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 September 30, 2002
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
Commission File Number 0-20638
PATRIOT TAX CREDIT PROPERTIES L.P.,
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3519080
- ------------------------------- -------------------
(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
N/A
-------------------------------
Former name, former address and
former fiscal year, if changed since last report
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
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
============ ============
September 30, March 31,
2002 2002
------------ ------------
(Unaudited)
ASSETS
Investment in property:
Land $ 4,005,633 $ 4,005,633
Buildings and improvements 75,955,392 75,707,158
Accumulated depreciation (25,172,636) (24,091,263)
------------ ------------
Net investment in property 54,788,389 55,621,528
------------ ------------
Cash and cash equivalents 1,225,877 1,005,628
Cash and cash equivalents
held in escrow 1,361,672 1,681,511
Deferred financing costs, net
of accumulation of $3,574,752
and $3,433,205 1,788,970 1,879,582
Other assets 364,342 303,834
------------ ------------
Total assets $ 59,529,250 $ 60,492,083
============ ============
2
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(continued)
============ ============
September 30, March 31,
2002 2002
------------ ------------
(Unaudited)
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage notes payable $ 45,610,398 $ 46,015,770
Accrued interest payable 2,192,727 2,040,908
Other accrued expenses
and liabilities 1 ,652,280 1,775,134
Due to Local General Partners and
affiliates of Local Partnerships 4,982,138 4,651,838
Development fees payable 1,151,510 1,151,510
Real estate taxes payable 183,619 81,878
Due to General Partner and
its affiliates 7,362,046 6,565,471
------------ ------------
Total liabilities 63,134,718 62,282,509
------------ ------------
Minority interest in local
partnerships (1,016,719) (606,601)
------------ ------------
PARTNERS' CAPITAL (DEFICIT)
Limited partners (38,125 BUC$
issued and outstanding) (3,324,526) (1,926,627)
General partner (1 BUC$
issued and outstanding) 735,777 742,802
------------ ------------
Total partners' capital (deficit) (2,588,749) (1,183,825)
------------ ------------
Total liabilities and partners'
capital (deficit) $ 59,529,250 $ 60,492,083
============ ============
See accompanying notes to consolidated financial statements.
3
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
======================== =========================
Three Months Ended Six Months Ended
September 30, September 30,
------------------------ -------------------------
2002 2001 2002 2001
------------------------ -------------------------
Revenues
Rental income $2,379,036 $2,240,867 $ 4,718,420 $ 4,538,009
Other income 162,220 187,719 362,578 359,874
Interest income 2,733 7,488 8,125 11,972
---------- ---------- ----------- -----------
2,543,989 2,436,074 5,089,123 4,909,855
---------- ---------- ----------- -----------
Expenses
Interest 1,196,634 1,112,832 2,367,017 2,288,583
Depreciation and
amortization 613,709 612,401 1,222,920 1,224,471
Operating and other 195,257 193,790 372,427 379,912
Taxes and
insurance 306,159 282,339 606,959 577,298
Repairs and
maintenance 444,734 454,332 1,119,720 1,139,373
General and
administrative 441,354 428,762 919,141 873,177
Partnership
management fees 59,718 59,718 118,732 118,732
Property
management fees 92,876 86,758 176,942 175,458
---------- ---------- ----------- -----------
3,350,441 3,230,932 6,903,858 6,777,004
---------- ---------- ----------- -----------
Loss before minority
interest (806,452) (794,858) (1,814,735) (1,867,149)
Minority interest
in loss of
local partnerships 150,970 211,463 409,811 490,076
---------- ---------- ----------- -----------
Net loss $ (655,482) $ (583,395) $(1,404,924) $(1,377,073)
========== ========== =========== ===========
Net loss - limited
partners $ (652,204) $ (580,478) $(1,397,899) $(1,370,188)
========== ========== =========== ===========
Number of
limited partnership
units outstanding 38,125 38,125 38,125 38,125
========== ========== =========== ===========
Net loss per limited
partnership unit $ (17.11) $ (15.23) $ (36.67) $ (35.94)
========== ========== =========== ===========
See accompanying notes to consolidated financial statements.
4
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Limited General
Total Partners Partner BUC$
----------- ----------- ----------- ----------
Partners' capital
April 1, 2002 $(1,183,825) $(1,926,627) $ 742,802 38,125
Net loss-Six
Months ended
September 30, 2002 (1,404,924) (1,397,899) (7,025) 0
----------- ----------- ----------- ----------
Partners' capital
(deficit) -
September 30, 2002 $(2,588,749) $(3,324,526) $ 735,777 38,125
=========== =========== =========== ==========
See accompanying notes to consolidated financial statements.
5
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
===========================
Six Months Ended
September 30,
---------------------------
2002 2001
---------------------------
Cash flows from operating activities:
Net loss $(1,404,924) $(1,377,073)
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities:
Depreciation and amortization 1,222,920 1,224,471
Minority interest in loss of
local partnerships (409,811) (490,076)
Decrease in cash held
in escrow 319,839 103,654
Increase in real estate taxes payable 101,741 58,382
Increase in accrued interest payable 151,819 76,048
Increase in other assets (60,508) (145,243)
(Decrease) increase in accrued
expenses and liabilities (122,854) 636,814
Increase in partnership management
fees payable 118,732 118,732
(Decrease) increase in public funds
payable (23,979) 25,865
(Decrease) increase in asset manage-
ment fee payable (8,250) 1,375
----------- -----------
Total adjustments 1,289,649 1,610,022
----------- -----------
Net cash (used in) provided by
operating activities (115,275) 232,949
----------- -----------
Cash flows from investing activities:
Investment in property (248,234) (240,669)
----------- -----------
6
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
===========================
Six Months Ended
September 30,
---------------------------
2002 2001
---------------------------
Cash flows from financing activities:
Payments of mortgage notes (405,372) (367,265)
Increase in deferred costs (50,935) 0
Distribution to minority interest (307) 0
Advances from General Partner 710,072 640,164
Advances from local limited partner 0 350,000
Increase in due to Local General
Partners and affiliates of
Local Partnerships, General
Partners and its affiliates 397,038 0
Decrease in due to Local General
Partners and affiliates of Local
Partnerships, General Partner and
its affiliates (66,738) (103,849)
----------- -----------
Net cash provided by financing
activities 583,758 519,050
----------- -----------
Net increase in cash and
cash equivalents 220,249 511,330
Cash and cash equivalents at
beginning of period 1,005,628 667,371
----------- -----------
Cash and cash equivalents at
end of period $ 1,225,877 $ 1,178,701
=========== ===========
Supplemental disclosure of cash flow information:
Non-cash Financing activity:
Interest paid $ 2,215,198 $ 2,212,535
=========== ===========
See accompanying notes to consolidated financial statements.
7
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES ON CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
Note 1 - General
These consolidated financial statements have not been audited. In the opinion of
management, the consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of Patriot Tax Credit Properties L.P. (the "Partnership")
as of September 30, 2002, the results of operations for the three and six months
ended September 30, 2002 and 2001 and the cash flows for the six months ended
September 30, 2002 and 2001. However, the operating results and cash flows for
the interim periods may not be indicative of the results expected for a full
year.
Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements and
notes thereto included in the Partnership's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for the year ended March 31, 2002.
The Partnership invests in partnerships (the "Local Partnerships") which own the
properties. The financial statements of the Local Partnerships consolidated
herein are for the six month period ended June 30, 2002 and occupancy rates are
as of June 30, 2002.
Note 2 - Related Parties
The General Partner and its affiliates have performed and will continue to
perform services for the Partnership which include, but are not limited to:
accounting and financial management; registrar, transfer and assignment
functions; asset management; investor communications; and printing and other
administrative services. The General Partner and its affiliates receive
Partnership management fees and reimbursements for general and administrative
8
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES ON CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
costs incurred in connection with these services, the amount of which is limited
by the provisions of the Partnership Agreement. The costs and expenses incurred
to the General Partner were:
Three Months Ended Six Months Ended
September 30, September 30,
--------------------- ---------------------
2002 2001 2002 2001
--------------------- ---------------------
Partnership Manage-
ment fees (a) $ 59,718 $ 59,718 $118,732 $118,732
Property Management
fees 26,338 24,949 52,676 49,898
Local administrative
fees 5,063 5,063 10,125 10,125
General and
administrative 21,189 12,000 42,703 27,239
Interest (b) 113,666 82,667 227,332 165,334
-------- -------- -------- --------
$225,974 $184,397 $451,568 $371,328
======== ======== ======== ========
(a) A Partnership management fee for managing the affairs of the Partnership
equal to 0.375% of invested assets is payable from operations and reserves to
the General Partner and its affiliates. Partnership management fees owed to the
General Partner amounting to approximately $545,000 and $427,000 were accrued
and unpaid as of September 30, 2002 and March 31, 2002, respectively.
As of September 30, 2002, the properties owned by five of the Local Partnerships
are managed by a local general partner ("Local General Partner") or its
affiliates and one Local Partnership is managed by an affiliate of the General
Partner and Local General Partner.
(b) During the six months ended September 30, 2002, the General Partner and its
affiliates advanced $796,575 to the Partnership and as of September 30, 2002 and
March 31, 2002, total advances outstanding are $7,362,046 and $6,565,471,
respectively. The advances are unsecured, bear interest at prime +2% and are due
on demand.
Without the General Partner's continued allowance of accrual without payment of
certain fees, expense reimbursements and advances the Partnership will not be in
9
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES ON CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
a position to meet its financial obligations. The General Partner and its
affiliates have agreed to support the Partnership's operating expenses for the
foreseeable future.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
- -------------------------------
The Partnership invested in eight Local Partnerships that are owners of
affordable multi-family residential complexes. The Local Partnerships are
operated in accordance with the rules and regulations of Section 42 of the
Internal Revenue Code in order to protect the housing tax credits authorized
thereby (the "Housing Tax Credits"). The Partnership's primary source of funds
is rental revenues, which is fully utilized at the property level. As of
September 30, 2002, there was approximately $277,000 in working capital reserves
available to fund Partnership level expenses. The Partnership is dependent upon
the support of the General Partner and certain of its affiliates in order to
meet its obligations at the Partnership level. The General Partner and these
affiliates have agreed to continue such support for the foreseeable future.
Without the General Partner's continued allowance of accrual without payment of
certain fees, expense reimbursements and advances the Partnership will not be in
a position to meet its obligations.
For the six months ended September 30, 2002, cash and cash equivalents of the
Partnership and its eight Local Partnerships increased approximately $220,000.
The increase is primarily attributable to advances from General Partner
($710,000) and a net increase in due to Local General Partners and affiliates of
Local Partnerships, General Partner and its affiliates ($330,000) which exceeded
payments of mortgage notes ($405,000), cash used in operating activities
($115,000), an increase in deferred costs ($51,000) and investment in property
($248,000). Included in adjustments to reconcile the net loss to cash used in
operating activities is depreciation and amortization of approximately
$1,223,000.
Summer Creek Villas Local Partnership ("Summer Creek Villas")
- -------------------------------------------------------------
Summer Creek Villas has experienced lower than expected economic occupancy
levels over the course of the last several years, which has resulted in
recurring losses from operations and has adversely affected the liquidity of
Summer Creek Villas. Despite an increase in rent levels during 2001, Summer
Creek Villas' operations are impeded by its inability to raise rents
sufficiently to pay for the operating and debt costs. Summer Creek Villas has
been unable to obtain maximum rents as potential residents are restricted based
on county median income levels, which limit the maximum income that a
prospective resident can earn. Summer Creek Villas has been obligated, since
1996, to repay significant amounts of principal on its mortgage.
11
Effective January 1, 1999, Summer Creek Villas entered into a funding agreement
with its Class C local limited partner which provides for a series of loans to
be made to Summer Creek Villas in each of the years 1999, 2000 and 2001, in
amounts not to exceed $2,000,000 in the aggregate. Although no formal agreements
have been reached with its other partners, additional loans from the Partnership
(which is the Class A limited partner) are expected to be obtained in accordance
with the loans to be provided under the funding agreement. Loans made through
September 30, 2002 to fund operating deficits total $8,835,749 and are comprised
of $6,835,749 from the Partnership (which was eliminated in consolidation) and
$2,000,000 from the Class C local limited partner. Management of Summer Creek
Villas plans to request additional funding from its partners (including the
Partnership) in the coming year.
Summer Creek Villas' ability to continue its operations is dependent upon
management achieving the plans described in Form 10-K and above. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Any adjustments would be
limited solely to Summer Creek Villas' financial statements.
Critical Accounting Policies
- ----------------------------
The financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America, which requires Registrant to
make certain estimates and assumptions. A summary of significant accounting
policies is disclosed in Note 2 to the financial statements which are included
in Registrant's annual report on Form 10-K for the year ended March 31, 2002.
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 financial statements.
o Registrant consolidates its subsidiaries and eliminates intercompany
transactions.
12
o If the carrying value of a property exceeds the estimated amounts
recoverable through future operations on an undiscounted basis, Registrant
records a property at the lower of its carrying value or its estimated fair
value.
Results of Operations
- ---------------------
Results of operations for the Local Partnerships consolidated herein are for the
three and six month periods ended September 30, 2002. Information disclosed
below with respect to each Local Partnership is consistent with this method of
presentation.
Rental income increased approximately $138,000 and $180,000 for the three and
six months ended September 30, 2002 as compared to the corresponding periods in
2001, primarily due to rental rate increases.
Other income decreased approximately $25,000 for the three months ended
September 30, 2002 as compared to the corresponding period in 2001, primarily
due to a decrease in redecorating fees and termination fees received at Summer
Creek Villas in 2001.
Property Information
- --------------------
Occupancies at the properties were as follows:
June 30,
---------------------
2002 2001
---------------------
Property
Hubbard's Ridge 96% 100%
Cutler Canal II 99 100
Diamond Street 100 96
Papillion Heights 96 90
Hill Top Homes 91 95
Summer Creek Villas 86 87
Brookland Park Plaza 91 95
Compton Townhouses 97 97
(Occupancies are calculated by dividing occupied units by total available
units.)
The Partnership holds a 66.5% interest in Summer Creek Villas, a 98% interest in
Hubbard's Ridge, Hill Top Homes and Compton Townhouses and a 98.99% interest in
Cutler Canal II, Diamond Street, Papillion Heights and Brookland Park Plaza.
None of the above properties experienced significant changes in occupancy rates.
13
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
Item 4 Controls and Procedures
The Chief Executive Officer and Chief Financial Officer of RCC Partners 96,
L.L.C., the general partner of Patriot Tax Credit Plus L.P. (the "Partnership"),
has evaluated the Partnership's disclosure controls and procedures relating to
the Partnership's quarterly report on Form 10-Q for the period ending September
30, 2002 as filed with the Securities and Exchange Commission and has judged
such controls and procedures to be effective as of September 30, 2002 (the
"Evaluation Date").
There have been no significant changes in the internal controls or in other
factors that could significantly affect internal controls relating to the
Partnership since the Evaluation Date.
14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Description:
3.1 Amendment to Certificate of Limited Partnership dated October 1,
1997 (3)
4.1 Agreement of Limited Partnership as adopted on May 3, 1989 and
Amendments thereto dated May 25, 1989 and December21, 1989 (1)
4.2 Amendment Number 1 to Prudential-Bache Tax Credit Properties L.P.
Amended and Restated Agreement of Limited Partnership, dated October 1, 1997 (3)
10.1 Form of Purchase and Sale Agreement pertaining to the
Partnership's Acquisition of Local Partnership Interests (2)
10.2Form of Amended and Restated Agreement of Local Limited
Partnership of Local Partnerships (2)
99.1Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(1) Filed as an exhibit to Pre-Effective Amendment No. 1 to Form
S-11 Registration Statement (No. 33-28571) (the "Registration Statement") and
incorporated herein by reference.
(2) Filed as an exhibit to Pre-Effective Amendment No. 2 to Form
S-11 Registration Statement and incorporated herein by reference.
15
(3) Filed as an exhibit to Registrant's Current Report on Form
8-K dated October 1, 1997 and incorporated herein by reference.
(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.
PATRIOT TAX CREDIT PROPERTIES L.P.
(Registrant)
By: RCC PARTNERS 96, L.L.C.,
General Partner
Date: November 7, 2002
By:/s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Member, President and
Chief Executive and
Financial Officer
Date: November 7, 2002
By:/s/ Glenn F. Hopps
------------------
Glenn F. Hopps
Treasurer and
Chief Accounting Officer
CERTIFICATION
I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of RCC
Partners 96 L.L.C. (the "General Partner"), the general partner of Patriot Tax
Credit Plus L.P. (the "Partnership"), hereby certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period
ending September 30, 2002 of the Partnership;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Partnership as of, and for, the periods presented in
this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15-d-14)
for the Partnership and I have:
a) designed such disclosure controls and procedures to ensure the
material information relating to the Partnership is made known to me,
particularly during the period in which this quarterly report was
being prepared;
b) evaluated the effectiveness of the Partnership's disclosure
controls and procedures as of September 30, 2002 (the "Evaluation
Date"); and
c) presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
Partnership's auditors and to the boards of directors of the General
Partners:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Partnership's ability to
record, process, summarize and report financial data and have
identified for the Partnership's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Partnership's
internal controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Partnership has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
By:/s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Executive Officer and
Chief Financial Officer
November 7, 2002
CERTIFICATION PURSUANT TO
18.U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Patriot Tax Credit Properties L.P.
(the "Partnership") on Form 10-Q for the period ending September 30, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Alan P. Hirmes, Chief Executive Officer and Chief Financial
Officer of RCC Partners 96, L.L.C., the general partner of the Partnership,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Partnership.
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Executive Officer and Chief Financial Officer
November 7, 2002