Attached files
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EX-32.1 - EX-32.1 - AMERICAN TAX CREDIT PROPERTIES LP | v210265_ex32-1.htm |
EX-32.2 - EX-32.2 - AMERICAN TAX CREDIT PROPERTIES LP | v210265_ex32-2.htm |
EX-31.2 - EX-31.2 - AMERICAN TAX CREDIT PROPERTIES LP | v210265_ex31-2.htm |
EX-31.1 - EX-31.1 - AMERICAN TAX CREDIT PROPERTIES LP | v210265_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
Quarterly Period Ended December
30, 2010
OR
¨ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
Transition Period from ____________ to ____________
Commission
File Number: 0-17619
American Tax Credit
Properties L.P.
(Exact
Name of Registrant as Specified in its Charter)
Delaware
|
13-3458875
|
|
(State
or Other Jurisdiction of
|
(I.R.S.
Employer
|
|
Incorporation
or Organization)
|
Identification
No.)
|
Richman
Tax Credit Properties L.P.
|
||
340
Pemberwick Road
|
||
Greenwich, Connecticut
|
06831
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Registrant's
Telephone Number, Including Area Code: (203)
869-0900
Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to filing requirements for the
past 90 days.
Yes x No ¨
Indicate
by check mark whether the Registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
Registrant was required to submit and post such files).
Yes ¨ No
¨
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
Accelerated Filer ¨ Accelerated
Filer ¨
Non-Accelerated Filer ¨ Smaller
Reporting Company x
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes ¨ No x
As of
February 8, 2011, there are 41,286 units of limited partnership interest
outstanding.
AMERICAN
TAX CREDIT PROPERTIES L.P.
PART
I - FINANCIAL
INFORMATION
Table of Contents
|
||
Page
|
||
Item
1.
|
Financial
Statements.
|
|
Balance
Sheets
|
3
|
|
Statements
of Operations
|
4
|
|
Statements
of Cash Flows
|
5
|
|
Notes
to Financial Statements
|
7
|
|
Item
2.
|
Management’s Discussion and Analysis of
Financial Condition and Results of
Operations.
|
10
|
Item
3.
|
Quantitative and Qualitative Disclosure
About Market Risk.
|
13
|
Item
4.
|
Controls
and Procedures.
|
13
|
Item
4T.
|
Internal
Control Over Financial Reporting.
|
14
|
2
AMERICAN
TAX CREDIT PROPERTIES L.P.
BALANCE
SHEETS
(UNAUDITED)
December 30,
|
March 30,
|
|||||||
2010
|
2010
|
|||||||
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 211,253 | $ | 295,778 | ||||
Investment
in mutual fund
|
1,048,576 | 1,555,638 | ||||||
Investment
in bond
|
101,238 | |||||||
Interest
receivable
|
2,341 | |||||||
Due
from local partnerships
|
50,000 | |||||||
Investment
in local partnerships
|
345,384 | 270,769 | ||||||
$ | 1,758,792 | $ | 2,122,185 | |||||
LIABILITIES
AND PARTNERS' EQUITY (DEFICIT)
|
||||||||
Liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ | 50,938 | $ | 73,923 | ||||
Payable
to general partner and affiliates
|
86,257 | 369,406 | ||||||
137,195 | 443,329 | |||||||
Commitments
and contingencies
|
||||||||
Partners'
equity (deficit)
|
||||||||
General
partner
|
(349,613 | ) | (348,912 | ) | ||||
Limited
partners (41,286 units of limited partnership interest
outstanding)
|
1,958,358 | 2,027,768 | ||||||
Accumulated
other comprehensive income
|
12,852 | |||||||
1,621,597 | 1,678,856 | |||||||
$ | 1,758,792 | $ | 2,122,185 |
See Notes
to Financial Statements.
3
AMERICAN
TAX CREDIT PROPERTIES L.P.
STATEMENTS
OF OPERATIONS
THREE
AND NINE MONTH PERIODS ENDED DECEMBER 30, 2010 AND 2009
(UNAUDITED)
Three Months
Ended
December 30,
2010
|
Nine Months
Ended
December 30,
2010
|
Three Months
Ended
December 30,
2009
|
Nine Months
Ended
December 30,
2009
|
|||||||||||||
REVENUE
|
||||||||||||||||
Interest
|
$ | 6,569 | $ | 18,113 | $ | 893 | $ | 1,878 | ||||||||
Other
income from local partnerships
|
50,000 | 54,893 | 7,181 | 29,041 | ||||||||||||
TOTAL
REVENUE
|
56,569 | 73,006 | 8,074 | 30,919 | ||||||||||||
EXPENSES
|
||||||||||||||||
Administration
fees
|
45,930 | 137,792 | 45,930 | 137,792 | ||||||||||||
Management
fee
|
43,865 | 131,599 | 43,865 | 131,599 | ||||||||||||
Professional
fees
|
14,210 | 42,580 | 14,298 | 59,707 | ||||||||||||
State
of New Jersey filing fee
|
(9,443 | ) | 13,867 | 12,556 | 30,049 | |||||||||||
Printing,
postage and other
|
8,288 | 19,894 | 3,458 | 9,272 | ||||||||||||
TOTAL
EXPENSES
|
102,850 | 345,732 | 120,107 | 368,419 | ||||||||||||
(46,281 | ) | (272,726 | ) | (112,033 | ) | (337,500 | ) | |||||||||
Equity
in income of investment in local partnerships
|
26,046 | 74,615 | 29,312 | 25,099 | ||||||||||||
Loss
prior to gain on sale of limited partner interests/local partnership
properties
|
(20,235 | ) | (198,111 | ) | (82,721 | ) | (312,401 | ) | ||||||||
Gain
on sale of limited partner interests/local partnership
properties
|
128,000 | 128,000 | 217,800 | 217,800 | ||||||||||||
NET
INCOME (LOSS)
|
107,765 | (70,111 | ) | 135,079 | (94,601 | ) | ||||||||||
Other
comprehensive income, net
|
185 | 12,852 | ||||||||||||||
COMPREHENSIVE
INCOME (LOSS)
|
$ | 107,950 | $ | (57,259 | ) | $ | 135,079 | $ | (94,601 | ) | ||||||
NET
INCOME (LOSS) ATTRIBUTABLE TO
|
||||||||||||||||
General
partner
|
$ | 1,078 | $ | (701 | ) | $ | 1,351 | $ | (946 | ) | ||||||
Limited
partners
|
106,687 | (69,410 | ) | 133,728 | (93,655 | ) | ||||||||||
$ | 107,765 | $ | (70,111 | ) | $ | 135,079 | $ | (94,601 | ) | |||||||
NET INCOME (LOSS) per
unit of limited partnership interest (41,286 units of limited partnership
interest)
|
$ | 2.59 | $ | (1.68 | ) | $ | 3.24 | $ | (2.27 | ) |
See Notes
to Financial Statements.
4
AMERICAN
TAX CREDIT PROPERTIES L.P.
STATEMENTS
OF CASH FLOWS
NINE
MONTHS ENDED DECEMBER 30, 2010 AND 2009
(UNAUDITED)
2010
|
2009
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Interest
received
|
$ | 18,955 | $ | 1,878 | ||||
Cash
paid for
|
||||||||
Administration
fees
|
(295,728 | ) | (22,405 | ) | ||||
Management
fee
|
(256,812 | ) | (50,000 | ) | ||||
Professional
fees
|
(63,632 | ) | (86,052 | ) | ||||
State
of New Jersey filing fee
|
(16,684 | ) | (40,384 | ) | ||||
Printing,
postage and other expenses
|
(19,010 | ) | (15,160 | ) | ||||
Net
cash used in operating activities
|
(632,911 | ) | (212,123 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Investments
in mutual fund
|
(14,623 | ) | ||||||
Redemptions
from mutual fund
|
531,056 | |||||||
Investment
in bond
|
(100,940 | ) | ||||||
Proceeds
in connection with sale of limited partner interests/local partnership
properties
|
128,000 | 217,800 | ||||||
Distributions
received from local partnerships
|
4,893 | 29,041 | ||||||
Net
cash provided by investing activities
|
548,386 | 246,841 | ||||||
Net
increase (decrease) in cash and cash equivalents
|
(84,525 | ) | 34,718 | |||||
Cash
and cash equivalents at beginning of period
|
295,778 | 1,817,949 | ||||||
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
$ | 211,253 | $ | 1,852,667 | ||||
SIGNIFICANT
NONCASH INVESTING ACTIVITIES
|
||||||||
Unrealized
gain on investment in mutual fund
|
$ | 9,371 | ||||||
Unrealized
gain on investment in bond
|
$ | 3,481 | ||||||
Increase
in due from local partnerships classified as other income from local
partnerships
|
$ | 50,000 |
See
reconciliation of net loss to net cash used in operating activities on page
6.
See Notes
to Financial Statements.
5
AMERICAN
TAX CREDIT PROPERTIES L.P.
STATEMENTS
OF CASH FLOWS - CONTINUED
NINE
MONTHS ENDED DECEMBER 30, 2010 AND 2009
(UNAUDITED)
2010
|
2009
|
|||||||
RECONCILIATION
OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES
|
||||||||
Net
loss
|
$ | (70,111 | ) | $ | (94,601 | ) | ||
Adjustments
to reconcile net loss to net cash used in operating
activities
|
||||||||
Equity
in income of investment in local partnerships
|
(74,615 | ) | (25,099 | ) | ||||
Gain
on sale of limited partner interests/local partnership
properties
|
(128,000 | ) | (217,800 | ) | ||||
Other
income from local partnerships
|
(54,893 | ) | (29,041 | ) | ||||
Amortization
of premium on investment in bond
|
1,433 | |||||||
Accrued
interest purchased at date of investment in bond
|
1,750 | |||||||
Increase
in interest receivable
|
(2,341 | ) | ||||||
Decrease
in accounts payable and accrued expenses
|
(22,985 | ) | (42,568 | ) | ||||
Increase
(decrease) in due to general partner and affiliates
|
(283,149 | ) | 196,986 | |||||
NET
CASH USED IN OPERATING ACTIVITIES
|
$ | (632,911 | ) | $ | (212,123 | ) |
See Notes
to Financial Statements.
6
AMERICAN
TAX CREDIT PROPERTIES L.P.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
30, 2010
(UNAUDITED)
1.
|
Basis
of Presentation
|
The
accompanying unaudited financial statements of American Tax Credit Properties
L.P. (the “Partnership”) have been prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”) for
interim financial information. They do not include all information
and footnotes required by GAAP for complete financial statements. The
results of operations are impacted, in part, by the combined results of
operations of the Local Partnerships, which are provided by the Local
Partnerships on an unaudited basis during interim
periods. Accordingly, the accompanying unaudited financial statements
are dependent on such unaudited information. In the opinion of the
General Partner, the accompanying unaudited financial statements include all
adjustments necessary to present fairly the financial position as of December
30, 2010 and the results of operations and cash flows for the interim periods
presented. All adjustments are of a normal recurring
nature. The results of operations for the nine months ended December
30, 2010 are not necessarily indicative of the results that may be expected for
the entire year.
2.
|
Investment
in Local Partnerships
|
The
Partnership originally acquired limited partner interests (the “Local
Partnership Interests”) in nineteen Local Partnerships representing capital
contributions in the aggregate amount of $36,228,149, which includes voluntary
advances made to certain Local Partnerships and all of which has been
paid. As of December 30, 2010, the Partnership holds a Local
Partnership Interest in seven Local Partnerships (see discussion below regarding
the potential sale of a Local Partnership Interest). The Partnership
has no legal obligation to fund any operating deficits of the Local
Partnerships.
For the
nine months ended December 30, 2010, the investment in local partnerships
activity consists of the following:
Investment
in local partnerships as of March 30, 2010
|
$ | 270,769 | ||
Equity
in income of investment in local partnerships
|
74,615 | * | ||
Distributions
received from Local Partnerships
|
(54,893 | ) | ||
Distributions
classified as other income
|
54,893 | |||
Investment
in local partnerships as of December 30, 2010
|
$ | 345,384 |
*
|
In
the event the operations of a Local Partnership result in a loss, equity
in loss of each investment in Local Partnership allocated to the
Partnership is recognized to the extent of the Partnership’s investment
balance in each Local Partnership. Equity in loss in excess of
the Partnership’s investment balance in a Local Partnership is allocated
to other partners’ capital in any such Local
Partnership.
|
In
November 2010, the Partnership sold its Local Partnership Interest in Golden
Gates Associates (“Golden Gates”) to an affiliate of the Local General Partner
of Golden Gates for $128,000; such amount is reflected as gain on sale of
limited partner interests/local partnership properties in the accompanying
unaudited statement of operations for the nine months ended December 30,
2010. The Partnership’s investment balance in Golden Gates, after
cumulative equity losses, became zero during the year ended March 30,
1994.
In
December 2010, Dunbar Limited Partnership (“Dunbar”) and Dunbar Limited
Partnership No. 2 (“Dunbar 2”), which Local Partnerships have the same Local
General Partner (the “Dunbar Local General Partner”), sold their underlying
Properties to affiliates of the Dunbar Local General
Partner. Although the Partnership received no proceeds in connection
with the sales, the purchasers agreed to pay the Partnership $25,000 for both
Dunbar and Dunbar 2 for distributions that were due to the Partnership under the
terms of the partnership agreements of Dunbar and Dunbar
2. Accordingly, $50,000 is reflected as due from local partnerships
in the accompanying unaudited balance sheet as of December 30, 2010 and is
included in other income from local partnerships in the accompanying unaudited
statement of operations for the nine months then ended. The
Partnership’s investment balance in Dunbar and Dunbar 2, after cumulative equity
losses, became zero during the years ended March 30, 1998 and 1997,
respectively.
7
AMERICAN
TAX CREDIT PROPERTIES L.P.
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER
30, 2010
(UNAUDITED)
2.
|
Investment
in Local Partnerships (Continued)
|
In
September 2009, the Partnership entered into a purchase agreement (the “Purchase
Agreement”) to sell its Local Partnership Interest in Federal Apartments Limited
Partnership (“Federal”) to an affiliate of the Local General Partner of Federal
for $334,000. The Purchase Agreement is subject to the approval of
the United States Department of Housing and Urban Development (“HUD”) and there
can be no assurance that the Local Partnership Interest will be sold under the
terms of the Purchase Agreement. The Partnership received a $50,000
nonrefundable deposit in connection with the Purchase Agreement in January
2011. The Partnership’s investment balance in Federal, after
cumulative equity losses, became zero during the year ended March 30,
1997.
Cobbet
Hill Associates Limited Partnership (“Cobbet”) was originally financed with a
first mortgage with mandatory monthly payment terms with the Massachusetts
Housing Finance Agency (“MHFA”) and a second mortgage with MHFA under the State
Housing Assistance for Rental Production Program (the “SHARP Operating Loan”)
whereby proceeds would be advanced monthly as an operating subsidy (the
“Operating Subsidy Payments”). The terms of the SHARP Operating Loan
called for declining Operating Subsidy Payments over its term (not more than 15
years). However, due to the economic condition of the Northeast
region in the early 1990’s, MHFA instituted an operating deficit loan (the
“ODL”) program that supplemented the scheduled reduction in the Operating
Subsidy Payments. Effective October 1, 1997, MHFA announced its
intention to eliminate the ODL program, such that Cobbet no longer receives the
ODL, without which Cobbet is unable
to make the full mandatory debt service payments on its first
mortgage. MHFA issued a formal notice of default dated February 2,
2004. The Local General Partners of Cobbet have informed MHFA that
they would transfer the ownership of the Property to the unaffiliated management
agent or to other parties, which might redevelop and recapitalize the
Property. The Partnership does not believe that it will receive any
proceeds from such a transfer. Since the date MHFA ceased funding the
ODL through December 31, 2009, Cobbet has accumulated over $9,050,000 of
arrearages and other charges on the first mortgage; as a result of the default,
principal and accrued interest in excess of $23,000,000 in connection with the
first mortgage, the SHARP Operating Loan and the ODL are considered currently
due. Cumulative voluntary advances made by the Partnership to Cobbet
as of December 30, 2010 total $392,829, none of which were made during the nine
months then ended. Such voluntary advances were recorded as
investment in local partnerships and were written off as additional equity in
loss of investment in local partnerships. The Partnership’s
investment balance in Cobbet, after cumulative equity losses, became zero during
the year ended March 30, 1994.
The
Partnership’s equity in income of its investment in Madison-Bellefield
Associates (“Madison-Bellefield”) of $74,615 represents more than 20% of the
Partnership’s net loss for the nine months ended December 30,
2010. The following financial information represents certain
unaudited operating statement data of Madison-Bellefield for the nine months
ended September 30, 2010:
Revenue
|
$ | 1,076,044 | ||
Net
income
|
$ | 75,268 |
3.
|
Investment
in Mutual Fund
|
The
Partnership carries its investment in mutual fund (the “Fund”) at estimated fair
value. The fair value of the Partnership’s investment in mutual fund
is classified within Level 1 of the fair value hierarchy of the guidance on
Fair Value Measurements as defined in Accounting Standards Codification (“ASC”)
Topic 820. Level 1 inputs utilize quoted prices (unadjusted) in
active markets for identical assets or liabilities that the Partnership has the
ability to access. The Fund’s net asset value (“NAV”) is $10.06 per
share as of December 30, 2010. The unrealized gain of $9,371 is
included as a component of accumulated other comprehensive income in the
accompanying unaudited financial statements as of and for the nine months ended
December 30, 2010.
8
AMERICAN
TAX CREDIT PROPERTIES L.P.
NOTES
TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER
30, 2010
(UNAUDITED)
4.
|
Investment
in Bond
|
The
Partnership carries its investment in bond as available-for-sale because such
investment is used to facilitate and provide flexibility for its obligations,
including resolving circumstances that may arise in connection with the Local
Partnerships. Investment in bond is reflected in the accompanying
unaudited balance sheet as of December 30, 2010 at estimated fair value and is
classified within Level 1 of the fair value hierarchy of the guidance on
Fair Value Measurements (see discussion in Note 3 above). The
unrealized gain of $3,481 is included as a component of accumulated other
comprehensive income in the accompanying unaudited financial statements as of
and for the nine months ended December 30, 2010.
As of
December 30, 2010, certain information concerning investment in bond is as
follows:
Gross
|
Gross
|
|||||||||||||||
Amortized
|
unrealized
|
unrealized
|
Estimated
|
|||||||||||||
Description and maturity
|
cost
|
gain
|
loss
|
fair value
|
||||||||||||
Corporate
debt security
|
||||||||||||||||
Callable
in September 2013
|
$ | 97,757 | $ | 3,481 | $ | — | $ | 101,238 |
5.
|
Additional
Information
|
Additional
information, including the audited March 30, 2010 Financial Statements and the
Organization, Purpose and Summary of Significant Accounting Policies, is
included in the Partnership's Annual Report on Form 10-K for the fiscal year
ended March 30, 2010 on file with the Securities and Exchange
Commission.
9
AMERICAN
TAX CREDIT PROPERTIES L.P.
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Material Changes in
Financial Condition
As of
December 30, 2010, American Tax Credit Properties L.P. (the “Registrant”)
experienced a significant change in financial condition as compared to March 30,
2010 primarily as the result of the payment of deferred administration and
management fees, partially offset by proceeds received in connection with the
sale of its interest (the “Local Partnership Interest”) in Golden Gates
Associates (“Golden Gates”) (see discussion below under Results of Operations
and Local Partnership
Matters). Principal changes in assets are comprised of
periodic transactions and adjustments and equity in income (loss) from
operations of the local partnerships (the “Local Partnerships”), which own
low-income multifamily residential complexes (the “Properties”) that qualified
for the low-income tax credit in accordance with Section 42 of the Internal
Revenue Code (the “Low-income Tax Credit”). During the nine months
ended December 30, 2010, Registrant received cash from interest revenue,
distributions from Local Partnerships, redemptions from a mutual fund and
proceeds in connection with the sale of its Local Partnership Interest in Golden
Gates and utilized cash for operating expenses and investments in a mutual fund
and a bond. Cash and cash equivalents, investment in mutual fund and
investment in bond decreased, in the aggregate, by approximately $490,000 during
the nine months ended December 30, 2010 (which includes unrealized gains on
investment in mutual fund and investment in bond in the aggregate of
approximately $13,000). Registrant intends to hold the bond until its
call date (September 2013) and therefore does not expect to realize significant
gains or losses on its investment in bond, if any. During the nine
months ended December 30, 2010, the investment in local partnerships increased
as a result of Registrant's equity in the Local Partnerships' net income for the
nine months ended September 30, 2010 of $74,615. Payable to general
partner and affiliates represents accrued administration and management fees in
the accompanying unaudited balance sheet as of December 30, 2010.
Results of
Operations
Registrant’s
operating results are dependent, in part, upon the operating results of the
Local Partnerships and are impacted by the Local Partnerships’
policies. In addition, the operating results herein are not
necessarily the same for tax reporting. Registrant accounts for its
investment in local partnerships in accordance with the equity method of
accounting. Accordingly, the investment is carried at cost and is
adjusted for Registrant’s share of each Local Partnership’s results of
operations and by cash distributions received. In the event the
operations of a Local Partnership result in a loss, equity in loss of each
investment in Local Partnership allocated to Registrant is recognized to the
extent of Registrant’s investment balance in each Local
Partnership. Equity in loss in excess of Registrant’s investment
balance in a Local Partnership is allocated to other partners’ capital in any
such Local Partnership.
Cumulative
losses and cash distributions in excess of investment in local partnerships may
result from a variety of circumstances, including a Local Partnership's
accounting policies, subsidy structure, debt structure and operating deficits,
among other things. In addition, the book value of Registrant’s
investment in each Local Partnership (the “Local Partnership Carrying Value”)
may be reduced if the Local Partnership Carrying Value is considered to exceed
the estimated value derived by management. Accordingly, cumulative
losses and cash distributions in excess of the investment or an adjustment to a
Local Partnership’s Carrying Value are not necessarily indicative of adverse
operating results of a Local Partnership.
Registrant’s
operations for the three months ended December 30, 2010 and 2009 resulted in net
income of $107,765 and $135,079, respectively. The decrease in net
income from fiscal 2009 to fiscal 2010 is primarily attributable to a decrease
in gain on sale of limited partner interests/local partnership properties of
approximately $90,000 (see discussion below under Local Partnership
Matters), partially offset by (i) an increase in interest revenue and
other income from local partnerships in the aggregate amount of approximately
$48,000 and (ii) a net decrease in operating expenses of approximately
$17,000. Other comprehensive income for the three months ended
December 30, 2010 resulted from unrealized gains (losses) on investment in
mutual fund and investment in bond of $(1,567) and $1,752,
respectively.
Registrant’s
operations for the nine months ended December 30, 2010 and 2009 resulted in net
losses of $70,111 and $94,601, respectively. The decrease in net loss
from fiscal 2009 to fiscal 2010 is primarily attributable to (i) an increase in
equity in income of investment in local partnerships of approximately $50,000,
which is attributable to an increase in the net operating income of the Local
Partnership in which Registrant continues to have an investment balance, (ii) an
increase in interest revenue and other income from local partnerships in the
aggregate amount of approximately $42,000 and (iii) a net decrease in operating
expenses of approximately $23,000, all partially offset by a decrease in gain on
sale of limited partner interests/local partnership properties of approximately
$90,000 (see discussion below under Local Partnership
Matters). Other comprehensive income for the nine months ended
December 30, 2010 resulted from unrealized gains on investment in mutual fund
and investment in bond of $9,371 and $3,481, respectively.
10
AMERICAN
TAX CREDIT PROPERTIES L.P.
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued).
Local Partnership
Matters
Registrant's
primary objective, to provide Low-income Tax Credits to its limited partners
(the “Limited Partners”), has been completed. The relevant state tax
credit agency allocated each of the Local Partnerships an amount of Low-income
Tax Credits, which are generally available for a ten year period from the year
the Property is placed in service (the “Ten Year Credit Period”). The
Ten Year Credit Period was fully exhausted with respect to all of the Properties
as of December 31, 2003. The required holding period of each
Property, in order to avoid Low-income Tax Credit recapture, is fifteen years
from the year in which the Low-income Tax Credits commence on the last building
of the Property (the "Compliance Period"). The Compliance Period of
all of the Local Partnerships had expired as of December 31, 2004. In
addition, certain of the Local Partnerships entered into agreements with the
relevant state tax credit agencies whereby the Local Partnerships must maintain
the low-income nature of the Properties for a period which exceeds the
Compliance Period (in certain circumstances, up to 50 years from when the
Property is placed in service, but commonly 30 years from the date any such
Property is placed in service), regardless of a sale of the Properties by the
Local Partnerships after the Compliance Period (the “Extended Use
Provisions”). Although the Extended Use Provisions do not extend the
Compliance Period of the respective Local Partnerships, such provisions limit
the number and availability of potential purchasers of the
Properties. Accordingly, a sale of a Property may happen well after
the expiration of the Compliance Period and/or may be significantly
discounted. Registrant is in the process of disposing of its Local
Partnership Interests. As of December 30, 2010, Registrant owns seven
of the nineteen Local Partnership Interests originally acquired (see discussion
below regarding the potential sale of a Local Partnership
Interest). Registrant has served a demand on the local general
partners (the “Local General Partners”) of all remaining Local Partnerships to
commence a sale process to dispose of the Properties. In the event a
sale cannot be consummated, it is the General Partner’s intention to sell or
assign Registrant’s Local Partnership Interests. Following the final
disposition of its Local Partnership Interests, Registrant intends to
dissolve. It is uncertain as to the amount, if any, that Registrant
will receive with respect to each specific Property from such sales or
assignments. There can be no assurance as to when Registrant will
dispose of its remaining Local Partnership Interests.
The
Properties are principally comprised of subsidized and leveraged low-income
multifamily residential complexes located throughout the United States and
Puerto Rico. All of the remaining Local Partnerships receive rental
subsidy payments, including six that receive payments under Section 8 of Title
II of the Housing and Community Development Act of 1974 ("Section
8”). The subsidy agreements expire at various times. Since
October 1997, the United States Department of Housing and Urban Development
(“HUD”) has issued a series of directives related to project based Section 8
contracts that define owners’ notification responsibilities, advise owners of
project based Section 8 properties of what their options are regarding the
renewal of Section 8 contracts, provide guidance and procedures to owners,
management agents, contract administrators and HUD staff concerning renewal of
Section 8 contracts, provide policies and procedures on setting renewal rents
and handling renewal rent adjustments and provide the requirements and
procedures for opting-out of a Section 8 project based
contract. Registrant cannot reasonably predict legislative
initiatives and governmental budget negotiations, the outcome of which could
result in a reduction in funds available for the various federal and state
administered housing programs including the Section 8 program. Such
changes could adversely affect the future net operating income before debt
service (“NOI”) and debt structure of any or all Local Partnerships currently
receiving such subsidy or similar subsidies. The six Local
Partnerships’ Section 8 contracts are currently subject to renewal under
applicable HUD guidelines. Of the six Local Partnerships noted above,
three have entered into restructuring agreements, resulting in a change to both
rent subsidy and mandatory debt service.
The Local
Partnerships have various financing structures which include (i) required debt
service payments ("Mandatory Debt Service") and (ii) debt service payments that
are payable only from available cash flow subject to the terms and conditions of
the notes, which may be subject to specific laws, regulations and agreements
with appropriate federal and state agencies ("Non-Mandatory Debt Service or
Interest"). Registrant has no legal obligation to fund any operating
deficits of the Local Partnerships.
In
November 2010, Registrant sold its Local Partnership Interest in Golden Gates to
an affiliate of the Local General Partner of Golden Gates for $128,000; such
amount is reflected as gain on sale of limited partner interests/local
partnership properties in the accompanying unaudited statement of operations for
the nine months ended December 30, 2010. Registrant’s investment
balance in Golden Gates, after cumulative equity losses, became zero during the
year ended March 30, 1994.
11
AMERICAN
TAX CREDIT PROPERTIES L.P.
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued).
In
December 2010, Dunbar Limited Partnership (“Dunbar”) and Dunbar Limited
Partnership No. 2 (“Dunbar 2”), which Local Partnerships have the same Local
General Partner (the “Dunbar Local General Partner”), sold their underlying
Properties to affiliates of the Dunbar Local General
Partner. Although Registrant received no proceeds in connection with
the sales, the purchasers agreed to pay Registrant $25,000 for both Dunbar and
Dunbar 2 for distributions that were due to Registrant under the terms of the
partnership agreements of Dunbar and Dunbar 2. Accordingly, $50,000
is reflected as due from local partnerships in the accompanying unaudited
balance sheet as of December 30, 2010 and is included in other income from local
partnerships in the accompanying unaudited statement of operations for the nine
months then ended. Registrant’s investment balance in Dunbar and
Dunbar 2, after cumulative equity losses, became zero during the years ended
March 30, 1998 and 1997, respectively.
In
September 2009, Registrant entered into a purchase agreement (the “Purchase
Agreement”) to sell its Local Partnership Interest in Federal Apartments Limited
Partnership (“Federal”) to an affiliate of the Local General Partner of Federal
for $334,000. The Purchase Agreement is subject to the approval of
HUD and there can be no assurance that the Local Partnership Interest will be
sold under the terms of the Purchase Agreement. Registrant received a
$50,000 nonrefundable deposit in connection with the Purchase Agreement in
January 2011. Registrant’s investment balance in Federal, after cumulative
equity losses, became zero during the year ended March 30, 1997.
Cobbet
Hill Associates Limited Partnership (“Cobbet”) was originally financed with a
first mortgage with mandatory monthly payment terms with the Massachusetts
Housing Finance Agency (“MHFA”) and a second mortgage with MHFA under the State
Housing Assistance for Rental Production Program (the “SHARP Operating Loan”)
whereby proceeds would be advanced monthly as an operating subsidy (the
“Operating Subsidy Payments”). The terms of the SHARP Operating Loan
called for declining Operating Subsidy Payments over its term (not more than 15
years). However, due to the economic condition of the Northeast
region in the early 1990’s, MHFA instituted an operating deficit loan (the
“ODL”) program that supplemented the scheduled reduction in the Operating
Subsidy Payments. Effective October 1, 1997, MHFA announced its
intention to eliminate the ODL program, such that Cobbet no longer receives the
ODL, without which Cobbet is unable to make the full mandatory debt service
payments on its first mortgage. MHFA issued a formal notice of
default dated February 2, 2004. The Local General Partners of Cobbet
have informed MHFA that they would transfer the ownership of the Property to the
unaffiliated management agent or to other parties, which might redevelop and
recapitalize the Property. Registrant does not believe that it will
receive any proceeds from such a transfer. Since the date MHFA ceased
funding the ODL through December 31, 2009, Cobbet has accumulated over
$9,050,000 of arrearages and other charges on the first mortgage; as a result of
the default, principal and accrued interest in excess of $23,000,000 in
connection with the first mortgage, the SHARP Operating Loan and the ODL are
considered currently due. Registrant’s investment balance in Cobbet,
after cumulative equity losses, became zero during the year ended March 30,
1994.
Critical Accounting Policies
and Estimates
The
accompanying unaudited financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America
(“GAAP”), which requires Registrant to make certain estimates and
assumptions. The following section is a summary of certain aspects of
those accounting policies that may require subjective or complex judgments and
are most important to the portrayal of Registrant’s financial condition and
results of operations. Registrant believes that there is a low
probability that the use of different estimates or assumptions in making these
judgments would result in materially different amounts being reported in the
accompanying unaudited financial statements.
|
·
|
Registrant
accounts for its investment in local partnerships in accordance with the
equity method of accounting.
|
|
·
|
If
the book value of Registrant’s investment in a Local Partnership exceeds
the estimated value derived by management, Registrant reduces its
investment in any such Local Partnership and includes such reduction in
equity in loss of investment in local partnerships. Registrant
makes such assessment at least annually in the fourth quarter of its
fiscal year or whenever there are indications that a permanent impairment
may have occurred. A loss in value of an investment in a Local
Partnership other than a temporary decline would be recorded as an
impairment loss. Impairment is measured by comparing the
investment carrying amount to the estimated residual value of the
investment.
|
12
AMERICAN
TAX CREDIT PROPERTIES L.P.
Item
2. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued).
|
·
|
Registrant
does not consolidate the accounts and activities of the Local
Partnerships, which are considered Variable Interest Entities as defined
by Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Topic 810; Subtopic 10, because Registrant is not
considered the primary beneficiary. Registrant’s balance in
investment in local partnerships represents the maximum exposure to loss
in connection with such investments. Registrant’s exposure to
loss on the Local Partnerships is mitigated by the condition and financial
performance of the underlying Properties as well as the financial strength
of the Local General Partners. In addition, the Local
Partnerships’ partnership agreements grant the Local General Partners the
power to direct the activities that most significantly impact the Local
Partnerships’ economic success.
|
Forward-Looking
Information
As a
cautionary note, with the exception of historical facts, the matters discussed
in this quarterly report on Form 10-Q are “forward-looking” statements within
the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform
Act”). Forward-looking statements may relate to, among other things,
current expectations, forecasts of future events, future actions, future
performance generally, business development activities, capital expenditures,
strategies, the outcome of contingencies, future financial results, financing
sources and availability and the effects of regulation and
competition. Words such as “anticipate,” “expect,” “intend,” “plan,”
“seek,” “estimate” and other words and terms of similar meaning in connection
with discussions of future operating or financial performance signify
forward-looking statements. Registrant may also provide written
forward-looking statements in other materials released to the
public. Such statements are made in good faith by Registrant pursuant
to the “Safe Harbor” provisions of the Reform Act. Registrant
undertakes no obligation to update publicly or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise. Such forward-looking statements involve known risks,
uncertainties and other factors that may cause Registrant’s actual results of
operations or actions to be materially different from future results of
operations or actions expressed or implied by the forward-looking
statements.
Item
3. Quantitative and Qualitative
Disclosure About Market Risk.
Registrant’s
investment in mutual fund (the “Fund”) is subject to certain
risk. The fixed income securities in which the Fund invests are
subject to interest rate risk, credit risk, prepayment risk, counterparty risk,
municipal securities risk, liquidity risk, management risk, government security
risk and valuation risk. Typically, when interest rates rise, the
market prices of fixed income securities go down. The Fund is
classified as “non-diversified,” and thus may invest most of its assets in
securities issued by or representing a small number of issuers. As a
result, the Fund may be more susceptible to the risks associated with these
particular issuers, or to a single economic, political or regulatory occurrence
affecting these issuers. These risks could adversely affect the
Fund’s net asset value (“NAV”), yield and total return.
The
market value of Registrant’s investment in bond is subject to fluctuation based
upon changes in interest rates relative to the investment’s maturity date and
the associated bond rating. Since Registrant’s investment in bond is
callable in 2013, the value of such investment may be adversely impacted in an
environment of rising interest rates in the event Registrant decides to
liquidate the investment prior to its call date. Although Registrant
may utilize the investment to pay for its operating expenses and/or for certain
Local Partnership matters, it otherwise intends to hold such investment to its
call date. Therefore, Registrant does not anticipate any material
adverse impact in connection with such investment.
Item
4. Controls
and Procedures.
Disclosure
controls and procedures are controls and procedures that are designed to ensure
that information required to be disclosed by Registrant in reports that
Registrant files or submits under the Exchange Act is recorded, processed,
summarized and timely reported as provided in SEC rules and
forms. Registrant periodically reviews the design and effectiveness
of its disclosure controls and procedures, including compliance with various
laws and regulations that apply to its operations. Registrant makes
modifications to improve the design and effectiveness of its disclosure controls
and procedures, and may take other corrective action, if its reviews identify a
need for such modifications or actions. In designing and evaluating
the disclosure controls and procedures, Registrant recognizes that any controls
and procedures, no matter how well designed and operated, can provide only
reasonable assurance of achieving the desired control
objectives.
13
AMERICAN
TAX CREDIT PROPERTIES L.P.
Item
4. Controls
and Procedures (Continued).
Registrant
has carried out an evaluation, under the supervision and the participation of
its management, including the Chief Executive Officer and Chief Financial
Officer of the general partner of the General Partner, of the effectiveness of
the design and operation of its disclosure controls and procedures (as defined
in Rule 13a-15(e) and 15d-15(e) under the Exchange Act), as of
the three months ended December 30, 2010. Based upon that evaluation,
the Chief Executive Officer and Chief Financial Officer of the general partner
of the General Partner concluded that Registrant’s disclosure controls and
procedures were effective as of December 30, 2010.
Item
4T. Internal Control Over
Financial Reporting.
There
were no changes in Registrant’s internal control over financial reporting during
the three months ended December 30, 2010 that have materially affected, or
are reasonably likely to materially affect, Registrant’s internal control over
financial reporting.
14
AMERICAN
TAX CREDIT PROPERTIES L.P.
Part
II - OTHER
INFORMATION
Item
1.
|
Legal
Proceedings.
|
None.
Item
1A.
|
Risk
Factors.
|
There
have been no material changes from the risk factors previously disclosed in Item
1A of Registrant’s Annual Report on Form 10-K for the year ended March 30,
2010.
Item
2.
|
Unregistered Sales of
Equity Securities and Use of
Proceeds.
|
None.
Item
3.
|
Defaults Upon Senior
Securities.
|
|
None;
see Item 2 of Part I regarding the mortgage default of a certain Local
Partnership.
|
Item
4.
|
Removed and
Reserved.
|
Item
5.
|
Other
Information.
|
|
None.
|
Item
6.
|
Exhibits.
|
Exhibit
31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer.
Exhibit
31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer.
Exhibit
32.1 Section 1350 Certification of Chief Executive Officer.
Exhibit
32.2 Section 1350 Certification of Chief Financial Officer.
15
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
AMERICAN
TAX CREDIT PROPERTIES L.P.
|
||
(a
Delaware limited partnership)
|
||
By:
|
Richman
Tax Credit Properties L.P.,
|
|
General
Partner
|
||
By:
|
Richman
Tax Credit Properties Inc.,
|
|
general
partner
|
||
Dated:
February 8, 2011
|
/s/David
Salzman
|
|
By:
|
David
Salzman
|
|
Chief
Executive Officer
|
||
Dated:
February 8, 2011
|
/s/James
Hussey
|
|
By:
|
James
Hussey
|
|
Chief
Financial Officer
|
||
Dated:
February 8, 2011
|
/s/Richard
Paul Richman
|
|
By:
|
Richard
Paul Richman
|
|
Director
|
16