UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
Commission File Number 0-24660
LIBERTY TAX CREDIT PLUS II L.P.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3458180
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- ---------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes No X
----- -----
PART I - Financial Information
Item 1. Financial Statements
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
============= ==============
September 30, March 31,
2004 2004
------------- --------------
ASSETS
Property and equipment, net of
accumulated depreciation of
$105,519,189 and $102,005,231,
respectively $ 117,892,034 $ 121,262,827
Cash and cash equivalents 2,261,743 1,838,615
Cash held in escrow 8,574,384 8,314,043
Deferred costs, net of accumulated
amortization of $2,294,283 and
$2,214,346, respectively 2,253,092 2,333,029
Other assets 4,014,983 4,306,926
------------- --------------
Total assets $ 134,996,236 $ 138,055,440
============= ==============
2
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
============= ==============
September 30, March 31,
2004 2004
------------- --------------
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgage notes payable $ 95,690,841 $ 96,557,630
Accounts payable and other
liabilities 8,694,770 7,948,887
Due to local general partners and
affiliates 14,847,849 14,797,705
Due to general partners and affiliates 16,440,008 15,634,778
Due to selling partners 2,578,119 2,574,369
------------- -------------
Total liabilities 138,251,587 137,513,369
------------- -------------
Minority interest 1,952,076 2,123,287
------------- -------------
Commitments and contingencies (Note 4)
Partners' deficit
Limited partners (115,917.5 BACs
issued and outstanding) (4,124,669) (534,720)
General partners (1,082,758) (1,046,496)
------------- -------------
Total partners' deficit (5,207,427) (1,581,216)
------------- -------------
Total liabilities and partners'
deficit $ 134,996,236 $ 138,055,440
============= =============
See accompanying notes to consolidated financial statements.
3
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
============================ ============================
Three Months Ended Six Months Ended
September 30, September 30,
---------------------------- ----------------------------
2004 2003 2004 2003
---------------------------- ----------------------------
Revenues
Rentals, net $ 6,538,830 $ 6,792,977 $ 13,065,098 $ 13,403,245
Other 113,415 149,073 238,837 321,988
------------ ------------ ------------ ------------
Total revenue 6,652,245 6,942,050 13,303,935 13,725,233
------------ ------------ ------------ ------------
Expenses
General and ad-
ministrative 1,625,356 1,853,668 3,344,753 3,732,459
General and admini-
strative - related
parties (Note 2) 662,366 650,959 1,298,736 1,302,535
Repairs and main-
tenance 1,508,008 1,541,761 3,007,494 2,658,878
Operating 858,698 726,569 1,748,239 1,658,056
Taxes 218,177 252,710 479,490 532,707
Insurance 364,321 456,957 867,156 923,768
Interest 1,388,331 1,592,431 2,732,455 3,230,850
Depreciation and
amortization 1,819,672 1,911,152 3,621,524 3,807,698
------------ ------------ ------------ ------------
Total expenses 8,444,929 8,986,2071 7,099,847 17,846,951
------------ ------------ ------------ ------------
Loss before
minority interest
and extra-
ordinary item (1,792,684) (2,044,157) (3,795,912) (4,121,718)
Minority interest in
loss of subsidiaries 77,890 57,197 169,701 162,726
------------ ------------ ------------ ------------
Net loss $ (1,714,794) $ (1,986,960) $ (3,626,211) $ (3,958,992)
============ ============ ============ ============
Net loss - limited
partner $ (1,697,646) $ (1,967,090) $ (3,589,949) $ (3,919,402)
============ ============ ============ ============
Number of units
outstanding 115,917.5 115,917.5 115,917.5 115,917.5
============ ============ ============ ============
Net loss
per limited
partner unit $ (14.65) $ (16.97) $ (30.97) $ (33.81)
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
4
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Deficit
(Unaudited)
=========================================
Limited General
Total Partners Partners
-----------------------------------------
Partners' deficit -
April 1, 2004 $(1,581,216) $ (534,720) $(1,046,496)
Net loss (3,626,211) (3,589,949) (36,262)
---------- ---------- ----------
Partners' deficit -
September 30, 2004 $(5,207,427) $(4,124,669) $(1,082,758)
========== ========== ==========
See accompanying notes to consolidated financial statements.
5
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
==========================
Six Months Ended
September 30,
--------------------------
2004 2003
--------------------------
Cash flows from operating activities:
Net loss $(3,626,211) $(3,958,992)
----------- -----------
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 3,621,524 3,807,698
Minority interest in loss of
subsidiaries (169,701) (162,726)
Increase in cash held in escrow (277,976) (16,879)
Decrease in other assets 291,943 595,364
Increase in accounts payable and
other liabilities 787,275 224,340
Increase in due to local general
partners and affiliates 286,825 512,492
Decrease in due to local general
partners and affiliates (236,681) (277,081)
Increase in due to general partners
and affiliates 805,230 1,096,145
----------- -----------
Total adjustments 5,108,439 5,779,353
----------- -----------
Net cash provided by operating
activities 1,482,228 1,820,361
----------- -----------
Cash flows from investing activities:
Acquisitions of property and
equipment (212,185) (315,822)
Decrease (increase) in cash held in escrow 17,635 (460,893)
----------- -----------
Net cash used in investing
activities (194,550) (776,715)
----------- -----------
6
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
==========================
Six Months Ended
September 30,
--------------------------
2004 2003
--------------------------
Cash flows from financing activities:
Repayments of mortgage notes (866,789) (800,335)
Increase in deferred costs 0 (11,336)
Increase in due to selling
partners 3,750 3,750
Decrease in capitalization
of consolidated subsidiaries
attributable to minority
interest (1,511) (41,263)
----------- -----------
Net cash used in financing activities (864,550) (849,184)
----------- -----------
Net increase in cash and cash equivalents 423,128 194,462
Cash and cash equivalents at
beginning of period 1,838,615 1,577,939
----------- -----------
Cash and cash equivalents at
end of period $ 2,261,743 $ 1,772,401
=========== ===========
See accompanying notes to consolidated financial statements.
7
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2004
(Unaudited)
Note 1 - General
The consolidated financial statements for the six months ended September 30,
2004 and 2003 include the accounts of Liberty Tax Credit Plus II L.P. (the
"Partnership") and 24 and 26 subsidiary partnerships ("subsidiaries",
"subsidiary partnerships" or "Local Partnerships"), respectively, in which the
Partnership is the limited partner. Through the rights of the Partnership and/or
Related Credit Properties II L.P., a Delaware limited partnership, Liberty
Associates II L.P., a Delaware limited partnership, or Liberty GP II Inc., a
Delaware corporation (each a "General Partner" and collectively, the "General
Partners"), which General Partners have a contractual obligation to act on
behalf of the Partnership to remove the general partner of the subsidiary
partnerships (each, a "Local General Partner"), and to approve certain major
operating and financial decisions, the Partnership has a controlling financial
interest in each of the subsidiary partnerships. As of September 30, 2004, the
Partnership has disposed of four of its twenty-seven original investments (see
Note 3).
For financial reporting purposes, the Partnership's fiscal quarter ends
September 30 in order to allow adequate time for the subsidiaries' financial
statements to be prepared and consolidated. All subsidiary partnerships have
fiscal quarters ending June 30. Accounts of the subsidiary partnerships have
been adjusted for intercompany transactions from July 1 through September 30.
All intercompany accounts and transactions have been eliminated in
consolidation.
Increase (decrease) in capitalization of consolidated subsidiary partnerships
attributable to minority interest arise from cash contributions from and cash
distributions to the minority interest partners.
Losses attributable to minority interests which exceed the minority interests'
investment in a subsidiary partnership have been charged to the Partnership.
Such losses aggregated $183,000 and $178,000 and $440,000 and $391,000 for the
three and six months ended September 30, 2004 and 2003, respectively. The
Partnership's investment in each subsidiary is equal to the respective
subsidiary partners' equity less minority interest capital, if any.
The books and records of the Partnership are maintained on the accrual basis in
accordance with generally accepted accounting principles ("GAAP"). In the
8
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2004
(Unaudited)
opinion of each of the General Partners, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position of the
Partnership as of September 30, 2004, the results of operations of the
Partnership for the three and six months ended September 30, 2004 and 2003 and
the cash flows of the Partnership for the six months ended September 30, 2004
and 2003, respectively. However, the operating results for the six months ended
September 30, 2004 may not be indicative of the results for the year.
Certain information and note disclosures normally included in financial
statements prepared in accordance with GAAP have been omitted or condensed.
These consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Partnership's Annual
Report on Form 10-K for the year ended March 31, 2004.
9
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2004
(Unaudited)
Note 2 - Related Party Transactions
One of the General Partners has a 1% interest as a special limited partner in
each of the subsidiary partnerships. An affiliate of the General Partners also
has a minority interest in certain subsidiary partnerships.
The costs incurred to related parties for the three and six months ended
September 30, 2004 and 2003 were as follows:
Three Months Ended Six Months Ended
September 30, September 30,
----------------------- -----------------------
2004 2003 2004 2003
----------------------- -----------------------
Partnership manage-
ment fees (a) $ 350,000 $ 365,000 $ 700,000 $ 730,000
Expense reimburse-
ment (b) 54,917 38,811 87,830 78,128
Property management
fees incurred to
affiliates of the
General Partners (c) 104,485 100,158 208,970 200,315
Local administrative
fee (d) 13,000 13,000 25,000 26,000
---------- ---------- ---------- ----------
Total general and ad-
ministrative-General
Partners 522,402 516,969 1,021,800 1,034,443
---------- ---------- ---------- ----------
Property management
fees incurred to affili-
ates of the subsidiary
partnerships' general
partners (c) 139,964 133,990 276,936 268,092
---------- ---------- ---------- ----------
Total general and admi-
nistrative-related parties $ 662,366 $ 650,959 $1,298,736 $1,302,535
========== ========== ========== ==========
(a) The General Partners are entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the annual local
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. The partnership management fee, subject to the foregoing
limitation, will be determined by the General Partners in their sole discretion
based upon their review of the Partnership's investments. Partnership management
fees owed to the General Partners amounting to approximately $13,413,000 and
10
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2004
(Unaudited)
$12,713,000 were accrued and unpaid as of September 30, 2004 and March 31, 2004,
respectively. Without the General Partners' continued accrual without payment,
the Partnership will not be in a position to meet its obligations. The General
Partners have allowed for the accrual without payment of these amounts but are
under no obligation to continue to do so.
(b) The Partnership reimburses the General Partners and their affiliates for
actual Partnership operating expenses incurred by the General Partners and their
affiliates on the Partnership's behalf. The amount of reimbursement from the
Partnership is limited by the provisions of the Partnership Agreement.
Another affiliate of the General Partners performs asset monitoring for the
Partnership. These services include site visits and evaluations of the
subsidiary partnerships' performance.
(c) Property management fees incurred by subsidiary partnerships amounted to
$374,977 and $449,476 and $797,019 and $860,833 for the three and six months
ended September 30, 2004 and 2003, respectively. Of these fees, $244,449 and
$234,148 and $485,906 and $468,407, respectively, were incurred to affiliates of
the Local General Partners. Included in amounts incurred to affiliates of the
Local General Partners are $104,485 and $100,158 and $208,970 and $200,315 for
the three and six months ended September 30, 2004 and 2003, respectively, which
were also incurred to affiliates of the Partnership.
(d) Liberty Associates II L.P., a General Partner and a special limited partner
of the subsidiary partnerships, is entitled to receive a local administrative
fee of up to $2,500 per year from each subsidiary partnership.
Note 3 - Sale of Properties
On September 21, 2004, the Partnership's limited partner interest in Alexis Park
Apartments ("Alexis Park") was sold to an unaffiliated third party purchaser for
$1,000,000. This amount consisted of $600,000 paid in cash at the closing and
$400,000 pursuant to two promissory notes of $200,000 each. Both notes compound
interest at 5% and the principal and interest of one note is to be paid annually
from 50% of cash flow, with a maturity in five years, when all unpaid principal
and interest shall become payable, and the principal and interest on the second
note is to be paid upon refinancing or sale of the property, but in no event
11
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2004
(Unaudited)
later than 10 years. The sale resulted in a gain of approximately $1,781,000
which will be recognized in the financial statements of the Partnership's Form
10-Q for the quarter ending December 31, 2004.
On March 2, 2004, a letter of intent was received that constitutes a proposal
from the purchaser to purchase the property and the related assets and
liabilities of Goodfellow Place Limited Partnership for a purchase price of
$100,000 plus the existing debt. No assurance can be given that the closing will
actually occur.
On August 15, 2003, the property and related assets of Polynesian Apartments
Associates, Limited Partnership ("Polynesian") were sold to an unaffiliated
third party for $2,700,000, resulting in a loss of approximately $484,000 which
was recognized in the financial statements of the Partnership's Form 10-Q for
the quarter ending December 31, 2003.
On August 15, 2003, the property and related assets of Seagrape Village
Associates, Limited Partnership ("Seagrape") were sold to an unaffiliated third
party for $5,140,000, resulting in a gain of approximately $290,000 which was
recognized in the financial statements of the Partnership's Form 10-Q for the
quarter ending December 31, 2003.
Note 4 - Commitments and Contingencies
Whittier Plaza Associates
- -------------------------
Whittier Plaza Associates Limited Partnership ("Whittier") has sustained
continuous losses since commencement of operations in 1988. Whittier has
experienced lower rental income than those originally projected, resulting in
increased difficulty in meeting both operating and debt service obligations. The
Local General Partner, pursuant to a development deficit guarantee agreement,
has advanced funds since 1988 to fund operating cash shortfalls. In addition,
Whittier's management company, an affiliate of the Local General Partner, has
deferred receipt of various fees since 1991 totaling approximately $99,000.
Alexis Park Apartments
- ----------------------
A hazardous waste issue has affected Alexis Park for nearly 13 years. Although
this environmental issue is in many respects beyond its control, management
believes that the selected remedy of the United States Environmental Protection
Agency is practical and is not likely to cause significant disruption to the
apartment project's operations beyond what it has experienced over the last
12
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2004
(Unaudited)
several years. The Local Partnership's congressman, U.S. Senators and the Mayor
of Bossier City have assisted Alexis Park in preventing this issue from
escalating unnecessarily and management believes that no escalation will occur
in the near term. Further, all indications are that an oil company will bear all
costs of remediation and that the Local Partnership will not be called upon to
share in those costs. Alexis Park was sold on September 21, 2004 (see Note 3).
Westminster Place II - Olive Site, L.P.
- ---------------------------------------
The rental subsidy of Westminster Place II - Olive Site, L.P. ("Westminster")
will be depleted during 2004. This subsidy represents approximately 16% of
Westminster's rental revenue. Westminster submitted a rent increase to the
Missouri Housing Development Commission and a 7% rent increase was approved. The
rental increase should facilitate Westminster's ability to meet its financial
obligations, despite the elimination of the rental subsidy.
Gramco Development Limited Dividend Partnership, L.P.
- -----------------------------------------------------
Gramco Development Limited Dividend Partnership, L.P. ("Gramco") was granted net
funds of $4,867,000 by the Municipality of Bayamon (the "Municipality") and the
Department of Housing and Urban Development ("HUD"). In the event of a
substantial violation of the provisions of certain agreements between Gramco and
the Municipality and between the Municipality and HUD, the funds shall become
immediately due and payable at the election of HUD and the Municipality.
Otherwise, the principal amount of the grant together with any interest will be
forgiven. Proceeds from the grant have been deducted from fixed assets.
Williamsburg Residential, L.P.
- ------------------------------
In November 1996, the Local General Partner of Williamsburg Residential, L.P.
("Williamsburg") stopped making the mortgage note payments which constituted an
event of default. A Reinstatement and Modification Agreement was entered into
effective March 1, 1997. The Partnership has advanced Williamsburg the necessary
funds to keep the mortgage and escrows current and is expected to continue to do
so during 2004. As of September 30, 2004, the Partnership has advanced
approximately $1,155,000 to Williamsburg.
13
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2004
(Unaudited)
Property Development Associates, L.P.
- -------------------------------------
Property Development Associates, L.P. ("Property Development") is involved as a
defendant in a pending litigation case. This case was filed by the plaintiffs on
December 18, 2002 and served on the defendants on January 6, 2003. Discovery is
ongoing, and trial has been scheduled for February 2005. The plaintiff's
petition consists of claims against Property Development for assault, battery,
constructive eviction, negligent hiring, negligent retention, misuse of Housing
and Urban Development funds, slander, retaliatory eviction, and breach of
implied warranty of habitability. The potential verdict in this case ranges from
complete defense verdict up through the $2 million sought by the plaintiffs. The
potential damages, other than those for the alleged intentional acts of assault
and battery, are covered by insurance. Property Development denies each of these
allegations and intends to continue to contest the case vigorously.
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
- -------------------------------
The Partnership has invested all of the net proceeds of its original offering in
twenty-seven Local Partnerships. Through September 30, 2004, the Partnership's
investment in the property and the related assets and liabilities of three Local
Partnerships have been sold and it has sold its limited partnership interest in
one Local Partnership.
The Partnership's primary sources of funds are (i) working capital reserves;
(ii) interest earned on working capital reserves; (iii) cash distributions from
operations of the Local Partnerships; and (iv) sales proceeds. All of these
sources of funds, none of which are significant, are available to meet
obligations of the Partnership. During the six months ended September 30, 2004,
approximately $1,500 of distributions were received by the Partnership from
operations of the Local Partnerships.
During the six months ended September 30, 2004, cash and cash equivalents of the
Partnership and its consolidated Local Partnerships increased approximately
$423,000. This increase was due to cash provided by operating activities
($1,482,000), a decrease in cash held in escrow relating to investing activities
($18,000) and an increase in due to selling partners ($4,000) which exceeded
acquisitions of property and equipment ($212,000), repayments of mortgage notes
($867,000) and a decrease in capitalization of consolidated subsidiaries
attributable to minority interest ($2,000). In the adjustments to reconcile the
net loss to cash provided by operating activities is depreciation and
amortization ($3,622,000).
Partnership management fees owed to the General Partners amounting to
approximately $13,413,000 and $12,713,000 were accrued and unpaid as of
September 30, 2004 and March 31, 2004, respectively. Without the General
Partners continued accrual without payment, the Partnership will not be in a
position to meet its obligations. The General Partners have allowed for the
accrual without payment of these amounts but are under no obligation to continue
to do so.
For a discussion of the sale of properties, see Note 3 to the financial
statements.
Management is not aware of any trends, events, commitments or uncertainties
which have not otherwise been disclosed, that will or are likely to impact
liquidity in a material way. Management believes the only impact would be from
laws that have not yet been adopted. The portfolio is diversified by the
location of the properties around the United States so that if one area of the
country is experiencing downturns in the economy, the remaining properties in
the portfolio may be experiencing upswings. However, the geographic
15
diversification of the portfolio may not protect against a general downturn in
the national economy.
Critical Accounting Policies
- ----------------------------
In preparing the consolidated financial statements, management has made
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates. Set forth below is a summary of the accounting policies
that management believes are critical to the preparation of the consolidated
financial statements. The summary should be read in conjunction with the more
complete discussion of the Partnership's accounting policies included in Note 2
to the consolidated financial statements in the Partnership's Annual Report on
Form 10-K for the year ended March 31, 2004.
Property and Equipment
- ----------------------
Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period interest
and any other costs incurred in acquiring such property and equipment. The cost
of property and equipment is depreciated over their estimated useful lives using
accelerated and straight-line methods. Expenditures for repairs and maintenance
are charged to expense as incurred; major renewals and betterments are
capitalized. At the time property and equipment are retired or otherwise
disposed of, the cost and accumulated depreciation are eliminated from the
assets and accumulated depreciation accounts and the profit or loss on such
disposition is reflected in earnings. The Partnership complies with Statement of
Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets". A loss on impairment of assets is recorded when
management estimates amounts recoverable through future operations and sale of
the property on an undiscounted basis are below depreciated cost. Property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows) when the property is considered to be impaired and the
depreciated cost exceeds estimated fair value.
Income Taxes
- ------------
The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31.
16
Results of Operations
- ---------------------
During the fiscal year ended March 31, 2004, Polynesian and Seagrape (the "2003
Sold Assets") sold their properties and the related assets and liabilities. The
results of operations of the Partnership, as well as the Local Partnerships,
remained fairly consistent during the three and six months ended September 30,
2004 and 2003, excluding the 2003 Sold Assets, other income, repairs and
maintenance, operating and insurance. The results of operations for the three
and six months ended September 30, 2004 and 2003 consisted primarily of the
results of the Partnership's investment in the Local Partnerships.
Rental income decreased approximately 4% and 3% for the three and six months
ended September 30, 2004 as compared to the corresponding periods in 2003.
Excluding the 2003 Sold Assets, rental income increased approximately 2% and 3%
primarily due to rental rate increases.
Other income decreased approximately $36,000 and $83,000 for the three and six
months ended September 30, 2004 as compared to the corresponding periods in
2003. Excluding the 2003 Sold Assets, other income decreased $31,000 and $44,000
primarily due to the receipt of insurance proceeds at one Local Partnership in
the prior year.
Total expenses, excluding the 2003 Sold Assets, repairs and maintenance,
operating and insurance, remained fairly consistent with decreases of
approximately 3% for both the three and six months ended September 30, 2004 as
compared to the corresponding periods in 2003.
Repairs and maintenance increased approximately $349,000 for the six months
ended September 30, 2004 as compared to the corresponding period in 2003.
Excluding the 2003 Sold Assets, repairs and maintenance increased approximately
$439,000 primarily due to increased security costs and nonrecurring improvements
at one Local Partnership, plumbing and heating repairs at a second Local
Partnership, increased interior repairs at a third and fourth Local Partnership
and increased turnover costs, maintenance supplies and payroll at a fifth Local
Partnership.
Operating expenses increased approximately $132,000 and $90,000 for the three
and six months ended September 30, 2004 as compared to the corresponding periods
in 2003. Excluding the 2003 Sold Assets, operating increased approximately
$145,000 and $114,000 primarily due to higher natural gas costs at one Local
Partnership in 2004 and higher water and sewer costs at a second Local
Partnership in 2004.
Insurance decreased approximately $93,000 for the three months ended September
30, 2004 as compared to the corresponding period in 2003. Excluding the 2003
Sold Assets, insurance decreased approximately $74,000 primarily due to an
17
underaccrual in the first quarter of 2004 at three Local Partnerships which was
corrected in the second quarter of 2004.
General and administrative, taxes and interest decreased approximately $228,000
and $388,000, $35,000 and $53,000, and $204,000 and $498,000 for the three and
six months ended September 30, 2004 as compared to the corresponding periods in
2003, primarily due to decreases relating to the 2003 Sold Assets.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Partnership does not have any market risk sensitive instruments.
Item 4. Controls and Procedures
(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Chief Executive
Officer and Chief Financial Officer of Related Credit Properties II, Inc., the
general partner of Related Credit Properties II L.P., has evaluated the
effectiveness of the Partnership'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 Partnership's disclosure controls and procedures are
effective.
(b) INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any changes
in the Partnership's internal control over financial reporting during the fiscal
quarter to which this report relates that have materially affected, or are
reasonably likely to materially affect, the Partnership's internal control over
financial reporting.
18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(3B) Form of Amended and Restated Agreement of Limited Partnership of
Liberty Tax Credit Plus II L.P. (incorporated by reference to exhibits filed
with Amendment No. 1 to Liberty Tax Credit Plus II L.P.'s Registration Statement
on Form S-11 Registration No. 33-21429).
(31.1) Certification Pursuant to Rule 13a-14(a) or Rule 15d-(14a).
(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).
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LIBERTY TAX CREDIT PLUS II L.P.
-------------------------------
(Registrant)
By: RELATED CREDIT PROPERTIES II L.P.,
a General Partner
By: Related Credit Properties II Inc.,
its General Partner
Date: November 1, 2004
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President (Chief Executive Officer and
Chief Financial Officer)
By: LIBERTY GP II INC.,
a General Partner
Date: November 1, 2004
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President
20
and
By: LIBERTY ASSOCIATES II, L.P.
a General Partner
By: Related Credit Properties II Inc.,
its General Partner
Date: November 1, 2004
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President
and
By: Liberty GP II Inc.,
its General Partner
Date: November 1, 2004
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President
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
Related Credit Properties II Inc. the general partner of Related Credit
Properties II L.P. and of Liberty GP II Inc., each of which is a General Partner
of Liberty Tax Credit Plus II L.P. (the "Partnership"), hereby certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period
ending September 30, 2004 of the Partnership;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Partnership as of, and for, the periods presented in
this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-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 or caused such
disclosure controls and procedures to be designed under my supervision,
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
quarterly 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 quarterly report based on such
evaluation; and
d) disclosed in this quarterly report any change in the Partnership's
internal control over financial reporting that occurred during the
period ending September 30, 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 control 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 control over financial reporting.
Date: November 1, 2004
----------------
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Executive Officer and
Chief Financial Officer
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 Quarterly Report of Liberty Tax Credit Plus II L.P. (the
"Partnership") on Form 10-Q for the period ending September 30, 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 Related Credit Properties II Inc. (general partner of each of Related
Credit Properties II L.P. and Liberty Associates II, L.P., General Partners of
Registrant) and Liberty GP II, Inc. (general partner of Liberty Associates II,
L.P.), 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
November 1, 2004