UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended June 15, 2002
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
Commission File Number 0-17015
LIBERTY TAX CREDIT PLUS L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3446500
- --------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- -------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
PART I - Financial Information
Item 1. Financial Statements
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
June 15, March 15,
2002 2002
------------ ------------
ASSETS
Property and equipment, at cost,
net of accumulated depreciation
of $110,706,546 and $117,564,191
respectively $133,182,626 $144,303,061
Property and equipment -
held for sale, net of accumulated
depreciation of $9,091,326
and $0, respectively 9,682,316 0
Cash and cash equivalents 5,835,496 6,379,655
Cash held in escrow 14,568,335 14,707,928
Accounts receivable - tenants 599,781 704,001
Deferred costs - net of accumulated
amortization of $3,336,269
and $3,268,299, respectively 3,553,328 3,384,587
Other assets 1,328,128 1,073,070
----------- -----------
Total assets $168,750,010 $170,552,302
=========== ===========
2
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
June 15, March 15,
2002 2002
------------ ------------
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $161,846,710 $161,496,588
Accounts payable and other
liabilities 13,139,427 12,694,556
Due to local general partners and
affiliates 14,497,251 15,249,086
Due to general partners and
affiliates 6,952,007 6,723,981
Due to selling partners 1,233,660 1,233,660
----------- -----------
Total liabilities 197,669,055 197,397,871
----------- -----------
Minority interest 1,958,665 2,111,304
----------- -----------
Commitments and contingencies
(Note 3)
Partners' deficit:
Limited partners (15,987.5 BACs
issued and outstanding) (29,839,089) (27,937,460)
General partners (1,038,621) (1,019,413)
----------- -----------
Total partners' deficit (30,877,710) (28,956,873)
----------- -----------
Total liabilities and partners'
deficit $168,750,010 $170,552,302
=========== ===========
See Accompanying Notes to Consolidated Financial Statements.
3
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
Three Months Ended
June 15,
-----------------------------
2002 2001
-----------------------------
Revenues
Rental income $ 8,967,937 $ 8,983,757
Other 296,595 342,201
------------ ------------
9,264,532 9,325,958
Expenses
General and administrative 1,473,896 1,676,364
General and administrative-
related parties (Note 2) 659,718 618,744
Repairs and maintenance 1,653,987 1,462,618
Operating and other 1,358,178 1,511,914
Taxes 379,112 388,105
Insurance 367,723 363,013
Financial 3,103,880 3,143,907
Depreciation and amortization 2,317,804 2,205,928
------------ ------------
Total expenses 11,314,298 11,370,593
------------ ------------
Loss before minority
interest (2,049,766) (2,044,635)
Minority interest in loss of
subsidiaries 128,929 130,784
------------ ------------
Net loss $ (1,920,837) $ (1,913,851)
============ ============
Net loss-limited partners $ (1,901,629) $ (1,894,712)
============ ============
Number of BACs outstanding 15,987.5 15,987.5
============ ============
Net loss per BAC $ (118.94) $ (118.51)
============ ============
See Accompanying Notes to Consolidated Financial Statements.
4
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Deficit
(Unaudited)
Limited General
Total Partners Partners
------------------------------------------
Partners'
deficit -
March 16, 2002 $(28,956,873) $(27,937,460) $(1,019,413)
Net loss (1,920,837) (1,901,629) (19,208)
------------ ------------ -----------
Partners'
deficit -
June 15, 2002 $(30,877,710) $(30,877,710) $(1,038,621)
============ ============ ===========
See Accompanying Notes to Consolidated Financial Statements.
5
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
Three Months Ended
June 15,
-----------------------------
2002 2001
-----------------------------
Cash flows from operating activities:
Net loss $ (1,920,837) $(1,913,851)
Adjustments to reconcile net loss
to net cash (used in) provided
by operating activities:
Depreciation and amortization 2,317,804 2,205,928
Minority interest in loss of
subsidiaries (128,929) (130,784)
Decrease (increase) in accounts
receivable-tenants 104,220 (4,923)
Increase in other assets (255,058) (387,174)
Increase in accounts payable and
other liabilities 444,871 844,960
Increase in due to general partners
and affiliates 228,026 115,671
Increase in cash held
in escrow (805,659) (440,024)
------------ -----------
Net cash (used in) provided by
operating activities (15,562) 289,803
------------ -----------
Cash flows from investing activities:
Decrease in cash held in escrow 945,252 761,437
Improvements to property and
equipment (811,715) (203,067)
------------ -----------
Net cash provided by investing
activities 133,537 558,370
------------ -----------
6
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
Three Months Ended
June 15,
-----------------------------
2002 2001
-----------------------------
Cash flows from financing activities:
Increase in deferred costs (236,711) 0
Proceeds from mortgage notes 11,500,000 0
Repayments of mortgage notes (11,149,878) (900,221)
Increase in due to local general
partners and affiliates 85,912 201,509
Decrease in due to local general
partners and affiliates (837,747) (270,714)
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest (23,710) (320,888)
------------ -------------
Net cash used in
financing activities (662,134) (1,290,314)
------------ -------------
Net decrease in cash and cash
equivalents (544,159) (442,141)
Cash and cash equivalents at
beginning of period 6,379,655 6,659,875
------------ -------------
Cash and cash equivalents at
end of period $ 5,835,496 $ 6,217,734
============ =============
Supplemental disclosures of noncash investing and
financing activities:
Increase in property and equipment -
held for sale reclassified from
property and equipment $ 9,682,316 $ 0
See Accompanying Notes to Consolidated Financial Statements.
7
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 15, 2002
(Unaudited)
Note 1 - General
The consolidated financial statements include the accounts of Liberty Tax Credit
Plus L.P. (the "Partnership") and 31 subsidiary partnerships (each a "subsidiary
partnership" or "Local Partnership") in which the Partnership is a limited
partner. Through the rights of the Partnership and/or a general partner of the
Partnership (a "General Partner"), which General Partner has a contractual
obligation to act on behalf of the Partnership, to remove the general partners
of each subsidiary partnership (the "local general partners") and to approve
certain major operating and financial decisions, the Partnership has a
controlling financial interest in the subsidiary partnerships. All intercompany
accounts and transactions with the subsidiary partnerships have been eliminated
in consolidation.
For financial reporting purposes, the Partnership's fiscal quarter ends on June
15. All subsidiary partnerships have fiscal quarters ending March 31. Accounts
of the subsidiary partnerships have been adjusted for intercompany transactions
from April 1 through June 15. The Partnership's quarter ends on June 15 in order
to allow adequate time for the subsidiary partnerships financial statements to
be prepared and consolidated. The books and records of the Partnership are
maintained on the accrual basis of accounting, in accordance with generally
accepted accounting principles ("GAAP").
In the opinion of the General Partners, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position of the
Partnership as of June 15, 2002 and the results of operations and its cash flows
for the three months ended June 15, 2002 and 2001. However, the operating
results for the three months ended June 15, 2002 may not be indicative of the
results for the year.
Certain information and note disclosures which are normally included in
financial statements prepared in accordance with GAAP have been omitted or
condensed. These consolidated financial statements should be read in conjunction
with the financial statements and notes thereto included in the Partnership's
Annual Report on Form 10-K for the period ended March 15, 2002.
8
Increases (decreases) in the capitalization of consolidated subsidiaries
attributable to minority interest arise from cash contributions from and cash
distributions to the minority interest partners.
The Partnership's investment in each subsidiary partnership is equal to the
respective subsidiary partnership's partners' equity less minority interest
capital, if any. Losses attributable to minority interests which exceed the
minority interests' investment in subsidiary partnerships have been charged to
the Partnership. Such losses aggregated $73,000 and $50,000 for the three months
ended June 15, 2002 and 2001, respectively. In consolidation, all subsidiary
partnership losses are included in the Partnership's capital account except for
losses allocated to minority interest capital.
Note 2 - Related Party Transactions
An affiliate of the General Partners has a 1% interest, as a special limited
partner, in each of the subsidiary partnerships. An affiliate of the General
Partners also has a minority interest in certain subsidiary partnerships.
9
The costs incurred to related parties for the three months ended June 15, 2002
and 2001 were as follows:
Three Months Ended
June 15,
--------------------
2002 2001
--------------------
Partnership management fees (a) $284,500 $284,500
Expense reimbursement (b) 23,612 27,583
Property management fees incurred
to affiliates of the General Partners (c)305,421 261,697
Local administrative fee (d) 16,000 17,000
-------- --------
Total general and administrative -
General Partners 629,533 590,780
-------- --------
Property management fees incurred
to affiliates of the subsidiary
partnerships' general partners (c) 30,185 27,964
-------- --------
Total general and administrative -
related parties $659,718 $618,744
======== ========
(a) The General Partners are entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the local annual
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership's Amended and Restated Agreement of
Limited Partnership), for administering the affairs of the Partnership. The
partnership management fee, subject to the foregoing limitation, will be
determined by the General Partners in their sole discretion based upon their
review of the Partnership's investments. Partnership management fees owed to the
General Partners amounting to approximately $6,437,000 and $6,215,000 were
accrued and unpaid as of June 15, 2002 and March 15, 2002, respectively.
(b) 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. Expense reimbursements and asset monitoring fees owed
to Related Credit Properties L.P. amounting to approximately $20,000 were
accrued and unpaid as of both June 15, 2002 and March 15, 2002, respectively.
10
The General Partners have allowed for the accrual without payment of the amounts
set forth in (a) and (b) but are under no obligation to continue to do so.
(c) Property management fees incurred by the subsidiary partnerships amounted to
$488,728 and $482,657 for the three months ended June 15, 2002 and 2001,
respectively. Of these fees, $305,421 and $261,697 were incurred to affiliates
of the subsidiary partnerships' general partners. In addition, $30,185 and
$27,964 were incurred to affiliates of the General Partners.
(d) Liberty Associates III L.P., the special 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.
Note 3 - Mortgage Note Payable
On January 31, 2002, Alameda Towers Associates, Ltd. refinanced its outstanding
mortgage note payable of $7,834,000. The new mortgage in the amount of
$8,650,000 bears interest at 7% through January 31, 2032.
Note 4 - Sale of Properties
On May 22, 2002, Dixie Apartment Associates, LTD. entered into a purchase and
sale agreement with an unaffiliated third party for a purchase price of
$1,350,000. The closing is expected to occur in late 2002. No assurance can be
given that the closing will actually occur.
On May 31, 2002, the Partnership's Limited Partnership Interest in Apple Creek
Housing Associates, LTD. was sold to an unaffiliated third party purchaser for
$200,000 resulting in a gain of approximately $6,740,000, such gain will be
recognized in the second quarter of 2002.
11
On June 7, 2002, Ludlam Gardens Apartments, LTD. entered into a purchase and
sale agreement with an unaffiliated third party for a purchase price of
$3,900,000. The closing is expected to occur in late 2002. No assurance can be
given that the closing will actually occur.
Note 5 - Commitments and Contingencies
There have been no material changes and/or additions to the disclosures
regarding the subsidiary partnerships which were included in the Partnership's
Annual Report on Form 10-K for the fiscal year ended March 15, 2002.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Partnership's capital has been invested in 31 Local Partnerships.
The Partnership's primary source of funds is cash distributions from operations
of the Local Partnerships in which the Partnership has invested. Such funds are
available to meet obligations of the Partnership. During the three months ended
June 15, 2002 and 2001, such distributions amounted to approximately $231,000
and $946,000, respectively. In addition, partnership management fees and expense
reimbursements owed to the General Partners amounting to approximately
$6,457,000 and $6,235,000 were accrued and unpaid as of June 15, 2002 and March
15, 2002, respectively. Without the General Partners' continued accrual without
payment of the partnership management fees, the Partnership will not be in a
position to meet its obligations. The General Partners have allowed for the
accrual without payment of these partnership management fees but are under no
obligation to continue to do so.
For the three months ended June 15, 2002, cash and cash equivalents of the
Partnership and its 31 subsidiary partnerships decreased approximately $544,000.
This decrease is attributable to improvements to property and equipment
($812,000), an increase in deferred costs ($237,000), a decrease in
capitalization of consolidated subsidiaries attributable to minority interest
($24,000), cash used in operating activities ($16,000) and a net decrease in due
to local general partners and affiliates relating to financing activities
($752,000) which exceeded net proceeds and principal repayment of mortgage notes
($350,000) and a decrease in cash held in escrow relating to investing
activities ($945,000). Included in adjustments to reconcile the net loss to cash
used in operating activities is depreciation and amortization of approximately
$2,318,000.
For a discussion of contingencies affecting certain Local Partnerships, see Note
5 to the financial statements. Since the maximum loss the Partnership would be
liable for is its net investment in the respective Local Partnerships, the
resolution of the existing contingencies is not anticipated to impact future
results of operations, liquidity or financial condition in a material way.
However, the Partnership's loss of its investment in a Local Partnership may
result in recapture of tax credits if the investment is lost before the
expiration of the applicable compliance period.
13
Management is not aware of any trends or events, commitments or uncertainties
which have not otherwise been disclosed that will, or are likely to impact
liquidity in a material way. Management believes the only impact would be from
laws that have not yet been adopted. The portfolio is diversified by the
location of the properties around the United States so that if one area of the
country is experiencing downturns in the economy, the remaining properties in
the Partnership's portfolio may be experiencing upswings. However, the
geographic diversification of the portfolio may not protect against a general
downturn in the national economy.
Results of Operations
Results of operations for the three months ended June 15, 2002 and 2001
consisted primarily of the results of the Partnership's investment in the
consolidated Local Partnerships.
Rental income decreased less than 1% for the three months ended June 15, 2002 as
compared to the corresponding period in 2001.
Other income decreased approximately $46,000 for the three months ended June 15,
2002 as compared to the corresponding period in 2001, primarily due to lower
interest rates on cash and cash equivalent balances at the Partnership level.
Total expenses, excluding general and administrative, repairs and maintenance
and operating and other, remained fairly consistent, with an increase of
approximately 2% for the three months ended June 15, 2002 as compared to the
corresponding period in 2001.
General and administrative decreased approximately $202,000 for the three months
ended June 15, 2002 as compared to the corresponding period in 2001, primarily
due to a decrease in salaries and professional fees at one Local Partnership as
well as small decreases at three other Local Partnerships.
Repairs and maintenance increased approximately $191,000 for the three months
ended June 15, 2002 as compared to the corresponding period in 2001, primarily
due to carpet replacement, new cabinets and painting at one Local Partnership
due to a fire.
Operating and other expenses decreased approximately $154,000 for the three
months ended June 15, 2002 as compared to the corresponding period in 2001,
primarily due to a decrease in gas prices at three Local Partnerships.
14
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIBERTY TAX CREDIT PLUS L.P.
(Registrant)
By: RELATED CREDIT PROPERTIES L.P.,
a General Partner
By:Related Credit Properties Inc.,
its General Partner
Date: July 16, 2002
By:/s/ Alan P. Hirmes
Alan P. Hirmes,
President and Chief Executive
Officer
(Principal Executive and Financial Officer)
Date: July 16, 2002
By:/s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(Principal Accounting Officer)
By: LIBERTY ASSOCIATES III, L.P.,
a General Partner
By:Related Credit Properties L.P.,
its General Partner
By:Related Credit Properties Inc.,
its General Partner
Date: July 16, 2002
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Chief Executive Officer
(Principal Executive and Financial Officer)
Date: July 16, 2002
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(Principal Accounting Officer)