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 December 15, 2004
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
Commission File Number 0-17015
LIBERTY TAX CREDIT PLUS L.P.
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3446500
- ------------------------------- -------------------
(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 L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
============= =============
December 15, March 15,
2004 2004
------------- -------------
ASSETS
Property and equipment, at cost,
net of accumulated depreciation
of $108,236,516 and $121,278,707
respectively $ 98,332,554 $ 120,489,756
Cash and cash equivalents 5,648,193 5,224,728
Cash held in escrow 15,091,801 15,550,003
Accounts receivable - tenants 648,350 938,800
Deferred costs - net of accumulated
amortization of $1,924,407
and $2,394,139, respectively 1,994,791 2,609,060
Other assets 1,756,085 1,373,958
------------- -------------
Total assets $ 123,471,774 $ 146,186,305
============= =============
2
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
============= =============
December 15, March 15,
2004 2004
------------- -------------
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $ 113,710,039 $ 136,800,161
Accounts payable and other
liabilities 13,193,788 14,571,500
Due to local general partners and
affiliates 20,454,392 19,979,284
Due to general partners and
affiliates 9,095,460 8,568,329
Due to selling partners 1,292,934 1,292,934
------------- -------------
Total liabilities 157,746,613 181,212,208
------------- -------------
Minority interest 965,259 1,654,689
------------- -------------
Commitments and contingencies
(Note 4)
Partners' deficit:
Limited partners (15,987.5 BACs
issued and outstanding) (34,157,853) (35,583,942)
General partners (1,082,245) (1,096,650)
------------- -------------
Total partners' deficit (35,240,098) (36,680,592)
------------- -------------
Total liabilities and partners'
deficit $ 123,471,774 $ 146,186,305
============= =============
See accompanying notes to consolidated financial statements.
3
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
============================ ============================
Three Months Ended Nine Months Ended
December 15, December 15,
---------------------------- ----------------------------
2004 2003* 2004 2003*
---------------------------- ----------------------------
Operations:
Revenues
Rental income $ 7,105,917 $ 7,041,993 $ 21,086,032 $ 21,321,475
Other 173,933 311,136 663,785 832,995
------------ ------------ ------------ ------------
7,279,850 7,353,129 21,749,817 22,154,470
------------ ------------ ------------ ------------
Expenses
General and
administrative 1,158,880 1,197,930 3,554,688 3,727,967
General and
administrative-
related parties
(Note 2) 581,188 600,003 1,726,471 1,774,756
Repairs and
maintenance 1,685,556 1,758,194 5,157,909 4,752,257
Operating and
other 762,143 744,679 2,957,968 3,056,379
Taxes 371,762 445,620 975,744 1,025,543
Insurance 431,684 394,036 1,213,997 1,109,934
Financial 2,246,168 2,294,096 6,349,543 6,609,660
Depreciation and
amortization 1,891,488 1,632,923 5,509,936 4,898,761
------------ ------------ ------------ ------------
Total expenses 9,128,869 9,067,481 27,446,256 26,955,257
------------ ------------ ------------ ------------
Loss from operations
before minority
interest (1,849,019) (1,714,352) (5,696,439) (4,800,787)
Minority interest
in loss of
subsidiaries from
operations 5,493 4,272 14,848 7,324
------------ ------------ ------------ ------------
Loss from operations (1,843,526) (1,710,080) (5,681,591) (4,793,463)
------------ ------------ ------------ ------------
Discontinued operations:
Income (loss) from
discontinued
operations (including
gain on sale of
properties) (Note 6) 4,149,109 (490,496) 7,122,085 453,067
------------ ------------ ------------ ------------
Net income (loss) $ 2,305,583 $ (2,200,576) $ 1,440,494 $ (4,340,396)
============ ============ ============ ============
4
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(continued)
============================ ============================
Three Months Ended Nine Months Ended
December 15, December 15,
---------------------------- ----------------------------
2004 2003* 2004 2003*
---------------------------- ----------------------------
Loss from operations -
limited partners (1,825,090) (1,692,979) (5,624,775) (4,745,528)
Income (loss) from
discontinued oper-
ations (including gain
on sale of properties) -
limited partners 4,107,617 (485,591) 7,050,864 448,536
------------ ------------ ------------ ------------
Net income (loss) -
limited partners $ 2,282,527 $ (2,178,570) $ 1,426,089 $ (4,296,992)
============ ============ ============ ============
Number of BACs
outstanding 15,987.5 15,987.5 15,987.5 15,987.5
============ ============ ============ ============
Loss from operations
per BAC (114.16) (105.90) (351.82) (296.83)
Income (loss) from
discontinued
operations (including
gain on sale of prop-
erties) per BAC 256.93 (30.37) 441.02 28.06
------------ ------------ ------------ ------------
Net income (loss)
per BAC $ 142.77 $ (136.27) $ 89.20 $ (268.77)
============ ============ ============ ============
* Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
5
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Deficit
(Unaudited)
============================================
Limited General
Total Partners Partners
--------------------------------------------
Partners' deficit -
March 16, 2004 $(36,680,592) $(35,583,942) $ (1,096,650)
Net income 1,440,494 1,426,089 14,405
------------ ------------ ------------
Partners' deficit -
December 15, 2004 $(35,240,098) $(34,157,853) $ (1,082,245)
============ ============ ============
See accompanying notes to consolidated financial statements.
6
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
============================
Nine Months Ended
December 15,
----------------------------
2004 2003*
----------------------------
Cash flows from
operating activities:
Net income (loss) $ 1,440,494 $ (4,340,396)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Income from discontinued operations
(including gain on sale of properties -
Notes 3 and 6) (7,122,085) (453,067)
Depreciation and amortization 5,509,936 4,898,761
Minority interest in loss of
subsidiaries (14,848) (7,324)
Decrease in accounts
receivable-tenants 297,376 131,715
Increase in other assets (1,036,804) (3,918)
Increase in accounts payable and
other liabilities 1,581,844 1,282,146
Increase in due to general partners
and affiliates 839,476 534,170
Increase in cash held in escrow (677,299) (412,777)
------------ ------------
Net cash provided by operating
activities 818,090 1,629,310
------------ ------------
Cash flows from investing activities:
Proceeds from sale of properties 1,224,789 504,984
Decrease (increase) in cash held
in escrow 288,138 (218,057)
Improvements to property and
equipment (1,099,721) (776,519)
------------ ------------
Net cash provided by (used in) investing
activities 413,206 (489,592)
------------ ------------
7
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
============================
Nine Months Ended
December 15,
----------------------------
2004 2003*
----------------------------
Cash flows from financing activities:
Repayments of mortgage notes (1,828,243) (2,407,336)
Increase in due to local general
partners and affiliates 1,061,896 739,428
Decrease in due to local general
partners and affiliates (329,044) (589,691)
Increase in capitalization of
consolidated subsidiaries
attributable to minority interest 287,560 55,178
------------ ------------
Net cash used in financing activities (807,831) (2,202,421)
------------ ------------
Net increase (decrease) in cash and
cash equivalents 423,465 (1,062,703)
Cash and cash equivalents at
beginning of period 5,224,728 6,067,262
------------ ------------
Cash and cash equivalents at
end of period $ 5,648,193 $ 5,004,559
============ ============
Supplemental disclosures of
noncash activities:
Increase in property and equipment-
held for sale reclassified from
property and equipment $ 0 $ 8,952,525
8
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Increase (decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
============================
Nine Months Ended
December 15,
----------------------------
2004 2003*
----------------------------
Summarized below are the
components of the discontinued
operations (including gain on sale
of properties):
Decrease in property and
equipment, net of accumulated
depreciation $ 17,874,259 $ 7,524,476
Decrease in mortgage notes payable (21,261,879) (6,442,728)
Decrease in mortgage escrow
deposits 297,852 476,531
Decrease in cash-restricted for
tenants security deposits 116,134 0
Decrease in reserve for replacement 433,377 0
Decrease (increase) in prepaid
expenses and other assets 654,677 (15,831)
Increase in accounts receivable (6,926) (70,746)
Decrease in deferred costs 486,997 310,908
(Decrease) increase in accounts
payable, accrued expenses and
other liabilities (2,959,556) 221,259
Decrease in due to general partners
and affiliates (312,345) (43,009)
Decrease in due to local general
partner and affiliates (257,744) (1,444,227)
Decrease in capitalization of
consolidated subsidiaries attributable
to minority interest (962,142) (464,716)
* Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
9
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 15, 2004
(Unaudited)
Note 1 - General
The consolidated financial statements for the nine months ended December 15,
2004 and 2003, include the accounts of Liberty Tax Credit Plus L.P. (the
"Partnership") and 27 and 30 subsidiary partnerships (each a "subsidiary
partnership" or "Local Partnership"), respectively, in which the Partnership is
a limited partner. Through the rights of the Partnership and/or a general
partner of the Partnership (a "General Partner"), which General Partner has a
contractual obligation to act on behalf of the Partnership, to remove the
general partners of each subsidiary partnership (the "local general partners")
and to approve certain major operating and financial decisions, the Partnership
has a controlling financial interest in the subsidiary partnerships. All
intercompany accounts and transactions with the subsidiary partnerships have
been eliminated in consolidation.
For financial reporting purposes, the Partnership's fiscal quarter ends on
December 15. All subsidiary partnerships have fiscal quarters ending September
30. Accounts of the subsidiary partnerships have been adjusted for intercompany
transactions from October 1 through December 15. The Partnership's quarter ends
on December 15 in order to allow adequate time for the subsidiary partnerships
financial statements to be prepared and consolidated. The books and records of
the Partnership are maintained on the accrual basis of accounting, in accordance
with generally accepted accounting principles ("GAAP").
In the opinion 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 December 15, 2004, the results of operations for the three and
nine months ended December 15, 2004 and 2003 and cash flows for the nine months
ended December 15, 2004 and 2003. However, the operating results and cash flows
for the nine months ended December 15, 2004 may not be indicative of the results
for the year.
In accordance with FASB 144, the results of discontinued operations are reported
as a separate component of income before extraordinary items on the Consolidated
Statements of Operations. Discontinued operations include the results of
operations and any gain or loss recognized for Local Partnerships that have been
disposed of or are held for sale. A gain or loss recognized on the disposal is
disclosed in the notes to the consolidated financial statements. Adjustments to
amounts previously reported in operations that are directly related to the
10
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 15, 2004
(Unaudited)
disposal of a Local Partnership are reclassified in the current period as
discontinued operations for comparability purposes. Assets and liabilities of a
Local Partnership that are classified as held for sale are presented separately
in the asset and liability sections, respectively, of the Consolidated Balance
Sheets.
Certain information and note disclosures which are 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 period ended March 15, 2004.
Increases (decreases) in the capitalization of consolidated subsidiaries
attributable to minority interest arise from cash contributions and cash
distributions to the minority interest partners.
The Partnership's investment in each subsidiary partnership is equal to the
respective subsidiary partnership's partners' equity less minority interest
capital, if any. Losses attributable to minority interests which exceed the
minority interests' investments in the subsidiary partnerships have been charged
to the Partnership. Such losses aggregate approximately $0 and $10,000 for both
the three and nine months ended December 15, 2004 and 2003, respectively. In
consolidation, all subsidiary partnership losses are included in the
Partnership's capital account except for losses allocated to minority interest
capital.
11
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 15, 2004
(Unaudited)
Note 2 - Related Party Transactions
An affiliate 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 nine months ended
December 15, 2004 and 2003 classified as operations on the Consolidated
Statements of Operations were as follows:
Three Months Ended Nine Months Ended
December 15, December 15,
----------------------- -----------------------
2004 2003 2004 2003
----------------------- -----------------------
Partnership manage-
ment fees (a) $ 269,250 $ 269,250 $ 800,250 $ 807,750
Expense reimburse-
ment (b) 47,431 59,865 131,675 142,014
Local administrative
fee (d) 10,500 11,500 31,500 34,500
---------- ---------- ---------- ----------
Total general and
administrative-
General Partners 327,181 340,615 963,425 984,264
---------- ---------- ---------- ----------
Property manage-
ment fees
incurred to affili-
ates of the local
general partners (c) 254,007 259,388 763,046 790,492
---------- ---------- ---------- ----------
Total general and
administrative-
related parties $ 581,188 $ 600,003 $1,726,471 $1,774,756
========== ========== ========== ==========
(a) The General Partners are entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the local annual
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership's Amended and Restated Agreement of
Limited Partnership), 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
12
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 15, 2004
(Unaudited)
General Partners amounting to approximately $8,587,000 and $7,911,000 were
accrued and unpaid as of December 15, 2004 and March 15, 2004, respectively.
(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. Expense reimbursements and asset monitoring fees owed
to Related Credit Properties L.P., a General Partner, amounting to approximately
$82,000 and $90,000 were accrued and unpaid as of December 15, 2004 and March
15, 2004, respectively.
The General Partners have allowed for the accrual without payment of the amounts
set forth in (a) and (b) but are under no obligation to continue to do so.
(c) Property management fees incurred by the subsidiary partnerships amounted to
$419,437 and $435,229 and $1,313,094 and $1,354,736 for the three and nine
months ended December 15, 2004 and 2003, respectively. Of these fees, $254,007
and $259,388 and $763,046 and $790,492 were incurred to affiliates of the local
general partners.
(d) Liberty Associates III L.P., a General Partner and the 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 24, 2004, the property and the related assets and liabilities of
Autumn Park Associates, L.P. ("Autumn Park") were sold to an unaffiliated third
party for $1,050,000. This amount consisted of $900,000 paid in cash at the
closing and $150,000 pursuant to one promissory note. The note compounds
interest at 10% and is due on October 30, 2005. The sale resulted in a gain of
approximately $1,992,000.
On August 27, 2004, the property and the related assets and liabilities of 2108
Bolton Drive Associated, L.P. ("Bolton") were sold to an unaffiliated third
13
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 15, 2004
(Unaudited)
party for $8,891,000, resulting in a gain of approximately $1,259,000.
On July 30, 2004, the property and the related assets and liabilities of
Tanglewood Apartments, L.P. ("Tanglewood") were sold to an unaffiliated third
party for $3,425,000, resulting in a gain of approximately $1,167,000.
On March 31, 2004, the property and the related assets and liabilities of Walnut
Park Plaza ("Walnut") were sold to the local general partner for a purchase
price of $1 plus the assumption of all the related debt which totaled
approximately $7,732,000 resulting in a gain of approximately $2,559,000. The
sale resulted in the liquidation of Walnut.
On March 2, 2004, the Partnership signed a "Letter of Intent" with an
unaffiliated third party to purchase the Partnership's limited partnership
interest in Bayridge Associates, L.P. ("Bayridge") for a purchase price of
$1,100,000 plus the assumption of the existing debt. The closing is expected to
occur in 2006. No assurances can be given that the sale will actually occur.
On May 19, 2003, the property and the related assets and liabilities of Silver
Blue Lake Apts. LTD ("Silver Blue") were sold to an unaffiliated third party for
a purchase price of $3,500,000, resulting in a gain of approximately $408,000,
which was recognized in the quarter ended September 15, 2003. Accrued interest
on a note related to the Local Partnership was forgiven resulting in forgiveness
of indebtedness income of approximately $114,000 which was recognized during the
quarter ended September 15, 2003. The sale resulted in the liquidation of Silver
Blue.
On March 16, 2003, the deed in lieu of foreclosure to Bryden Road, one of the
properties owned by Shiloh Grove, L.P. ("Shiloh"), was transferred to an
unaffiliated third party. The outstanding mortgage balance paid by the third
party on the day of transfer was $189,871 resulting in a gain of approximately
$104,000, which was recognized during the fourth quarter ended March 15, 2004.
On January 23, 2003, the property and the related assets and liabilities of
Ludlam Gardens Apartments, LTD. ("Ludlam") were sold to an unaffiliated third
14
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 15, 2004
(Unaudited)
party for a purchase price of $3,900,000, resulting a gain of approximately
$959,000. The sale resulted in the liquidation of Ludlam.
On January 16, 2003, the property and the related assets and liabilities of
Dixie Apartment Associates, LTD. ("Dixie") were sold to an unaffiliated third
party for a purchase price of $1,300,000, resulting a gain of approximately
$327,000. The sale resulted in the liquidation of Dixie.
Note 4 - Commitments and Contingencies
Redwood Villa Associates, L.P.
- ------------------------------
Redwood Villa Associates, L.P. ("Redwood") has sustained operating losses since
its inception, and at December 15, 2004 had a partners' deficit of approximately
$1,592,000. Redwood has been able to defer ground lease payments that are due to
a related party. The local general partner, whenever possible, plans to reduce
operating costs to achieve profitable operations or provide future capital
contributions.
Bayridge Associates, L.P.
- -------------------------
Bayridge Associates, L.P. ("Bayridge") has experienced increased vacancy loss
and recurring concessions over the past year due to the continuing soft rental
market in the Portland, OR area. Management of the property changed during the
year. They are working to make all vacant units market ready and hope to improve
occupancy during the next year.
Note 5 - Subsequent Events
On January 5, 2005, the property and the related assets and liabilities of Lund
Hill Associates, L.P. ("Lund Hill"), were sold to an unaffiliated third party
for a purchase price of $6,500,000, resulting in a gain of approximately
$1,097,000, which will be recognized in the financial statements of the
Partnership's Form 10-K during the quarter ended March 15, 2005.
On December 29, 2004, the Partnership entered into an agreement for the sale of
its Limited Partnership Interest in Lancaster Towers Associates, Ltd.
("Lancaster") to an affiliate of the local general partner for a purchase price
of $450,000. The sales documents have been executed and the funds are being held
15
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 15, 2004
(Unaudited)
in escrow waiting for approval of the sale from the Department of Housing and
Urban Development ("HUD"). No assurances can be given that HUD will approve the
sale.
Note 6 - Discontinued Operations:
The following table summarizes the financial results of the Local Partnerships
that are classified as discontinued operations. For the three and nine month
period ended December 15, 2004, Autumn Park, Bolton, Tanglewood and Walnut were
classified as discontinued operations on the Consolidated Statement of
Operations. For the three and nine month period ended December 15, 2003, Autumn
Park, Bolton, Tanglewood, Walnut, Silver Blue, Bryden Road (one of the
properties owned by Shiloh), Ludlam and Dixie were classified as discontinued
operations on the Consolidated Statement of Operations.
========================== =========================
Three Months Ended Nine Months Ended
December 15, December 15,
-------------------------- -------------------------
2004 2003 2004 2003
-------------------------- -------------------------
Revenues $ 878,439 $ 1,191,498 $ 2,812,231 $ 3,830,314
Gain on sale of
properties (Note 3) 4,451,845 0 6,976,752 1,808,199
----------- ----------- ----------- -----------
Total revenue 5,330,284 1,191,498 9,788,983 5,638,513
----------- ----------- ----------- -----------
Total expenses 1,146,154 1,685,740 3,629,041 5,650,162
----------- ----------- ----------- -----------
Income (loss) before
minority interest 4,184,130 (494,242) 6,159,942 (11,649)
Minority interest in
(income) loss of
subsidiaries from
discontinued
operations (35,021) 3,746 962,143 464,716
----------- ----------- ----------- -----------
Total net income
(loss) from
discontinued
operations (in-
cluding gain on
sale of properties) $ 4,149,109 $ (490,496) $ 7,122,085 $ 453,067
=========== =========== =========== ===========
16
LIBERTY TAX CREDIT PLUS L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 15, 2004
(Unaudited)
========================== =========================
Three Months Ended Nine Months Ended
December 15, December 15,
-------------------------- -------------------------
2004 2003 2004 2003
-------------------------- -------------------------
Income (loss) -
limited partners
from discontinued
operations (includ-
ing gain on sale of
properties) $ 4,107,617 $ (485,591) $ 7,050,864 $ 448,536
=========== =========== =========== ===========
Number of BACs
outstanding 15,987.5 15,987.5 15,987.5 15,987.5
=========== =========== =========== ===========
Income (loss)
discontinued
operations (includ-
ing gain on sale
of properties) per
BAC $ 256.93 $ (30.37) $ 441.0 $ 28.06
=========== =========== =========== ===========
17
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
- -------------------------------
The Partnership's capital has been invested in 31 Local Partnerships. As of
December 15, 2004, the properties and the related assets and liabilities of
seven Local Partnerships and the limited partnership interest in one Local
Partnership were sold. For a discussion of the sale of the Local Partnerships,
see Note 3 to the financial statements.
The Partnership's primary source of funds is cash distributions from operations
of the Local Partnerships in which the Partnership has invested. Such funds,
although minimal, are available to meet obligations of the Partnership. During
the nine months ended December 15, 2004 and 2003, such distributions amounted to
approximately $1,338,000 and $115,000, respectively. In addition, partnership
management fees and expense reimbursements owed to the General Partners
amounting to approximately $8,669,000 and $8,001,000 were accrued and unpaid as
of December 15, 2004 and March 15, 2004, respectively. Without the General
Partners' continued accrual without payment of the partnership management fees,
the Partnership will not be in a position to meet its obligations. The General
Partners have allowed for the accrual without payment of a portion of the
partnership management fees but are under no obligation to continue to do so.
For the nine months ended December 15, 2004, cash and cash equivalents of the
Partnership and its consolidated Local Partnerships increased approximately
$423,000. This increase is attributable to cash provided by operating activities
($818,000), proceeds from sales of properties ($1,225,000), a decrease in cash
held in escrow relating to investing activities ($288,000), a net increase in
due to local general partners and affiliates relating to financing activities
($733,000) and an increase in capitalization of consolidated subsidiaries
attributable to minority interest ($288,000) which exceeded improvements to
property and equipment ($1,100,000) and principal repayment of mortgage notes
($1,828,000). Included in adjustments to reconcile the net loss to net cash
provided by operating activities are depreciation and amortization of
approximately ($5,510,000) and income from discontinued operations (including
gain on sale of properties) of approximately ($7,122,000).
For a discussion of contingencies affecting certain Local Partnerships, see Note
4 to the financial statements. Since the maximum loss the Partnership would be
liable for is its net investment in the respective Local Partnerships, the
resolution of the existing contingencies is not anticipated to impact future
results of operations, liquidity or financial condition in a material way.
However, the Partnership's loss of its investment in a Local Partnership may
result in recapture of tax credits if the investment is lost before the
expiration of the applicable compliance period.
18
Management is not aware of any trends or 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 Partnership's portfolio may be experiencing upswings. However, the
geographic 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 accounting policies included in Note 2 to
the consolidated financial statements in the annual report on Form 10-K.
Property and Equipment
- ----------------------
Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, and any other costs incurred
in acquiring the properties. 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. At that time property investments
themselves are reduced to estimated fair value (generally using discounted cash
flows).
At the time management commits to a plan to dispose of assets, said assets are
adjusted to the lower of carrying amount or fair value less costs to sell. These
assets are classified as property and equipment-held for sale and are not
19
depreciated. For the nine months ended December 15, 2004, the Partnership has
not recorded any property and equipment as held for sale.
Discontinued Operations
- -----------------------
In accordance with FASB 144, the results of discontinued operations are reported
as a separate component of income before extraordinary items on the Consolidated
Statements of Operations. Discontinued operations include the results of
operations and any gain or loss recognized for Local Partnerships that have been
disposed of or are held for sale. A gain or loss recognized on the disposal is
disclosed in the notes to the consolidated financial statements. Adjustments to
amounts previously reported in operations that are directly related to the
disposal of a Local Partnership are reclassified in the current period as
discontinued operations for comparability purposes. Assets and liabilities of a
Local Partnership that are classified as held for sale are presented separately
in the asset and liability sections, respectively, of the Consolidated Balance
Sheets.
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.
Results of Operations
- ---------------------
The results of operations of the Partnership, as well as the Local Partnerships,
remained fairly consistent during the three and nine months ended December 15,
2004 and 2003, excluding gain on sale of properties, other income, taxes,
depreciation and amortization and capital events with respect to Ludlam, Dixie,
Silver Blue, Bryden Road, Walnut, Tanglewood, Bolton and Autumn Park, which sold
their respective properties and the related assets and liabilities (the "Sold
Assets"). The results of operations for the three and nine months ended December
15, 2004 and 2003 consisted primarily of the results of the Partnership's
investment in the consolidated Local Partnerships.
Rental income decreased approximately 3% and 5% for the three and nine months
ended December 15, 2004 as compared to the corresponding periods in 2003.
Excluding the Sold Assets, rental income remained fairly consistent for the
three months ended December 15, 2004 and 2003 and decreased approximately 1% for
the nine months ended December 15, 2004 and 2003, primarily due to a grant
received by one Local Partnership in 2003 and increased vacancy and recurring
concessions at a second Local Partnership in 2004 (see Note 4).
20
Other income decreased approximately $101,000 and $205,000 for the three and
nine months ended December 15, 2004 as compared to the corresponding periods in
2003. Excluding the Sold Assets, other income decreased approximately $100,000
and $45,000, primarily due to a decrease in subsidy income at one Local
Partnership.
Taxes decreased approximately $134,000 and $157,000 for the three and nine
months ended December 15, 2004 as compared to the corresponding periods in 2003.
Excluding the Sold Assets, taxes decreased approximately $74,000 and $50,000,
primarily due to an overaccrual of taxes in the prior year at one Local
Partnership.
Depreciation and amortization increased approximately $331,000 and $34,000 for
the three and nine months ended December 15, 2004, as compared to the
corresponding periods in 2003. Excluding the Sold Assets, depreciation and
amortization increased approximately $260,000 and $614,000, primarily due to the
resumption of depreciation expense at one Local Partnership that was classified
as an asset held for sale in 2004, and therefore not depreciated in 2003.
Repairs and maintenance decreased approximately $236,000 for the three months
ended December 15, 2004 as compared to the corresponding period in 2003,
primarily due to decreases relating to the 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 Principal Executive
Officer and Principal Financial Officer of Related Credit Properties L.P. and
Liberty Associates III, L.P., the general partners of the Partnership, 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 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.
21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Unregistered Sales of Equity 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
(3A) Limited Partnership Agreement of Liberty Tax Credit Plus L.P.
dated October 9, 1987**
(3B) Form of Amended and Restated Agreement of Partnership of Liberty
Tax Credit Plus L.P. (attached to Prospectus as Exhibit A)**
(3C) Certificate of Limited Partnership of Liberty Tax Credit Plus
L.P., together with amendments filed September 14, 1987 and October 8, 1987**
(10A) Form of Subscription Agreement (attached to Prospectus as
Exhibit B)**
(10B) Form of Purchase Agreement for purchase of Local Partnership
Interests**
(10C) Form of Local Partnership Agreement**
(31.1) Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
(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).
** Incorporated herein as an exhibit by reference to exhibits filed
with Amendment No. 1 to Liberty Tax Credit Plus L.P.'s Registration Statement on
Form S-11, file No. 33-15479.
22
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 L.P.
----------------------------
(Registrant)
By: RELATED CREDIT PROPERTIES L.P.,
a General Partner
By: Related Credit Properties Inc.,
its General Partner
Date: January 28, 2005
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Chief Executive
Officer
(Principal Executive and Financial
Officer)
Date: January 28, 2005
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(Principal Accounting Officer)
By: LIBERTY ASSOCIATES III, L.P.,
a General Partner
By: Related Credit Properties L.P.,
its General Partner
By: Related Credit Properties Inc.,
its General Partner
Date: January 28, 2005
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Chief
Executive Officer
(Principal Executive and
Financial Officer)
Date: January 28, 2005
By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(Principal Accounting
Officer)
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE
13a-14(a) OR RULE 15d-14(a)
I, Alan P. Hirmes, Principal Executive Officer and Principal Financial Officer
of Related Credit Properties L.P. and Liberty Associates III, L.P. (the "General
Partners"), each of which is a general partner of Liberty Tax Credit Plus L.P.
(the "Partnership"), hereby certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period
ending December 15, 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 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 December 15, 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
Principal Executive Officer and
Principal Financial Officer
January 28, 2005
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 L.P. (the
"Partnership") on Form 10-Q for the period ending December 15, 2004 as filed
with the Securities and Exchange Commission ("SEC") on the date hereof (the
"Report"), I, Alan P. Hirmes, Principal Executive Officer and Principal
Financial Officer of Related Credit Properties L.P. and Liberty Associates III,
L.P., the general partners 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
Principal Executive Officer and Principal Financial Officer
January 28, 2005