-----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, E4gozwOHgNId7XK3CwORoOYO4kzHdu7oQxLJJ+0oTl6LtBXYjgB0qPSRBNdnIuK6 Q4OSz9uDFmzrpe5rqKEbMw== 0000898733-97-000650.txt : 19970701 0000898733-97-000650.hdr.sgml : 19970701 ACCESSION NUMBER: 0000898733-97-000650 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970630 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PRUDENTIAL BACHE TAX CREDIT PROPERTIES LP CENTRAL INDEX KEY: 0000850184 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [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: 97632867 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, 1997 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 incorporation or organization) (I.R.S. Employer 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, 1997 is incorporated by reference into Parts 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............................................................... 14
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 Properties. These investments were made with proceeds from the initial sale of 38,125 Beneficial Unit Certificates ('BUC$'). The Registrant's fiscal year for tax and financial reporting purposes ends on December 31 and March 31, respectively. The primary objectives of the Registrant are to provide the limited partners with low-income housing tax credits allowed under Section 42 of the Internal Revenue Code of 1986, as amended ('Housing Tax Credits') over the credit period for each Property in which the Registrant has invested and to a lesser extent, 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 43.8%, 47.5% and 47.9% during the years ended March 31, 1997, 1996 and 1995, 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, 1997. 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. On December 19, 1996, PBP and Related Capital Company ('RCC') entered into an agreement for the purchase by RCC or its affiliates of PBP's general partner interests in the Registrant and certain other associated interests. The agreement is subject to numerous conditions including the settlement of the class action litigation (In re Prudential Securities Inc. Limited Partnerships Litigation, MDL No. 1005) (the 'Class Action') against affiliates of RCC and the approval of the sale and withdrawal of PBP as the sole general partner of the Registrant by the court overseeing the Class Action. Following consummation of the transaction, RCC or its affiliate will become the general partner of the Registrant. On December 31, 1996, the court overseeing the Class Action issued a preliminary approval order with respect to the settlement of the Class Action, which provides, in part, that pending final approval of the settlement of the Class Action, class members (including the limited partners and unitholders (collectively, the 'Limited Partners') of the Registrant) are prohibited from, among other things, transferring their partnership interests unless the transferee agrees to be bound by the terms of the settlement of the Class Action. There can be no assurance that the conditions to the closing of the proposed transaction will be satisfied nor as to the time frame in which a closing may occur. In June 1997, an Information Statement was mailed to Limited Partners of record as of December 24, 1996 advising them of these proposed changes together with a Notice of the Class Action and the terms of the settlement with RCC in the Class Action. A hearing will be held on August 28, 1997 in the U.S. Courthouse, 40 Centre Street, New York, New York, 10007, to determine the reasonableness and fairness of the settlement. Competition The General Partner has formed various entities to engage in businesses that may be competitive with the Registrant. The Registrant's business is affected by competition to the extent that the underlying Properties from which it derives tax credits may be subject to competition relating to rental rates and amenities from comparable neighboring properties. Employees The Registrant has no employees. Management and administrative services for the Registrant are performed by the General Partner and its affiliates pursuant to the Partnership Agreement. See Notes C and F to the consolidated financial statements in the Registrant's Annual Report to Limited Partners for the year ended March 31, 1997 ('Registrant's Annual Report') which is filed as an exhibit hereto. Pending Legislation The United States Department of Housing and Urban Development ('HUD') previously released a proposal entitled the American Community Partnerships Act ('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 that could affect the Local Partnerships 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 payments would be converted to a tenant-based voucher system. Any Federal Housing Administration ('FHA') insured debt would then be 'marked-to market', that is, revalued in light of the reduced income stream. Several industry sources have 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 owners such as the limited partners in the Partnership. Legislative relief has been proposed to exempt 'marked-to-market' debt from cancellation of indebtedness income treatment. At present, there are several 4 bills pending in Congress to address this tax relief issue. Additionally, in the interim, HUD has agreed to annual extensions of any expiring project-based Section 8 contracts, but there is no guarantee that such extensions will be available in the future. Item 2. Properties As of March 31, 1997, 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 16, 1997 JUNE 16, 1997 DECEMBER 31, 1996 - -------------------------------- --------- ------------- -------------- ----------------- RMB Limited Partnership (Hubbard's Ridge) Garland, TX 196 $385-$549 92% $ 395,768 Cutler Canal II Associates, Ltd. Miami, FL 216 347-604 93 896,701 Diamond Street Venture Philadelphia, PA 48 476-536 96 282,288 Papillion Heights Apartments L.P. Papillion, NE 48 370-440 100 173,661 Hill Top Homes Apartments Limited Partnership Arlington, TX 171 460-660 96 616,546 Palm Beach Apartments, Ltd. (Summer Creek Villas) West Palm Beach, FL 770 519-708 85 2,241,161 Brookland Park Plaza Limited Partnership Richmond, VA 77 511 99 429,237 Compton Townhouses Limited Partnership Cincinnati, OH 39 615 100 205,620 ----------------- $ 5,240,982 ----------------- ----------------- (a) At March 31, 1997, 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 5 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. 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 None 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 1, 1997, there were 2,259 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$. In addition, as noted in Item 1 Business above, pending final approval of the settlement of the Class Action, limited partners are prohibited from transferring their partnership interests unless the transferee agrees to be bound by the terms of the settlement of the Class Action. Consequently, holders of BUC$ may not be able to liquidate their investments in the event of an emergency or for any other reason. 6 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. 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 25 of the Registrant's Annual Report which is filed as an exhibit hereto.
Year ended March 31, ------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ----------- ----------- ----------- ----------- ----------- Rental and other income $ 9,775,005 $ 9,783,022 $ 9,031,174 $ 9,212,457 $ 8,938,787 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Interest income $ 41,291 $ 49,257 $ 47,693 $ 75,242 $ 93,419 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Interest expense $ 4,428,530 $ 4,448,986 $ 4,474,229 $ 4,462,589 $ 4,236,927 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Depreciation and amortization expense $ 2,517,547 $ 2,549,449 $ 2,640,262 $ 2,615,469 $ 2,692,891 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Provision for loss on impairment of assets $ -- $ -- $ 2,700,000 $ -- $ -- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Loss before minority interest $(2,920,508) $(2,587,393) $(6,271,864) $(3,341,362) $(3,415,486) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Minority interest in loss of local partnerships $ 409,993 $ 421,144 $ 608,088 $ 496,042 $ 476,756 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net loss $(2,510,515) $(2,166,249) $(5,663,776) $(2,845,320) $(2,938,730) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net loss per limited partner BUC $ (65.19) $ (56.25) $ (147.07) $ (73.89) $ (76.31) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total assets $70,502,375 $72,944,919 $76,174,392 $81,370,985 $90,042,295 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Mortgage notes payable $46,099,028 $46,387,992 $46,529,512 $46,661,471 $46,797,027 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This information is incorporated by reference to pages 26 through 28 of the Registrant's Annual Report which is filed as an exhibit hereto. Item 8. Financial Statements and Supplementary Data The consolidated financial statements are incorporated by reference to pages 2 through 25 of the Registrant's Annual Report which is filed as an exhibit hereto. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None PART III Item 10. Directors and Executive Officers of the Registrant There are no directors or executive officers of the Registrant. The Registrant is managed by the General Partner. The Registrant, the Registrant's General Partner and its directors and executive officers, and any persons holding more than ten percent of the Registrant's BUC$ are required to report their initial ownership of such 7 BUC$ and any subsequent changes in that ownership to the Securities and Exchange Commission on Forms 3, 4 and 5. Such executive officers, directors and persons who own greater than ten percent of the Registrant's BUC$ are required by Securities and Exchange Commission regulations to furnish the Registrant with copies of all Forms 3, 4 and 5 they file. All of these filing requirements were satisfied on a timely basis. In making these disclosures, the Registrant 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 Brian J. Martin 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. Senior Vice President Piskorowski Frank W. Giordano Director Nathalie P. Maio Director
BRIAN J. MARTIN, age 46, 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. Martin also serves in various capacities for other affiliated companies. Mr. Martin joined PSI in September 1980. Mr. Martin is a member of the Pennsylvania Bar. BARBARA J. BROOKS, age 48, 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 52, 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 54, is a Senior 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 55, is a Director of PBP. He is a Senior Vice President and Senior Counsel 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 46, 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. Thomas F. Lynch, III ceased to serve as President, Chief Executive Officer, Chairman of the Board of Directors and Director of Prudential-Bache Properties, Inc. effective May 2, 1997. Effective May 2, 1997, Brian J. Martin was elected President, Chief Executive Officer, Chairman of the Board of Directors and Director of Prudential-Bache Properties, Inc. 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 1, 1997, no director or executive officer of PBP owns directly or beneficially any interest in the voting securities of PBP. As of June 1, 1997, no director or executive officer of PBP owns directly or beneficially any of the BUC$ issued by the Registrant. As of June 1, 1997, 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, 1997 and 1996 18 Consolidated Statements of Operations--Three years ended March 31, 1997 19 Consolidated Statements of Changes in Partners' Capital--Three years ended March 31, 1997 19 Consolidated Statements of Cash Flows--Three years ended March 31, 1997 20 Notes to Consolidated Financial Statements 21 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, 1997 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, 1997 (with the exception of the information and data incorporated by reference to Items 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 Current Report on Form 8-K dated December 19, 1996, as filed with the Securities and Exchange Commission on January 10, 1997, relating to Item 5 regarding the entering into of an agreement for the sale of the General Partner's interests in the Registrant and certain other associated interests.
- ------------------ * 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. 10 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, 1997. 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 11, 1997 11 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES Schedule III--Real Estate and Accumulated Depreciation March 31, 1997
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 $ 1,934,623 $ 107,237 $ 965,136 $ 3,732,973 $ 185,180 $ 107,237 Cutler Canal II Associates, Ltd.(2) Miami, FL 5,982,895 807,071 1,388,350 8,861,278 67,728 807,071 Diamond Street Venture(3) Philadelphia, PA 3,017,829 9,729 234,465 2,352,712 273,218 9,729 Papillion Heights Apartments L.P.(1) Papillion, NE 1,033,084 63,329 1,816,598 255,218 66,552 63,329 Hill Top Homes Apartments L.P.(1) Arlington, TX 3,643,632 553,841 3,690,150 3,542,729 316,368 553,841 Palm Beach Apartments, Ltd.(1) (Summer Creek Villas) West Palm Beach, FL 26,614,668 2,396,876 10,578,563 25,557,883 1,876,795 2,396,876 Brookland Park Plaza L.P.(1) Richmond, VA 2,499,200 50,000 109,850 5,907,565 376,165 50,000 Compton Townhouses L.P.(1) Cincinnati, OH 1,373,097 17,550 476,708 1,923,171 28,203 17,550 ------------ ---------- ------------ ------------ -------------- ---------- $46,099,028 $4,005,633 $19,259,820 $52,133,529 $3,190,209 $4,005,633 ------------ ---------- ------------ ------------ -------------- ---------- ------------ ---------- ------------ ------------ -------------- ---------- Column E Column F Column G Column H Column I ------------------------- ------------ ------------- ---------- ------------------------ Gross Amounts At Which Life on which Carried At Close Of Period(5) Depreciation in ---------------------------- Date Latest Consolidated Buildings 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 $1,192,388 5/90 12/89 30 Cutler Canal II Associates, Ltd.(2) Miami, FL 10,317,356 11,124,427 1,573,623 1/91 1/90 40 Diamond Street Venture(3) Philadelphia, PA 2,860,395 2,870,124 789,098 12/90 1/90 40 Papillion Heights Apartments L.P.(1) Papillion, NE 2,138,318 2,201,647 398,418 12/90 4/90 27.5 Hill Top Homes Apartments L.P.(1) Arlington, TX 7,549,247 8,103,088 1,254,076 12/90 6/90 30 Palm Beach Apartments, Ltd.(1) (Summer Creek Villas) West Palm Beach, FL 38,013,241 40,410,117 5,934,623 8/91 6/90 40 Brookland Park Plaza L.P.(1) Richmond, VA 6,393,630 6,443,630 1,491,822 12/90 7/90 27.5 Compton Townhouses L.P.(1) Cincinnati, OH 2,428,082 2,445,632 649,784 6/92 1/92 40 ------------ ----------- ----------- $74,583,558 $78,589,191 $13,283,832 ------------ ----------- ----------- ------------ ----------- -----------
(1) First mortgage (2) Includes first and second mortgages (3) Includes first, second and third mortgages (4) At March 31, 1997, 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, 1996 is $80,495,274. (6) The Registrant 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. 12 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES SCHEDULE III--Real Estate and Accumulated Depreciation (Continued)
Year ended March 31 --------------------------------------------- 1997 1996 1995 ----------- ----------- --------------- NOTE A--RECONCILIATIONS AMOUNT AT WHICH REAL ESTATE IS CARRIED: Balance at beginning of period......................... $78,589,191 $78,589,191 $81,195,661 Additions (deductions) during the period Improvements...................................... -- -- 93,530 Write-downs during year (1)....................... -- -- (2,700,000) ----------- ----------- --------------- Balance at end of period............................... $78,589,191 $78,589,191 $78,589,191 ----------- ----------- --------------- ----------- ----------- --------------- ACCUMULATED DEPRECIATION: Balance at beginning of period......................... $11,073,281 $ 8,863,867 $ 6,594,015 Depreciation...................................... 2,210,551 2,209,414 2,269,852 ----------- ----------- --------------- Balance at end of period............................... $13,283,832 $11,073,281 $ 8,863,867 ----------- ----------- --------------- ----------- ----------- ---------------
- --------------- (1) Refer to Notes B and D to the consolidated financial statements for additional information. 13 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 30, 1997 ---------------------------------------- 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/ Brian J. Martin Date: June 30, 1997 ---------------------------------------- Brian J. Martin President, Chief Executive Officer, Chairman of the Board of Directors and Director By: /s/ Barbara J. Brooks Date: June 30, 1997 ---------------------------------------- Barbara J. Brooks Vice President-Finance and Chief Financial Officer By: /s/ Eugene D. Burak Date: June 30, 1997 ---------------------------------------- Eugene D. Burak Vice President By: /s/ Frank W. Giordano Date: June 30, 1997 ---------------------------------------- Frank W. Giordano Director By: /s/ Nathalie P. Maio Date: June 30, 1997 ---------------------------------------- Nathalie P. Maio Director 14 EX-13 2 ANNUAL REPORT March 31, 1997 - -------------------------------------------------------------------------------- Prudential-Bache Annual Tax Credit Report Properties L.P. PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. LETTER TO THE LIMITED PARTNERS FOR THE YEAR ENDED MARCH 31, 1997 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, 1997 and 1996 and the related consolidated statements of operations, changes in partners' capital and cash flows for the years ended March 31, 1997, 1996 and 1995. 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 $70,274,405 and $72,647,170 as of March 31, 1997 and 1996, respectively, and total revenues of $9,809,626, $9,821,070 and $9,061,869 for the years ended March 31, 1997, 1996 and 1995, 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 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, 1997 and 1996, and the results of their operations and their cash flows for the years ended March 31, 1997, 1996 and 1995, in conformity with generally accepted accounting principles. ANCHIN, BLOCK & ANCHIN LLP CERTIFIED PUBLIC ACCOUNTANTS New York, New York June 11, 1997 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, 1996 and 1995, 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, 1996. 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 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 RMB LIMITED PARTNERSHIP as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. DICKEY & WOLF, LLC Certified Public Accountants Harrisonville, MO January 27, 1997 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, 1996 and 1995, and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. REZNICK FEDDER & SILVERMAN Charlotte, North Carolina January 20, 1997 4 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 the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the 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 the years then ended, in conformity with generally accepted accounting principles. REZNICK FEDDER & SILVERMAN Charlotte, North Carolina January 19, 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, 1996 and 1995, and the related statements of loss, 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, 1996 and 1995, 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 14, 1997 6 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 7 INDEPENDENT AUDITORS' REPORT To The Partners Papillion Heights Apartments, L.P. (A Limited Partnership) Springfield, Missouri We have audited the accompanying balance sheets of Papillion Heights Apartments, L.P. (a limited partnership), as of December 31, 1996 and 1995, and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. COHEN, COVEY AND SCHULTZ, P.C. January 31, 1997 8 INDEPENDENT AUDITORS' REPORT To The Partners of Papillion Apartments, L.P. We have audited the accompanying balance sheets 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 results 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 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, 1996 and 1995, and the related statements of operations, partners' equity/(deficit) and cash flows for each of the three years in the period ended December 31, 1996. 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 HILL TOP HOMES APARTMENTS LIMITED PARTNERSHIP as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. DICKEY & WOLF, LLC Certified Public Accountants Harrisonville, MO January 27, 1997 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, 1996 and 1995, and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. REZNICK FEDDER & SILVERMAN Charlotte, North Carolina January 24, 1997, Except for Note F, as to which the date is February 28, 1997 11 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 the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the 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 the years then ended, in conformity with generally accepted accounting principles. REZNICK FEDDER & SILVERMAN Charlotte, North Carolina January 19, 1996 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, 1996, 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, 1996, 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 and the 'Consolidated Audit Guide for Audits of HUD Programs,' we have also issued reports dated February 6, 1997 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 6, 1997 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 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 14 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 15 INDEPENDENT AUDITORS' REPORT 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, 1996 and 1995, and the related statements of operations, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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 Compton Townhouses Limited Partnership (An Ohio Limited Partnership), as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. SPAETH & BATTERBERRY, LTD. February 3, 1997 16 INDEPENDENT AUDITORS' REPORT 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, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with 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 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 the years then ended, in conformity with generally accepted accounting principles. SPAETH & BATTERBERRY, LTD. January 24, 1996 17 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, ---------------------------- 1997 1996 - --------------------------------------------------------------------------------------------------- ASSETS Investment in property: Land $ 4,005,633 $ 4,005,633 Buildings and improvements 74,583,558 74,583,558 Accumulated depreciation (13,283,832) (11,073,281) ------------ ----------- Net investment in property 65,305,359 67,515,910 Cash and cash equivalents 839,134 1,012,131 Cash and cash equivalents held in escrow 903,486 613,065 Deferred financing costs, net 3,136,727 3,386,089 Organizational costs, net 11,422 69,056 Other assets 306,247 348,668 ------------ ----------- Total assets $ 70,502,375 $72,944,919 ------------ ----------- ------------ ----------- LIABILITIES AND PARTNERS' CAPITAL Liabilities Mortgage notes payable $ 46,099,028 $46,387,992 Accrued interest payable 1,266,943 1,044,112 Other accrued expenses and liabilities 1,265,302 1,346,458 Due to general partners and affiliates of local partnerships 1,654,598 1,457,195 Development fees payable 1,579,709 1,579,709 Construction costs payable 605,358 605,358 Real estate taxes payable 118,195 87,289 Due to General Partner and its affiliates 848,543 451,599 ------------ ----------- Total liabilities 53,437,676 52,959,712 ------------ ----------- Minority interest in local partnerships 3,302,224 3,712,217 ------------ ----------- Contingencies Partners' capital (deficit) Limited partners (38,125 BUC$ issued and outstanding) 13,966,449 16,451,859 General partner (1 BUC issued and outstanding) (203,974) (178,869) ------------ ----------- Total partners' capital 13,762,475 16,272,990 ------------ ----------- Total liabilities and partners' capital $ 70,502,375 $72,944,919 ------------ ----------- ------------ -----------
- ------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated statements 18 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended March 31, ----------------------------------------- 1997 1996 1995 - ---------------------------------------------------------------------------------------------------- REVENUES Rental income $ 8,480,496 $ 8,796,928 $ 8,453,789 Other income 1,294,509 986,094 577,385 Interest income 41,291 49,257 47,693 ----------- ----------- ----------- 9,816,296 9,832,279 9,078,867 ----------- ----------- ----------- EXPENSES Interest 4,428,530 4,448,986 4,474,229 Depreciation and amortization 2,517,547 2,549,449 2,640,262 Operating and other 2,049,212 1,887,060 1,806,207 Taxes and insurance 1,210,641 1,180,035 1,165,434 Repairs and maintenance 1,399,907 1,299,154 1,396,627 General and administrative 356,553 349,069 398,312 Property management fees 481,839 445,054 426,984 Partnership management fees 292,575 260,865 342,676 Provision for loss on impairment of assets -- -- 2,700,000 ----------- ----------- ----------- 12,736,804 12,419,672 15,350,731 ----------- ----------- ----------- Loss before minority interest (2,920,508) (2,587,393) (6,271,864) Minority interest in loss of local partnerships 409,993 421,144 608,088 ----------- ----------- ----------- Net loss $(2,510,515) $(2,166,249) $(5,663,776) ----------- ----------- ----------- ----------- ----------- ----------- ALLOCATION OF NET LOSS Limited partners $(2,485,410) $(2,144,587) $(5,607,138) ----------- ----------- ----------- ----------- ----------- ----------- General partner $ (25,105) $ (21,662) $ (56,638) ----------- ----------- ----------- ----------- ----------- ----------- Net loss per limited partner BUC $ (65.19) $ (56.25) $ (147.07) ----------- ----------- ----------- ----------- ----------- -----------
- ------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
LIMITED GENERAL BUC$ PARTNERS PARTNER TOTAL - ----------------------------------------------------------------------------------------------------- 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 Net loss -- (2,485,410 ) (25,105 ) (2,510,515) ------ ------------ --------- ----------- Partners' capital (deficit)--March 31, 1997 38,126 $13,966,449 $(203,974) $13,762,475 ------ ------------ --------- ----------- ------ ------------ --------- -----------
- ------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated statements 19 PRUDENTIAL-BACHE TAX CREDIT PROPERTIES L.P. (a limited partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended March 31, ------------------------------------------- 1997 1996 1995 - ------------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net loss $(2,510,515) $ (2,166,249) $ (5,663,776) ----------- ------------ ------------ Adjustments to reconcile net loss to net cash provided by (used in) in operating activities: Depreciation and amortization 2,517,547 2,549,449 2,640,262 Minority interest in loss of local partnerships (409,993) (421,144) (608,088) Forgiveness of debt (154,500) (154,500) -- Decrease (increase) in cash held in escrow (290,421) 662,504 (147,951) Increase (decrease) in real estate taxes payable 30,906 (378,829) 305,023 Increase in accrued interest payable 222,831 54,071 236,961 Decrease (increase) in other assets 42,421 (172,003) 63,660 Increase (decrease) in other liabilities 667,691 (121,302) 37,881 Provision for loss on impairment of assets -- -- 2,700,000 ----------- ------------ ------------ Total adjustments 2,626,482 2,018,246 5,227,748 ----------- ------------ ------------ Net cash provided by (used in) operating activities 115,967 (148,003) (436,028) ----------- ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Investments in property -- -- (93,530) ----------- ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Payments on mortgage notes (288,964) (141,520) (131,959) Advances from local general partners 100,000 100,000 733,132 Payments for loans from local general partners (100,000) -- (105,767) ----------- ------------ ------------ Net cash provided by (used in) financing activities (288,964) (41,520) 495,406 ----------- ------------ ------------ Net decrease in cash and cash equivalents (172,997) (189,523) (34,152) Cash and cash equivalents at beginning of year 1,012,131 1,201,654 1,235,806 ----------- ------------ ------------ Cash and cash equivalents at end of year $ 839,134 $ 1,012,131 $ 1,201,654 ----------- ------------ ------------ ----------- ------------ ------------ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 4,136,059 $ 4,325,996 $ 4,170,797 ----------- ------------ ------------ ----------- ------------ ------------
- ------------------------------------------------------------------------------- The accompanying notes are an integral part of these consolidated statements 20 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') 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, 1997, the Partnership has investments in eight Local Partnerships. On December 19, 1996, PBP and Related Capital Company ('RCC') entered into an agreement for the purchase by RCC or its affiliates of PBP's general partner interests in the Partnership and certain other associated interests. The agreement is subject to numerous conditions including the settlement of the class action litigation (In re Prudential Securities Inc. Limited Partnerships Litigation, MDL No. 1005) (the 'Class Action') against affiliates of RCC and the approval of the sale and withdrawal of PBP as the sole general partner of the Partnership by the court overseeing the Class Action. Following consummation of the transaction, RCC or its affiliate will become the general partner of the Partnership. On December 31, 1996, the court overseeing the Class Action issued a preliminary approval order with respect to the settlement of the Class Action, which provides, in part, that pending final approval of the settlement of the Class Action, class members (including the limited partners and unitholders (collectively, the 'Limited Partners') of the Partnership) are prohibited from, among other things, transferring their partnership interests unless the transferee agrees to be bound by the terms of the settlement of the Class Action. There can be no assurance that the conditions to the closing of the proposed transaction will be satisfied nor as to the time frame in which a closing may occur. In June 1997, an Information Statement was mailed to Limited Partners of record as of December 24, 1996 advising them of these proposed changes together with a Notice of the Class Action and the terms of the settlement with RCC in the Class Action. A hearing will be held on August 28, 1997 in the U.S. Courthouse, 40 Centre Street, New York, New York, 10007, to determine the reasonableness and fairness of the settlement. 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 reclassed to conform with the current year's financial statement presentation. 21 Investment in property The impairment of properties to be held and used is determined to exist when estimated amounts recoverable through future operations on an undiscounted basis are below the properties' carrying value. If a property is determined to be impaired, it is recorded at the lower of its carrying value or its estimated fair value. As a result of this accounting policy, a $2,700,000 provision for loss on impairment of assets was recorded for the year ended March 31, 1995. No additional provisions were required for the years ended March 31, 1996 and 1997. The determination of estimated fair value is based not only upon future cash flows, which rely upon estimates and assumptions including expense growth, occupancy and rental rates, and tax credits, but also upon market capitalization and discount rates as well as other market indicators. 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. Cash and cash equivalents Cash and cash equivalents include money market funds whose cost approximates market value. Cash and cash equivalents held in escrow Cash and cash equivalents held in escrow include restricted funds held for payment of real estate taxes and insurance, tenant security deposits and replacement reserves. 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, 1997, 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. 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, 1997 and 1996 is $2,094,056 and $1,844,694, 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, 1997 and 1996 is $514,485 and $456,851, respectively. 22 Management fees Each individual property has a managing agent who performs the necessary functions in operating the property. The property management fee is equal to a percentage of the annual gross revenues of a property paid in consideration of the property management services provided (See Note 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 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) 1997 1996 1997 1996 - -------------------------------------- ----------- ----------- ----------- ----------- Apartment Complexes: RMB Limited Partnership (Hubbard's Ridge) Garland, TX $ 3,798,138 $ 3,975,405 $ 1,934,623 $ 1,950,493 Cutler Canal II Associates, Ltd. Miami, FL 9,550,804 9,833,407 5,982,895 6,008,536 Diamond Street Venture (b) Philadelphia, PA 2,081,026 2,193,006 3,017,829 3,031,298 Papillion Heights Apartments L.P. Papillion, NE 1,803,229 1,856,525 1,033,084 1,041,976 Hill Top Homes Apartments L.P. Arlington, TX 6,849,012 7,055,930 3,643,632 3,695,985 Palm Beach Apartments, Ltd. (Summer Creek Villas) West Palm Beach, FL 34,475,494 35,498,673 26,614,668 26,750,000 Brookland Park Plaza L.P. Richmond, VA 4,951,808 5,187,960 2,499,200 2,519,227 Compton Townhouses L.P. Cincinnati, OH 1,795,848 1,915,004 1,373,097 1,390,477 ----------- ----------- ----------- ----------- $65,305,359 $67,515,910 $46,099,028 $46,387,992 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(a) The Partnership holds a 66.5% interest in Summer Creek Villas, a 98% interest in Hubbard's Ridge, Hill Top Homes and Compton Townhouses and a 98.99% interest in Cutler Canal II, Diamond Street, Papillion Heights and Brookland Park Plaza. (b) The investment in property relating to the Diamond Street Venture was reduced by $2,700,000 as of March 31, 1995 representing a provision for loss on impairment of the asset. 23 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: 1997 $ 461,764 1998 508,232 1999 559,335 2000 616,491 2001 679,431 Thereafter 43,273,775 ----------- $46,099,028 ----------- -----------
Mortgage notes consist of both first mortgages and support loans (second and third mortgages). First mortgages amounting to $41,159,028 bear interest at rates ranging from 6.25% to 10.75% and have final maturities ranging from December 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 .125% 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, 1997 and 1996, the estimated fair values of the mortgage notes payable were approximately $51,700,000 and $52,500,000, respectively. These estimates were based upon the present value of expected cash flows discounted at rates currently available to the Local Partnerships for similar loans. Fair value estimates are made at a specific point in time, based on relevant market information, and are subjective in nature and involve uncertainties and matters of significant judgment. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Local Partnerships would pay upon 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. The costs and expenses incurred were:
Year ended March 31 ---------------------------------- 1997 1996 1995 -------- -------- -------- Management fees $292,575 $260,865 $342,676 Local administrative fees 51,979 15,250 15,250 General and administrative 83,514 88,541 75,080 -------- -------- -------- $428,068 $364,656 $433,006 -------- -------- -------- -------- -------- --------
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 has deferred the receipt of its management fees since January 1, 1995 and has deferred the receipt of the reimbursement of general and administrative costs (excluding printing costs) incurred on behalf of the Partnership since April 1, 1996. As of March 31, 1997, Due to General Partner and its affiliates includes $637,935 relating to management fees payable and $75,879 relating to reimbursement of general and administrative costs. 24 PBSLP acts as 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. As of March 31, 1997, $134,729 in fees have been accrued; however, no fees have been paid to date. The increased amount during the year ended March 31, 1997 reflects underaccruals from prior years. The local administrative fees are included in Property Management Fees. Pursuant to the agreement entered into by PBP and RCC on December 19, 1996 and subject to the conditions to the closing of the proposed transaction being satisfied, all amounts due to the General Partner as noted in the preceding two paragraphs (excluding printing costs of $8,149 as of March 31, 1997) will be forgiven by PBP (See Note A). The Partnership maintains an account with the Prudential Tax Free Money Fund, an affiliate of PBP, for investment of its available cash in short-term instruments. Prudential Securities Incorporated ('PSI'), an affiliate of PBP, owns 56 BUC$ at March 31, 1997. 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. Interest is accrued on certain loans made by two of the Local General Partners. Additionally, six of the Local Partnerships are managed by a Local General Partner or its affiliates. The costs were:
Year ended March 31 ---------------------------------- 1997 1996 1995 -------- -------- -------- Interest $ 69,280 $ 69,280 $ 78,417 Management fees 394,228 394,719 374,564 -------- -------- -------- $463,508 $463,999 $452,981 -------- -------- -------- -------- -------- --------
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 years ended March 31, 1997 and 1996, Summer Creek Villas received from its Local General Partner $778,000 and $255,000, respectively, of operating deficit guaranty payments. The Local General Partner elected to treat $678,000 of the amount received during the year ended March 31, 1997 and all of the amount received during the year ended March 31, 1996 as non-repayable advances and recorded the amounts as other income during the respective years. Additionally, during the year ended March 31, 1996, Summer Creek Villas received from its Local General Partner a $100,000 working capital advance which was repaid in January 1996. As of March 31, 1997, two properties, Summer Creek Villas and Papillion Heights, remain subject to an operating deficit guaranty. At March 31, 1997 and 1996, construction costs of $605,358 were payable to an affiliate of one of the Local General Partners. At March 31, 1997 and 1996, development fees of $1,579,709 were payable to various Local General Partners. 25 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 ($89,000 at March 31, 1997) 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 reduced level of the Partnership's working capital reserve, the General Partner has deferred the receipt of its management fee since January 1, 1995 and the reimbursement of general and administrative costs (excluding printing costs) incurred on behalf of the Partnership since April 1, 1996 (See Note F to the consolidated financial statements). At the Local Partnership level, certain 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. These operating deficit advances do not bear interest and are repayable by the Local Partnership in accordance with the respective Local Partnership agreement. As of March 31, 1997, there are still operating deficit guaranty agreements in effect at Summer Creek Villas and Papillion Heights. The Summer Creek Villas Local Partnership continues to experience severe cash flow deficits. The maximum funding obligation of the Local General Partner under the Summer Creek Villas operating deficit guaranty agreement which expired on December 31, 1996 was $3,392,000, of which $1,653,000 was funded through December 31, 1996. Of the total funded, the Local General Partner has elected to treat $933,000 as non-repayable advances. On February 28, 1997, the Local General Partner advanced Summer Creek Villas an additional $165,000 pursuant to the operating deficit guaranty agreement expiring December 31, 1996. The Local General Partner is also obligated to fund operating deficits during a second guaranty period commencing August 1996 and expiring July 1999. The maximum funding obligation during this second guaranty period is $924,000. Through June 1997, a total of $755,000 has been funded pursuant to this second guaranty period. As of March 31, 1997, the financial statements of the Partnership include $720,000 as 'Due to general partners and affiliates of local partnerships' under the Summer Creek Villas operating deficit guaranty agreement due to the three-month lag in recording the financial information of the Local Partnerships. The Papillion Heights operating deficit guaranty agreement is in effect until such date that the net operating income is sufficient to cover 115% of the debt service for twelve consecutive months, as defined. Of the $170,000 maximum funding obligation, $40,000 has been funded to date. The Partnership's financial statements as of March 31, 1997 also reflect payables of $150,000 under operating deficit guaranty agreements at Hubbard's Ridge and Hill Top Homes, which have expired. 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 in each of the years ended March 31, 1997 and 1996. The Local Partnerships have generated net operating income before debt service of $4,489,000, $4,816,000 and $4,043,000 for each of the three years ended March 31, 1997, 1996 and 1995, respectively. Debt service payments (interest and principal) made during the same periods were $4,425,000, $4,468,000 and $4,303,000, respectively. 26 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 1997 vs. Fiscal 1996 Rental income decreased $316,000 for the year ended March 31, 1997 as compared to 1996 primarily due to decreases of $225,000, $66,000 and $41,000 at Summer Creek Villas, Cutler Canal II and Diamond Street, respectively, due to lower occupancies. Other income (consisting primarily of application fees, forfeited security deposits and operating deficit guarantees) increased $308,000 for the year ended March 31, 1997 as compared to 1996. The variance was mainly due to the election by the Summer Creek Villas Local General Partner to treat $678,000 and $255,000 of the operating deficit guaranty payments it made to the Local Partnership for the years ended March 31, 1997 and 1996, respectively, as non-repayable advances. These amounts were recorded on the financial statements as other income during the respective years. This increase was offset by the decrease in other income at Papillion Heights of $106,000 mainly due to a $94,000 adjustment recorded in the year ended March 31, 1996 relating to an operating deficit guaranty agreement. Operating and other expenses increased $162,000 for the year ended March 31, 1997 as compared to 1996. The variance was primarily due to increases of $142,000 and $37,000 at Summer Creek Villas and Hubbard's Ridge, respectively, as a result of bad debt expense relating to uncollected rents. Repairs and maintenance increased $101,000 for the year ended March 31, 1997 as compared to 1996 primarily due to increases at Hubbard's Ridge, Cutler Canal II and Hill Top Homes of $47,000, $30,000 and $18,000, respectively, as a result of an increase in general maintenance and carpet replacement costs. Fiscal 1996 vs. Fiscal 1995 Rental income increased $343,000 for the year ended March 31, 1996 as compared to 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 $409,000 for the year ended March 31, 1996 as compared to 1995. The variance was mainly due to increases in other income at Summer Creek Villas, Brookland Park Plaza and Papillion Heights of $188,000, $155,000 and $104,000, respectively. The variance at Summer Creek Villas was mainly due to the election by its Local General Partner to treat the operating deficit guaranty payment of $255,000 it made to the Local Partnership for the year ended March 31, 1996 as a non-repayable advance. This amount was recorded on the financial statements as other income. No amount had been treated as a non-repayable advance in the prior year. At Brookland Park Plaza, an amount of $155,000 was recorded as other income due to the partial forgiveness of a non-interest bearing loan. See Liquidity and Capital Resources above for further information. The variance at Papillion Heights was mainly due to a $94,000 adjustment relating to an operating deficit guaranty agreement recorded in the year ended March 31, 1996. Operating expenses increased $81,000 for the year ended March 31, 1996 as compared to 1995 primarily due to increases in utilities and bad debt expense at Hill Top Homes. Repairs and maintenance expense decreased $97,000 for the year ended March 31, 1996 as compared to 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 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 1995 as a result of a reversal of an accrual from prior periods. 27 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 OCCUPANCY HOUSING TAX PROPERTY AT RATE AT CREDIT FOR THE MARCH 31, NUMBER DECEMBER 31, YEAR ENDED PROPERTY (a) 1997 OF UNITS 1996(b) DECEMBER 31, 1996 - ------------------------------- ----------------- --------- ------------ ----------------- RMB Limited Partnership (Hubbard's Ridge) Garland, TX $ 4,990,526 196 78% $ 395,768 Cutler Canal II Associates, Ltd. Miami, FL 11,124,427 216 84 896,701 Diamond Street Venture Philadelphia, PA 2,870,124 48 90 282,288 Papillion Heights Apartments L.P. Papillion, NE 2,201,647 48 92 173,661 Hill Top Homes Apartments L.P. Arlington, TX 8,103,088 171 91 616,546 Palm Beach Apartments, Ltd. (Summer Creek Villas) West Palm Beach, FL 40,410,117 770 80 2,241,161 Brookland Park Plaza L.P. Richmond, VA 6,443,630 77 100 429,237 Compton Townhouses L.P. Cincinnati, OH 2,445,632 39 97 205,620 ----------------- ----------------- $78,589,191 $ 5,240,982 ----------------- ----------------- ----------------- -----------------
(a) At March 31, 1997, 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 16, 1997 except for increases at Hubbard's Ridge and Cutler Canal II to 92% and 93%, respectively. Net operating income before debt service of the Local Partnerships for each of the years in the three-year period ended March 31, 1997 was as follows:
1997 1996 1995 ---------- ---------- ---------- Hubbard's Ridge $ 192,000 $ 292,000 $ 260,000 Cutler Canal II 471,000 560,000 630,000 Diamond Street 54,000 102,000 60,000 Papillion Heights 113,000 214,000 106,000 Hill Top Homes 328,000 357,000 381,000 Summer Creek Villas 2,796,000 2,793,000 2,211,000 Brookland Park Plaza 377,000 351,000 242,000 Compton Townhouses 158,000 147,000 153,000 ---------- ---------- ---------- $4,489,000 $4,816,000 $4,043,000 ---------- ---------- ---------- ---------- ---------- ----------
* * * * 28 OTHER INFORMATION The Partnership's Annual Report on Form 10-K filed with the Securities and Exchange Commission is available to limited partners without charge upon written request to: Prudential-Bache Tax Credit Properties L.P. c/o Prudential-Bache Properties, Inc. Client Services Department P.O. Box 2016 New York, New York 10272-2016 29 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-31-1997 APR-1-1996 MAR-31-1997 12-MOS 839,134 0 306,247 0 0 5,197,016 78,589,191 13,283,832 70,502,375 10,640,872 0 0 0 0 13,762,475 70,502,375 9,816,296 9,816,296 0 0 8,308,274 0 4,428,530 0 0 0 0 0 0 (2,510,515) (65.19) 0
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