Partnerships. The General Partners believe that these reserves, plus any cash
distributions received from the operations of the Local Partnerships are
sufficient to fund the Partnership's ongoing operations for the foreseeable
future. As of March 31, 1996 amounts received from operations of the Local
Partnerships were approximately $16,000. Management anticipates receiving
distributions in the future, although not to a level sufficient to permit
providing cash distributions to BAC's holders.
The Partnership has negotiated development deficit guarantees with the
Local Partnerships in which it has invested. The Local General Partners have
agreed to fund development deficits through the breakeven dates of each of the
Local Partnerships, most of which are unlimited or in an unspecified amount. As
of March 31, 1996 and 1995, $59,035 and $0 has been funded under the Development
Deficit Guaranty Agreements. All current development deficit guarantees expire
within the next three years. Management does not expect a material impact on
liquidity, based on prior years' fundings.
The Partnership has negotiated Operating Deficit Guaranty Agreements with
all Local Partnerships by which the general partners of the Local Partnerships
have agreed to fund operating deficits for a specified period of time. The terms
of the Operating Deficit Guaranty Agreements vary for each Local Partnership,
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with maximum dollar amounts to be funded for a specified period of time,
generally three years, commencing on the break-even date. The gross amount of
the Operating Deficit Guarantees aggregates approximately $5,670,000, none of
which have expired as of March 31, 1996. As of March 31, 1996 and 1995, $41,395
and $16,895 has been funded under the Operating Deficit Guaranty agreements. All
current operating deficit guarantees expire within the next three years.
Management does not expect a material impact on liquidity, based on prior years'
fundings.
In addition, several Local Partnerships have Rent-Up Guaranty Agreements,
in which the Local General Partner agrees to pay liquidating damages if
predetermined occupancy rates are not achieved. The terms of the Rent-Up
Guaranty Agreements vary for each Local Partnership, with maximum dollar amounts
to be funded for a specified period of time. The gross amount of these Rent-Up
Guarantees for the Local Partnerships is approximately $6,212,000 as of March
31, 1996. All current rent-up deficit guarantees expire within the next three
years. Management does not expect a material impact on liquidity, based on prior
years' fundings.
The Operating Deficit Guaranty Agreements, Rent-Up Guaranty Agreements, and
Development Deficit Guaranty Agreements are negotiated to protect the
Partnership's interest in the Local Partnerships and to provide incentive to the
Local General Partners to generate positive cash flow.
HUD recently released the American Community Partnerships Act (the "ACPA").
The ACPA is HUD's blueprint for providing for the nation's housing needs in an
era of static or decreasing budget authority.
Two key proposals in the ACPA that could affect the Local Partnerships are:
a discontinuation of project based Section 8 subsidy payments and an attendant
reduction in debt on properties that were supported by the Section 8 payments.
The ACPA calls for a transition during which the project based Section 8
would be converted to a tenant based voucher system. Any FHA insured debt would
then be "marked-to-market", that is revalued in light of the reduced income
stream, if any.
Several industry sources have already commented to HUD and Congress that in
the event the ACPA was fully enacted in its present form the reduction in
mortgage indebtedness would be considered taxable income to limited partners in
the Partnership. Legislative relief has been proposed to exempt
"marked-to-market" debt from cancellation of indebtedness income treatment.
Though HUD initially backed away from the "marked-to-market" proposal, it has
now been re-introduced as "Portfolio Restructuring".
For discussion of contingencies affecting certain subsidiary partnerships,
see Results of Operations of Certain Local Partnerships, below. Since the
maximum loss the Partnership would be liable for is its net investment in the
respective subsidiary partnerships, the resolution of the existing contingencies
is not anticipated to impact future results of operations, liquidity or
financial condition in a material way.
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
for 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 Partnership has invested the proceeds of its offering
in 15 Local Partnerships, all of which fully have their tax credits in place.
The tax credits are attached to the project for a period of ten years, and are
transferable with the property during the remainder of the ten-year period. If
trends in the real estate market warranted the sale of a property, the remaining
tax credits would transfer to the new owner; thereby adding significant value to
the property on the market, which are not included in the financial statement
carrying amount.
-10-
Results of Operations
Property and equipment are carried at the lower of depreciated cost or
estimated amounts recoverable through future operations and ultimate disposition
of the property. Cost includes the purchase price, acquisition fees and
expenses, and any other costs incurred in acquiring the properties. A provision
for loss on impairment of assets is generally recorded when estimated amounts
recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. Property investments themselves
are reduced to estimated fair value when the property is considered to be
impaired and the depreciated cost exceeds estimated fair value. Through March
31, 1996, the Partnership has not recorded any provisions for loss on impairment
of assets or reductions to estimated fair value.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.
Effective April 1, 1996, the Partnership intends to adopt SFAS No. 121,
consistent with the required adoption period. The Partnership does not expect
the implementation to have a material impact on its financial condition or its
future results of operations.
The following is a summary of the results of operations of the Partnership
for the years ended March 31, 1996, 1995 and 1994 (the 1995, 1994 and 1993
Fiscal Years, respectively.)
The net loss for the 1995, 1994 and 1993 Fiscal Years totaled $2,944,389,
$1,193,217 and $266,447, respectively.
The Partnership and BACs holders will begin to recognize Housing Tax
Credits with respect to a Property when the Credit Period for such Property
commences. Because of the time required for the acquisition, completion and
rent-up of Properties, it is expected that the amount of Tax Credits per BAC
will gradually increase over the first three years of the Partnership. Housing
Tax Credits not recognized in the first three years will be recognized in the
11th through 13th years. The Partnership generated $3,997,227, $624,796 and
$60,054 Housing Tax Credits and $3,096,915, $9,813,716 and $4,486,653 Historic
Tax Credits during the 1995, 1994 and 1993 tax years, respectively.
1995 vs 1994
The Partnership's results of operations for the 1995 and 1994 Fiscal Years
consisted primarily of (i) $440,205 and $767,716, respectively, of tax-exempt
interest income earned on funds not currently invested in Local Partnership's
and (ii) the results of the Partnerships investment in fifteen and thirteen
Local Partnerships, respectively.
During the year ended March 31, 1996, rental income and all categories of
expenses increased and the results of operations are not comparable or
reflective of future operations due to the continued acquisition construction
and rent up of properties. In addition, interest income will continue to
decrease in future periods since all proceeds of the Offering have been
invested. For the year ended March 31, 1996 and 1995, seven and two of the
Partnership's fifteen and thirteen properties, respectively, completed
construction and were in various stages of rent up. Two and one of the
properties, respectively, had completed construction in a previous fiscal year,
but were in various stages of rent up for the year ended March 31, 1996 and
1995. In addition, one and zero of the properties had completed construction and
were rented up in a previous fiscal year. Five and ten of the Partnership's
fifteen and thirteen properties, respectively, were still under construction as
of March 31, 1996 and 1995, respectively.
-11-
As of December 31, 1995, five of the fifteen properties had construction
loans with a commitment for permanent financing. As of May 1, 1996, construction
has been completed on twelve of the Partnership's fifteen properties. Occupancy
rates as of May 1, 1996 varied from 0% to 100%.
1994 vs 1993
The Partnership's results of operations for the 1994 and 1993 Fiscal Years
consisted primarily of (1) $767,716 and $258,799, respectively, of tax-exempt
interest income earned on funds not currently invested in Local Partnerships and
(2) the results of the Partnership's investment in thirteen and three of five
Local Partnerships, respectively.
During the 1994 Fiscal Year, all categories of income and expenses
increased and the results of operations are not comparable due to the continued
acquisition and rent up of properties, and are not reflective of future
operations of the Partnership due to uncompleted property construction, rent-up
of properties and the continued utilization of the net proceeds of the Offering
to invest in Local Partnerships. In addition, interest income will continue to
decrease in future periods after all proceeds of the Offering are invested.
During the 1994 and 1993 Fiscal Years, five and two of the Partnership's
thirteen and five properties, respectively, completed construction and were in
various stages of rent up. In addition, two and zero of the properties,
respectively, had completed construction in a previous fiscal year, but were in
various stages of rent up during the current fiscal year. Six and three of the
properties were still under construction as of March 31, 1995 and 1994,
respectively.
As of December 31, 1994, nine of the thirteen properties had construction
loans with a commitment for permanent financing. As of May 1, 1995, construction
has been completed on eight of the Partnership's thirteen properties. Occupancy
rates as of May 1, 1995 varied from 0% to 100%.
Results of Operations of Certain Local Partnerships
Martha Bryant Manor, L.P.
Martha Bryant Manor, L.P. ("Martha Bryant") agreed to an out-of-court
settlement resulting from an alleged breach of contract suit. The settlement
resulted in a loss of $164,860, which is included in general and administrative
expenses in the March 31, 1996 Financial Statements.
Clear Horizons Limited Partnership
Clear Horizons Limited Partnership ("Clear Horizons") is named as a
defendant in a lawsuit involving the death of a person shot on the premises of
the apartment project. Clear Horizons' defense is being handled by its liability
insurer. Legal counsel believes that any settlement will be within insurance
policy limits, $3,000,000, and there will be no loss to Clear Horizons. The
maximum loss which the Partnership would be liable for is its net investment in
Clear Horizons amounting to approximately $1,026,000.
United Germano-Millgate Limited Partnership
A former management agent has filed a $70,000 breach of contract claim
against United Germano Millgate ("United Germano"). Management believes the suit
is totally without merit and has filed a $40,000 counterclaim. The outcome of
this matter cannot presently be determined. Since it is premature to make an
evaluation of the amount of United Germano'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 United Germano amounting to approximately $2,861,000.
-12-
Other
The Partnership's investment as a limited partner in the Local Partnerships
is subject to the risks of potential losses arising from management and
ownership of improved real estate. The Partnership's investments also could be
adversely affected by poor economic conditions generally, which could increase
vacancy levels and rental payment defaults and by increased operating expenses,
any or all of which could threaten the financing viability of one or more of the
Local Partnerships.
There also are substantial risks associated with the operation of Apartment
Complexes receiving government assistance. These include governmental
regulations concerning tenant eligibility, which may make it more difficult to
rent apartments in the complexes; difficulties in obtaining government approval
for rent increases; limitations on the percentage of income which low and
moderate income tenants may pay as rent; the possibility that Congress may not
appropriate funds to enable the Department of Housing and Urban Development to
make the rental assistance payments it has contracted to make; and that when the
rental assistance contracts expire there may not be market demand for apartments
at full market rents in a Local Partnership's Apartment Complex.
The Local Partnerships are impacted by inflation in several ways. Inflation
allows for increases in rental rates generally to reflect the impact of higher
operating and replacement costs. Inflation also affects the Local Partnerships
adversely by increasing operating costs as, for example, for such items as fuel,
utilities and labor.
Item 8. Financial Statements and Supplementary Data.
Sequential
Page
----
(a) 1. Consolidated Financial Statements
Independent Auditors' Report 14
Consolidated Balance Sheets at March 31, 1996 and 1995 45
Consolidated Statements of Operations for the Years Ended
March 31, 1996, 1995 and 1994 46
Consolidated Statements of Changes in Partners' Capital
for the Years Ended March 31, 1996, 1995 and 1994 47
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1996, 1995 and 1994 48
Notes to Consolidated Financial Statements 50
-13-
[Letterhead of Trien, Rosenberg, Felix, Rosenberg, Barr & Weinberg, LLP]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Independence Tax Credit Plus L.P. II and Subsidiaries
(A Delaware Limited Partnership)
We have audited the consolidated balance sheets of Independence Tax Credit Plus
L.P. II and Subsidiaries (a Delaware Limited Partnership) as of March 31, 1996
and 1995, and the related consolidated statements of operations, changes in
partners' capital and cash flows for the years ended March 31, 1996 and 1995 and
1994, (the 1995, 1994 and 1993 Fiscal Years, respectively). The financial
statements are the responsibility of the Partner's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements for fifteen (Fiscal 1995),
thirteen (Fiscal 1994) and three (Fiscal 1993) subsidiary partnerships whose
losses aggregated $2,533,349, $1,148,796 and $140,709 for the 1995, 1994 and
1993 Fiscal Years, respectively, and whose assets constituted 91% and 72% of the
Partnership's assets at March 31, 1996 and 1995, respectively, presented in the
accompanying consolidated financial statements. The financial statements of
these subsidiary partnerships were audited by other auditors whose reports
thereon have been furnished to us, and our opinion expressed herein, insofar as
it relates 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the reports of the other auditors, the
accompanying consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Independence Tax Credit Plus
L.P. II and Subsidiaries at March 31, 1996 and 1995, and the results of their
operations and their cash flows for the years ended March 31, 1996, 1995 and
1994 in conformity with generally accepted accounting principles.
/s/ Trien, Rosenberg, Felix,
Rosenberg, Barr & Weinberg, LLP
TRIEN, ROSENBERG, FELIX,
ROSENBERG, BARR & WEINBERG, LLP
New York, New York
June 25, 1996
[J. H. WILLIAMS & CO., LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Lincoln Renaissance (a Limited Partnership)
Reading, Pennsylvania
We have audited the accompanying balance sheets of Lincoln Renaissance (a
Limited Partnership) as of December 31, 1995 and 1994 and the related statements
of income, changes in partners' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's general
partners and contracted management agent. Our responsibility is to express an
opinion on these financial statements based on our audits.
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 the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statements presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lincoln Renaissance (a Limited
Partnership) at December 31, 1995 and 1994, and its results of operations,
changes in partners' equity and cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ J. H. WILLIAMS & CO., LLP
Kingston, Pennsylvania
February 9, 1996
[Letterhead of J.H. Williams & Co.]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Lincoln Renaissance (a Limited Partnership)
Reading, Pennsylvania
We have audited the accompanying balance sheets of Lincoln Renaissance (a
Limited Partnership) as of December 31, 1994 and 1993 and the related statements
of income, changes in partners' equity and cash flows for the years then ended
as more fully described in Note 1. These financial statements are the
responsibility of the Partnership's general partners and contracted management
agent. Our responsibility is to express an opinion on these financial statements
based on our audits.
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 the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statements presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lincoln Renaissance (a Limited
Partnership) at December 31, 1994 and 1993, and its results of operations,
changes in partners' equity and cash flows for the years then ended as more
fully described in Note 1 in conformity with generally accepted accounting
principles.
/s/ J.H. WILLIAMS & CO.
Kingston, Pennsylvania
February 3, 1995
[WIELAND & COMPANY, INC. LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Partners
United - Germano - Millgate Limited Partnership
We have audited the accompanying balance sheet of United - Germano - Millgate
Limited Partnership (an Illinois limited partnership) as of December 31, 1995,
and the related statements of operations, partners' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United - Germano - Millgate
Limited Partnership as of December 31, 1995, and the results of its operations,
changes in partners' equity, and cash flows for the year then ended in
conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated March 15, 1996, on our
consideration of the internal control structure of United - Germano - Millgate
Limited Partnership, and reports dated March 15, 1996 on its compliance with
specific requirements applicable to major HUD programs and specific requirements
applicable to Affirmative Fair Housing.
/s/ WIELAND & COMPANY, INC.
March 15, 1996
Employer Identification No.: 36-4025026
Engagement Partner: Paul H. Wieland
315 James Street
Geneva, Illinois 60134
[MULCAHY FESLER & COMPANY LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
United - Germano - Millgate Limited Partnership
We have audited the accompanying balance sheet of United - Germano - Millgate
Limited Partnership (an Illinois limited partnership) as of December 31, 1994,
and the related statements of operations, partners' equity, and cash flows for
the year ended December 31, 1994. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United - Germano - Millgate
Limited Partnership as of December 31, 1994, and the results of its operations,
changes in partners' equity and cash flows for the year ended December 31, 1994,
in conformity with generally accepted accounting principles.
/s/ MULCAHY, FESLER & COMPANY
January 20, 1995
[D.J. GOTAAS & CO. LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
United - Germano - Millgate Limited Partnership
We have audited the accompanying balance sheet of United - Germano - Millgate
Limited Partnership (an Illinois limited partnership) as of December 31, 1993,
and the related statements of operations, partners' equity, and cash flows for
the period October 1, 1993 to December 31, 1993. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United - Germano - Millgate
Limited Partnership as of December 31, 1993, and the results of its operations,
changes in partners' equity and cash flows for the period October 1, 1993 to
December 31, 1993, in conformity with generally accepted accounting principles.
/s/ D.J. GOTAAS & CO.
February 4, 1994
[J. H. WILLIAMS & CO., LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Mansion Court Associates (a Limited Partnership)
Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Mansion Court Associates (a
Limited Partnership) as of December 31, 1995 and 1994, and the related
statements of income, changes in partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's general partner and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.
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 the
Partnership's general partner and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mansion Court Associates (a
Limited Partnership) at December 31, 1995 and 1994, and its results of
operations, changes in partners' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.
/s/ J. H. WILLIAMS & CO., LLP
Kingston, Pennsylvania
February 12, 1996
[J. H. WILLIAMS & CO. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Mansion Court Associates (a Limited Partnership)
Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Mansion Court Associates (a
Limited Partnership) as of December 31, 1994 and 1993 and the related statements
of income, change in partners' equity and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's general
partner and contracted management agent. Our responsibility is to express an
opinion on these financial statements based on our audits.
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 the
Partnership's general partner and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mansion Court Associates (a
Limited Partnership) at December 31, 1994 and 1993, and its results of
operations, changes in partners' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.
/s/ J. H. WILLIAMS & CO.
Kingston, Pennsylvania
February 4, 1995
[WALL, EINHORN & CHERNITZER, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Virginia Housing Development Authority
Derby Run Associates, L.P. 601 South Belvidere Street
Virginia Beach, Virginia Richmond, Virginia 23220
We have audited the accompanying balance sheets of Derby Run Associates,
L.P., VHDA Project Number 93-0625-C, as of December 31, 1995 and 1994, and the
related statements of operations, partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the project's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
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, the financial statements referred to above present fairly,
in all material respects, the financial position of VHDA Project Number
93-0625-C as of December 31, 1995 and 1994, and the results of its operations,
changes in partners' equity and cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying supplementary information (shown on pages 10 to 12) is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ WALL, EINHORN & CHERNITZER, P.C.
Norfolk, Virginia
February 14, 1996
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Renaissance Plaza 93 Associates, L.P.
We have audited the accompanying balance sheet of Renaissance Plaza 93
Associates, L.P. as of December 31, 1995, and the related statements of profit
and loss (on HUD Form No. 92410), changes in partners' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Renaissance Plaza 93
Associates, L.P. as of December 31, 1995, and the results of its operations, the
changes in partners' equity and cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 21
through 28 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information, except for
that portion marked "unaudited," on which we express no opinion, has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards we have also issued
reports dated February 9, 1996 on our consideration of Renaissance Plaza 93
Associates, L.P.'s internal control structure and on its compliance with
requirements applicable to CDA programs, affirmative fair housing and laws and
regulations applicable to the financial statements.
/s/ REZNICK FEDDER & SILVERMAN
Bethesda, Maryland
February 9, 1996
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Renaissance Plaza 93 Associates, L.P.
We have audited the accompanying balance sheet of Renaissance Plaza 93
Associates, L.P. as of December 31, 1994, and the related statements of changes
in partners' capital and cash flows for the year then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Renaissance Plaza 93
Associates, L.P. as of December 31, 1994, and the changes in partners' capital
and cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ REZNICK FEDDER & SILVERMAN
Bethesda, Maryland
February 2, 1995
[J. H. WILLIAMS & CO., LLP LETTERHEAD]
To the Partners of
Tasker Village Associates
(a Limited Partnership)
Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Tasker Village Associates (a
Limited Partnership) as of December 31, 1995 and 1994, and the related
statements of income, changes in partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's general partner and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audit.
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 the
Partnership's general partner and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tasker Village Associates (a
Limited Partnership) at December 31, 1995 and 1994, and its results of
operations, changes in partners' equity and cash flows for the years then ended
in conformity with generally accepted accounting principles.
/s/ J. H. WILLIAMS & CO., LLP
Kingston, Pennsylvania
February 14, 1996
[CLIFFORD R. BENN LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
General Partner
Martha Bryant Manor, L.P.
Los Angeles, California
I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31,
1995 and the related statements of income, changes in partners' capital, and
cash flow for the year then ended. These financial statements are the
responsibility of Martha Bryant Manor, L.P.'s management. My responsibility is
to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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.
I believe that my audit provides a reasonable basis for my opinion.
I was unable to obtain sufficient evidential matter in connection with the
beginning balance of property investments.
In my opinion, except for the effects of any adjustments and additional
disclosures that might have resulted had I been able to obtain sufficient
evidence in connection with property investments, the financial statements
referred to above present fairly, in all material respects, the financial
position of Martha Bryant Manor, L.P. at December 31, 1995 and the results of
its operations and its cash flow for the year then ended. In conformity with
generally accepted accounting principles.
/s/ CLIFFORD BENN, CPA
January 24, 1996
Carson, California
[ROBERT J. PACHECO LETTERHEAD]
To the Partners of
Martha Bryant Manor, L. P.
A California Limited Partnership
Los Angeles, California
I have audited the accompanying balance sheet of Martha Bryant Manor, L.P., a
California Limited Partnership, as of December 31, 1994, and the related
statements of operations, changes in partners' capital and cash flows for the
period September 1, 1994 (inception) to December 31, 1994. These financial
statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Martha Bryant Manor, L.P., a
California Limited Partnership, at December 31, 1994, and the results of its
operations and its cash flows for the period from September 1, 1994 (inception)
to December 31, 1994 in conformity with generally accepted accounting
principles.
/s/ ROBERT PACHECO
Robert J. Pacheco
Certified Public Accountant
February 28, 1995
[ROBERT J. PACHECO LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Partners of
Colden Oaks, A California Limited Partnership
Los Angeles, California
I have audited the accompanying balance sheet of Colden Oaks, a California
Limited Partnership, as of December 31, 1995, and the related statements of
operations, changes in partners' capital and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Colden Oaks, a California Limited
Partnership, at December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ ROBERT PACHECO
Robert J. Pacheco
Certified Public Accountant
February 29, 1996
[ROBERT J. PACHECO LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Partners of
Colden Oaks, A California Limited Partnership
Los Angeles, California
I have audited the accompanying balance sheet of Colden Oaks, a California
Limited Partnership, as of December 31, 1994, and the related statements of
operations, changes in partners' capital and cash flows for the period September
1, 1994 (inception) to December 31, 1994. These financial statements are the
responsibility of the Partnership's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Colden Oaks, a California Limited
Partnership, at December 31, 1994, and the results of its operations and its
cash flows for the period from September 1, 1994 (inception) to December 31,
1994 in conformity with generally accepted accounting principles.
/s/ ROBERT PACHECO
Robert J. Pacheco
Certified Public Accountant
February 28, 1995
[CLIFFORD R. BENN LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
General Partner
Brynview Terrace, L.P.
Los Angeles, California
I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 1995
and the related statements of income, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Brynview Terrace, L.P.'s management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Brynview Terrace, L.P. at December
31, 1995 and the results of its operations and its cash flow for the year then
ended. In conformity with generally accepted accounting principles.
/s/ CLIFFORD BENN, CPA
February 2, 1996
Carson, California
[CLIFFORD R. BENN LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
General Partner
Brynview Terrace, L.P.
Los Angeles, California
I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 1994
and the related statements of income, changes in partners' capital, and cash
flow for the period from inception, September 14, 1994, through December 31,
1994. These financial statements are the responsibility of Brynview Terrace,
L.P.'s management. My responsibility is to express an opinion on these financial
statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Brynview Terrace, L.P. at December
31, 1994 and the results of its operations and its cash flow for the period from
inception, September 14, 1994, through December 31, 1994. In conformity with
generally accepted accounting principles.
/s/ CLIFFORD BENN, CPA
February 14, 1995
Carson, California
[ROBERT J. PACHECO LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Partners of
NLEDC, L.P., A California Limited Partnership
Los Angeles, California
I have audited the accompanying balance sheet of NLEDC, L.P., a California
Limited Partnership, as of December 31, 1995, and the related statements of
changes in partners' capital and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of NLEDC, L.P., a California Limited
Partnership, at December 31, 1995, and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ ROBERT PACHECO
Robert J. Pacheco
Certified Public Accountant
February 21, 1996
[ROBERT J. PACHECO LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Partners of
NLEDC, L.P., A California Limited Partnership
Los Angeles, California
I have audited the accompanying balance sheet of NLEDC, L.P., a California
Limited Partnership, as of December 31, 1994, and the related statements of
operations, changes in partners' capital and cash flows for the period September
1, 1994 (inception) to December 31, 1994. These financial statements are the
responsibility of the Partnership's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of NLEDC, L.P., a California Limited
Partnership, at December 31, 1994, and the results of its operations and its
cash flows for the period from September 1, 1994 (inception) to December 31,
1994 in conformity with generally accepted accounting principles.
/s/ ROBERT PACHECO
Robert J. Pacheco
Certified Public Accountant
February 28, 1995
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Creative Choice Homes VI, Ltd.
We have audited the accompanying balance sheet of Creative Choice Homes VI,
Ltd. as of December 31, 1995, and the related statements of operations,
partners' equity and cash flows for the year then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Creative Choice Homes VI,
Ltd. as of December 31, 1995, and the results of its operations, the changes in
partners' equity and cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/ REZNICK FEDDER & SILVERMAN
Bethesda, Maryland
March 22, 1996
[MARK ESCOFFERY, P.A. LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the General Partner
of Creative Choice Homes VI Ltd.
Owner of Caribbean West Apartments
4243 Northlake Boulevard
Palm Beach Gardens, Florida 33410
I have audited the balance sheet of Creative Choice Homes VI Ltd. (a Limited
Partnership) as of December 31, 1994. This financial statement is the
responsibility of the Company's Management. My responsibility is to express an
opinion on this financial statement based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. I believe that my audit of
the balance sheet provides a reasonable basis for my opinion.
In my opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Creative Choice Homes VI Ltd. as of
December 31, 1994, in conformity with generally accepted accounting principles.
/s/ MARK ESCOFFERY, P.A.
April 14, 1995.
[SUAREZ ACCOUNTANCY CORPORATION LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Partners
P & P Home for the Elderly, L.P.
(A Development Stage Company)
Los Angeles, California
I have audited the accompanying balance sheet of P & P Home for the Elderly,
L.P. (A Development Stage Company) as of December 31, l995, and the related
statements of income, changes in partners' capital, and cash flows for the year
then ended. These financial statements are the responsibility of the
Partnership's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of P & P Home for the Elderly, L.P. (A
Development Stage Company) at December 31, 1995, and the results of its
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.
/s/ SUAREZ ACCOUNTANCY CORPORATION
January 31, 1996
[RICHARD SUAREZ, JR. LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Partners
P & P Home for the Elderly, L.P.
(A Development Stage Company)
Los Angeles, California
I have audited the accompanying balance sheet of P & P Home for the Elderly,
L.P. (A Development Stage Company) as of December 31, 1994, and the related
statements of income, changes in partners' capital, and cash flows for the
period March 1, 1994 (inception) through December 31, 1994. These financial
statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of P & P Home for the Elderly, L.P. (A
Development Stage Company) at December 31, 1994, and the results of its
operations and cash flows for the period March 1, 1994 (inception) through
December 31, 1994, in conformity with generally accepted accounting principles.
/s/ RICHARD SUAREZ, JR.
April 4, 1995
[COLE, EVANS & PETERSON LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL STATEMENTS
Clear Horizons Limited Partnership
Shreveport, Louisiana
We have audited the accompanying balance sheet of Clear Horizons Limited
Partnership, at December 31, 1995, and the related statements of profit and
loss, capital and cash flows for the year then ended. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to in the first paragraph
above present fairly, in all material respects, the financial position of Clear
Horizons Limited Partnership, at December 31, 1995 and the results of its
operations, changes in capital, and cash flows for the year then ended in
conformity with generally accepted accounting principles.
Our audit was made primarily for the purpose of forming an opinion on the
basic financial statements for the year ended December 31, 1995 taken as a
whole. The supplementary Schedules 1 through 5 are presented for purposes of
additional analysis and are not a required part of the basic financial
statements. Such information has been subjected to the audit procedures applied
in the audit of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
Clear Horizons Apartments February 9, 1996
Page 2
In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 9, 1996 on our
consideration of Clear Horizons Limited Partnership's internal control
structure, and reports dated February 9, 1996, on its compliance with laws and
regulations, compliance with specific requirements applicable to Affirmative
Fair Housing, and compliance with specific requirements applicable to major
HUD-assisted programs.
/s/ COLE, EVANS & PETERSON
Cole, Evans & Peterson
Federal ID No. 72-0506596
Lead Auditor: Steven W. Hedgepeth
[COLE, EVANS & PETERSON LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Clear Horizons Limited Partnership
Shreveport, Louisiana
We have audited the accompanying balance sheet of Clear Horizons Limited
Partnership, at December 31, 1994, and the related statements of profit and
loss, capital and cash flows for the month then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to in the first paragraph
above present fairly, in all material respects, the financial position of Clear
Horizons Limited Partnership, at December 31, 1994 and the results of its
operations, changes in capital, and cash flows for the month then ended in
conformity with generally accepted accounting principles.
/s/ COLE, EVANS & PETERSON
Cole, Evans & Peterson
[J. H. WILLIAMS & CO., LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Neptune Venture, L.P.
(a New Jersey Limited Partnership)
Marlton, New Jersey
We have audited the accompanying balance sheet of Neptune Venture, L.P. (a New
Jersey Limited Partnership) as of December 31, 1995 and the related statements
of income, changes in partners' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's general
partner and contracted management agent. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's general partner and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Neptune Venture, L.P. at
December 31, 1995, and its results of operations, changes in partners' equity
and cash flows for the year then ended in conformity with generally accepted
accounting principles.
/s/ J. H. WILLIAMS & CO., LLP
Kingston,Pennsylvania
April 9, 1996
[LAWLOR, O'BRIEN & LESKOWICZ LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Affordable Green Associates, L.P.
We have audited the accompanying balance sheet of Affordable Green Associates,
L.P. as of December 31, 1995, and the related statements of operations for the
period (from commencement of operations) August 15, 1995 through December 31,
1995, changes in partners' capital and cash flows for the year ended December
31, 1995. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Affordable Green Associates,
L.P. as of December 31, 1995, and the results of its operations for the period
(from commencement of operations) August 15, 1995 through December 31, 1995,
changes in partners' equity and its cash flows for the year ended December 31,
1995 in conformity with generally accepted accounting principles.
/s/ LAWLOR, O'BRIEN & LESKOWICZ
West Paterson, New Jersey
February 28, 1996
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31
-----------------------------
1996 1995
------------- -------------
ASSETS
Property and equipment - at cost, less accumulated depreciation
(Notes 2, 4 and 7) $ 80,526,910 $ 44,068,700
Construction in progress (Note 8) 19,121,823 23,459,201
Cash and cash equivalents (Notes 2 and 10) 13,646,746 29,045,148
Cash held in escrow (Note 5) 2,653,919 5,963,583
Deferred costs, less accumulated amortization (Notes 2 and 6) 544,330 1,259,938
Other assets 434,794 311,395
------------- -------------
$ 116,928,522 $ 104,107,965
============= =============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable (Note 7) $ 37,687,695 $ 21,203,643
Construction loan payable (Note 7) 18,214,849 18,572,596
Accounts payable and other liabilities 5,569,729 5,515,067
Due to local general partners and affiliates (Note 8) 6,565,952 6,755,871
Due to general partner and affiliates 48,755 2,632
------------- -------------
68,086,980 52,049,809
------------- -------------
Minority interests 750,595 1,022,820
------------- -------------
Commitments and contingencies (Notes 7, 8 and 10)
Partners' capital:
Limited partners (100,000 BACs authorized;
58,928 issued and outstanding in
1996 and 1995, respectively) (Note 1) 48,133,987 51,048,932
General partner (43,040) (13,596)
------------- -------------
Total partners' capital 48,090,947 51,035,336
------------- -------------
Total liabilities and partners' capital $ 116,928,522 $ 104,107,965
============= =============
See accompanying notes to consolidated financial statements.
-15-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended March 31
---------------------------------------
1996 1995 1994*
----------- ----------- -----------
Revenues
Rental income $ 4,598,213 $ 1,500,399 $ 304,084
Other income (principally interest
on capital contributions) 726,832 933,462 339,391
----------- ----------- -----------
5,325,045 2,433,861 643,475
----------- ----------- -----------
Expenses
General and administrative 1,366,774 817,692 201,908
General and administrative-related parties (Note 8) 672,731 602,863 356,880
Repairs and maintenance 990,315 355,562 54,418
Operating and other 541,524 284,983 71,603
Real estate taxes 497,793 289,453 86,385
Insurance 366,543 216,328 0
Financial, principally interest 1,681,052 290,972 32,916
Depreciation and amortization 2,161,221 776,331 107,216
----------- ----------- -----------
8,277,953 3,634,184 911,326
----------- ----------- -----------
Loss before minority interest (2,952,908) (1,200,323) (267,851)
Minority interest in loss of subsidiary partnerships 8,519 7,106 1,404
----------- ----------- -----------
Net Loss (2,944,389) (1,193,217) (266,447)
=========== =========== ===========
Net Loss - limited partners (2,914,945) (1,181,285) (263,773)
=========== =========== ===========
Weighted average number of BACs outstanding 58,928 58,901 34,319
=========== =========== ===========
Net loss per weighted average BAC (49.47) (20.06) (7.69)
=========== =========== ===========
*Reclassified for comparative purposes
See accompanying notes to consolidated financial statements.
-16-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
General Limited
Total Partner Partners
------------ ------------ ------------
Partners' capital -
April 1, 1993 4,555,300 1,000 4,554,300
Capital contributions 52,835,000 0 52,835,000
Offering costs
(Notes 2 and 8) (5,774,397) 0 (5,774,397)
Net loss (266,447) (2,664) (263,783)
------------ ------------ ------------
Partners' capital -
March 31, 1994 51,349,456 (1,664) 51,351,120
Capital contributions 1,030,000 0 1,030,000
Offering costs (150,903) 0 (150,903)
Net loss (1,193,217) (11,932) (1,181,285)
------------ ------------ ------------
Partners' capital -
March 31, 1995 51,035,336 (13,596) 51,048,932
Net loss (2,944,389) (29,444) (2,914,945)
------------ ------------ ------------
Partners' capital -
March 31, 1996 $ 48,090,947 $ (43,040) $ 48,133,987
============ ============ ============
See accompanying notes to consolidated financial statements.
-17-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year Ended March 31
------------------------------------------
1996 1995 1994
------------ ------------ ------------
Cash flows from operating activities:
Net loss $ (2,944,389) $ (1,193,217) $ (266,447)
------------ ------------ ------------
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 2,161,221 776,331 107,216
Minority interest in loss of subsidiary partnerships (8,519) (7,106) (1,404)
(Increase) decrease in assets
Cash held in escrow 1,702,798 (2,410,627) (313,713)
Other assets (123,399) (179,335) (132,060)
Increase (decrease) in liabilities
Accounts payable and other liabilities 1,166,100 24,852 1,113,532
Increase in due to local general partners and affiliates 181,392 48,185 0
Due to general partner and affiliates 46,123 (91,878) 144,280
------------ ------------ ------------
Total adjustments 5,125,716 (1,839,578) 917,851
------------ ------------ ------------
Net cash provided by (used in) operating activities 2,181,327 (3,032,795) 651,404
------------ ------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment (10,422,237) (16,295,221) (20,724,577)
Increase in construction in progress (22,579,370) (17,915,190) (4,534,869)
Decrease (increase) in cash held in escrow 1,606,866 816,740 (4,055,983)
Deferred acquisition costs 0 (61,800) (3,170,100)
Increase in deferred costs (118,849) (138,009) (10,000)
(Decrease) increase in accounts payable and other liabilities (1,111,438) 917,958 1,332,204
Increase in due to local general partner and affiliates 662,982 811,619 1,076,922
Decrease in due to local general partner and affiliates (1,943,924) 0 0
Decrease in due to general partner and affiliates 0 (52,664) (300,870)
------------ ------------ ------------
Net cash used in investing activities (33,905,970) (31,916,567) (30,387,273)
------------ ------------ ------------
Cash flows from financing activities:
Capital contributions received 0 1,030,000 52,835,000
Proceeds from mortgage notes 95,990 8,760,670 12,491,311
Principal payments of mortgage notes (273,461) (25,764) (22,574)
Proceeds from construction loans 16,909,776 18,878,228 894,368
Principal payments of construction loans (606,000) (1,200,000) 0
Increase in due to local general partners and affiliates 506,250 689,194 0
Decrease in due to local general partners and affiliates 0 0 (10,812)
Decrease in due to general partner and affiliates 0 0 (470,803)
Increase in offering costs 0 (150,903) (5,774,397)
Increase in deferred costs (42,608) (194,353) (41,714)
(Decrease) increase in capitalization of consolidated
subsidiaries attributable to minority interest (263,706) 170,862 860,468
------------ ------------ ------------
Net cash provided by financing activities 16,326,241 27,957,934 60,760,847
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents
carried forward (15,398,402) (6,991,428) 31,024,978
------------ ------------ ------------
See accompanying notes to consolidated financial statements.
-18-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year Ended March 31
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents,
brought forward $(15,398,402) $ (6,991,428) $ 31,024,978
Cash and cash equivalents at beginning of year 29,045,148 36,036,576 5,011,598
------------ ------------ ------------
Cash and cash equivalents at end of year $ 13,646,746 $ 29,045,148 $ 36,036,576
============ ============ ============
Supplemental disclosure of cash flows information:
Cash paid during the year for interest $ 640,805 $ 136,958 $ 91,774
Supplemental disclosure of noncash investing and financing activities:
Capitalization of deferred acquisition costs $ 817,767 $ (1,238,476) $ 1,445,614
Capitalization of deferred acquisition expenses $ 0 $ 19,880
Property and equipment reclassified from construction
in progress $ 26,916,748 $ 4,534,869 $ 0
Development fees to local general partners and
affiliates, accounts payable and other liabilities
capitalized to construction in progress and property
and equipment $ 403,381 $ 6,212,013 $ 0
Conversion of construction notes payable
to mortgage notes payable $ 16,661,523 $ 0 $ 0
See accompanying notes to consolidated financial statements.
-19-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 - General
Independence Tax Credit Plus L.P. II (a Delaware limited partnership) (the
"Partnership") was organized on February 11, 1992, and commenced the public
offering on January 19, 1993. The general partner of the Partnership is Related
Independence Associates L.P., a Delaware limited partnership (the "General
Partner").
The Partnership's business is to invest in other partnerships ("Local
Partnerships," "subsidiaries" 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, some of which complexes
may also be eligible for the historic rehabilitation tax credit.
The Partnership has acquired interests in fifteen Local Partnerships as of
March 31, 1996.
The Partnership was authorized to issue a total of 100,000 ($100,000,000)
Beneficial Assignment Certificates ("BACs") which have been registered with the
Securities and Exchange Commission for sale to the public. Each BAC represents
all of the economic and virtually all of the ownership rights attributable to a
limited partnership interest. As of March 31, 1996 the Partnership has raised a
total of $58,928,000 (before volume discounts of $2,000) representing 58,928
BACs.
The terms of the Amended and Restated Agreement of the Limited Partnership
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 partner.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Consolidation
The consolidated financial statements include the accounts of the
Partnership and fifteen subsidiary (1996), thirteen (1995) and three (1994)
partnerships in which the Partnership is the principal limited partner, with an
ownership interest of 98.99%.
For financial reporting purposes, the Partnership's fiscal year ends on
March 31. All subsidiaries have fiscal years ending December 31. Accounts of the
subsidiaries have been adjusted for intercompany transactions from January 1
through March 31.
All intercompany accounts and transactions with the subsidiary partnerships
have been eliminated in consolidation.
Increases (decreases) in the capitalization of consolidated subsidiaries
attributable to minority interest arises from cash contributions and cash
distributions to the minority interest partners.
Losses attributable to minority interest which exceed the minority
interests' investment in a subsidiary have been charged to the Partnership. Such
losses aggregated approximately $17,000, $4,700 and $1,500 for the years ended
March 31, 1996, 1995 and 1994 (the 1995, 1994 and 1993 Fiscal Years),
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.
-20-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 2 - Summary of Significant Accounting Policies (Continued)
b) Cash and Cash Equivalents
In accordance with SFAS 115, cash and cash equivalents include cash on
hand, cash in banks, and investments in short-term highly liquid instruments
purchased with original maturities of three months or less. Cash held in escrow
has various use restrictions and is not considered a cash equivalent.
c) Property and Equipment
Property and equipment are carried at the lower of depreciated cost or
estimated amounts recoverable through future operations and ultimate disposition
of the property. Cost includes the purchase price, acquisition fees and
expenses, and any other costs incurred 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 renewals and betterments are
capitalized. At the time property and equipment are retired or otherwise
disposed of, the cost and accumulated depreciation are eliminated from the
assets and accumulated depreciation accounts and the profit of loss on such
disposition is reflected in earnings. A provision for loss on impairment of
assets is generally recorded when estimated amounts recoverable through future
operations and sale of the property on an undiscounted basis are below
depreciated cost. Property investments themselves are reduced to estimated fair
value when the property is considered to be impaired and the depreciated cost
exceeds estimated fair value. Through March 31, 1996, the Partnership has not
recorded any provisions for loss on impairment of assets or reductions to
estimated fair value.
d) Income Taxes
The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31 (Note 9).
e) Organization and Offering Costs
Costs incurred to organize the Partnership, including but not limited to
legal, accounting and registration fees, are considered deferred organization
expenses. These costs are capitalized and are being amortized over a 60-month
period. Costs incurred to sell BACs including brokerage and the nonaccountable
expense allowance are considered selling and offering expenses. These costs are
charged directly to limited partners' capital (Note 8).
f) Deferred Acquisition Costs
Acquisition costs and fees incurred in connection with the proposed
purchase of interests in certain subsidiary partnerships have been deferred. In
the event these partnerships are acquired, these amounts will be capitalized as
property costs. If the subsidiary partnerships are not acquired, these amounts
will charged to operations.
-21-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 2 - Summary of Significant Accounting Policies (Continued)
g) 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.
h) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
i) Accounting Pronouncements Not Yet Implemented
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". Under SFAS No. 121, the Partnership is required to review long-lived assets
and certain identifiable intangibles for impairment whenever events or changes
in circumstances indicate that the book value of an asset may not be
recoverable. An impairment loss should be recognized whenever the review
demonstrates that the book value of a long-lived asset is not recoverable.
Effective April 1, 1996, the Partnership intends to adopt SFAS No. 121,
consistent with the required adoption period. The Partnership does not expect
the implementation to have a material impact on its financial condition or its
future results of operations.
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 for which it is practicable to estimate
that value:
Cash and Cash Equivalents, Certificates of Deposit, Mortgage Escrow
Deposits and Cash-Restricted for Tenants' Security Deposits
The carrying amount approximates fair value because of the short maturity
of those instruments.
Mortgage Notes Payable
The fair value of mortgage notes payable is estimated, where practicable,
based on the borrowing rate currently available for similar loans.
-22-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 3 - Fair Value of Financial Instruments (Continued)
The estimated fair values of the Partnership's mortgage notes payable are
as follows:
March 31, 1996
-----------------------------
Carrying
Mortgage Notes Payable for which it is: Amount Fair Value
----------- -----------
Practicable to estimate fair value $13,450,000 $13,450,000
Not Practicable $36,342,695 (a)
(a) Management believes it is not practical to estimate the fair value of
the mortgage notes payable because mortgage programs with similar
characteristics are not currently available to the partnerships.
The carrying amount of other assets and liabilities reported on the
statement of financial position that require such disclosure approximates fair
value.
NOTE 4 - Property and Equipment
The components of property and equipment and their estimated useful lives
are as follows:
March 31 Estimated
------------------------- Useful Lives
1996 1995 (Years)
----------- ----------- -----------
Land $ 5,702,297 $ 5,217,498 -
Building and improvements 76,909,641 39,175,839 10-40
Furniture and fixtures 874,834 533,302 5-10
----------- -----------
83,486,772 44,926,639
Less: Accumulated depreciation 2,959,862 857,939
----------- -----------
$80,526,910 $44,068,700
=========== ===========
Included in property and equipment at March 31, 1996 and 1995 is $3,501,977
and $2,684,090 of acquisition fees paid to the General Partner and $867,942 and
$794,572 of acquisition expenses as of March 31, 1996 and 1995. In addition, as
of March 31, 1996 and 1995, building and improvements and construction in
progress includes $1,147,120 and $902,569, respectively, of capitalized
interest.
In connection with the rehabilitation of the properties, the subsidiary
partnerships have incurred developer's fees of $8,394,303 and $6,173,686 to the
local general partners and affiliates as of March 31, 1996 and 1995. Such fees
have been included in the cost of property and equipment.
Depreciation expense for the year ended March 31, 1996, 1995 and 1994
amounted to $2,101,923, $760,862 and $97,077, respectively.
-23-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 5 - Cash Held in Escrow
Cash held in escrow consists of the following:
March 31
--------------------------
1996 1995
---------- ----------
Purchase price payments* $1,243,220 $2,512,920
Construction 218,783 704,049
Real estate taxes, insurance and other 1,021,542 2,724,340
Reserve for replacements 170,374 22,274
---------- ----------
$2,653,919 $5,963,583
========== ==========
*Represents amounts to be paid to seller upon completion of properties
under construction and upon meeting specified rental achievement criteria.
NOTE 6 - Deferred Costs
The components of deferred costs and their periods of amortization are as
follows:
March 31
-------------------------
1996 1995 Period
---------- ----------- ------------
Financing costs $ 278,675 $ 236,067 *
Deferred acquisition costs 33,703 851,470 **
Organization costs 316,858 198,009 60 months
---------- -----------
629,236 1,285,546
Less: accumulated amortization 84,906 25,608
---------- -----------
$ 544,330 $ 1,259,938
========== ===========
*Over the life of the related mortgages.
**Will be capitalized as part of the cost of future acquisitions.
Amortization expense for the year ended March 31, 1996, 1995 and 1994
amounted to $59,298, $15,469 and $10,139, respectively.
NOTE 7 - Mortgage Notes and Construction Loans Payable
The mortgage and construction notes are payable in aggregate monthly
installments of approximately $103,000 including principal and interest at rates
varying from 0% to 10% per annum, through the year 2040. Each subsidiary
partnership's mortgage note payable is collateralized by the land and buildings
of the respective subsidiary partnership, the assignment of certain subsidiary
partnership's rents and leases, and is without further recourse.
-24-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 7 - Mortgage Notes and Construction Loans Payable (Continued)
One mortgage note with a balance of $5,826,427 and $6,044,285 at December
31, 1995 and 1994, respectively, which bears interest at 7% per annum was
eligible for an interest rate subsidy. Accordingly, the subsidiary partnership
paid only that portion of the monthly payments that would be required if the
interest rate was 1%. The balance was subsidized under Section 236 of the
National Housing Act.
Annual principal payment requirements for mortgage notes payable for each
of the next five fiscal years and thereafter are as follows:
Fiscal Year Ending Amount
------------------ ------
1996 $ 425,801
1997 270,857
1998 291,960
1999 314,329
2000 349,990
Thereafter 36,034,758
----------
$37,687,695
The mortgage agreements require monthly deposits to replacement reserves of
approximately $16,600 and monthly deposits to escrow accounts for real estate
taxes, hazard insurance and mortgage insurance and other (Note 5).
As of December 31, 1995, five subsidiary partnerships have construction
loan commitments totaling approximately $23,117,000. As of December 31, 1995,
such loans had outstanding balances of $18,214,849.
Certain subsidiary partnerships have outstanding letters of credit totaling
$162,400 at December 31, 1995, as required under the terms of the construction
loan agreements.
NOTE 8 - Related Party Transactions
An affiliate of the General Partner has a .01% interest as a special
limited partner, in each of the Local Partnerships. An affiliate of the General
Partner also has a minority interest in certain local limited partnerships.
The General Partner and its affiliates perform services for the
Partnership. The costs incurred for the years ended March 31, 1996, 1995, and
1994 are as follows:
A) Acquisition Fees and Expenses
The General Partner is entitled to an acquisition fee equal to 6% of the
gross proceeds of the offering paid upon investor closing, for its services in
connection with the selection and evaluation of Local Partnerships. Such fees
are capitalized as a cost of the investments upon closing of subsidiary
partnerships acquisitions. As of March 31, 1996, 1995, and 1994, $3,535,680,
$3,535,560 and $3,473,760, of such costs have been incurred, respectively.
-25-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 8 - Related Party Transactions (Continued)
B) Public Offering Costs
Costs incurred to organize the Partnership and certain costs of offering
the BACs including but not limited to legal, accounting, and registration fees
are considered organization and offering expenses. Related Equities Corporation,
the Dealer Manager is entitled to a non-accountable organization and offering
expense allowance equal to 2.5% of Gross Proceeds, in consideration of which it
is obligated to pay all such expenses up to the amount of such allowance. The
Partnership is obligated to pay all such expenses that are in excess of 2.5% of
Gross Proceeds and up to 3.5% of Gross Proceeds. The Dealer Manager is
responsible for all such expenses in excess of 3.5% of Gross Proceeds. The
selling commissions and a non-accountable marketing expense allowance are
considered offering expenses. These costs are charged directly to limited
partners' capital. As of March 31, 1996, total organization and offering costs
were approximately $2,115,000, of which approximately $53,000 was charged to the
Dealer Manager since it is in excess of 3.5%.
C) Selling Commissions and Fees
The Partnership will pay up to 7.5% of the aggregate purchase price of BACs
sold, without regard to quantity discounts, to Related Equities Corporation, an
affiliate of the General Partner. Through March 31, 1996, $4,419,600 was paid or
incurred to Related Equities Corporation and then fully reallocated to other
broker/dealers.
D) Guarantees
The Partnership has negotiated development deficit guarantees with the
Local Partnerships in which it has invested. The Local General Partners have
agreed to fund development deficit through the breakeven dates of each of the
Local Partnerships, most of which are unlimited or in an unspecified amount.
Amounts received under development deficit guarantees from the developers of the
properties purchased by the Partnership are treated as a reduction of the asset.
The Partnership has negotiated Operating Deficit Guaranty Agreements with
all Local Partnerships by which the general partners of the Local Partnerships
have agreed to fund operating deficits for a specified period of time. The terms
of the Operating Deficit Guaranty Agreements vary for each Local Partnership,
with maximum dollar amounts to be funded for a specified period of time,
generally three years, commencing on the break-even date. The gross amount of
the Operating Deficit Guarantees aggregates approximately $5,670,000, none of
which have expired as of March 31, 1996. As of March 31, 1996, 1995 and 1994,
$41,395, $16,895 and $0 has been funded under the Operating Deficit Guaranty
agreements. Amounts funded under such agreements are treated as non-interest
bearing loans, which will be repaid only out of 50% of available cash flow or
out of available net sale or refinancing proceeds.
In addition, several Local Partnerships have Rent-Up Guaranty Agreements,
in which the Local General Partner agrees to pay liquidating damages if
predetermined occupancy rates are not achieved. The terms of the Rent-Up
Guaranty Agreements vary for each local partnership, with maximum dollar amounts
to be funded for a specified period of time. The gross amount of these Rent-Up
Guarantees for the Local Partnerships is approximately $6,212,000 as of March
31, 1996. There have not been any fundings under these guaranty agreements.
Amounts received under rental guarantees from the sellers of the properties
purchased by the Partnership are treated as a reduction of the asset.
The Operating Deficit Guaranty Agreements, Rent-Up Guaranty Agreements and
Development Deficit Guaranty Agreements were negotiated to protect the
Partnership's interest in the local partnerships and to provide incentive to the
local general partners to generate positive cash flow.
-26-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 8 - Related Party Transactions (Continued)
E) Other Related Party Expenses
The costs incurred to related parties for the years ended March 31, 1996
and 1995 were as follows:
Year Ended March 31
------------------------------------
1996 1995 1994
-------- -------- --------
Partnership management fees (i) $434,550 $475,023 $233,094
Expense reimbursement (ii) 91,757 94,702 118,786
Property management fees (iii) 133,924 18,138 0
Local administrative fees (iv) 12,500 15,000 5,000
-------- -------- --------
$672,731 $602,863 $356,880
======== ======== ========
(i) 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 only 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).
(ii) 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 evaluations of the
subsidiary partnerships' performance.
(iii) Property management fees incurred by Local Partnerships amounted to
$301,751, $100,314 and $19,184 for the years ended March 31, 1996, 1995 and
1994, respectively. Of these fees $133,924, $18,138 and $0 were incurred to
affiliates of the subsidiary partnerships General Partners.
(iv) Independence SLP, L.P., a limited partner of the subsidiary
partnerships is entitled to receive a local administrative fee of up to $2,500
per year from each subsidiary partnership.
-27-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 8 - Related Party Transactions (Continued)
F) Due to Local General Partners and Affiliates
Due to Local General Partners and Affiliates at December 31, 1995 and 1994
consists of the following:
December 31
--------------------------
1995 1994
---------- ----------
Operating advances $1,184,632 $ 678,382
Development fee payable 3,666,330 5,206,873
Construction costs payable 1,485,413 822,431
Management and other operating advances 229,577 48,185
---------- ----------
$6,565,952 $6,755,871
========== ==========
G) Construction Commitments
As of December 31, 1995, three subsidiary partnerships have construction
commitments with contractors who are affiliated with the local general partners.
These construction contracts amounted to approximately $11,600,000, of which
approximately $6,100,000 was paid as of December 31, 1995.
-28-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 9 - Income Taxes
A reconciliation of the financial statement net loss to the income tax loss
for the Partnership and its consolidated subsidiaries follows:
For the Year Ended
December 31,
-------------------------
1996 1995
----------- -----------
Financial statement
net loss $(2,944,389) $(1,193,217)
Differences between depreciation
and amortization expense records
for financial reporting purposes
and the accelerated costs
recovery system utilized
for income tax purposes (254,256) (147,940)
Tax exempt interest income (569,018) (701,095)
Differences resulting from parent
company having a different fiscal
year for income tax and financial
reporting purposes 12,102 (146,850)
Other, including accruals for financial reporting not
deductible for tax purposes until paid 7,349 248,792
----------- -----------
Net loss as shown on the income tax return
for the calendar year ended $(3,748,212) $(1,940,310)
=========== ===========
NOTE 10 - Commitments and Contingencies
a) Subsidiary Partnerships-Litigation
Martha Bryant Manor, L.P.
Martha Bryant Manor, L.P. ("Martha Bryant") agreed to an out-of-court
settlement resulting from an alleged breach of contract suit. The settlement
resulted in a loss of $164,860, which is included in general and administrative
expenses in the March 31, 1996 Financial Statements.
Clear Horizons Limited Partnership
Clear Horizons Limited Partnership ("Clear Horizons") is named as a
defendant in a lawsuit involving the death of a person shot on the premises of
the apartment project. Clear Horizons' defense is being handled by its liability
insurer. Legal counsel believes that any settlement will be within insurance
policy limits,
-29-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 10 - Commitments and Contingencies (continued)
a) Subsidiary Partnerships-Litigation (continued)
$3,000,000, and there will be no loss to Clear Horizons. The maximum loss which
the Partnership would be liable for is its net investment in Clear Horizons
amounting to approximately $1,026,000.
United Germano-Millgate Limited Partnership
A former management agent has filed a $70,000 breach of contract claim
against United Germano Millgate ("United Germano"). Management believes the suit
is totally without merit and has filed a $40,000 counterclaim. The outcome of
this matter cannot presently be determined. Since it is premature to make an
evaluation of the amount of United Germano'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 United Germano amounting to approximately $2,861,000.
b) Uninsured Cash and Cash Equivalents
The Partnership maintains its cash and cash equivalents in various banks.
The accounts at each bank are guaranteed by the Federal Deposit Insurance
Corporation up to $100,000. At March 31, 1996, uninsured cash and cash
equivalents approximated $8,995,000.
c) Letters of Credit
As of December 31, 1995, the subsidiary partnerships were contingently
liable on open letters of credit as follows:
Description Amount
----------- ------
Development contingency $ 62,400
Rent reduction escrow 100,000
--------
$162,400
========
d) 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 economic conditions generally, however
no more than 34% of the properties are located in any single state. There are
also substantial risks associated with owning properties receiving government
assistance, for example the possibility that Congress may not appropriate funds
to enable HUD to make rental assistance payments. HUD also restricts annual cash
distributions to partners based on operating results and a percentage of the
owners equity contribution. The Partnership cannot sell or substantially
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
assistance contracts expire.
-30-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 10 - Commitments and Contingencies (continued)
The Partnership and BAC's holders will begin to recognize Housing Tax
Credits with respect to a Property when the Credit Period for such Property
commences. Because of the time required for the acquisition, completion and
rent-up of Properties, it is expected that the amount of Tax Credits per BAC
will gradually increase over the first three years of the Partnership. Housing
Tax Credits not recognized in the first three years will be recognized in the
11th through 13th years. For the 1995 and 1994 tax years, Housing Tax Credits of
$3,997,227 and $624,796 were generated and $3,096,915 and $9,813,716 of Historic
Tax Credits were generated, respectively.
-31-
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no directors or executive officers. The Partnership's
affairs are managed and controlled by Related Independence Associates L.P., the
General Partner. Certain information concerning the directors and executive
officers of Related Independence Associates Inc. ("RIAI"), the sole general
partner of the General Partner, is set forth below.
Name Position
---- --------
Stephen M. Ross Director
J. Michael Fried President and Director
Alan P. Hirmes Senior Vice President
Stuart J. Boesky Vice President
Ryne A. Nishimi Vice President
Marc D. Schnitzer Vice President
Lawrence J. Lipton Assistant Vice President and Treasurer
Robert Bordonaro Assistant Vice President
Lynn A. McMahon Secretary
Susan J. McGuire Assistant Secretary
STEPHEN M. ROSS, 56, is a Director of RIAI. Mr. Ross is also President,
Director and shareholder of The Related Realty Group, Inc., the General Partner
of The Related 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
apartment developments.
J. MICHAEL FRIED, 52, is President of RIAI. Mr. Fried is the sole
shareholder of one of the general partners of Related Capital Company
("Capital"), a real estate finance and acquisition affiliate of the Related
General Partner. In that capacity, he is responsible for all of Capital's
syndication, finance, 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.
-32-
ALAN P. HIRMES, 41, is a Senior Vice President of RIAI. Mr. Hirmes has been
a Certified Public Accountant in New York since 1978. Prior to joining Related
in October 1983, Mr. Hirmes was employed by Weiner & Co., Certified Public
Accountants. Mr. Hirmes is also a Vice President of Capital. Mr. Hirmes
graduated from Hofstra University with a Bachelor of Arts degree.
STUART J. BOESKY, 40, is a Vice President of RIAI. Mr. Boesky practiced
real estate and tax law in New York City with the law firm of Shipley &
Rothstein from 1984 until 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 specializing 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.
RYNE A. NISHIMI, 37, is a Vice President of RIAI. Mr. Nishimi is a Senior
Vice President of and serves as the National Sales Manager for Related Capital
Corporation and has held other positions in marketing since joining Capital in
1983. From 1981 to 1983, Mr. Nishimi worked for Fox & Carskadon Financial
Corporation as a Marketing Manager in their real estate syndication operation.
Mr. Nishimi graduated from Santa Clara University School of Business
Administration with a Bachelor of Science degree.
MARC D. SCHNITZER, 35, is a Vice President of RIAI. He is responsible both
for financial restructurings of real estate properties and directing Related's
acquisitions of properties generating Housing Tax Credits. Mr. Schnitzer
received a Masters of Business Administration from The Wharton School of the
University of Pennsylvania in December 1987 before joining Related in January
1988. From 1983 to January 1986, he was a financial analyst for the First Boston
Corporation in New York. Mr. Schnitzer graduated summa cum laude with a Bachelor
of Science in Business Administration from the School of Management at Boston
University in May 1983.
LAWRENCE J. LIPTON, 40, is Treasurer and an Assistant Vice President of
RIAI. Mr. Lipton is also a controller of The Related Companies, L.P. Mr. Lipton
has been a Certified Public Accountant in New York since 1989. Prior to joining
Related, Mr. Lipton was employed by Deloitte & Touche from 1987-1991. Mr. Lipton
graduated from Rutgers College with a Bachelor of Arts degree and from Baruch
College with a Masters of Business Administration degree.
ROBERT BORDONARO, 42, is an Assistant Vice President of RIAI. Mr. Bordonaro
is also a controller of The Related Companies, L.P. Mr. Bordonaro has been a
Certified Public Accountant in New York since 1977. Prior to joining Related,
Mr. Bordonaro was employed by the accounting firms of Weiner & Co. from
1982-1985 and Arthur Young from 1975-1981. Mr. Bordonaro graduated from New York
University with a Bachelor of Science degree in 1974 and with a Masters of
Business Administration degree in 1975.
LYNN A. McMAHON, 40 is Secretary of RIAI. Since 1983, she has served as
Assistant to the President of Capital. From 1978 to 1983 she was employed at
Sony Corporation of America in the Government Relations Department.
SUSAN J. McGUIRE, 49, is Assistant Secretary of RIAI. Since January 1977
she has served as Assistant to the President and Office Manager at Capital. From
May 1973 to January 1977, she was employed as an administrative assistant with
Condren, Walker & Co., Inc., an investment banking firm in New York City. Ms.
McGuire attended Queensboro Community College.
-33-
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 compensation to directors or
officers of the General Partners for their services. However, under the terms of
the Partnership Agreement, the Partnership has entered into certain arrangements
with the General Partner and its affiliates, which provide for compensation to
be paid to the General Partner and its affiliates. Such arrangements include
(but are not limited to) agreements to pay nonrecurring Acquisition Fees, a
nonaccountable Acquisition Expense allowance, an accountable expense
reimbursement and Subordinated Disposition Fees to the General Partners and/or
their affiliates. In addition, the General Partner is entitled to a subordinated
interest in Cash from Sales or Financings and a 1% interest in Net Income, Net
Loss, Distributions of Adjusted Cash from Operations and Cash from Sales or
Financings. Certain directors and officers of the General Partner receive
compensation from the General Partner and its affiliates for services performed
for various affiliated entities which may include services performed for the
Partnership. The maximum annual partnership management fee paid to the General
Partner is 0.5% of invested assets. See Note 8 to the Financial Statements in
Item 8 above, which is incorporated herein by reference.
Tabular information concerning salaries, bonuses and other types of
compensation payable to executive officers has not been included in this annual
report. As noted above, the Partnership has no executive officers. The levels of
compensation payable to the General Partner and/or its affiliates is limited by
the terms of the Partnership Agreement and may not be increased therefrom on a
discretionary basis.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Name and Address of Amount and Nature of Percentage
Title of Class Beneficial Ownership Beneficial Ownership of Class
- -------------- -------------------- -------------------- --------
General Partnership Related Independence $1,000 capital contribution 98%
Interest in the Partnership Associates L.P. -directly owned
625 Madison Avenue
New York, NY 10022
Independence SLP L.P. $10 capital contribution 2%
625 Madison Avenue -directly owned
New York, NY 10022
Independence SLP L.P., a limited partnership whose general partner is the
General Partner of the Partnership and which acts as the special limited partner
of each Partnership, holds a 1% limited partnership interest in each Local
Partnership. See Note 8 to the Financial Statements in Item 8 above, which
information is incorporated herein by reference thereto.
No person is known by the Partnership to be the beneficial owner of more
than five percent of the Limited Partnership Interests and/or BACs; and neither
the General Partner nor any director or officer of the General Partner
beneficially owns any Limited Partnership Interests or BACs.
Item 13. Certain Relationships and Related Transactions.
The Partnership has and will continue to have certain relationships with
the General Partner and its affiliates, as discussed in Item 11 and also Note 8
to the Financial Statements in Item 8 above, which is incorporated herein by
reference thereto. However, there have been no direct financial transactions
between the Partnership and the directors and officers of the General Partner.
The firm of Battle Fowler renders legal services to the Partnership. Martin
L. Edelman, a former director, is counsel to Battle Fowler.
-34-
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sequential
Page
----
(a) 1. Consolidated Financial Statements
Independent Auditors' Report 14
Consolidated Balance Sheets at March 31, 1996 and 1995 45
Consolidated Statements of Operations for the Years Ended
March 31, 1996, 1995 and 1994 46
Consolidated Statements of Changes in Partners' Capital
for the Years Ended March 31, 1996, 1995 and 1994 47
Consolidated Statements of Cash Flows for the Years Ended
March 31, 1996, 1995 and 1994 48
Notes to Consolidated Financial Statements 50
(a) 2. Consolidated Financial Statement Schedules
Independent Auditors' Report 70
Schedule I - Condensed Financial Information of Registrant 71
Schedule III - Real Estate and Accumulated Depreciation 74
All other schedules have been omitted because they are not required or
because the required information is contained in the financial statements or
notes thereto.
-35-
Item 14. Exhibits, Financial Statement Schedules (continued), and Reports on
Form 8-K. (Continued)
Sequential
Page
----
(a) 3. Exhibits
(3A) Agreement of Limited Partnership of Independence Tax Credit
Plus L.P. II as adopted on February 11, 1992*
(3B) Form of Amended and Restated Agreement of Limited Partnership
of Independence Tax Credit Plus L.P. II, attached to the
Prospectus as Exhibit A**
(3C) Certificate of Limited Partnership of Independence Tax Credit
Plus L.P. II as filed on February 11, 1992*
(10A)Form of Subscription Agreement attached to the Prospectus as
Exhibit B**
(10B)Escrow Agreement between Independence Tax Credit Plus L.P. II
and Bankers Trust Company*
(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*
(22) Subsidiaries of the Registrant 77
(27) Financial Data Schedule (filed herewith) 78
*Incorporated herein as an exhibit by reference to exhibits
filed with Post-Effective Amendment No. 4 to the Registration
Statement on Form S-11 Registration No. 33-37704
**Incorporated herein as an exhibit by reference to exhibits
filed with Post-Effective Amendment No. 8 to the Registration
Statement on Form S-11 Registration No. 33-37704
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
-36-
Supplemental Information to be furnished with Reports Filed Pursuant to
Section 15(d) of the Act by Registrants which have Not Registered Securities
Pursuant to Section 12 of the Act.
No annual report to security holders covering the Registrant's last fiscal
year nor any proxy statement, form of proxy or other proxy soliciting material
with respect to any annual or other meeting of security holders has been sent to
security holders.
-37-
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. II
(Registrant)
By: RELATED INDEPENDENCE ASSOCIATES L.P.
a General Partner
By: RELATED INDEPENDENCE ASSOCIATES INC.
a General Partner
Date: June 28, 1996 By: /s/ J. Michael Fried
-----------------------------
J. Michael Fried
President and Director
(Principal Executive Officer)
-40-
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
- ---------------------- ------------------------------------- -------------
/s/ J. Michael Fried President and Chief Executive Officer
- ---------------------- (principal executive officer) and
J. Michael Fried Director of Related Independence
Associates Inc. June 28, 1996
/s/ Lawrence J. Lipton Treasurer (principal financial and
- ---------------------- accounting officer) of Related
Lawrence J. Lipton Independence Associates Inc. June 28, 1996
/s/ Stephen M. Ross Director of Related Independence
- ---------------------- Associates Inc. June 28, 1996
Stephen M. Ross
-41-
[Letterhead of Trien, Rosenberg, Felix, Rosenberg, Barr & Weinberg, LLP]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Independence Tax Credit Plus L.P. II and Subsidiaries
(A Delaware Limited Partnership)
In connection with our audits of the consolidated financial statements of
Independence Tax Credit Plus L.P. II and Subsidiaries included in the Form 10-K
as presented in our opinion dated June 25, 1996 on pages 14 and 15, and
based on the reports of other auditors, we have also audited supporting
Schedules I and III for the 1995, 1994 and 1993 Fiscal Years. In our opinion,
and based on the reports of the other auditors, these consolidated schedules
present fairly, when read in conjunction with the related consolidated financial
statements, the financial data required to be set forth therein.
/s/ Trien, Rosenberg, Felix,
Rosenberg, Barr & Weinberg, LLP
TRIEN, ROSENBERG, FELIX,
ROSENBERG, BARR & WEINBERG, LLP
New York, New York
June 25, 1996
INDEPENDENCE TAX CREDIT PLUS L.P. II
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)
CONDENSED BALANCE SHEETS
ASSETS
March 31,
---------------------------
1996 1995
----------- -----------
Cash and cash equivalents $ 8,964,005 $24,832,921
Cash held in escrow 1,243,220 2,512,920
Investment in subsidary partnerships 37,854,372 22,744,231
Other assets 59,653 946,535
----------- -----------
Total assets $48,121,250 $51,036,607
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Due to general partner and affiliates $ 28,755 $ 0
Other liabilities 1,548 1,271
----------- -----------
Total liabilities 30,303 1,271
Partners' capital 48,090,947 51,035,336
----------- -----------
Total liabilities and partners' capital $48,121,250 $51,036,607
=========== ===========
Investments in subsidiary partnerships are recorded in accordance with the
equity method of accounting, under which the investments are not reduced below
zero.
-1-
INDEPENDENCE TAX CREDIT PLUS L.P. II
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)
CONDENSED STATEMENTS OF OPERATIONS
Year Ended March 31,
--------------------------
1996 1995
----------- -----------
Revenues
Other income $ 491,496 $ 811,357
----------- -----------
Total Revenues $ 491,496 $ 811,357
=========== ===========
Expenses
Financial (principally interest) 16,024 0
Administrative and management 330,886 267,212
Administrative and management-related parties 526,307 569,725
Amortization 10,000 10,000
----------- -----------
Total expenses 883,217 846,937
----------- -----------
Loss from operations (391,721) (35,580)
----------- -----------
Equity in loss of subsidiary partnerships (2,552,668) (1,157,637)
----------- -----------
Net loss $(2,944,389) $(1,193,217)
=========== ===========
-2-
INDEPENDENCE TAX CREDIT PLUS L.P. II
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)
CONDENSED STATEMENTS OF CASH FLOWS
Year Ended March 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
Cash flows from operating activities:
Net loss $ (2,944,389) $ (1,193,217) $ (266,447)
------------ ------------ ------------
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Amortization 10,000 10,000 10,000
Equity in loss of subsidiary partnerships 2,552,668 1,157,637 145,423
Increase (decrease) in liabilities
Due to general partners and affiliates 28,755 (89,510) 139,280
Other liabilities 0 (99,954) 45,954
------------ ------------ ------------
Total adjustments 2,591,423 978,173 340,657
------------ ------------ ------------
Net cash (used in) provided by operating activities (352,966) (215,044) 74,210
------------ ------------ ------------
Cash flows from investing activities:
Investment in subsidiary partnerships (17,678,489) (11,275,028) (12,772,263)
Decrease (increase) in other assets 876,882 1,127,689 (1,720,684)
Decrease (increase) in cash held in escrow-
purchase price payments 1,269,700 75,680 (2,588,600)
(Decrease) increase in due to general partners
and affiliates 0 0 (300,870)
Increase in accounts payable and other liabilities 277 0 0
------------ ------------ ------------
Net cash used in investing activities (15,531,630) (10,071,659) (17,382,417)
------------ ------------ ------------
Net cash provided by financing activities:
Distributions 15,680 0 0
(Increase) in offering costs 0 (150,903) (5,774,397)
Capital contributions received 0 1,030,000 52,835,000
(Decrease) increase in due to general partners
and affiliates 0 (52,664) (470,803)
------------ ------------ ------------
Net cash provided by financing activities 15,680 826,433 46,589,800
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (15,868,916) (9,460,270) 29,281,593
Cash and cash equivalents, beginning of year 24,832,921 34,293,191 5,011,598
------------ ------------ ------------
Cash and cash equivalents, end of year $ 8,964,005 $ 24,832,921 $ 34,293,191
============ ============ ============
-3-
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 1996
Cost
Initial Cost to Partnership Capitalized
--------------------------- Subsequent to
Buildings and Acquisition:
Description Encumbrances Land Improvements Improvements
----------- ------------ ---- ------------ ------------
Apartment Complexes
Lincoln Renaissance $2,457,085 $ 0 $5,240,173 $ 227,770
Reading, PA
United Germano Millgate 10,939,539 580,000 6,070,477 9,984,696
Limited Partnership
Chicago, IL
Mansion Court Associates 1,431,244 19,072 3,224,984 183,450
Philadelphia, PA
Derby Run Associates L.P. 4,653,284 407,410 3,069,628 4,557,603
Hampton, VA
Renaissance Plaza Assoc. 6,665,464 684,255 9,840,170 4,244,605
Baltimore, MD
Tasker Village 1,625,521 18,235 0 3,922,433
Philadelphia, PA
Martha Bryant Manor, L.P. 5,519,676 1,162,454 0 47,217
Los Angeles, CA
Colden Oaks Limited 5,316,500 840,374 0 5,872,999
Partnership
Los Angeles, CA
Brynview Terrace Limited 1,022,746 175,943 0 47,217
Partnership
Los Angeles, CA
NLEDC, L.P. 3,986,866 624,000 0 47,217
Los Angeles, CA
Life on which
Gross Amount at which Carried At Close of Period Year of Depreciation in
------------------------------------------------ Con- Latest Income
Buildings and Accumulated struction/ Date Statement is
Description Land Improvements Total Depreciation Renovation Acquired Computed(a)(b)
----------- ---- ------------ ----- ------------ ---------- -------- --------------
Apartment Complexes
Lincoln Renaissance $ 5,373 $ 5,462,570 $5,467,943 $261,833 1993-94 April 1993 20-40
Reading, PA
United Germano Millgate 585,374 16,049,799 16,635,173 1,348,571 1993-94 October 1993 10-25
Limited Partnership
Chicago, IL
Mansion Court Associates 25,095 3,402,411 3,427,506 173,584 1993-94 November 1993 40
Philadelphia, PA
Derby Run Associates L.P. 409,771 7,624,870 8,034,641 249,325 1994-95 February 1994 40
Hampton, VA
Renaissance Plaza Assoc. 686,616 14,082,414 14,769,030 361,860 1994-95 February 1994 27.5
Baltimore, MD
Tasker Village 20,596 3,920,072 3,940,668 60,138 1994-95 May 1994 27.5
Philadelphia, PA
Martha Bryant Manor, L.P. 1,164,815 44,856 1,209,671 3,083 1994-95 September 1994 27.5
Los Angeles, CA
Colden Oaks Limited 842,735 5,870,638 6,713,373 214,925 1994-95 September 1994 27.5
Partnership
Los Angeles, CA
Brynview Terrace Limited 178,304 44,856 223,160 3,083 1994-95 September 1994 27.5
Partnership
Los Angeles, CA
NLEDC, L.P. 626,361 44,856 671,217 3,082 1994-95 September 1994 27.5
Los Angeles, CA
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral (Continued)
MARCH 31, 1996
Cost
Initial Cost to Partnership Capitalized
--------------------------- Subsequent to
Buildings and Acquisition:
Description Encumbrances Land Improvements Improvements
----------- ------------ ---- ------------ ------------
Apartment Complexes
Creative Choice Homes VI Ltd. 3,254,058 650,072 13,134 5,332,621
Miami, FL
P&P Homes for the 5,671,532 0 0 51,266
Elderly, L.P.
Los Angeles, CA
Clear Horizons Limited 1,345,000 15,304 2,058,729 59,931
Partnership
Shreveport, LA
Neptune Venture L.P. 0 460,631 10,151,873 36,684
Neptune Township, NJ
Affordable Green 2,014,029 20,500 3,506,961 36,684
Associates L.P.
New York, NY
----------- ---------- ----------- -----------
$55,902,544 $5,658,250 $43,176,129 $34,652,393
=========== ========== =========== ===========
Life on which
Gross Amount at which Carried At Close of Period Year of Depreciation in
------------------------------------------------ Con- Latest Income
Buildings and Accumulated struction/ Date Statement is
Description Land Improvements Total Depreciation Renovation Acquired Computed(a)(b)
----------- ---- ------------ ----- ------------ ---------- -------- --------------
Apartment Complexes
Creative Choice Homes VI Ltd. 652,433 5,343,394 5,995,827 117,476 1994-05 September 1994 40
Miami, FL
P&P Homes for the 2,360 48,906 51,266 3,082 1994-95 September 1994 27.5
Elderly, L.P.
Los Angeles, CA
Clear Horizons Limited 17,665 2,116,299 2,133,964 89,973 1994-95 December 1994 27.5
Partnership
Shreveport, LA
Neptune Venture L.P. 462,465 10,186,723 10,649,188 20,256
Neptune Township, NJ
Affordable Green 22,334 3,541,811 3,564,145 49,591
Associates L.P.
New York, NY
---------- ----------- ----------- ----------
$5,702,297 $77,784,475 $83,486,772 $2,959,862
========== =========== =========== ==========
(a) Depreciation is computed using primarily the straight line method over the
estimated useful lives determined by the Partnership date of acquisition.
(b) Personal property is depreciated primarily by the straight line method over
the estimated useful lives ranging from 5 to 10 years.
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral (Continued)
MARCH 31, 1996
Cost of Property and Equipment Accumulated Depreciation
------------------------------ ------------------------
Year Ended March 31,
---------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994
----------- ----------- ----------- ----------- ----------- -----------
Balance at beginning of period $44,926,639 $22,190,071 $ 0 $ 857,939 $ 97,077 $ 0
Additions during period:
Improvements 38,560,133 22,736,568 22,190,071
Depreciation expense 2,101,923 760,862 97,077
Reductions during period:
Dispositions 0 0 0 0
----------- ----------- ----------- ----------- ----------- -----------
Balance at end of period $83,486,772 $44,926,639 $22,190,071 $ 2,959,862 $ 857,939 $ 97,077
=========== =========== =========== =========== =========== ===========
At the time the Local Partnerships were acquired by Independence Tax Credit Plus
II Limited Partnership, the entire purchase price paid by Independence Tax
Credit Plus II Limited Partnership was pushed down to the Local Partnerships as
property and equipment with an offsetting credit to capital. Since the projects
were in the construction phase at the time of acquisition, the capital accounts
were insignificant at the time of purchase. Therefore, there are no material
differences between the original cost basis for tax and GAAP.