-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PC4nD+X5w4YUL4SsN1U+GOKS8CfvC67i5G7OKCNzzzDHAnoIx5tQOSfFyFHulEpK O0vxSu15LIgC0CpLYA8LFQ== 0000898733-96-000587.txt : 19960724 0000898733-96-000587.hdr.sgml : 19960724 ACCESSION NUMBER: 0000898733-96-000587 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960628 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL BACHE TAX CREDIT PROPERTIES LP CENTRAL INDEX KEY: 0000850184 STANDARD INDUSTRIAL CLASSIFICATION: 6513 IRS NUMBER: 133519080 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20638 FILM NUMBER: 96587865 BUSINESS ADDRESS: STREET 1: ONE SEAPORT PLAZA STREET 2: 16TH FL CITY: NEW YORK STATE: NY ZIP: 10292-0116 BUSINESS PHONE: 2122141016 MAIL ADDRESS: STREET 1: ONE SEAPORT PLAZA STREET 2: 16TH FL CITY: NEW YORK STATE: NY ZIP: 10292-0116 FORMER COMPANY: FORMER CONFORMED NAME: PRUDENTIAL BACHE TAX CREDIT PROPERTIES L P DATE OF NAME CHANGE: 19900708 10-K 1 P-B TAX CREDIT PROPERTIES, L.P. 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, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ______________________ Commission file number: 0-20638 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.) One Seaport Plaza, New York, New York 10292-0116 - - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 214-1016 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 _CK_ 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. [CK] DOCUMENTS INCORPORATED BY REFERENCE Pre-Effective Amendment No. 1 to Registration Statement on Form S-11 (File No. 33-28571) Pre-Effective Amendment No. 2 to Registration Statement on Form S-11 (File No. 33-28571) Annual Report to Limited Partners for the year ended March 31, 1996 is incorporated by reference into Parts I, II and IV of this Annual Report on Form 10-K Index to exhibits can be found on page 10. PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) TABLE OF CONTENTS
PART I PAGE Item 1 Business..................................................... 3 Item 2 Properties................................................... 5 Item 3 Legal Proceedings............................................ 6 Item 4 Submission of Matters to a Vote of Limited Partners.......... 6 PART II Item 5 Market for Registrant's BUC$ and Related Limited Partner Matters.................................................... 6 Item 6 Selected Financial Data...................................... 7 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................. 7 Item 8 Financial Statements and Supplementary Data.................. 7 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................... 7 PART III Item 10 Directors and Executive Officers of the Registrant........... 7 Item 11 Executive Compensation....................................... 9 Item 12 Security Ownership of Certain Beneficial Owners and Management................................................. 9 Item 13 Certain Relationships and Related Transactions............... 9 PART IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K Financial Statements and Financial Statement Schedules....... 10 Exhibits..................................................... 10 Reports on Form 8-K.......................................... 10 SIGNATURES............................................................... 15
2 PART I Item 1. Business General Prudential-Bache 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 Property. 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, 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. or any affiliate had an interest. The Registrant's investments are composed of limited partnership interests in Local Partnerships owning then newly constructed or existing structures that have undergone substantial rehabilitation. The Local Partnerships in which the Registrant has invested must be operated in accordance with the low-income housing rules and regulations to protect the related tax credits. It is not expected that any of the Local Partnerships in which the Registrant has invested will generate any significant cash flow to provide distributions to the 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. Each Property in which the Registrant invested is substantially mortgaged. However, the aggregate indebtedness did not exceed 85% of the appraised fair market value of any Property at the time of acquisition. The first mortgage financing encumbering the Properties was arranged by the general partner of the Local Partnership (the ``Local General Partner'') owning the Properties prior to the time the Registrant became a limited partner therein. The Registrant acquired its Local Partnership Interest in each Local Partnership by purchasing it directly from the existing limited and/or general partner of the Local Partnership. In each of the Registrant's investments, the Local General Partner of the Local Partnership owning the complex was required to provide personal guarantees and/or establish cash escrows, financial bonds and/or letters of credit to protect the Registrant against, among other things, the failure to meet certain operating criteria. The Registrant is engaged solely in the business of investing in Local Partnerships that own Properties; therefore, presentation of industry segment information is not applicable. For more information regarding the Properties, see Item 2 Properties. For more information regarding the Registrant's operations, see Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations. One Property had rental income which exceeded 15% of the Registrant's total revenue. Rental income from Palm Beach Apartments Ltd. (``Summer Creek Villas'') as a percentage of the Registrant's total revenue was 47.5%, 47.9% and 46.2% during the years ended March 31, 1996, 1995 and 1994, 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, 1996. 3 General Partner The general partner of the Registrant is Prudential-Bache Properties, Inc. (the ``General Partner'' or ``PBP''). P.B. Tax Credit S.L.P. (``PBSLP''), an affiliate of the General Partner, 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. Competition The General Partner has formed various entities to engage in businesses which may be competitive with the Registrant. The Registrant's business is affected by competition to the extent that the underlying Properties from which it derives tax credits may be subject to competition relating to rental rates and amenities from comparable neighboring properties. Employees The Registrant has no employees. Management and administrative services for the Registrant are performed by the General Partner and its affiliates pursuant to the Partnership Agreement. See Notes C and F to the consolidated financial statements in the Registrant's Annual Report to Limited Partners for the year ended March 31, 1996 (``Registrant's Annual Report'') which is filed as an exhibit hereto. Pending Legislation The United States Department of Housing and Urban Development (``HUD'') recently released a proposal entitled the American Community Partnerships Act (the ``ACPA''). The ACPA is HUD's blueprint for providing for the nation's housing needs in an era of static or decreasing budget authority. Two key proposals in the ACPA are a discontinuation of project based Section 8 subsidy payments and an attendant reduction in debt on properties that were supported by the Section 8 payments. The ACPA calls for a transition during which the project based Section 8 would be converted to a tenant based voucher system. Any Federal Housing Administration insured debt would then be ``marked-to-market'', that is revalued in light of the reduced income stream, if any. Several industry sources have already commented to HUD and Congress that in the event the ACPA was fully enacted in its present form, the reduction in mortgage indebtedness would be considered taxable income to limited partners. Legislative relief has been proposed to exempt ``mark-to-market'' debt from cancellation of indebtedness income treatment. Though HUD initially backed away from the ``marked-to-market'' proposal, it has now been re-introduced as ``Portfolio Restructuring''. The Registrant currently holds interests in two Local Partnerships which operate under Section 8 regulations (Diamond Street Venture and Brookland Park Plaza L.P.). The ultimate effect of these proposals on the Registrant cannot be determined at this time. 4 Item 2. Properties As of March 31, 1996, the Registrant holds interests in Local Partnerships which own the following Properties which continue to be operated in a manner to qualify for tax credits:
REGISTRANT'S LOW-INCOME HOUSING TAX CREDIT RENTS OCCUPANCY RATE FOR THE NUMBER AS OF AS OF YEAR ENDED PROPERTY (a) OF UNITS JUNE 2, 1996 JUNE 2, 1996 DECEMBER 31, 1995 - - -------------------------------- --------- ------------- -------------- ----------------- RMB Limited Partnership (Hubbard's Ridge) Garland, TX 196 $385-$549 92% $ 395,768 Cutler Canal II Associates, Ltd. Miami, FL 216 347-604 92 896,701 Diamond Street Venture Philadelphia, PA 48 461-529 90 282,288 Papillion Heights Apartments L.P. Papillion, NE 48 365-425 100 173,661 Hill Top Homes Apartments Limited Partnership Arlington, TX 171 445-630 94 616,546 Palm Beach Apartments, Ltd. (Summer Creek Villas) West Palm Beach, FL 770 498-679 89 2,241,161 Brookland Park Plaza Limited Partnership Richmond, VA 77 511 100 429,237 Compton Townhouses Limited Partnership Cincinnati, OH 39 616 100 205,620 ----------------- $ 5,240,982 ----------------- ----------------- (a) 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 on 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. The Cutler Canal II property 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. 5 The Diamond Street property 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. The Papillion Heights property 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. The Hill Top Homes property 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. The unit distribution mix includes 171 apartment units of which 18 are three-bedroom/one bath apartment units each containing approximately 925 square feet, 52 two-bedroom/two bath apartment units each containing approximately 1,100 square feet, 98 two-bedroom/one bath apartment units each containing approximately 936 square feet and three one-bedroom/one bath apartment units each containing 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 containing 570 square feet; 372 are two-bedroom/one-bath apartments, each containing 773 square feet; 144 are three-bedroom/two-bath apartments, each containing 980 square feet; and 72 are three-bedroom/two-bath villa units, each containing 1,050 square feet. The Brookland Park Plaza property is an existing 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 of which contains approximately 890 square feet. Each unit contains a refrigerator, range, carpeting and air-conditioning. Brookland Park Plaza also maintains a community room for tenants. The Compton Townhouses consist 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, 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 This information is incorporated by reference to Note I to the consolidated financial statements in the Registrant's Annual Report which is filed as an exhibit hereto. Item 4. Submission of Matters to a Vote of Limited Partners None PART II Item 5. Market for Registrant's BUC$ and Related Limited Partner Matters As of June 3, 1996, there were 2,269 holders of record owning 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$. Consequently, holders of BUC$ may not be able to liquidate their investments in the event of an emergency or for any other reason. 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 on pages 2 through 24 of the Registrant's Annual Report which is filed as an exhibit hereto.
Year ended March 31, ------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ----------- ----------- ----------- ----------- ----------- Rental and other income $ 9,745,864 $ 9,011,441 $ 9,212,457 $ 8,938,787 $ 5,329,039 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Interest income $ 49,257 $ 47,693 $ 75,242 $ 93,419 $ 415,864 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Interest expense $ 4,448,986 $ 4,474,229 $ 4,462,589 $ 4,236,927 $ 4,112,788 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Depreciation and amortization expense $ 2,549,449 $ 2,640,262 $ 2,615,469 $ 2,692,891 $ 2,335,064 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Provision for loss on impairment of assets $ -- $ 2,700,000 $ -- $ -- $ -- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Loss before minority interest $(2,587,393) $(6,271,864) $(3,341,362) $(3,415,486) $(5,037,973) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Minority interest in loss of local partnerships $ 421,144 $ 608,088 $ 496,042 $ 476,756 $ 877,814 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net loss $(2,166,249) $(5,663,776) $(2,845,320) $(2,938,730) $(4,160,159) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net loss per limited partner BUC $ (56.25) $ (147.07) $ (73.89) $ (76.31) $ (108.03) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total assets $72,944,919 $76,174,392 $81,370,985 $90,042,295 $86,455,040 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Construction loans payable $ -- $ -- $ -- $ -- $25,328,207 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Mortgage notes payable $46,378,992 $46,529,512 $46,661,471 $46,797,027 $13,790,870 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This information is incorporated by reference to pages 25 through 27 of the Registrant's Annual Report which is filed as an exhibit hereto. Item 8. Financial Statements and Supplementary Data The consolidated financial statements are incorporated by reference to pages 2 through 24 of the Registrant's Annual Report which is filed as an exhibit hereto. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Registrant There are no directors or executive officers of the Registrant. The Registrant is managed by the General Partner. The Registrant, the Registrant's General Partner and its directors and executive officers, and any persons holding more than ten percent of the Registrant's BUC$ are required to report their initial ownership of such BUC$ and any subsequent changes in that ownership to the Securities and Exchange Commission on 7 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 has relied solely on written representations of the General Partner, directors and executive officers and persons who own greater than ten percent of the Registrant's BUC$, 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. Prudential-Bache Properties, Inc. The directors and executive officers of PBP and their positions with regard to managing the Registrant are as follows:
Name Position Thomas F. Lynch, III President, Chief Executive Officer, Chairman of the Board of Directors and Director Barbara J. Brooks Vice President--Finance and Chief Financial Officer Eugene D. Burak Vice President and Chief Accounting Officer Chester A. Vice President Piskorowski Frank W. Giordano Director Nathalie P. Maio Director
THOMAS F. LYNCH, III, age 37, is the President, Chief Executive Officer, Chairman of the Board of Directors and a Director of PBP. He is a Senior Vice President of Prudential Securities Incorporated (``PSI''), an affiliate of PBP. Mr. Lynch also serves in various capacities for other affiliated companies. Mr. Lynch joined PSI in November 1989. BARBARA J. BROOKS, age 47, is the Vice President-Finance and Chief Financial Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in various capacities for other affiliated companies. She has held several positions within PSI since 1983. Ms. Brooks is a certified public accountant. EUGENE D. BURAK, age 51, is a Vice President of PBP. He is a First Vice President of PSI. Prior to joining PSI in September 1995, he was a management consultant for three years and was with Equitable Capital Management Corporation from March 1990 to May 1992. Mr. Burak is a certified public accountant. CHESTER A. PISKOROWSKI, age 53, is a Vice President of PBP. He is a Senior Vice President of PSI and is the Senior Manager of the Specialty Finance Asset Management area. Mr. Piskorowski has held several positions within PSI since April 1972. Mr. Piskorowski is a member of the New York and Federal Bars. FRANK W. GIORDANO, age 54, is a Director of PBP. He is a Senior Vice President of PSI and an Executive Vice President and General Counsel of Prudential Mutual Fund Management, Inc., an affiliate of PSI. Mr. Giordano also serves in various capacities for other affiliated companies. He has been with PSI since July 1967. NATHALIE P. MAIO, age 45, is a Director of PBP. She is a Senior Vice President and Deputy General Counsel of PSI and supervises non-litigation legal work for PSI. She joined PSI's Law Department in 1983; presently she also serves in various capacities for other affiliated companies. James M. Kelso ceased to serve as President, Chief Executive Officer, Chairman of the Board of Directors and Director effective June 30, 1995. Effective June 30, 1995, Thomas F. Lynch, III was elected President, Chief Executive Officer, Chairman of the Board of Directors and Director. Robert J. Alexander ceased to serve as Vice President effective August 25, 1995. Eugene D. Burak was elected Vice President effective October 9, 1995. There are no family relationships among any of the foregoing directors or executive officers. All of the foregoing directors and executive officers have indefinite terms. 8 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. Item 12. Security Ownership of Certain Beneficial Owners and Management As of June 3, 1996, no director or executive officer of PBP owns directly or beneficially any interest in the voting securities of PBP. As of June 3, 1996, no director or executive officer of PBP owns directly or beneficially any of the BUC$ issued by the Registrant. As of June 3, 1996, no limited partner beneficially owns more than five percent (5%) of the BUC$ issued by the Registrant. Item 13. Certain Relationships and Related Transactions The Registrant has and will continue to have certain relationships with the General Partner and its affiliates. However, there have been no direct financial transactions between the Registrant and the directors or executive officers of the General Partner. Reference is made to Notes A, C, F and G to the consolidated financial statements in the Registrant's Annual Report which is filed as an exhibit hereto, which identify the related parties and discuss the services provided by these parties and the amounts paid or payable for their services. 9 PART IV
Page in Annual Report Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1. Financial Statements and Independent Auditors' Report--Incorporated by reference to Registrant's Annual Report which is filed as an exhibit hereto Financial Statements: Independent Auditors' Report 2 Consolidated Statements of Financial Condition--March 31, 1996 and 1995 16 Consolidated Statements of Operations--Three years ended March 31, 1996 17 Consolidated Statements of Changes in Partners' Capital--Three years ended March 31, 1996 17 Consolidated Statements of Cash Flows--Three years ended March 31, 1996 18 Notes to Consolidated Financial Statements 19 2. Financial Statement Schedules and Independent Auditors' Report on Schedules Independent Auditors' Report on Schedules Schedules: III--Real Estate and Accumulated Depreciation at March 31, 1996 All other schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements or the notes thereto. 3. Exhibits Description: Agreement of Limited Partnership as adopted on May 3, 1989 and Amendments thereto dated May 25, 1989 and June 21, 1989* Form of Amended and Restated Agreement of Limited Partnership (included in Prospectus as Exhibit A)** Certificate of Limited Partnership as filed on May 3, 1989 and Amendments thereto dated May 25, 1989 and June 21, 1989* Form of Purchase and Sale Agreement pertaining to the Partnership's Acquisition of Local Partnership Interests** Form of Amended and Restated Agreement of Local Limited Partnership of Local Partnerships** Annual Report to Limited Partners for the year ended March 31, 1996 (with the exception of the information and data incorporated by reference to Items 3, 7 and 8 of this Annual Report on Form 10-K, no other information or data appearing in the Registrant's Annual Report is deemed to be filed as part of this report) (filed herewith) Financial Data Schedule (filed herewith) (b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of the period covered by this report.
10 - - ------------- * Filed as an exhibit to Pre-Effective Amendment No. 1 to Form S-11 Registration Statement (No. 33-28571) and incorporated herein by reference. ** Filed as an exhibit to Pre-Effective Amendment No. 2 to Form S-11 Registration Statement (No. 33-28571) and incorporated herein by reference. 11 INDEPENDENT AUDITORS' REPORT ON SCHEDULES To the Partners of Prudential-Bache Tax Credit Properties L.P. (A Delaware Limited Partnership): In connection with our audit of the consolidated financial statements of Prudential-Bache 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, 1996. In our opinion, based on our audit and the reports of the other auditors, the consolidated schedule presents fairly, when read in conjunction with the related consolidated financial statements, the financial data required to be set forth therein. ANCHIN, BLOCK & ANCHIN LLP Certified Public Accountants New York, New York June 3, 1996 12 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES Schedule III--Real Estate and Accumulated Depreciation March 31, 1996
Column A Column B Column C Column D Column E - - ------------------------------------------------------------------------------------------------------------------------- Gross Amounts At Which Carried At Close Of Initial Cost Period(5) --------------------------- Costs Capitalized ---------- Buildings Subsequent to Acquisition(7) - - ------------------------- ------------ and ------------------------------- Description (4)(6) Encumbrances Land Improvements Improvements Carrying Costs Land - - ------------------------- ------------ ---------- ------------ ------------ -------------- ---------- Apartment Complexes: RMB Limited Partnership(1) (Hubbard's Ridge) Garland, TX $ 1,950,493 $ 107,237 $ 965,136 $ 3,732,973 $ 185,180 $ 107,237 Cutler Canal II Associates, Ltd.(2) Miami, FL 6,008,536 807,071 1,388,350 8,861,278 67,728 807,071 Diamond Street Venture(3) Philadelphia, PA 3,031,298 9,729 234,465 2,352,712 273,218 9,729 Papillion Heights Apartments L.P.(1) Papillion, NE 1,032,976 63,329 1,816,598 255,218 66,552 63,329 Hill Top Homes Apartments L.P.(1) Arlington, TX 3,695,985 553,841 3,690,150 3,542,729 316,368 553,841 Palm Beach Apartments, Ltd.(1) (Summer Creek Villas) West Palm Beach, FL 26,750,000 2,396,876 10,578,563 25,557,883 1,876,795 2,396,876 Brookland Park Plaza L.P.(1) Richmond, VA 2,519,227 50,000 109,850 5,907,565 376,165 50,000 Compton Townhouses L.P.(1) Cincinnati, OH 1,390,477 17,550 476,708 1,923,171 28,203 17,550 ------------ ---------- ------------ ------------ -------------- ---------- $46,378,992 $4,005,633 $19,259,820 $52,133,529 $ 3,190,209 $4,005,633 ------------ ---------- ------------ ------------ -------------- ---------- ------------ ---------- ------------ ------------ -------------- ---------- Life on which Depreciation in Buildings ----------- Date Latest Consolidated - - ------------------------- and Accumulated Construction Date Statement of Operations Description (4)(6) Improvements Total Depreciation Completed Acquired is computed - - ------------------------- ------------ ----------- ----------- ------------- ---------- ------------------------ Apartment Complexes: RMB Limited Partnership(1) (Hubbard's Ridge) Garland, TX $ 4,883,289 $ 4,990,526 $1,015,121 5/90 12/89 30 Cutler Canal II Associates, Ltd.(2) Miami, FL 10,317,356 11,124,427 1,291,020 1/91 1/90 40 Diamond Street Venture(3) Philadelphia, PA 2,860,395 2,870,124 677,118 12/90 1/90 40 Papillion Heights Apartments L.P.(1) Papillion, NE 2,138,318 2,201,647 345,122 12/90 4/90 27.5 Hill Top Homes Apartments L.P.(1) Arlington, TX 7,549,247 8,103,088 1,047,158 12/90 6/90 30 Palm Beach Apartments, Ltd.(1) (Summer Creek Villas) West Palm Beach, FL 38,013,241 40,410,117 4,911,444 8/91 6/90 40 Brookland Park Plaza L.P.(1) Richmond, VA 6,393,630 6,443,630 1,255,670 12/90 7/90 27.5 Compton Townhouses L.P.(1) Cincinnati, OH 2,428,082 2,445,632 530,628 6/92 1/92 40 ------------ ----------- ----------- $74,583,558 $78,589,191 $11,073,281 ------------ ----------- ----------- ------------ ----------- -----------
(1) First mortgage (2) Includes first and second mortgages (3) Includes first, second and third mortgages (4) The Registrant holds a 66.5% interest in the Local Partnership 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, 1995 is $80,488,202. (6) The General Partner believes the properties are adequately insured. (7) Costs Capitalized Subsequent to Acquisition include a write-down of $2,700,000 for Diamond Street Venture recorded as of March 31, 1995. 13 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES SCHEDULE III--Real Estate and Accumulated Depreciation (Continued)
Year ended March 31 --------------------------------------------- 1996 1995 1994 ----------- ----------- --------------- NOTE A--RECONCILIATIONS AMOUNT AT WHICH REAL ESTATE IS CARRIED: Balance at beginning of period......................... $78,589,191 $81,195,661 $81,190,649 Additions (deductions) during the period Improvements...................................... -- 93,530 5,012 Write-downs during year (1)....................... -- (2,700,000) -- ----------- ----------- --------------- Balance at end of period............................... $78,589,191 $78,589,191 $81,195,661 ----------- ----------- --------------- ----------- ----------- --------------- ACCUMULATED DEPRECIATION: Balance at beginning of period......................... $ 8,863,867 $ 6,594,015 $ 4,376,635 Depreciation...................................... 2,209,414 2,269,852 2,217,380 ----------- ----------- --------------- Balance at end of period............................... $11,073,281 $ 8,863,867 $ 6,594,015 ----------- ----------- --------------- ----------- ----------- ---------------
- - --------------- (1) Refer to Notes B and D to the consolidated financial statements for additional information. 14 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. Prudential-Bache Tax Credit Properties L.P. By: Prudential-Bache Properties, Inc. A Delaware corporation, General Partner By: /s/ Eugene D. Burak Date: June 28, 1996 ---------------------------------------- Eugene D. Burak Vice President and Chief Accounting 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 (with respect to the General Partner) and on the dates indicated. By: Prudential-Bache Properties, Inc. A Delaware corporation, General Partner By: /s/ Thomas F. Lynch, III Date: June 28, 1996 ---------------------------------------- Thomas F. Lynch, III President, Chief Executive Officer, Chairman of the Board of Directors and Director By: /s/ Barbara J. Brooks Date: June 28, 1996 ---------------------------------------- Barbara J. Brooks Vice President-Finance and Chief Financial Officer By: /s/ Eugene D. Burak Date: June 28, 1996 ---------------------------------------- Eugene D. Burak Vice President By: /s/ Frank W. Giordano Date: June 28, 1996 ---------------------------------------- Frank W. Giordano Director By: /s/ Nathalie P. Maio Date: June 28, 1996 ---------------------------------------- Nathalie P. Maio Director 15 EX-13 2 ANNUAL REPORT 1996 ANNUAL REPORT 1996 - - --------------------------------------------------------------- Prudential-Bache Annual Tax Credit Properties L.P. Report PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. LETTER TO THE LIMITED PARTNERS FOR THE YEAR ENDED MARCH 31, 1996 1 INDEPENDENT AUDITORS' REPORT To The Partners of Prudential-Bache Tax Credit Properties L.P. (A Delaware Limited Partnership) We have audited the accompanying consolidated statements of financial condition of Prudential-Bache Tax Credit Properties L.P. and Subsidiaries as of March 31, 1996 and 1995 and the related consolidated statements of operations, changes in partners' capital and cash flows for the years ended March 31, 1996, 1995 and 1994. These consolidated 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 did not audit the financial statements of the consolidated subsidiaries, which statements reflect total assets of $72,647,170 and $75,706,683 as of March 31, 1996 and 1995, respectively, and total revenues of $9,783,912, $9,042,136 and $9,269,607 for the years ended March 31, 1996, 1995 and 1994, respectively. These statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion, insofar as it relates to the amounts included for the consolidated subsidiaries, is based solely on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated 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 Prudential-Bache Tax Credit Properties L.P. and Subsidiaries at March 31, 1996 and 1995, and the results of their operations and their cash flows for the years ended March 31, 1996, 1995 and 1994, in conformity with generally accepted accounting principles. ANCHIN, BLOCK & ANCHIN LLP Certified Public Accountants New York, New York June 3, 1996 2 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, 1995 and 1994, and the related statements of operations, partner's equity (deficit) and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 RMB LIMITED PARTNERSHIP as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. DICKEY & WOLF, LLC Certified Public Accountants Harrisonville, MO January 21, 1996 3 INDEPENDENT AUDITORS' REPORT To the Partners Cutler Canal II Associates, Ltd. We have audited the accompanying balance sheets of Cutler Canal II Associates, Ltd as of December 31, 1995 and 1994, and the related statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the 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 Cutler Canal II Associates, Ltd. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. REZNICK FEDDER & SILVERMAN Charlotte, North Carolina January 19, 1996 4 INDEPENDENT AUDITORS' REPORT To the Partners of Diamond Street Venture (a Limited Partnership) Philadelphia, Pennsylvania We have audited the accompanying balance sheets of Diamond Street Venture (a Limited Partnership) as of December 31, 1995 and 1994 and the related statements of income, changes in partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's general partners and contracted management agent. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the 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 the Partnership's general partners and contracted management agent, 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 Diamond Street Venture (a Limited Partnership) at December 31, 1995 and 1994, and the results of its operations, changes in partners' equity and cash flows for the years then ended in conformity with generally accepted accounting principles. J. H. WILLIAMS & CO., LLP Kingston, Pennsylvania February 8, 1996 5 INDEPENDENT AUDITORS' REPORT To the Partners of Diamond Street Venture (a Limited Partnership) Philadelphia, Pennsylvania We have audited the accompanying balance sheets of Diamond Street Venture (a Limited Partnership) as of December 31, 1994 and 1993 and the related statements of income, changes in partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's general partners and contracted management agent. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the 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 the Partnership's general partners and contracted management agent, 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 Diamond Street Venture (a Limited Partnership) at December 31, 1994 and 1993, and the results of its operations, changes in partners' equity and cash flows for the years then ended in conformity with generally accepted accounting principles. J. H. WILLIAMS & CO. Kingston, Pennsylvania February 8, 1995 6 INDEPENDENT AUDITORS' REPORT February 9, 1996 To the Partners Papillion Heights Apartments, L.P. (A Limited Partnership) We have audited the balance sheet of Papillion Heights Apartments, L.P. (a limited partnership) as of December 31, 1995, and the related statements of operations, partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Papillion Heights Apartments, L.P. as of December 31, 1994, were audited by other auditors whose report dated March 13, 1995 expressed an unqualified opinion on those statements. We conducted our audits in accordance with generally accepted auditing standards. 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, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. COHEN, COVEY AND SCHULTZ, P.C. 7 INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT To the Partners of Papillion Apartments L.P. We have audited the accompanying balance sheet of Papillion Apartments L.P., a limited partnership, as of December 31, 1994, and the related statements of operations, changes in partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 Papillion Apartments, L.P. as of December 31, 1994, and the result of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. SANDRA K. CLAXTON Certified Public Accountant March 13, 1995 8 INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT To the Partners of Papillion Apartments L.P. We have audited the accompanying balance sheet of Papillion Apartments L.P., a limited partnership, as of December 31, 1993, and the related statements of operations, changes in partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 Papillion Apartments, L.P. as of December 31, 1993, and the result of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. SANDRA K. CLAXTON Certified Public Accountant March 11, 1994 9 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, 1995 and 1994, and the related statement of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 HILL TOP HOMES APARTMENTS LIMITED PARTNERSHIP as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. DICKEY & WOLF, LLC Certified Public Accountants Harrisonville, MO January 21, 1996 10 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, 1995 and 1994, and the related statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the 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 Palm Beach Apartments, Ltd. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. REZNICK FEDDER & SILVERMAN Charlotte, North Carolina January 19, 1996 11 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, 1995, and the related statements of profit and loss (on HUD Form No. 92410), partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brookland Park Plaza Limited Partnership as of December 31, 1995, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 19 through 24 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, we have also issued reports dated February 8, 1996 on our consideration of Brookland Park Plaza Limited Partnership's internal control structure and on its compliance with specific requirements applicable to major HUD programs, affirmative fair housing, and laws and regulations applicable to the financial statements. REZNICK FEDDER & SILVERMAN Federal Employer Identification Number: 52-1088612 Bethesda, Maryland February 8, 1996 Audit Principal: Renee G. Scruggs 12 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, 1994, and the related statements of profit and loss (on HUD Form No. 92410), partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brookland Park Plaza Limited Partnership as of December 31, 1994, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 18 through 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 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. REZNICK FEDDER & SILVERMAN Federal Employer Identification Number: 52-1088612 Bethesda, Maryland February 17, 1995 Audit Principal: Renee G. Scruggs 13 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) as of December 31, 1993, and the related statements of profit and loss (on HUD Form No. 92410), partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brookland Park Plaza Limited Partnership as of December 31, 1993, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 17 through 22 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. REZNICK FEDDER & SILVERMAN Federal Employer Identification Number: 52-1088612 Bethesda, Maryland February 11, 1994 Audit Principal: Renee G. Scruggs 14 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Partners Compton Townhouses Limited Partnership (An Ohio Limited Partnership) We have audited the accompanying balance sheet of Compton Townhouses Limited Partnership (An Ohio Limited Partnership), as of December 31, 1995 and 1994, and the related statements of operations, changes in partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Compton Townhouses Limited Partnership (An Ohio Limited Partnership), as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. SPAETH & BATTERBERRY, LTD. January 24, 1996 15 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, ---------------------------- 1996 1995 - - --------------------------------------------------------------------------------------------------- ASSETS Investment in property: Land $ 4,005,633 $ 4,005,633 Buildings and improvements 74,583,558 74,583,558 Accumulated depreciation (11,073,281) (8,863,867) ------------ ----------- Net investment in property 67,515,910 69,725,324 Cash and cash equivalents 1,012,131 1,201,654 Cash and cash equivalents held in escrow 613,065 1,275,569 Deferred financing costs, net 3,386,089 3,686,401 Organizational costs, net 69,056 108,779 Other assets 348,668 176,665 ------------ ----------- Total assets $ 72,944,919 $76,174,392 ------------ ----------- ------------ ----------- LIABILITIES AND PARTNERS' CAPITAL Liabilities Mortgage notes payable $ 46,378,992 $46,529,512 Accrued interest payable 1,044,112 990,041 Other accrued expenses and liabilities 1,355,458 1,923,881 Due to general partners and affiliates of local partnerships 1,539,945 1,554,451 Development fees payable 1,579,709 1,579,709 Construction costs payable 605,358 605,358 Real estate taxes payable 87,289 466,118 Due to General Partner and its affiliates 368,849 122,722 ------------ ----------- Total liabilities 52,959,712 53,771,792 ------------ ----------- Minority interest in local partnerships 3,712,217 3,963,361 ------------ ----------- Contingencies Partners' capital (deficit) Limited partners (38,125 BUC$ issued and outstanding) 16,451,859 18,596,446 General partner (1 BUC issued and outstanding) (178,869) (157,207) ------------ ----------- Total partners' capital 16,272,990 18,439,239 ------------ ----------- Total liabilities and partners' capital $ 72,944,919 $76,174,392 ------------ ----------- ------------ ----------- - - --------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated statements
16 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended March 31, ----------------------------------------- 1996 1995 1994 - - ---------------------------------------------------------------------------------------------------- REVENUES Rental income $ 8,968,292 $ 8,605,901 $ 8,002,696 Other income 777,572 405,540 1,209,761 Interest income 49,257 47,693 75,242 ----------- ----------- ----------- 9,795,121 9,059,134 9,287,699 ----------- ----------- ----------- EXPENSES Interest 4,448,986 4,474,229 4,462,589 Depreciation and amortization 2,549,449 2,640,262 2,615,469 Operating and other 1,849,902 1,786,474 2,152,955 Taxes and insurance 1,180,035 1,165,434 1,034,157 Repairs and maintenance 1,299,154 1,396,627 1,241,018 General and administrative 349,069 398,312 290,054 Property management fees 445,054 426,984 490,143 Partnership management fees 260,865 342,676 342,676 Provision for loss on impairment of assets -- 2,700,000 -- ----------- ----------- ----------- 12,382,514 15,330,998 12,629,061 ----------- ----------- ----------- Loss before minority interest (2,587,393) (6,271,864) (3,341,362) Minority interest in loss of local partnerships 421,144 608,088 496,042 ----------- ----------- ----------- Net loss $(2,166,249) $(5,663,776) $(2,845,320) ----------- ----------- ----------- ----------- ----------- ----------- ALLOCATION OF NET LOSS Limited partners $(2,144,587) $(5,607,138) $(2,816,867) ----------- ----------- ----------- ----------- ----------- ----------- General partner $ (21,662) $ (56,638) $ (28,453) ----------- ----------- ----------- ----------- ----------- ----------- Net loss per limited partner BUC $ (56.25) $ (147.07) $ (73.89) ----------- ----------- ----------- ----------- ----------- ----------- - - ----------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
LIMITED GENERAL BUC$ PARTNERS PARTNER TOTAL - - ----------------------------------------------------------------------------------------------------- Partners' capital (deficit)--March 31, 1993 38,126 $27,020,451 $(72,116 ) $26,948,335 Net loss -- (2,816,867 ) (28,453 ) (2,845,320) ------ ------------ --------- ----------- Partner's capital (deficit)--March 31, 1994 38,126 24,203,584 (100,569 ) 24,103,015 Net loss -- (5,607,138 ) (56,638 ) (5,663,776) ------ ------------ --------- ----------- Partner's capital (deficit)--March 31, 1995 38,126 18,596,446 (157,207 ) 18,439,239 Net loss -- (2,144,587 ) (21,662 ) (2,166,249) ------ ------------ --------- ----------- Partners' capital (deficit)--March 31, 1996 38,126 $16,451,859 $(178,869) $16,272,990 ------ ------------ --------- ----------- ------ ------------ --------- ----------- - - ----------------------------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated statements
17 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended March 31, ------------------------------------------- 1996 1995 1994 - - ------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(2,166,249) $ (5,663,776) $ (2,845,320) ----------- ------------ ------------ Adjustments to reconcile net loss to net cash used in operating activities: Provision for loss on impairment of assets -- 2,700,000 -- Depreciation and amortization 2,549,449 2,640,262 2,615,469 Minority interest in loss of local partnerships (421,144) (608,088) (496,042) Forgiveness of debt (154,500) -- -- Decrease (increase) in cash held in escrow 662,504 (147,951) 265,436 Increase (decrease) in real estate taxes payable (378,829) 305,023 (243,121) Increase in accrued interest payable 54,071 236,961 207,385 Decrease (increase) in other assets (172,003) 63,660 27,011 Increase (decrease) in other liabilities (112,302) 37,881 184,331 ----------- ------------ ------------ Total adjustments 2,027,246 5,227,748 2,560,469 ----------- ------------ ------------ Net cash used in operating activities (139,003) (436,028) (284,851) ----------- ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Decrease in contributed capital held in escrow -- -- 495,213 Investments in property -- (93,530) (5,012) Payments of development fees payable -- -- (39,553) Decrease in cash restricted for reconstruction -- -- 4,740,226 Payment for reconstruction from insurance proceeds -- -- (4,740,226) ----------- ------------ ------------ Net cash provided by (used in) investing activities -- (93,530) 450,648 ----------- ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Payments on mortgage notes (150,520) (131,959) (135,556) Advances from local general partners 100,000 733,132 36,296 Payments for loans from local general partners -- (105,767) (599,504) ----------- ------------ ------------ Net cash provided by (used in) financing activities (50,520) 495,406 (698,764) ----------- ------------ ------------ Net decrease in cash and cash equivalents (189,523) (34,152) (532,967) Cash and cash equivalents at beginning of year 1,201,654 1,235,806 1,768,773 ----------- ------------ ------------ Cash and cash equivalents at end of year $ 1,012,131 $ 1,201,654 $ 1,235,806 ----------- ------------ ------------ ----------- ------------ ------------ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 4,325,996 $ 4,170,797 $ 4,129,461 ----------- ------------ ------------ ----------- ------------ ------------ - - ------------------------------------------------------------------------------------------------------ The accompanying notes are an integral part of these consolidated statements
18 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. General Prudential-Bache 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. The general partner of the Partnership, Prudential-Bache Properties, Inc. (the ``General Partner'' or ``PBP''), is not affiliated with a general partner of any Local Partnership (``Local General Partner''). P.B. Tax Credit S.L.P. (``PBSLP''), an affiliate of the General Partner, 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, 1996, the Partnership has investments in eight Local Partnerships. B. Summary of Significant Accounting Policies 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 generally accepted accounting principles. The preparation of financial statements in conformity with generally accepted accounting principles 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 financial statements of the Local Partnerships consolidated herein are for the twelve month periods ended December 31. Intercompany transactions with Local Partnerships are eliminated. Minority interest in local partnerships represents the minority partners' share of the net assets of the Local Partnerships. Certain balances for prior years have been reclassified to conform with the current year's financial statement presentation. Investment in property Effective March 31, 1995, the Partnership adopted Statement of Financial Accounting Standards (``SFAS'') No. 121, ``Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.'' Under SFAS No. 121, 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 should be recorded at the lower of its carrying value or its estimated fair value. The implementation of SFAS No. 121 resulted in a $2,700,000 provision for loss on impairment of assets for the year ended March 31, 1995. No additional provision was required for the year ended March 31, 1996. 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, but also upon market capitalization and discount rates as well as other market indicators. The General Partner believes that the estimates and assumptions used are appropriate in evaluating the carrying amount of the Partnership's properties. 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. 19 Cash and cash equivalents Cash and cash equivalents include highly liquid investments with original maturities of three months or less which are carried at market value. Cash and cash equivalents held in escrow Cash and cash equivalents held in escrow include restricted funds held for payment of taxes and insurance, tenant security deposits and replacement reserves. 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. Profit and loss allocations/distributions Net income or loss is allocated 99% to the limited partners and 1% to the General Partner. Distributions of cash may be made in accordance with the Partnership Agreement and, if made, are allocated 99% to the limited partners and 1% to the General Partner. As of March 31, 1996, no distributions have been paid. Operating deficit guaranties Pursuant to certain operating deficit guaranty agreements, Local General Partners are required to fund operating deficits, as defined in the Local Partnership agreements, incurred during the period commencing with the break-even date, as defined in the Local Partnership agreements, and ending on the third anniversary of the break-even date. These advances are non-interest bearing. Development deficit guaranties Pursuant to certain development deficit guaranty agreements, Local General Partners were required to fund development deficits, as defined in the Local Partnership Agreements, until the break-even date. These payments are not repayable to the Local General Partner. During the year ended March 31, 1994, approximately $484,000 was received under one such agreement and recorded as other income. All of these agreements had terminated as of March 31, 1995. C. Costs, Fees and Expenses 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, 1996 and 1995 is $1,844,694 and $1,544,382, respectively. Organizational costs Costs incurred to organize the Partnership, including but not limited to legal and accounting, are considered organizational costs. These costs have been capitalized and are being amortized on a straight-line basis over a 60-month period. The accumulated amortization as of March 31, 1996 and 1995 is $456,851 and $417,128, respectively. Management fees The Partnership pays a management fee to the property managers and the General Partner. 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 G). The General Partner is entitled to receive a management fee, payable from operations and reserves, in an amount not to exceed the difference between .5% per annum of Invested Assets (as defined in the Partnership Agreement) and the local administrative fee payable to PBSLP. This management fee is for 20 administering the affairs of the Partnership (See Note F). Unpaid portions of the management fee for any year accrue without interest. 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 F). The Partnership also pays amounts directly to unrelated third parties for certain operating expenses. D. Investment in Property The Partnership's Properties and related debt at March 31 were:
Net investment in property Mortgage notes payable -------------------------- -------------------------- Description (a) 1996 1995 1996 1995 - - ----------------------------------- ----------- ----------- ----------- ----------- Apartment Complexes: RMB Limited Partnership (Hubbard's Ridge) Garland, TX $ 3,975,405 $ 4,152,669 $ 1,950,493 $ 1,964,824 Cutler Canal II Associates, Ltd. Miami, FL 9,833,407 10,116,010 6,008,536 6,033,845 Diamond Street Venture Philadelphia, PA 2,193,006 2,278,785 3,031,298 3,043,845 Papillion Heights Apartments L.P. Papillion, NE 1,856,525 1,914,708 1,032,976 1,050,035 Hill Top Homes Apartments L.P. Arlington, TX 7,055,930 7,262,847 3,695,985 3,743,825 Palm Beach Apartments, Ltd. (Summer Creek Villas) West Palm Beach, FL 35,498,673 36,521,852 26,750,000 26,750,000 Brookland Park Plaza L.P. Richmond, VA 5,187,960 5,434,248 2,519,227 2,536,505 Compton Townhouses L.P. Cincinnati, OH 1,915,004 2,044,205 1,390,477 1,406,633 ----------- ----------- ----------- ----------- $67,515,910 $69,725,324 $46,378,992 $46,529,512 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(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. The investment in property relating to the Diamond Street Venture was reduced by $2,700,000 as of March 31, 1995 representing a provision for loss on impairment of the asset. E. Mortgage Notes Payable Mortgage notes are collateralized (on a recourse basis) 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 consolidated, and thereafter are as follows: 1996 $ 290,817 1997 461,764 1998 508,232 1999 559,335 2000 616,491 Thereafter 43,942,353 ----------- $46,378,992 ----------- -----------
Mortgage notes consist of both first mortgages and support loans (second and third mortgages). First mortgages amounting to $41,438,992 bear interest at rates ranging from 6.25% to 10.75% and have final 21 maturities ranging from September 1, 2006 to May 1, 2031. First mortgages include $26,750,000 in the form of a guaranteed bond bearing interest at 10.451% (including a .375% service fee payable to an affiliate of the Local General Partner) maturing on June 20, 2008. The support loans include two loans totalling $2,440,000 maturing on May 1, 2016 and December 15, 2029, the latter of which bears interest at 1%, and the former being non-interest bearing, and a $2,500,000 loan bearing interest at a maximum rate of 9% and maturing on January 16, 2005. The $2,500,000 loan includes a base interest rate of 3% and an additional interest rate of 6%. The base interest rate is payable annually from Project Income, as defined in the loan agreement, and can be deferred if Project Income is inadequate. The additional interest is payable from Project Income, if available, and only after payment of a cumulative annual 12% return on capital to the limited partners of the Local Partnership. Currently, only the base interest rate is being paid; however, the additional interest of 6% continues to be accrued in the accompanying consolidated financial statements. At March 31, 1996, the estimated fair value of the mortgage notes payable was approximately $53,000,000. These estimates are 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 necessarily indicative of the amounts that the Local Partnerships would pay upon the maturity or disposition of the loans. F. Related Parties The General Partner and its affiliates 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 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. These costs and expenses were:
Year ended March 31 ---------------------------------- 1996 1995 1994 -------- -------- -------- Management fees $260,865 $342,676 $342,676 General and administrative 88,541 75,080 93,422 -------- -------- -------- $349,406 $417,756 $436,098 -------- -------- -------- -------- -------- --------
A portion of the management fees paid to the General Partner is remitted to an affiliate of the Local General Partner of five of the Local Partnerships. The General Partner deferred its management fee as of January 1, 1995; therefore, $345,360 is included in due to General Partner and affiliates as of March 31, 1996. PBSLP acts as a special limited partner of each Local Partnership and is entitled to receive up to $2,750 per year from each Local Partnership as a local administrative fee. For each of the years ended March 31, 1996, 1995 and 1994, $15,250 in fees were incurred; however, no fees have been paid to date. The Partnership maintains an account with the Prudential Tax Free Money Fund, an affiliate of PBP, for investment of its available cash in short-term instruments. Prudential Securities Incorporated (``PSI''), an affiliate of PBP, owned 56 BUC$ at March 31, 1996. 22 G. 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. Additionally, six of the Local Partnerships are managed by the Local General Partner or its affiliates. The costs were:
Year ended March 31 ---------------------------------- 1996 1995 1994 -------- -------- -------- Interest $ 69,280 $ 78,417 $108,511 Management fees 394,719 374,564 444,217 -------- -------- -------- $463,999 $452,981 $552,728 -------- -------- -------- -------- -------- --------
Due to 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. During the year ended March 31, 1996, Summer Creek Villas received from its Local General Partner a $255,000 operating deficit guaranty payment as well as a $100,000 working capital advance. The Local General Partner elected to treat the operating deficit guaranty payment as non-repayable and recorded the amount as other income. The $100,000 working capital advance was recorded as due to general partners and affiliates of local partnerships. During the year ended March 31, 1995, $733,132 was received under these operating deficit guaranty agreements and recorded as due to general partners and affiliates of local partnerships. As of March 31, 1996, two properties were still subject to an operating deficit guaranty. At March 31, 1996 and 1995, construction costs of $605,358 were payable to an affiliate of one of the Local General Partners. At March 31, 1996 and 1995, development fees of $1,579,709 were payable to various Local General Partners. H. Damage from Hurricane Andrew On August 24, 1992, Cutler Canal II (``Cutler''), a property located in Miami, Florida, suffered substantial damage from Hurricane Andrew which caused normal rent operations to cease as of that date. Cutler was rebuilt with insurance proceeds totalling approximately $5,396,000. These proceeds were placed in an escrow account controlled by the first mortgage holder and paid to the construction contractor, an affiliate of the Local General Partner, during reconstruction. In addition, Cutler was covered by business interruption insurance which provided for reimbursement of operating costs plus a normal operating profit margin during the reconstruction period. During the year ended March 31, 1994, approximately $405,000 was recognized as other income under this coverage. Reconstruction was completed by August 1993 and occupancies have stabilized. I. Contingencies By order of the Judicial Panel on Multidistrict Litigation dated April 14, 1994, a number of purported class actions then pending in various federal district courts were transferred to a single judge of the United States District Court for the Southern District of New York and consolidated for pretrial proceedings under the caption In re Prudential Securities Incorporated Limited Partnerships Litigation (MDL Docket 1005). On June 8, 1994, plaintiffs in the transferred cases filed a complaint that consolidated the previously filed complaints and named as defendants, among others, PSI, certain of its present and former employees and PBP. The Partnership was not named a defendant in the consolidated complaint, but the name of the Partnership was listed as being among the limited partnerships at issue in the case. On August 9, 1995, PBP, PSI and other Prudential defendants entered into a Stipulation and Agreement of Partial Compromise and Settlement with legal counsel representing plaintiffs in the consolidated actions. The court preliminarily approved the settlement agreement by order dated August 29, 1995 and, following a hearing held November 17, 1995, found that the agreement was fair, reasonable, adequate and in the best interests of the plaintiff class. The court gave final approval to the settlement, certified a class of purchasers of specific limited partnerships, including the Partnership, released all settled claims by members of the class against the PSI settling defendants and permanently barred and enjoined class members from 23 instituting, commencing or prosecuting any settled claim against the released parties. The full amount due under the settlement agreement has been paid by PSI. 24 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Prudential-Bache Tax Credit Properties L.P. (the ``Partnership'') invested in eight Local Partnerships that are owners of low-income multi-family residential complexes. The Local Partnerships are operated in accordance with the low-income housing rules and regulations in order to protect the related tax credits. The Partnership's primary sources of funds are rental revenues (which are fully utilized at the property level) and, to a lesser extent, interest earned on working capital reserves. A working capital reserve (approximately $210,000 at March 31, 1996) is maintained to fund operations and contingencies of the Partnership. The working capital reserve is invested in a tax-free money fund. Based on the current level of the Partnership's working capital reserve, the General Partner has deferred the collection of its management fee commencing with the three month period ended March 31, 1995. At the Local Partnership level, some Local General Partners and/or their affiliates have made guaranties with respect to the Local Partnerships which, under certain circumstances, require their funding cash flow deficits pursuant to deficit guaranty agreements, the majority of which are unsecured. The Local Partnerships have received funds from the Papillion Heights, Hubbard's Ridge, Hill Top Homes and Summer Creek Villas Local General Partners under these agreements. The Local Partnerships have generated net operating income before debt service of approximately $4,914,000, $4,043,000 and $3,766,000 for each of the three years ended March 31, 1996, 1995 and 1994, respectively. Debt service payments (interest and principal) made during the same periods approximated $4,477,000, $4,303,000 and $4,265,000, respectively. The Local Partnerships received approximately $255,000, $733,000 and $520,000 from operating deficit and development deficit guarantees during each respective year. During the year ended March 31, 1996, Summer Creek Villas received from its Local General Partner a $255,000 operating deficit guaranty payment as well as a $100,000 working capital advance. The Local General Partner elected to treat the operating deficit guaranty payment as non-repayable and recorded the amount as other income. In addition, Brookland Park Plaza currently has a loan outstanding for $618,000 with the Virginia Housing Development Authority. This loan is non-interest bearing and is forgiven at the rate of 25% per year commencing with the year ended March 31, 1996, assuming that the Local Partnership complies with all conditions as set forth in the loan agreement. Accordingly, $155,000 was recorded as other income for the year ended March 31, 1996. Cutler Canal II fully repaid the advance previously received from the Local General Partner with a payment of $110,000 during the year ended March 31, 1995 offset by an additional loan for Papillion Heights for $4,000. For the year ended March 31, 1994, Cutler Canal II and Summer Creek Villas repaid advances and Hill Top Homes took an additional loan. 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 1996 vs. Fiscal 1995 Rental income increased $362,000 for the year ended March 31, 1996 as compared to the same period in 1995 primarily due to increases of $221,000 and $33,000 at Summer Creek Villas and Hubbard's Ridge, respectively, as a result of higher rental rates. Additionally, rental income at Hill Top Homes increased $69,000 as a result of higher average occupancies. Other income increased $372,000 for the year ended March 31, 1996 as compared to the same period in 1995. For an explanation of the variance, see the Liquidity and Capital Resources section. Operating expenses increased $63,000 for the year ended March 31, 1996 as compared to the same period in 1995 primarily due to increases in utilities and bad debt expense at Hill Top Homes. 25 Repairs and maintenance expense decreased $97,000 for the year ended March 31, 1996 as compared to the same period in 1995 primarily due to lower property maintenance and carpet replacement expenses at Summer Creek Villas of $133,000 partially offset by an increase of $42,000 at Hill Top Homes primarily as a result of carpet replacement costs. General and administrative expenses decreased $49,000 for the year ended March 31, 1996 as compared to the same period in 1995 primarily due to lower professional fees at Summer Creek Villas. Partnership management fees decreased $82,000 for the year ended March 31, 1996 as compared to the same period in 1995 as a result of a reversal of an accrual from prior periods. Fiscal 1995 vs. Fiscal 1994 Rental income increased $603,000 for the year ended March 31, 1995 as compared to the same period in 1994. This variance was primarily due to an increase of $469,000 at Cutler Canal II resulting from a full year of rental activities and an increase of $101,000 at Hubbard's Ridge as a result of higher occupancies and rental rates. The hurricane damage at Cutler Canal II affected rental operations through August 1993. See Note H to the consolidated financial statements for additional information. Other income decreased $804,000 for the year ended March 31, 1995 as compared to the same period in 1994. This decrease was primarily due to the $484,000 development deficit guaranty payment from Summer Creek Villas and $405,000 of business interruption insurance proceeds from Cutler Canal II received during 1994. As previously discussed, Cutler Canal II recorded rental income from a full year of operations during 1995. Interest income decreased $28,000 for the year ended March 31, 1995 as compared to the same period in 1994 due to lower average cash balances and the non-recurring interest earned on cash for reconstruction at Cutler Canal II in 1994. Operating expenses decreased $366,000 for the year ended March 31, 1995 as compared to the same period in 1994 primarily due to the decrease in marketing and advertising expenses at Summer Creek Villas and Cutler Canal II. A non-recurring marketing effort was made during the prior year at Summer Creek Villas to improve occupancies. Additionally, increased marketing costs were incurred during 1994 at Cutler Canal II to restore occupancies to those before Hurricane Andrew. Professional fees at Cutler Canal II, Hill Top Homes and Summer Creek Villas decreased in 1995 as compared to 1994. Taxes and insurance increased $131,000 for the year ended March 31, 1995 as compared to the same period in 1994. This variance was due to an insurance rate increase at Cutler Canal II and Summer Creek Villas and higher taxes at Cutler Canal II due to resumption of operations. This increase was offset by decreases at Hubbard's Ridge and Hill Top Homes due to lower insurance rates and lower real estate taxes resulting from successful appeals of the assessed property values. Repairs and maintenance increased $156,000 for the year ended March 31, 1995 as compared to the same period in 1994. This increase was primarily due to carpet cleaning and general property maintenance at Summer Creek Villas and Cutler Canal II. A provision for loss on impairment of assets of $2,700,000 was recorded as of March 31, 1995 relating to the Partnership's investment in Diamond Street. See Notes B and D to the consolidated financial statements for additional information. 26 Property information The Partnership currently holds interests in eight Local Partnerships. The following schedule gives specific details about the related Properties.
PARTNERSHIP'S GROSS CARRYING LOW-INCOME VALUE OF RENTS OCCUPANCY HOUSING TAX PROPERTY AT AS OF RATE AT CREDIT FOR THE MARCH 31, NUMBER DECEMBER 31, DECEMBER 31, YEAR ENDED PROPERTY (a) 1996 OF UNITS 1995 1995(b) DECEMBER 31, 1995 - - ------------------------------- ----------------- --------- ------------ ------------ ----------------- RMB Limited Partnership (Hubbard's Ridge) Garland, TX $ 4,990,526 196 $ 370-$534 91% $ 395,768 Cutler Canal II Associates, Ltd. Miami, FL 11,124,427 216 347-604 95 896,701 Diamond Street Venture Philadelphia, PA 2,870,124 48 461-529 100 282,288 Papillion Heights Apartments L.P. Papillion, NE 2,201,647 48 365-425 100 173,661 Hill Top Homes Apartments L.P. Arlington, TX 8,103,088 171 442-590 95 616,546 Palm Beach Apartments, Ltd. (Summer Creek Villas) West Palm Beach, FL 40,410,117 770 471-642 94 2,241,161 Brookland Park Plaza L.P. Richmond, VA 6,443,630 77 511 97 429,237 Compton Townhouses L.P. Cincinnati, OH 2,445,632 39 585 97 205,620 ----------------- ----------------- $78,589,191 $ 5,240,982 ----------------- ----------------- ----------------- -----------------
(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) Occupancies are calculated by dividing occupied units by total available units. There were no significant changes in occupancies at the above properties as of June 2, 1996 except for a decrease to 90% at Diamond Street. Net operating income before debt service and development deficit guaranty payments of the Local Partnerships for each of the years in the three year period ended March 31, 1996 was as follows:
1996 1995 1994 ---------- ---------- ---------- Hubbard's Ridge $ 390,000 $ 260,000 $ 143,000 Cutler Canal II 560,000 630,000 706,000 Diamond Street 102,000 60,000 63,000 Papillion Heights 214,000 106,000 94,000 Hill Top Homes 357,000 381,000 314,000 Summer Creek Villas 2,793,000 2,211,000 2,047,000 Brookland Park Plaza 351,000 242,000 258,000 Compton Townhouses 147,000 153,000 141,000 ---------- ---------- ---------- $4,914,000 $4,043,000 $3,766,000 ---------- ---------- ---------- ---------- ---------- ----------
* * * * 27 Peck Slip Station BULK RATE P.O. Box 2016 U.S. POSTAGE New York, NY 10272 PAID Automatic Mail CREDIT1/171801 EX-27 3 ART. 5 FDS FOR 4TH QUARTER 10-K
5 The Schedule contains summary financial information extracted from the financial statements for P-B Tax Credit Properties, L.P. and is qualified in its entirety by reference to such financial statements 0000850184 P-B Tax Credit Properties, L.P. 1 MAR-31-1996 APR-1-1995 MAR-31-1996 12-MOS 1,625,196 0 0 0 0 5,429,009 78,589,191 (11,073,281) 72,944,919 52,959,712 0 0 0 0 0 72,944,919 0 9,795,121 0 12,382,514 0 0 4,448,986 (2,166,249) (2,166,249) 0 0 0 0 (2,166,249) (56.25) 0
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