No 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended December 31, 2003
Commission file number 33-24537
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
(Exact name of registrant as specified in its charter)
| CALIFORNIA | 95-4178283 | ||
| (State of other jurisdiction of | (IRS Employer | ||
| incorporation of organization) | Identification Number) | ||
| 1 E. Stow Road | 08053 | ||
| Marlton, NJ | (Zip Code) | ||
| (Address of principal executive offices) | |||
| Registrant’s telephone number, including area code: (856) 596-3008 |
No Change
(Former name, former address and former fiscal year if changed since last report)
Indicate by a 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 No
Indicate by check mark in whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes No
| CENTURY PACIFIC TAX CREDIT HOUSING FUND II | |||
| TABLE OF CONTENTS | |||
| Page | |||
| PART I | FINANCIAL INFORMATION | ||
| Item 1 Financial Statements and Supplementary Data | 3 | ||
| Item 2 Management's Discussion and Analysis Of Financial Condition and Results of Operations | 10 | ||
| Item 3 Quantitative and Qualitative Disclosures About Market Risk | 12 | ||
| Item 4 Controls and Procedures | 12 | ||
| PART II | OTHER INFORMATION | ||
| Item 6 Exhibits and Reports on Form 8-K | 12 |
CERTIFICATIONS
EXHIBITS
2
PART I FINANCIAL INFORMATION
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
BALANCE SHEET
(Unaudited)
December 31,
|
March
31,
|
||||||
2003
|
2003
|
||||||
| ASSETS | |||||||
| Cash | $ | 0 | $ | 0 | |||
| Advance to General Partners | 871 | 871 | |||||
Investments in Limited Partnerships (Note 4) |
0 | 0 | |||||
| $ | 871 | $ | 871 | ||||
| LIABILITIES AND PARTNERS' EQUITY (DEFICIT) | |||||||
| Accounts Payable and Accrued Expenses | $ | 5,800 | $ | 5,800 | |||
| Amounts Payable to Related Parties (Note 3) | 2,297,295 | 2,269,095 | |||||
| Advance from Affiliates | 40,594 | 40,594 | |||||
| 2,343,689 | 2,315,489 | ||||||
| Commitments and Contingencies | |||||||
| Partners' Equity (Deficit), per accompanying statement | |||||||
| General Partners | (72,482 | ) | (72,200 | ) | |||
| Limited Partners, $1,000 stated value per unit, 25,000 units authorized, 5,754 units issued and outstanding | (2,270,336 | ) | (2,242,418 | ) | |||
| (2,342,818 | ) | (2,314,618 | ) | ||||
| $ | 871 | $ | 871 | ||||
The accompanying notes are an integral part of this statement.
3
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
STATEMENT OF OPERATIONS
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| December 31, | December 31, | ||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||
| REVENUES: | |||||||||||||||
| Other income | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||
| 0 | 0 | 0 | 0 | ||||||||||||
| EXPENSES: | |||||||||||||||
| General & Adm. (Note 3) | 9,400 | 8,984 | 28,200 | 27,830 | |||||||||||
| Equity in Net Losses of Operating Partnership (Note 4) | 0 | 0 | 0 | 0 | |||||||||||
| 9,400 | 8,984 | 28,200 | 27,830 | ||||||||||||
| Net Loss | $ | (9,400 | ) | $ | (8,984 | ) | $ | (28,200 | ) | $ | (27,830 | ) | |||
| Allocation of net Loss | |||||||||||||||
| General Partners | $ | (94 | ) | $ | (90 | ) | $ | (28 | ) | $ | (278 | ) | |||
| Limited Partners | (9,306 | ) | (8,894 | ) | (28,172 | ) | (27,552 | ) | |||||||
| $ | (9,400 | ) | $ | (8,984 | ) | $ | (28,200 | ) | $ | (27,830 | ) | ||||
| Net Loss Per Unit of Limited Partnership Interest | $ | (2 | ) | $ | (2 | ) | $ | (5 | ) | $ | (5 | ) | |||
| Average Number of Units Outstanding | 5,754 | 5,754 | 5,754 | 5,754 | |||||||||||
The accompanying notes are an integral part of this statement.
4
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
December 31,
2003
(Unaudited)
| General | Limited | |||||||||
| Partners | Partners | Total | ||||||||
| Balance at March 31, 2003 | $ | (72,200 | ) | $ | (2,242,418 | ) | $ | (2,314,618 | ) | |
| Net Loss | (282 | ) | (27,918 | ) | (28,200 | ) | ||||
| Equity (Deficit) at December 31, 2003 | $ | (72,482 | ) | $ | (2,270,336 | ) | $ | (2,342,818 | ) | |
| Percentage Interest December 31, 2003 | 1 | % | 99 | % | 100 | % | ||||
The accompanying notes are an integral part of this statement.
5
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
STATEMENT OF CASH FLOWS
(Unaudited)
| Nine Months Ended | ||||||
| December 31, | ||||||
| 2003 | 2002 | |||||
| Cash Flow from Operating Activities | ||||||
| Net Loss | $ | (28,200 | ) | $ | (27,830 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
| Equity in net losses of operating partnerships | — | — | ||||
| Change in assets and liabilities: | ||||||
| Decrease in accounts payable and accrued expenses | — | (1,671 | ) | |||
| Increase in due to affiliates | 28,200 | 29,454 | ||||
| Net Cash Used in Operating Activities | $ | 0 | $ | (47 | ) | |
| Net Decrease in Cash | $ | 0 | $ | (47 | ) | |
| Cash at Beginning of Period | 0 | 47 | ||||
| Cash at End of Period | $ | 0 | $ | 0 | ||
The accompanying notes are an integral part of this statement.
6
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
a California
limited partnership
NOTES TO FINANCIAL STATEMENTS
NOTE 1 – DESCRIPTION OF THE PARTNERSHIP AND ITS ORGANIZATION:
Century Pacific Tax Credit Housing Fund II, a California limited partnership (the “Partnership” or “CPTCHF II”) was formed on September 2, 1988 for the purpose of raising capital and selling limited partnership interests and then acquiring limited partnership interests in partnerships (the “Operating Partnerships”) owning and operating existing residential apartment properties (the “Properties”).
The general partners of the Partnership are Century Pacific Capital II Corporation, a California corporation, (“CPII”) and Irwin Jay Deutch, an individual (collectively, the “General Partners”). The General Partners and affiliates of the General Partners (the “General Partners and Affiliates”) have interest in the Partnership and receive compensation from the Partnership and the Operating Partnerships (Note 3).
The Properties qualify for the “Low-Income Housing Tax Credit” established by Section 42 of the Tax Reform Act of 1986 (the “Low-Income Housing Tax Credit”). These properties are leveraged low-income multifamily residential complexes and some receive one or more forms of assistance from federal, state or local governments, or agencies (the “Government Agencies”) while others do not receive any subsidy from Government Agencies although some may have mortgage loans insured by a Government Agency.
In September 1988, the Partnership began raising capital from sales of limited partnership interests, at $1,000 per unit. The limited partnership offering closed as of December 31, 1989, with 5,754 units having been sold.
As of December 31, 2003, the Partnership had acquired limited partnership interest of 90% in Washington Courts Limited Partnership and 60% in Laurel-Clayton Limited Partnership, two existing Operating Partnerships which own apartment rental properties. The interest in Washington Courts Limited Partnership was sold in September 2003. The Partnership did not receive any proceeds from this sale.
Basis of Presentation
The accompanying unaudited financial statements of Century Pacific Tax Credit Housing Fund II (the “Partnership”) as of December 31, 2003 and March 31, 2003 (the March 31, 2003 financial information included herein has been extracted from the Partnership's audited financial statements on Form 10-K) and for the three and nine months ended December 31, 2003 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities and Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the Partnership's management, all adjustments (consisting of only normal recurring adjustments) considered necessary to present fairly the financial statements have been made.
7
The statement of operations for the three and nine months ended December 31,2003 are not necessarily indicative of the results that may be expected for the entire year. These statements should be read in conjunction with the financial statements and related notes thereto included on Form 10-K for the year ended March 31, 2003.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Method of Accounting for Investments in Operating Partnerships
The Partnership uses the equity method to account for its investment in the Operating Partnerships in which it has invested (Note 4).
Under the equity method of accounting, the investment is carried at cost and adjusted for the Partnership's share of the Operating Partnerships' results of operations and by cash distributions received. Equity in the loss of each Operating Partnership allocated to the Partnership is not recognized to the extent that the investment balance would become negative.
Basis of Accounting
The Partnership maintains its financial records on the tax basis. Memorandum entries, while not recorded in the records of the Partnership, have been made in the financial statements to reflect accounting principles generally accepted in the United States of America.
On August 7, 1991, management of the Partnership changed from a calendar year end to a fiscal year end of March 31 for financial reporting purposes.
Accordingly, the Partnership's quarterly periods end June 30, September 30, and December 31. The Operating Partnerships, for financial reporting purposes, have a calendar year. The Partnership, as well as the Operating Partnerships, have a calendar year for income tax purposes.
Syndication Costs
Public offering costs have been recorded as a direct reduction to the capital accounts of the Limited Partners.
Organization, Acquisition and Other Costs
Costs incurred in organizing the Partnership and expenditures made by the Partnership in connection with its acquiring limited partnership interest in Operating Partnerships are deferred and amortized over a period of sixty months on a straight-line basis or capitalized as investments in Operating Partnerships. Other fees and expenses of the Partnership are recognized as expenses in the period the related services are received.
Income Taxes
No provision has been made for income taxes in the accompanying financial statements since such taxes and/or the recapture of the Low-Income Housing Tax Credits benefits received, if any, are the liability of the individual partners. The Partnership uses the accrual method of accounting for tax purposes.
8
NOTE 3 – TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES OF THE GENERAL PARTNERS:
The General Partners of the Partnership are CPII and Irwin Jay Deutch. Century Pacific Placement Corporation (“CPPC”), an affiliate of the General Partners, served as the broker-dealer-manager for sales of the limited partnership interests in the Partnership. Century Pacific Realty Corporation (“CPRC”), an affiliate of CPII, is a general partner in each of the Operating Partnerships. The General Partners have an aggregate one percent interest in the Partnership. CPRC has a one-half percent interest in each of the Operating Partnerships.
The General Partners and their Affiliates receive compensation and reimbursement of expenses from the Partnership, as set forth in the limited partnership agreement, for their services in managing the Partnership and its business. Pursuant to the partnership agreement, the Partnership is required to pay CPII an annual Management Fee for its services in connection with the management affairs of the Partnership. The annual Management Fee is equal to .5% of Invested Assets (as defined by the partnership agreement). The General Partners and Affiliates also receive compensation and reimbursement of expenses from the Operating Partnerships. This compensation and reimbursement include services provided to the Partnership during its offering stage, acquisition stage and operational stage.
NOTE 4 – INVESTMENTS IN OPERATING PARTNERSHIPS:
The following is a summary of the Partnership's investments in Operating Partnerships:
December 31, 2003 |
March 31, 2003 |
||||||
| Cash Contribution to Operating Partnerships to fund purchase of beneficial interest in Properties | $ |
2,426,000 | $ |
4,536,020 | |||
| Equity in net losses of Operating Partnerships | (2,426,000 | ) | (4,536,020 | ) | |||
$ |
0 | $ |
0 | ||||
9
The Property in which the Operating Partnership holds a beneficial interest is as follows:
| Name of Operating Partnership |
Property Name | Location | ||
| Laurel-Clayton, L.P. | Plumley Village | Worcester, Massachusetts |
The following combined statement of operations is prepared on the accrual basis and summarizes the operations of the Operating Partnerships for the three months ended December 31, 2003 and December 31, 2002 and for the nine months ended December 31, 2003 and December 31, 2002.
COMBINED STATEMENT OF OPERATIONS OF PROPERTIES
ACQUIRED BY THE OPERATING PARTNERSHIPS IN WHICH
CENTURY PACIFIC TAX CREDIT HOUSING FUND II HAS INVESTED
(Unaudited)
| Three Months Ended December 31, |
Nine Months Ended December 31, |
|||||||||||
2003 |
2002 |
2003 |
2002 |
|||||||||
| REVENUES: | ||||||||||||
| Rental Income | $ |
1,205,294 | $ |
1,333,243 | $ |
3,958,228 |
$ | 4,017,728 | ||||
| Other | 49,117 | 35,899 | 148,628 |
113,658 | ||||||||
| 1,254,411 | 1,369,142 | 4,106,856 |
4,131,386 | |||||||||
| EXPENSES: | ||||||||||||
| Operating, General and Administrative | 879,114 | 910,008 | 2,710,577 |
3,054,311 | ||||||||
| Depreciation | 226,290 | 269,303 | 764,455 |
807,909 | ||||||||
| Interest | 233,915 | 115,451 | 956,753 |
346,353 | ||||||||
| 1,339,319 | 1,294,762 | 4,431,785 |
4,208,573 | |||||||||
| Net Loss | $ |
(84,908 | ) | $ |
(74,380 | ) | $ |
(324,929 | ) |
$ | ( 77,187 | ) |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations
PLUMLEY VILLAGE – Worcester, Massachusetts
Plumley Village consists of 430 units situated on approximately 16 acres of land adjacent to Downtown Worcester. There is one 16 story high-rise and three low-rise structures on the site. The property has good freeway access and is convenient to stores, churches and hospitals.
The property is 100% occupied during the quarter. Cash flow was sufficient to cover operating expenses. Property rents were last increased in October 2002, bringing the annual gross potential rental revenue to approximately $4,582,104.
10
WASHINGTON COURTS – Chicago, Illinois
Washington Courts consists of 103 units on several sites in the Austin neighborhood of Chicago. The property is convenient to banks, schools, churches and commercial areas.
The property averaged a 90% occupancy rate during the quarter. Cash flow was sufficient to cover operating expenses. Property rents were adjusted in September 1998, with an annual gross potential rental revenue of approximately $1,045,728. The property was sold on September 15, 2003 for $7,110,669, an amount equal to its debt.
Liquidity and Capital Resources
The Partnership is currently experiencing a liquidity problem. Under the Partnership Agreement, the Partnership is entitled to receive distributions of surplus cash from the Operating Partnerships, which is to provide the funds necessary for the Partnership to meet its administrative expenses and pay the Partnership management fee. At the present time, the Operating Partnerships have not generated sufficient cash distributions to fund the Partnership's expenses. As a result of the foregoing, the Partnership has been dependent upon its affiliates and the General Partners for continued financial support to meet its expenses. Though, there can be no assurance, management believes that affiliates and/or the General Partners, though not required to do so, will continue to fund operations of the Partnership and defer receipt of payment of allocated overhead administrative expenses and partnership management fees. Allocated administrative expenses paid or accrued to affiliates and the General Partners represent reimbursement of the actual cost of goods and materials used for or by the Partnership, salaries, related payroll costs and other administrative items incurred or allocated, and direct expenses incurred in rendering legal, accounting/bookkeeping, computer, printing and public relations services. Items excluded from the overhead allocation include overhead expenses of the General Partners, including rent and salaries of employees not specifically performing the services described above. Unpaid allocated administrative expenses and partnership management fees, an annual amount up to .5% of invested assets, will accrue for payment in future operating years.
The Partnership is not expected to have access to any significant sources of financing. Accordingly, if unforeseen contingencies arise that cause an Operating Partnership to require additional capital to sustain operations, in addition to that previously contributed by the Partnership, the source of the required capital needs may be from (i) limited reserves from the Partnership (which may include distributions received from Operating Partnerships that would otherwise be available for distribution to partners), (ii) debt financing at the Operating Partnership level (which may not be available), or (iii) additional equity contributions from the general partner of the Operating Partnerships (which may not be available). There can be no assurance that any of these sources would be readily available to provide for possible additional capital requirements, which may be necessary to sustain the operations of the Operating Partnerships.
11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Due to the nature of our foregoing operations, we have concluded that there is no material market risk exposure and, therefore, no quantitative tabular disclosures are required.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of December 31, 2003, the Partnership's Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Partnership's disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c) as of the end of the period covered by this report. Based on that evaluation, they have concluded that the Partnership's current disclosure controls and procedures are effective in timely providing them with material information relating to the Partnership required to be disclosed in the reports the Partnership files or submits under the Exchange Act.
(b) Changes in Internal Controls
During the period covered by this report, there have not been any significant changes in the Partnership's internal controls or in other factors that could significantly affect these controls. There were no significant deficiencies or material weaknesses, and, therefore, no corrective actions were taken.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
We have listed the exhibits by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K on the Exhibit list attached to this report.
(b) Reports on Form 8-K
None
12
* * * SIGNATURE * * *
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.
| Date: July 1, 2004 | CENTURY PACIFIC TAX CREDIT HOUSING FUND II a California limited partnership |
|
| By: | Century Pacific Capital II Corporation, | |
| a California Corporation | ||
| General Partner | ||
| By: | /s/Irwin J. Deutch | |
| Irwin J. Deutch, President | ||
13
14