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”). The Partnership’s investment in each Local Partnership represents 98.99% of the partnership interests in the Local Partnership. During the fiscal year ended March 31, 2012, the Partnership sold its limited partnership interests in four Local Partnerships. As of March 31, 2012, the Partnership has sold its limited partnership interests in eleven Local Partnerships. In addition, as of March 31, 2012, the Partnership has entered into an agreement to sell its limited partnership interests in one Local Partnership and one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities (see Note 11). Subsequently, the Partnership sold its limited partnership interests in one Local Partnership (see Note 12). As of March 31, 2012, 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.
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1.
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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.
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2.
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Preserve and protect the Partnership’s capital.
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3.
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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.
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4.
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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.
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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. However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits. The Compliance Periods will continue through December 31, 2012 with respect to the Properties depending upon when the Compliance Period commenced.
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 direct capitalization method). During the year ended March 31, 2012, the Partnership recorded approximately $1,016,000 as an aggregate loss on impairment of assets or reduction to estimated fair value. Through March 31, 2012, the Partnership has recorded approximately $30,147,000 as an aggregate loss on impairment of assets or reduction to estimated fair value.
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 objectives 2 and 3, also as noted above.
The Partnership is subject to the risks incident to potential losses arising from the management and ownership of improved real estate. The Partnership can also be affected by poor economic conditions generally; however, no more than 25% of the Properties are located in any single state. 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 investments in subsidiary partnerships during the period that the subsidy agreements are in existence without HUD’s approval. Furthermore, there may not be market demand for apartments at full market rents when the rental assistance contracts expire.
Sale of Local Partnership Interests
The Partnership is in the process of disposing of all of its investments. During the fiscal year ended March 31, 2012, the Partnership sold its limited partnership interests in four Local Partnerships. As of March 31, 2012, the Partnership has sold its limited partnership interests in eleven Local Partnerships. In addition, as of March 31, 2012, the Partnership has entered into an agreement to sell its limited partnership interests in one Local Partnership and one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities (see Note 11). Subsequently, the Partnership sold its limited partnership interests in one Local Partnership (see Note 12). There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investments. All gains and losses on sales are included in discontinued operations.
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.
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.
On July 30, 2010, the Partnership sold its limited partnership interest in Derby Run Associates (“Derby Run”) to an affiliate of the Local General Partner for a sales price of $1,045,822. The Partnership received $1,043,717 after the repayment of other liabilities of approximately $2,000. The sale resulted in a gain of approximately $1,777,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $733,000 and the $1,043,717 cash received from the sale, which was recorded during the quarter ended September 30, 2010. An adjustment to the gain of approximately ($56,000) was recorded during the quarter ended March 31, 2011, resulting in an overall gain of approximately $1,721,000.
On March 31, 2010, the Partnership sold its limited partnership interest in Tasker Village Associates (“Tasker”) to an affiliate of the Local General Partner for a sales price of $20,000. The Partnership did not receive any cash from this sale after the repayment of other liabilities of $20,000. The sale resulted in a gain of approximately $2,361,000, resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of the sale, which was recorded during the year ended March 31, 2010. Adjustments to the gain of approximately $39,000 and ($7,000) were recorded during the quarters ended June 30, 2010 and March 31, 2011, respectively, resulting in an overall gain of approximately $2,400,000. In addition, the sale resulted in a non-cash contribution to the Local Partnership from (i) the General Partner of approximately $28,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner; and (ii) the Local General Partners of approximately $99,000 as a result of the write-off of fees owed by the Local Partnership to the Local General Partner.
Assets Held for Sale
On December 5, 2011, the Partnership entered into an assignment and assumption agreement to sell 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. As of December 31, 2011, United-Germano had property and equipment, at cost, of approximately $18,686,000, accumulated depreciation of approximately $13,527,000 and mortgage debt of approximately $6,501,000. The sale was contingent upon Illinois Housing Development Authority and U.S. Department of Housing and Urban Development (“HUD”) approval and was subsequently consummated on May 1, 2012 (see Note 12).
On August 29, 2011, Clear Horizons Limited Partnership (“Clear Horizons”) entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a sales price of $2,100,000. As of December 31, 2011, Clear Horizon had property and equipment, at cost, of approximately $2,466,000, accumulated depreciation of approximately $1,565,000 and mortgage debt of approximately $571,000. The sale is contingent upon approval of all governmental agencies, including HUD, and is expected to be consummated during the second quarter of 2012.
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, 2012, the Partnership sold its limited partnership interests in four Local Partnerships. As of March 31, 2012, the Partnership has sold its limited partnership interests in eleven Local Partnerships. In addition, as of March 31, 2012, the Partnership has entered into an agreement to sell its limited partnership interests in one other Local Partnership and one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities. Subsequently, on May 1, 2012, the Partnership sold its limited partnership interest in one Local Partnership (see Note 12). There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. The Partnership’s investment in each Local Partnership represents 98.99% of the partnership interests in the 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.
Local Partnership Schedule
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% of Units Occupied at May 1,
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Name and Location
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Date Acquired
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2012
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2011
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2010
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2009
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2008
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Lincoln Renaissance
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Reading, PA (52)
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April 1993
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(c)
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90 %
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96 %
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94 %
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94 %
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United Germano-Millgate Limited Partnership
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Chicago, IL (350) (d)
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October 1993
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95 %
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94 %
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90 %
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97 %
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95 %
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Mansion Court Associates
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Philadelphia, PA (30)
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November 1993
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(c)
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20 %
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26 %
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27 %
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33 %
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Derby Run Associates, L.P.
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Hampton, VA (160)
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February 1994
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(b)
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(b)
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95 %
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98 %
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91 %
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Renaissance Plaza ‘93 Associates , L.P.
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Baltimore, MD (95)
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February 1994
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91 %
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90 %
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97 %
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98 %
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97 %
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Tasker Village Associates
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Philadelphia, PA (28)
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May 1994
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(a)
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(a)
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(a)
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96 %
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89 %
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Martha Bryant Manor, L.P.
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Los Angeles, CA (77)
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September 1994
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(b)
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(b)
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94 %
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95 %
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96 %
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Colden Oaks Limited Partnership
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Los Angeles, CA (38)
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September 1994
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(b)
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(b)
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100 %
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95 %
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97 %
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Brynview Terrace, L.P.
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Los Angeles, CA (8)
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September 1994
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(b)
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(b)
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100 %
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100 %
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75 %
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NLEDC, L.P.
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Los Angeles, CA (43)
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September 1994
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(c)
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98 %
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100 %
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98 %
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100 %
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Creative Choice Homes VI, Ltd.
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Miami, FL (102)
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September 1994
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(a)
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(a)
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(a)
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98 %
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83 %
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P&P Homes for the Elderly, L.P.
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Los Angeles, CA (107)
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September 1994
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(b)
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(b)
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95 %
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98 %
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98 %
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Clear Horizons Limited Partnership
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Shreveport, LA (84)
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December 1994
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99 %
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96 %
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99 %
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94 %
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99 %
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Neptune Venture, L.P.
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Neptune Township, NJ (99)
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April 1995
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(c)
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99 %
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99 %
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100 %
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98 %
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Affordable Green Associates L.P.
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New York, NY (41)
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April 1995
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100 %
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100 %
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100 %
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100 %
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100 %
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(a)
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The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2010 (see Note 10 in Item 8).
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(b)
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The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2011 (see Note 10 in Item 8).
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(c)
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The Partnership’s limited partnership interest was sold during the fiscal year ended March 31, 2012 (see Note 10 in Item 8).
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(d)
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The Partnership’s limited partnership interest was sold subsequently on May 1, 2012 (see Note 12 in Item 8).
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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.
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.
In connection with investments in Apartment Complexes in development stage, the General Partner generally required that the Local General Partners provide completion guarantees and/or undertake to repurchase the Partnership’s interest in the Local Partnership if construction or rehabilitation was not completed substantially on time or on budget (“Development Deficit Guarantees”). The Development Deficit Guarantees generally also required the Local General Partner to provide any funds necessary to cover net operating deficits of the Local Partnership until such time as the Apartment Complex had achieved break-even operations. The General Partner generally required that the Local General Partners undertake an obligation to fund operating deficits of the Local Partnership (up to a stated maximum amount) during a limited period of time (typically three to five years) following the achievement of break-even operations (“Operating Deficit Guarantees”). Amounts funded under such agreements were treated as noninterest bearing loans, which were paid only out of 50% of available cash flow or out of available net sale or refinancing proceeds.
Tax Credits with respect to a given Apartment Complex were generally available for a ten-year period that commenced when the Property was placed into service. However, the annual Tax Credits available in the year in which the Apartment Complex was placed in service must be prorated based upon the months remaining in the year. The amount of the annual Tax Credit that was not available in the first year was made available in the eleventh year. In certain cases, the Partnership acquired its interest in a Local Partnership after the Local Partnership had placed its Apartment Complex in service. In these cases, the Partnership were allocated Tax Credits only beginning in the month following the month in which it acquired its interest and Tax Credits allocated in any prior period were not available to the Partnership.
Item 3. Legal Proceedings.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
As of March 31, 2012, 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 May 16, 2012, the Partnership has approximately 3,414 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, 2012. 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:
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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.
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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.
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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.
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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.
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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.
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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.
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, 2012, the Partnership did not make any advances to the Local Partnerships.
During the fiscal year ended March 31, 2012, the Partnership sold its limited partnership interests in four Local Partnerships. As of March 31, 2012, the Partnership has sold its limited partnership interests in eleven Local Partnerships. In addition, as of March 31, 2012, the Partnership has entered into an agreement to sell its limited partnership interests in one Local Partnership and one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities. Subsequently, the Partnership sold its limited partnership interests in one Local Partnership (see Note 12). The Partnership is in the process of disposing of all of its investments, but there can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will 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, 2012, 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, 2012 and 2011, the amounts received from operations of the Local Partnerships were approximately $5,000 and $120,000, respectively. Additionally, during the years ended March 31, 2012 and 2011, the Partnership received approximately $5,000 and $1,113,000, respectively, in proceeds from the sale of Local Partnerships’ limited partnership interests and approximately $1,476,000 and $0, respectively, in cash distributions from the sales. The Partnership does not anticipate being able to make distributions sufficient to return to BACs holders their original capital contributions.
For the year ended March 31, 2012, cash and cash equivalents of the Partnership and its consolidated Local Partnerships increased approximately $469,000. This increase was due to net cash provided by operating activities ($314,000), proceeds from sale of properties ($5,000) and mortgage proceeds of approximately ($1,500,000), which exceeded improvements to property and equipment ($461,000), principal payments of mortgage notes ($486,000), an increase in cash held in escrow relating to investing activities ($188,000), a decrease in due to local general partners and affiliates relating to financing activities ($34,000), an increase in deferred costs ($55,000), and a decrease in capitalization of consolidated subsidiaries attributable to minority interest ($125,000). Included in the adjustment to reconcile the net loss to cash provided by operating activities are depreciation and amortization of approximately ($1,021,000), gain on sale of properties of approximately ($2,548,000) and loss on impairment of assets of approximately ($1,016,000).
Total expenses for the years ended March 31, 2012 and 2011, respectively, excluding depreciation and amortization, interest, general and administrative – related parties and loss on impairment of fixed assets, totaled $1,128,020 and $1,141,171, respectively.
Accounts payable as of March 31, 2012 and 2011 were $172,282 and $599,843, 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 $562,436 and $16,308 as of March 31, 2012 and 2011, respectively. Accrued interest as of March 31, 2012 and 2011 was $7,030,303 and $17,012,618, 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 $10,786,185 and $1,553,917 as of March 31, 2012 and 2011, 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.
Because the provisions of the secondary loans defer the payment of accrued interest of the respective Local Partnerships, and the General Partner continues to defer the payment of fees as discussed below and in Note 8 to the Financial Statements in Item 8, the Partnership (and the applicable Local Partnerships) 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.
The Partnership has an unconsolidated working capital reserve of approximately $1,609,000 at March 31, 2012.
Long-Term
Partnership management fees owed to the General Partner amounting to approximately $1,707,000 and $4,930,000 were accrued and unpaid as of March 31, 2012 and 2011, respectively and are included in Due to general partner and affiliates on the Consolidated Balance Sheets. During the years ended March 31, 2012 and 2011, management deemed the unpaid partnership management fees related to sold properties uncollectible and wrote off approximately $3,130,000 and $967,000, respectively, resulting in a non-cash General Partner contributions 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.
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 affiliates”. The General Partner does not anticipate making any future advances of operating funds to any of the Local Partnerships 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 that particular Local Partnership. The Partnership’s ability to continue its operations would not be affected.
For a discussion of contingencies affecting certain Local Partnerships, see Results of Operations of Certain Local Partnerships, below. Since the maximum loss the Partnership would be liable for is its net investment in the respective subsidiary partnerships, the resolution of the existing contingencies is not anticipated to impact future results of operations, liquidity or financial condition in a material way. However, the Partnership’s loss of its investment in a Local Partnership may result in recapture of Tax Credits if the investment is lost before expiration of the Compliance Period.
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. The portfolio is diversified by the location of the Properties around the United States so that if one area of the country is experiencing downturns in the economy, the remaining Properties in the portfolio may be experiencing upswings. However the geographic diversification of the portfolio may not protect against a general downturn in the national economy. The Partnership had originally invested the proceeds of its Offering in 15 Local Partnerships, all of which had their Tax Credits fully in place during the Credit Periods. As of December 31, 2007, all the Local Partnerships had completed their Credit Periods. However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits. The Compliance Periods will continue through December 31, 2012 with respect to the Properties depending upon when the Compliance Period commenced. At December 31, 2008, Mansion Court Associates was required to recapture $190,635 of low-income housing tax credits.
Off Balance Sheet Arrangements
The Partnership has no off-balance sheet arrangements.
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 direct capitalization method) when the Property is considered to be impaired and the depreciated cost exceeds estimated fair value.
During the year ended March 31, 2012, the Partnership recorded approximately $1,016,000 as an aggregate loss on impairment of assets or reduction to estimated fair value. Through March 31, 2012, the Partnership has recorded approximately $30,147,000 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.
Recent Accounting Pronouncements
In December 2011, the FASB issued under Topic 220, Comprehensive Income, ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05”. The amendments in this ASU are being made to allow the Board time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the Board is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update. For public entities, the amendments are effective for fiscal years and interim periods within those years, beginning after December 15, 2011. However, early adoption is permitted. The adoption of this accounting standard will not have a material effect on the Partnership’s consolidated financial statements.
In December 2011, the FASB issued under Topic 210, Balance Sheet, ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities”. The amendments require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The adoption of this accounting standard will not have a material effect on the Partnership’s consolidated financial statements.
In December 2011, the FASB issued under Topic 360, Property, Plant, and Equipment, ASU 2011-10, “Derecognition of in Substance Real Estate—a Scope Clarification (a consensus of the FASB Emerging Issues Task Force)”. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest (as described in Subtopic 810-10) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. The adoption of this accounting standard will not have a material effect on the Partnership’s 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, 2012 and 2011 (the 2011 and 2010 Fiscal Years, respectively) excluding the results of its discontinued operations which are not reflected in the following discussion (see Item 8, Note 13).
The net (loss) income for the 2011 and 2010 Fiscal Years totaled ($1,577,436) and $14,976,024, respectively.
2011 vs. 2010
Rental income decreased approximately 2% for the 2011 Fiscal Year as compared to the 2010 Fiscal Year, primarily due to a decrease in occupancy rates partially offset by rental increases at one Local Partnership.
The Partnership recorded a loss on impairments from operations of approximately $1,016,000 and $469,000 during 2011 and 2010 Fiscal Years, respectively (see Note 4, Item 8).
General and administrative-related party’s expenses decreased approximately $372,000 for the 2011 Fiscal Year as compared to the 2010 Fiscal Year, primarily due to a decrease in partnership management fees and expense reimbursements resulting from the sale of properties at the Partnership level.
Repairs and maintenance expenses decreased approximately $48,000 for the 2011 Fiscal Year as compared to the 2010 Fiscal Year, primarily due to a decrease in boiler repairs and painting expenses at one Local Partnership, partially offset by an increase in maintenance contracts and other general repairs at another Local Partnership.
Depreciation and amortization expenses decreased approximately $39,000 for the 2011 Fiscal Year as compared to the 2010 Fiscal Year, primarily due to the reduction in carrying amounts relating to impairment of assets recorded during the year ended March 31, 2011 at one Local Partnership.
Results of Operations of Certain Local Partnerships
Mansion Court Associates (“Mansion Court”)
On May 12, 2011, the Partnership sold its limited partnership interest in Mansion Court (see Note 10). Mansion Court had operational losses of $31,116 and $68,981 (excluding loss on impairment of $301,015) for the 2011 and 2010 Fiscal Years, respectively. The financial statements for Mansion Court had been prepared assuming that Mansion Court would continue as a going concern. Mansion Court sustained operating losses over the years and had not generated sufficient cash flow from operations to meet its obligations. The Local General Partner provided funding in the past years; however there was no obligation to do so. The property also had experienced a high number of vacancies due to deteriorating conditions in the area. As of May 12, 2011, the property had 24 vacant units of the total 30 units. Vacancies continued to increase due to declining conditions in the surrounding neighborhood, and the expenditure of funds to make improvements would not have benefited the property.
During the year ended March 31, 2011, in accordance with ASC 360, the Partnership deemed the building of Mansion Court impaired and wrote it down to its estimated fair value of $0, which resulted in a loss on impairment of approximately $301,000. Fair value was obtained from an assessment made by the management after indications that the carrying value of the assets were not recoverable, evidenced by a history of net operating losses over the past few years as discussed above.
Other
The Partnership’s investment as a limited partner in the Local Partnerships is subject to the risks of potential losses arising from management and ownership of improved real estate. The Partnership’s investments also could be adversely affected by poor economic conditions generally, which could increase vacancy levels and rental payment defaults and by increased operating expenses, any or all of which could threaten the financing viability of one or more of the Local Partnerships.
There also are substantial risks associated with the operation of Apartment Complexes receiving government assistance. These include governmental regulations concerning tenant eligibility, which may make it more difficult to rent apartments in the Apartment Complexes; difficulties in obtaining government approval for rent increases; limitations on the percentage of income which low and moderate-income tenants may pay as rent; the possibility that Congress may not appropriate funds to enable HUD to make the rental assistance payments it has contracted to make; and that when the rental assistance contracts expire, there may not be market demand for apartments at full market rents in a Local Partnership’s Apartment Complex.
The Local Partnerships are impacted by inflation in several ways. Inflation allows for increases in rental rates generally to reflect the impact of higher operating and replacement costs. Furthermore, inflation generally does not impact the fixed long-term financing under which real property investments were purchased. Inflation also affects the Local Partnerships adversely by increasing operating costs as, for example, for such items as fuel, utilities and labor.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
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Item 8.
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Financial Statements and Supplementary Data.
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Sequential
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(a) 1.
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Consolidated Financial Statements
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Report of Independent Registered Public Accounting Firm
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14
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Consolidated Balance Sheets at March 31, 2012 and 2011
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36
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Consolidated Statements of Operations for the Years Ended March 31, 2012 and 2011
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37
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Consolidated Statements of Changes in Partners’ (Deficit) Capital for the Years Ended March 31, 2012 and 2011
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38
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Consolidated Statements of Cash Flows for the Years Ended March 31, 2012 and 2011
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39
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Notes to Consolidated Financial Statements
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40
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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)
We have audited the consolidated balance sheet of Independence Tax Credit Plus L.P. II and Subsidiaries (A Delaware Limited Partnership) as of March 31, 2012, and the related consolidated statements of operations, changes in partners’ deficit, and cash flows for the year then ended (the 2011 Fiscal Year). 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 did not audit the financial statements for eleven subsidiary partnerships whose losses aggregated $2,603,676 for the 2011 Fiscal Year, and whose assets constituted 85% of the Partnership’s assets at March 31, 2012, presented in the accompanying consolidated financial statements. The financial statements of ten 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. The financial statements for one of these subsidiary partnerships is unaudited.
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. 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, based upon our audit, and the reports of the other auditors, the accompanying 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 at March 31, 2012, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 12, 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. This subsidiary partnership’s net income aggregated $1,751,205 (2011 Fiscal Year), and their assets aggregated $0 at March 31, 2012. Management’s plan in regard to this matter is also described in Note 12. 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 18, 2012
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 consolidated balance sheet of Independence Tax Credit Plus L.P. II and Subsidiaries (A Delaware Limited Partnership) as of March 31, 2011, and the related consolidated statements of operations, changes in partners’ deficit, and cash flows for the year then ended (the 2010 Fiscal Year). 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 did not audit the financial statements for fourteen subsidiary partnerships whose losses aggregated $3,780,072 for the 2010 Fiscal Year, and whose assets constituted 95% of the Partnership’s assets at March 31, 2011, presented in the accompanying consolidated financial statements. The financial statements of thirteen 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. The financial statements for one of these subsidiary partnerships is unaudited.
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. 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, based upon our audit, and the reports of the other auditors, the accompanying 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 at March 31, 2011, and the results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 12, 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. This subsidiary partnership’s net loss aggregated $369,996 (2010 Fiscal Year), and their assets aggregated $169,783 at March 31, 2011. Management’s plan in regard to this matter is also described in Note 12. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ TRIEN ROSENBERG
WEINBERG CIULLO & FAZZARI LLP
New York, New York
June 27, 2011
[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
[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
[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
[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 sheets of Mansion Court Associates as of December 31, 2010 and 2009, 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 evaluations 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 Mansion Court Associates as of December 31, 2010 and 2009, 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.
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 11.
In accordance with Government Auditing Standards, we have also issued our report dated March 15, 2011, on our consideration of Mansion Court Associates’ 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 audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information on pages 24 through 27 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Reznick Group, P.C.
Baltimore, Maryland
March 15, 2011
Lead Auditor: Michael A. Cumming, CPA
E-mail Address: mike.cumming@reznickgroup.com
[Letterhead of Wall Einhorn & Chernitzer P.C.]
INDEPENDENT AUDITORS' REPORT
To the Partners
Derby Run Associates, L.P.
(A Virginia Limited Partnership)
Virginia Beach, Virginia
We have audited the accompanying balance sheets of Derby Run Associates, L.P. (A Virginia Limited Partnership) as of July 31, 2010 and December 31, 2009, and the related statements of income, changes in partners' deficit, and cash flows for the periods 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 audits 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 Derby Run Associates, L.P. as of July 31, 2010 and December 31, 2009, and the results of its operations, changes in partners' deficit and its cash flows for the periods then ended in conformity with accounting principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic financial statements referred to above. The Partnership's management has elected to disclose certain information relating to the low-income housing tax credits allocated to the Partnership as described in Note 6 to the financial statements which are not required to be disclosed in accordance with accounting principles generally accepted in the United States of America. Such disclosures have not been subjected to the auditing procedures applied in the audits of the financial statements, and accordingly, we express no opinion on them.
/s/ Wall Einhorn & Chernitzer P.C.
Norfolk, Virginia
November 5, 2010
[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
[REZNICK GROUP, P.C. LETTERHEAD]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Renaissance Plaza 93 Associates, L.P. (A Limited Partnership)
We have audited the accompanying balance sheet of Renaissance Plaza 93 Associates, L.P. as of December 31, 2010, 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, 2010, 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 a report dated February 19, 2011, on our consideration of Renaissance Plaza 93 Associates, L.P.’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 19, 2011, on Renaissance Plaza 93 Associates, L.P.’s compliance with certain provisions of laws, regulations, contracts, and grant agreements, and other matters that could have a direct and material effect on DHCD-assisted programs. 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 basic financial statements taken as a whole. The accompanying supplemental information on pages 24 through 36 is presented for purposes of additional analysis and is not a required part of the basic financial statements of the partnership. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
/s/ Reznick Group, PC
Skokie, Illinois Taxpayer Identification Number:
February 19, 2011 52-1088612
Lead Auditor: Nelson D. Gomez, CPA
[REZNICK GROUP, P.C. LETTERHEAD]
REPORT ON INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
To the Partners
Tasker Village Associates
We have audited the accompanying balance sheet of Tasker Village Associates as of March 9, 2010, and the related statements of profit and loss, changes in partners' equity (deficit) and cash flows for the period January 1, 2010 through March 9, 2010 (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 Tasker Village Associates as of March 9, 2010, and the results of its operations, the changes in partners' equity (deficit) and its cash flows for the period January 1, 2010 through March 9, 2010 (date of investor transfer), in conformity with accounting principles generally accepted in the United States of America.
/s/ Reznick Group, P.C.
Baltimore, Maryland
September 30, 2010
[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
[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 December 31, 2010, and the related statements of loss, changes in partners' capital, and cash-flow for the year 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. 1 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 December 31, 2010, 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
February 23, 2011
Carson, California
[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
[Letterhead of HODGES AND HAMMONS Certified Public Accountants, Inc.]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of
Colden Oaks, A California Limited Partnership
Los Angeles, California
I have audited the accompanying balance sheets of Colden Oaks, a California Limited Partnership as of December 31, 2010, and the related statements of operations, changes in partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audits.
The accompanying balance sheet, and the related statements of operations, changes in partners' equity and cash flows for the year ended December 31, 2009 was audited by another Auditor and as such we relied on that report which was unqualified for presentation along with the December 31, 2010 financial statements.
I conducted my audit in accordance with the 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 fee of material misstatement. The Partnership has determined that it is not required to have, nor was I engaged to perform, an audit of its internal 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 Colden Oaks, a California Limited Partnership, as of December 31, 2010 and 2009, and the results of its operations, changes in partners' equity and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United State of America.
/s/ Paul R. Hammons, CPA
HODGES & HAMMONS, CPAs, Inc.
Los Angeles, California
February 28, 2011
[Letterhead of Chu Associates]
INDEPENDENT AUDITORS' REPO RT
To the Partners of NLEDC, L.P.
We have audited the accompanying balance sheet of NLEDC, L.P. (the Partnership) as of December 31, 2010, and the related statement of operations, changes in 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 the financial statements based on our audits.
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 NLEDC, L.P. as of December 31, 2010, and the results of its operations, 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.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information on pages 13 to 14 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ Chu & Associates
San Marino, California
February 25, 2011
[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
[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 December 31, 2010, and the related statements of income, changes in partners' equity and cash flows for the year then ended. 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 internal 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, 1 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 L' & P Home For The Elderly, L.P. as of December 31, 2010, and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
/s/ Bert D. Samuels
Tarzana, California
February 10, 2011
[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
[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, 2010, 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, 2010, and the results of its operations, changes in partners’ equity (deficit), and its 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 a report, dated March 22, 2011 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 March 22, 2011, on Clear Horizons Limited Partnership’s compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters that could have a direct and material effect on a 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 basic financial statements taken as a whole. The accompanying supplemental information on pages 23 through 35 is presented for purposes of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
/s/ Reznick Group, P.C.
Baltimore, Maryland Taxpayer Identification Number:
March 22, 2011 52-1088612
Lead Auditor: Scott H. Szeliga, CPA
[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
[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 December 31, 2010, and the related statements of operations, changes in 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). 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 December 31, 2010, and the results of its operations, the changes in partners’ equity (deficit) and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ Reznick Group, P.C.
Baltimore, Maryland
March 9, 2011
[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
|
INDEPENDENCE TAX CREDIT PLUS L.P. II
|
|
AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
2012
|
|
2011 *
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Operating assets
|
|
|
|
|
|
|
|
|
Property and equipment net, less accumulated depreciation (Notes 2, 4 and 7)
|
|
$
|
1,914,568
|
|
$
|
16,574,109
|
|
|
Cash and cash equivalents(Notes 2, 3 and 12)
|
|
|
1,811,841
|
|
|
1,479,226
|
|
|
Cash held in escrow (Notes 3 and 5)
|
|
|
476,444
|
|
|
2,086,911
|
|
|
Deferred costs, less accumulated amortization (Notes 2 and 6)
|
|
|
41,035
|
|
|
90,211
|
|
|
Other assets
|
|
|
74,796
|
|
|
385,197
|
|
|
|
|
|
|
|
|
|
|
Total operating assets
|
|
|
4,318,684
|
|
|
20,615,654
|
|
|
|
|
|
|
|
|
|
|
Assets from discontinued operations (Note 13)
|
|
|
|
|
|
|
|
|
Property and equipment held for sale, net of accumulated depreciation (Note 4)
|
|
|
6,142,284
|
|
|
1,699,698
|
|
|
Net assets held for sale
|
|
|
1,517,676
|
|
|
99,678
|
|
Total assets from discontinued operations
|
|
|
7,659,960
|
|
|
1,799,376
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
11,978,644
|
|
$
|
22,415,030
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS’ (DEFICIT) CAPITAL
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Mortgage notes payable (Note 7)
|
|
$
|
8,800,542
|
|
$
|
20,398,584
|
|
|
Accounts payable
|
|
|
172,282
|
|
|
599,843
|
|
|
Security deposit payable
|
|
|
68,432
|
|
|
254,770
|
|
|
Accrued interest payable
|
|
|
7,030,303
|
|
|
17,012,618
|
|
|
Due to local general partners and affiliates (Note 8)
|
|
|
589,883
|
|
|
1,023,346
|
|
|
Due to general partner and affiliates (Note 8)
|
|
|
1,836,255
|
|
|
5,270,129
|
|
|
|
|
|
|
|
|
|
|
Total operating liabilities
|
|
|
18,497,697
|
|
|
44,559,290
|
|
|
|
|
|
|
|
|
|
|
Liabilities from discontinued operations (Note 13)
|
|
|
|
|
|
|
|
|
Mortgage notes payable of assets held for sale
|
|
|
7,071,971
|
|
|
4,139,881
|
|
|
Net liabilities held for sale
|
|
|
11,466,393
|
|
|
1,622,261
|
|
Total liabilities from discontinued operations
|
|
|
18,538,364
|
|
|
5,762,142
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
37,036,061
|
|
|
50,321,432
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 7, 8 and 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ (deficit) capital
|
|
|
|
|
|
|
|
|
Limited partners (58,928 BACs issued and outstanding)
|
|
|
(28,508,943)
|
|
|
(26,947,281)
|
|
|
General partner
|
|
|
3,474,109
|
|
|
278,863
|
|
|
|
|
|
|
|
|
|
|
Independence Tax Credit Plus L.P. II total
|
|
|
(25,034,834)
|
|
|
(26,668,418)
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interests
|
|
|
(22,583)
|
|
|
(1,237,984)
|
|
|
|
|
|
|
|
|
|
|
Total partners’ deficit
|
|
|
(25,057,417)
|
|
|
(27,906,402)
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners’ (deficit) capital
|
|
$
|
11,978,644
|
|
$
|
22,415,030
|
|
|
|
|
|
|
|
|
|
| * As restated (see Note 14) |
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
|
INDEPENDENCE TAX CREDIT PLUS L.P. II
|
|
AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended March 31,
|
|
|
|
2012
|
|
2011 */**
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
1,087,232
|
|
$
|
1,112,570
|
|
Other income
|
|
|
28,291
|
|
|
36,995
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,115,523
|
|
|
1,149,565
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
General and administrative
|
|
|
443,553
|
|
|
423,202
|
|
General and administrative-related parties (Note 8)
|
|
|
301,412
|
|
|
673,833
|
|
Repairs and maintenance
|
|
|
365,888
|
|
|
413,612
|
|
Operating
|
|
|
197,453
|
|
|
180,939
|
|
Taxes
|
|
|
75,044
|
|
|
73,746
|
|
Insurance
|
|
|
46,082
|
|
|
49,672
|
|
Financial, principally interest
|
|
|
435,652
|
|
|
447,778
|
|
Depreciation and amortization
|
|
|
164,789
|
|
|
203,788
|
|
Loss on impairment of fixed assets
|
|
|
1,016,000
|
|
|
468,890
|
|
|
|
|
|
|
|
|
|
Total expenses from operations
|
|
|
3,045,873
|
|
|
2,935,460
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(1,930,350)
|
|
|
(1,785,895)
|
|
Income from discontinued operations
|
|
|
1,692,974
|
|
|
17,761,268
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(237,376)
|
|
|
15,975,373
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests from operations
|
|
|
15,183
|
|
|
10,354
|
|
Net income attributable to noncontrolling interests from discontinued operations
|
|
|
(1,355,243)
|
|
|
(1,009,703)
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests
|
|
|
(1,340,060)
|
|
|
(999,349)
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Independence Tax Credit Plus L.P. II
|
|
$
|
(1,577,436)
|
|
$
|
14,976,024
|
|
|
|
|
|
|
|
|
|
Loss from operations – limited partners
|
|
|
(1,896,016)
|
|
|
(1,757,785)
|
|
Income from discontinued operations (including gain on sale of properties) – limited partners
|
|
|
334,354
|
|
|
16,584,049
|
|
|
|
|
|
|
|
|
|
Net (loss) income – limited partners
|
|
$
|
(1,561,662)
|
|
$
|
14,826,264
|
|
|
|
|
|
|
|
|
|
Number of BACs outstanding
|
|
|
58,928
|
|
|
58,928
|
|
|
|
|
|
|
|
|
|
Loss from operations per weighted average BAC
|
|
$
|
(32.18)
|
|
$
|
(29.83)
|
|
Income from discontinued operations per weighted average BAC
|
|
|
5.67
|
|
|
281.43
|
|
|
|
|
|
|
|
|
|
Net (loss) income per weighted average BAC
|
|
$
|
(26.51)
|
|
$
|
251.60
|
|
|
|
|
|
|
|
|
|
* Reclassified for comparative purposes.
|
|
** As restated (see Note 14)
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
|
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 – April 1, 2010, as previously reported
|
$
|
(44,336,450)
|
|
$
|
(41,301,465)
|
|
$
|
(918,143)
|
|
$
|
(2,116,842)
|
|
Prior period adjustment (Note 14)
|
|
(481,714)
|
|
|
(472,080)
|
|
|
(4,768)
|
|
|
(4,866)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ deficit – April 1, 2010, as restated
|
|
(44,818,164)
|
|
|
(41,773,545)
|
|
|
(922,911)
|
|
|
(2,121,708)
|
|
Net income, as restated
|
|
15,975,373
|
|
|
14,826,264
|
|
|
149,760
|
|
|
999,349
|
|
Distributions
|
|
(115,625)
|
|
|
-
|
|
|
-
|
|
|
(115,625)
|
|
Contributions – write-off of partnership management fees related to sold properties
|
|
967,014
|
|
|
-
|
|
|
967,014
|
|
|
-
|
|
Contributions - write-off of related party debt
|
|
85,000
|
|
|
-
|
|
|
85,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ (deficit) equity – March 31, 2011, as restated
|
|
(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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
|
|
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,
|
|
|
|
2012
|
|
2011 */**
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(237,376)
|
|
$
|
15,975,373
|
|
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
Gain on sale of properties
|
|
|
(2,548,259)
|
|
|
(20,284,069)
|
|
Depreciation and amortization
|
|
|
1,021,336
|
|
|
2,094,452
|
|
Loss on impairment of assets
|
|
|
1,016,000
|
|
|
1,047,336
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Increase (decrease) in accounts payable
|
|
|
87,190
|
|
|
(251,558)
|
|
(Decrease) increase in security deposit payable
|
|
|
(498)
|
|
|
15,892
|
|
Increase in accrued interest payable
|
|
|
1,340,649
|
|
|
1,805,453
|
|
Increase in cash held in escrow
|
|
|
(78,646)
|
|
|
(100,004)
|
|
Increase in other assets
|
|
|
(114,605)
|
|
|
(34,772)
|
|
Increase (decrease) in due to local general partners and affiliates
|
|
|
1,640
|
|
|
(48,709)
|
|
Decrease in due to general partner and affiliates
|
|
|
(173,854)
|
|
|
(322,436)
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
550,953
|
|
|
(16,078,415)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
313,577
|
|
|
(103,042)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
Proceeds from sale of properties
|
|
|
5,000
|
|
|
1,160,185
|
|
Costs paid relating to sale of properties
|
|
|
-
|
|
|
(47,105)
|
|
Improvements to property and equipment
|
|
|
(460,604)
|
|
|
(423,670)
|
|
Decrease (increase) in cash held in escrow
|
|
|
(188,394)
|
|
|
30,449
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities
|
|
|
(643,998)
|
|
|
719,859
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
Principal payments of mortgage notes
|
|
|
(486,209)
|
|
|
(635,677)
|
|
Mortgage proceeds
|
|
|
1,500,000
|
|
|
-
|
|
Increase in deferred cost
|
|
|
(55,262)
|
|
|
-
|
|
(Decrease) increase in due to local general partners and affiliates
|
|
|
(34,000)
|
|
|
156,059
|
|
Decrease in capitalization of consolidated subsidiaries attributable to noncontrolling interests
|
|
|
(124,659)
|
|
|
(244,989)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
799,870
|
|
|
(724,607)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
469,449
|
|
|
(107,790)
|
|
Cash and cash equivalents at beginning of year
|
|
|
1,479,226
|
|
|
1,587,016
|
|
Cash and cash equivalents at end of year ***
|
|
$
|
1,948,675
|
|
$
|
1,479,226
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows information:
|
|
|
|
|
|
|
|
Cash paid during the year for interest
|
|
$
|
706,540
|
|
$
|
728,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
Contribution from write-off of partnership management fee related to sold properties
|
|
$
|
3,130,116
|
|
$
|
967,014
|
|
|
|
|
|
|
|
|
|
Summarized below are the components of the gain on sale of properties:
|
|
|
|
|
|
|
|
Proceeds from sale of properties – net
|
|
$
|
(5,000)
|
|
$
|
(1,113,080)
|
|
Decrease in Property and equipment, net of accumulated depreciation
|
|
|
8,644,793
|
|
|
12,925,270
|
|
Decrease in deferred costs
|
|
|
59,069
|
|
|
65,931
|
|
Decrease in other assets
|
|
|
252,391
|
|
|
554,302
|
|
Decrease in cash held in escrow
|
|
|
809,757
|
|
|
166,752
|
|
Increase in accounts payable and other liabilities
|
|
|
31,377
|
|
|
79,184
|
|
Decrease in due to general partners and affiliates
|
|
|
(110,904)
|
|
|
(167,500)
|
|
Decrease (increase) in due to local general partners and affiliates
|
|
|
(394,655)
|
|
|
122,673
|
|
Decrease in mortgage note payable
|
|
|
(9,679,742)
|
|
|
(26,082,091)
|
|
Decrease in accrued interest payable
|
|
|
(2,090,696)
|
|
|
(6,900,698)
|
|
Decrease in security deposits payable
|
|
|
(145,553)
|
|
|
(149,176)
|
|
Contribution - General Partner
|
|
|
80,904
|
|
|
85,000
|
|
Increase in capitalization of consolidated subsidiaries attributable to noncontrolling interest
|
|
|
-
|
|
|
129,364
|
|
|
|
|
|
|
|
|
|
*
|
Reclassified for comparative purposes.
|
|
**
|
As restated (see Note 14)
|
|
***
|
Cash and cash equivalents at end of period, includes cash and cash equivalents from discontinued operations of $136,834 and $0, respectively.
|
See accompanying notes to consolidated financial statements.
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
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 audited 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, 2012, the Partnership sold its limited partnership interests in four Local Partnerships. As of March 31, 2012, the Partnership has sold its limited partnership interests in eleven Local Partnerships. In addition, as of March 31, 2012, the Partnership has entered into an agreement to sell its limited partnership interests in one Local Partnership and one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities (see Note 11). Subsequently, the Partnership sold its limited partnership interests in one other Local Partnership (see Note 12). There can be no assurance as to when the Partnership will dispose of its remaining investments 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 twelve (2011 Fiscal Year) and fourteen (2010 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, 2012, the Partnership continued to own interests in four Local Partnerships. 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.
In accordance with FASB Accounting Standards Codification (“ASC”) Topic 810, Noncontrolling Interests in Consolidated Financial Statements (“ASC 810”), income attributable to noncontrolling interests amounted to approximately $(1,340,000) and $(999,000) for the years ended March 31, 2012 and 2011, 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 Partnership complies with ASC 360, Property, Plant and Equipment. A loss on impairment of assets is recorded when management estimates that 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 direct capitalization method) when the property is considered to be impaired and the depreciated cost exceeds estimated fair value.
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
During the years ended March 31, 2012 and 2011, the Partnership recorded approximately $1,016,000 and $1,047,000 as an aggregate loss on impairment of assets or reduction to estimated fair value. Through March 31, 2012, the Partnership has recorded approximately $30,147,000 as an aggregate loss on impairment of property.
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,
|
|
|
|
|
|
|
|
2012
|
|
2011 *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
$
|
428
|
|
$
|
1,802
|
|
|
|
|
|
Other
|
|
27,863
|
|
|
35,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other revenue
|
$
|
28,291
|
|
$
|
36,995
|
|
|
Other revenues from discontinued operations include the following amounts at both the Partnership and Local Partnership level:
|
|
|
|
|
Years Ended March 31,
|
|
|
|
|
|
|
|
2012
|
|
2011 *
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
$
|
5,077
|
|
$
|
30,667
|
|
|
|
|
|
Other
|
|
49,373
|
|
|
150,025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other revenue
|
$
|
54,450
|
|
$
|
180,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
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, 2011, 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, among other things, 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, 2012, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2008 forward.
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
g) Recent Accounting Pronouncements
In December 2011, the FASB issued under Topic 220, Comprehensive Income, ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05”. The amendments in this ASU are being made to allow the Board time to redeliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the Board is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05. All other requirements in Update 2011-05 are not affected by this Update. For public entities, the amendments are effective for fiscal years and interim periods within those years, beginning after December 15, 2011. However, early adoption is permitted. The adoption of this accounting standard will not have a material effect on the Partnership’s consolidated financial statements.
In December 2011, the FASB issued under Topic 210, Balance Sheet, ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities”. The amendments require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The adoption of this accounting standard will not have a material effect on the Partnership’s consolidated financial statements.
In December 2011, the FASB issued under Topic 360, Property, Plant, and Equipment, ASU 2011-10, “Derecognition of in Substance Real Estate—a Scope Clarification (a consensus of the FASB Emerging Issues Task Force)”. Under the amendments in this Update, when a parent (reporting entity) ceases to have a controlling financial interest (as described in Subtopic 810-10) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. For public entities, the amendments in this Update are effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2012. The adoption of this accounting standard will not have a material effect on the Partnership’s 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.
Mortgage Notes Payable
The Partnership adopted FASB ASC 820 – “Fair Value Measurements” for financial assets and liabilities. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.
As permitted, we chose not to elect the fair value option as prescribed by ASC 825 – “Financial Instruments” – Including an Amendment of ASC 320 – “Investments – Debt and Equity Securities”, for our financial assets and liabilities that had not been previously carried at fair value. Therefore, we did not elect to fair value any additional items under ASC 825.
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
The estimated fair value of financial instruments 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. The following are financial instruments for which the Partnership’s estimate of fair value differs from the carrying amounts:
|
|
|
|
|
At March 31, 2012
|
|
At March 31, 2011*
|
|
|
|
|
|
|
Carrying
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
Amount
|
|
Fair Value
|
|
Amount
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes
|
|
$
|
15,872,513
|
|
$
|
8,796,945
|
|
$
|
24,538,465
|
|
$
|
11,992,518
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
As restated (Note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
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
|
|
|
|
|
|
2012
|
|
2011
|
|
(Years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
697,372
|
|
$
|
1,785,200
|
|
-
|
|
|
|
Building and improvements
|
|
|
6,657,042
|
|
|
42,420,182
|
|
10-40
|
|
|
|
Furniture and fixtures
|
|
|
131,166
|
|
|
542,198
|
|
5-10
|
|
|
|
|
|
|
7,485,580
|
|
|
44,747,580
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(5,571,012)
|
|
|
(28,173,471)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,914,568
|
|
$
|
16,574,109
|
|
|
|
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, 2012 and 2011 amounted to $164,789 and $203,788, respectively. During the year ended March 31, 2012, there was a decrease in accumulated depreciation on impairments in the amount of $2,061,713.
The components of property and equipment from discontinued operations are as follows:
|
|
|
|
March 31,
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
Useful Lives
|
|
|
|
|
|
2012
|
|
2011
|
|
(Years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
595,304
|
|
$
|
626,361
|
|
-
|
|
|
|
Building and improvements
|
|
|
20,558,555
|
|
|
4,110,566
|
|
15-40
|
|
|
|
Furniture and fixtures
|
|
|
152,251
|
|
|
18,148
|
|
3-10
|
|
|
|
|
|
|
21,306,110
|
|
|
4,755,075
|
|
|
|
|
|
Less: Accumulated depreciation
|
|
|
(15,163,826)
|
|
|
(3,055,377)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,142,284
|
|
$
|
1,699,698
|
|
|
|
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
Depreciation expenses for the discontinued property and equipment for the years ended March 31, 2012 and 2011 amounted to $851,977 and $1,871,301, respectively. During the year ended March 31, 2012, there was a decrease in accumulated depreciation on dispositions in the amount of $9,449,063.
Impairments
During the years ended March 31, 2012 and 2011, the Partnership performed a fair value analysis on all of its remaining investments due to the current deteriorating market conditions in the real estate industry. 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 direct capitalization method). 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 of the remaining investments. A net operating income projection was prepared to calculate a residual value at the end of the 5-year period. 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 $1,016,000 and $1,047,336 of losses on impairment for the years ended March 31, 2012 and 2011, respectively.
Impairments from operations recorded for the year ended March 31, 2012 were as follows:
|
|
|
|
|
|
|
|
|
Affordable Greene Associates, LP
|
|
$
|
1,016,000
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,016,000
|
|
|
Impairments from operations recorded for the year ended March 31, 2011 were as follows:
|
|
|
|
|
|
|
|
|
|
Affordable Grrene Associates, LP
|
|
$
|
468,890
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
468,890
|
|
|
Impairments from discontinued operations recorded for the year ended March 31, 2011 is as follows:
|
|
|
|
|
|
|
|
|
|
Mansion Court Associates
|
|
$
|
301,015
|
|
|
|
Lincoln Renaissance
|
|
|
277,431
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
578,446
|
|
NOTE 5 – Cash Held in Escrow
Cash held in escrow from operations consists of the following:
|
|
|
|
March 31,
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase price payments*
|
|
$
|
0
|
|
|
$
|
6,000
|
|
|
|
Real estate taxes, insurance and other
|
|
|
232,900
|
|
|
|
355,716
|
|
|
|
Reserve for replacements
|
|
|
177,558
|
|
|
|
1,448,972
|
|
|
|
Tenant security deposits
|
|
|
65,986
|
|
|
|
276,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
476,444
|
|
|
$
|
2,086,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Represents amounts to be paid to seller upon meeting specified rental achievement criteria.
|
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
|
Cash held in escrow from discontinued operations consists of the following:
|
|
|
|
|
March 31,
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate taxes, insurance and other
|
|
$
|
122,175
|
|
|
$
|
23,452
|
|
|
|
Reserve for replacements
|
|
|
932,346
|
|
|
|
37,905
|
|
|
|
Tenant security deposits
|
|
|
106,657
|
|
|
|
32,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,161,178
|
|
|
$
|
93,428
|
|
NOTE 6 – Deferred Costs
The components of deferred costs from operations and their periods of amortization are as follows:
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing costs
|
|
$
|
7,332
|
|
|
$
|
119,642
|
|
|
*
|
|
|
|
Other
|
|
|
33,703
|
|
|
|
33,703
|
|
|
various
|
|
|
|
|
|
|
41,035
|
|
|
|
153,345
|
|
|
|
|
|
|
Less: Accumulated amortization
|
|
|
-
|
|
|
|
(63,134)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
41,035
|
|
|
$
|
90,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Over the life of the related mortgages.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the years ended March 31, 2012 and 2011, amounted to $0 for both years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The components of deferred costs from discontinued operations and their periods of amortization are as follows:
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
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, 2012 and 2011 amounted to $4,570 and $19,363, respectively. During the year ended March 31, 2012, there was a decrease in deferred costs and accumulated amortization on dispositions in the amount of $253,505 and $194,436, respectively.
NOTE 7 – Mortgage Notes Payable
The mortgage notes from operations are payable in aggregate monthly installments of approximately $4,000, including principal and interest, at rates ranging from 0% to 6.33% per annum through the year 2024. The mortgage notes from discontinued operations are payable in aggregate monthly installments of approximately $49,000, including principal and interest, at rates ranging from 6.53% to 7.21% per annum through the year 2037. Each subsidiary partnership’s mortgage note payable is collateralized by the land and buildings of the respective subsidiary partnership, the assignment of each certain subsidiary partnership’s rents and leases, and is without further recourse.
Accrued interest payable as of March 31, 2012 and 2011 was $7,030,303 and $17,012,618, respectively. Accrued interest payable from discontinued operations as of March 31, 2012 and 2011 was $10,786,185 and $1,553,917, 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 respective Local Partnership) will be made from future refinancing or sales proceeds of the respective Local Partnerships or through assumption by the buyer upon sale of the Partnership interest in the respective Local Partnerships.
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
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 and $11,000 were made for replacement reserves from operations and discontinued operations, respectively.
One mortgage note relating to discontinued operations with a balance of $1,387,570 and $1,815,375 at December 31, 2011 and 2010, respectively, which bears interest at 7% per annum, is eligible for an interest rate subsidy. Accordingly, the subsidiary partnership paid only that portion of the monthly payments that would be required if the interest rate was 1%. The balance was subsidized under Section 236 of the National Housing Act.
Annual principal payment requirements for mortgage notes from operations payable by the subsidiary partnerships for each of the next five years and thereafter are as follows:
|
|
December 31,
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
31,604
|
|
|
|
2013
|
|
|
33,379
|
|
|
|
2014
|
|
|
35,209
|
|
|
|
2015
|
|
|
37,096
|
|
|
|
2016
|
|
|
2,010,402
|
|
|
|
Thereafter
|
|
|
6,652,852
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,800,542
|
|
Annual principal payment requirements for mortgage notes from discontinued operations payable by the subsidiary partnerships for each of the next five years and thereafter are as follows:
|
|
December 31,
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
471,812
|
|
|
|
2013
|
|
|
506,143
|
|
|
|
2014
|
|
|
5,564,852
|
|
|
|
2015
|
|
|
15,358
|
|
|
|
2016
|
|
|
15,944
|
|
|
|
Thereafter
|
|
|
497,862
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,071,971
|
|
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
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, 2012 and 2011 were as follows:
|
|
|
Years Ended March 31,
|
|
|
|
|
2012
|
|
|
2011* |
|
|
|
|
|
|
|
|
|
|
|
Partnership management fees (a)
|
|
$ |
120,929 |
|
|
$ |
452,789 |
|
|
Expense reimbursement (b)
|
|
|
116,123 |
|
|
|
152,872 |
|
|
Local administrative fees (c)
|
|
|
7,000 |
|
|
|
7,000 |
|
|
Total general and administrative - General Partner
|
|
|
244,052 |
|
|
|
612,661 |
|
|
|
|
|
|
|
|
|
|
|
|
Property management fees incurred to affiliates of the
|
|
|
|
|
|
|
|
|
|
subsidiary partnerships’ general partners
|
|
|
57,360 |
|
|
|
61,172 |
|
|
Total general and administrative-related parties
|
|
$ |
301,412 |
|
|
$ |
673,833 |
|
Expenses incurred to related parties from discontinued operation for the years ended March 31, 2012 and 2011 were as follows:
|
|
|
Years Ended March 31,
|
|
|
|
|
2012
|
|
|
2011* |
|
|
|
|
|
|
|
|
|
|
|
Local administrative fees (c)
|
|
$ |
16,154 |
|
|
$ |
31,980 |
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative – General Partner
|
|
|
16,154 |
|
|
|
31,980 |
|
|
|
|
|
|
|
|
|
|
|
|
Property management fees incurred to affiliates of
|
|
|
|
|
|
|
|
|
|
the subsidiary partnerships’ general partners
|
|
|
142,058 |
|
|
|
471,419 |
|
|
|
|
|
|
|
|
|
|
|
|
Total general and administrative-related parties
|
|
$ |
158,212 |
|
|
$ |
503,399 |
|
|
|
|
|
|
|
|
|
|
|
|
* 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 $1,707,000 and $4,930,000 were accrued and unpaid as of March 31, 2012 and 2011, respectively, and are included in the line item Due to general partners and affiliates in the consolidated balance sheets. During the years ended March 31, 2012 and 2011, management deemed the unpaid partnership management fees related to sold properties uncollectible and wrote off approximately $3,130,000 and $967,000, respectively, 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.
|
|
(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 $14,000 and $39,000 were accrued and unpaid as of March 31, 2012 and 2011, 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 from working capital reserves or future sales proceeds.
|
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
|
(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 $148,000 and $241,000 were accrued and unpaid as of March 31, 2012 and 2011, respectively. These fees have been deferred in certain cases and the Partnership anticipates that they will be paid from working capital reserves or future sales proceeds.
|
As of March 31, 2012 and 2011, the Partnership owed approximately $6,000 and $80,000, 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, 2012 and 2011 consists of the following:
|
|
|
March 31,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Operating advances
|
|
$ |
4,689 |
|
|
$ |
413,318 |
|
|
Construction costs payable
|
|
|
382,200 |
|
|
|
382,200 |
|
|
Management and other operating advances
|
|
|
- |
|
|
|
(9,166 |
) |
|
Loans payable to local general partner and affiliates (a)
|
|
|
202,994 |
|
|
|
236,994 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
589,883 |
|
|
$ |
1,023,346 |
|
|
(a)
|
Affordable Green 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.
|
|
Due to local general partner and affiliates from discontinued operations consists of the following:
|
|
|
|
|
March 31,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Operating advances
|
|
$ |
6,448 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,448 |
|
|
$ |
- |
|
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
NOTE 9 – Taxable Net Loss
Our adoption of FASB interpretation (“FIN”) No. 48 did not have a material impact on the consolidated financial statements and does not impact our financial position at March 31, 2012.
A reconciliation of the financial statement net loss to the taxable net loss for the Partnership and its consolidated subsidiaries is as follows:
|
|
|
|
Years Ended March 31,
|
|
|
|
|
|
2012
|
|
|
2011* |
|
|
|
|
|
|
|
|
|
|
|
|
Financial statement net (loss) income
|
|
$ |
(1,577,436 |
) |
|
$ |
14,976,024 |
|
|
|
|
|
|
|
|
|
|
|
|
Differences between depreciation and amortization expense records for financial reporting purposes and the accelerated costs recovery system utilized for income tax purposes
|
|
|
(990,237 |
) |
|
|
(1,407,597 |
) |
|
|
|
|
|
|
|
|
|
|
|
Differences between gain on sale of properties for financial reporting purposes and gain on sale for income tax purposes
|
|
|
7,233,883 |
|
|
|
(17,348,103 |
) |
| |
|
|
|
|
|
|
|
|
|
Accrued interest not deductible for tax purposes until paid
|
|
|
771,143 |
|
|
|
1,138,584 |
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible loss on impairment of property
|
|
|
1,016,000 |
|
|
|
1,047,336 |
|
|
|
|
|
|
|
|
|
|
|
|
Write-off of Partnership management fees included in income for tax purposes
|
|
|
1,466,412 |
|
|
|
967,014 |
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, including related party accruals for financial reporting not deductible for tax purposes until paid
|
|
|
1,334,722 |
|
|
|
1,553,840 |
|
| |
|
|
|
|
|
|
|
|
|
Net income as shown on the income tax return for the calendar year ended
|
|
$ |
9,254,487 |
|
|
$ |
927,098 |
|
|
|
|
|
|
|
|
|
|
|
|
*
|
As restated (see Note 14)
|
|
|
|
|
|
|
|
|
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, 2012, the tax basis net assets exceeded the financial statement net assets by approximately $8,964,000 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, 2012, the Partnership sold its limited partnership interests in four Local Partnerships. As of March 31, 2012, the Partnership has sold its limited partnership interests in eleven Local Partnerships. In addition, as of March 31, 2012, the Partnership has entered into an agreement to sell its limited partnership interests in one Local Partnership and one Local Partnership has entered into an agreement to sell its property and the related assets and liabilities. Subsequently, the Partnership sold its limited partnership interests in one Local Partnership (see Note 12). There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investments. All gains and losses on sales are included in discontinued operations.
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.
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
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 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.
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 $6,195,000.
On July 30, 2010, the Partnership sold its limited partnership interest in Derby Run Associates (“Derby Run”) to an affiliate of the Local General Partner for a sales price of $1,045,822. The Partnership received $1,043,717 after the repayment of other liabilities of approximately $2,000. The sale resulted in a gain of approximately $1,777,000 resulting from the write-off of the deficit basis in the Local Partnership of approximately $733,000 and the $1,043,717 cash received from the sale, which was recorded during the quarter ended September 30, 2010. An adjustment to the gain of approximately ($56,000) was recorded during the quarter ended March 31, 2011, resulting in an overall gain of approximately $1,721,000.
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
On March 31, 2010, the Partnership sold its limited partnership interest in Tasker Village Associates (“Tasker”) to an affiliate of the Local General Partner for a sales price of $20,000. The Partnership did not receive any cash from this sale after the repayment of other liabilities of $20,000. The sale resulted in a gain of approximately $2,361,000, resulting from the write-off of the deficit basis in the Local Partnership of the same amount at the date of the sale, which was recorded during the year ended March 31, 2010. Adjustments to the gain of approximately $39,000 and ($7,000) were recorded during the quarters ended June 30, 2010 and March 31, 2011, respectively, resulting in an overall gain of approximately $2,400,000. In addition, the sale resulted in a non-cash contribution to the Local Partnership from (i) the General Partner of approximately $28,000 as a result of the write-off of fees owed by the Local Partnership to an affiliate of the General Partner; and (ii) the Local General Partners of approximately $99,000 as a result of the write-off of fees owed by the Local Partnership to the Local General Partner.
NOTE 11 – Assets Held for Sale
On December 5, 2011, the Partnership entered into an assignment and assumption agreement to sell 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. As of December 31, 2011, United-Germano had property and equipment, at cost, of approximately $18,686,000, accumulated depreciation of approximately $13,527,000 and mortgage debt of approximately $6,501,000. The sale was contingent upon Illinois Housing Development Authority and U.S. Department of Housing and Urban Development (“HUD”) approval and was subsequently consummated on May 1, 2012 (see Note 12).
On August 29, 2011, Clear Horizons Limited Partnership (“Clear Horizons”) entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a sales price of $2,100,000. As of December 31, 2011, Clear Horizon had property and equipment, at cost, of approximately $2,466,000, accumulated depreciation of approximately $1,565,000 and mortgage debt of approximately $571,000. The sale is contingent upon approval of all governmental agencies, including HUD, and is expected to be consummated during the second quarter of 2012.
NOTE 12 – Commitments and Contingencies
|
a)
|
Going Concern Consideration
|
At March 31, 2012, the Partnership’s liabilities exceeded assets by $25,057,417 and for the year then ended incurred net loss of $ (237,376), including gain on sale of properties of $2,548,259 and loss on impairment of fixed assets of $1,016,000. 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 $1,707,000 will be payable out of sales or refinancing proceeds only to the extent of available funds after payments on 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 $15,872,513 and the accrued interest payable balance of $17,816,488 are of a nonrecourse nature and secured by the respective properties. The Partnership is currently in the process of disposing of all of its investments. 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 all its investments, and as such has no financial responsibility to fund operating losses incurred by the Local Partnerships. The maximum loss the Partnership would incur is its net investment in the respective Local Partnerships and the potential recapture of the Tax Credits if the investment is lost before the expiration of the Compliance Period. Dispositions of any investment in a Local Partnership should not impact the future results of operations, liquidity, or financial condition of the Partnership.
The Partnership has working capital reserves of approximately $1,609,000 at March 31, 2012. 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 $185,000 for the year ended March 31, 2012.
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)
|
Subsidiary Partnerships – Going Concern and Uncertainties
|
Mansion Court Associates (“Mansion Court”)
On May 12, 2011, the Partnership sold its limited partnership interest in Mansion Court (see Note 10). Mansion Court had operational losses of $31,116 and $68,981 (excluding loss on impairment of $301,015) for the 2011 and 2010 Fiscal Years, respectively. The financial statements for Mansion Court had been prepared assuming that Mansion Court would continue as a going concern. Mansion Court sustained operating losses over the years and had not generated sufficient cash flow from operations to meet its obligations. The Local General Partner provided funding in the past years; however there was no obligation to do so. The property also had experienced a high number of vacancies due to deteriorating conditions in the area. As of May 12, 2011, the property had 24 vacant units of the total 30 units. Vacancies continued to increase due to declining conditions in the surrounding neighborhood, and the expenditure of funds to make improvements would not have benefited the property.
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
During the year ended March 31, 2011, in accordance with ASC 360, the Partnership deemed the building of Mansion Court impaired and wrote it down to its estimated fair value of $0, which resulted in a loss on impairment of approximately $301,000. Fair value was obtained from an assessment made by the management after indications that the carrying value of the assets were not recoverable, evidenced by a history of net operating losses over the past few years as discussed above.
|
c)
|
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, 2012.
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.
|
e)
|
Property Management Fees
|
Property and incentive management fees incurred by the subsidiary partnerships amounted to $523,684 and $981,064 for the years ended March 31,2012 and 2011, respectively. Of these fees $199,418 and $532,591 were earned by affiliates of the Local General Partners, which include $0 and $223,750 of incentive management fees at one Local Partnership and $142,058 and $471,419 of fees relating to discontinued operations.
The Partnership is subject to the risks incident to potential losses arising from the management and ownership of improved real estate. The Partnership can also be affected by poor economic conditions generally; however, no more than 25% of the properties are located in any single state. 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 investments in subsidiary partnerships during the period that the subsidy agreements are in existence without HUD’s approval. Furthermore, there may not be market demand for apartments at full market rents when the rental assistance contracts expire.
The Partnership and BACs holders began to recognize Tax Credits with respect to a property when the Credit Period for such Property (generally ten years from the date of investment or, if later, the date the Property was leased to qualified tenants) commenced. Because of the time required for the acquisition, completion and rent-up of Properties, the amount of Tax Credits per BAC gradually increased over the first three years of the Partnership. Tax Credits not recognized in the first three years were recognized in the 11th through 13th years. As of December 31, 2007, all the Local Partnerships had completed their Credit Periods. However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits. The Compliance Periods will continue through December 31, 2012 with respect to the Properties depending upon when the Compliance Period commenced. At December 31, 2008, Mansion Court was required to recapture $190,635 of low-income housing tax credits.
We evaluated all subsequent events from the date of the balance sheet through the issuance date of this report and determined that there were no events or transactions occurring during the subsequent event reporting period, other than United-Germano discussed below, which require recognition or disclosure in the financial statements.
United-Germano
On May 1, 2012, the Partnership sold its limited partnership interest in United-Germano to an unaffiliated third party purchaser for a sales price of $141,875. The sale will result in a gain of approximately $11,770,000, resulting from the write-off of the deficit basis in the Local Partnership of approximately $11,628,000 and $141,875 cash received from the sale, which will be recognized on the Partnership’s Form 10-Q for the quarter ending June 30, 2012.
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
NOTE 13 – 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, 2012, United-Germano and Clear Horizons, which were classified as assets held for sale, were all classified as discontinued operations on the consolidated balance sheets. As of March 31, 2011, Paradise Arms, which was classified as an asset held for sale, was classified as discontinued operations on the consolidated balance sheets.
|
Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
March 31,
|
|
|
|
|
2012
|
|
2011 *
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment – less accumulated depreciation of $15,163,826 and
|
|
|
|
|
|
|
|
|
$3,055,377, respectively
|
$
|
6,142,284
|
|
$
|
1,699,698
|
|
|
|
Cash and cash equivalents
|
|
136,834
|
|
|
-
|
|
|
|
Cash held in escrow
|
|
1,161,178
|
|
|
93,428
|
|
|
|
Deferred costs, net of accumulated amortization of $27,694 and $0, respectively
|
|
40,799
|
|
|
-
|
|
|
|
Other assets
|
|
178,865
|
|
|
6,250
|
|
|
Total assets
|
$
|
7,659,960
|
|
$
|
1,799,376
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Mortgage notes payable
|
$
|
7,071,971
|
|
$
|
4,139,881
|
|
|
|
Accounts payable
|
|
562,436
|
|
|
16,308
|
|
|
|
Accrued interest payable
|
|
10,786,185
|
|
|
1,553,917
|
|
|
|
Security deposit payable
|
|
72,324
|
|
|
32,036
|
|
|
|
Due to local general partners and affiliates
|
|
6,448
|
|
|
-
|
|
|
|
Due to general partners and affiliates
|
|
39,000
|
|
|
20,000
|
|
|
Total liabilities
|
$
|
18,538,364
|
|
$
|
5,762,142
|
|
|
|
|
|
|
|
|
|
|
|
* As restated (see Note 14)
|
|
|
|
|
|
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
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, 2012, Martha Bryant, P&P, Colden Oaks and Brynview, which were sold during the year ended March 31, 2011, Abraham Lincoln Court, Paradise Arms, Mansion Court and Winding Ridge, which were sold during the year ended March 31, 2012, and Clear Horizons and United-Germano, which were classified as assets held for sale, were all classified as discontinued operation in the consolidated statements of operations. For the year ended March 31, 2011, Tasker, which was sold on March 31, 2010, Derby Run, Martha Bryant, P&P, Colden Oaks and Brynview, which were sold during the year ended March 31, 2011, and Abraham Lincoln Court, Paradise Arms, Mansion Court, Winding Ridge, Clear Horizons and United-Germano, in order to present comparable results to the year ended March 31,2012, were all classified as discontinued operations in the consolidated statements of operations.
Consolidated Statements of Discontinued Operations:
|
|
|
|
|
|
|
Years Ended March 31,
|
|
|
|
2012
|
|
2011 */**
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
5,849,985
|
|
$
|
9,191,905
|
|
Other (Note 2)
|
|
|
54,450
|
|
|
180,692
|
|
Gain on sale of properties (Note 10)
|
|
|
2,548,259
|
|
|
20,284,069
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
8,452,694
|
|
|
29,656,666
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
General and administrative
|
|
|
2,019,097
|
|
|
2,901,323
|
|
General and administrative-related parties (Note 8)
|
|
|
158,212
|
|
|
503,399
|
|
Repairs and maintenance
|
|
|
1,488,329
|
|
|
2,075,148
|
|
Operating and other
|
|
|
573,495
|
|
|
1,060,504
|
|
Taxes
|
|
|
374,296
|
|
|
557,637
|
|
Insurance
|
|
|
196,971
|
|
|
334,408
|
|
Interest
|
|
|
1,092,773
|
|
|
1,993,869
|
|
Depreciation and amortization
|
|
|
856,547
|
|
|
1,890,664
|
|
Loss on impairment of fixed assets
|
|
|
-
|
|
|
578,446
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
6,759,720
|
|
|
11,895,398
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
$
|
1,692,974
|
|
$
|
17,761,268
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in income of subsidiaries from discontinued operations
|
|
|
(1,355,243)
|
|
|
(1,009,703)
|
|
|
|
|
|
|
|
|
Income from discontinued operation – Independence Tax Credit Plus LP II
|
|
$
|
337,731
|
|
$
|
16,751,565
|
|
|
|
|
|
|
|
|
|
Income – limited partners from discontinued operations
|
|
$
|
334,354
|
|
$
|
16,584,049
|
|
|
|
|
|
|
|
|
|
Number of BACs outstanding
|
|
|
58,928
|
|
|
58,928
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations per BAC
|
|
$
|
5.67
|
|
$
|
281.43
|
|
|
|
|
|
|
|
Years Ended March 31,
|
|
|
|
2012
|
|
2011 */**
|
|
Cash flows from Discontinued Operations:
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(869,248)
|
|
$
|
(538,034)
|
|
Net cash (used in) provided by investing activities
|
|
$
|
(805,106)
|
|
$
|
884,622
|
|
Net cash provided by (used in) financing activities
|
|
$
|
1,378,219
|
|
$
|
(819,315)
|
|
|
|
|
|
|
|
|
|
*
|
Reclassified for comparative purposes.
|
|
**
|
As restated (see Note 14).
|
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012
NOTE 14 – Prior Period Adjustment
Renaissance Plaza 93 Associates, LP. (“The Esplanade”)
The accompanying financial statements for the year ended March 31, 2011 have been restated to correct an understated amount of mortgage notes payable and related accrued interest due to a dispute between a lender and the management of The Esplanade over the calculation of compounded interest when the construction note was converted to a permanent mortgage. Upon the completion of construction, the lender converted remaining accrued interest into a principal balance. In 2011, the two parties came to an agreement thereby increasing the outstanding principal balance on the mortgage note by $154,754 and accrued interest by $207,254.
NLEDC, LP (“Paradise Arms”)
The accompanying financial statements for the year ended March 31, 2011 have been restated to correct an understated amount of accrued interest. Upon completion of the 2011 audit it was noted that the accrued interest, for the note payable due to Community Redevelopment Agency of Los Angeles, had been understated in prior years by $128,904. Therefore a prior period adjustment was made in order to properly state the outstanding accrued interest as of December 31, 2011.
The effect of prior period accounting errors resulted in the following changes:
|
|
|
At March 31, 2011
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
Reported
|
|
|
As Restated
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet including discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable
|
|
$ |
24,383,711 |
|
|
$ |
24,538,465 |
|
|
Accrued interest payable
|
|
|
18,230,377 |
|
|
|
18,566,535 |
|
|
Noncontrolling interests
|
|
|
(1,233,025 |
) |
|
|
(1,237,984 |
) |
|
Partners' deficit
|
|
|
(27,415,490 |
) |
|
|
(27,906,402 |
) |
|
|
|
|
|
|
|
|
|
|
|
Statement of Operations including discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial, principally interest
|
|
|
2,432,449 |
|
|
|
2,441,647 |
|
|
Net income
|
|
|
15,984,571 |
|
|
|
15,975,373 |
|
|
|
|
|
|
|
|
|
|
|
|
Net income per weighted average BAC
|
|
$ |
251.75 |
|
|
$ |
251.60 |
|
|
|
|
|
|
|
|
|
|
|
Total partners’ deficit as of April 1, 2010 has been increased by $481,714 for the effects of the restatement on prior years.
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, 2012. 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, 2012, (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, 2012, 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.
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, 39, 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, 46, 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%
|
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 May 28, 2012, 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 May 28, 2012, 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, 2012 and 2011 and for the reviews of the financial statements included in the Partnership’s quarterly reports on Form 10-Q for those years were $64,500 and $61,000, 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 years ended December 31, 2011 and 2010 were $3,000 and $2,500, respectively.
All Other Fees
None.
The Partnership is not required to have, and does not have, a stand-alone audit committee.
PART IV
|
Item 15.
|
Exhibits, Financial Statement Schedules.
|
|
|
| |
|
|
Sequential
Page
|
| |
|
|
|
|
(a) 1.
|
Consolidated Financial Statements.
|
|
|
| |
|
|
|
| |
Report of Independent Registered Public Accounting Firm
|
|
14
|
| |
|
|
|
| |
Consolidated Balance Sheets at March 31, 2012 and 2011
|
|
36
|
| |
|
|
|
| |
Consolidated Statements of Operations for the Years Ended March 31, 2012 and 2011
|
|
37
|
| |
|
|
|
| |
Consolidated Statements of Changes in Partners’ Capital (Deficit) for the Years Ended March 31, 2012 and 2011
|
|
38
|
| |
|
|
|
| |
Consolidated Statements of Cash Flows for the Years Ended March 31, 2012 and 2011
|
|
39
|
| |
|
|
|
| |
Notes to Consolidated Financial Statements
|
|
40
|
| |
|
|
|
|
(a) 2.
|
Consolidated Financial Statement Schedules.
|
|
|
| |
|
|
|
| |
Report of Independent Registered Public Accounting Firm
|
|
64
|
| |
|
|
|
| |
Schedule I - Condensed Financial Information of Registrant
|
|
66
|
| |
|
|
|
| |
Schedule III - Real Estate and Accumulated Depreciation
|
|
69
|
| |
|
|
|
| |
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
|
|
61
|
| |
|
|
|
|
(31.1)+
|
|
|
|
| |
|
|
|
|
(31.2) +
|
|
|
|
| |
|
|
|
|
(32.1) +
|
|
|
|
| |
|
|
|
|
(32.2) +
|
|
|
|
| |
|
|
|
| |
*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.
|
|
|
|
Item 15.
|
Exhibits and Financial Statement Schedules (continued).
|
| |
Subsidiaries of the Registrant (Exhibit 21).
|
|
Jurisdiction
of Organization
|
| |
|
|
|
| |
|
|
|
| |
United Germano – Millgate Limited Partnership
|
|
IL
|
| |
Renaissance Plaza ‘93 Associates, L.P.
|
|
MD
|
| |
Clear Horizons Limited Partnership
|
|
LA
|
| |
Affordable Green Associates L.P.
|
|
NY
|
| |
|
|
|
| |
|
|
|
| |
|
|
|
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 18, 2012
|
|
|
|
By:
|
/s/ Robert A. Pace
|
|
| |
|
|
|
|
|
Robert A. Pace
|
|
| |
|
|
|
|
|
Chief Financial Officer and Principal Accounting Officer
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Date:
|
June 18, 2012
|
|
|
|
By:
|
/s/ Robert L. Levy
|
|
| |
|
|
|
|
|
Robert L. Levy
|
|
| |
|
|
|
|
|
President and Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities 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 18, 2012
|
|
Robert A. Pace
|
| |
|
|
|
|
|
/s/ Robert L. Levy
|
|
President and Chief Executive Officer of Independence Associates GP LLC.
|
|
June 18, 2012
|
|
Robert L. Levy
|
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 audit 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 18, 2012 on page 14, and based on the reports of other auditors, we have also audited supporting Schedule I for the 2011 Fiscal Year and Schedule III at March 31, 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 12, 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. This subsidiary partnership’s net income aggregated $1,751,205 (2011 Fiscal Year), and their assets aggregated $0 at March 31, 2012. Management’s plan in regard to this matter is also described in Note 12. 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 18, 2012
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 audit 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 27, 2011 on page 15, and based on the reports of other auditors, we have also audited supporting Schedule I for the 2010 Fiscal Year. 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 12, 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. This subsidiary partnership’s net loss aggregated $369,996 (2010 Fiscal Year), and their assets aggregated $169,783 at March 31, 2011. Management’s plan in regard to this matter is also described in Note 12. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty
/s/ TRIEN ROSENBERG
WEINBERG CIULLO & FAZZARI LLP
New York, New York
June 27, 2011
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)
CONDENSED BALANCE SHEETS
ASSETS
|
|
|
March 31,
|
|
|
|
2012
|
|
2011
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,608,963
|
|
$
|
850,744
|
|
Cash held in escrow
|
|
|
-
|
|
|
6,000
|
|
Investment in subsidiary partnerships
|
|
|
697,936
|
|
|
9,058,888
|
|
Other assets
|
|
|
33,703
|
|
|
53,703
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,340,602
|
|
$
|
9,969,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS' CAPITAL
|
|
|
|
|
|
|
|
|
|
Due to general partner and affiliates
|
|
$
|
1,727,255
|
|
$
|
5,049,129
|
|
Other liabilities
|
|
|
45,005
|
|
|
50,127
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,772,260
|
|
|
5,099,256
|
|
|
|
|
|
|
|
|
|
Partners’ capital
|
|
|
568,342
|
|
|
4,870,079
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners’ capital
|
|
$
|
2,340,602
|
|
$
|
9,969,335
|
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.
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)
CONDENSED STATEMENTS OF OPERATIONS
|
|
|
Years Ended March 31,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
$ |
450 |
|
|
$ |
1,300 |
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative and management
|
|
|
185,479 |
|
|
|
143,792 |
|
|
Administrative and management-related parties
|
|
|
237,052 |
|
|
|
605,660 |
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
422,531 |
|
|
|
749,452 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(422,081 |
) |
|
|
(748,152 |
) |
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of investments in subsidiary partnerships
|
|
|
1,237,492 |
|
|
|
19,273,596 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity in loss of subsidiary partnerships*
|
|
|
(8,247,264 |
) |
|
|
(18,534,944 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(7,431,853 |
) |
|
$ |
(9,500 |
) |
|
*
|
Includes suspended prior year losses of investments in accordance with the equity method of accounting amounting to $(8,509,161) and $(18,141,477) for the years ended March 31, 2012 and 2011, respectively.
|
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,
|
|
|
|
2012
|
|
2011 *
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,431,853)
|
|
$
|
(9,500)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
Loss (gain) on sale of investments in subsidiary partnerships
|
|
|
(1,237,492)
|
|
|
(19,273,596)
|
|
Equity in (income) loss of subsidiary partnerships
|
|
|
8,247,264
|
|
|
18,534,944
|
|
Increase in assets:
|
|
|
|
|
|
|
|
Other assets
|
|
|
(109,361)
|
|
|
(123,027)
|
|
(Decrease) increase in liabilities:
|
|
|
|
|
|
|
|
Due to general partners and affiliates
|
|
|
(191,758)
|
|
|
(349,436)
|
|
Other liabilities
|
|
|
(5,122)
|
|
|
(15,943)
|
|
Total adjustments
|
|
|
6,703,531
|
|
|
(1,227,058)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(728,322)
|
|
|
(1,236,558)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from sale of investments in subsidiary partnerships
|
|
|
5,000
|
|
|
1,075,822
|
|
Investment in subsidiary partnerships
|
|
|
6,000
|
|
|
-
|
|
Decrease in cash held in escrow
|
|
|
(6,000)
|
|
|
-
|
|
Net cash provided by investing activities
|
|
|
5,000
|
|
|
1,075,822
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from subsidiary partnerships
|
|
|
1,481,541
|
|
|
120,493
|
|
Net cash provided by financing activities
|
|
|
1,481,541
|
|
|
120,493
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
758,219
|
|
|
(40,243)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of year
|
|
|
850,744
|
|
|
890,987
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
1,608,963
|
|
$
|
850,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant noncash investing and financing activities:
|
|
|
|
|
|
|
|
Write-off of Partnership management fees related to sold properties
|
|
$
|
3,130,116
|
|
$
|
967,014
|
|
|
|
|
|
|
|
|
|
* Reclassified for comparative purposes.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2012
|
|
|
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
|
|
$
|
6,500,682
|
|
$
|
580,000
|
|
$
|
6,070,477
|
|
$
|
12,144,280
|
|
$
|
585,374
|
|
$
|
18,209,382
|
|
$
|
18,794,756
|
|
$
|
13,564,244
|
|
1993-94
|
|
Oct. 1993
|
|
10-25
|
|
Lincoln Renaissance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reading, PA (e)
|
|
|
0
|
|
|
-
|
|
|
5,240,173
|
|
|
(5,131,142)
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
1993-94
|
|
Apr. 1993
|
|
20-40
|
|
Mansion Court Associates
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Philadelphia, PA (e)
|
|
|
0
|
|
|
19,072
|
|
|
3,224,984
|
|
|
(3,135,025)
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
1993-94
|
|
Nov. 1993
|
|
20-40
|
|
Derby Run Associates L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hampton, VA(d)
|
|
|
-
|
|
|
407,410
|
|
|
3,069,628
|
|
|
(3,477,038)
|
|
|
-
|
|
|
-
|
|
|
0
|
|
|
-
|
|
1994-95
|
|
Feb. 1994
|
|
27.5-40
|
|
Renaissance Plaza Assoc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Baltimore, MD
|
|
|
6,728,170
|
|
|
684,255
|
|
|
9,840,170
|
|
|
(3,142,689)
|
|
|
686,616
|
|
|
6,695,121
|
|
|
7,381,737
|
|
|
5,536,141
|
|
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)
|
|
|
0
|
|
|
624,000
|
|
|
-
|
|
|
47,217
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
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
|
|
|
571,289
|
|
|
15,304
|
|
|
2,058,729
|
|
|
440,447
|
|
|
17,665
|
|
|
2,496,815
|
|
|
2,514,480
|
|
|
1,599,583
|
|
1994-95
|
|
Dec. 1994
|
|
27.5
|
|
Neptune Venture L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neptune Township, NJ (e)
|
|
|
-
|
|
|
460,631
|
|
|
10,151,873
|
|
|
(10,113,626)
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
1995-96
|
|
Apr. 1995
|
|
40
|
|
Affordable Green Associates L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York, NY
|
|
|
2,072,372
|
|
|
20,500
|
|
|
3,506,961
|
|
|
(3,426,745)
|
|
|
3,021
|
|
|
97,696
|
|
|
100,717
|
|
|
34,870
|
|
1995-96
|
|
May-95
|
|
27
|
|
Less: discontinued operations and dispositions
|
|
|
|
|
|
(4,244,730)
|
|
|
(21,699,792)
|
|
|
24,556,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
15,872,513
|
|
$
|
1,300,059
|
|
$
|
21,476,337
|
|
$
|
6,015,294
|
|
$
|
1,292,676
|
|
$
|
27,499,014
|
|
$
|
28,791,690
|
|
$
|
20,734,838
|
|
|
|
|
|
|
|
(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
|
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2012
(continued)
|
|
|
Cost of Property and Equipment
|
|
|
Accumulated Depreciation
|
|
|
|
|
Years Ended March 31,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$ |
49,502,655 |
|
|
$ |
78,288,769 |
|
|
$ |
31,228,848 |
|
|
$ |
44,397,771 |
|
|
Additions during period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Improvements
|
|
|
460,604 |
|
|
|
423,670 |
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
|
|
|
|
|
|
|
|
1,016,766 |
|
|
|
2,075,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deductions during period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dispositions and impairments
|
|
|
(21,171,569 |
) |
|
|
(29,209,784 |
) |
|
|
(11,510,776 |
) |
|
|
(15,244,012 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at close of period
|
|
$ |
28,791,690 |
|
|
$ |
49,502,655 |
|
|
$ |
20,734,838 |
|
|
$ |
31,228,848 |
|
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.