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, 2004
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, 2003, was
($7,169,000), based on Limited Partner equity (deficit) as of such date.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Business.
General
- -------
Patriot Tax Credit Properties L.P. (the "Registrant"), a Delaware limited
partnership, was formed on May 3, 1989 and will terminate on December 31, 2029
unless terminated sooner under the provisions of the Amended and Restated
Agreement of Limited Partnership (the "Partnership Agreement"). The Registrant
was formed to invest in low-income, multi-family residential complexes
("Apartment Complexes" or "Properties") and, to a lesser extent, in historic
apartment complexes undergoing rehabilitation ("Historic Complexes" or
"Properties") through the acquisition of interests (the "Local Partnership
Interests") in local partnerships (the "Local Partnerships") that are the owners
of the Properties. These investments were made with proceeds from the initial
sale of 38,125 Beneficial Unit Certificates ("BUC$"). 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 had
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 from operations 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 Partnership generated $0, $126,188 and $1,814,136 in Tax Credits during the
years ended December 31, 2003, 2002, and 2001, respectively. As of December 31,
2002 all the Local Partnerships completed their tax credit periods and the
Partnership has met its primary objective of generating Housing Tax Credits for
qualified BUC$ holders. However, each Local Partnership must continue to comply
with the Housing Tax Credit requirements until the end of the compliance period
in order to avoid recapture of the Housing Tax Credits. The compliance period
will end at various dates through December 31, 2007 with respect to the
Properties depending upon when the Housing Tax Credit Period commenced.
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
2
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.
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 in
each of the three years ended March 31, 2004, 2003 and 2002. Income from Palm
Beach Apartments Ltd. ("Summer Creek Villas") as a percentage of the
Registrant's total revenue was 55.31%, 52.10%, and 50.89% and during the years
ended March 31, 2004, 2003 and 2002, 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, 2004.
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. On
November 17, 2003, CharterMac acquired RCC, which is the indirect parent of RCC
Manager L.L.C., the managing member of the General Partner. Pursuant to the
acquisition, CharterMac acquired controlling interests in the General Partner.
This acquisition did not affect the Registrant or its day-to-day operations, as
the majority of the General Partner's management team remained unchanged.
Segments
- --------
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. 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 Part III and Notes 1, 3 and 6 to the consolidated
financial statements set forth in Item 8.
The Local Partnerships are impacted by inflation in several ways. Inflation
allows for increases in rental rates generally to reflect the impact of higher
operating and replacement costs. Furthermore, inflation generally does not
impact the fixed long-term financing under which real property investments were
purchased. Inflation also affects the Local Partnerships adversely by increasing
operating costs, such as fuel, utilities, and labor.
3
Item 2. Properties.
As of March 31, 2004, 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:
Occupancy
Number Rents as of Rate as of
Property (a) of Units May 1, 2004 May 1, 2004
- ------------ -------- ----------- -----------
RMB Limited Partnership 196 $445-755 76%
(Hubbard's Ridge)
Garland, TX
Cutler Canal II 216 396-665 98%
Associates, Ltd.
Miami, FL
Diamond Street Venture 48 473-540 90%
Philadelphia, PA
Papillion Heights 48 485-495 85%
Apartments L.P.
Papillion, NE
Hill Top Homes 171 560-770 89%
Apartments
Limited Partnership
Arlington, TX
Palm Beach 770 605-860 95%
Apartments, Ltd.
(Summer Creek Villas)
West Palm Beach, FL
Brookland Park Plaza 77 563 96%
Limited Partnership
Richmond, VA
Compton Townhouses 39 765 100%
Limited Partnership
Cincinnati, OH
(a) At March 31, 2004, 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
from 700 square feet for a one-bedroom apartment to 1,100 square feet for a
three-bedroom unit.
4
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 10, 2004, there were 2,233 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 2004 2003 2002 2001 2000
- ---------- ------------ ------------ ------------ ------------ ------------
Rental and other income $ 10,747,362 $ 10,803,448 $ 10,333,034 $ 9,761,295 $ 7,915,054
============ ============ ============ ============ ============
Interest income $ 12,093 $ 15,827 $ 38,065 $ 39,888 $ 24,826
============ ============ ============ ============ ============
Interest expense $ 4,755,090 $ 4,747,765 $ 4,689,172 $ 4,729,740 $ 4,408,997
============ ============ ============ ============ ============
Depreciation and amorti-
zation expenses $ 2,440,364 $ 2,429,909 $ 2,447,028 $ 2,445,646 $ 2,433,206
============ ============ ============ ============ ============
Loss before minority
interest and extraordi-
nary item $ (4,848,759) $ (4,776,862) $ (4,815,277) $ (5,563,134) $ (5,435,229)
============ ============ ============ ============ ============
Minority interest in loss
of local partnerships $ 1,048,921 $ 1,139,863 $ 1,207,124 $ 1,135,959 $ 637,201
============ ============ ============ ============ ============
Loss before extraordinary
item $ (3,799,838) $ (3,636,999) $ (3,608,103) $ (4,427,175) $ (4,798,028)
============ ============ ============ ============ ============
Extraordinary item -
forgiveness of indebted-
ness $ 0 $ 0 $ 0 $ 833,002 $ 1,656,843
============ ============ ============ ============ ============
Net loss $ (3,799,838) $ (3,636,999) $ (3,608,103) $ (3,594,173) $ (3,141,185)
============ ============ ============ ============ ============
Loss before extraordinary
item per limited partner
BUC$ $ (99.17) $ (94.92) $ (94.17) $ (115.54) $ (125.22)
Extraordinary item per
limited partner BUC$ $ 0 $ 0 $ 0 $ 21.74 $ 43.24
------------ ------------ ------------ ------------ ------------
Net loss per limited part-
ner BUC$ $ (99.17) $ (94.92) $ (94.17) $ (93.80) $ (81.98)
============ ============ ============ ============ ============
Total assets $ 55,556,172 $ 58,143,529 $ 60,492,083 $ 62,137,819 $ 64,662,321
============ ============ ============ ============ ============
Mortgage notes payable $ 44,697,118 $ 45,294,215 $ 46,015,770 $ 43,955,708 $ 44,569,822
============ ============ ============ ============ ============
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, 2004, there was approximately
$275,000 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, 2004 and 2003 also reflect
payables of $426,961 and $282,000, respectively, under operating deficit
guaranty agreements at Hill Top Homes, which have expired. As of March 31, 2004,
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 2003 and 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, 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 playgrounds, 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 an amount not to 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
limited partner) are expected to be obtained in accordance with the loans to be
provided under the funding agreement. Loans made in 2003 and 2002 under these
funding agreements to fund operating deficit's total $2,418,647 and $3,137,720,
respectively. Of such amounts, $1,913,331 and $2,409,305 were loaned by the
Registrant in 2003 and 2002, respectively.
8
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 2003 and 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 unreimbursed payroll in the net amount
of $720,678. As of December 31, 2003 and 2002, the management agent was due
$122,649 and $491,988, respectively. The management agent is not obligated to
provide such advances.
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 2004 vs. Fiscal 2003
- ---------------------------
Rental income decreased approximately $97,000 for the year ended March 31, 2004
as compared to 2003 primarily due to a decrease in occupancy at three Local
Partnerships.
Interest income decreased approximately $4,000 for the year ended March 31, 2004
as compared to 2003 primarily due to lower cash and cash equivalent balances
earning interest at the Local Partnership and Registrant level.
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.
9
Tabular Disclosure of Contractual Obligations
- ---------------------------------------------
The following table summarizes the Registrant's commitments as of March 31, 2004
to make future payments under its debt agreements and other contractual
obligations.
Less
than 1 - 3 3 -5 More than
Total 1 Year Years Years 5 Years
----------- ----------- ----------- ----------- -----------
Mortgage notes
payable (a) $44,697,118 $ 925,122 $ 7,591,985 $23,587,939 $12,592,072
----------- ----------- ----------- ----------- -----------
(a) Mortgage notes are collateralized by land, buildings and improvements and
leases related thereto. Mortgage notes consist of both first mortgages and
support loans (second and third mortgages).
Off Balance Sheet Arrangements
- ------------------------------
The Partnership has no off-balance sheet arrangements.
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.
New Accounting Pronouncements
- -----------------------------
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46").
FIN 46 is applicable immediately for variable interest entities created after
January 31, 2003. For variable interest entities created before February 1,
2003, the provisions of FIN 46 are applicable no later than December 15, 2003.
The Partnership has not created any variable interest entities after January 31,
2003. In December 2003, the FASB redeliberated certain proposed modifications
and revised FIN 46 ("FIN 46 (R)"). The revised provisions are applicable no
later than the first reporting period ending after March 15, 2004. The adoption
of FIN 46 (R) is not intended to have a material impact on the Registrant's
financial reporting and disclosure.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, by now requiring
those instruments to be classified as liabilities ( or assets in some
circumstances) in the Consolidated Balance Sheets. Further, SFAS No. 150
10
requires disclosure regarding the terms of those instruments and settlement
alternatives. The guidance in SFAS No. 150 generally was effective for all
financial instruments entered into or modified after May 31, 2003, and was
otherwise effective at the beginning of the first interim period beginning after
June 15, 2003. The Registrant has evaluated SFAS No. 150 and determined that it
does not have an impact on the Registrant's financial reporting and disclosures.
Property Information
- --------------------
The Registrant currently holds interests in eight Local Partnerships. The
following schedule gives specific details about the related Properties.
Gross Carrying Occupancy
Value of Rate at
Number Property at December 31,
Property (a) of Units March 31,2004 2003 (c)
-------- ------------- ------------
RMB Limited Partnership 196 $ 5,310,849 87%
(Hubbard's Ridge)
Garland, TX
Cutler Canal II 216 11,540,233 99%
Associates, Ltd.
Miami, FL
Diamond Street Venture (b) 48 2,912,536 92%
Philadelphia, PA
Papillion Heights 48 2,206,424 81%
Apartments L.P.
Papillion, NE
Hill Top Homes 171 8,104,661 76%
Apartments
Limited Partnership
Arlington, TX
Palm Beach 770 40,832,871 94%
Apartments, Ltd.
(Summer Creek Villas)
West Palm Beach, FL
Brookland Park Plaza 77 6,449,682 91%
Limited Partnership
Richmond, VA
Compton Townhouses 39 2,446,959 97%
Limited Partnership -----------
Cincinnati, OH
$79,804,215
===========
(a) At March 31, 2004, 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, 2004, was as follows:
2004 2003 2002
---------- ---------- ----------
Hubbard's Ridge $ 296,000 $ 329,000 $ 427,000
Cutler Canal II 684,000 737,000 783,000
Diamond Street 63,000 71,000 54,000
Papillion Heights 38,000 72,000 64,000
Hill Top Homes 221,000 365,000 429,000
Summer Creek Villas 1,188,000 871,000 679,000
Brookland Park Plaza 181,000 192,000 160,000
Compton Townhouses 107,000 151,000 132,000
---------- ---------- ----------
$2,778,000 $2,788,000 $2,728,000
========== ========== ==========
Item 7A. Quantitative and Qualitative Disclosure about Market Risk.
The Partnership does not have any market risk sensitive instruments.
12
Item 8. Financial Statements and Supplementary Data.
Sequential
Page
----------
(a) 1. Financial Statements
Report of Independent Registered Public Accounting Firm 14
Consolidated Balance Sheets as of March 31, 2004 and 2003 32
Consolidated Statements of Operations for the years ended
March 31, 2004, 2003 and 2002 33
Consolidated Statements of Changes in Partners' Capital
(Deficit) for the years ended March 31, 2004, 2003 and
2002 34
Consolidated Statements of Cash Flows for the years ended
March 31, 2004, 2003 and 2002 35
Notes to Consolidated Financial Statements 36
13
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004 and 2003, and the
related consolidated statements of operations, changes in partners' capital
(deficit) and cash flows for the years ended March 31, 2004, 2003 and 2002. 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. For the year ended March 31, 2004, we
did not audit the financial statements of certain investee partnerships which
represent $15,334,378 in total assets and $915,112 of the net loss as of and for
the year ended March 31, 2004. Those statements were audited by other auditors
whose reports have been furnished to us, and our opinion, insofar as it relates
to those investee partnerships, is based solely on the reports of the other
auditors.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (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 and the reports of
the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, 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, 2004 and 2003, and the results of their
operations, changes in Partners' capital (deficit), and their cash flows for the
years ended March 31, 2004, 2003 and 2002, in conformity with accounting
principles generally accepted in the United States of America.
Our report on the 2004 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 14, 2004
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, 2003 and 2002, 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, 2003 and 2002, 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 21, 2004
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, 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
16
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners
Cutler Canal II Associates, Ltd.
We have audited the accompanying balance sheet of Cutler Canal II Associates,
Ltd. as of December 31, 2003 and 2002, 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 Cutler Canal II Associates,
Ltd. as of December 31, 2003 and 2002, 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/ Reznick Fedder & Silverman
Atlanta, Georgia
January 28, 2004
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
Diamond Street Venture
We have audited the accompanying balance sheet of Diamond Street Venture as of
December 31, 2003 and 2002, 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, 2003 and 2002, 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, 2003, dated January 23, 2004, 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 29
through 32 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 23, 2004
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 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, 2003 and 2002, 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, 2003 and 2002, 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 11, 2004
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 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, 2003 and
2002, 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, 2003 and 2002, 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 21, 2004
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 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, 2003 and 2002, 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, 2003 and 2002, 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 14 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 14. 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 23
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 13, 2004
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
Brookland Park Plaza Limited Partnership
We have audited the accompanying balance sheet of BROOKLAND PARK PLAZA LIMITED
PARTNERSHIP (a Maryland Limited Partnership), HUD Project No. 051-36617, as of
December 31, 2003, 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, 2003, 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, we have also issued reports
dated January 21, 2004, on our consideration OF BROOKLAND PARK PLAZA LIMITED
PARTNERSHIP'S internal control and on our tests of its compliance with certain
provisions of laws, regulations, contracts and grants. 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 14 through 24 is presented for purposes of additional analysis and is
not a required part of the basic financial statements of BROOKLAND PARK PLAZA
LIMITED 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/ Dickey, Wolf & Humbard, LLC
Certified Public Accountants
Harrisonville, MO
January 21, 2004
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 Barnes, Dennig & Co., Ltd.]
Report of Independent Certified Public Accountants
To the Partners
Compton Townhouses Limited Partnership
We have audited the accompanying balance sheets of Compton Townhouses Limited
Partnership (An Ohio Limited Partnership), as of December 31, 2003 and 2002, and
the related statements of operations, changes in 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 Compton Townhouses Limited
Partnership as of December 31, 2003 and 2002, and the results of its operations,
changes in partners' deficit and 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 16, 2004
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
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31,
----------------------------
2004 2003
------------ ------------
Investment in property:
Land $ 4,005,633 $ 4,005,633
Building and improvements 75,798,582 75,746,346
Accumulated depreciation (28,372,375) (26,237,792)
------------ ------------
Net investment in property 51,431,840 53,514,187
Cash and cash equivalents 1,216,053 1,344,954
Cash and cash equivalents held in escrow 1,222,301 1,318,344
Deferred financing costs, net 1,302,170 1,596,650
Other assets 383,808 369,394
------------ ------------
Total assets $ 55,556,172 $ 58,143,529
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage notes payable $ 44,697,118 $ 45,294,215
Accrued interest payable 2,180,744 2,122,418
Other accrued expenses and liabilities 2,200,263 2,643,043
Due to local general partners and affiliates of local partnerships 6,378,776 5,085,535
Development fees payable 1,151,510 1,151,510
Real estate taxes payable 174,018 179,876
Due to General Partner and its affiliates 10,190,654 8,234,527
------------ ------------
Total liabilities 66,973,083 64,711,124
------------ ------------
Minority interests in local partnerships (2,796,249) (1,746,771)
------------ ------------
Partners' capital (deficit):
Limited partners (38,125 BUC$ issued and outstanding) (9,326,280) (5,545,441)
General partner (1 BUC$ issued and outstanding) 705,618 724,617
------------ ------------
Total partners' capital (deficit) (8,620,662) (4,820,824)
------------ ------------
Total liabilities and partners' capital (deficit) $ 55,556,172 $ 58,143,529
============ ============
See accompanying notes to consolidated financial statements.
32
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended March 31,
--------------------------------------------
2004 2003 2002
------------ ------------ ------------
Revenues
Rental income $ 9,876,634 $ 9,973,773 $ 9,530,921
Other income 870,728 829,675 802,113
Interest income 12,093 15,827 38,065
------------ ------------ ------------
10,759,455 10,819,275 10,371,099
------------ ------------ ------------
Expenses
Interest 4,755,090 4,747,765 4,689,172
Depreciation and amortization 2,440,364 2,429,909 2,447,028
Operating and other 921,634 914,339 918,938
Taxes and insurance 1,501,816 1,374,659 1,158,871
Repairs and maintenance 2,483,200 2,749,023 2,540,544
General and administrative 2,837,480 2,699,222 2,762,046
Property management fees 431,166 440,564 424,360
Partnership management fees 237,464 240,656 245,367
------------ ------------ ------------
Total expenses 15,608,214 15,596,137 15,186,326
------------ ------------ ------------
Loss before minority interest (4,848,759) (4,776,862) (4,815,227)
Minority interest in loss of local partnerships 1,048,921 1,139,863 1,207,124
------------ ------------ ------------
Net loss $ (3,799,838) $ (3,636,999) $ (3,608,103)
============ ============ ============
Net loss-limited partners $ (3,780,839) $ (3,618,814) $ (3,590,062)
============ ============ ============
Number of BUC$ outstanding - limited partners 38,125 38,125 38,125
============ ============ ============
Net loss per BUC$ - limited partners $ (99.17) $ (94.92) $ (94.17)
============ ============ ============
See accompanying notes to consolidated financial statements.
33
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, 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
Net Loss (3,799,838) (3,780,839) (18,999) 0
----------- ----------- ----------- -----------
Partners' capital (deficit)
March 31, 2004 $(8,620,662) $(9,326,280) $ 705,618 $ 38,126
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
34
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended March 31,
-----------------------------------------
2004 2003 2002
----------- ----------- -----------
Cash flows from operating activities:
Net loss $(3,799,838) $(3,636,999) $(3,608,103)
----------- ----------- -----------
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 2,440,364 2,429,909 2,447,028
Minority interest in loss of local partnerships (1,048,921) (1,139,863) (1,207,124)
Decrease (increase) in cash held in escrow 96,043 363,167 (194,178)
(Decrease) increase in real estate taxes payable (5,858) 97,998 (57,527)
Increase (decrease) in accrued interest payable 58,326 81,510 (2,820)
Increase in other assets (16,353) (66,008) (76,455)
(Decrease) increase in other accrued expenses
and liabilities (150,028) 1,084,764 (390,253)
----------- ----------- -----------
Total adjustments 1,373,573 2,851,477 518,671
----------- ----------- -----------
Net cash used in operating activities (2,426,265) (785,522) (3,089,432)
----------- ----------- -----------
Cash flows from investing activities:
Investments in property (52,236) (39,188) (62,881)
----------- ----------- -----------
Net cash used in investing activities (52,236) (39,188) (62,881)
----------- ----------- -----------
Cash flows from financing activities
Proceeds from mortgage notes 1,197,500 0 4,600,000
Payments on mortgage notes (1,794,597) (721,555) (2,539,938)
Increase in deferred costs (9,362) 0 (129,521)
Decrease in development fees payable 0 0 (299,199)
Advance from General Partner 1,663,375 1,452,201 1,373,146
Increase in due to Local General Partners
and affiliates of Local Partnerships,
General Partner and its affiliates 847,278 61,202 557,174
Decrease in due to Local General Partners
and affiliates of Local Partnerships,
General Partner and its affiliates (59,353) (355,920) (420,675)
Advance from local limited partner 505,316 728,415 350,000
Distribution to minority interest (557) (307) (417)
----------- ----------- -----------
Net cash provided by financing activities 2,349,600 1,164,036 3,490,570
----------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents (128,901) 339,326 338,257
Cash and cash equivalents at beginning of year 1,344,954 1,005,628 667,371
----------- ----------- -----------
Cash and cash equivalents at end of year $ 1,216,053 $ 1,344,954 $ 1,005,628
=========== =========== ===========
Supplemental disclosures of cash flow infor-
mation:
Interest paid $ 4,696,764 $ 4,666,255 $ 3,020,853
=========== =========== ===========
See accompanying notes to consolidated financial statements.
35
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
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"). On November 17, 2003,
CharterMac acquired RCC, which is the indirect parent of RCC Manager L.L.C., the
managing member of the General Partner. Pursuant to the acquisition, CharterMac
acquired controlling interests in the General Partner. This acquisition did not
affect the Partnership or its day-to-day operations, as the majority of the
General Partner's management team remained unchanged. 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, 2004, 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
36
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
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
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, 2004, no distributions have been paid.
g) Rental Income
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.
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, 2004 and 2003 is $4,019,979 and $3,716,137, respectively.
37
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
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.
38
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
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) 2004 2003 2004 2003
- --------------- ----------- ----------- ----------- -----------
Apartment Complexes:
RMB Limited Partnership $ 2,933,334 $ 3,104,050 $ 4,519,054 $ 4,562,398
(Hubbard's Ridge)
Garland, TX
Cutler Canal II 7,875,271 8,131,281 5,675,068 5,733,478
Associates, Ltd.
Miami, FL
Diamond Street Venture (b) 1,526,094 1,610,420 2,891,356 2,913,484
Philadelphia, PA
Papillion Heights 1,437,773 1,490,423 1,183,317 958,143
Apartments L.P.
Papillion, NE
Hill Top Homes 5,531,851 5,717,040 3,109,436 3,207,845
Apartments
Limited Partnership
Arlington, TX
Palm Beach 27,686,049 28,700,604 23,793,641 24,327,859
Apartments, Ltd.
(Summer Creek Villas)
West Palm Beach, FL
Brookland Park Plaza 3,344,485 3,571,140 2,317,981 2,348,964
Limited Partnership
Richmond, VA
Compton Townhouses 1,096,983 1,189,229 1,207,265 1,242,044
----------- ----------- ----------- -----------
Limited Partnership
Cincinnati, OH
$51,431,840 $53,514,187 $44,697,118 $45,294,215
=========== =========== =========== ===========
(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.
39
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
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
-----------
2004 $ 925,122
2005 3,516,725
2006 4,075,260
2007 1,138,287
2008 22,449,652
Thereafter 12,592,072
-----------
$44,697,118
===========
Mortgage notes consist of both first mortgages and support loans (second and
third mortgages). First mortgages amounting to $39,757,118 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 $23,793,641 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
December 15, 2014 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.
In April 2003, Papillion Heights refinanced its outstanding mortgage note
payable in the amount of $958,143. The new mortgage in the amount of $1,197,500
is payable in monthly installments of $7,679 including interest at the rate of
5.95% per annum through March 17, 2008 with a balloon payment of approximately
$1,078,500 due April 17, 2008.
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, 2004 and 2003, the estimated fair values of the mortgage notes
payable were approximately $39,307,053 and $40,099,970, 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
40
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
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,
------------------------------------
2004 2003 2002
---------- ---------- ----------
Partnership management fees $ 252,986 $ 240,656 $ 245,367
Property management fees 159,865 157,983 149,693
Local administrative fees 20,250 20,250 20,250
General and administrative 95,165 85,781 64,867
Interest 475,640 378,534 365,789
---------- ---------- ----------
$1,003,906 $ 883,204 $ 845,966
========== ========== ==========
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, 2004, the General Partner and its affiliates
advanced $1,956,127 to the Partnership and as of March 31, 2004 and 2003, total
advances outstanding are $10,190,654 and $8,234,527, respectively. The advances
are unsecured, and bear interest at prime +2% and are due on demand.
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, 2004, 2003 and 2002,
respectively. Additionally, during the years ended March 31, 2004, 2003 and
2002, 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,
------------------------------
2004 2003 2002
-------- -------- --------
Interest $213,634 $199,058 $213,276
Management fees 417,438 415,046 330,218
-------- -------- --------
$631,072 $614,104 $543,494
======== ======== ========
41
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
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, 2004 and 2003 of
$2,418,647 and $3,137,720, respectively, have been received from the Partnership
and Palm Beach Investors, L.P. (Washington Mutual).
At both March 31, 2004 and 2003, development fees of $1,151,510 were payable to
various Local General Partners.
NOTE 8 - Quarterly Financial Information (Unaudited)
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------
Fiscal Year 2004
- ----------------
Total Revenue $ 2,499,145 $ 2,545,149 $ 2,596,534 $ 3,118,627
Net loss (799,405) (832,173) (904,421) (1,263,839)
Fiscal Year 2003
- ----------------
Total Revenue $ 2,545,134 $ 2,543,989 $ 2,575,969 $ 3,154,183
Net loss (749,442) (655,482) (663,174) (1,568,901)
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 2004, the account balances exceeded the FDIC limit.
NOTE 10 - 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 2003 and 2002,
Summer Creek Villas' operations are impeded by the inability to raise rents
42
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
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, in an effort to improve occupancy, Summer Creek Villas invested
funds to improve the physical condition of the property. Such improvements
primarily consisted of painting, landscaping, new playgrounds, 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 2003 and 2002 under these
funding agreements to fund operating deficit's total $2,418,647 and $3,137,720,
respectively. Of such amounts, $1,913,331 and $2,409,305 were loaned by the
Partnership in 2003 and 2002, 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 2003 and 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 unreimbursed payroll in the net amount
of $720,678. As of December 31, 2003 and 2002, the management agent was due
$122,649 and $491,988, respectively. The management agent is not obligated to
provide such advances.
As of March 31, 2004 and 2003, the consolidated financial statements include
total assets of $29,513,452 and $30,772,961, respectively, total liabilities of
$40,265,248 and $38,315,144, respectively, and a minority interest of $2,982,210
and $1,935,146, respectively, attributable to this subsidiary.
Summer Creek Villas' ability to continue its operations is dependent upon
management achieving the plans described in the foregoing paragraphs. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty. Any adjustments would be
limited solely to Summer Creek Villas' financial statements.
43
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 9A. Controls and Procedures
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Chief Executive
Officer and Chief Financial Officer of RCC Partners 96, L.L.C., the General
Partner of the Registrant, has evaluated the effectiveness of the Registrant's
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange
Act") as of the end of the period covered by this report. Based on such
evaluation, such officer has concluded that, as of the end of such period, the
Registrant's disclosure controls and procedures are effective.
(b) INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any changes
in Registrant's internal control over financial reporting during the fiscal year
to which this report relates that have materially affected, or are reasonably
likely to materially affect, the Registrant's internal control over financial
reporting.
PART III
Item 10. Directors and Executive Officers of the Registrant.
There are no directors or executive officers of the Registrant. The Registrant
is managed by the General Partner.
The Registrant, the Registrant's General Partner and its members and executive
officers, and any persons holding more than ten percent of the Registrant's BUC$
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. The
Partnership has not adopted a separate code of ethics because the Partnership
has no directors or executive officers. However, the parent company of Related
Capital Company ("RCC") which controls the General Partner has adopted a code of
ethics. See http://www.chartermac.com
On November 17, 2003, CharterMac acquired RCC, which is the indirect parent of
RCC Manager L.L.C., the managing member of the General Partner. Pursuant to the
acquisition, CharterMac acquired controlling interests in the General Partner.
This acquisition did not affect the Registrant or its day-to-day operations, as
a majority of the General Partner's management team remained unchanged.
44
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, 49, 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
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
CharterMac and American Mortgage Acceptance Company ("AMAC").
STUART J. BOESKY, 48, 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
CharterMac and AMAC.
DENISE L. KILEY, 44, 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. Ms. Kiley also serves on the Board of
Trustees of CharterMac.
MARK J. SCHLACTER, 53, 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
45
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, 43, 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. Mr. Schnitzer also serves on the
Board of Trustees of CharterMac.
GLENN F. HOPPS, 41, 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.
TERESA WICELINSKI, 38, 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, 2004, Messrs. Boesky and Hirmes each own directly or beneficially
6.8% of the economic interest in the General Partner. 100% of the voting
securities are owned by RCC Manager LLC, which is wholly owned by RCC.
As of June 2, 2004, 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, 2004, no limited partner beneficially owns more than five percent
(5%) of the BUC$ issued by the Registrant.
46
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. Principal Accountant Fees and Services
Audit Fees
- ----------
The aggregate fees billed by Reznick, Fedder and Silverman and their respective
affiliates (collectively, "Reznick") for professional services rendered for the
audit of our annual financial statements for the years ended December 31, 2003
and 2002 and for the reviews of the financial statements included in the
Registrant's Quarterly Reports on Form 10-Q for those years were $25,000 and
$25,000, respectively.
Audit Related Fees
- ------------------
None.
Tax Fees
- --------
The aggregate fees billed by Weiser LLP (formerly, Rubin and Katz LLP) and their
respective affiliates (collectively, "Weiser") for professional services
rendered for the preparation of our annual tax returns for the years ended
December 31, 2003 and 2002 were $27,500 and $25,000, respectively.
All Other Fees
- --------------
None.
The Partnership is not required to have, and does not have, a stand alone audit
committee.
47
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sequential
Page
----------
(a) 1. Financial Statements
Report of Independent Registered Public Accounting Firm 14
Consolidated Balance Sheets as of March 31, 2004 and 2003 32
Consolidated Statements of Operations for the years ended
March 31, 2004, 2003 and 2002 33
Consolidated Statements of Changes in Partners' Capital
(Deficit) for the years ended March 31, 2004, 2003 and 2002 34
Consolidated Statements of Cash Flows for the years ended
March 31, 2004, 2003 and 2002 35
Notes to Consolidated Financial Statements 36
(a) 2. Financial Statement Schedules and Report of Independent
-------------------------------------------------------
Registered Public Accounting Firm on Schedules
----------------------------------------------
Report of Independent Registered Public Accounting Firm
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 conta-
ined in the financial statements or notes thereto.
48
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) Amendment Number 1 to Prudential-Bache Tax Credit
Properties L.P. Amended and Restated Agreement of Limited
Partnership, dated October 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
Partnership of Local Partnerships**
(21) Subsidiaries of the Registrant - the Local Partnerships
set forth in Item 2 may be considered subsidiaries of the
Registrant. 50
(31.1) Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a). 53
(32.1) Certification Pursuant to Rule 13a-14(b) or Rule 15d-14(b)
and Section 1350 of Title 18 of the United States Code (18
U.S.C. 1350). 55
(99.1) Balance Sheet and Report of Independent Registered Public
Accounting Firm 59
(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 acco-
untant.
*Filed as an exhibit to Pre-Effective Amendment No. 1 to
Form S-11 Registration Statement (No. 33-28571) and inco-
rporated herein by reference.
**Filed as an exhibit to Pre-Effective Amendment No. 2 to
Form S-11 Registration Statement (No. 33-28571) and incor-
porated herein by reference.
***Filed as an exhibit to Registrants Current Report on Form
8-K dated October 1, 1997 and incorporated herein by reference.
49
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
50
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 15, 2004 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
- -------------------- ---------------------------------------- -------------
Member and President
(Chief Executive and Financial Officer)
/s/ Alan P. Hirmes of RCC Partners 96., L.L.C.
- ------------------
Alan P. Hirmes June 15, 2004
Member and Executive Vice President
(Chief Operating Officer)
/s/ Stuart J. Boesky of RCC Partners 96., L.L.C.
- --------------------
Stuart J. Boesky June 15, 2004
Treasurer
/s/ Glenn F. Hopps (Chief Accounting Officer)
- ------------------
Glenn F. Hopps of RCC Partners 96., L.L.C. June 15, 2004
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE
13a-14(a) OR RULE 15d-14(a)
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, 2004 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-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) 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
was being prepared;
b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles; and
c) evaluated the effectiveness of the Partnership's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this annual report based on such evaluation;
and
d) disclosed in this annual report any change in the Partnership's
internal control over financial reporting that occurred during the
period ending March 31, 2004 that has materially affected, or is
reasonably likely to materially affect, the Partnership's internal
control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the Partnership's auditors and to
the boards of directors of the General Partners:
a) all significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are
reasonably likely to adversely affect the Partnership's ability to
record, process, summarize and report financial information; 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 over financial reporting.
By:/s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Executive Officer and
Chief Financial Officer
June 15, 2004
Exhibit 32.1
CERTIFICATION PURSUANT TO
RULE 13a-14(b) OR RULE 15d-14(b) AND
SECTION 1350
OF TITLE 18 OF THE UNITED STATES
CODE (18 U.S.C. 1350)
In connection with the Annual Report of Patriot Tax Credit Plus L.P. (the
"Partnership") on Form 10-K for the period ending March 31, 2004 as filed with
the Securities and Exchange Commission ("SEC") on the date hereof (the
"Report"), I, Alan P. Hirmes, Chief Executive Officer and Chief Financial
Officer of RCC Partners 96, L.L.C., the General Partner of the Partnership,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Partnership.
A signed original of this written statement required by Section 906 has been
provided to the Partnership and will be retained by the Partnership and
furnished to the SEC or its staff upon request.
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Executive Officer and Chief Financial Officer
June 15, 2004
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
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, 2004. In our
opinion, based on our audit and the reports of the other auditors, the
consolidated schedule presents fairly, in all material respects, 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 14, 2004
56
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
MARCH 31, 2004
Initial Cost to Partnership Costs Capitalized
--------------------------- Subsequent to Acquisition (7)
Buildings and -----------------------------
Emcumbrances Land Improvements Improvements Carrying Costs
------------ ----------- ------------ ------------ --------------
Apartment Complexes:
RMB Limited Partnership
(Hubbard's Ridge) (1)
Garland, TX $ 4,519,054 $ 107,237 $ 965,136 $ 4,053,296 $ 185,180
Cutler Canal II
Associates, Ltd. (2)
Miami, FL 5,675,068 807,071 1,388,350 9,277,084 67,728
Diamond Street Venture (3)
Philadelphia, PA 2,891,356 9,729 234,465 2,395,124 273,218
Papillion Heights
Apartments L.P. (1)
Papillion, NE 1,183,317 63,329 1,816,598 259,945 66,552
Hill Top Homes
Apartments L.P. (1)
Arlington, TX 3,109,436 553,841 3,690,150 3,544,302 316,368
Palm Beach Apartments Ltd, (1)
(Summer Creek Villas)
West Palm Beach, FL 23,793,641 2,396,876 10,578,563 25,980,637 1,876,795
Brookland Park Plaza L.P. (1)
Richmond, VA 2,317,981 50,000 109,850 5,913,667 376,165
Compton Townhouses L.P. (1)
Cincinnati, OH 1,207,265 17,550 476,708 1,924,498 28,203
----------- ----------- ----------- ----------- -----------
$44,697,118 $ 4,005,633 $19,259,820 $53,348,553 $ 3,190,209
=========== =========== =========== =========== ===========
Gross Amounts
at which Carried At Closed Period (5)
-----------------------------------------
Buildings and Accumulated
Land Improvements Total Depreciation
----------- ------------ ----------- ------------
Apartment Complexes:
RMB Limited Partnership
(Hubbard's Ridge) (1)
Garland, TX $ 107,237 $ 5,203,612 $ 5,310,849 $ 2,377,516
Cutler Canal II
Associates, Ltd. (2)
Miami, FL 807,071 10,733,162 11,540,233 3,664,962
Diamond Street Venture (3)
Philadelphia, PA 9,729 2,902,807 2,912,536 1,386,440
Papillion Heights
Apartments L.P. (1)
Papillion, NE 63,329 2,143,095 2,206,424 768,651
Hill Top Homes
Apartments L.P. (1)
Arlington, TX 553,841 7,550,820 8,104,661 2,572,811
Palm Beach Apartments Ltd, (1)
(Summer Creek Villas)
West Palm Beach, FL 2,396,876 38,435,995 40,832,871 13,146,822
Brookland Park Plaza L.P. (1)
Richmond, VA 50,000 6,399,682 6,449,682 3,105,197
Compton Townhouses L.P. (1)
Cincinnati, OH 17,550 2,429,409 2,446,959 1,349,976
----------- ----------- ----------- -----------
$ 4,005,633 $75,798,582 $79,804,215 $28,372,375
=========== =========== =========== ===========
Life on which
Depreciation in
Date Latest income
Construction Date Statements are
Completed Acquired Computed
--------- -------- ----------------
Apartment Complexes:
RMB Limited Partnership
(Hubbard's Ridge) (1)
Garland, TX 5/90 12/89 30
Cutler Canal II
Associates, Ltd. (2)
Miami, FL 1/91 1/90 40
Diamond Street Venture (3)
Philadelphia, PA 12/90 1/90 40
Papillion Heights
Apartments L.P. (1)
Papillion, NE 12/90 4/90 40
Hill Top Homes
Apartments L.P. (1)
Arlington, TX 12/90 6/90 40
Palm Beach Apartments Ltd, (1)
(Summer Creek Villas)
West Palm Beach, FL 8/91 6/90 40
Brookland Park Plaza L.P. (1)
Richmond, VA 12/90 7/90 27.5
Compton Townhouses L.P. (1)
Cincinnati, OH 6/92 1/92 40
(1) First mortgage
(2) Includes first and second mortgages
(3) Includes first, second and third mortgages
(4) At March 31, 2004, 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.
57
PATRIOT TAX CREDIT PROPERTIES L.P.
(a limited partnership)
AND SUBSIDIARIES
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
MARCH 31, 2004
Cost of Property and Equipment Accumulated Depreciation
--------------------------------------- ---------------------------------------
Year Ended March 31,
---------------------------------------------------------------------------------
Note A - Reconciliation 2004 2003 2002 2004 2003 2002
- ----------------------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at beginning of year $79,751,979 $79,712,791 $79,649,910 $26,237,792 $24,091,263 $21,934,135
Additions during year:
Improvements 52,236 39,188 62,881
Depreciation expense (1) 2,134,583 2,146,529 2,157,128
----------- ----------- ----------- ----------- ----------- -----------
Balance at close of year $79,804,215 $79,751,979 $79,712,791 $28,372,375 $26,237,792 $24,091,263
=========== =========== =========== =========== =========== ===========
(1) Refer to Notes 2 and 4 to the consolidated financial statements for
additional information.
58
Exhibit 99.1
BALANCE SHEET AND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
RCC PARTNERS 96, L.L.C.
MARCH 31, 2004
59
RCC Partners 96, L.L.C.
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS
BALANCE SHEET 4
NOTES TO BALANCE SHEET 5
60
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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, 2004. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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, 2004, in conformity with accounting principles generally accepted in the
United States of America.
Bethesda, Maryland
May 14, 2004
61
RCC Partners 96, L.L.C.
BALANCE SHEET
March 31, 2004
ASSETS
Investment in limited partnership $ 0
Due from limited partnership 914,436
---------
$ 914,436
=========
LIABILITIES AND MEMBERS' EQUITY
Due to affiliate $ 914,436
Members' equity 0
---------
$ 914,436
=========
The accompanying notes are an integral part of this balance sheet
62
RCC Partners 96, L.L.C.
NOTES TO BALANCE SHEET
March 31, 2004
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.
On November 17, 2003, CharterMac acquired RCC, which is the indirect parent of
RCC Manager LLC, the sole shareholder of the Company. Pursuant to the
acquisition, CharterMac acquired controlling interests in the Company. This
acquisition did not affect Patriot or its day-to-day operations, as the majority
of the Company's management team remained unchanged.
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.
63
RCC Partners 96, L.L.C.
NOTES TO BALANCE SHEET - CONTINUED
March 31, 2004
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, 2004, Patriot owes the Company $914,436 for partnership
management fees pursuant to the Limited Partnership Agreement. The Company owes
$914,436 to their affiliates as of March 31, 2004.
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, 2003 $ 705,618
Less: Adjustment to estimated realizable value (705,618)
----------
Balance - March 31, 2004 $ 0
==========
64
RCC Partners 96, L.L.C.
NOTES TO BALANCE SHEET - CONTINUED
March 31, 2004
NOTE C - INVESTMENT IN LIMITED PARTNERSHIP (continued)
The summarized consolidated balance sheet at March 31, 2004 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 $ 51,431,840
OTHER ASSETS
Cash and cash equivalents 1,216,053
Cash and cash equivalents, held in escrow 1,222,301
Deferred financing costs, net 1,302,170
Other assets 383,808
------------
Total assets $ 55,556,172
============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
LIABILITIES
Mortgage notes payable $ 44,697,118
Accrued interest payable 2,180,744
Other accrued expenses and liabilities 2,200,263
Due to general partners and affiliates of local partnerships 6,378,776
Development fees payable 1,151,510
Real estate taxes payable 174,018
Due to general partners and its affiliates 10,190,654
------------
Total liabilities 66,973,083
------------
Minority interest in local partnerships (2,796,249)
------------
Partners' capital (deficit)
Limited partners (38,125 BUC$ issued and outstanding) (9,326,280)
General partner (1 BUC$ issued and outstanding) 705,618
------------
Total partners' capital (deficit) (8,620,662)
------------
Total liabilities and partners' capital (deficit) $ 55,556,172
============
65
RCC Partners 96, L.L.C.
NOTES TO BALANCE SHEET - CONTINUED
March 31, 2004
NOTE C - INVESTMENT IN LIMITED PARTNERSHIP (continued)
CONSOLIDATED STATEMENT OF OPERATIONS
Revenues
Rental income $ 9,876,634
Other income 870,728
Interest income 12,093
-------------
10,759,455
Expenses
Interest 4,755,090
Depreciation and amortization 2,440,364
Operating and other 921,634
Taxes and insurance 1,501,816
Repairs and maintenance 2,483,200
General and administrative 2,837,480
Property management fees 431,166
Partnership management fees 237,464
-------------
Total expenses 15,608,214
-------------
Loss before minority interest (4,848,759)
Minority interest in loss of local partnership 1,048,921
-------------
Net loss $ (3,799,838)
=============
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.
66