10-K 1 v348909_10k.htm FORM 10-K

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-K

 

 

(Mark One)

 

þANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended March 31, 2013

 

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 0-13782

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

(Exact name of registrant as specified in its charter)

Delaware   13-3646846
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     
100 Church Street, New York, New York   10007
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code (212) 517-3700

 

Securities registered pursuant to Section 12(b) of the Act:

 

None

 

Securities registered pursuant to Section 12(g) of the Act:

 

Title of Class

Limited Partnership Interests and Beneficial Assignment Certificates

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  ¨   No  þ

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes ¨   No  þ

 

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  þ  No  ¨

 

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  þ  No  ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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.  þ

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company.  See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

 

Large accelerated filer  ¨   Accelerated filer  ¨
Non-accelerated filer  ¨  (Do not check if a smaller reporting company)   Smaller reporting company þ

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes  ¨   No  þ

 

The approximate aggregate book value of the voting and non-voting common equity held by non-affiliates of the Registrant as of September 30, 2012 was ($14,151,000) based on Limited Partner equity (deficit) as of such date.

 

Registrant’s voting and non-voting common equity is not publicly traded.

 

DOCUMENTS INCORPORATED BY REFERENCE

None

 

 

 

 
 

 

PART I

 

Item 1. Business.

 

General

 

Independence Tax Credit Plus L.P. II (the “Partnership”) is a limited partnership which was formed under the laws of the State of Delaware on February 11, 1992. The general partner of the Partnership is Related Independence Associates L.P., a Delaware limited partnership (the “General Partner”). The general partner of the General Partner is Related Independence Associates Inc., a Delaware corporation (“RIAI”). The ultimate parent of the General Partner is Centerline Holding Company (“Centerline”).

 

On January 19, 1993, the Partnership commenced a public offering (the “Offering”) of Beneficial Assignment Certificates (“BACs”) representing assignments of limited partnership interests in the Partnership (“Limited Partnership Interests”). The Partnership received $58,928,000 of gross proceeds from the Offering (the “Gross Proceeds”) from 3,475 investors (“BACs holders”). The Offering was terminated on April 7, 1994.

 

The Partnership’s business is primarily to invest as a limited partner in other partnerships (“Local Partnerships”, “subsidiaries” or “subsidiary partnership”) owning apartment complexes (“Apartment Complexes” or “Properties”) that are eligible for the low-income housing tax credit (“Tax Credit”) enacted in the Tax Reform Act of 1986, some of which may also be eligible for the historic rehabilitation tax credit (“Historic Tax Credit”). As of March 31, 2013, the Partnership has ownership interests in one remaining investment. During the fiscal year ended March 31, 2013, the Partnership sold its limited partnership interests in two Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. As of March 31, 2013, the Partnership has sold its limited partnership interests in thirteen Local Partnerships, and one Local Partnership sold its property and the related assets and liabilities. As of March 31, 2013, approximately $47,000,000 (not including acquisition fees of approximately $3,502,000) of the net proceeds of the Offering had been invested in the fifteen Local Partnerships originally acquired by the Partnership, all of which has been paid to the Local Partnerships. See Item 2. Properties below.

 

Investment Objectives/Government Incentives

 

The Partnership was formed to invest in Apartment Complexes that are eligible for the Tax Credit enacted in the Tax Reform Act of 1986. Some Apartment Complexes may also be eligible for Historic Tax Credits. The investment objectives of the Partnership are described below:

 

1.Entitle qualified BACs holders to Tax Credits over the period of the Partnership’s entitlement to claim Tax Credits (for each Property, generally ten years from the date of investment or, if later, the date the Property is leased to qualified tenants; referred to herein as the “Credit Period”) with respect to each Apartment Complex.

 

2.Preserve and protect the Partnership’s capital.

 

3.Participate in any capital appreciation in the value of the Properties and provide distributions of sale or refinancing proceeds upon the disposition of the Properties.

 

4.Allocate passive losses to individual BACs holders to offset passive income that they may realize from rental real estate investments and other passive activities, and allocate passive losses to corporate BACs holders to offset business income.

 

One of the Partnership’s objectives is to entitle qualified BACs holders to Tax Credits over the Credit Period. Each of the Local Partnerships in which the Partnership has acquired an interest has been allocated by the relevant state credit agencies the authority to recognize Tax Credits during the Credit Period provided that the Local Partnership satisfies the rent restriction, minimum set-aside and other requirements for recognition of the Tax Credits at all times during such period. Once a Local Partnership has become eligible to recognize Tax Credits, it may lose such eligibility and suffer an event of “recapture” if its Property fails to remain in compliance with the Tax Credit requirements during the 15-year period commencing at the beginning of the Credit Period (“Compliance Period”). At December 31, 2008, Mansion Court Associates was required to recapture $190,635 of low-income housing tax credits. All the Local Partnerships have completed their Credit Periods and Compliance Periods.

 

A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the Property on an undiscounted basis are below depreciated cost. At that time the Property investments themselves are reduced to estimated fair value (using the fair market value based on comparative sales). During the year ended March 31, 2013, the Partnership recorded approximately $1,759,000 as an aggregate loss on impairment of assets. Through March 31, 2013, the Partnership has recorded approximately $31,906,000 as an aggregate loss on impairment of assets.

 

While the value of the remaining Tax Credits are a factor in calculating fair value, the expiration of the Credit Period, in and of itself, has not been the only factor in determining whether there is an impairment and generally does not have any adverse impact on the fair value of the Local Partnerships.

 

There can be no assurance that the Partnership will achieve its investment objectives as described above, and it is unlikely that the Partnership will meet objective 3, also as noted above.

 

The Partnership is subject to the risks incidental to potential losses arising from the management and ownership of improved real estate. The Partnership can also be affected by poor economic conditions generally. There are also substantial risks associated with owning interests in properties, as does the Partnership, which receive government assistance, for example the possibility that Congress may not appropriate funds to enable the Department of Housing and Urban Development (“HUD”) to make rental assistance payments. HUD also restricts annual cash distributions to partners based on operating results and a percentage of the owner’s equity contribution. The Partnership cannot sell or substantially liquidate its remaining investment during the period that the subsidy agreement is in existence without HUD’s approval. Furthermore, there may not be market demand for apartments at full market rents when the rental assistance contract expires.

 

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Sale of Underlying Local Partnerships

 

The Partnership is in the process of disposing of all of its investments. During the fiscal year ended March 31, 2013, the Partnership sold its limited partnership interests in two Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. As of March 31, 2013, the Partnership has sold its limited partnership interests in thirteen Local Partnerships, and one Local Partnership sold its property and the related assets and liabilities. There can be no assurance as to when the Partnership will dispose of its last remaining investment or the amount of proceeds which may be received. However, based on the historical operating results of the remaining Local Partnership and the current economic conditions, including changes in tax laws, the proceeds from such sales received by the Partnership will not be sufficient to return to the limited partners their original investments. All gains and losses on sales are included in discontinued operations.

 

On June 28, 2012, the Partnership sold its limited partnership interest in Greene Avenue to an affiliate of the Local General Partner for a sales price of $10. The sale resulted in a gain of approximately $2,354,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $2,374,000, costs related to sale of approximately $20,000 and the $10 cash received from the sale, which was recorded during the quarter ended June 30, 2012. Adjustments to the gain of approximately $7,000 and ($4,000) were recorded during the quarter ended September 30, 2012 and March 31, 2013, respectively, resulting in an overall gain of approximately $2,357,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of $2,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On June 22, 2012, the property and the related assets and liabilities of Clear Horizons Limited Partnership (“Clear Horizons”) were sold to an unaffiliated third party purchaser for a sales price of $2,100,000. The Partnership received $978,396 as distributions from this sale after the repayment of the mortgages, other liabilities, closing costs and distributions to other partners of approximately $1,122,000. The sale resulted in a gain of approximately $1,035,000 resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of sale, which was recorded during the quarter ended June 30, 2012. Adjustments to the gain of approximately ($56,000) and ($3,000) were recorded during the quarter ended September 30, 2012 and March 31, 2013, resulting in an overall gain of approximately $976,000.

 

On May 1, 2012, the Partnership sold its limited partnership interest in United Germano-Millgate Limited Partnership (“United Germano”) to an unaffiliated third party purchaser for a sales price of $141,875. The sale resulted in a gain of approximately $11,568,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $11,426,000 and the $141,875 cash received from the sale, which was recorded during the quarter ended June 30, 2012. Adjustments to the gain of approximately $12,000 and ($67,000) were recorded during the quarter ended September 30, 2012 and March 31, 2013, respectively, resulting in an overall gain of approximately $11,513,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $2,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On December 31, 2011, the Partnership sold its limited partnership interest in Lincoln Renaissance (“Abraham Lincoln Court”) to an affiliate of the Local General Partner for a sales price of $10. The sale resulted in a gain of approximately $2,667,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $2,667,000, which was recorded during the quarter ended December 31, 2011. An adjustment to the gain of approximately $48,000 was recorded during the quarter ended March 31, 2012, resulting in an overall gain of approximately $2,715,000. During the year ended March 31, 2011, in accordance with ASC 360, the Partnership deemed the building impaired and wrote it down to its fair value, which resulted in a loss on impairment of approximately $277,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of $27,500, as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On September 21, 2011, the Partnership sold its limited partnership interest in NLEDC, Limited Partnership (“Paradise Arms”) to the Local General Partner for a sales price of $5,000. The sale resulted in a gain of approximately $3,846,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $3,841,000 and the $5,000 cash received from the sale, which was recorded during the quarter ended September 30, 2011. Adjustments to the gain of approximately $16,000 and $119,000 were recorded during the quarters ended December 31, 2011 and March 31, 2012, respectively, resulting in an overall gain of approximately $3,981,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of $2,500 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On June 30, 2011, the Partnership sold its limited partnership interest in Neptune Venture L.P. (“Winding Ridge”) to the Local General Partner for a sales price of $1,476,329. The Partnership received $1,476,329 as a distribution from this sale. The sale resulted in a loss of approximately $5,836,000 resulting from the write-off of the basis in the Local Partnership of the same amount at the date of sale, which was recorded during the quarter ended June 30, 2011. Adjustments to the loss of approximately ($96,000) and $98,000 were recorded during the quarters ended September 30, 2011 and March 31, 2012, respectively, resulting in an overall loss of approximately $5,834,000. In accordance with the partnership agreement of Winding Ridge, the Local General Partner was to be paid certain fees and distributions, based on the selling price, contingent upon the completion of a sale. These fees, amounting to $6,725,000, were based on the implied sales price of $8,201,828 as determined by an independent real estate service agency. No cash payments were made for these fees. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of $3,750 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On May 12, 2011, the Partnership sold its limited partnership interest in Mansion Court Associates (“Mansion Court”) to an affiliate of the Local General Partner for a sales price of $1. The sale resulted in a gain of approximately $1,698,000 resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of sale, which was recorded during the quarter ended June 30, 2011. Adjustments to the gain of approximately $1,000 and $10,000 were recorded during the quarters ended September 30, 2011 and March 31, 2012, resulting in an overall gain of approximately $1,709,000. During the year ended March 31, 2011, in accordance with ASC 360, the Partnership deemed the building impaired and wrote it down to its fair value, which resulted in a loss on impairment of $301,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $46,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

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On March 31, 2011, the Partnership sold its limited partnership interest in Brynview Terrace, L.P. (“Brynview”) to the Local General Partner for a sales price of $2. The Partnership did not receive any cash from this sale and paid other liabilities of $5,000 in relation to the sale. The sale resulted in a gain of approximately $1,024,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $1,029,000 and the $5,000 cost incurred relating to the sale, which was recorded during the year ended March 31, 2011. An adjustment to the gain of approximately ($4,000) was recorded during the quarter ended June 30, 2011, resulting in an overall gain of approximately $1,020,000.

 

On March 31, 2011, the Partnership sold its limited partnership interest in Colden Oaks Limited Partnership (“Colden Oaks”) to an affiliate of the Local General Partner for a sales price of $2. The Partnership did not receive any cash from this sale and paid other liabilities of $5,000 in relation to the sale. The sale resulted in a gain of approximately $5,061,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $5,066,000 and the $5,000 cost incurred relating to the sale, which was recorded during the year ended March 31, 2011. Adjustments to the gain of approximately $7,000 and ($47,000) were recorded during the quarters ended June 30, 2011 and March 31, 2012, respectively, resulting in an overall gain of approximately $5,021,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $85,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On February 9, 2011, the Partnership sold its limited partnership interest in P&P Home for the Elderly, L.P. (“P&P”) to an unaffiliated third party purchaser for a sales price of $50,000. The Partnership received $79,363 (including a distribution from sale of $49,363) after the payment of other liabilities of approximately $20,000. The sale resulted in a gain of approximately $6,288,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $6,208,000 and the $79,363 cash received from the sale, which was recorded during the year ended March 31, 2011. Adjustments to the gain of approximately ($112,000) and $18,000 were recorded during the quarters ended June 30, 2011 and March 31, 2012, respectively, resulting in an overall gain of approximately $6,194,000.

 

On February 9, 2011, the Partnership sold its limited partnership interest in Martha Bryant Manor, L.P. (“Martha Bryant”) to an unaffiliated third party purchaser for a sales price of $15,000. The Partnership did not receive any cash from this sale and paid other liabilities of $15,000 in relation to the sale. The sale resulted in a gain of approximately $6,158,000 resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of sale, which was recorded during the year ended March 31, 2011. Adjustments to the gain of approximately $30,000 and $5,000 were recorded during the quarters ended June 30, 2011 and March 31, 2012, respectively, resulting in an overall gain of approximately $6,193,000.

 

Segments

 

The Partnership operates in one segment, which is the investment in multi-family residential property. Financial information about this segment is set forth in Item 8 hereto.

 

Competition

 

The real estate business is highly competitive and substantially all of the Properties acquired by the Partnership are expected to have active competition from similar properties in their respective vicinities. Various other limited partnerships have, in the past, and may, in the future, be formed by the General Partner and/or its affiliates to engage in businesses which may be competitive with the Partnership.

 

Employees

 

The Partnership does not have any direct employees. All services are performed for the Partnership by the General Partner and its affiliates. The General Partner receives compensation in connection with such activities as set forth in Items 11 and 13. In addition, the Partnership reimburses the General Partner and certain of its affiliates for expenses incurred in connection with the performance by their employees of services for the Partnership in accordance with the Partnership’s Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”).

 

Item 1A.  Risk Factors.

 

Not applicable.

 

Item 1B.  Unresolved Staff Comments.

 

Not applicable.

 

Item 2.  Properties.

 

The Partnership is subject to the risks incidental to potential losses arising from the management and ownership of improved real estate. The Partnership can also be affected by poor economic conditions. The Partnership had originally acquired interests in fifteen Local Partnerships, all of which have been, or were, consolidated for accounting purposes. During the fiscal year ended March 31, 2013, the Partnership sold its limited partnership interests in two Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. As of March 31, 2013, the Partnership has sold its limited partnership interests in thirteen Local Partnerships, and one Local Partnership sold its property and the related assets and liabilities. There can be no assurance as to when the Partnership will dispose of its last remaining investment or the amount of proceeds which may be received. The Partnership’s investment in the last remaining Local Partnership represents 98.99% of the partnership interest in such Local Partnership. Set forth below is a schedule of the Local Partnerships including certain information concerning their respective Apartment Complexes (the “Local Partnership Schedule”). Further information concerning these Local Partnerships and their Properties, including any encumbrances affecting the Properties, may be found in Schedule III to the financial statements which are included herein.

 

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Local Partnership Schedule

 

      % of Units Occupied at May 1, 
Name and Location  Date Acquired  2013   2012   2011   2010   2009 
                        
Lincoln Renaissance Reading, PA (52)  April 1993   (c)    (c)    90%   96%   94%
                             
United Germano-Millgate Limited Partnership Chicago, IL (350) (d)  October 1993   (d)    95%   94%   90%   97%
                             
Mansion Court Associates Philadelphia, PA (30)  November 1993   (c)    (c)    20%   26%   27%
                             
Derby Run Associates, L.P. Hampton, VA (160)  February 1994   (b)    (b)    (b)    95%   98%
                             
Renaissance Plaza ‘93 Associates , L.P. Baltimore, MD (95)  February 1994   96%   91%   90%   97%   98%
                             
Tasker Village Associates Philadelphia, PA (28)  May 1994   (a)    (a)    (a)    (a)    96%
                             
Martha Bryant Manor, L.P. Los Angeles, CA (77)  September 1994   (b)    (b)    (b)    94%   95%
                             
Colden Oaks Limited Partnership Los Angeles, CA (38)  September 1994   (b)    (b)    (b)    100%   95%
                             
Brynview Terrace, L.P. Los Angeles, CA (8)  September 1994   (b)    (b)    (b)    100%   100%
                             
NLEDC, L.P. Los Angeles, CA (43)  September 1994   (c)    (c)    98%   100%   98%
                             
Creative Choice Homes VI, Ltd. Miami, FL (102)  September 1994   (a)    (a)    (a)    (a)    98%
                             
P&P Homes for the Elderly, L.P. Los Angeles, CA (107)  September 1994   (b)    (b)    (b)    95%   98%
                             
Clear Horizons Limited Partnership Shreveport, LA (84)  December 1994   (e)    99%   96%   99%   94%
                             
Neptune Venture, L.P. Neptune Township, NJ (99)  April 1995   (c)    (c)    99%   99%   100%
                             
Affordable Greene Associates L.P. New York, NY (41)  April 1995   (d)    100%   100%   100%   100%

 

(a)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2010 (see Note 10 in Item 8).
(b)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2011 (see Note 10 in Item 8).
(c)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2012 (see Note 10 in Item 8).
(d)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2013 (see Note 10 in Item 8).
(e)The property and the related assets and liabilities were sold during the fiscal year ended March 31, 2013 (see Note 10 in Item 8).

 

All leases are generally for periods not exceeding one to two years and no tenant occupies more than 10% of the total rentable square footage in any single Apartment Complex.

 

Rents from commercial tenants (to which average rental per square foot applies) comprise less than 5% of the rental revenues of the Partnership. Maximum allowable rents for the residential units are determined annually by HUD.

 

Management continuously reviews the physical state of the Properties and suggests to the respective general partners of the Local Partnerships (“Local General Partners”) budget improvements which are generally funded from cash flow from operations or release of replacement reserve escrows.

 

Management continuously reviews the insurance coverage of the Properties and believes such coverage is adequate.

 

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See Item 1, Business, above for the general competitive conditions to which the Properties described above are subject.

 

Real estate taxes are calculated using rates and assessed valuations determined by the township or city in which the Property is located. Such taxes have approximated 1% of the aggregate cost of the Properties as shown in Schedule III to the financial statements included herein.

 

Item 3.  Legal Proceedings.

 

None.

 

Item 4.  Mine Safety Disclosures.

 

Not applicable.

 

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PART II

 

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

As of March 31, 2013, the Partnership had issued and outstanding 58,928 Limited Partnership Interests, each representing a $1,000 capital contribution to the Partnership, or an aggregate capital contribution of $58,928,000 before volume discounts of $2,000. All of the issued and outstanding Limited Partnership Interests have been issued to Independence Assignor Inc. (the “Assignor Limited Partner”), which has in turn issued 58,928 BACs to the purchasers thereof for an aggregate purchase price of $58,928,000 reduced by volume discounts of $2,000. Each BAC represents all of the economic and virtually all of the ownership rights attributable to a Limited Partnership Interest held by the Assignor Limited Partner. BACs may be converted into Limited Partnership Interests at no cost to the holder (other than the payment of transfer costs not to exceed $100), but Limited Partnership Interests so acquired are not thereafter convertible into BACs.

 

Neither the BACs nor the Limited Partnership Interests are traded on any established trading market. The Partnership does not intend to include the BACs for quotation on NASDAQ or for listing on any national or regional stock exchange or any other established securities market. The Revenue Act of 1987 contained provisions which have an adverse impact on investors in “publicly traded partnerships.” Accordingly, the General Partner has imposed limited restrictions on the transferability of the BACs and the Limited Partnership Interests in secondary market transactions. Implementation of the restrictions should prevent a public trading market from developing and may adversely affect the ability of an investor to liquidate his or her investment quickly. It is expected that these procedures will remain in effect until such time, if ever, as further revision of the Revenue Act of 1987 may permit the Partnership to lessen the scope of the restrictions.

 

As of June 24, 2013, the Partnership has approximately 3,420 registered holders of an aggregate of 58,928 BACs.

 

All of the Partnership’s general partnership interests, representing an aggregate capital contribution of $1,000, are held by the General Partner.

 

There are no material legal restrictions in the Partnership Agreement on the ability of the Partnership to make distributions. However, the Partnership has made no distributions to the BACs holders as of March 31, 2013. The Partnership does not anticipate providing cash distributions to its BACs holders other than from net refinancing or sales proceeds.

 

Transfer Procedures

 

The Partnership from time to time receives requests by unit holders and others to transfer BACs and/or limited partnership interests. Such requests may occur in connection with tender offers for the Partnership’s units. Such requests implicate the Partnership’s policies and procedures concerning transfers generally and tender offers in particular, which were adopted by the Partnership pursuant to the terms of its Partnership Agreement, to ensure compliance with applicable law, avoid adverse tax consequences for the Partnership and its investors, and preserve the Partnership’s advantageous tax status.

 

The Partnership relies on a 2% safe harbor established by an Internal Revenue Service (“IRS”) regulation to avoid being characterized as a “publicly-traded partnership” that is taxed as a corporation.

 

A brief summary of certain of the Partnership’s key policies, practices and requirements with respect to transfers and tender offers is as follows:

 

·No transfer (whether for substitution, assignment or otherwise) is effective or binding on the Partnership unless and until it is approved by the General Partner.

 

·No transfer will be approved unless the transferor and transferee submit complete and properly executed forms of the Partnership’s own transfer documentation. The Partnership does not accept forms of transfer documentation other than its own and does not accept signatures made by power of attorney in lieu of original signatures by each of the transferors and transferees.

 

·The Partnership will not approve transfers that in the cumulative aggregate for any tax year exceed the IRS 2% safe harbor, unless a financially responsible person provides the Partnership and its partners with (i) an indemnity (in form and substance in all ways acceptable to the General Partner) for all liability (including, without limitation, any adverse tax consequences) arising from or relating to exceeding the 2% safe harbor and (ii) a legal opinion (in form and substance in all ways acceptable to the General Partner) that there will be no adverse tax consequences to the Partnership and its partners from exceeding the 2% safe harbor.

 

·In order to avoid the undesirable situation of one or more tender offers consuming the entire safe harbor limitation early in the tax year and leaving the Partnership’s remaining investors with no liquidity opportunity for the rest of that tax year, the Partnership restricts the cumulative aggregate total of transfers made pursuant to all tender offers to 1.5% of its outstanding units in each tax year, unless a financially responsible person conducting such tender offer provides the Partnership with an acceptable indemnity and legal opinion of the type described above. At the end of each tax year, the General Partner, in its discretion, may allow the cumulative total number of transfers (including those by tender offer) to reach the 2% safe harbor limit.

 

·The Partnership requires that all tender offers for its units be conducted in accordance with all applicable law including, without limitation, the federal securities laws.

 

The foregoing is solely a summary of the Partnership’s policies, requirements and practices with respect to transfers and tender offers. More complete information, including a copy of the Partnership’s transfer documentation package, may be obtained from the Partnership.

 

Item 6.  Selected Financial Data.

 

Not applicable.

 

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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Liquidity and Capital Resources

 

The Partnership had originally invested approximately $47,000,000 (not including acquisition fees of approximately $3,502,000) of the net proceeds of its Offering in fifteen Local Partnerships, all of which has been paid. The Partnership does not intend to acquire additional Properties. During the year ended March 31, 2013, the Partnership did not make any advances to the Local Partnerships.

 

During the fiscal year ended March 31, 2013, the Partnership sold its limited partnership interests in two Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. As of March 31, 2013, the Partnership has sold its limited partnership interests in thirteen Local Partnerships, and one Local Partnership sold its property and the related assets and liabilities. There can be no assurance as to when the Partnership will dispose of its last remaining investment or the amount of proceeds which may be received. However, based on the historical operating results of the remaining Local Partnership and the current economic conditions, including changes in tax laws, the proceeds from such sale received by the Partnership will not be sufficient to return to the limited partners their original investments. All gains and losses on sales are included in discontinued operations.

 

Short-term

 

During the year ended March 31, 2013, the Partnership’s primary sources of funds included: (i) working capital reserves; (ii) interest earned on the working capital reserves; (iii) cash distributions from operations of the Local Partnerships; and (iv) sales proceeds and distributions. Such funds are available to meet the obligations of the Partnership. The Partnership does not anticipate providing cash distributions to BACs holders in circumstances other than refinancing or sales. Cash distributions received from the Local Partnerships, as well as the working capital reserves referred to above, will be used towards the future operating expenses of the Partnership. During the years ended March 31, 2013 and 2012, the amounts received from operations of the Local Partnerships were approximately $9,000 and $5,000, respectively. Additionally, during the years ended March 31, 2013 and 2012, the amounts of distributions and proceeds from sale were approximately $1,120,000 and $1,481,000, respectively. The Partnership will not be able to make distributions sufficient to return to BACs holders their original capital contributions.

 

For the year ended March 31, 2013, cash and cash equivalents of the Partnership and its consolidated Local Partnerships increased approximately $620,000. This increase was due to net cash provided by operating activities ($211,000), proceeds from sale of properties ($2,242,000) and a decrease in deferred costs ($2,000), which exceeded improvements to property and equipment ($121,000), principal payments of mortgage notes ($459,000), costs paid relating to sale of properties ($592,000), an increase in cash held in escrow relating to investing activities ($48,000), and a decrease in capitalization of consolidated subsidiaries attributable to minority interest ($615,000). Included in the adjustment to reconcile the net income to cash provided by operating activities are depreciation and amortization of approximately ($85,000), gain on sale of properties of approximately ($14,846,000) and loss on impairment of assets of approximately ($1,759,000).

 

Total expenses for the years ended March 31, 2013 and 2012, respectively, excluding depreciation and amortization, interest, general and administrative – related parties and loss on impairment of fixed assets, totaled $799,612 and $850,182, respectively.

 

Accounts payable as of March 31, 2013 and 2012 were $79,117 and $172,282, respectively. Accounts payable are short term liabilities which are expected to be paid from operating cash flows, working capital balances at the Local Partnership level, Local General Partner advances and in certain circumstances advances from the Partnership. Accounts payable from discontinued operations totaled $0 and $562,436 as of March 31, 2013 and 2012, respectively. Accrued interest as of March 31, 2013 and 2012 was $7,299,826 and $7,030,303, respectively. Such amount represents the accrued interest on all mortgage loans, which include primary and secondary loans. Certain secondary loans have provisions such that interest is accrued but not payable until a future date. Accrued interest payable from discontinued operations totaled $0 and $10,786,185 as of March 31, 2013 and 2012, respectively. The Partnership anticipates the payment of accrued interest on the secondary loans (which make up the majority of the accrued interest payable amount and which have been accumulating since the Partnership’s investment in the respective Local Partnership) will be made from future refinancing or sales proceeds of the respective Local Partnerships. In addition, each Local Partnership’s mortgage notes are collateralized by the land and buildings of the respective Local Partnership, and are without further recourse to the Partnership. The maximum loss the Partnership would incur is its net investment in the remaining Local Partnership.

 

The Partnership has an unconsolidated working capital reserve of approximately $2,433,000 at March 31, 2013. Such amount is considered sufficient to cover the Partnership’s day to day operating expenses, excluding fees to the General Partner, for at least the next year.

 

At March 31, 2013, the Partnership’s liabilities exceeded assets by $13,140,279 and for the year ended March 31, 2013, the Partnership had net income of $12,528,794, including gain on sale of properties of $14,845,849. However, because 1) the provisions of the secondary loan defers the payment of accrued interest of the remaining Local Partnership and will be made from future refinancing or sales proceeds of the remaining Local Partnership, 2) the General Partner continues to defer the payment of fees as discussed below and in Note 8 to the Financial Statements in Item 8, and 3) the Partnership has sufficient unconsolidated working capital reserves to cover the Partnership’s day to day operating expenses, the Partnership (and the remaining Local Partnership) believes it has sufficient liquidity and ability to generate cash and to meet existing and known or reasonably likely future cash requirements over both the short and long term.

 

Long-Term

 

Partnership management fees owed to the General Partner amounting to approximately $1,713,000 and $1,707,000 were accrued and unpaid as of March 31, 2013 and 2012, respectively and are included in Due to general partner and affiliates on the Consolidated Balance Sheets. During the year ended March 31, 2012, management deemed the unpaid partnership management fees related to sold properties uncollectible and wrote off approximately $3,130,000, resulting in a non-cash General Partner contribution of the same amount. Unpaid partnership management fees for any year are deferred without interest and will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on all Partnership liabilities have been made other than to those owed to the General Partner and its affiliates, and after the Limited Partners have received a 10% return on their capital contributions.

 

- 8 -
 

 

All other amounts included in Due to general partner and affiliates are expected to be paid, if at all, from working capital reserves. See Note 8 in Item 8 for further discussion of amounts due to the General Partner and its affiliates. The General Partner does not anticipate making any future advances of operating funds to the remaining Local Partnership in which the Partnership has invested. Even if a situation arose where the General Partner and its affiliates needed to but were not able to make operating advances in the future due to lack of funds, the only impact on the Partnership would be that it would lose its investment in such Local Partnership. The Partnership’s ability to continue its operations would not be affected.

 

The Partnership’s liquidity considerations are discussed in Note 11a in Item 8.

 

Since the maximum loss the Partnership would be liable for is its net investment in its remaining subsidiary partnership, the resolution of any contingencies is not anticipated to impact future results of liquidity or financial condition of the Partnership.

 

Except as described above, management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed, that will or are likely to impact liquidity in a material way. Management believes the only impact would be from laws that have not yet been adopted.

 

Off Balance Sheet Arrangements

 

The Partnership has no off-balance sheet arrangements.

 

Fair Value Measurements

 

See Note 3 in Item 8 for methods and assumptions used to estimate the fair value of each class of financial instruments (all of which are held for nontrading purposes) for which it is practicable to estimate that value.

 

Critical Accounting Policies and Estimates

 

The preparation of consolidated financial statements requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of certain accounting estimates considered critical by the Partnership. The summary should be read in conjunction with the more complete discussion of the Partnership’s accounting policies included in Item 8, Note 2 to the consolidated financial statements in this annual report on Form 10-K.

 

Property and Equipment

 

Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, construction period interest and any other costs incurred in acquiring the Properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The Partnership complies with ASC 360, Property, Plant and Equipment. A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the Property on an undiscounted basis are below depreciated cost. At that time, Property investments themselves are reduced to estimated fair value (using the fair market value based on comparative sales) when the Property is considered to be impaired and the depreciated cost exceeds estimated fair value.

 

At the time management commits to a plan to dispose of a specific asset, said asset is adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. Property and equipment that are held for sale are included in discontinued operations. There were no assets classified as property and equipment-held for sale as of March 31, 2013.

 

During the year ended March 31, 2013, the Partnership recorded approximately $1,759,000 as an aggregate loss on impairment of assets or reduction to estimated fair value. Through March 31, 2013, the Partnership has recorded approximately $31,906,000 as an aggregate loss on impairment of property.

 

Revenue Recognition

 

Rental income is earned primarily under standard residential operating leases and is typically due the first day of each month, but can vary by Property due to the terms of the tenant leases. Rental income is recognized when earned and charged to tenants’ accounts receivable if not received by the due date. Rental payments received in advance of the due date are deferred until earned. Rental subsidies are recognized as rental income during the month in which it is earned.

 

Other revenues are recorded when earned and consist of the following items: interest income earned on cash and cash equivalent balances and cash held in escrow balances, income from forfeited security deposits, late charges, laundry and vending income and other rental related items (see Note 2e, Item 8).

 

Income Taxes

 

The Partnership is not required to provide for, or pay, any federal income taxes. Net income or loss generated by the Partnership is passed through to the partners and is required to be reported by them. The Partnership may be subject to state and local taxes in jurisdictions in which it operates. For income tax purposes, the Partnership has a fiscal year ending December 31.

 

- 9 -
 

 

Recent Accounting Pronouncements

 

In February 2013, the FASB issued an Accounting Standards Update ("ASU") No. 2013-02 "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income," requiring new disclosures for items reclassified out of accumulated other comprehensive income ("AOCI"), including (1) changes in AOCI balances by component and (2) significant items reclassified out of AOCI. The guidance does not amend any existing requirements for reporting net income or OCI in the financial statements. The standards update was effective for reporting periods beginning after December 15, 2012, to be applied prospectively. The Partnership evaluated the impact of adopting this standard and does not expect it to have a significant impact on its consolidated financial statements.

 

Results of Operations

 

The following is a summary of the results of operations of the Partnership for the years ended March 31, 2013 and 2012 (the 2012 and 2011 Fiscal Years, respectively) excluding the results of its discontinued operations which are not reflected in the following discussion (see Item 8, Note 12).

 

The net income (loss) for the 2012 and 2011 Fiscal Years totaled $12,375,229 and ($1,577,436), respectively.

 

2012 vs. 2011

 

Rental income decreased by less than 1% for the 2012 Fiscal Year as compared to the 2011 Fiscal Year, primarily due to a decrease in occupancy at the remaining Local Partnership.

 

Total expenses from operations, excluding general and administrative, general and administrative – related parties, operating expenses and loss on impairment of assets, remained fairly consistent with an increase of approximately 2% for the 2012 Fiscal Year as compared to the 2011.

 

The Partnership recorded a loss on impairments from operations of approximately $1,759,000 and $1,016,000 during the 2012 and 2011 Fiscal Years, respectively (see Note 4, Item 8).

 

General and administrative-related party’s expenses decreased approximately $107,000 for the 2012 Fiscal Year as compared to the 2011 Fiscal Year, primarily due to a decrease in partnership management fees and expense reimbursements resulting from the sale of properties at the Partnership level.

 

General and administrative expenses decreased approximately $44,000 for the 2012 Fiscal Year as compared to the 2011 Fiscal Year, primarily due to a reduction in legal expenses pertaining to sale of properties at the Partnership level.

 

Operating expenses decreased approximately $19,000 for the 2012 Fiscal Year as compared to the 2011 Fiscal Year, primarily due to an overall decrease in utility expenses at the remaining Local Partnership.

 

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

 

Not applicable.

 

- 10 -
 

 

Item 8. Financial Statements and Supplementary Data.  

 

      Sequential
Page
       
(a) 1. Consolidated Financial Statements    
       
  Report of Independent Registered Public Accounting Firm   12-25
       
  Consolidated Balance Sheets at March 31, 2013 and 2012   26
       
  Consolidated Statements of Operations for the Years Ended March 31, 2013 and 2012   27
       
  Consolidated Statements of Changes in Partners’ (Deficit) Capital for the Years Ended
March 31, 2013 and 2012
  28
       
  Consolidated Statements of Cash Flows for the Years Ended March 31, 2013 and 2012   29
       
  Notes to Consolidated Financial Statements   30

 

- 11 -
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners of

Independence Tax Credit Plus L.P. II and Subsidiaries

(A Delaware Limited Partnership)

 

We have audited the accompanying consolidated balance sheets of Independence Tax Credit Plus L.P. II and Subsidiaries (A Delaware Limited Partnership) as of March 31, 2013 and 2012, and the related consolidated statements of operations, changes in partners’ deficit, and cash flows for the years ended March 31, 2013 and 2012 (the 2012 and 2011 Fiscal Years), respectively. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We did not audit the financial statements for three and eleven (Fiscal Years 2012 and 2011) subsidiary partnerships whose losses aggregated $10,389,320 and $2,603,676 for the years ended March 31, 2013 and 2012, and whose assets constituted 16% and 85% of the Partnership’s assets at March 31, 2013 and 2012, presented in the accompanying consolidated financial statements. The financial statements of three (Fiscal 2012) and eleven (Fiscal 2011) subsidiary partnerships were audited by other auditors whose reports thereon have been furnished to us and our opinion expressed herein, insofar as it relates to the amounts included for these subsidiary partnerships, is based solely upon the reports of the other auditors.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, 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, based upon our audits, and the reports of the other auditors referred to above, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Independence Tax Credit Plus L.P. II and Subsidiaries as of March 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

As discussed in Note 11, the consolidated financial statements include the financial statements of one subsidiary partnership with significant uncertainties. The financial statements of this subsidiary partnership were prepared assuming that they will continue as a going concern. The subsidiary partnerships’ net (loss) income aggregated $(2,149,741) (2011 Fiscal Year) and $1,751,205 (2012 Fiscal Year) and their assets aggregated $482,675 and $-0- at March 31, 2013 and 2012. Management’s plan in regard to this matter is also described in Note 11. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ RAICH ENDE & MALTER CO. LLP
RAICH ENDE & MALTER CO. LLP
 
New York, New York
June 28, 2013

 

- 12 -
 

 

[Letterhead of REZNICK GROUP, P.C.]

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners

Lincoln Renaissance

 

We have audited the accompanying balance sheets of Lincoln Renaissance as of December 31, 2011 and 2010, and the related statements of profit and loss, changes in partners' equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Lincoln Renaissance as of December 31, 2011 and 2010, and the results of its operations, the changes in partners' equity (deficit) and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

In accordance with Government Auditing Standards we have also issued our report dated February 29, 2012, on our consideration of Lincoln Renaissance's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and on compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

 

Our audits were conducted for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental information on pages 24 through 28 is presented for purposes of additional analysis as required by the Financial Reporting Manual issued by the Pennsylvania Housing Finance Agency and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

 

/s/ Reznick Group, P.C.
Baltimore, Maryland
February 29, 2012
 
Lead Auditor: Gregory M. Remeikis, CPA
 
E-mail Address: greg.remeikis@reznickgroup.com

 

- 13 -
 

 

[Letterhead of Wieland & Company, Inc.]

 

INDEPENDENT AUDITOR'S REPORT

 

To the Partners

United - Germano - Millgate Limited Partnership

 

Report on the Financial Statements

 

We have audited the accompanying financial statements of United - Germano - Millgate Limited Partnership which comprise the balance sheet as of May 1, 2012, and the related statements of operations and partners' equity, and cash flows for the period January 1, 2012 to May 1, 2012, and the related notes to the financial statements

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States), and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of United - Germano - Millgate Limited Partnership as of May 1, 2012, and the results of its operations, changes in partners' equity, and cash flows for the period January 1, 2012 to May 1, 2012, in conformity with accounting principles generally accepted in the United States of America.

 

Other Matters

 

Other Information

 

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information in Schedules I, II and III on pages 11 and 12 is presented for purposes of additional analysis, and is not a required part of the financial statements.

 

The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

 

/s/ Wieland & Company, Inc.
February 26, 2013
Batavia, Illinois

 

- 14 -
 

 

[Letterhead of Wieland & Company, Inc.]

 

INDEPENDENT AUDITOR'S REPORT

 

To the Partners

United - Germano - Millgate Limited Partnership

 

We have audited the accompanying balance sheets of United - Germano - Millgate Limited Partnership as of December 31, 2011 and 2010, and the related statements of operations, partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States), and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of United - Germano - Millgate Limited Partnership as of December 31, 2011 and 2010, and the results of its operations, changes in partners' equity, and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

In accordance with Government Auditing Standards, we have also issued a report dated February 24, 2012, on our consideration of the internal control of United - Germano - Millgate Limited Partnership, and on our tests of its compliance with certain provisions of laws, regulations, contracts, grants, agreements and other matters. The purpose of those reports is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over reporting or on compliance. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit.

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information in Schedules I, II and III on pages 10 and 11 is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements of United - Germano - Millgate Limited Partnership. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

 

/s/ Wieland & Company, Inc.
February 24, 2012
Batavia, Illinois

 

- 15 -
 

 

[Letterhead of REZNICK GROUP, P.C.]

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners

Mansion Court Associates

 

We have audited the accompanying balance sheet of Mansion Court Associates as of May 12, 2011, and the related statements of profit and loss, changes in partners' equity (deficit) and cash flows for the period January 1, 2011 through May 12, 2011 (date of investor transfer). 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Mansion Court Associates as of May 12, 2011, and the results of its operations, the changes in partners' equity (deficit) and cash flows for the period January 1, 2011 through May 12, 2011 (date of investor transfer), in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. The project has sustained operating losses over the years and has not generated sufficient cash flow from operations to meet its obligations. Furthermore, the Partnership has a net deficiency in partners' equity. Those conditions raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in note 10.

 

/s/ Reznick Group, P.C.
Baltimore, Maryland
November 29, 2011

 

- 16 -
 

 

[COHNREZNICK LLP LETTERHEAD]

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners

Renaissance Plaza 93 Associates, L.P.

 

Report on the Financial Statements

 

We have audited the accompanying financial statements of Renaissance Plaza 93 Associates, L.P., which comprise the balance sheet as of December 31, 2012, and the related statements of operations, partners' equity (deficit) and cash flows for the year then ended, and the related notes to the financial statements.

 

Management’s Responsibility for the Financial Statements

 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

 

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America as established by the Auditing Standards Board (United States), in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States), and in accordance with the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

 

Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Renaissance Plaza 93 Associates, L.P. as of December 31, 2012, and the results of its operations and its cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America.

 

Report on Supplementary Information

 

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information on pages 25 through 38 is presented for purposes of additional analysis as required by the Audit Guide issued by the Maryland Department of Housing and Community Development and is not a required part of the financial statements. Such information is the responsibility of the management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. That information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole

 

Other Reporting Required by Government Auditing Standards

 

In accordance with Government Auditing Standards, we have also issued a report, dated April 1, 2013 on our consideration of Renaissance Plaza 93 Associates, L.P’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Renaissance Plaza 93 Associates, L.P’s internal control over the financial reporting and compliance.

 

/s/ CohnReznick LLP  
Chicago, Illinois Taxpayer Identification Number:
April 1, 2013 22-1478099
Lead Auditor: Nelson Gomez, CPA  

 

- 17 -
 

 

[REZNICK GROUP, P.C. LETTERHEAD]

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners

Renaissance Plaza 93 Associates, L.P.

 

We have audited the accompanying balance sheet of Renaissance Plaza 93 Associates, L.P. as of December 31, 2011, and the related statements of operations, partners' equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the partnership's internal control over financial reporting. 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 Renaissance Plaza 93 Associates, L.P. as of December 31, 2011, and the results of its operations, the changes in partners' equity (deficit) and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

 

In accordance with Government Auditing Standards, we have also issued our report dated March 6, 2012, on our consideration of Renaissance Plaza 93 Associates, L.P.'s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

 

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplemental information on pages 24 through 36, which is the responsibility of management, is presented for purposes of additional analysis as required by the Audit Guide issued by the Maryland Department of Housing and Community Development and is not a required part of the financial statements. Such information was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. That information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

 

/s/ Reznick Group, PC  
Skokie, Illinois Taxpayer Identification Number:
March 6, 2012 52-1088612
   
Lead Auditor: Nelson D. Gomez, CPA  

 

- 18 -
 

 

[Letterhead of CLIFFORD R. BENN, CPA]

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

General partner

Martha Bryant Manor Limited Partnership

Los Angeles, California

 

I have audited the balance sheet of Martha Bryant Manor Limited Partnership, at February 9, 2011, and the related statements of loss, changes in partners' capital, and cash-flow for the forty day period then ended. These financial statements are the responsibility of Martha Bryant Manor Limited Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.

 

I conducted my audit in accordance with standards of the Public Company Accounting Oversight Board, used in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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 over all financial statement presentation. I believe that my audit provide a reasonable basis for my opinion.

 

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Martha Bryant Manor Limited Partnership on February 9, 2011, and the results of its operations and its cash-flow for the year then ended in conformity with generally accepted accounting principles used in the United States of America.

 

/s/ Clifford R. Benn, CPA
July 26, 2011
Carson, California

 

- 19 -
 

 

[Letterhead of KELLER & ASSOCIATES, LLP]

 

Independent Auditors’ Report

 

To the Partners of

Colden Oaks

 

We have audited the accompanying balance sheet of Colden Oaks (a California limited partnership) (the "Partnership"), as of March 31, 2011, and the related statements of operations, changes in partners' capital (deficit) and cash flows for the period from January 1, 2011 to March 31, 2011. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Colden Oaks as of December 31, 2010, were audited by other auditors whose report dated February 28, 2011, expressed an unqualified opinion on those statements.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 Colden Oaks as of March 31, 2011 and, and the results of its operations and its cash flows for the period from January 1, 2011 to March 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Keller & Associates, LLP
KELLER & ASSOCIATES, LLP
Reseda, California
February 12, 2012

 

- 20 -
 

 

[Letterhead of BERT D. SAMUELS CERTIFIED PUBLIC ACCOUNTANT]

 

INDEPENDENT AUDITOR'S REPORT

 

The Partners

P & P Home For The Elderly, L.P. Los Angeles, California

 

I have audited the accompanying balance sheet of P & P Home For The Elderly, L.P. as of February 9, 2011, and the related statements of income, changes in partners' equity and cash flows for the period January 1, 2011 through February 9, 2011. The financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.

 

I conducted my audit in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor am I engaged to perform, an audit of its interned control over financial reporting. My audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, I express no such opinion. 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. I believe that my audit provides a reasonable basis for my opinion.

 

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of P & P Home For The Elderly, L.P. as of February 9, 2011, and the results of its operations and cash flows for the period January 1, 2011 through February 9, 2011 in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Bert D. Samuels

Tarzana, California

March 31, 2012

 

- 21 -
 

 

[Letterhead of COHNREZNICK LLP]

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners

Clear Horizons Limited Partnership

 

We have audited the accompanying balance sheet of Clear Horizons Limited Partnership, HUD Project No. LA48E000007, as of June 21, 2012, and the related statements of operations, partners’ equity (deficit) and cash flows for the period January 1, 2012 through June 21, 2012. 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 the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Clear Horizons Limited Partnership as of June 21, 2012, and the results of its operations, changes in partners’ equity (deficit), and its cash flows for the period January 1, 2012 through June 21, 2012, in conformity with the basis of accounting described in note 1.

 

As described in note 1 to the financial statements, the partnership’s financial statements have been prepared on the basis of accounting and reporting practices prescribed by the U.S. Department of Housing and Urban Development (HUD). These prescribed practices are a comprehensive basis of accounting other than accounting principles accepted in the United States of America.

 

In accordance with Government Auditing Standards, we have also issued a report, dated April 25, 2013 on our consideration of Clear Horizons Limited Partnership’s internal control over financial reporting. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and the results of that testing and not to provide an opinion on the internal control over financial reporting. In accordance with Government Auditing Standards, we have also issued an opinion dated April 25, 2013, on Clear Horizons Limited Partnership’s compliance with certain provisions of laws, regulations, contracts and grant agreements, and applicable with certain transactions for certain non-major HUD-assisted program. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

 

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information on pages 20 through 33 is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

 

/s/ CohnReznick LLP  
Baltimore, Maryland Taxpayer Identification Number:
April 25, 2013 22-1478099
   
Lead Auditor: Scott H. Szeliga, CPA  

 

- 22 -
 

 

[Letterhead of REZNICK GROUP, P.C.]

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners

Clear Horizons Limited Partnership

 

We have audited the accompanying balance sheet of Clear Horizons Limited Partnership, HUD Project No. LA48E000007, as of December 31, 2011, and the related statements of income, partners' equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Clear Horizons Limited Partnership as of December 31, 2011, and the results of its operations, changes in partners' equity (deficit), and its cash flows for the year then ended, in conformity with the basis of accounting described in Note 1.

 

As described in note 1 to the financial statements, the partnership's financial statements have been prepared on the basis of accounting and reporting practices prescribed by the U.S. Department of Housing and Urban Development (HUD). These prescribed practices are a comprehensive basis of accounting other than accounting principles accepted in the United States of America.

 

In accordance with Government Auditing Standards, we have also issued a report, dated February 14, 2012 on our consideration of Clear Horizons Limited Partnership's internal control over financial reporting. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and the results of that testing and not to provide an opinion on the internal control over financial reporting. In accordance with Government Auditing Standards, we have also issued an opinion dated February 14, 2012, on Clear Horizons Limited Partnership's compliance with certain provisions of laws, regulations, contracts and grant agreements, and applicable with certain transactions for certain non-major HUD-assisted program. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit.

 

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplemental information on pages 23 through 36 is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

 

/s/ Reznick Group, P.C.  
Baltimore, Maryland Taxpayer Identification Number:
February 14, 2012 52-1088612
   
Lead Auditor: Scott H. Szeliga, CPA  

 

- 23 -
 

 

[REZNICK GROUP, P.C. LETTERHEAD]

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners

Neptune Venture, L.P.

 

We have audited the accompanying balance sheet of Neptune Venture, L.P. as of June 13, 2011, and the related statements of operations, changes in partners' equity (deficit) and cash flows for the period January 1, 2011 through June 13, 2011 (date of partners' redemption). 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Neptune Venture, L.P. as of June 13, 2011, and the results of its operations, the changes in partners' equity (deficit) and its cash flows for the period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Reznick Group, P.C.
Baltimore, Maryland
March 2, 2012

 

- 24 -
 

 

[Letterhead of D. F. O’Brien & Co., Certified Public Accountants]

 

INDEPENDENT AUDITORS' REPORT

 

To the Partners

Affordable Green Associates, L.P.

 

We have audited the accompanying balance sheet of Affordable Green Associates, L.P. as of December 31, 2011 and 2010 and the related statements of operations, changes in partners' (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 Affordable Green Associates, L.P. as of December 31, 2011 and 2010 and the results of its operations, changes in partners' (deficit), and its cash flows for the years then ended in conformity with generally accepted accounting principles in the United States of America.

 

/s/ D. F. O’Brien & Co.

Totowa, New Jersey

February 15, 2012

 

- 25 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

   March 31, 
   2013   2012 
         
ASSETS          
           
Operating assets          
Property and equipment net, less accumulated depreciation (Notes 2, 4 and 7)  $5,459   $1,914,568 
Cash and cash equivalents(Notes 2, 3 and 11)   2,568,335    1,811,841 
Cash held in escrow (Notes 3 and 5)   285,044    476,444 
Deferred costs, less accumulated amortization (Notes 2 and 6)   8,426    41,035 
Other assets   65,868    74,796 
           
Total operating assets   2,933,132    4,318,684 
           
Assets from discontinued operations (Note 12)          
Property and equipment held for sale, net of accumulated depreciation(Note 4)   -    6,142,284 
Net assets held for sale   -    1,517,676 
Total assets from discontinued operations   -    7,659,960 
           
Total assets  $2,933,132   $11,978,644 
           
LIABILITIES AND PARTNERS’ (DEFICIT) CAPITAL          
           
Liabilities          
Mortgage notes payable (Note 7)  $6,712,964   $8,800,542 
Accounts payable   79,117    172,282 
Security deposit payable   59,505    68,432 
Accrued interest payable   7,299,826    7,030,303 
Due to local general partners and affiliates (Note 8)   124,796    589,883 
Due to general partner and affiliates (Note 8)   1,797,203    1,836,255 
           
Total operating liabilities   16,073,411    18,497,697 
           
Liabilities from discontinued operations (Note 12)          
Mortgage notes payable of assets held for sale   -    7,071,971 
Net liabilities held for sale   -    11,466,393 
Total liabilities from discontinued operations   -    18,538,364 
           
Total liabilities   16,073,411    37,036,061 
           
Commitments and contingencies (Note 7, 8 and 11)          
           
Partners’ (deficit) capital          
Limited partners (58,928 BACs issued and outstanding)   (16,257,466)   (28,508,943)
General partner   3,601,736    3,474,109 
           
Independence Tax Credit Plus L.P. II total   (12,655,730)   (25,034,834)
           
Noncontrolling interests   (484,549)   (22,583)
           
Total partners’ deficit   (13,140,279)   (25,057,417)
           
Total liabilities and partners’ (deficit) capital  $2,933,132   $11,978,644 

 

See accompanying notes to consolidated financial statements.

 

- 26 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

   Years Ended March 31, 
   2013   2012* 
         
Revenues          
Rental income  $793,612   $800,046 
Other income   32,197    27,863 
           
Total revenues   825,809    827,909 
           
Expenses          
General and administrative   343,823    388,053 
General and administrative-related parties (Note 8)   192,537    299,412 
Repairs and maintenance   260,009    243,662 
Operating   91,335    109,853 
Taxes   72,995    73,100 
Insurance   31,450    35,514 
Financial, principally interest   425,899    417,301 
Depreciation and amortization   76,908    77,539 
Loss on impairment of fixed assets   1,758,541    0 
           
Total expenses from operations   3,253,497    1,644,434 
           
Loss from operations   (2,427,688)   (816,525)
Income from discontinued operations   14,956,482    579,149 
           
Net income (loss)   12,528,794    (237,376)
           
Net loss attributable to noncontrolling interests from operations   21,712    3,952 
Net income attributable to noncontrolling interests from discontinued operations   (175,277)   (1,344,012)
           
Net income attributable to noncontrolling interests   (153,565)   (1,340,060)
           
Net income (loss) attributable to Independence Tax Credit Plus L.P. II  $12,375,229   $(1,577,436)
           
Loss from operations – limited partners   (2,381,916)   (804,447)
Income (loss) from discontinued operations (including gain on sale of properties) – limited partners   14,633,393    (757,215)
           
Net income (loss) – limited partners  $12,251,477   $(1,561,662)
           
Number of BACs outstanding   58,928    58,928 
           
Loss from operations per weighted average BAC  $(40.42)  $(13.65)
Income (loss) from discontinued operations per weighted average BAC   248.33    (12.86)
           
Net income (loss) per weighted average BAC  $207.91   $(26.51)

 

* Reclassified for comparative purposes.

 

See accompanying notes to consolidated financial statements.

 

- 27 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ EQUITY (DEFICIT)

 

       Limited   General   Noncontrolling 
   Total   Partners   Partner   Interests 
                 
Partners’ (deficit) equity – April 1, 2011  $(27,906,402)  $(26,947,281)  $278,863   $(1,237,984)
Net (loss) income   (237,376)   (1,561,662)   (15,774)   1,340,060 
Distributions   (124,659)   -    -    (124,659)
Contributions – write-off of partnership management fees related to sold properties   3,130,116    -    3,130,116    - 
Contributions – write-off of related party debt   80,904    -    80,904    - 
                     
Partners’ (deficit) equity – March 31, 2012   (25,057,417)   (28,508,943)   3,474,109    (22,583)
Net income   12,528,794    12,251,477    123,752    153,565 
Distributions   (615,531)   -    -    (615,531)
Contributions – write-off of related party debt   3,875    -    3,875    - 
Partners (deficit) equity – March 31, 2013  $(13,140,279)  $(16,257,466)  $3,601,736   $(484,549)

 

- 28 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

   Years Ended March 31, 
   2013   2012 
         
Cash flows from operating activities:          
Net income (loss)  $12,528,794   $(237,376)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:          
Gain on sale of properties   (14,845,849)   (2,548,259)
Depreciation and amortization   85,104    1,021,336 
Loss on impairment of assets   1,758,541    1,016,000 
Changes in operating assets and liabilities:          
(Decrease) increase in accounts payable   (64,553)   87,190 
Increase (decrease) in security deposit payable   7,874    (498)
Increase in accrued interest payable   678,900    1,340,649 
Decrease (increase) in cash held in escrow   53,269    (78,646)
Decrease (increase) in other assets   53,108    (114,605)
Increase in due to local general partners and affiliates   29,991    1,640 
Decrease in due to general partner and affiliates   (74,177)   (173,854)
           
Total adjustments   (12,317,792)   550,953 
           
Net cash provided by operating activities   211,002    313,577 
           
Cash flows from investing activities:          
Proceeds from sale of properties   2,241,885    5,000 
Costs paid relating to sale of properties   (592,492)   - 
Improvements to property and equipment   (120,738)   (460,604)
Increase in cash held in escrow   (48,039)   (188,394)
           
Net cash provided by (used in) investing activities   1,480,616    (643,998)
           
Cash flows from financing activities:          
Principal payments of mortgage notes   (458,759)   (486,209)
Mortgage proceeds   -    1,500,000 
Decrease (increase) in deferred cost   2,332    (55,262)
Decrease in due to local general partners and affiliates   -    (34,000)
Decrease in capitalization of consolidated subsidiaries attributable to noncontrolling interests   (615,531)   (124,659)
           
Net cash (used in) provided by financing activities   (1,071,958)   799,870 
           
Net increase in cash and cash equivalents   619,660    469,449 
Cash and cash equivalents at beginning of year   1,948,675    1,479,226 
Cash and cash equivalents at end of year *  $2,568,335   $1,948,675 
           
Supplemental disclosure of cash flows information:          
Cash paid during the year for interest  $158,961   $706,540 
           
Supplemental disclosure of non-cash investing and financing activities:          
Contribution from write-off of partnership management fee related to sold properties  $-   $3,130,116 
           
Summarized below are the components of the gain on sale of properties:          
Proceeds from sale of properties – net  $(1,649,393)  $(5,000)
Decrease in Property and equipment, net of accumulated depreciation   6,053,594    8,644,793 
Decrease in deferred costs   68,266    59,069 
Decrease in other assets   134,685    252,391 
Decrease in cash held in escrow   1,347,348    809,757 
(Decrease) increase in accounts payable and other liabilities   (313,346)   31,377 
Decrease in due to general partners and affiliates   (3,875)   (110,904)
Decrease in due to local general partners and affiliates   (501,526)   (394,655)
Decrease in mortgage note payable   (8,700,790)   (9,679,742)
Decrease in accrued interest payable   (11,195,562)   (2,090,696)
Decrease in security deposits payable   (89,125)   (145,553)
Contribution - General Partner   3,875    80,904 

 

* Cash and cash equivalents at end of period, includes cash and cash equivalents from discontinued operations of $0 and $136,834, respectively.

 

See accompanying notes to consolidated financial statements.

 

- 29 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

NOTE 1 – General

 

Independence Tax Credit Plus L.P. II (a Delaware limited partnership) (the “Partnership”) was organized on February 11, 1992 and commenced its public offering on January 19, 1993. The general partner of the Partnership is Related Independence Associates L.P., a Delaware limited partnership (the “General Partner”). The general partner of the General Partner is Related Independence Associates Inc., a Delaware Corporation (“RIAI”). The ultimate parent of the General Partner is Centerline Holding Company (“Centerline”). For information on Centerline’s unaudited balance sheet for the most recent fiscal year, see http://sec.gov.

 

The Partnership’s business is primarily to invest in other partnerships (“Local Partnerships,” “subsidiaries” or “subsidiary partnerships”) owning leveraged apartment complexes that are eligible for the low-income housing tax credit (“Tax Credit”) enacted in the Tax Reform Act of 1986, some of which may also be eligible for the historic rehabilitation tax credit.

 

The Partnership had originally acquired interests in fifteen subsidiary partnerships. During the fiscal year ended March 31, 2013, the Partnership sold its limited partnership interests in two Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. As of March 31, 2013, the Partnership has sold its limited partnership interests in thirteen Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. There can be no assurance as to when the Partnership will dispose of its last remaining investment or the amount of proceeds which may be received.

 

The Partnership was authorized to issue a total of 100,000 ($100,000,000) Beneficial Assignment Certificates (“BACs”) which were registered with the Securities and Exchange Commission for sale to the public. Each BAC represents all of the economic and virtually all of the ownership rights attributable to a limited partnership interest. The Partnership raised a total of $58,928,000 representing 58,928 BACs. The offering was terminated on April 7, 1994.

 

The terms of the Partnership’s Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”) provide, among other things, that net profits or losses and distributions of cash flow are, in general, allocated 99% to the limited partners and BACs holders and 1% to the general partner.

 

NOTE 2 – Summary of Significant Accounting Policies

 

a) Basis of Accounting

 

For financial reporting purposes the Partnership’s fiscal year ends on March 31. All subsidiaries have fiscal years ending December 31. Accounts of the subsidiaries have been adjusted for intercompany transactions from January 1 through March 31. The Partnership’s fiscal year ends March 31 in order to allow adequate time for the subsidiaries’ financial statements to be prepared and consolidated. The books and records of the Partnership are maintained on the accrual basis of accounting, in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

 

b) Basis of Consolidation

 

The consolidated financial statements include the accounts of the Partnership and four (2012 Fiscal Year) and twelve (2011 Fiscal Year) subsidiary partnerships, including those which have been sold during these periods, in which the Partnership is the principal limited partner, with an ownership interest of 98.99%. As of March 31, 2013, the Partnership has ownership interests in one remaining investment. Through the rights of the Partnership and/or an affiliate of the General Partner, which affiliate has a contractual obligation to act on behalf of the Partnership, to remove the general partners of the subsidiary local partnerships (“Local General Partners”) and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary local partnerships. All intercompany accounts and transactions with the subsidiary partnerships have been eliminated in consolidation.

 

Income attributable to noncontrolling interests amounted to approximately $(154,000) and $(1,340,000) for the years ended March 31, 2013 and 2012, respectively. The Partnership’s investment in each subsidiary is equal to the respective subsidiary’s partners’ equity less noncontrolling interest capital, if any.

 

c) Cash and Cash Equivalents

 

Cash and cash equivalents include cash on hand, cash in banks, and investments in short-term highly liquid instruments purchased with original maturities of three months or less. Cash held in escrow has various use restrictions and is not considered a cash equivalent.

 

d) Property and Equipment

 

Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, construction period interest and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The determination of asset impairment is a two-step process. First, management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis. If such estimates are below depreciated cost, management estimates fair value (using the fair market value based on comparative sales). The property is considered to be impaired when the depreciated cost exceeds estimated fair value.

 

- 30 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

At the time management commits to a plan to dispose of a specific asset, said asset is adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. Property and equipment that are held for sale are included in discontinued operations. There are no assets classified as property and equipment-held for sale at March 31, 2013.

 

e) Revenue Recognition

 

Rental income is earned primarily under standard residential operating leases and is typically due the first day of each month, but can vary by property due to the terms of the tenant leases. Rental income is recognized when earned and charged to tenants’ accounts receivable if not received by the due date. Rental payments received in advance of the due date are deferred until earned. Rental subsidies are recognized as rental income during the month in which it is earned.

 

Other revenues are recorded when earned and consist of the following items: Interest income earned on cash and cash equivalent balances and cash held in escrow balances, income from forfeited security deposits, late charges, laundry and vending income and other rental related items.

 

Other revenues from operations include the following amounts at both the Partnership and Local Partnership level:

 

   Years Ended March 31, 
   2013   2012* 
         
Interest  $26   $- 
Other   32,171    27,863 
           
Total other revenue  $32,197   $27,863 

 

* Reclassified for comparative purposes.

 

Other revenues from discontinued operations include the following amounts at both the Partnership and Local Partnership level:

 

   Years Ended March 31, 
   2013   2012* 
         
Interest  $642   $5,505 
Other   13,099    49,373 
           
Total other revenue  $13,741   $54,878 

 

* Reclassified for comparative purposes.

 

f) Income Taxes

 

The Partnership is not required to provide for, or pay, any federal income taxes. Net income or loss generated by the Partnership is passed through to the partners and is required to be reported by them. The Partnership may be subject to state and local taxes in jurisdictions in which it operates. For income tax purposes, the Partnership has a fiscal year ending December 31 (See Note 9).

 

The Partnership’s management have analyzed the Partnership’s tax positions and concluded that no liability for unrecognized tax benefits should be recorded for positions taken on returns filed for open tax years. As of and during the year ended March 31, 2012, the Partnership did not have a liability for any unrecognized tax benefits or related interest and penalties. Such related interest and penalties, if any, would be included in general and administrative expense.

 

The Partnership relies on a 2% safe harbor established by an Internal Revenue Service (“IRS”) regulation to avoid being characterized as a “publicly-traded partnership” that is taxed as a corporation.

 

In the normal course of business the Partnership or one of its subsidiaries is subject to examination by federal, state and local jurisdictions in which it operates where applicable. At March 31, 2013, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2009 forward.

 

- 31 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

g) Recent Accounting Pronouncements

 

In February 2013, the FASB issued an Accounting Standards Update ("ASU") No. 2013-02 "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income," requiring new disclosures for items reclassified out of accumulated other comprehensive income ("AOCI"), including (1) changes in AOCI balances by component and (2) significant items reclassified out of AOCI. The guidance does not amend any existing requirements for reporting net income or OCI in the financial statements. The standards update was effective for reporting periods beginning after December 15, 2012, to be applied prospectively. The Partnership evaluated the impact of adopting this standard and does not expect it to have a significant impact on its consolidated financial statements.

 

h) Offering Costs

 

Costs incurred to sell BACs, including brokerage and the nonaccountable expense allowance, are considered selling and offering expenses. These costs are charged directly to limited partners’ capital.

 

i) Loss Contingencies

 

The Partnership records loss contingencies as a charge to income when information becomes available which indicates that it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated.

 

j) Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

 

NOTE 3 – Fair Value of Financial Instruments

 

The following methods and assumptions were used to estimate the fair value of each class of financial instruments (all of which are held for nontrading purposes) for which it is practicable to estimate that value:

 

Cash and Cash Equivalents and Cash Held in Escrow

 

The carrying amount approximates fair value.

 

Accounts Payable and Other Liabilities

 

The carrying amounts approximate fair value due to their short-term nature.

 

Mortgage Notes Payable and Accrued Interest

 

The Partnership has categorized the fair value of financial assets and liabilities based upon the fair value hierarchy specified by ASC Topic 820, Fair Value Measurements (“ASC 820”). This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). This standard provides for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1:Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2:Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3:Unobservable inputs that reflect the Partnership’s own assumptions.

 

The estimated fair value of mortgage notes payable has been determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

 

- 32 -
 

 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

   At March 31, 2013   At March 31, 2012 
   Carrying       Carrying     
   Amount   Fair Value   Amount   Fair Value 
                 
LIABILITIES:                    
Mortgage notes  $6,712,964   $2,827,743   $15,872,513   $8,796,945 

 

Fair value for the mortgage notes have been estimated using Level 3 inputs.

 

For the mortgage notes, fair value is calculated using present value cash flow models based on a discount rate. It was determined that the Tender Option Bond market, through which these bonds have been securitized in the past, continued to see a dramatic slowdown with limited liquidity and significantly reduced transaction levels. To assist in valuing these notes, the Partnership held separate discussions with various third party investment banks who are leaders in the municipal bond business. The discussions produced assumptions that were based on market conditions as well as the credit quality of the underlying property partnerships, which held the mortgage notes, to determine what discount rates to utilize.

 

Due to General Partner and Affiliates and Due to/from Local General Partners and Affiliates

 

Management believes it is not practical to estimate the fair value of due to General Partner and affiliates and due to/from Local General Partners and affiliates because market information on such obligations is not currently available.

 

NOTE 4 – Property and Equipment

 

The components of property and equipment from operations and their estimated useful lives are as follows:

 

   March 31,   Estimated 
           Useful Lives 
   2013   2012   (Years) 
             
Land  $686,616   $697,372    - 
Building and improvements   4,862,007    6,657,042    10-40 
Furniture and fixtures   69,885    131,166    5-10 
    5,618,508    7,485,580      
Less:  Accumulated depreciation   (5,613,049)   (5,571,012)     
                
   $5,459   $1,914,568      

 

Original acquisition costs totaling $4,369,919, of which $3,501,977 was paid to the General Partner, are included in the cost of property and equipment.

 

In connection with the rehabilitation of the properties, the subsidiary partnerships incurred developer’s fees of $9,282,042 to the Local General Partners and their affiliates. Such fees have been included in the cost of property and equipment.

 

Depreciation expense for the years ended March 31, 2013 and 2012 amounted to $76,908 and $77,539, respectively.

 

The components of property and equipment from discontinued operations are as follows:

 

   March 31,   Estimated 
           Useful Lives 
   2013   2012   (Years) 
             
Land  $-   $595,304    - 
Building and improvements   -    20,558,555    15-40 
Furniture and fixtures   -    152,251    3-10 
    -    21,306,110      
Less:  Accumulated depreciation   -    (15,163,826)     
                
   $-   $6,142,284      

 

- 33 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

Depreciation expenses for the discontinued property and equipment for the years ended March 31, 2013 and 2012 amounted to $5,878 and $939,227, respectively. During the year ended March 31, 2013, there was a decrease in accumulated depreciation on dispositions in the amount of $15,204,575.

 

Impairments

 

During the years ended March 31, 2013 and 2012, the Partnership performed a fair value analysis on all of its investments. Impairment of assets is a two-step process. First, management estimated amounts recoverable through future operations and sale of the Property on an undiscounted basis. If such estimates were below depreciated cost, Property investments themselves were reduced to estimated fair value (using the fair market value based on comparative sales). Each Local Partnership must continue to comply with its Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits. Therefore, a 5-year cash flow projection was used, as this period is indicative of the average holding period left on the remaining investments. Based on this analysis, the Partnership deemed the properties of the below Local Partnerships impaired and wrote them down to their estimated fair value which resulted in $1,759,000 and $1,016,000 of losses on impairment for the years ended March 31, 2013 and 2012, respectively. Impairments have been estimated using Level 3 inputs

 

Impairments from operations recorded for the year ended March 31, 2013 were as follows:

 

Renaissance Plaza '93 Associates, LP  $1,758,541 
      
   $1,758,541 

 

Impairments from discontinued operations recorded for the year ended March 31, 2012 is as follows:

 

Affordable Greene Associates, LP  $1,016,000 
      
   $1,016,000 

 

NOTE 5 – Cash Held in Escrow

 

Cash held in escrow from operations consists of the following:

 

   March 31, 
   2013   2012 
         
Real estate taxes, insurance and other  $80,469   $232,900 
Reserve for replacements   147,751    177,558 
Tenant security deposits   56,824    65,986 
           
   $285,044   $476,444 

 

Cash held in escrow from discontinued operations consists of the following:

 

   March 31, 
   2013   2012 
         
Real estate taxes, insurance and other  $-   $122,175 
Reserve for replacements   -    932,346 
Tenant security deposits   -    106,657 
           
   $-   $1,161,178 

 

- 34 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

NOTE 6 – Deferred Costs

 

The components of deferred costs from operations and their periods of amortization are as follows:

 

   March 31,     
   2013   2012   Period 
             
Financing costs  $-   $7,332   * 
Other   8,426    33,703    various 
    8,426    41,035      
                
   $8,426   $41,035      

 

* Over the life of the related mortgages.

 

Amortization expense for the years ended March 31, 2013 and 2012, amounted to $0 for both years.

 

The components of deferred costs from discontinued operations and their periods of amortization are as follows:

 

   March 31,     
   2013   2012   Period 
             
Financing costs  $-   $68,493   * 
               
    -    68,493     
Less: Accumulated amortization   -    (27,694)    
               
   $-   $40,799     

 

* Over the life of the related mortgages.

  

Amortization expense from discontinued operations for the years ended March 31, 2013 and 2012 amounted to $2,318 and $4,570, respectively. During the year ended March 31, 2013, there was a decrease in deferred costs and accumulated amortization on dispositions in the amount of $101,102 and $30,012, respectively.

 

NOTE 7 – Mortgage Notes Payable

 

The mortgage notes from operations are payable in aggregate monthly installments of approximately $2,000, including principal and interest, at rates ranging from 6.22% to 6.33% per annum through the year 2024. The remaining subsidiary partnership’s mortgage note payable is collateralized by its land and buildings, and is without further recourse to the Partnership.

 

Accrued interest payable as of March 31, 2013 and 2012 was $7,299,826 and $7,030,303, respectively. Accrued interest payable from discontinued operations as of March 31, 2013 and 2012 was $0 and $10,786,185, respectively. Interest accrues on all mortgage loans, which include primary and secondary loans. Certain secondary loans have provisions such that interest is accrued but not payable until a future date. The Partnership anticipates the payment of accrued interest on the secondary loans (which make up the majority of the accrued interest payable amount which have been accumulating since the Partnership’s investment in the remaining Local Partnership) will be made from future refinancing or sales proceeds of such Local Partnership or through assumption by the buyer upon sale of the Partnership interest in such Local Partnership.

 

The mortgage agreements generally require monthly deposits to replacement reserves and escrow accounts for real estate taxes, hazard insurance and mortgage insurance and other (see Note 5). Monthly deposits of approximately $3,000 from operations were made for replacement reserves.

 

- 35 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

Annual principal payment requirements for mortgage notes from operations payable by the subsidiary partnership for each of the next five years and thereafter are as follows:

 

December 31,  Amount 
     
2013  $14,103 
2014   15,006 
2015   15,966 
2016   16,988 
2017   18,076 
Thereafter   6,632,825 
      
   $6,712,964 

 

NOTE 8 – Related Party Transactions

 

An affiliate of the General Partner has a .01% interest as a special limited partner in each of the subsidiary partnerships. An affiliate of the General Partner also has a minority interest in certain local partnerships.

 

A) Other Related Party Expenses

 

The costs incurred to related parties from operations for the years ended March 31, 2013 and 2012 were as follows:

 

   Years Ended March 31, 
   2013   2012 * 
         
Partnership management fees (a)  $79,896   $120,929 
Expense reimbursement (b)   51,475    116,123 
Local administrative fees (c)   5,000    5,000 
Total general and administrative - General Partner   136,371    242,052 
           
Property management fees incurred to affiliates of the subsidiary partnerships’ general partners   56,166    57,360 
Total general and administrative-related parties  $192,537   $299,412 

 

* Reclassified for comparative purposes.

 

Expenses incurred to related parties from discontinued operations for the years ended March 31, 2013 and 2012 were as follows:

 

   Years Ended March 31, 
   2013   2012 * 
         
Local administrative fees (c)  $-   $18,154 
           
Total general and administrative – General Partner   -    18,154 
           
Property management fees incurred to affiliates of the subsidiary partnerships’ general partners   15,391    142,058 
           
Total general and administrative-related parties  $15,391   $160,212 

 

* Reclassified for comparative purposes.

 

(a)The General Partner is entitled to receive a partnership management fee, after payment of all Partnership expenses, which together with the annual local administrative fees will not exceed a maximum of 0.5% per annum of invested assets (as defined in the Partnership Agreement), for administering the affairs of the Partnership. Subject to the foregoing limitation, the partnership management fee will be determined by the General Partner in its sole discretion based upon its review of the Partnership’s investments. Unpaid partnership management fees for any year will be accrued without interest and will be payable from working capital reserves or to the extent of available funds after the Partnership has made distributions to the limited partners of sale or refinancing proceeds equal to their original capital contributions plus a 10% priority return thereon (to the extent not theretofore paid out of cash flow). Partnership management fees owed to the General Partner amounting to approximately $1,713,000 and $1,707,000 were accrued and unpaid as of March 31, 2013 and 2012, respectively, and are included in the line item Due to general partners and affiliates in the consolidated balance sheets. During the year ended March 31, 2012, management deemed the unpaid partnership management fees related to sold properties uncollectible and wrote off approximately $3,130,000, resulting in a noncash General Partner contribution of the same amount. Current year partnership management fees may be paid out of operating reserves or refinancing and sales proceeds. As such, the General Partner cannot demand payment of the deferred fees except as noted above.

 

- 36 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

(b)The Partnership reimburses the General Partner and its affiliates for actual Partnership operating expenses incurred by the General Partner and its affiliates on the Partnership’s behalf. The amount of reimbursement from the Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the General Partner performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnerships’ performance. Expense reimbursements and asset monitoring fees owed to the General Partner and its affiliates amounting to approximately $5,000 and $14,000 were accrued and unpaid as of March 31, 2013 and 2012, respectively. The General Partner does not intend to demand payment of the deferred payables beyond the Partnership’s ability to pay them. The Partnership anticipates that these will be paid, if at all, from working capital reserves or future sales proceeds.

 

(c)Independence SLP L.P., a special limited partner of the subsidiary partnerships, is entitled to receive a local administrative fee of up to $5,000 per year from each subsidiary partnership. Local administrative fee owed to Independence SLP L.P. amounting to approximately $79,000 and $148,000 were accrued and unpaid as of March 31, 2013 and 2012, respectively. These fees have been deferred in certain cases and the Partnership anticipates that they will be paid, if at all, from working capital reserves or future sales proceeds.

 

As of March 31, 2013 and 2012, the Partnership owed approximately $0 and $6,000, respectively, to the Special Limited Partner for the fees it received from a Local Partnership on its behalf.

 

B) Due to Local General Partners and Affiliates

 

Due to local general partners and affiliates at March 31, 2013 and 2012 consists of the following:

 

   March 31, 
   2013   2012 
         
Operating advances  $4,796   $4,689 
Construction costs payable   120,000    382,200 
Loans payable to local general partner and affiliates (a)   -    202,994 
           
   $124,796   $589,883 

 

(a)Affordable Greene associates, LP borrowed monies from affiliates of the Local general Partner while the building was being constructed. Interest was accrued at rates from 8% to 11% during the construction period. The loans are now due on demand and do not accrue interest. On June 28, 2012, the Partnership sold its limited partnership interest in Greene Avenue (See Note 10).

 

Due to local general partner and affiliates from discontinued operations consists of the following:

 

   March 31, 
   2013   2012 
         
Operating advances  $-   $6,448 
           
   $-   $6,448 

 

- 37 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

NOTE 9 – Taxable Net Income

 

A reconciliation of the financial statement net income (loss) to the taxable net income for the Partnership and its consolidated subsidiaries is as follows:

 

   Years Ended March 31, 
   2013   2012 
         
Financial statement net income (loss)  $12,375,229   $(1,577,436)
           
Differences between depreciation and amortization expense records for financial reporting purposes and the accelerated costs recovery system utilized for income tax purposes   (440,576)   (990,237)
           
Differences between gain on sale of properties for financial reporting purposes and gain on sale for income tax purposes   (11,008,666)   7,233,883 
Accrued interest not deductible for tax purposes until paid   -    771,143 
           
Non-deductible loss on impairment of property   1,758,541    1,016,000 
           
Write-off of Partnership management fees included in income for tax purposes   695,746    1,466,412 
           
Other expense, including related party accruals for financial reporting not deductible for tax purposes until paid   (382,200)   1,334,722 
           
Net income as shown on the income tax return for the calendar year ended  $2,998,074   $9,254,487 

 

No provision for income taxes related to the operations of the Partnership has been included in the accompanying financial statements because, as a partnership, it is not subject to federal or material state income taxes and the tax effect of its activities accrues to the BACs holders. Net income for financial statement purposes may differ significantly from taxable income reportable to BACs holders as a result of differences between the tax bases and financial reporting bases of assets and liabilities and the taxable income allocation requirements under its Partnership Agreement. In the event of an examination of the Partnership’s tax return, the tax liability of the partners could be changed if an adjustment in the Partnership’s income is ultimately sustained by the taxing authorities. At March 31, 2013, the tax basis net assets exceeded the financial statement net assets by approximately $6,510,000 due to depreciation differences, impairments of property and equipment, and related party accruals.

 

NOTE 10 – Sale of Properties

 

The Partnership is in the process of disposing of all of its investments. During the fiscal year ended March 31, 2013, the Partnership sold its limited partnership interests in two Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. As of March 31, 2013, the Partnership has sold its limited partnership interests in thirteen Local Partnerships and one Local Partnership sold its property and the related assets and liabilities. There can be no assurance as to when the Partnership will dispose of its last remaining investment or the amount of proceeds which may be received. However, based on the historical operating results of the remaining Local Partnership and the current economic conditions, including changes in tax laws, the proceeds from such sales received by the Partnership will not be sufficient to return to the limited partners their original investments. All gains and losses on sales are included in discontinued operations.

 

On June 28, 2012, the Partnership sold its limited partnership interest in Greene Avenue to an affiliate of the Local General Partner for a sales price of $10. The sale resulted in a gain of approximately $2,354,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $2,374,000, costs related to sale of approximately $20,000 and the $10 cash received from the sale, which was recorded during the quarter ended June 30, 2012. Adjustments to the gain of approximately $7,000 and $(4,000) were recorded during the quarter ended September 30, 2012 and March 31, 2013, respectively, resulting in an overall gain of approximately $2,357,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of $2,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On June 22, 2012, the property and the related assets and liabilities of Clear Horizons Limited Partnership (“Clear Horizons”) were sold to an unaffiliated third party purchaser for a sales price of $2,100,000. The Partnership received $978,396 as distributions from this sale after the repayment of the mortgages, other liabilities, closing costs and distributions to other partners of approximately $1,122,000. The sale resulted in a gain of approximately $1,035,000 resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of sale, which was recorded during the quarter ended June 30, 2012. Adjustments to the gain of approximately $(56,000) and $(3,000) were recorded during the quarter ended September 30, 2012 and March 31, 2013, resulting in an overall gain of approximately $976,000.

 

- 38 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

On May 1, 2012, the Partnership sold its limited partnership interest in United Germano-Millgate Limited Partnership (“United Germano”) to an unaffiliated third party purchaser for a sales price of $141,875. The sale resulted in a gain of approximately $11,568,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $11,426,000 and the $141,875 cash received from the sale, which was recorded during the quarter ended June 30, 2012. Adjustments to the gain of approximately $12,000 and $(67,000) were recorded during the quarter ended September 30, 2012 and March 31, 2013, respectively, resulting in an overall gain of approximately $11,513,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $2,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On December 31, 2011, the Partnership sold its limited partnership interest in Lincoln Renaissance (“Abraham Lincoln Court”) to an affiliate of the Local General Partner for a sales price of $10. The sale resulted in a gain of approximately $2,667,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $2,667,000, which was recorded during the quarter ended December 31, 2011. An adjustment to the gain of approximately $48,000 was recorded during the quarter ended March 31, 2012, resulting in an overall gain of approximately $2,715,000. During the year ended March 31, 2011, in accordance with ASC 360, the Partnership deemed the building impaired and wrote it down to its fair value, which resulted in a loss on impairment of approximately $277,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of $27,500, as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On September 21, 2011, the Partnership sold its limited partnership interest in NLEDC, Limited Partnership (“Paradise Arms”) to the Local General Partner for a sales price of $5,000. The sale resulted in a gain of approximately $3,846,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $3,841,000 and the $5,000 cash received from the sale, which was recorded during the quarter ended September 30, 2011. Adjustments to the gain of approximately $16,000 and $119,000 were recorded during the quarters ended December 31, 2011 and March 31, 2012, respectively, resulting in an overall gain of approximately $3,981,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of $2,500 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On June 30, 2011, the Partnership sold its limited partnership interest in Neptune Venture L.P. (“Winding Ridge”) to the Local General Partner for a sales price of $1,476,329. The Partnership received $1,476,329 as a distribution from this sale. The sale resulted in a loss of approximately $5,836,000 resulting from the write-off of the basis in the Local Partnership of the same amount at the date of sale, which was recorded during the quarter ended June 30, 2011. Adjustments to the loss of approximately $(96,000) and $98,000 were recorded during the quarters ended September 30, 2011 and March 31, 2012, respectively, resulting in an overall loss of approximately $5,834,000. In accordance with the partnership agreement of Winding Ridge, the Local General Partner was to be paid certain fees and distributions, based on the selling price, contingent upon the completion of a sale. These fees, amounting to $6,725,000, were based on the implied sales price of $8,201,828 as determined by an independent real estate service agency. No cash payments were made for these fees. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of $3,750 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On May 12, 2011, the Partnership sold its limited partnership interest in Mansion Court Associates (“Mansion Court”) to an affiliate of the Local General Partner for a sales price of $1. The sale resulted in a gain of approximately $1,698,000 resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of sale, which was recorded during the quarter ended June 30, 2011. Adjustments to the gain of approximately $1,000 and $10,000 were recorded during the quarters ended September 30, 2011 and March 31, 2012, resulting in an overall gain of approximately $1,709,000. During the year ended March 31, 2011, in accordance with ASC 360, the Partnership deemed the building impaired and wrote it down to its fair value, which resulted in a loss on impairment of $301,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $46,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On March 31, 2011, the Partnership sold its limited partnership interest in Brynview Terrace, L.P. (“Brynview”) to the Local General Partner for a sales price of $2. The Partnership did not receive any cash from this sale and paid other liabilities of $5,000 in relation to the sale. The sale resulted in a gain of approximately $1,024,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $1,029,000 and the $5,000 cost incurred relating to the sale, which was recorded during the year ended March 31, 2011. An adjustment to the gain of approximately $(4,000) was recorded during the quarter ended June 30, 2011, resulting in an overall gain of approximately $1,020,000.

 

On March 31, 2011, the Partnership sold its limited partnership interest in Colden Oaks Limited Partnership (“Colden Oaks”) to an affiliate of the Local General Partner for a sales price of $2. The Partnership did not receive any cash from this sale and paid other liabilities of $5,000 in relation to the sale. The sale resulted in a gain of approximately $5,061,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $5,066,000 and the $5,000 cost incurred relating to the sale, which was recorded during the year ended March 31, 2011. Adjustments to the gain of approximately $7,000 and $(47,000) were recorded during the quarters ended June 30, 2011 and March 31, 2012, respectively, resulting in an overall gain of approximately $5,021,000. In addition, the sale resulted in a noncash contribution to the Local Partnership from the General Partner of approximately $85,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner.

 

On February 9, 2011, the Partnership sold its limited partnership interest in P&P Home for the Elderly, L.P. (“P&P”) to an unaffiliated third party purchaser for a sales price of $50,000. The Partnership received $79,363 (including a distribution from sale of $49,363) after the payment of other liabilities of approximately $20,000. The sale resulted in a gain of approximately $6,288,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $6,208,000 and the $79,363 cash received from the sale, which was recorded during the year ended March 31, 2011. Adjustments to the gain of approximately $(112,000) and $18,000 were recorded during the quarters ended June 30, 2011 and March 31, 2012, respectively, resulting in an overall gain of approximately $6,194,000.

 

- 39 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

On February 9, 2011, the Partnership sold its limited partnership interest in Martha Bryant Manor, L.P. (“Martha Bryant”) to an unaffiliated third party purchaser for a sales price of $15,000. The Partnership did not receive any cash from this sale and paid other liabilities of $15,000 in relation to the sale. The sale resulted in a gain of approximately $6,158,000 resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of sale, which was recorded during the year ended March 31, 2011. Adjustments to the gain of approximately $30,000 and $5,000 were recorded during the quarters ended June 30, 2011 and March 31, 2012, respectively, resulting in an overall gain of approximately $6,193,000.

 

NOTE 11 – Commitments and Contingencies

 

a)Liquidity

 

At March 31, 2013, the Partnership’s liabilities exceeded assets by $13,140,279 and for the year then ended had net income of $ 12,528,794, including gain on sale of properties of $14,845,849 and loss on impairment of fixed assets of $1,758,541. These factors raise substantial doubt about the Partnership’s ability to continue as a going concern. As discussed in Note 8, partnership management fees of approximately $1,713,000 will be payable out of sales or refinancing proceeds only to the extent of available funds after payments of all other Partnership liabilities have been made and after the Limited Partners have received a 10% return on their capital contributions. As such, the General Partner cannot demand payment of these deferred fees beyond the Partnership’s ability to pay them. In addition, where the Partnership has unpaid partnership management fees related to sold properties, such management fees are written off and recorded as capital contributions.

 

The entire mortgage payable balance of $6,712,964 and the accrued interest payable balance of $7,299,826 are of a nonrecourse nature and secured by the respective properties. The Partnership is currently in the process of disposing of its last remaining investment. Historically, the mortgage notes and accrued interest thereon have been assumed by the buyer in instances of sales of the Partnership’s interest or have been paid off from sales proceeds in instances of sales of the property. In most instances when the Partnership’s interest was sold and liabilities were assumed, the Partnership recognized a gain from the sale. The Partnership owns the limited partner interest in its last remaining investment, and as such has no financial responsibility to fund operating losses incurred by the Local Partnership. The maximum loss the Partnership would incur is its net investment in such Local Partnership.

 

The Partnership has working capital reserves of approximately $2,433,000 at March 31, 2013. Such amount is considered sufficient to cover the Partnership’s day to day operating expenses, excluding fees to the General Partner, for at least the next year. The Partnership’s operating expenses, excluding the Local Partnerships’ expenses and related party expenses amounted to approximately $140,000 for the year ended March 31, 2013.

 

Management believes the above mitigating factors enable the Partnership to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

b)Uninsured Cash and Cash Equivalents

 

The Partnership maintains its cash and cash equivalents in various banks. The accounts at each bank are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”). There were no uninsured cash and cash equivalent amounts at March 31, 2013.

 

c)Cash Distributions

 

Cash distributions from the Local Partnerships to the Partnership are restricted by the provisions of the respective agreements of limited partnership of the Local Partnerships and/or the U.S. Department of Housing and Urban Development.

 

d)Property Management Fees

 

Property and incentive management fees incurred by the subsidiary partnerships amounted to $179,901 and $523,684 for the years ended March 31, 2013 and 2012, respectively. Of these fees $71,557 and $199,418 were earned by affiliates of the Local General Partners and $15,391 and $142,058 of fees relating to discontinued operations.

 

e)Other

 

The Partnership is subject to the risks incidental to potential losses arising from the management and ownership of improved real estate. The Partnership can also be affected by poor economic conditions generally. There are also substantial risks associated with owning properties receiving government assistance; for example, the possibility that Congress may not appropriate funds to enable HUD to make rental assistance payments. HUD also restricts annual cash distributions to partners based on operating results and a percentage of the owner’s equity contribution. The Partnership cannot sell or substantially liquidate its remaining investment during the period that the subsidy agreement is in existence without HUD’s approval. Furthermore, there may not be market demand for apartments at full market rents when the rental assistance contract expires.

 

- 40 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

f)Subsequent Events

 

We evaluated all subsequent events from the balance sheet date the issuance date of this report and determined that there were no events or transactions occurring during the subsequent event reporting period which require recognition or disclosure in the financial statements.

 

NOTE 12 – Discontinued Operations

 

The following table summarizes the financial position of the Local Partnerships that are classified as discontinued operations because the respective Local Partnerships were classified as assets held for sale or were sold. As of March 31, 2013, there were no assets classified as discontinued operations on the consolidated balance sheets. As of March 31, 2012, United-Germano and Clear Horizons, which were classified as assets held for sale, were classified as discontinued operations on the consolidated balance sheets.

 

Consolidated Balance Sheets:

 

   March 31,   March 31, 
   2013   2012 
         
Assets          
           
Property and equipment – less accumulated depreciation of $0 and $15,163,826, respectively  $-   $6,142,284 
Cash and cash equivalents   -    136,834 
Cash held in escrow   -    1,161,178 
Deferred costs, net of accumulated amortization of $0 and $27,694, respectively   -    40,799 
Other assets   -    178,865 
Total assets  $-   $7,659,960 
           
Liabilities          
Mortgage notes payable  $-   $7,071,971 
Accounts payable   -    562,436 
Accrued interest payable   -    10,786,185 
Security deposit payable   -    72,324 
Due to local general partners and affiliates   -    6,448 
Due to general partners and affiliates   -    39,000 
Total liabilities  $-   $18,538,364 

 

- 41 -
 

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2013

 

The following table summarizes the results of operations of the Local Partnerships that were classified as discontinued operations in the consolidated statements of operations. For the year ended March 31, 2013, Greene Avenue, Clear Horizons and United Germano, which were sold during the period, were all classified as discontinued operations in the consolidated statements of operations. For the year ended March 31, 2012, Martha Bryant, P&P, Colden Oaks and Brynview, which were sold during the year ended March 31, 2011, Mansion Court, Winding Ridge, Paradise Arms and Abraham Lincoln Court, which were sold during the year ended March 31, 2012, and Clear Horizons, United Germano and Greene Avenue, in order to present comparable results to the year ended March 31, 2013, were all classified as discontinued operations in the consolidated statements of operations.

 

Consolidated Statements of Discontinued Operations:

 

   Years Ended March 31, 
   2013   2012 * 
         
Revenues          
           
Rental income  $1,827,393   $6,137,171 
Other (Note 2)   13,741    54,878 
Gain on sale of properties (Note 10)   14,845,849    2,548,259 
           
Total revenue   16,686,983    8,740,308 
           
Expenses          
General and administrative   464,353    2,074,597 
General and administrative-related parties (Note 8)   15,391    160,212 
Repairs and maintenance   599,407    1,610,555 
Operating and other   195,704    661,095 
Taxes   65,850    376,240 
Insurance   57,247    207,539 
Interest   324,353    1,111,124 
Depreciation and amortization   8,196    943,797 
Loss on impairment of fixed assets   -    1,016,000 
           
Total expenses   1,730,501    8,161,159 
           
Income from discontinued operations  $14,956,482   $579,149 
           
Noncontrolling interest in income of subsidiaries from discontinued operations   (175,277)   (1,344,012)
           
Income (loss) from discontinued operations – Independence Tax Credit Plus LP II  $14,781,205   $(764,863)
           
Income (loss) – limited partners from discontinued operations  $14,633,393   $(757,215)
           
Number of BACs outstanding   58,928    58,928 
           
Income (loss) from discontinued operations per BAC  $248.33   $(12.86)

 

   Years Ended March 31, 
   2013   2012 * 
Cash flows from Discontinued Operations:          
Net cash used in operating activities  $(1,237,563)  $(1,358,477)
Net cash provided by investing activities  $1,704,410   $165,137 
Net cash (used in) provided by financing activities  $(237,102)  $1,365,156 

 

* Reclassified for comparative purposes.

 

- 42 -
 

 

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A. Controls and Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures. The Chief Executive Officer and Chief Financial Officer of Related Independence Associates, L.P., the general partner of the Partnership, have evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”) as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective (see section (b) below for a discussion concerning certain subsidiary Partnerships).

 

(b) Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). In evaluating the Partnership’s internal control over financial reporting, management has adopted the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring organizations of the Treadway Commission (the “COSO Framework”). Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer of the General Partner, the Partnership conducted an evaluation of the effectiveness of its internal control over financial reporting as of March 31, 2013. The Partnership’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Partnership; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Partnership are being made only in accordance with authorizations of management and directors of the Partnership; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Partnership’s assets that could have a material effect on the financial statements. However, because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Based on management’s evaluation under the COSO Framework, it has concluded that the Partnership’s internal control over financial reporting, was, as of March 31, 2013, (1) effective at the Partnership level, in that they provide reasonable assurance that information required to be disclosed by the Partnership in the reports it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (2) ineffective at the subsidiary level due to deficiencies that resulted in restatements on two subsidiaries’ financial statements (see Note 14 in Item 8). Management will attempt to cause the Local General Partners to remedy such deficiencies; however, the General Partner does not have control over the internal controls at the subsidiary level. These deficiencies were noted in prior years. Management has worked closely with the Local General Partner at each of these subsidiary Partnerships during the year (and will continue to do so going forward) to prevent such deficiencies.

 

(c) Changes in Internal Controls over Financial Reporting. During the year ended March 31, 2013, there were no changes in the Partnership’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

 

Item 9B. Other Information.

 

Not applicable.

 

- 43 -
 

 

PART III

 

Item 10. Directors, Executive Officers and Corporate Governance.

 

The Partnership is a limited partnership which was formed under the laws of the State of Delaware on February 11, 1992. The general partner of the Partnership is Related Independence Associates L.P., a Delaware limited partnership (the “General Partner”). The general partner of the General Partner is Related Independence Associates Inc., a Delaware corporation (“RIAI”). The Partnership has no directors or executive officers. The Partnership’s affairs are managed and controlled by the General Partner.

 

The ultimate parent of the General Partner is Centerline Holding Company (“Centerline”). The Partnership has not adopted a separate code of ethics because the Partnership has no directors or executive officers. However, Centerline, which controls the General Partner, has adopted a code of ethics (see http://www.centerline.com).

 

Certain information concerning the directors and executive officers of RIAI, is set forth below. The General Partner is also the general partner of Independence Tax Credit Plus L.P.

 

Name   Position
     
Robert A. Pace   Chief Financial Offer
Robert L. Levy   President and Chief Executive Officer

 

ROBERT A. PACE, 40, is the Chief Financial Officer of RIAI and a Director of Centerline Capital Group (“Centerline”). Mr. Pace oversees the accounting operations of the General Partner, and is also responsible for overseeing the accounting operations of Centerline’s Affordable Housing Group. Mr. Pace joined Centerline’s predecessor in January of 2003 as an Assistant Controller. Prior to joining Centerline’s predecessor, Mr. Pace worked for KPMG in the financial services real estate group as an audit manager. He received a Bachelor of Science Degree from Wagner College in 1994 and is a Certified Public Accountant.

 

ROBERT L. LEVY, 47, is the President and Chief Executive Officer of RILLC and is also a managing trustee and President and Chief Operating Officer of Centerline. Mr. Levy was appointed as Chief Financial Officer of Centerline in November 2006 and stepped down from that position in May 2012. He was also appointed as President and Chief Operating Officer of Centerline in April 2010. He directs the day-to-day operations of Centerline and is also responsible for overseeing all of Centerline’s business and operations. Mr. Levy joined Centerline in November of 2001 as the Director of Capital Markets. From 1998 through 2001, he was a Vice President in the Real Estate Equity Research and Investment Banking Departments at Robertson Stephens, an investment banking firm in San Francisco. Prior to 1998, Mr. Levy was employed by Prudential Securities in the Real Estate Equity Research Group and at the Prudential Realty Group, the real estate investment arm of the Prudential Insurance Company. He received his Master’s in Business Administration from the Leonard N. Stern School of Business at New York University and his Bachelor of Arts from Northwestern University.

 

Item 11. Executive Compensation.

 

The Partnership has no officers or directors. The Partnership does not pay or accrue any fees, salaries or other forms of compensation to directors or officers of the General Partner for their services. However, under the terms of the Partnership Agreement, the Partnership has entered into certain arrangements with the General Partner and its affiliates, which provide for compensation to be paid to the General Partner and its affiliates. Such arrangements include (but are not limited to) agreements to pay an annual partnership management fee, nonrecurring Acquisition Fees, a nonaccountable Acquisition Expense allowance and an accountable expense reimbursement. In addition, the General Partner is entitled to a subordinated interest in Cash from Sales or Financings and a 1% interest in Net Income, Net Loss, Distributions of Adjusted Cash from Operations and Cash from Sales or Financings. Certain directors and officers of the General Partner receive compensation from the General Partner and its affiliates for services performed for various affiliated entities which may include services performed for the Partnership. The maximum annual partnership management fee paid to the General Partner is 0.5% of invested assets. See Note 8 in Item 8 above, which is incorporated herein by reference.

 

Tabular information concerning salaries, bonuses and other types of compensation payable to executive officers has not been included in this annual report. As noted above, the Partnership has no executive officers. The levels of compensation payable to the General Partner and/or its affiliates is limited by the terms of the Partnership Agreement and may not be increased therefrom on a discretionary basis. See Note 8 in Item 8 above, which is incorporated herein by reference.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

Title of Class   Name and Address of
Beneficial Ownership
  Amount and Nature of
Beneficial Ownership
  Percentage
of Class
             
General Partnership Interest in the Partnership   Related Independence
Associates L.P.
100 Church Street
New York, NY 10007
  $1,000 capital contribution –
directly owned
  100%

 

- 44 -
 

 

Independence SLP L.P., a limited partnership whose general partner is the general partner of the General Partner of the Partnership and which acts as the special limited partner of each Local Partnership, holds a .01% limited partnership interest in each Local Partnership. See Note 8 in Item 8 above, which information is incorporated herein by reference thereto.

 

Except as set forth below, no person is known by the Partnership to be the beneficial owner of more than 5% of the Limited Partnership Interests and neither the General Partner nor any executive officer of the General Partner owns any Limited Partnership Interests. The following table sets forth the number of BACs beneficially owned, as of June 24, 2013, by (i) each BACs holder known to the Partnership to be a beneficial owner of more than 5% of the BACs, (ii) each director and executive officer of the general partner of the General Partner and (iii) the directors and executive officers of the general partner of the General Partner as a group. Unless otherwise noted, all BACs are owned directly with sole voting and dispositive powers.

 

   Amount and Nature of     
Name of Beneficial Owner (1)  Beneficial Ownership   Percentage of Class 
         
Lehigh Tax Credit Partners, Inc.   4,453.20(2)   7.6%
           
J. Michael Fried   4,453.20(2) (3)   7.6%
           
Alan P. Hirmes   4,453.20(2) (3)   7.6%
           
Stuart J. Boesky   4,453.20(2) (3)   7.6%
           
Marc D. Schnitzer   4,453.20(2) (3)   7.6%
           
Denise L. Kiley   4,453.20(2) (3)   7.6%
           
Robert A. Pace   -    - 
           
Robert L. Levy   -    - 
           
All executive officers of the general partner of the Related
General Partner as a group (two persons)
          

 

(1)The address for each of the persons in the table is 100 Church Street, New York, New York 10007.

 

(2)Information derived from Schedule 13D filed by Lehigh Tax Credit Partners L.L.C. (“Lehigh I”) and Lehigh Tax Credit Partners, Inc., (the “Managing Member”) on June 10, 1997 with the Securities and Exchange Commission (the “Commission”). All of such BACs represent BACs owned directly by Lehigh I and Lehigh Tax Credit Partners II, L.L.C. (“Lehigh II”), for which the Managing Member serves as managing member. As of June 4, 2013, Lehigh I held 2,213.60 BACs and Lehigh II held 2,239.60 BACs.

 

(3) Only owns an economic interest in the Managing Member.

 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

The Partnership has and will continue to have certain relationships with the General Partner and its affiliates, as discussed in Item 11 and also Note 8 in Item 8 above, which are incorporated herein by reference thereto. However, there have been no direct financial transactions between the Partnership and the directors and officers of the General Partner.

 

Item 14. Principal Accountant Fees and Services.

 

Audit Fees

 

The aggregate fees billed by Raich Ende Malter & Co LLP and its affiliates for professional services rendered for the audit of the Partnership’s annual financial statements for the years ended March 31, 2013 and 2012 and for the reviews of the financial statements included in the Partnership’s quarterly reports on Form 10-Q for those years were $63,000 and $64,500, respectively.

 

Audit – Related Fees

 

None.

 

Tax Fees

 

The aggregate tax fees billed by Raich Ende Malter & Co LLP and its affiliates for tax professional services of the Partnership for the year ended December 31, 2011 was $3,000.

 

- 45 -
 

 

All Other Fees

 

None.

 

The Partnership is not required to have, and does not have, a stand-alone audit committee.

 

- 46 -
 

 

PART IV

 

Item 15. Exhibits, Financial Statement Schedules.    
      Sequential
Page
       
(a) 1. Consolidated Financial Statements.    
       
  Report of Independent Registered Public Accounting Firm   12-25
       
  Consolidated Balance Sheets at March 31, 2013 and 2012   26
       
  Consolidated Statements of Operations for the Years Ended March 31, 2013 and 2012   27
       
  Consolidated Statements of Changes in Partners’ Capital (Deficit) for the Years Ended March 31, 2013 and 2012   28
       
  Consolidated Statements of Cash Flows for the Years Ended March 31, 2013 and 2012   39
       
  Notes to Consolidated Financial Statements   30
       
(a) 2. Consolidated Financial Statement Schedules.    
       
  Report of Independent Registered Public Accounting Firm   51
       
  Schedule I - Condensed Financial Information of Registrant   52
       
  Schedule III - Real Estate and Accumulated Depreciation   55
       
  All other schedules have been omitted because they are not required or because the required information is contained in the financial statements or notes thereto.    
       
(a) 3. Exhibits.    
       
(3A) Agreement of Limited Partnership of Independence Tax Credit Plus L.P. II as adopted on February 11, 1992*    
       
(3B) Form of Amended and Restated Agreement of Limited Partnership of Independence Tax Credit Plus L.P. II, attached to the Prospectus as Exhibit A**    
       
(3C) Certificate of Limited Partnership of Independence Tax Credit Plus L.P. II as filed on February 11, 1992*    
       
(10A) Form of Subscription Agreement attached to the Prospectus as Exhibit B**    
       
(10B) Escrow Agreement between Independence Tax Credit Plus L.P. II and Bankers Trust Company*    
       
(10C) Form of Purchase and Sales Agreement pertaining to the Partnership’s acquisition of Local Partnership Interests*    
       
(10D) Form of Amended and Restated Agreement of Limited Partnership of Local Partnerships*    
       
(21) Subsidiaries of the Registrant   48
       
(31.1)+ Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)    
       
(31.2) + Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a)    
       
(32.1) + Certification Pursuant to Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350)    
       
(32.2) + Certification Pursuant to Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350)    

 

  * Incorporated herein as an exhibit by reference to exhibits filed with Post-Effective Amendment No. 4 to the Registration Statement on Form S-11 (Registration No. 33-37704)    
         
  ** Incorporated herein as an exhibit by reference to exhibits filed with Post-Effective Amendment No. 8 to the Registration Statement on Form S-11 (Registration No. 33-37704)    
         
  + Filed herewith.    

 

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Item 15. Exhibits and Financial Statement Schedules (continued).

 

  Subsidiaries of the Registrant (Exhibit 21).   Jurisdiction
of Organization
       
  Renaissance Plaza ‘93 Associates, L.P.   MD

 

- 48 -
 

 

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.

 

INDEPENDENCE TAX CREDIT PLUS L.P. II

(Registrant)

  

  By: RELATED INDEPENDENCE ASSOCIATES L.P.,
    General Partner

 

      By: INDEPENDENCE ASSOCIATES GP LLC,
        General Partner
             
Date: June 28, 2013     By: /s/ Robert A. Pace  
          Robert A. Pace  
          Chief Financial Officer and Principal Accounting Officer
             
Date: June 28, 2013     By: /s/ Robert L. Levy  
          Robert L. Levy  
          President and Chief Executive Officer

 

- 49 -
 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

 

Signature   Title   Date
         
/s/ Robert A. Pace  

Chief Financial Officer and Principal Accounting Officer of

Independence Associates GP LLC.

  June 28, 2013
Robert A. Pace
         
/s/ Robert L. Levy   President and Chief Executive Officer of Independence Associates
GP LLC.
  June 28, 2013
Robert L. Levy

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Partners of

Independence Tax Credit Plus L.P. II and Subsidiaries 

(A Delaware Limited Partnership)

 

In connection with our audits of the consolidated financial statements of Independence Tax Credit Plus L.P. II and Subsidiaries (A Delaware Limited Partnership) included in this Form 10-K as presented in our opinion dated June 28, 2013 on page 13, and based on the reports of other auditors, we have also audited supporting Schedule I for the 2012 and 2011 Fiscal Years and Schedule III at March 31, 2013 and 2012. In our opinion, and based on the reports of the other auditors, these consolidated schedules present fairly, when read in conjunction with the related consolidated financial statements, the financial data required to be set forth therein.

 

As discussed in Note 11, the consolidated financial statements include the financial statements of one subsidiary partnership with significant uncertainties. The financial statements of this subsidiary partnership were prepared assuming that it will continue as a going concern. This subsidiary partnership net (loss) income aggregated $(2,149,741) (2012 Fiscal Year) and $1,751,205 (2011 Fiscal Year) and their assets aggregated $487,675 and $-0- at March 31, 2013 and 2012. Management’s plan in regard to this matter is also described in Note 11. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ RAICH ENDE & MALTER CO. LLP 

RAICH ENDE & MALTER CO. LLP

 

New York, New York 

June 28, 2013

 

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SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)

 

CONDENSED BALANCE SHEETS

 

   March 31, 
   2013   2012 
         
ASSETS          
           
Cash and cash equivalents  $2,433,225   $1,608,963 
Investment in subsidiary partnerships   -    697,936 
Other assets   11,773    33,703 
           
Total assets  $2,444,998   $2,340,602 
           
LIABILITIES AND PARTNERS' CAPITAL          
           
Due to general partner and affiliates  $1,717,203   $1,727,255 
Other liabilities   49,000    45,005 
           
Total liabilities   1,766,203    1,772,260 
           
Partners’ capital   678,795    568,342 
           
Total liabilities and partners’ capital  $2,444,998   $2,340,602 

 

Investments in Subsidiary Partnerships are recorded in accordance with the equity method of accounting, wherein the investments are not reduced below zero. Accordingly, partners’ capital on the consolidated balance sheet will differ from partners’ capital shown above.

 

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SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)

 

CONDENSED STATEMENTS OF OPERATIONS

 

   Years Ended March 31, 
   2013   2012 
         
Revenues          
           
Other income  $-   $450 
           
Expenses          
           
Administrative and management   144,056    185,479 
Administrative and management-related parties   131,371    237,052 
           
Total expenses   275,427    422,531 
           
Loss from operations   (275,427)   (422,081)
           
Gain on sale of investments in subsidiary partnerships   13,070,192    1,237,492 
           
Equity in loss of subsidiary partnerships*   (12,684,312)   (8,247,264)
           
Net income (loss)  $110,453   $(7,431,853)

 

*Includes suspended prior year losses of investments in accordance with the equity method of accounting amounting to $(12,970,397) and $(8,509,161) for the years ended March 31, 2013 and 2012, respectively.

 

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SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF REGISTRANT

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)

 

CONDENSED STATEMENTS OF CASH FLOWS

 

   Years Ended March 31, 
   2013   2012 
         
Cash flows from operating activities:          
Net income (loss)  $110,403   $(7,431,853)
           
Adjustments to reconcile net income (loss) to net cash used in operating activities:          
Gain on sale of investments in subsidiary partnerships   (13,070,192)   (1,237,492)
Equity in loss of subsidiary partnerships   12,684,312    8,247,264 
Increase in assets:          
Other assets   (3,292)   (109,361)
(Decrease) increase in liabilities:          
Due to general partners and affiliates   (10,052)   (191,758)
Other liabilities   3,995    (5,122)
Total adjustments   (395,229)   6,703,531 
           
Net cash used in operating activities   (284,826)   (728,322)
           
Cash flows from investing activities:          
           
Proceeds from sale of investments in subsidiary partnerships   121,885    5,000 
Investment in subsidiary partnerships   -    6,000 
Decrease in cash held in escrow   -    (6,000)
Net cash provided by investing activities   121,885    5,000 
           
Cash flows from financing activities:          
           
Distributions from subsidiary partnerships   987,203    1,481,541 
Net cash provided by financing activities   987,203    1,481,541 
           
Net increase in cash and cash equivalents   824,262    758,219 
           
Cash and cash equivalents, beginning of year   1,608,963    850,744 
           
Cash and cash equivalents, end of year  $2,433,225   $1,608,963 
           
Significant noncash investing and financing activities:          
Write-off of Partnership management fees related to sold properties  $-   $3,130,116 

 

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INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

Partnership Property Pledged as Collateral

MARCH 31, 2013

 

   Initial Cost to Partnership       Gross Amount at which Carried at Close of Period                 
                                             
               Cost                           Life on which 
               Capitalized                           Depreciation in 
               Subsequent to                   Year of       Latest Income 
           Buildings and   Acquisition:       Buildings and       Accumulated   Construction/   Date   Statements is 
Description  Encumbrances   Land   Improvements   Improvements   Land   Improvements   Total   Depreciation   Renovation   Acquired   Computed(a)(b) 
                                             
Apartment Complexes                                                       
                                                        
United Germano Millgate Limited Partnership                                                       
Chicago, IL (f)  $-   $580,000   $6,070,477   $(6,650,477)  $-   $-   $-   $-    1993-94    Oct. 1993    10-25 
Lincoln Renaissance                                                       
Reading, PA (e)   -    -    5,240,173    (5,240,173)   -    -    -    -    1993-94    Apr. 1993    20-40 
Mansion Court Associates                                                       
Philadelphia, PA (e)   -    19,072    3,224,984    (3,244,056)   -    -    -    -    1993-94    Nov. 1993    20-40 
Derby Run Associates L.P.                                                       
Hampton, VA(d)   -    407,410    3,069,628    (3,477,038)   -    -    -    -    1994-95    Feb. 1994    27.5-40 
Renaissance Plaza Assoc.                                                       
Baltimore, MD   6,712,964    684,255    9,840,170    (4,905,917)   686,616    4,931,892    5,618,508    5,613,049    1994-95    Feb. 1994    27.5 
Tasker Village                                                       
Philadelphia, PA(c)   -    18,235    -    (18,235)   -    -    -    -    1994-95    May-94    40 
Martha Bryant Manor, L.P.                                                       
Los Angeles, CA(d)   -    966,577    -    (966,577)   -    -    -    -    1994-95    Sept. 1994    15-27.5 
Colden Oaks Limited Partnership                                                       
Los Angeles, CA(d)   -    922,790    -    (922,790)   -    -    -    -    1994-95    Sept. 1994    31 
Brynview Terrace Limited Partnership                                                       
Los Angeles, CA(d)   -    175,943    -    (175,943)   -    -    -    -    1994-95    Sept. 1994    15-27.5 
NLEDC, L.P.                                                       
Los Angeles, CA (e)   -    624,000    -    (624,000)   -    -    -    -    1994-95    Sept. 1994    27.5 
Creative Choice Homes VI Ltd.                                                       
Miami, FL(c)   -    650,072    13,134    (663,206)   -    -    -    -    1994-95    Sept. 1994    40 
P&P Homes for the Elderly, L.P.                                                       
Los Angeles, CA(d)   -    -    -    -    -    -    -    -    1994-95    Sept. 1994    30 
Clear Horizons Limited Partnership                                                       
Shreveport, LA (g)   -    15,304    2,058,729    (2,074,033)   -    -    -    -    1994-95    Dec. 1994    27.5 
Neptune Venture L.P.                                                       
Neptune Township, NJ (e)   -    460,631    10,151,873    (10,612,504)   -    -    -    -    1995-96    Apr. 1995    40 
Affordable Greene Associates L.P.                                                       
New York, NY (f)   -    20,500    3,506,961    (3,527,461)   -    -    -    -    1995-96    May-95    27 
Less: discontinued operations and dispositions        (4,860,534)   (33,335,959)   38,196,493                                    
                                                        
   $6,712,964   $684,255   $9,840,170   $(4,905,917)  $686,616   $4,931,892   $5,618,508   $5,613,049                

 

(a)Depreciation is computed using primarily the straight-line method over the estimated useful lives determined by the Partnership date of acquisition.
(b)Personal property is depreciated primarily by the straight-line method over the estimated useful lives ranging from 5 to 10 years.
(c)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2010.
(d)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2011.
(e)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2012.
(f)The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2013.
(g)The property and the related assets and liabilities were sold during the fiscal year ended March 31, 2013.

 

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INDEPENDENCE TAX CREDIT PLUS L.P. II

AND SUBSIDIARIES

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION

Partnership Property Pledged as Collateral

MARCH 31, 2013

(continued)

 

   Cost of Property and Equipment   Accumulated Depreciation 
   Years Ended March 31, 
   2013   2012   2013   2012 
                 
Balance at beginning of period  $28,791,690   $49,502,655   $20,734,838   $31,228,848 
Additions during period:                    
Improvements   120,738    460,604           
Depreciation expense             82,786    1,016,766 
                     
Deductions during period:                    
Dispositions and impairments   (23,293,920)   (21,171,569)   (15,204,575)   (11,510,776)
                     
Balance at close of period  $5,618,508   $28,791,690   $5,613,049   $20,734,838 

 

At the time the Local Partnerships were acquired by Independence Tax Credit Plus II Limited Partnership, the entire purchase price paid by Independence Tax Credit Plus II Limited Partnership was pushed down to the Local Partnerships as property and equipment with an offsetting credit to capital. Since the projects were in the construction phase at the time of acquisition, the capital accounts were insignificant at the time of purchase. Therefore, there are no material differences between the original cost basis for tax and GAAP.

 

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