UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ------- ACT OF 1934
For the fiscal year ended March 31, 2003
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.
(formerly known as Prudential-Bache 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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Beneficial Unit Certificates
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes No X
------- -------
The approximate aggregate book value of the voting and non-voting common
equity held by non-affiliates of the Registrant as of September 30, 2002, was
($3,325,000), based on Limited Partner equity (deficit) as of such date.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Business.
General
- -------
Patriot Tax Credit Properties L.P. (the "Registrant"), a Delaware limited
partnership, was formed on May 3, 1989 and will terminate on December 31, 2029
unless terminated sooner under the provisions of the Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement"). The Registrant
was formed to invest in low-income, multi-family residential complexes
("Apartment Complexes" or "Properties") and, to a lesser extent, in historic
apartment complexes undergoing rehabilitation ("Historic Complexes" or
"Properties") through the acquisition of interests (the "Local Partnership
Interests") in local partnerships (the "Local Partnerships") that are the owners
of the Properties. These investments were made with proceeds from the initial
sale of 38,125 Beneficial Unit Certificates ("BUC$"). The Registrant's fiscal
year for tax and financial reporting purposes ends on December 31 and March 31,
respectively.
The primary objectives of the Registrant are to provide the limited partners
with low-income housing tax credits allowed under Section 42 of the Internal
Revenue Code of 1986, as amended ("Housing Tax Credits") over the credit period
for each Property in which the Registrant has invested and to a lesser extent,
10-year historic rehabilitation tax credits allowed under Section 48(g) of the
Internal Revenue Code of 1986, as amended. The Registrant invested only in Local
Partnerships that owned Properties which qualified for Housing Tax Credits. No
properties were acquired from any entity in which Prudential-Bache Properties,
Inc. (the former general partner) or any affiliate had an interest. The
Registrant's investments are composed of limited partnership interests in Local
Partnerships owning then newly constructed or existing structures that have
undergone substantial rehabilitation. The Local Partnerships in which the
Registrant has invested must be operated in accordance with the low-income
housing rules and regulations to protect the related tax credits. It is not
expected that any of the Local Partnerships in which the Registrant has invested
will generate any significant cash flow to provide distributions to the holders
of BUC$ ("BUC$ holders") or the limited partners.
The Registrant expects that in order to avoid recapture of Housing Tax Credits,
its holding period with respect to each Local Partnership Interest will be at
least as long as the 15-year compliance period and may be substantially longer.
The Registrant is in the final year of its 10-year Housing Tax Credit period,
however, the compliance period is still in effect.
Each Property in which the Registrant invested is substantially mortgaged.
However, the aggregate indebtedness did not exceed 85% of the appraised fair
market value of any Property at the time of acquisition. The first mortgage
financing encumbering the Properties was arranged by the general partner of the
Local Partnership (the "Local General Partner") owning the Properties prior to
the time the Registrant became a limited partner therein.
The Registrant acquired its Local Partnership Interest in each Local Partnership
by purchasing it directly from the existing limited and/or general partner of
the Local Partnership. In each of the Registrant's investments, the Local
General Partner of the Local Partnership owning the complex was required to
provide personal guarantees and/or establish cash escrows, financial bonds
and/or letters of credit to protect the Registrant against, among other things,
the failure to meet certain operating criteria. All of these guarantees and
escrows have expired.
2
The Registrant is engaged solely in the business of investing in Local
Partnerships that own Properties; therefore, presentation of industry segment
information is not applicable. For more information regarding the Properties,
see Item 2, Properties. For more information regarding the Registrant's
operations, see Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations.
One Property had income which exceeded 15% of the Registrant's total revenue.
Income from Palm Beach Apartments Ltd. ("Summer Creek Villas") as a percentage
of the Registrant's total revenue was 52.10%, 50.89% and 56.56% during the years
ended March 31, 2003, 2002 and 2001, respectively.
No single tenant accounted for 10% or more of the Registrant's total revenue for
any of the three years in the period ended March 31, 2003.
General Partner
- ---------------
The general partner of the Registrant is RCC Partners 96 L.L.C. (the "General
Partner") and is an affiliate of Related Capital Company ("RCC"). Independence
SLP L.P. ("SLP"), an affiliate of RCC, is the special limited partner.
Segments
- --------
The Registrant operates in one segment, which is the investment in multi-family
residential property.
Competition
- -----------
The General Partner has formed various entities to engage in businesses that may
be competitive with the Registrant.
The Registrant's business is affected by competition to the extent that the
underlying Properties from which it derives tax credits may be subject to
competition relating to rental rates and amenities from comparable neighboring
properties.
Employees
- ---------
The Registrant has no employees. Management and administrative services for the
Registrant are performed by the General Partner and its affiliates pursuant to
the Partnership Agreement. See Notes 1, 3 and 6 to the consolidated financial
statements set forth in Item 8.
3
Item 2. Properties.
As of March 31, 2003, the Registrant holds interests in Local Partnerships which
own the following Properties which continue to be operated in a manner to
qualify for Housing Tax Credits:
Registrant's
Low-Income
Occupancy Housing TaxCredit
Number Rents as of Rate as of for the YearEnded
Property (a) of Units May 1, 2003 May 1, 2003 December 31, 2002
- ------------ -------- ------------- ----------- -----------------
RMB Limited Partnership 196 $494 - 755 85% $ 0
(Hubbard's Ridge)
Garland, TX
Cutler Canal II 216 396 - 665 99% 0
Associates, Ltd.
Miami, FL
Diamond Street Venture 48 473 - 540 98% 0
Philadelphia, PA
Papillion Heights 48 495 88% 0
Apartments L.P.
Papillion, NE
Hill Top Homes 171 560 - 770 70% 0
Apartments
Limited Partnership
Arlington, TX
Palm Beach 770 605 - 860 92% 44,027
Apartments, Ltd.
(Summer Creek Villas)
West Palm Beach, FL
Brookland Park Plaza 77 563 92% 0
Limited Partnership
Richmond, VA
Compton Townhouses 39 765 91% 82,161
-----------
Limited Partnership
Cincinnati, OH
$ 126,188
===========
(a) At March 31, 2003, the Registrant 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.
Hubbard's Ridge is comprised of seven separate three-story buildings on
approximately 6.5 acres. The buildings are wood-framed structures on
post-tensioned flat slab grade foundations and have white stucco exteriors with
asphalt shingles on sloped roofs. Each building contains an average of 28 units.
The unit mix consists of 164 one-bedroom units ranging in size from 657 square
feet to 783 square feet and 32 two-bedroom units ranging in size from 1,145
square feet to 1,167 square feet.
Cutler Canal II is comprised of 216 units in 13 two-story garden-style
residential buildings on approximately 9.4 acres. It borders on a Metro-Dade
Water Management District Canal on the east with approximately 1,200 square feet
of frontage giving certain units waterfront views. Each building has a laundry
room and two storage rooms. There are three basic floor plans with sizes ranging
4
from 700 square feet for a one-bedroom apartment to 1,100 square feet for a
three-bedroom unit.
Diamond Street consists of 48 units in 16 buildings. The buildings are
three-story brownstone row houses with historic features and similar layouts. Of
the 48 apartment units, 46 are two-bedroom apartment units and two are
efficiency apartment units.
Papillion Heights consists of two buildings, each containing 24 units. The
buildings are 2 1/2 stories of wood frame and brick exterior with pitched roofs.
Of the total 48 apartment units, two are one-bedroom units and 46 are
two-bedroom units.
Hill Top Homes is comprised of a two-story building surrounded by 13 one-story
fourplexes which are brick with wood siding and pitched roofs. The buildings are
surrounded by a security gate of brick columns and wrought iron fencing with a
guard house at the entrance. Of the total 171 apartment units, 18 are
three-bedroom/one bath apartment units, each comprising approximately 925 square
feet; 52 are two-bedroom/two bath apartment units, each comprising approximately
1,100 square feet; 98 are two-bedroom/one bath apartment units, each comprising
approximately 936 square feet; and three are one-bedroom/one bath apartment
units, each comprising approximately 1,000 square feet.
Summer Creek Villas consists of 61 concrete block and stucco buildings housing
770 apartment units situated on approximately 60 acres of residential-planned
unit-development zoned land. 182 of the units are one-bedroom/one-bath
apartments, each comprising 570 square feet; 372 are two-bedroom/one-bath
apartments, each comprising 773 square feet; 144 are three-bedroom/two-bath
apartments, each comprising 980 square feet; and 72 are three-bedroom/two-bath
villa units, each comprising 1,050 square feet. In September 1997, the Local
General Partner for Summer Creek Villas decided to divide the apartment complex
into two individual entities called the Arbors and the Crossings.
Brookland Park Plaza is a three-level brick building and is a registered
historic landmark. The building is comprised of stucco and brick exterior and a
sloped red glazed tile roof. It is a 77-unit development with 68,564 net
rentable square feet. All 77 units are one-bedroom apartment units each
comprising approximately 890 square feet. Each unit contains a refrigerator,
range oven, carpeting and air-conditioning. Brookland Park Plaza also maintains
a community room for tenants.
The Compton Townhouses consists of six two-story buildings containing a total of
39 townhouse units. Four of the buildings contain six units; one building has
seven units; and one has eight units. All units have three bedrooms and
two-and-one-half baths. Total gross building area is 52,595 square feet; net
rentable area is 47,814 square feet. The average net area of the subject units
is 1,226 square feet.
For additional information describing the Registrant's properties and
encumbrances, see Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations and Schedule III - Real Estate and
Accumulated Depreciation.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Limited Partners
None.
5
PART II
Item 5. Market for the Registrant's BUC$ and Related Limited Partner Matters
As of May 9, 2003, there were 2,235 BUC$ holders of record owning a total of
38,125 BUC$. Additionally, the General Partner holds one BUC$. A significant
secondary market for BUC$ has not developed, and it is not expected that one
will develop in the future. There are also certain restrictions set forth in the
Partnership Agreement limiting the ability of a limited partner to transfer
BUC$.
There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Partnership Agreement; however, the Registrant has paid no distributions from
operations or otherwise since inception. No distributions are anticipated in the
foreseeable future.
6
Item 6. Selected Financial Data.
The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the consolidated financial statements of
the Registrant and the notes thereto set forth in Item 8.
For the Years ended March 31,
--------------------------------------------------------------------------
OPERATIONS 2003 2002 2001 2000 1999
- ---------- ------------ ------------ ------------ ------------ ------------
Rental and other in- $ 10,803,448 $ 10,333,034 $ 9,761,295 $ 7,915,054 $ 9,079,891
come ============ ============ ============ ============ ============
Interest income $ 15,827 $ 38,065 $ 39,888 $ 24,826 $ 32,104
============ ============ ============ ============ ============
Interest expense $ 4,747,765 $ 4,689,172 $ 4,729,740 $ 4,408,997 $ 4,354,244
============ ============ ============ ============ ============
Depreciation and amor-
tization expenses $ 2,429,909 $ 2,447,028 $ 2,445,646 $ 2,433,206 $ 2,428,529
============ ============ ============ ============ ============
Loss before minority
interest and extraord-
inary item $ (4,776,862) $ (4,815,277) $ (5,563,134) $ (5,435,229) $ (4,270,762)
============ ============ ============ ============ ============
Minority interest in loss
of local partnerships $ 1,139,863 $ 1,207,124 $ 1,135,959 $ 637,201 $ 496,863
============ ============ ============ ============ ============
Loss before extraordi-
nary item $ (3,636,999) $ (3,608,103) $ (4,427,175) $ (4,798,028) $ (3,773,899)
============ ============ ============ ============ ============
Extraordinary item -
forgiveness of indebt-
edness $ 0 $ 0 $ 833,002 $ 1,656,843 $ 809,460
============ ============ ============ ============ ============
Net loss $ (3,636,999) $ (3,608,103) $ (3,594,173) $ (3,141,185) $ (2,964,439)
============ ============ ============ ============ ============
Loss before extraordi-
nary item per limited
partnership unit $ (93.49) $ (94.17) $ (115.54) $ (125.22) $ (98.49)
Extraordinary item per
limited partnership
unit 0 0 21.74 43.24 21.13
------------ ------------ ------------ ------------ ------------
Net loss per limited
partner BUC$ $ (93.49) $ (94.17) $ (93.80) $ (81.98) $ (77.36)
============ ============ ============ ============ ============
Total assets $ 58,143,529 $ 60,492,083 $ 62,137,819 $ 64,662,321 $ 65,885,709
============ ============ ============ ============ ============
Mortgage notes payable $ 45,294,215 $ 46,015,770 $ 43,955,708 $ 44,569,822 $ 45,127,197
============ ============ ============ ============ ============
7
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
- -------------------------------
The Registrant 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. The
Registrant's primary source of funds is rental revenues, which are fully
utilized at the property level. As of March 31, 2003, there was approximately
$325,000 in working capital reserves available to fund Registrant level
expenses. The Registrant is dependent upon the support of the General Partner
and certain of its affiliates in order to meet its obligations at the Registrant
level. The General Partner and these affiliates have agreed to continue such
support for the foreseeable future.
At the Local Partnership level, certain Local General Partners and/or their
affiliates have made deficit guaranty agreements with respect to the Local
Partnerships which, under certain circumstances, required the Local General
Partners and/or their affiliates to fund cash flow deficits. These operating
deficit advances do not bear interest and are repayable by the Local Partnership
in accordance with the respective deficit guaranty agreements. In addition, the
Registrant's financial statements as of March 31, 2003 and 2002 also reflect
payables of $282,000 under operating deficit guaranty agreements at Hill Top
Homes, which have expired. As of March 31, 2003, all operating deficit guaranty
agreements have expired.
Summer Creek Villas Local Partnership
- -------------------------------------
The 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 2002, Summer
Creek Villas' operations are impeded by the 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. The Summer Creek Villas has been obligated, since
1996, to repay significant amounts of principal on its mortgage.
During 2002 and 2001, in an effort to improve occupancy, the Summer Creek Villas
invested funds to improve the physical condition of the property. Such
improvements primarily consisted of painting, landscaping, new playground,
asphalt repairs, and individual units fixture and finish replacements.
The Local General Partner of Summer Creek Villas was formerly obligated to fund
operating deficits under two separate operating deficit guaranty agreements.
Total advances made by the Local General Partner under the operating deficit
guaranties totaled $2,742,460. In addition, the Local General Partner has made
voluntary loans in excess of its obligations under the guaranties to fund
operations of $1,645,074, even though as of December 31, 1997, the Local General
Partner was no longer required to fund operations of Summer Creek Villas.
Effective January 1, 1999, Summer Creek Villas entered into a funding agreement
with Palm Beach Investor, L.P. (the Class C limited partner) which provided 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. On
September 9, 2002, Summer Creek Villas entered into a second funding agreement
with the Class C limited partner which provides for a second series of loans to
Summer Creek Villas in the years 2002, 2003 and 2004, in amount not exceed
$1,500,000 in aggregate. Although no formal agreements have been reached with
the other partners, additional loans from the Registrant (which is the Class A
8
limited partner) are expected to be obtained in accordance with the loans to be
provided under the funding agreement. Loans made in 2002 and 2001 under these
funding agreements to fund operating deficit's total $2,774,980 and $1,525,000,
respectively. Of such amounts, $2,046,565 and $1,175,000 were loaned by the
Registrant in 2002 and 2001, respectively.
These loans are expected to enable the Summer Creek Villas to continue
operations and make payments on its mortgage while management endeavors to
improve occupancy rates and rental rates to sufficient levels to sustain
operations independent of such funding.
During 2002, the management agent, an affiliate of the Local General Partner of
Summer Creek Villas, was reimbursed by Summer Creek Villas for operating
advances, made in the current and prior years, in the form of deferred
management fees and unreimbursed payroll in the net amount of $720,678. As of
December 31, 2002 and 2001, the management agent was due $491,988 and
$1,212,666, respectively. The management agent is not obligated to provide such
advances.
As of March 31, 2003 and 2002, the consolidated financial statements include
total assets of $30,772,961 and $32,067,406, respectively, total liabilities of
$38,315,144 and $36,100,522, respectively, and a minority interest of $1,935,146
and $796,380, respectively, attributable to this Local Partnership.
Summer Creek Villas' ability to continue its operations is dependent upon
management achieving the plans described in the foregoing paragraphs. 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.
Results of Operations
- ---------------------
The operating results of the Local Partnerships consolidated herein are for the
twelve-month periods ended December 31. Information disclosed below with respect
to each Local Partnership is consistent with this method.
Fiscal 2003 vs. Fiscal 2002
- ---------------------------
Rental income increased approximately $443,000 for the year ended March 31, 2003
as compared to 2002, primarily due to rental rate increases.
Interest income decreased approximately $22,000 for the year ended March 31,
2003 as compared to 2002, primarily due to lower interest rates on cash and cash
equivalent balances at the Local Partnerships and Registrant level.
Taxes and insurance increased approximately $216,000 for the year ended March
31, 2003 as compared to 2002, primarily due to an increase in insurance premiums
at the Local Partnerships.
Fiscal 2002 vs. Fiscal 2001
- ---------------------------
Rental income increased approximately $524,000 for the year ended March 31, 2002
as compared to 2001, primarily due to rental rate increases and an increase in
occupancy at Summer Creek Villas.
No other operating accounts had significant changes.
9
Critical Accounting Estimates
- -----------------------------
The preparation of consolidated financial statements requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of
accounting estimate considered critical by the Registrant.
Impairment of Long-Lived Assets
- -------------------------------
The Registrant is required to assess potential impairments to its long-lived
assets, which is primarily property and equipment. If impairment indicators are
present, the Registrant must measure the fair value of the assets in accordance
with Statement of Financial Standards No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." to determine if adjustments are to be recorded.
Taxes
- -----
The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the partners. The Partnership may be subject to other state and
local taxes in jurisdictions in which it operates. For income tax purposes, the
Partnership's year ends on December 31.
10
Property Information
- --------------------
The Registrant currently holds interests in eight Local Partnerships. The
following schedule gives specific details about the related Properties.
Registrant's
Gross Carrying Occupancy Low-Income
Value of Rate at Housing Tax Credit
Number Property at December 31, for the Year Ended
Property (a) of Units March 31, 2003 2002 (c) December 31, 2002
- -------------------------- ----------- -------------- ----------- ------------------
RMB Limited Partnership 196 $ 5,310,849 90% $ 0
(Hubbard's Ridge)
Garland, TX
Cutler Canal II 216 11,489,324 97% 0
Associates, Ltd.
Miami, FL
Diamond Street Venture (b) 48 2,912,536 98% 0
Philadelphia, PA
Papillion Heights 48 2,206,424 90% 0
Apartments L.P.
Papillion, NE
Hill Top Homes 171 8,104,661 74% 0
Apartments
Limited Partnership
Arlington, TX
Palm Beach 770 40,832,871 93% 44,027
Apartments, Ltd.
(Summer Creek Villas)
West Palm Beach, FL
Brookland Park Plaza 77 6,449,682 94% 0
Limited Partnership
Richmond, VA
Compton Townhouses 39 2,445,632 97% 82,161
Limited Partnership -------------- -----------
Cincinnati, OH
$ 79,751,979 $ 126,188
============== ===========
(a) At March 31, 2003, the Registrant 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.
(b) The investment in property relating to the Diamond Street Venture was
reduced by $2,700,000 as of March 31, 1995 representing a loss on impairment of
assets.
(c) Occupancies are calculated by dividing occupied units by total available
units.
11
Net operating income before debt service of the Local Partnerships for each of
the years in the three-year period ended March 31, 2003, was as follows:
2003 2002 2001
---------- ---------- ----------
Hubbard's Ridge $ 329,000 $ 427,000 $ 403,000
Cutler Canal II 737,000 783,000 675,000
Diamond Street 71,000 54,000 16,000
Papillion Heights 72,000 64,000 89,000
Hill Top Homes 365,000 429,000 437,000
Summer Creek Villas 871,000 679,000 99,000
Brookland Park Plaza 192,000 160,000 193,000
Compton Townhouses 151,000 132,000 138,000
---------- ---------- ----------
$2,788,000 $2,728,000 $2,050,000
========== ========== ==========
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable.
12
Item 8. Financial Statements and Supplementary Data.
Sequential
Page
----------
(a) 1. Financial Statements
Independent Auditors' Reports 14
Consolidated Balance Sheets as of March 31, 2003 and 2002 33
Consolidated Statements of Operations for the years ended March 31,
2003, 2002 and 2001 34
Consolidated Statements of Changes in Partners' Capital (Deficit) for
the years ended March 31, 2003, 2002 and 2001 35
Consolidated Statements of Cash Flows for the years ended
March 31, 2003, 2002 and 2001 36
Notes to Consolidated Financial Statements 37
13
INDEPENDENT AUDITORS' REPORT
To the Partners of
Patriot Tax Credit Properties L.P. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Patriot Tax
Credit Properties L.P. and Subsidiaries as of March 31, 2003 and 2002, and the
related consolidated statements of operations, changes in partners' capital
(deficit) and cash flows for the years ended March 31, 2003, 2002 and 2001. The
consolidated financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Patriot Tax Credit
Properties L.P. and Subsidiaries as of March 31, 2003, 2002, and the results of
their operations, changes in Partners' capital (deficit), and their cash flows
for the years ended March 31, 2003, 2002 and 2001, in conformity with accounting
principles generally accepted in the United States of America.
Our report on the 2003 financial statements of a subsidiary included an
explanatory paragraph describing conditions that raised substantial doubt
regarding its ability to continue as a going concern, as discussed in note 10 to
the consolidated financial statements.
REZNICK FEDDER & SILVERMAN
Bethesda, Maryland
May 15, 2003
14
[Letterhead of Dickey, Wolf & Humbard, LLC]
INDEPENDENT AUDITORS' REPORT
To The Partners
RMB Limited Partnership
We have audited the accompanying balance sheets of RMB LIMITED PARTNERSHIP (a
Texas Limited Partnership) as of December 31, 2002 and 2001, and the related
statements of operations, partners' equity/(deficit) and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RMB LIMITED PARTNERSHIP as of
December 31, 2002 and 2001, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ DICKEY, WOLF & HUMBARD, LLC
Certified Public Accountants
Harrisonville, MO
January 23, 2003
15
[Letterhead of Dickey, Wolf & Humbard, LLC]
INDEPENDENT AUDITORS' REPORT
To The Partners
RMB Limited Partnership
We have audited the accompanying balance sheets of RMB LIMITED PARTNERSHIP (a
Texas Limited Partnership) as of December 31, 2001 and 2000, and the related
statements of income, partners' equity/(deficit) and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RMB LIMITED PARTNERSHIP as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ DICKEY, WOLF & HUMBARD, LLC
Certified Public Accountants
Harrisonville, MO
January 23, 2002
16
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the General Partners
Cutler Canal II Associates, Ltd.
We have audited the accompanying balance sheet of Cutler Canal II Associates,
Ltd. as of December 31, 2002, and the related statements of operations, changes
in partners' equity (deficit) and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Cutler Canal II Associates, Ltd. as of
and for the year ended December 31, 2001, were audited by other auditors whose
report dated February 13, 2002 expressed an unqualified opinion on those
financial statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cutler Canal II Associates,
Ltd. as of December 31, 2002, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 17
through 18 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
/s/ Reznick Fedder & Silverman
Atlanta, Georgia
January 20, 2003
17
[Letterhead of KPMG]
INDEPENDENT AUDITORS' REPORT
To the General Partners
Cutler Canal II Associates, Ltd.
We have audited the accompanying balance sheet of Cutler Canal II Associates,
Ltd. as of December 31, 2001, and the related statements of operations,
partners' capital (deficit), and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cutler Canal II Associates,
Ltd. as of December 31, 2002, and the results of its operations and its cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information included in the
Schedule of Certain Expenses is presented for purposes of additional analysis
and is not a required part of the basic financial statements. Such information
has been subjected to the procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ KPMG
Greenville, South Carolina
February 13, 2002
18
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners
Cutler Canal II Associates, Ltd.
We have audited the accompanying balance sheets of Cutler Canal II Associates,
Ltd., as of December 31, 2000 and 1999, and the related statements of
operations, partners' capital (deficit), and cash flows for the years then
ended. These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cutler Canal II Associates,
Ltd., as of December 31, 2001 and 1999, and the results of its operations, and
its cash flows for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 18
and 19 is presented for purposes of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
/s/ Reznick Fedder & Silverman
Atlanta, Georgia
January 30, 2001
19
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners
Diamond Street Venture
We have audited the accompanying balance sheet of Diamond Street Venture as of
December 31, 2002 and 2001, and the related statements of profit and loss,
changes in partners' equity (deficit) and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position Diamond Street Venture as of
December 31, 2002 and 2001, and the results of its operations, the changes in
partners' equity (deficit) and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
In accordance with Government Auditing Standards we have also issued our report
for the year ended December 31, 2002, dated January 24, 2003, on our
consideration of Diamond Street Venture's internal control over financial
reporting and on our tests of its compliance with certain provisions of laws,
regulations, contracts and grants. That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be read in
conjunction with this report in considering the results of our audit.
Our audits were made for the purpose of forming an opinion on the basis
financial statements taken as a whole. The supplemental information on pages 28
through 31 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 24, 2003
20
[Letterhead of Ziner, Kennedy & Lehan LLP]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Diamond Street Venture
We have audited the accompanying balance sheets of Diamond Street Venture (a
Pennsylvania limited partnership) as of December 31, 2000 and 1999, and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diamond Street Venture as of
December 31, 2001 and 1999, and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Ziner, Kennedy & Lehan LLP
Boston, Massachusetts
January 29, 2001
21
[Letterhead of Schultz, Durham & Rapp, P.C.]
INDEPENDENT AUDITOR'S REPORT
To the Partners
Papillion Heights Apartments, L.P.
(A Limited Partnership)
Springfield, Missouri
We have audited the balance sheets of Papillion Heights Apartments, L.P. (a
limited partnership), as of December 31, 2002 and 2001, and the related
statements of operations, partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Papillion Heights Apartments,
L.P. (a limited partnership) as of December 31, 2002 and 2001, and the results
of its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ Schultz, Durham & Rapp, P.C.
Springfield, Missouri
February 6, 2003
22
[Letterhead of Schultz, Durham & Rapp, P.C.]
INDEPENDENT AUDITOR'S REPORT
To the Partners
Papillion Heights Apartments, L.P.
(A Limited Partnership)
Springfield, Missouri
We have audited the balance sheets of Papillion Heights Apartments, L.P. (a
limited partnership), as of December 31, 2001 and 2000, and the related
statements of operations, partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Papillion Heights Apartments,
L.P. (a limited partnership) as of December 31, 2001 and 2000, and the results
of its operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ Schultz, Durham & Rapp, P.C.
Springfield, Missouri
February 12, 2002
23
[Letterhead of Dickey, Wolf & Humbard, LLC]
INDEPENDENT AUDITORS' REPORT
To the Partners
Hill Top Homes Apartments Limited Partnership
We have audited the accompanying balance sheets of HILL TOP HOMES APARTMENTS
LIMITED PARTNERSHIP, (a Texas Limited Partnership) as of December 31, 2002 and
2001, and the related statements of operations, partners' equity/(deficit) and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HILL TOP HOMES APARTMENTS
LIMITED PARTNERSHIP as of December 31, 2002 and 2001, and the results of its
operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Dickey, Wolf & Humbard, LLC
Certified Public Accountants
Harrisonville, MO
January 23, 2003
24
[Letterhead of Dickey, Wolf & Humbard, LLC]
INDEPENDENT AUDITORS' REPORT
To the Partners
Hill Top Homes Apartments Limited Partnership
We have audited the accompanying balance sheets of HILL TOP HOMES APARTMENTS
LIMITED PARTNERSHIP, (a Texas Limited Partnership) as of December 31, 2001 and
2000, and the related statements of operations, partners' equity/(deficit) and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HILL TOP HOMES APARTMENTS
LIMITED PARTNERSHIP as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Dickey, Wolf & Humbard, LLC
Certified Public Accountants
Harrisonville, MO
January 23, 2002
25
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners
Palm Beach Apartments, Ltd.
We have audited the accompanying balance sheets of Palm Beach Apartments, Ltd.
as of December 31, 2002 and 2001, and the related statements of operations,
partners' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Palm Beach Apartments, Ltd., as
of December 31, 2002 and 2001, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note B to the
financial statements, the Partnership has suffered recurring losses from
operations and has a capital deficiency that raises substantial doubt regarding
its ability to continue as a going concern. Management's plans in connection
with these matters are also described in Note B. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on page 18
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Reznick Fedder & Silverman
Atlanta, Georgia
February 7, 2003
26
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners
Palm Beach Apartments, Ltd.
We have audited the accompanying balance sheets of Palm Beach Apartments, Ltd.
as of December 31, 2001 and 2000, and the related statements of operations,
partners' capital (deficit), and cash flows for the years then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Palm Beach Apartments, Ltd., as
of December 31, 2002 and 2001, and the results of its operations, changes in
partners' capital (deficit) and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note B to the
financial statements, the Partnership has suffered recurring losses from
operations and has a capital deficiency that raises substantial doubt regarding
its ability to continue as a going concern. Management's plans in connection
with these matters are also described in Note B. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 19
and 20 is presented for purposes of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audits of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
/s/ Reznick Fedder & Silverman
Atlanta, Georgia
February 5, 2002
27
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners
Brookland Park Plaza Limited Partnership
We have audited the accompanying balance sheet of Brookland Park Plaza Limited
Partnership as of December 31, 2002, and the related statements of operations,
partners' equity (deficit) and cash flows for the year then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brookland Park Plaza Limited
Partnership as of December 31, 2002, and the results of its operations, the
changes in partners' equity (deficit) and cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," we have also issued reports dated January 27,
2003 on our consideration of Brookland Park Plaza Limited Partnership's internal
control and on its compliance with specific requirements applicable to major HUD
programs and fair housing and non-discrimination. Those reports are an integral
part of an audit performed in accordance with Government Auditing Standards and
should be read in conjunction with this report in considering the results of our
audit.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental information
on pages 21 through 26 is presented for purposes of additional analysis and is
not a required part of the basic financial statements of the partnership. Such
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated, in all
material respects, in relation to the basic financial statements taken as a
whole.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland
Taxpayer Identification Number: 52-1088612
January 27, 2003
Lead Auditor: Renee G. Scruggs
28
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners
Brookland Park Plaza Limited Partnership
We have audited the accompanying balance sheet of Brookland Park Plaza Limited
Partnership as of December 31, 2001, and the related statements of operations,
partners' equity (deficit) and cash flows for the year then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America and Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brookland Park Plaza Limited
Partnership as of December 31, 2001, and the results of its operations, the
changes in partners' equity (deficit) and cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 21 through 25
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," we have also issued reports dated January 17,
2002 on our consideration of Brookland Park Plaza Limited Partnership's internal
control and on its compliance with specific requirements applicable to major HUD
programs and fair housing and non-discrimination. Those reports are an integral
part of an audit performed in accordance with Government Auditing Standards and
should be read in conjunction with this report in considering the results of our
audit.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland
Taxpayer Identification Number: 52-1088612
January 17, 2002
Lead Auditor: Renee G. Scruggs
29
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners
Brookland Park Plaza Limited Partnership
We have audited the accompanying balance sheet of Brookland Park Plaza Limited
Partnership as of December 31, 2000, and the related statements of operations,
partners' equity (deficit) and cash flows for the year then ended. These
financial statements are the responsibility of the partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Brookland Park Plaza Limited
Partnership as of December 31, 2000, and the results of its operations, the
changes in partners' equity (deficit) and cash flows for the year then ended, in
conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 21 through 25
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," we have also issued reports dated January 16,
2001 on our consideration of Brookland Park Plaza Limited Partnership's internal
control and on its compliance with specific requirements applicable to major HUD
programs and fair housing and non-discrimination. Those reports are an integral
part of an audit performed in accordance with Government Auditing Standards and
should be read in conjunction with this report in considering the results of our
audit.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland
Taxpayer Identification Number: 52-1088612
January 16, 2001
Lead Auditor: Renee G. Scruggs
30
[Letterhead of Barnes, Dennig & Co., Ltd.]
Report of Independent Certified Public Accountants
To the Partners
Compton Townhouses Limited Partnership
(An Ohio Limited Partnership)
We have audited the accompanying balance sheets of Compton Townhouses Limited
Partnership (An Ohio Limited Partnership), as of December 31, 2002 and 2001, and
the related statements of operations, changes in partners' capital, and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Compton Townhouses Limited
Partnership (An Ohio Limited Partnership), as of December 31, 2002 and 2001, and
the results of its operations and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Barnes, Dennig & Co., Ltd.
Cincinnati, Ohio
January 20, 2003
31
[Letterhead of Barnes, Dennig & Co., Ltd.]
Report of Independent Certified Public Accountants
To the Partners
Compton Townhouses Limited Partnership
(An Ohio Limited Partnership)
We have audited the accompanying balance sheets of Compton Townhouses Limited
Partnership (An Ohio Limited Partnership), as of December 31, 2001 and 2000, and
the related statements of operations, changes in partners' capital, and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Compton Townhouses Limited
Partnership (An Ohio Limited Partnership), as of December 31, 2001 and 2000, and
the results of its operations and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Barnes, Dennig & Co., Ltd.
Cincinnati, Ohio
January 22, 2002
32
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31,
----------------------------
2003 2002
------------ ------------
Investment in property:
Land $ 4,005,633 $ 4,005,633
Building and improvements 75,746,346 75,707,158
Accumulated depreciation (26,237,792) (24,091,263)
------------ ------------
Net investment in property 53,514,187 55,621,528
Cash and cash equivalents 1,344,954 1,005,628
Cash and cash equivalents held in escrow 1,318,344 1,681,511
Deferred financing costs, net 1,596,650 1,879,582
Other assets 369,394 303,834
------------ ------------
Total assets $ 58,143,529 $ 60,492,083
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage notes payable $ 45,294,215 $ 46,015,770
Accrued interest payable 2,122,418 2,040,908
Other accrued expenses and liabilities 2,643,043 1,775,134
Due to local general partners and affiliates of local partnerships 5,085,535 4,651,838
Development fees payable 1,151,510 1,151,510
Real estate taxes payable 179,876 81,878
Due to General Partner and its affiliates 8,234,527 6,565,471
------------ ------------
Total liabilities 64,711,124 62,282,509
------------ ------------
Minority interests in local partnerships (1,746,771) (606,601)
------------ ------------
Partners' capital (deficit):
Limited partners (38,125 BUC$ issued and outstanding) (5,545,441) (1,926,627)
General partner (1 BUC$ issued and outstanding) 724,617 742,802
------------ ------------
Total partners' capital (deficit) (4,820,824) (1,183,825)
------------ ------------
Total liabilities and partners' capital (deficit) $ 58,143,529 $ 60,492,083
============ ============
See accompanying notes to consolidated financial statements.
33
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended March 31,
--------------------------------------------
2003 2002 2001
------------ ------------ ------------
Revenues
Rental income $ 9,973,773 $ 9,530,921 $ 9,006,505
Other income 829,675 802,113 754,790
Interest income 15,827 38,065 39,888
------------ ------------ ------------
10,819,275 10,371,099 9,801,183
------------ ------------ ------------
Expenses
Interest 4,747,765 4,689,172 4,729,740
Depreciation and amortization 2,429,909 2,447,028 2,445,646
Operating and other 914,339 918,938 921,562
Taxes and insurance 1,374,659 1,158,871 1,079,256
Repairs and maintenance 2,749,023 2,540,544 2,618,238
General and administrative 2,699,222 2,762,046 2,929,956
Property management fees 440,564 424,360 395,297
Partnership management fees 240,656 245,367 244,622
------------ ------------ ------------
Total expenses 15,596,137 15,186,326 15,364,317
------------ ------------ ------------
Loss before minority interest and
extraordinary item (4,776,862) (4,815,277) (5,563,134)
Minority interest in loss of local partnerships 1,139,863 1,207,124 1,135,959
------------ ------------ ------------
Loss before extraordinary item (3,636,999) (3,608,103) (4,427,175)
Extraordinary item - forgiveness of indebtedness
income (Note 10) 0 0 833,002
------------ ------------ ------------
Net loss $ (3,636,999) $ (3,608,103) $ (3,594,173)
============ ============ ============
Loss before extraordinary item -
limited partners $ (3,618,814) $ (3,590,062) $ (4,405,039)
Extraordinary item-limited partners 0 0 828,837
------------ ------------ ------------
Net loss-limited partners $ (3,618,814) $ (3,590,062) $ (3,576,202)
============ ============ ============
Number of limited partnership units
outstanding 38,125 38,125 38,125
============ ============ ============
Loss before extraordinary item per limited
partnership unit $ (94.92) $ (94.17) $ (115.54)
Extraordinary item per limited
partnership unit 0 0 21.74
------------ ------------ ------------
Net loss per limited partnership unit $ (94.92) $ (94.17) $ (93.80)
============ ============ ============
See accompanying notes to consolidated financial statements.
34
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
Limited General
Total Partners Partner BUC$
----------- ----------- ----------- -----------
Partners' capital
April 1, 2000 $ 6,018,451 $ 5,239,637 $ 778,814 38,126
Net Loss (3,594,173) (3,576,202) (17,971) 0
----------- ----------- ----------- -----------
Partners' capital
March 31, 2001 2,424,278 1,663,435 760,843 38,126
Net Loss (3,608,103) (3,590,062) (18,041) 0
----------- ----------- ----------- -----------
Partners' capital (deficit)
March 31, 2002 (1,183,825) (1,926,627) 742,802 38,126
Net Loss (3,636,999) (3,618,814) (18,185) 0
----------- ----------- ----------- -----------
Partners' capital (deficit)
March 31, 2003 $(4,820,824) $(5,545,441) $ 724,617 38,126
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
35
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended March 31,
-----------------------------------------
2003 2002 2001
----------- ----------- -----------
Cash flows from operating activities:
Net loss $(3,636,999) $(3,608,103) $(3,594,173)
----------- ----------- -----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 2,429,909 2,447,028 2,445,646
Minority interest in loss of local partnerships (1,139,863) (1,207,124) (1,135,959)
Forgiveness of debt (Note 9) 0 0 (833,002)
Decrease (increase) in cash held in escrow 363,167 (194,178) (203,440)
Increase (decrease) in real estate taxes payable 97,998 (57,527) 15,391
Increase (decrease) in accrued interest payable 81,510 (2,820) 765,364
(Increase) decrease in other assets (66,008) (76,455) 79,511
Increase (decrease) in other accrued expenses
and liabilities 1,084,764 (390,253) (230,107)
----------- ----------- -----------
Total adjustments 2,851,477 518,671 903,404
----------- ----------- -----------
Net cash used in operating activities (785,522) (3,089,432) (2,690,769)
----------- ----------- -----------
Cash flows from investing activities:
Investments in property (39,188) (62,881) (86,750)
----------- ----------- -----------
Net cash used in investing activities (39,188) (62,881) (86,750)
----------- ----------- -----------
Cash flows from financing activities
Proceeds from mortgage notes 0 4,600,000 0
Payments on mortgage notes (721,555) (2,539,938) (614,114)
Increase in deferred costs 0 (129,521) 0
Decrease in development fees payable 0 (299,199) 0
Advance from General Partner 1,452,201 1,373,146 0
Increase in due to Local General Partners
and affiliates of Local Partnerships,
General Partner and its affiliates 61,202 557,174 2,249,564
Decrease in due to Local General Partners
and affiliates of Local Partnerships,
General Partner and its affiliates (355,920) (420,675) 0
Advance from local limited partner 728,415 350,000 852,935
Distribution to minority interest (307) (417) (401)
----------- ----------- -----------
Net cash provided by financing activities 1,164,036 3,490,570 2,487,984
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents 339,326 338,257 (289,535)
Cash and cash equivalents at beginning of year 1,005,628 667,371 956,906
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,344,954 $ 1,005,628 $ 667,371
=========== =========== ===========
Supplemental disclosures of cash flow infor-
mation:
Interest paid $ 4,666,255 $ 3,020,853 $ 3,570,449
=========== =========== ===========
See accompanying notes to consolidated financial statements.
36
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
NOTE 1 - General
Patriot Tax Credit Properties L.P., a Delaware limited partnership (the
"Partnership"), was formed on May 3, 1989, and will terminate on December 31,
2029, unless terminated sooner under the provisions of the Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement"). The Partnership
was formed to invest as a limited partner in other partnerships ("Local
Partnerships" or "subsidiaries") owning apartment complexes ("Apartment
Complexes" or "Properties") that are eligible for the low-income housing tax
credit or the historic rehabilitation tax credit ("Tax Credit"). The general
partner of the Partnership is RCC Partners 96, L.L.C. (the "General Partner")
and is an affiliate of Related Capital Company ("RCC"). Independence SLP L.P.
("SLP"), an affiliate of RCC, is the special limited partner. The SLP acts as
special limited partner of each Local Partnership entitling it to certain rights
with respect to the operation and management of each Local Partnership. At March
31, 2003, the Partnership has investments in eight Local Partnerships.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Accounting and Principles of Consolidation
The books and records of the Partnership are maintained on the accrual basis of
accounting in accordance with accounting principle generally accepted in the
United States of America. The preparation of financial statements in conformity
with accounting principle generally accepted in the United States of America
requires the General Partner to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The consolidated financial statements include the assets, liabilities and
results of operations of the subsidiaries. All subsidiaries have fiscal years
ending December 31. Intercompany transactions have been eliminated.
Minority interest in Local Partnerships represents the minority partners' share
of the net assets of the Local Partnerships.
b) Investment in Property
The impairment of Properties to be held and used is determined to exist when
estimated amounts recoverable through future operations on an undiscounted basis
are below the Properties' carrying value. If a property is determined to be
impaired, it is recorded at the lower of its carrying value or its estimated
fair value.
The determination of estimated fair value is based not only upon future cash
flows, which rely upon estimates and assumptions including expense growth,
occupancy and rental rates, and Tax Credits, but also upon market capitalization
and discount rates as well as other market indicators. However, changes in
market conditions and circumstances may occur in the near term which would cause
these estimates and assumptions to change, which, in turn, could cause the
37
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
amounts ultimately realized upon the sale or other disposition of the Properties
to differ materially from their estimated fair value. Such changes may also
require write-downs in future years.
The cost of buildings and improvements is depreciated using the straight-line
method over their estimated useful lives, which range from 27.5 to 40 years.
c) Cash and Cash Equivalents
Cash and cash equivalents include money market funds whose cost approximates
market value.
d) Cash and Cash Equivalents Held in Escrow
Cash and cash equivalents held in escrow include restricted funds held for
payment of real estate taxes and insurance, tenant security deposits and
replacement reserves.
e) Taxes
The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the partners. The Partnership may be subject to other state and
local taxes in jurisdictions in which it operates. For income tax purposes, the
Partnership's year ends on December 31.
f) Profits and Loss Allocations/Distributions
Net income or loss is allocated 99.5% to the limited partners and .5% to the
General Partner.
Distributions of cash may be made in accordance with the Partnership Agreement
and, if made, are allocated 99.5% to the limited partners and .5% to the General
Partner. As of March 31, 2003, no distributions have been paid.
g) Rental Income
h) Reclassification
Certain items in the 2002 financial statements have been reclassified to conform
to the 2003 presentation.
Rental income is recognized as rents become due. Rental payments received in
advance are deferred until earned. All leases between the Partnership and the
tenants of the property are operating leases.
38
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
NOTE 3 - Costs, Fees and Expenses
a) Deferred Financing Costs
Deferred financing costs include amounts paid for services rendered in arranging
the financing for the Local Partnerships. These costs were capitalized and are
being amortized over the lives of the related debt. The accumulated amortization
as of March 31, 2003 and 2002 is, $3,716,137 and $3,433,205, respectively.
b) Management Fees
Each individual Property has a managing agent who performs the necessary
functions in operating the Property. The property management fee is equal to a
percentage of the annual gross revenues of a Property paid in consideration of
the property management services provided (See Note 7).
The General Partner is entitled to receive a partnership management fee, payable
from operations and reserves, in an amount not to exceed the difference between
..375% per annum of Invested Assets (as defined in the Partnership Agreement) and
the local administrative fee payable to the SLP. This partnership management fee
is for administering the affairs of the Partnership (See Note 6). Unpaid
portions of the management fee for any year accrue without interest.
c) General and Administrative
The Partnership reimburses the General Partner and its affiliates for actual
Partnership operating expenses payable by or allocable to the Partnership (See
Note 6). The Partnership also pays amounts directly to unrelated third parties
for certain operating expenses.
39
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
NOTE 4 - Investment in Property
The Partnership's Properties and related debt at March 31 were:
Net Investment in Property Mortgage Notes Payable
-------------------------- -------------------------
Description (a) 2003 2002 2003 2002
- --------------- ----------- ----------- ----------- -----------
Apartment Complexes:
RMB Limited Partnership $ 3,104,050 $ 3,274,780 $ 4,562,398 $ 4,600,000
(Hubbard's Ridge)
Garland, TX
Cutler Canal II 8,131,281 8,390,718 5,733,478 5,786,090
Associates, Ltd.
Miami, FL
Diamond Street Venture (b) 1,610,420 1,693,504 2,913,484 2,934,097
Philadelphia, PA
Papillion Heights 1,490,423 1,543,073 958,143 972,787
Apartments L.P.
Papillion, NE
Hill Top Homes 5,717,040 5,902,229 3,207,845 3,297,769
Apartments
Limited Partnership
Arlington, TX
Palm Beach 28,700,604 29,734,352 24,327,859 24,776,886
Apartments, Ltd.
(Summer Creek Villas)
West Palm Beach, FL
Brookland Park Plaza 3,571,140 3,800,107 2,348,964 2,378,063
Limited Partnership
Richmond, VA
Compton Townhouses 1,189,229 1,282,765 1,242,044 1,270,078
Limited Partnership ----------- ----------- ----------- -----------
Cincinnati, OH
$53,514,187 $55,621,528 $45,294,215 $46,015,770
=========== =========== =========== ===========
(a) 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.
(b) The investment in property relating to the Diamond Street Venture was
reduced by $2,700,000 as of March 31, 1995 representing a loss on impairment of
assets.
40
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
NOTE 5 - Mortgage Notes Payable
Mortgage notes are collateralized by land, buildings and improvements and leases
related thereto. Annual principal payment requirements for each of the next five
years ending December 31, the date at which the Local Partnerships are
reporting, and thereafter are as follows:
Amount
-----------
2003 $ 845,997
2004 928,578
2005 3,520,427
2006 4,079,644
2007 1,990,858
Thereafter 33,928,711
-----------
$45,294,215
===========
Mortgage notes consist of both first mortgages and support loans (second and
third mortgages). First mortgages amounting to $40,354,215 bear interest at
rates ranging from 5.83% to 10.5% and have final maturities ranging from
September 1, 2006 to May 1, 2031. First mortgages include $24,327,859 in the
form of a guaranteed bond bearing interest at 10.451% (including a .125% service
fee payable to an affiliate of the Local General Partner) maturing on June 20,
2008. The support loans include two loans totaling $2,440,000 maturing on May 1,
2016 and December 15, 2029, the latter of which bears interest at 1%, and the
former being non-interest bearing, and a $2,500,000 loan bearing interest at a
maximum rate of 9% and maturing on January 16, 2005. The $2,500,000 loan
includes a base interest rate of 3% and an additional interest rate of 6%. The
base interest rate is payable annually from Project Income, as defined in the
loan agreement, and can be deferred if Project Income is inadequate. The
additional interest is payable from Project Income, if available, and only after
payment of a cumulative annual 12% return on capital to the limited partners of
the Local Partnership. Currently, only the base interest rate is being paid;
however, the additional interest of 6% continues to be accrued in the
accompanying consolidated financial statements.
On December 28, 2001, Hubbard's Ridge refinanced its outstanding mortgage note
payable in the amount of $1,852,154. The new mortgage in the amount of
$4,600,000 is payable in monthly installments of $31,131 including interest at
the rate of 7.17% per annum through January 1, 2012, at which time the balance
will be due. Proceeds from the new mortgage were used to pay the prior mortgage
note payable, repay funds advanced from the Local General Partner and General
Partner, establish escrows, pay refinancing costs and the remaining cash was
available to the Partnership in the amount of approximately $1,955,000. The
Partnership used the proceeds to repay affiliates of the General Partner.
At March 31, 2003 and 2002, the estimated fair values of the mortgage notes
payable were approximately $40,099,970 and $42,823,333, respectively. These
estimates were based upon the present value of expected cash flows discounted at
rates currently available to the Local Partnerships for similar loans. Fair
value estimates are made at a specific point in time, based on relevant market
information, and are subjective in nature and involve uncertainties and matters
of significant judgment. Accordingly, the estimates presented herein are not
41
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
necessarily indicative of the amounts that the Local Partnerships would pay upon
maturity or disposition of the loans.
NOTE 6 - Related Parties
During their respective ownership periods, 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, printing and other administrative services. The General
Partner and its affiliates receive partnership management fees and
reimbursements for general and administrative 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:
Year Ended March 31,
------------------------------------
2003 2002 2001
-------- -------- --------
Partnership management fees $240,656 $245,367 $244,622
Property management fees 157,983 149,693 126,630
Local administrative fees 20,250 20,250 20,250
General and administrative 85,781 64,867 114,145
Interest 378,534 365,789 330,667
-------- -------- --------
$883,204 $845,966 $836,314
======== ======== ========
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.
During the year ended March 31, 2003, the General Partner and its affiliates
advanced $1,669,056 to the Partnership and as of March 31, 2003 and 2002, total
advances outstanding are $8,234,527 and $6,565,471, respectively. The advances
are unsecured, and bear interest at prime +2% and due on demand.
42
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
NOTE 7 - Local General Partners and Affiliates of Local Partnerships
Certain Local General Partners and their affiliates provided services in
connection with the construction, financing and development of the Apartment
Complexes. Interest is accrued on certain loans made by three of the Local
General Partners during the years ended March 31, 2003, 2002 and 2001,
respectively. Additionally, during the years ended March 31, 2003, 2002 and
2001, six of the Local Partnerships were managed by a Local General Partner or
its affiliates and one Local Partnership was managed by an affiliate of the
General Partner and Local General Partner. The costs were:
Year Ended March 31,
------------------------------------------
2003 2002 2001
-------- -------- --------
Interest $199,058 $213,276 $240,174
Management fees 415,046 330,218 282,710
-------- -------- --------
$614,104 $543,494 $522,884
======== ======== ========
Due to Local General Partners and affiliates of Local Partnerships includes
amounts payable for accrued interest, advances, property management fees and
operating loans made in accordance with operating deficit guaranty agreements.
The Local General Partner of Summer Creek Villas was formerly obligated to fund
operating deficits under two separate operating deficit guaranty agreements.
Total advances made by the Local General Partner under the operating deficit
guaranties totaled $2,742,460. In addition, the Local General Partner has made
voluntary loans in excess of its obligations under the guaranties to fund
operations of $1,645,074, even though as of December 31, 1997, the Local General
Partner was no longer required to fund operations of the Summer Creek Villas.
Additional voluntary loans during the year ended March 31, 2003 and 2002 of
$2,774,980 and $1,525,000, respectively, have been received from the Partnership
and Palm Beach Investors, L.P. (Washington Mutual).
At both March 31, 2003 and 2002, development fees of $1,151,510 were payable to
various Local General Partners.
43
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
NOTE 8 - Quarterly Financial Information (Unaudited)
First Quarter Second Quarter Third Quarter
------------- -------------- -------------
Fiscal Year 2003
- -----------------------
Total Revenue $ 2,545,134 $ 2,543,989 $ 2,575,969
Net loss (749,442) (655,482) (663,174)
Fiscal Year 2002
- -----------------------
Total Revenue $ 2,473,781 $ 2,436,074 $ 2,439,119
Net loss (793,678) (583,395) (872,262)
NOTE 9 - Concentration of Credit Risk
The Partnership maintains its cash in several banks which are insured by the
Federal Deposit Insurance Corporation (FDIC) for a balance up to $100,000. At
times during 2003, the account balances exceeded the FDIC limit.
NOTE 10 - Forgiveness of Indebtedness Income
Summer Creek Villas Local Partnership
- -------------------------------------
During 2001, 2000 and 1999, various partners made voluntary loans to the
Partnership. The Local General Partner also elected to treat portions of such
loans in the amount of $593,589 as nonrepayable in 2001. During 2001, it was
determined management fees in the amount of $239,413 payable to the former
management agent would not be paid and such amounts were subsequently written
off. These amounts were recorded as forgiveness of indebtedness income on the
consolidated statements of operations of the Partnership for the year ended
March 31, 2001.
NOTE 11 - Commitments and Contingencies
Subsidiary Partnership - Going Concern
Summer Creek Villas Local Partnership
- -------------------------------------
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 2002, Summer
Creek Villas' operations are impeded by the 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. The Summer Creek Villas has been obligated, since
1996, to repay significant amounts of principal on its mortgage.
During 2002 and 2001, in an effort to improve occupancy, Summer Creek Villas
invested funds to improve the physical condition of the property. Such
44
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
improvements primarily consisted of painting, landscaping, new playground,
asphalt repairs, and individual units fixture and finish replacements.
The Local General Partner of Summer Creek Villas was formerly obligated to fund
operating deficits under two separate operating deficit guaranty agreements.
Total advances made by the Local General Partner under the operating deficit
guaranties totaled $2,742,460. In addition, the Local General Partner has made
voluntary loans in excess of its obligations under the guaranties to fund
operations of $1,645,074, even though as of December 31, 1997, the Local General
Partner was no longer required to fund operations of Summer Creek Villas.
Effective January 1, 1999, Summer Creek Villas entered into a funding agreement
with Palm Beach Investor, L.P. (the Class C limited partner) which provided 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. On
September 9, 2002, Summer Creek Villas entered into a second funding agreement
with the Class C limited partner which provides for a second series of loans to
Summer Creek Villas in the years 2002, 2003 and 2004, in amount not to exceed
$1,500,000 in aggregate. Although no formal agreements have been reached with
the 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 in 2002 and 2001 under these
funding agreements to fund operating deficit's total $2,774,980 and $1,525,000,
respectively. Of such amounts, $2,046,565 and $1,175,000 were loaned by the
Partnership in 2002 and 2001, respectively.
These loans are expected to enable the Summer Creek Villas to continue
operations and make payments on its mortgage while management endeavors to
improve occupancy rates and rental rates to sufficient levels to sustain
operations independent of such funding.
During 2002, the management agent, an affiliate of Summer Creek Villas, was
reimbursed by Summer Creek Villas for operating advances, made in the current
and prior years, in the form of deferred management fees and unreimbursed
payroll in the net amount of $720,678. As of December 31, 2002 and 2001, the
management agent was due $491,988 and $1,212,666, respectively. The management
agent is not obligated to provide such advances.
As of March 31, 2003 and 2002, the consolidated financial statements include
total assets of $30,772,961 and $32,067,406, respectively, total liabilities of
$38,315,144 and $36,100,522, respectively, and a minority interest of $1,935,146
and $796,380, respectively, attributable to this subsidiary.
Summer Creek Villas' ability to continue its operations is dependent upon
management achieving the plans described in the foregoing paragraphs. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Any adjustments would be
limited solely to Summer Creek Villas' financial statements included herein.
45
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
There are no directors or executive officers of the Registrant. The Registrant
is managed by the General Partner.
The Registrant, the Registrant's General Partner and its members and executive
officers, and any persons holding more than ten percent of the Registrant's BUC$
are required to report their initial ownership of such BUC$ and any subsequent
changes in that ownership to the Securities and Exchange Commission on Forms 3,
4 and 5. Such executive officers, directors, and persons who own greater than
ten percent of the Registrant's BUC$ are required by Securities and Exchange
Commission regulations to furnish the Registrant with copies of all Forms 3, 4
and 5 they file. All of these filing requirements were satisfied on a timely
basis. In making these disclosures, the Registrant relied solely on written
representations of the General Partner, and its members and certain officers, if
any, or copies of the reports they have filed with the Securities and Exchange
Commission during and with respect to its most recent fiscal year.
In December 2002, Charter Municipal Mortgage Acceptance Company, ("CharterMac"),
which is also managed by an affiliate of Related Capital Company, announced a
proposed acquisition of Related Capital Company, an affiliate of the General
Partner. Pursuant to the proposed acquisition, CharterMac will acquire
controlling interests in the managing member of the General Partner. This
acquisition is not anticipated to affect the Partnership on its day-to-day
operations as management of the General Partner will not change.
The members and executive officers of the General Partner and their positions
with regard to managing the Registrant are as follows:
Name Position
- ---- --------
Alan P. Hirmes Member, President and Chief
Executive and Financial Officer
Stuart J. Boesky Member, Executive Vice President
and Chief Operating Officer
Denise L. Kiley Vice President
Mark J. Schlacter Vice President
Marc D. Schnitzer Vice President
Glenn F. Hopps Treasurer
Teresa Wicelinski Secretary
ALAN P. HIRMES, 48, is the sole stockholder of one of the general partners of
RCC, the real estate finance affiliate of The Related Companies, L.P. ("TRCLP")
Mr. Hirmes has been a Certified Public Accountant in New York since 1978. Prior
46
to joining Related in October 1983, Mr. Hirmes was employed by Wiener & Co.,
certified public accountants. Mr. Hirmes graduated from Hofstra University with
a Bachelor of Arts degree. Mr. Hirmes also serves on the Board of Trustees of
Charter Municipal Mortgage Acceptance Company and American Mortgage Acceptance
Company.
STUART J. BOESKY, 47, is the sole stockholder of one of the general partners of
RCC, the real estate finance affiliate of TRCLP Mr. Boesky practiced real estate
and tax law in New York City with the law firm of Shipley & Rothstein from 1984
until February 1986 when he joined Related. From 1983 to 1984 Mr. Boesky
practiced law with the Boston law firm of Kaye, Fialkow, Richmond & Rothstein
(which subsequently merged with Strook & Strook & Lavan) and from 1978 to 1980
was a consultant specializing in real estate at the accounting firm of Laventhol
& Horwath. Mr. Boesky graduated from Michigan State University with a Bachelor
of Arts degree and from Wayne State School of Law with a Juris Doctor degree. He
then received a Master of Laws degree in Taxation from Boston University School
of Law. Mr. Boesky also serves on the Board of Trustees of Charter Municipal
Mortgage Acceptance Company and American Mortgage Acceptance Company.
DENISE L. KILEY, 43, is an Executive Vice President and Chief Underwriter for
RCC, responsible for overseeing the investment underwriting and approval of all
multifamily residential properties invested in RCC-sponsored corporate, public
and private equity and debt funds. Ms. Kiley is also responsible for the
strategic planning and implementation of the firm's mortgage financing programs.
Prior to joining Related in 1990, Ms. Kiley had experience acquiring, financing,
and managing the assets of multifamily residential properties. From 1981 through
1985 she was an auditor with a national accounting firm. Ms. Kiley holds a
Bachelor of Science degree in Accounting from Boston College and is a Member of
the Affordable Housing Roundtable.
MARK J. SCHLACTER, 52, is a Vice President of Mortgage Acquisitions of RCC, and
has been with Related since June 1989. Mr. Schlacter is responsible for the
origination of Related's taxable participating debt programs and low-income
housing tax credit debt programs. Prior to joining Related, Mr. Schlacter
garnered 16 years of direct real estate experience covering commercial and
residential construction, single and multifamily mortgage origination and
servicing, commercial mortgage origination and servicing, multifamily property
acquisition and financing, and multifamily mortgage lending program underwriting
and development. He was a Vice President with Bankers Trust Company from 1986 to
June 1989, and held prior positions with Citibank, Anchor Savings Bank and the
Pyramid Companies covering the 1972-1986 period. Mr. Schlacter holds a Bachelor
of Arts degree in Political Science from Pennsylvania State University and
periodically teaches multifamily underwriting at the New York University School
of Continuing Education, Real Estate Institute.
MARK D. SCHNITZER, 42, is an Executive Vice President of RCC and Director of the
firm's Tax Credit Acquisitions Group. Mr. Schnitzer received a Master of
Business Administration degree from The Wharton School of the University of
Pennsylvania in December 1987, and joined Related in January 1988. From 1983 to
1986, Mr. Schnitzer was a Financial Analyst in the Fixed Income Research
department of The First Boston Corporation in New York. Mr. Schnitzer received a
Bachelor of Science degree, summa cum laude, in Business Administration from the
School of Management at Boston University.
GLENN F. HOPPS, 40, joined RCC in December, 1990, and prior to that date was
employed by Marks Shron & Company and Weissbarth, Altman and Michaelson,
certified public accountants. Mr. Hopps graduated from New York State University
at Albany with a Bachelor of Science degree in Accounting.
47
TERESA WICELINSKI, 37, joined RCC in June 1992, and prior to that date was
employed by Friedman, Alpren & Green, certified public accountants. Ms.
Wicelinski graduated from Pace University with a Bachelor of Arts Degree in
Accounting.
Item 11. Executive Compensation.
The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to directors and officers of the General Partner for its services.
Certain executive officers and directors of the General Partner receive
compensation from affiliates of the General Partner, not from the Registrant,
for services performed for various affiliated entities, which may include
services performed for the Registrant; however, the General Partner believes
that any compensation attributable to services performed for the Registrant is
immaterial. See Item 13, Certain Relationships and Related Transactions, for
information regarding compensation to the General Partner.
Tabular information concerning salaries, bonuses and other types of compensation
payable to executive officers has not been included in this annual report. As
noted above, the Registrant has no executive officers. The levels of
compensation payable to the General Partners and/or their affiliates is limited
by the terms of the Partnership Agreement and may not be increased therefrom on
a discretionary basis.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of June 2, 2003, Messrs. Boesky and Hirmes own directly or beneficially 100%
of the interest in the voting securities of the General Partner.
As of June 2, 2003, no director or executive officer of the General Partner owns
directly or beneficially any of the BUC$ issued by the Registrant.
As of June 2, 2003, no limited partner beneficially owns more than five percent
(5%) of the BUC$ issued by the Registrant.
Item 13. Certain Relationships and Related Transactions.
The Registrant has and will continue to have certain relationships with the
General Partner and its affiliates. However, there have been no direct financial
transactions between the Registrant and the directors or executive officers of
the General Partner.
Reference is made to Notes 1, 3, 6 and 7, to the consolidated financial
statements in the Registrant's financial statements, which identify the related
parties and discuss the services provided by these parties and the amounts paid
or payable for their services.
Item 14. Controls and Procedures.
The Chief Executive Officer and Chief Financial Officer of RCC Partners 96,
L.L.C., the General Partner of the Registrant, has evaluated the Registrant's
disclosure controls and procedures relating to the Registrant's annual report on
Form 10-K for the period ending March 31, 2003 as filed with the Securities and
Exchange Commission and has judged such controls and procedures to be effective
as of March 31, 2003 (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
Registrant since the Evaluation Date.
48
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sequential
Page
----------
(a) 1. Financial Statements
Independent Auditors' Report 14
Consolidated Balance Sheets as of March 31, 2003 and 2002 33
Consolidated Statements of Operations for the years ended March 31,
2003, 2002 and 2001 34
Consolidated Statements of Changes in Partners' Capital (Deficit) for
the years ended March 31, 2003, 2002 and 2001 35
Consolidated Statements of Cash Flows for the years ended March 31,
2003, 2002 and 2001 36
Notes to Consolidated Financial Statements 37
(a) 2. Financial Statement Schedules and Independent Auditors' Report on
--------------------------------------------------------------------
Schedules
---------
Independent Auditors' Report on Schedules 56
Schedule III - Real Estate and Accumulated Depreciation 57
All other schedules have been omitted because they are not required
or because the required information is contained in the financial state-
ments or notes thereto.
49
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Sequential
Page
----------
(a) 3. Exhibits
(3.1) The Partnership's Agreement of Limited Partnership as adopted on
May 3, 1989 and Amendments thereto dated May 25, 1989 and June
21, 1989*
(3.2) Amendmen Number 1 to Prudential-Bache Tax Credit Properties L.P.
Amended and Restated Agreement of Limited Partnership, dated Oc-
tober 1, 1997***
(3.3) Form of Amended and Restated Agreement of Limited Partnership
(included in Prospectus as Exhibit A)**
(3.4) Certificate of Limited Partnership as filed on May 3, 1989 and
Amendments thereto dated May 25, 1989 and June 21, 1989*
(3.5) Amendment to Certificate of Limited Partnership dated October 1,
1997***
(10.1) Form of Purchase and Sale Agreement pertaining to the Partnership's
acquisition of Local Partnership Interests**
(10.2) Form of Amended and Restated Agreement of Local Limited Partner-
ship of Local Partnerships**
(21) Subsidiaries of the Registrant - the Local Partnerships set forth in Item
2 may be considered subsidiaries of the Registrant. 51
(99.1) Balance Sheet and Independent Auditors' Report, RCC Partners 96,
L.L.C., March 31, 2003. 59
(99.2) Certification Pursuant to Title 18 U.S.C. Section 1350, as adopted pur-
suant to Section 906 of the Sarbanes-Oxley Act of 2002. 67
(b) Reports on Form 8-K
Current report on Form 8-K dated April 28, 1999 was filed on May 13,
1999 relating to the change in Registrant's accountant.
*Filed as an exhibit to Pre-Effective Amendment No. 1 to Form S-11
Registration Statement (No. 33-28571) and incorporated herein by ref-
erence.
**Filed as an exhibit to Pre-Effective Amendment No. 2 to Form S-11
Registration Statement (No. 33-28571) and incorporated herein by ref-
erence.
***Filed as an exhibit to Registrants Current Report on Form 8-K dated
October 1, 1997 and incorporated herein by reference.
50
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Jurisdiction
(c) Subsidiaries of the Registrant (Exhibit 21) of Organization
------------------------------ ---------------
RMB Limited Partnership TX
Culter Canal II Associates, Ltd. FL
Diamond Street Venture PA
Papillion Heights Apartments L.P. MO
Hill Top Homes Apartments Limited Partnership TX
Palm Beach Apartments, Ltd. FL
Brookland Park Plaza Limited Partnership MD
Compton Townhouses Limited Partnership OH
51
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PATRIOT TAX CREDIT PROPERTIES L.P.
----------------------------------
(Registrant)
By: RCC PARTNERS 96, L.L.C.,
General Partner
Date: June 23, 2003 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Member, President and Chief
Executive and Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Signature Title Date
- ------------------- --------------------------------------- -------------
/s/ Alan P. Hirmes Member and President
- ------------------ (Chief Executive and Financial Officer)
Alan P. Hirmes of RCC Partners 96., L.L.C. June 23, 2003
/s/ Stuart J. Boesky Member and Executive Vice President
- -------------------- (Chief Operating Officer)
Stuart J. Boesky of RCC Partners 96., L.L.C. June 23, 2003
/s/ Glenn F. Hopps Treasurer
- ------------------ (Chief Accounting Officer)
Glenn F. Hopps of RCC Partners 96., L.L.C. June 23, 2003
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 annual report on Form 10-K for the period ending
March 31, 2003 of the Partnership;
2. Based on my knowledge, this annual 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual 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 that
material information relating to the Partnership, including its
consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the Partnership's disclosure controls
and procedures as of March 31, 2003 (the "Evaluation Date"); and
c) presented in this annual report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
Partnership's auditors and to members of the General Partner:
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 annual 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.
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Executive Officer and
Chief Financial Officer
June 23, 2003
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Partners of
Patriot Tax Credit Properties L.P. and Subsidiaries
In connection with our audit of the consolidated financial statements of Patriot
Tax Credit Properties L.P. and Subsidiaries included in this Form 10-K, we have
also audited supporting Schedule III for the year ended March 31, 2003. In our
opinion, based on our audit and the reports of the other auditors, the
consolidated schedule presents fairly, when read in conjunction with the related
consolidated financial statements, the financial data required to be set forth
therein.
REZNICK FEDDER & SILVERMAN
Bethesda, Maryland
May 15, 2003
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
MARCH 31, 2003
Initial Cost to Partnership Cost Capitalized
-------------------------------------------- Subsequent to Acquisition (7)
Buildings and -------------------------------
Description (4)(6) Encumbrances Land Improvements Improvements Carrying Costs
- ------------------ ------------ ----------- ------------- ------------ --------------
Apartment Complexes:
RMB Limited Partnership
(Hubbard's Ridge)(1)
Garland, TX $ 4,562,398 $ 107,237 $ 965,136 $ 4,053,296 $ 185,180
Cutler Canal II
Associates, Ltd.(2)
Miami, FL 5,733,478 807,071 1,388,350 9,226,175 67,728
Diamond Street Venture(3)
Philadelphia, PA 2,913,484 9,729 234,465 2,395,124 273,218
Papillion Heights
Apartments L.P.(1)
Papillion, NE 958,143 63,329 1,816,598 259,945 66,552
Hill Top Homes
Apartments L.P.(1)
Arlington, TX 3,207,845 553,841 3,690,150 3,544,302 316,368
Palm Beach Apartments Ltd,(1)
(Summer Creek Villas)
West Palm Beach, FL 24,327,859 2,396,876 10,578,563 25,980,637 1,876,795
Brookland Park Plaza L.P.(1)
Richmond, VA 2,348,964 50,000 109,850 5,913,667 376,165
Compton Townhouses L.P.(1)
Cincinnati, OH 1,242,044 17,550 476,708 1,923,171 28,203
------------ ----------- ----------- ------------ -----------
$ 45,294,215 $ 4,005,633 $19,259,820 $ 53,296,317 $ 3,190,209
============ =========== =========== ============ ===========
Gross Amounts
at which Carried At Close of Period (5)
--------------------------------------------
Buildings and
Description (4)(6) Land Improvements Total
- ------------------ ----------- ------------- ------------
Apartment Complexes:
RMB Limited Partnership
(Hubbard's Ridge)(1)
Garland, TX $ 107,237 $ 5,203,612 $ 5,310,849
Cutler Canal II
Associates, Ltd.(2)
Miami, FL 807,071 10,682,253 11,489,324
Diamond Street Venture(3)
Philadelphia, PA 9,729 2,902,807 2,912,536
Papillion Heights
Apartments L.P.(1)
Papillion, NE 63,329 2,143,095 2,206,424
Hill Top Homes
Apartments L.P.(1)
Arlington, TX 553,841 7,550,820 8,104,661
Palm Beach Apartments Ltd,(1)
(Summer Creek Villas)
West Palm Beach, FL 2,396,876 38,435,995 40,832,871
Brookland Park Plaza L.P.(1)
Richmond, VA 50,000 6,399,682 6,449,682
Compton Townhouses L.P.(1)
Cincinnati, OH 17,550 2,428,082 2,445,632
----------- ------------ ------------
$ 4,005,633 $ 75,746,346 $ 79,751,979
=========== ============ ============
Life on which
Depreciation in
Date Latest Income
Accumulated Construction Date Statements are
Description (4)(6) Depreciation Completed Acquired Computed
- ------------------ ------------ ------------ -------- ---------------
Apartment Complexes:
RMB Limited Partnership
(Hubbard's Ridge)(1)
Garland, TX $ 2,206,799 5/90 12/89 30
Cutler Canal II
Associates, Ltd.(2)
Miami, FL 3,358,043 1/91 1/90 40
Diamond Street Venture(3)
Philadelphia, PA 1,302,116 12/90 1/90 40
Papillion Heights
Apartments L.P.(1)
Papillion, NE 716,001 12/90 4/90 40
Hill Top Homes
Apartments L.P.(1)
Arlington, TX 2,387,621 12/90 6/90 40
Palm Beach Apartments Ltd,(1)
(Summer Creek Villas)
West Palm Beach, FL 12,132,267 8/91 6/90 40
Brookland Park Plaza L.P.(1)
Richmond, VA 2,878,542 12/90 7/90 27.5
Compton Townhouses L.P.(1)
Cincinnati, OH 1,256,403 6/92 1/92 40
------------
$ 26,237,792
============
(1) First mortgage
(2) Includes first and second mortgages (3) Includes first, second and third
mortgages
(4) At March 31, 2003, the Registrant holds a 66.5% interest in the Local
Partnerships of 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.
(5) The cost basis of Land and Buildings and Improvements for federal income
tax purposes as of December 31, 2002 is $80,614,671.
(6) The Registrant believes the properties are adequately insured.
(7) Costs Capitalized Subsequent to Acquisition included a write-down of
$2,700,000 for Diamond Street Venture recorded as of March 31, 1995.
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
MARCH 31, 2003
Cost of Property and Equipment Accumulated Depreciation
--------------------------------------- ---------------------------------------
Year Ended March 31,
---------------------------------------------------------------------------------
Note A - Reconciliation 2003 2002 2001 2003 2002 2001
- ----------------------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at beginning of year $79,712,791 $79,649,910 $79,563,160 $24,091,263 $21,934,135 $19,762,979
Additions during year:
Improvements 39,188 62,881 86,750
Depreciation expense (1) 2,146,529 2,157,128 2,171,156
----------- ----------- ----------- ----------- ----------- -----------
Balance at close of year $79,751,979 $79,712,791 $79,649,910 $26,237,792 $24,091,263 $21,934,135
=========== =========== =========== =========== =========== ===========
(1) Refer to Notes 2 and 4 to the consolidated financial statements for
additional information.
Exhibit 99.1
BALANCE SHEET AND
INDEPENDENT AUDITORS' REPORT
RCC PARTNERS 96, L.L.C.
MARCH 31, 2003
RCC Partners 96, L.L.C.
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS
BALANCE SHEET 4
NOTES TO BALANCE SHEET 5
INDEPENDENT AUDITORS' REPORT
To the Members of
RCC Partners 96, L.L.C.
We have audited the accompanying balance sheet of RCC Partners 96, L.L.C. as of
March 31, 2003. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this balance sheet
based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the balance sheet
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the balance sheet. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall balance sheet
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of RCC Partners 96, L.L.C. as of March
31, 2003, in conformity with accounting principles generally accepted in the
United States of America.
Bethesda, Maryland
May 15, 2003
RCC Partners 96, L.L.C.
BALANCE SHEET
March 31, 2003
ASSETS
Investment in limited partnership $ 0
Due from limited partnership 676,972
--------
$676,972
========
LIABILITIES AND MEMBERS' EQUITY
Due to affiliate $676,972
Members' equity 0
--------
$676,972
========
The accompanying notes are an integral part of this balance sheet
RCC Partners 96, L.L.C.
NOTES TO BALANCE SHEET
March 31, 2003
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RCC Partners 96, L.L.C. (the "Company") was organized under the laws of the
State of Delaware as of July 23, 1996, to act as the general partner of, and to
acquire and hold a general partnership interest in Patriot Tax Credit
Properties, L.P. ("Patriot").
On October 1, 1997, as part of a settlement of class litigation known as
Prudential Securities Inc. Limited Partnership Litigation, MDL No. 1005,
Prudential-Bache Properties, Inc. ("PBP") withdrew as the general partner and
transferred its General Partner interest in the Partnership to the Company, an
affiliate of Related Capital Company ("RCC") pursuant to a purchase agreement
dated as of December 19, 1996 among PBP and its affiliates and RCC.
Affiliates of the Company and RCC have had significant involvement with Patriot
and the Local Partnerships, of which five are owned by RCC affiliates. RCC in
the past provided, and will continue to provide ongoing monitoring services with
respect to the Limited Partnership's investments pursuant to the Property
Investment Monitoring Agreement.
Investment in Limited Partnership
- ---------------------------------
The Company accounts for its investment in Patriot using the equity method,
whereby the Company adjusts the investment cost for its share of Patriot's
results of operations and for any distributions received or accrued.
The Company regularly assesses the carrying value of its investment in Patriot.
If the carrying value is considered to exceed the estimated value derived by
management (which contemplates remaining Low-income Tax Credits and potential
residual value, among other things), the Company reduces its investment in
Patriot.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
RCC Partners 96, L.L.C.
NOTES TO BALANCE SHEET - CONTINUED
March 31, 2003
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
- ------------
The Company is not a taxpaying entity for income tax purposes and, accordingly,
no provision has been made for income taxes. The member's allocable shares of
the Company's taxable income or loss are reportable on their income tax returns.
NOTE B - RELATED PARTY TRANSACTIONS
Due to/from affiliates
- ----------------------
As of March 31, 2003, Patriot owes the Company $676,972 for partnership
management fees pursuant to the Limited Partnership Agreement. The Company owes
$676,972 to their affiliates as of March 31, 2003.
NOTE C - INVESTMENT IN LIMITED PARTNERSHIP
On October 1, 1997, the Company was admitted as the general partner in Patriot
Tax Credit Properties, L.P. which was formed to invest as a limited partner in
other partnerships owning apartment complexes that are eligible for the
low-income housing tax credit or the rehabilitation tax credit.
The investment in Limited Partnership is as follows:
General Partner capital
at December 31, 2002 $ 724,617
Less: Adjustment to estimated
realizable value (724,617)
---------
Balance - March 31, 2003 $ 0
=========
RCC Partners 96, L.L.C.
NOTES TO BALANCE SHEET - CONTINUED
March 31, 2003
NOTE C - INVESTMENT IN LIMITED PARTNERSHIP (Continued)
The summarized consolidated balance sheet at March 31, 2003 and the summarized
consolidated statement of operations for the year then ended for Patriot Tax
Credit Properties, L.P. are as follows:
CONSOLIDATED BALANCE SHEET
ASSETS
INVESTMENT IN PROPERTY $ 53,514,187
OTHER ASSETS
Cash and cash equivalents 1,344,954
Cash and cash equivalents, held in escrow 1,318,344
Deferred financing costs, net 1,596,650
Other assets 369,394
------------
Total assets $ 58,143,529
============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
LIABILITIES
Mortgage notes payable $ 45,294,215
Accrued interest payable 2,122,418
Other accrued expenses and liabilities 2,643,043
Due to general partners and affiliates of local partnerships
5,085,535
Development fees payable 1,151,510
Real estate taxes payable 179,876
Due to general partners and its affiliates 8,234,527
------------
Total liabilities 64,711,124
------------
Minority interest in local partnerships (1,746,771)
------------
Partners' capital (deficit)
Limited partners (38,125 BUC$ issued and outstanding) (5,545,441)
General partner (1 BUC$ issued and outstanding) 724,617
------------
Total partners' capital (deficit) (4,820,824)
------------
Total liabilities and partners' capital (deficit) $ 58,143,529
============
RCC Partners 96, L.L.C.
NOTES TO BALANCE SHEET - CONTINUED
March 31, 2003
NOTE C - INVESTMENT IN LIMITED PARTNERSHIP (Continued)
CONSOLIDATED STATEMENT OF OPERATIONS
Revenues
Rental income $ 9,973,773
Other income 829,675
Interest income 15,827
------------
10,819,275
Expenses
Interest 4,747,765
Depreciation and amortization 2,429,909
Operating and other 914,339
Taxes and insurance 1,374,659
Repairs and maintenance 2,749,023
General and administrative 2,699,222
Property management fees 440,564
Partnership management fees 240,656
------------
Total expenses 15,596,137
------------
Loss before minority interest (4,776,862)
Minority interest in loss of local partnership 1,139,863
------------
Net loss $ (3,636,999)
============
NOTE D - CONTINGENCIES
The Company is contingently liable for all debts, liabilities and other
obligations of Patriot Tax Credit Properties L.P. to the extent not paid by the
partnership.
Exhibit 99.2
CERTIFICATION PURSUANT TO
TITLE 18.U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Patriot Tax Credit Properties L.P. (the
"Partnership") on Form 10-K for the period ending March 31, 2003 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 Title 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
June 23, 2003