0000912057-01-538010.txt : 20011128 0000912057-01-538010.hdr.sgml : 20011128 ACCESSION NUMBER: 0000912057-01-538010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INDEPENDENCE TAX CREDIT PLUS LP IV CENTRAL INDEX KEY: 0000940329 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133809869 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-89968 FILM NUMBER: 1776947 BUSINESS ADDRESS: STREET 1: 625 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124215333 MAIL ADDRESS: STREET 1: 625 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 10-Q 1 a2062612z10-q.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ------- EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 OR ____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 33-89968 INDEPENDENCE TAX CREDIT PLUS L.P. IV ------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 13-3809869 --------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 MADISON AVENUE, NEW YORK, NEW YORK 10022 -------------------------------------- -------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212)421-5333 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____ PART I - FINANCIAL INFORMATION Item 1. Financial Statements INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES Consolidated Condensed Balance Sheets
------------- --------- ------------- --------- SEPTEMBER 30, MARCH 31, 2001 2001 ------------- --------- (UNAUDITED) ASSETS Property and equipment at cost, net of accumulated depreciation of $8,208,606 and $7,000,352, respectively $72,098,861 $73,299,379 Cash and cash equivalents 3,109,337 3,705,003 Cash held in escrow 2,891,274 2,589,217 Deferred costs, net of accumulated amortization of $264,461 and $221,282, respectively 974,668 957,834 Other assets 535,777 390,171 ----------- ------------ Total assets $79,609,917 $80,941,604 =========== ===========
2 INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES Consolidated Condensed Balance Sheets (continued)
------------- --------- ------------- --------- SEPTEMBER 30, MARCH 31, 2001 2001 ------------- --------- (UNAUDITED) LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) Liabilities: Mortgage notes payable $36,598,580 $36,661,016 Construction loans payable 545,374 545,374 Accounts payable and other liabilities 6,389,555 5,684,359 Due to local general partners and affiliates 2,383,969 2,480,285 Due to general partner and affiliates 1,130,999 1,171,747 ----------- ----------- Total liabilities 47,048,477 46,542,781 ----------- ----------- Minority interest 2,082,677 2,097,716 ----------- ----------- Partners' capital (deficit): Limited partners (45,844 BACs issued and outstanding) 30,581,508 32,385,629 General partner (102,745) (84,522) ----------- ----------- Total partners' capital (deficit) 30,478,763 32,301,107 ----------- ----------- Total liabilities and partners' capital (deficit) $79,609,917 $80,941,604 =========== =========== The accompanying notes are an integral part of these consolidated condensed financial statements.
3 INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES Consolidated Condensed Statements of Operations (Unaudited)
========================== =========================== THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- --------------------------- 2001 2000* 2001 2000* -------------------------- --------------------------- Revenues Rental income $ 1,363,274 $ 1,290,358 $ 2,723,997 $ 2,545,564 Other income (principally interest) 64,391 106,670 163,741 195,055 ----------- ----------- ----------- ----------- Total revenues 1,427,665 1,397,028 2,887,738 2,740,619 ----------- ----------- ----------- ----------- Expenses General and administrative 403,631 494,527 822,880 963,693 General and administrative- related parties 140,418 159,522 292,742 310,268 Repairs and maintenance 232,717 220,598 455,778 415,842 Operating 160,890 146,442 391,214 308,194 Taxes 38,499 67,737 82,337 163,322 Insurance 49,163 53,289 116,184 120,886 Interest 692,046 634,420 1,310,839 1,291,648 Depreciation and amortization 627,038 643,630 1,251,433 1,276,208 ----------- ----------- ----------- ----------- Total expenses 2,344,402 2,420,165 4,723,407 4,850,061 ----------- ----------- ----------- ----------- Loss before minority interest (916,737) (1,023,137) (1,835,669) (2,109,442) Minority interest in loss (income) of subsidiary partnerships 5,759 (3,300) 13,325 6,920 ----------- ----------- ----------- ----------- Net loss $ (910,978) $(1,026,437) $(1,822,344) $(2,102,522) =========== =========== =========== =========== Net loss - limited partners $ (901,869) $(1,016,173) $(1,804,121) $(2,081,497) =========== =========== =========== =========== Number of BACs outstanding 45,844 45,844 45,844 45,844 =========== =========== =========== =========== Net loss per BAC $ (19.67) $ (22.16) $ (39.35) $ (45.40) =========== =========== =========== =========== *Reclassified for comparative purposes. The accompanying notes are an integral part of these consolidated condensed financial statements.
4 INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES Consolidated Condensed Statement of Changes in Partners' Capital (Deficit) For the Six Months Ended September 30, 2001 (Unaudited)
============================================ LIMITED GENERAL TOTAL PARTNERS PARTNER -------------------------------------------- Partners' capital (deficit) - April 1, 2001 $ 32,301,107 $ 32,385,629 $ (84,522) Net loss (1,822,344) (1,804,121) (18,223) ------------ ------------ ------------ Partners' capital (deficit) - September 30, 2001 $ 30,478,763 $ 30,581,508 $ (102,745) ============ ============ ============ The accompanying notes are an integral part of these consolidated condensed financial statements.
5 INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited)
=============================== SIX MONTHS ENDED SEPTEMBER 30, ------------------------------- 2001 2000 ------------------------------- Cash flows from operating activities: Net loss $(1,822,344) $(2,102,522) ----------- ----------- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 1,251,433 1,276,208 Minority interest in loss of subsidiary partnerships (13,325) (6,920) Increase in cash held in escrow (302,057) (443,988) (Increase) decrease in other assets (145,606) 257,838 Increase in accounts payable and other liabilities 705,196 661,702 Increase in due to local general partners and affiliates 576 51,750 Decrease in due to local general partners and affiliates (61,444) (553,329) (Decrease) increase in due to general partner and affiliates (40,748) 177,936 ----------- ----------- Total adjustments 1,394,025 1,421,197 ----------- ----------- Net cash used in operating activities (428,319) (681,325) ----------- -----------
6 INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited) (continued)
==================================== SIX MONTHS ENDED SEPTEMBER 30, ------------------------------------ 2001 2000 ------------------------------------ Cash flows from investing activities: Increase in property and equipment (7,736) (24,999) Decrease in accounts payable and other liabilities 0 (163,599) Increase in due to local general partners and affiliates 41,319 0 Decrease in due to local general partners and affiliates (76,767) 0 Decrease in investments available for sale 0 3,100,000 ----------- ----------- Net cash (used in) provided by investing activities (43,184) 2,911,402 ----------- ----------- Cash flows from financing activities: Proceeds from mortgage notes 0 58,140 Repayments of mortgage notes (62,436) (50,919) Repayments of construction loans 0 (1,497,109) Increase in deferred costs (60,013) (1,625) Decrease in capitalization of consolidated subsidiaries attributable to minority interest (1,714) (30,602) ----------- ----------- Net cash used in financing activities (124,163) (1,522,115) ----------- ----------- Net (decrease) increase in cash and cash equivalents (595,666) 707,962 Cash and cash equivalents at beginning of period 3,705,003 4,384,477 ----------- ----------- Cash and cash equivalents at end of period $ 3,109,337 $ 5,092,439 =========== ===========
7 INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES Consolidated Condensed Statements of Cash Flows (Unaudited) (continued)
==================================== SIX MONTHS ENDED SEPTEMBER 30, ------------------------------------ 2001 2000 ------------------------------------ Supplemental disclosures of noncash investing and financing activities: Conversion of construction loans to mortgage notes $ 0 $1,146,699 The accompanying notes are an integral part of these consolidated condensed financial statements.
8 INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES Notes to Financial Statements September 30, 2001 (Unaudited) Note 1 - General Independence Tax Credit Plus L.P. IV (a Delaware limited partnership) (the "Partnership") was organized on February 22, 1995, and commenced the public offering on July 6, 1995. The general partner of the Partnership is Related Independence L.L.C., a Delaware limited liability company (the "General Partner"). The Partnership's business is to invest in other partnerships ("Local Partnerships", "subsidiaries" or "subsidiary partnerships") owning apartment complexes that are eligible for the low-income housing tax credit ("Housing Tax Credit") enacted in the Tax Reform Act of 1986, some of which complexes may also be eligible for the historic rehabilitation tax credit ("Historic Tax Credit"; together with Housing Tax Credits, "Tax Credits"). As of September 30, 2001, the Partnership has acquired a limited partnership interest in fourteen subsidiary partnerships, all of which have been consolidated. The Partnership does not anticipate acquiring limited partnership interests in any additional subsidiary partnerships. The Partnership's investment in each Local Partnership represents from 98.99% to 99.98%, with the exception of a 58.12% interest in one Local Partnership. 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 partner of the subsidiary partnerships and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships. For financial reporting purposes, the Partnership's fiscal quarter ends September 30. All subsidiaries have fiscal quarters ending June 30. Accounts of the subsidiaries have been adjusted for intercompany transactions from July 1 through September 30. The Partnership's fiscal quarter ends September 30 in order to allow adequate time for the subsidiaries' financial statements to be prepared and consolidated. 9 INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES Notes to Financial Statements September 30, 2001 (Unaudited) All intercompany accounts and transactions with the subsidiary partnerships have been eliminated in consolidation. Increases (decreases) in the capitalization of consolidated subsidiaries attributable to minority interests arise primarily from cash contributions from and cash distributions to the minority interest partners. Losses attributable to minority interests which exceed the minority interests' investment in a subsidiary have been charged to the Partnership. Such losses aggregated approximately $2,000, $3,000, $5,000 and $6,000 for the three and six months ended September 30, 2001 and 2000, respectively. The Partnership's investment in each subsidiary is equal to the respective subsidiary's partners' equity less minority interest capital, if any. In consolidation, all subsidiary partnership losses are included in the Partnership's capital account except for losses allocated to minority interest capital. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted or condensed. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K for the year ended March 31, 2001. The books and records of the Partnership are maintained on the accrual basis of accounting in accordance with generally accepted accounting principles. In the opinion of the General Partner of the Partnership, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Partnership as of September 30, 2001, the results of operations for the three and six months ended September 30, 2001 and 2000 and its cash flows for the six months ended September 30, 2001 and 2000. However, the operating results for the six months ended September 30, 2001 may not be indicative of the results for the year. 10 INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES Notes to Financial Statements September 30, 2001 (Unaudited) Note 2 - Related Party Transactions An affiliate of the General Partner has a .01% interest as a special limited partner in each of the Local Partnerships. The costs incurred to related parties for the three and six months ended September 30, 2001 and 2000 were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- ---------------------- 2001 2000 2001 2000 --------------------- ---------------------- Partnership manage- ment fees (a) $ 83,742 $ 82,400 $167,484 $164,799 Expense reimburse- ment (b) 26,439 42,465 61,314 71,296 Local administrative fee (c) 11,000 9,500 22,000 19,000 -------- -------- -------- -------- Total general and administrative- General Partner 121,181 134,365 250,798 255,095 -------- -------- -------- -------- Property manage- ment fees incurred to affiliates of the subsidiary partnerships' general partners (d) 19,237 25,157 41,944 55,173 -------- -------- -------- -------- Total general and administrative- related parties $140,418 $159,522 $292,742 $310,268 ======== ======== ======== ========
(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 11 INDEPENDENCE TAX CREDIT PLUS L.P. IV AND SUBSIDIARIES Notes to Financial Statements September 30, 2001 (Unaudited) 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 $788,000 and $720,000 were accrued and unpaid as of September 30, 2001 and March 31, 2001, respectively. (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. (c) Independence SLP IV 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. (d) Property management fees incurred by the Local Partnerships amounted to $87,863, $83,362, $171,835 and $168,435 for the three and six months ended September 30, 2001 and 2000, respectively. Of these fees $19,237, $25,157, $41,944 and $55,173 were incurred to affiliates of the subsidiary partnerships' general partners. 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES The Partnership's primary sources of funds include (i) interest earned on Gross Proceeds which are invested in tax-exempt money market instruments pending final payments to Local Partnerships and (ii) working capital reserves and interest earned thereon. All these sources of funds are available to meet obligations of the Partnership. As of September 30, 2001, the Partnership has invested approximately $37,732,000 (including approximately $1,161,000 classified as a loan repayable from sale/refinancing proceeds in accordance with the Contribution Agreement and not including acquisition fees of approximately $1,771,000) of net proceeds in fourteen Local Partnerships of which approximately $2,040,000 remains to be paid to the Local Partnerships (including approximately $496,000 being held in escrow) as certain benchmarks, such as occupancy level, must be attained prior to the release of the funds. During the six months ended September 30, 2001, approximately $378,000 was paid to Local Partnerships (none of which was released from escrow). The Partnership is not acquiring additional properties, but the Partnership may be required to fund potential purchase price adjustments based on tax credit adjustor clauses. There were no purchase price adjustments during the six months ended September 30, 2001. For the six months ended September 30, 2001, cash and cash equivalents of the Partnership and its fourteen consolidated Local Partnerships decreased approximately $596,000. This decrease was due to cash used in operating activities ($428,000), an increase in deferred costs ($60,000), an increase in property and equipment ($8,000), repayments of mortgage notes ($62,000), a net decrease in due to local general partners and affiliates relating to investing activities ($35,000) and a decrease in capitalization of consolidated subsidiaries attributable to minority interest $(2,000). Included in the adjustments to reconcile the net loss to cash used in operations is depreciation and amortization of approximately $1,251,000. The Partnership has established a working capital reserve from funds available for investment, which includes amounts which may be required for potential purchase price adjustments based on tax credit adjustor clauses. At September 30, 2001, there is approximately $561,000 in the working capital reserves. The General Partner believes that these reserves, plus any cash distributions 13 received from the operations of the Local Partnerships, will be sufficient to fund the Partnership's ongoing operations for the foreseeable future. Cash distributions from the Local Partnerships will be relatively immaterial. During the six months ended September 30, 2001, cash distributions received from the Local Partnerships approximated $1,000. 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 tax credits will be attached to the project for a period of ten years, and will be transferable with the property during the remainder of such ten-year period. If the General Partner determined that a sale of a property is warranted, the remaining tax credits would transfer to the new owner, thereby adding value to the property on the market, which are not included in the financial statement carrying amount. RESULTS OF OPERATIONS The results of operations for the three and six months ended September 30, 2001 and 2000 continued to be in the form of rental income with corresponding expenses divided among operations, depreciation and mortgage interest. Rental income increased approximately 6% and 7% for the three and six months ended September 30, 2001 as compared to the corresponding periods in 2000, primarily due to rental rate increases and the rentup of one Local Partnership. Other income decreased approximately $42,000 and $31,000 for the three and six months ended September 30, 2001 as compared to the corresponding periods in 2000, primarily due to smaller cash and cash equivalent balances earning interest at one Local Partnership and the Partnership level. 14 Total expenses, excluding general and administrative, general and administrative-related parties, operating and taxes, remained fairly consistent with increases of approximately 3% and 1% for the three and six months ended September 30, 2001 as compared to the corresponding periods in 2000. General and administrative expenses decreased approximately $91,000 and $141,000 for the three and six months ended September 30, 2001 as compared to the corresponding periods in 2000, primarily due to an underaccrual at one Local Partnership in 1999 and a decrease in legal fees at the Partnership level. General and administrative-related parties decreased approximately $19,000 and $18,000 for the three and six months ended September 30, 2001 as compared to the corresponding periods in 2000, primarily due to a decrease in property management fees at one Local Partnership and a decrease in expense reimbursements at the Partnership level. Operating expense increased approximately $14,000 and $83,000 for the three and six months ended September 30, 2001 as compared to the corresponding periods in 2000, primarily due to an increase in fuel costs at two Local Partnerships. Taxes decreased approximately $29,000 and $81,000 for the three and six months ended September 30, 2001 as compared to the corresponding periods in 2000, primarily due to a reduction in taxes due to low-income housing status received at two Local Partnerships and a reduction in taxes at a third Local Partnership due to a payment in lieu of taxes agreement. Item 3. Quantitative and Qualitative Disclosures about Market Risk None 15 PART II. OTHER INFORMATION Item 1. Legal Proceedings - None Item 2. Changes in Securities and Use of Proceeds - None Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other Information - None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (4) Form of Amended and Restated Agreement of Limited Partnership of the Partnership (attached to the Prospectus as Exhibit A)* (10A) Form of Subscription Agreement (attached to the Prospectus as Exhibit B)* (10B) Form of Escrow Agreement between the Partnership and the Escrow Agent** (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** * Incorporated herein by reference to the final Prospectus as filed pursuant to Rule 424 under the Securities Act of 1933. ** Filed as an exhibit to the Registration Statement on Form S-11 of the Partnership (File No. 33-89968) and incorporated herein by reference thereto. (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter. 16 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. IV ------------------------------------ (Registrant) By: RELATED INDEPENDENCE L.L.C., General Partner Date: November 6, 2001 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President and Member (principal executive and financial officer) Date: November 6, 2001 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer)