AMERICAN TAX CREDIT PROPERTIES III LP - FORM 10-K - June 25, 2010
| Attached files | ||||||
| File | Filename | |||||
|---|---|---|---|---|---|---|
| EX-32.2 - EX-32.2 - AMERICAN TAX CREDIT PROPERTIES III LP | v189040_ex32-2.htm | |||||
| EX-31.2 - EX-31.2 - AMERICAN TAX CREDIT PROPERTIES III LP | v189040_ex31-2.htm | |||||
| EX-31.1 - EX-31.1 - AMERICAN TAX CREDIT PROPERTIES III LP | v189040_ex31-1.htm | |||||
| EX-32.1 - EX-32.1 - AMERICAN TAX CREDIT PROPERTIES III LP | v189040_ex32-1.htm | |||||
| EX-99.20 - EX-99.20 - AMERICAN TAX CREDIT PROPERTIES III LP | v189040_ex99-20.htm | |||||
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
(Mark
One)
xANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
fiscal year ended March 30,
2010
OR
¨TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the
transition period from _________ to _________
0-19217
(Commission
File Number)
American Tax Credit
Properties III L.P.
(Exact
Name of Registrant as Specified in its Governing Instruments)
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Delaware
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13-3545006
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(State
or Other Jurisdiction of Organization)
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(I.R.S.
Employer Identification No.)
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Richman
Tax Credit Properties III L.P.
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340
Pemberwick Road
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Greenwich,
Connecticut
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06831
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant's
Telephone Number, Including Area Code:
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(203) 869-0900
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Securities
Registered Pursuant to Section 12(b) of the Act:
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None
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None
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(Title
of Each Class)
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(Name
of Each Exchange on Which Registered)
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Securities
Registered Pursuant to Section 12(g) of the Act:
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Units
of Limited Partnership Interest
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(Title
of Class)
|
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes ¨ No x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. Yes ¨ No x
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 requirement for
the past 90 days. Yes x No ¨
Indicate
by check mark whether the Registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
Registrant was required to submit and post such
files). Yes ¨ No ¨
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in a definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “accelerated filer,” large
accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange
Act.
Large
Accelerated Filer ¨ Accelerated
Filer ¨ Non-Accelerated
Filer ¨ Smaller
Reporting Company x
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x
Registrant
has no voting common equity. There is no established public trading
market for Registrant’s Units. Accordingly, accurate information as
to the market value of a Unit at any given date is not available. As
of June 25, 2010, there are 35,883 units outstanding. The aggregate
sales price for such units was $35,883,000.
Documents
incorporated by reference:
Pages 14
through 19, 20 through 31, 44 through 71 and 78 through 80 of the Registrant’s
prospectus dated February 7, 1990, as supplemented by Supplement No. 1,
Supplement No. 2, Supplement No. 3, Supplement No. 4, Supplement No. 5 and
Supplement No. 6 dated June 6, 1990, November 21, 1990, December 20, 1990,
October 30, 1991, December 26, 1991 and January 15, 1992, respectively, filed
pursuant to Rule 424(b)(3) under the Securities Act of 1933, and filed as
Exhibits hereto, are incorporated by reference into Part I of this Annual
Report.
.PART I
|
Item
1.
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Business.
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General Development of
Business and Narrative Description of Business
American
Tax Credit Properties III L.P. (the "Registrant"), a Delaware limited
partnership, was formed on September 21, 1989 to invest primarily in leveraged
low-income multifamily residential complexes (the “Property” or “Properties”)
that qualified for the low-income tax credit in accordance with Section 42 of
the Internal Revenue Code (the "Low-income Tax Credit"), through the acquisition
of limited partner equity interests (the “Local Partnership Interests”) in
partnerships (the "Local Partnership" or "Local Partnerships") that are the
owners of the Properties. The Local Partnerships hold their
respective Properties in fee. Registrant considers its activity to
constitute a single industry segment.
Richman
Tax Credit Properties III L.P. (the "General Partner"), a Delaware limited
partnership, was formed on September 21, 1989 to act as the General Partner of
Registrant. The general partner of the General Partner is Richman
Housing Credits Inc. ("Richman Housing"), a Delaware corporation that is wholly
owned by Richard Paul Richman. Richman Housing is an affiliate of The
Richman Group, Inc. ("Richman Group"), a Delaware corporation founded by Richard
Paul Richman in 1988.
The
Amendment No. 2 to the Registration Statement on Form S-11 was filed with the
Securities and Exchange Commission (the "SEC") on February 1, 1990 pursuant to
the Securities Act of 1933 under Registration Statement File No. 33-31390 and
was declared effective on February 2, 1990. Reference is made to the
prospectus dated February 7, 1990, as supplemented by Supplement No. 1,
Supplement No. 2, Supplement No. 3, Supplement No. 4, Supplement No. 5 and
Supplement No. 6 dated June 6, 1990, November 21, 1990, December 20, 1990,
October 30, 1991, December 26, 1991 and January 15, 1992, respectively, filed
with the SEC pursuant to Rule 424(b)(3) under the Securities Act of 1933 (the
"Prospectus"). Pursuant to Rule 12b-23 of the SEC's General Rules and
Regulations promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the description of Registrant's business set forth under
the heading "Investment Objectives and Policies" at pages 44 through 66 of the
Prospectus is hereby incorporated into this Annual Report by
reference.
On March
12, 1990, Registrant commenced, through Merrill Lynch, Pierce, Fenner &
Smith Incorporated (“Merrill Lynch”), the offering of up to 150,000 units of
limited partnership interest (the "Units") at $1,000 per Unit to investors (the
“Limited Partners”). On June 13, 1990, December 27, 1990, December
31, 1991 and January 23, 1992 the closings for 19,730, 9,622, 5,227 and 1,304
Units, respectively, took place, amounting to aggregate Limited Partners’
capital contributions of $35,883,000.
Registrant's
primary objective, to provide Low-income Tax Credits to the Limited Partners,
has been completed. The relevant state tax credit agency allocated
each of the Local Partnerships an amount of Low-income Tax Credits, which are
generally available for a ten year period from the year the Property is placed
in service (the “Ten Year Credit Period”). The Ten Year Credit Period
was fully exhausted with respect to all of the Properties as of December 31,
2003. The required holding period of each Property, in order to avoid
Low-income Tax Credit recapture, is fifteen years from the year in which the
Low-income Tax Credits commence on the last building of the Property (the
"Compliance Period"). The Compliance Period of all of the Local
Partnerships had expired as of December 31, 2007. In addition,
certain of the Local Partnerships entered into agreements with the relevant
state tax credit agencies whereby the Local Partnerships must maintain the
low-income nature of the Properties for a period which exceeds the Compliance
Period (in certain circumstances, up to 50 years from when the Property is
placed in service, but commonly 30 years from the date any such Property is
placed in service), regardless of a sale of the Properties by the Local
Partnerships after the Compliance Period (the “Extended Use
Provisions”). Note that the existence of Extended Use Provisions does
not extend the Compliance Period of the respective Local
Partnerships. However, such provisions may limit the number and
availability of potential purchasers of the Properties. Accordingly,
a sale of a Property may happen well after the expiration of the Compliance
Period and/or may be significantly discounted.
Disposal of Local
Partnership Interests
Registrant
is in the process of disposing of its Local Partnership Interests. As
of March 30, 2010, Registrant owns thirty-nine of the forty-three Local
Partnership Interests originally acquired. Registrant has served a
demand on the local general partners (the “Local General Partners”) of all
remaining Local Partnerships to commence a sale process to dispose of the
Properties. In the event a sale cannot be consummated, it is the
General Partner’s intention to sell or assign Registrant’s Local Partnership
Interests. Following the final disposition of its Local Partnership
Interests, Registrant intends to dissolve. It is uncertain as to the
amount, if any, that Registrant will receive with respect to each specific
Property from such sales or assignments. There can be no assurance as to when
Registrant will dispose of its remaining Local Partnership
Interests.
2
Item
1. Business
(Continued).
Financial Information About
Industry Segments
Registrant
is engaged solely in the business of owning a Local Partnership Interest in each
of the Local Partnerships. A presentation of information regarding
industry segments is not applicable and would not be material to an
understanding of Registrant’s business taken as a whole. See Item 8
below for a summary of Registrant's operations.
Competition
Pursuant
to Rule 12b-23 of the SEC's General Rules and Regulations promulgated under the
Exchange Act, the description of Registrant's competition, general risks, tax
risks and partnership risks set forth under the heading "Risk Factors" at pages
20 through 31 of the Prospectus is hereby incorporated into this Annual Report
by reference.
Employees of
Registrant
Registrant
employs no personnel and incurs no payroll costs. All management
activities of Registrant are conducted by the General Partner. An
affiliate of the General Partner employs individuals who perform the management
activities of Registrant. This entity also performs similar services
for other affiliates of the General Partner.
Regulation
The
following is a brief summary of certain regulations applicable to Registrant and
is not, nor should it be considered, a full summary of the law or all related
issues. Other than as set forth above and below, Registrant is not
aware of any existing or probable federal, state or local governmental
regulations, or any recent changes to such governmental regulations, which would
have an effect on Registrant’s business.
Virtually
all of the Properties owned by the Local Partnerships have some form of a
government funded rental subsidy that affords the low-income tenants the ability
to reside at the Properties. During the period that a subsidy
agreement between the United States Department of Housing and Urban Development
(“HUD”) and a Local Partnership is in existence, the Local Partnership Interest
of such Local Partnership may not be sold, and the Property may not be
transferred by the Local Partnership to another entity, without HUD’s approval,
which may be subject to various conditions. In particular, the
transfer of title of the Properties by the Local Partnerships is expected to be
required to be closed in escrow pending HUD approval. In addition, as
a condition to certain disposals, Registrant anticipates that HUD will require
the Local Partnerships to dedicate resources to maintenance in order to correct
deficiencies in the physical condition of the Properties. Correction of such
deficiencies will probably require expenditures of significant amounts of funds,
thus effectively reducing the amount of any net proceeds from the sale of the
Property. There can be no assurance that the required governmental
agencies will approve any of the requested transfers, that such approvals will
be received in a timely manner or that other conditions will not be imposed for
such approvals. The failure to obtain or a delay in obtaining any required
approvals would have adverse consequences to the Limited Partners.
In the
case of certain of the Local Partnerships, the local housing authority has the
right, for a period of time, to find a purchaser for the Property prior to the
Local General Partner beginning its own efforts to sell the
Property. There can be no assurance that the local housing
authorities will be successful in finding purchasers for such Properties, which
may adversely impact the timing of Property sales.
Certain
of the Local Partnerships are subject to restrictions on the amount of annual
cash distributions to partners under the terms of such Local Partnerships’ loan,
regulatory or other agreements.
Registrant
is not aware of any non-compliance by the Local Partnerships with respect to
federal, state and local provisions regulating the discharge of material into
the environment or otherwise relating to the protection of the environment, and
is not aware of any condition that would have a material effect on the capital
expenditures or competitive position of Registrant.
3
Item
1A. Risk
Factors.
Risks Relating to
Registrant’s Business and Industry
There
is no guarantee that the Properties will be sold or, if sold, that Registrant
would receive any proceeds.
As noted
above in Item 1 - Business, Registrant
has served a demand on the Local General Partners of all remaining Local
Partnerships to commence a sale process to dispose of the
Properties. However, the market of interested buyers of the
Properties is limited. Some of the factors which negatively impact
the marketability of the Properties, or equivalently, the Local Partnership
Interests, include:
|
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·
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the
Extended Use Provisions;
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·
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the
substantial remaining mortgage balances on the Properties, which are
typically very near the initial balances as a result of the heavily
subsidized debt of the Local Partnership and the lengthy (usually near
40-year) amortization period of the debt;
and
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·
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poor
economic conditions.
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It is
generally expected, therefore, that in the event a sale of a Property by a Local
Partnership can be consummated, the net proceeds of such sale, after repayment
of any outstanding debt and other liabilities, are not likely to be
significant. Moreover, a portion of the net proceeds from the sale of
a Property by a Local Partnership may be payable to the Local General Partner
for prior operating advances and deferred fees. As such, there will
likely not be significant proceeds, if any, upon a sale of a Property that will
be available for distribution by the Local Partnership to
Registrant. In the event a sale cannot be consummated, it is the
General Partner’s intention to sell or assign Registrant’s Local Partnership
Interests. However, it is not possible to ascertain the amount, if
any, that Registrant will receive with respect to each specific Property from
such sales or assignments.
The
Local Partnerships may be required to continue to maintain the low-income nature
of the Properties beyond the Compliance Period under agreements with state tax
credit agencies.
As noted
above in Item 1 - Business, certain of
the Local Partnerships entered into agreements containing Extended Use
Provisions with the relevant state tax credit agencies whereby the Local
Partnerships must maintain the low-income nature of the Properties for a period
which exceeds the Compliance Period (in certain circumstances, up to 50 years
from when the Property is placed in service, but commonly 30 years from the date
any such Property is placed in service), regardless of a sale of the Properties
by the Local Partnerships after the Compliance Period. Although the
Extended Use Provisions do not extend the Compliance Period of the respective
Local Partnerships, such provisions may limit the number and availability of
potential purchasers of the Properties. Accordingly, a sale of a
Property may happen well after the expiration of the Compliance Period and/or
may be significantly discounted.
Properties
owned by the Local Partnerships are subject to certain risks relating to the
real estate industry in general that are outside of the control of the Local
Partnerships or Registrant and that may have an adverse affect on Registrant’s
investment in such Local Partnerships.
Registrant’s
investment in the Local Partnerships is subject to the risks associated with
multi-family rental property and real estate in general, including retail,
commercial and residential real estate. Such risks, which are subject
to change and are not in the control of Registrant, include risks related
to:
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·
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the
adverse use of adjacent or neighborhood real
estate;
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·
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regulated
rents, which may adversely impact rent
increases;
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·
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utility
allowances, which may adversely impact rents charged to tenants from year
to year in certain locations;
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·
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the
inability of tenants to pay rent in light of current market
conditions;
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·
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changes
in the demand for or supply of competing
properties;
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·
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changes
in state or local tax rates and
assessments;
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4
Item
1A. Risk
Factors (Continued).
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·
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increases
in utility charges;
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·
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unexpected
expenditures for repairs and
maintenance;
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·
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the
discovery of previously undetected environmentally hazardous
conditions;
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·
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costs
associated with complying with the Americans with Disabilities
Act;
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·
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uninsured
losses relating to real property or excessively expensive premiums for
insurance coverage;
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·
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lawsuits
from tenants or guests in connection with injuries that occur on the
Properties;
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·
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changes
in local economic conditions; and
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·
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changes
in interest rates and the availability of financing (including changes
resulting from current market
conditions).
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The
occurrence of any of the above risks could have a negative impact on the
operating results of such Properties and the respective Local Partnerships and,
in turn, may render the sale or refinancing of the Properties difficult or
unattractive, which could adversely affect Registrant’s investment in such Local
Partnerships.
The
modification or elimination of government rental subsidies on which the Local
Partnerships rely would require the Local Partnerships to use existing funds or
obtain additional funds to continue to operate the respective
Properties. Because Registrant’s investments in the Local
Partnerships are highly leveraged, it would be highly difficult to obtain such
additional funds.
Virtually
all of the Properties owned by the Local Partnerships have some form of a
government funded rental subsidy, which affords the low-income tenants the
ability to reside at the Properties. The Local Partnerships are
extremely reliant on such subsidies. If the respective rental subsidy
programs were to be materially modified or eliminated, the Local Partnerships’
rental revenue would likely be significantly reduced. To the extent
that revenues are not sufficient to meet operating expenses and service the
respective mortgages of the Properties, such Local Partnership would be required
to use reserves and any other funds available to avoid foreclosure of the
subject Property. Registrant’s investments in the Local Partnerships
are highly leveraged, and there can be no assurance that additional funds would
be available to any Local Partnership or Registrant, if needed. In
addition, there can be no assurance that, when a Property is sold, the proceeds
from a sale will be sufficient to pay the balance due on the mortgage loans or
any other outstanding indebtedness to which the Local Partnership is
subject.
Limited
Partners may not be able to use all of the carried forward Low-income Tax
Credits.
While a
limited exception is provided for Low-income Tax Credits in the case of
individuals, tax losses and credits allocated to a Limited Partner who is an
individual, trust, estate or personal service corporation generally may be used
to reduce the Limited Partner’s tax liability only to the extent that such
liability arises from passive activities. Therefore, tax losses and
credits allocated to such a Limited Partner are not expected to be available to
offset tax liabilities that arise from salaries, dividends and interest and
other forms of income. In addition, Low-income Tax Credits cannot be
used to offset alternative minimum tax. Accordingly, there is no
guarantee that Limited Partners will be able to utilize all of the carried
forward Low-income Tax Credits.
Risks Relating to Ownership
of Units of Limited Partnership Interest of Registrant
There
is no existing market for the Units.
There is
no trading market for Units and there are no assurances that any market will
develop. In addition, the Units may be transferred only if certain
requirements are satisfied, including requirements that such transfer would not
impair Registrant’s tax status for federal income tax purposes and would not be
a violation of federal or state securities laws. Accordingly, Limited
Partners may not be able to sell their Units promptly and bear the economic risk
of their investment for an indefinite period of time.
5
Item
1A. Risk
Factors (Continued).
Under
certain circumstances, Limited Partners of Registrant may incur out-of-pocket
tax costs.
At some
point, Registrant’s operations (including the sale or refinancing of the
Properties owned by the Local Partnerships) may generate less cash flow than
taxable income, and the income, as well as the income taxes payable with respect
to Registrant’s taxable income, may exceed cash flow available for distribution
to the Limited Partners in such years. This may result in an
out-of-pocket tax cost to the Limited Partners. In addition, a
Limited Partner may experience taxable gain on disposition of Units or upon a
disposition of the Local Partnership Interests or of the Properties even though
no cash is realized on the disposition; in such circumstances, the Limited
Partners may experience an out-of-pocket tax cost.
Limited
Partners of Registrant may not receive a return of any portion of their original
capital investment in Registrant.
To date,
the Limited Partners of Registrant have not received a return of any portion of
their original capital. Accordingly, the only benefit of this
investment may be the Low-income Tax Credits.
Item
1B. Unresolved Staff
Comments.
Not
applicable.
Item
2. Properties.
The
executive offices of Registrant and the General Partner are located at 340
Pemberwick Road, Greenwich, Connecticut 06831. Registrant does not own or lease
any properties. Registrant pays no rent; all charges for leased space
are borne by an affiliate of the General Partner.
Registrant
originally acquired Local Partnership Interests in forty-three Local
Partnerships. As discussed above in Item 1 - Business, the Compliance
Period of all of the Local Partnerships expired as of December 31, 2007 and,
accordingly, Registrant is in the process of disposing of its Local Partnership
Interests. As of March 30, 2010, Registrant owns thirty-nine of the
forty-three Local Partnership Interests originally
acquired. Registrant has served a demand on the Local General
Partners of all remaining Local Partnerships to commence a sale process to
dispose of the Properties, which Registrant intends will result in a termination
of Registrant’s Local Partnership Interests and ultimately the dissolution of
Registrant.
During
the year ended March 30, 2010, Registrant withdrew from Westminster Apartments
Limited Partnership (“Westminster”), assigned one-half of its 99% Local
Partnership Interest in Sydney Engel Associates L.P. (“Sydney Engel”) to an
affiliate of the Local General Partner of Sydney Engel and sold its Local
Partnership Interest in Justin Associates (“Justin”) to an affiliate of the
Local General Partner of Justin. Registrant received $10 in
connection with Westminster; there were no other proceeds in connection with
these transactions. See further discussion in Part II, Item 7 - Management’s Discussion and
Analysis of Financial Condition and Results of Operations
herein.
In the
event a sale of the remaining Properties cannot be consummated, it is the
General Partner’s intention to sell or assign Registrant’s Local Partnership
Interests. It is not possible to ascertain the amount, if any, that
Registrant will receive with respect to each specific Property from such sales
or assignments. In addition, certain of the Local Partnerships
entered into agreements with Extended Use Provisions with the relevant state tax
credit agencies whereby the Local Partnerships must maintain the low-income
nature of the Properties for a period which exceeds the Compliance Period (in
certain circumstances, up to 50 years from when the Property is placed in
service, but commonly 30 years from the date any such Property is placed in
service), regardless of a sale of the Properties by the Local Partnerships after
the Compliance Period. While the Extended Use Provisions do not
extend the Compliance Period of the respective Local Partnerships, such
provisions may limit the number and availability of potential purchasers of the
Properties. Accordingly, a sale of a Property may happen well after
the expiration of the Compliance Period and/or may be significantly
discounted. There can be no assurance as to when the Local
Partnerships will dispose of the Properties, when Registrant will dispose of the
Local Partnership Interests or the amount of proceeds which may be received in
such dispositions. In addition to amounts that remain outstanding under
the terms of the debt structure of the respective Local Partnerships, certain
Local Partnerships have outstanding obligations to the Local General Partners
and/or affiliates thereof for operating advances made over the years and for
certain fees that were deferred.
6
Item
2. Properties
(Continued).
The Local
Partnership Interests were acquired by Registrant from 1990 through
1992. Although Registrant generally owns a 98.9% - 99% Local
Partnership Interest in the Local Partnerships, Registrant and American Tax
Credit Properties II L.P. ("ATCP II"), a Delaware limited partnership whose
general partner is affiliated with the General Partner, together, in the
aggregate, own a 99% Local Partnership Interest in the following Local
Partnerships:
|
Registrant
|
ATCP
II
|
|||||||
|
Batesville
Family, L.P.
|
61.75 | % | 37.25 | % | ||||
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Bruce
Housing Associates, L.P.
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61.75 | 37.25 | ||||||
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Ivy
Family, L.P.
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61.75 | 37.25 | ||||||
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Lawrence
Road Properties, Ltd.
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61.75 | 37.25 | ||||||
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Mirador
del Toa Limited Partnership
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59.06 | 39.94 | ||||||
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Purvis
Heights Properties, L.P.
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61.75 | 37.25 | ||||||
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Queen
Lane Investors
|
48.50 | 50.50 | ||||||
Many of
the Local Partnerships receive rental subsidy payments, including payments under
Section 8 of Title II of the Housing and Community Development Act of 1974
("Section 8") (see descriptions of the subsidies below). The subsidy
agreements expire at various times. Since October 1997, HUD has
issued a series of directives related to project based Section 8 contracts that
define owners’ notification responsibilities, advise owners of project based
Section 8 properties of what their options are regarding the renewal of Section
8 contracts, provide guidance and procedures to owners, management agents,
contract administrators and HUD staff concerning renewal of Section 8 contracts,
provide policies and procedures on setting renewal rents and handling renewal
rent adjustments and provide the requirements and procedures for opting-out of a
Section 8 project based contract. Registrant cannot reasonably
predict legislative initiatives and governmental budget negotiations, the
outcome of which could result in a reduction in funds available for the various
federal and state administered housing programs including the Section 8
program. Such changes could adversely affect the future net operating
income before debt service (“NOI”) and debt structure of any or all Local
Partnerships currently receiving such subsidy or similar
subsidies. Two Local Partnerships’ Section 8 contracts are currently
subject to renewal under applicable HUD guidelines.
7
Item
2. Properties
(Continued).
|
Mortgage
|
||||||||||||||||
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Name
of Local Partnership
|
Number
|
loans
payable as of
|
Subsidy
|
|||||||||||||
|
Name
of apartment complex
|
of
rental
|
Capital
|
December
31,
|
(see
|
||||||||||||
|
Apartment
complex location
|
units
|
contribution
|
2009
|
footnotes)
|
||||||||||||
|
April
Gardens Apartments II Limited Partnership
|
||||||||||||||||
|
April
Gardens Apartments
|
||||||||||||||||
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Las
Piedras, Puerto Rico
|
48
|
$ | 485,581 | $ | 1,919,017 |
(1b&c)
|
||||||||||
|
Ashland
Park Apartments, L.P. (4), (6)
|
||||||||||||||||
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Ashland
Park Apartments
|
||||||||||||||||
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Ashland,
Nebraska
|
24
|
235,732 | — | (4) | ||||||||||||
|
Auburn
Family, L.P.
|
||||||||||||||||
|
Auburn
Apartments
|
||||||||||||||||
|
Louisville,
Mississippi
|
16
|
95,412 | 435,391 |
(1b&c)
|
||||||||||||
|
Batesville
Family, L.P.
|
||||||||||||||||
|
Westridge
Apartments
|
||||||||||||||||
|
Batesville,
Mississippi
|
|
48
|
239,716 | (2) | 1,388,997 | (1b) | ||||||||||
|
Bay
Springs Elderly, L.P.
|
||||||||||||||||
|
Bay
Springs Manor
|
||||||||||||||||
|
Bay
Springs, Mississippi
|
24
|
208,820 | 650,941 |
(1b&c)
|
||||||||||||
|
Brisas
del Mar Apartments Limited Partnership
|
||||||||||||||||
|
Brisas
del Mar Apartments
|
||||||||||||||||
|
Hatillo,
Puerto Rico
|
66
|
668,172 | 2,539,009 |
(1b&c)
|
||||||||||||
|
Bruce
Housing Associates, L.P.
|
||||||||||||||||
|
Bruce
Family Apartments
|
||||||||||||||||
|
Bruce,
Mississippi
|
40
|
183,155 | (2) | 1,058,397 |
(1b&c)
|
|||||||||||
|
Carrington
Limited Dividend Housing Association Limited Partnership (3),
(5)
|
||||||||||||||||
|
Carrington
Place
|
||||||||||||||||
|
Farmington
Hills, Michigan
|
100
|
2,174,720 | (2) | — | (3) | |||||||||||
|
Chestnut
Park Associates, L.P.
|
||||||||||||||||
|
Chestnut
Park Apartments
|
||||||||||||||||
|
East
Orange, New Jersey
|
59
|
4,204,576 | 4,201,606 |
(1a&f)
|
||||||||||||
|
Chowan
Senior Manor Associates Limited Partnership
|
||||||||||||||||
|
Azalea
Garden Senior Manor Apartments
|
||||||||||||||||
|
Murfreesboro,
North Carolina
|
33
|
278,405 | 1,183,484 |
(1b&c)
|
||||||||||||
|
Christian
Street Commons Associates
|
||||||||||||||||
|
Christian
Street Commons Apartments
|
||||||||||||||||
|
Philadelphia,
Pennsylvania
|
18
|
581,645 | 507,616 | (1b) | ||||||||||||
8
Item
2. Properties
(Continued).
|
Mortgage
|
||||||||||||||||
|
Name
of Local Partnership
|
Number
|
loans
payable as of
|
Subsidy
|
|||||||||||||
|
Name
of apartment complex
|
of
rental
|
Capital
|
December
31,
|
(see
|
||||||||||||
|
Apartment
complex location
|
units
|
contribution
|
2009
|
footnotes)
|
||||||||||||
|
Country
View Apartments
|
||||||||||||||||
|
Country
View Apartments
|
||||||||||||||||
|
Pembroke,
Maine
|
16
|
$ | 279,183 | $ | 900,561 |
(1b&c)
|
||||||||||
|
Desarrollos
de Belen Limited Partnership
|
||||||||||||||||
|
Vista
de Jagueyes II Apartments
|
||||||||||||||||
|
Aguas
Buenas, Puerto Rico
|
41
|
422,929 | 1,807,250 |
(1b&c)
|
||||||||||||
|
Desarrollos
de Emaus Limited Partnership
|
||||||||||||||||
|
Hucares
II Apartments
|
||||||||||||||||
|
Naguabo,
Puerto Rico
|
72
|
631,404 | 3,071,495 |
(1b&c)
|
||||||||||||
|
Ellinwood
Heights Apartments, L.P.
|
||||||||||||||||
|
Ellinwood
Heights Apartments
|
||||||||||||||||
|
Ellinwood,
Kansas
|
24
|
156,261 | 661,047 |
(1b&c)
|
||||||||||||
|
Fulton
Street Houses Limited Partnership
|
||||||||||||||||
|
Fulton
Street Townhouse Apartments
|
||||||||||||||||
|
New
York, New York
|
35
|
1,948,081 | 3,869,930 | (1b) | ||||||||||||
|
Hayes
Run Limited Partnership
|
||||||||||||||||
|
Mashburn
Gap Apartments
|
||||||||||||||||
|
Marshall,
North Carolina
|
34
|
322,074 | 1,370,693 |
(1b&c)
|
||||||||||||
|
Howard
L. Miller Sallisaw Apartments II, L.P.
|
||||||||||||||||
|
Sallisaw
II Apartments
|
||||||||||||||||
|
Sallisaw,
Oklahoma
|
24
|
130,158 | 592,943 |
(1b&c)
|
||||||||||||
|
Hurlock
Meadow Limited Partnership
|
||||||||||||||||
|
Hurlock
Meadow Apartments
|
||||||||||||||||
|
Hurlock,
Maryland
|
30
|
284,218 | 1,218,066 |
(1b&c)
|
||||||||||||
|
Ivy
Family, L.P.
|
||||||||||||||||
|
Ivy
Apartments
|
||||||||||||||||
|
Louisville,
Mississippi
|
32
|
135,528 | (2) | 722,550 |
(1b&c)
|
|||||||||||
|
Justin
Associates (9)
|
||||||||||||||||
|
Locust
Tower Apartments
|
||||||||||||||||
|
Philadelphia,
Pennsylvania
|
40
|
1,809,723 | 2,070,292 | |||||||||||||
|
LaBelle
Commons, Ltd.
|
||||||||||||||||
|
LaBelle
Commons
|
||||||||||||||||
|
LaBelle,
Florida
|
32
|
253,580 | 972,598 |
(1b&c)
|
||||||||||||
|
Lawrence
Road Properties, Ltd.
|
||||||||||||||||
|
Hillcrest
Apartments
|
||||||||||||||||
|
Newton,
Mississippi
|
24
|
123,799 | (2) | 729,334 |
(1b&c)
|
|||||||||||
9
Item
2. Properties
(Continued).
|
Mortgage
|
||||||||||||||||
|
Name
of Local Partnership
|
Number
|
loans
payable as of
|
Subsidy
|
|||||||||||||
|
Name
of apartment complex
|
of
rental
|
Capital
|
December
31,
|
(see
|
||||||||||||
|
Apartment
complex location
|
units
|
contribution
|
2009
|
footnotes)
|
||||||||||||
|
Loma
Del Norte Limited Partnership
|
||||||||||||||||
|
Loma
Del Norte Apartments
|
||||||||||||||||
|
Anthony,
New Mexico
|
40
|
$ | 314,865 | $ | 1,384,131 |
(1b&c)
|
||||||||||
|
Long
Reach Associates Limited Partnership
|
||||||||||||||||
|
Oak
Ridge Apartments
|
||||||||||||||||
|
Bath,
Maine
|
30
|
448,922 | 1,422,983 |
(1b&c)
|
||||||||||||
|
Mirador
del Toa Limited Partnership
|
||||||||||||||||
|
Mirador
del Toa Apartments
|
||||||||||||||||
|
Toa
Alta, Puerto Rico
|
48
|
284,847 | (2) | 1,799,524 |
(1b&c)
|
|||||||||||
|
Moore
Haven Commons, Ltd.
|
||||||||||||||||
|
Moore
Haven Commons
|
||||||||||||||||
|
Moore
Haven, Florida
|
28
|
213,402 | 891,738 |
(1b&c)
|
||||||||||||
|
NP-89
Limited Dividend Housing Association Limited Partnership
|
||||||||||||||||
|
Newport
Apartments
|
||||||||||||||||
|
Clinton
Township, Michigan
|
168
|
2,372,292 | 2,678,344 |
(1a,b&f)
|
||||||||||||
|
Nash
Hill Associates, Limited Partnership
|
||||||||||||||||
|
Nash
Hill Place
|
||||||||||||||||
|
Williamsburg,
Massachusetts
|
28
|
302,575 | 1,411,518 |
(1b,c&d)
|
||||||||||||
|
North
Calhoun City, L.P.
|
||||||||||||||||
|
North
Calhoun City Apartments
|
||||||||||||||||
|
Calhoun
City, Mississippi
|
18
|
146,565 | 442,614 |
(1b&c)
|
||||||||||||
|
Orange
City Plaza, Limited Partnership (10)
|
||||||||||||||||
|
Orange
City Plaza Apartments
|
||||||||||||||||
|
Orange
City, Iowa
|
32
|
576,580 | 361,020 | (1e) | ||||||||||||
|
Puerta
del Mar Limited Partnership
|
||||||||||||||||
|
Puerta
del Mar Apartments
|
||||||||||||||||
|
Hatillo,
Puerto Rico
|
66
|
630,570 | 2,417,459 |
(1b&c)
|
||||||||||||
|
Purvis
Heights Properties, L.P.
|
||||||||||||||||
|
Pineview
Apartments
|
||||||||||||||||
|
Purvis,
Mississippi
|
40
|
191,512 | (2) | 1,103,621 | (1b) | |||||||||||
|
Queen
Lane Investors
|
||||||||||||||||
|
Queen's
Row
|
||||||||||||||||
|
Philadelphia,
Pennsylvania
|
29
|
597,050 | (2) | 1,955,583 | (1b) | |||||||||||
|
Somerset
Manor, Ltd.
|
||||||||||||||||
|
Somerset
Manor
|
||||||||||||||||
|
Central
City, Pennsylvania
|
24
|
208,465 | 864,146 |
(1b&c)
|
||||||||||||
|
Sugar
Cane Villas, Ltd.
|
||||||||||||||||
|
Sugar
Cane Villas
|
||||||||||||||||
|
Pahokee,
Florida
|
87
|
751,560 | 3,182,404 |
(1b&c)
|
||||||||||||
10
Item
2. Properties
(Continued).
|
Mortgage
|
||||||||||||||||
|
Name
of Local Partnership
|
Number
|
loans
payable as of
|
Subsidy
|
|||||||||||||
|
Name
of apartment complex
|
of
rental
|
Capital
|
December
31,
|
(see
|
||||||||||||
|
Apartment
complex location
|
units
|
contribution
|
2009
|
footnotes)
|
||||||||||||
|
Summerfield
Apartments Limited Partnership
|
||||||||||||||||
|
Summerfield
Apartments
|
||||||||||||||||
|
Charlotte,
North Carolina
|
52
|
$ | 1,088,667 | $ | 1,393,021 | (1b) | ||||||||||
|
Sydney
Engel Associates L.P.
|
||||||||||||||||
|
(formerly
known as Sydney Engel Associates) (8)
|
||||||||||||||||
|
The
Castle
|
||||||||||||||||
|
New
York, New York
|
224
|
3,201,874 | 16,403,175 | (1b) | ||||||||||||
|
Union
Valley Associates Limited Partnership
|
||||||||||||||||
|
Union
Valley Apartments
|
||||||||||||||||
|
Union
Township, Pennsylvania
|
36
|
371,589 | 1,392,677 | (1b) | ||||||||||||
|
Walnut
Grove Family, L.P.
|
||||||||||||||||
|
Walnut
Grove Apartments
|
||||||||||||||||
|
Walnut
Grove, Mississippi
|
24
|
191,695 | 817,729 |
(1b&c)
|
||||||||||||
|
Waynesboro
Apartments Limited Partnership
|
||||||||||||||||
|
Waynesboro
Apartments
|
||||||||||||||||
|
Waynesboro,
Pennsylvania
|
36
|
360,859 | 1,424,179 | (1b) | ||||||||||||
|
West
Calhoun City, L.P.
|
||||||||||||||||
|
West
Calhoun City Apartments
|
||||||||||||||||
|
Calhoun
City, Mississippi
|
28
|
230,212 | 657,902 |
(1b&c)
|
||||||||||||
|
Westminster
Apartments Limited Partnership (4), (7)
|
||||||||||||||||
|
Westminster
Apartments
|
||||||||||||||||
|
Philadelphia,
Pennsylvania
|
42
|
1,047,993 | — | (4) | ||||||||||||
| $ | 29,384,966 | $ | 73,874,985 | |||||||||||||
|
(1)
|
Description
of subsidies:
|
|
(a)
|
Section
8 of Title II of the Housing and Community Development Act of 1974 allows
qualified low-income tenants to pay thirty percent of their monthly income
as rent with the balance paid by the federal
government.
|
|
|
(b)
|
The
Local Partnership’s debt structure includes a principal or interest
payment subsidy.
|
|
|
(c)
|
The
Rural Housing Service (formerly the Farmers Home Administration) of the
United States Department of Agriculture Rental Assistance Program allows
qualified low-income tenants to receive rental
subsidies.
|
|
|
(d)
|
The
Commonwealth of Massachusetts participates in a rental assistance
program.
|
|
|
(e)
|
The
Northwest Regional Housing Authority provides qualified tenants with a
rental subsidy.
|
|
|
(f)
|
The
Local Partnerships’ Section 8 contracts are currently subject to renewal
under applicable HUD guidelines.
|
|
(2)
|
Reflects
amount attributable to Registrant
only.
|
11
Item
2. Properties
(Continued).
|
(3)
|
The
Local Partnership Interest is no longer owned by Registrant; there are no
assets or liabilities related to such Local Partnership included in the
combined balance sheets of the Local Partnerships as of December 31, 2009
and 2008 in Note 6 to the accompanying financial
statements.
|
|
(4)
|
The
Local Partnership Interest is no longer owned by Registrant; there are no
assets or liabilities related to such Local Partnership included in the
combined balance sheet of the Local Partnerships as of December 31, 2009
in Note 6 to the accompanying financial
statements.
|
|
(5)
|
Registrant
assigned its Local Partnership Interest to one of the Local General
Partners in February 2007. The combined statement of operations
of the Local Partnerships for the year ended December 31, 2007 included in
Note 6 to the accompanying financial statements does not include any
results of operations for such Local
Partnership.
|
|
(6)
|
Registrant
withdrew from the Local Partnership in February 2009. The
combined statement of operations of the Local Partnerships for the year
ended December 31, 2009 included in Note 6 to the accompanying financial
statements does not include any results of operations for such Local
Partnership.
|
|
(7)
|
Registrant
withdrew from the Local Partnership in July 2009. The combined
statement of operations of the Local Partnerships for the year ended
December 31, 2009 included in Note 6 to the accompanying financial
statements includes results of operations for such Local Partnership
through the date of withdrawal (see Part II, Item 7 - Management’s
Discussion and Analysis of Financial Condition and Results of
Operations, herein).
|
|
(8)
|
Registrant
assigned one-half of its 99% Local Partnership Interest to an affiliate of
the Local General Partner in December 2009 (see Part II, Item 7 - Management’s
Discussion and Analysis of Financial Condition and Results of
Operations, herein).
|
|
(9)
|
Registrant
sold its Local Partnership Interest to an affiliate of the Local General
Partner in March 2010 (see Part II, Item 7 - Management’s
Discussion and Analysis of Financial Condition and Results of
Operations, herein).
|
|
(10)
|
Capital
contribution includes voluntary advances made to the Local
Partnership.
|
|
Item
3.
|
Legal
Proceedings.
|
None.
|
Item
4.
|
Reserved.
|
12
PART
II
|
Item
5.
|
Market for
Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity
Securities.
|
Market Information and
Holders
There is
no established public trading market for the Units. Accordingly,
accurate information as to the market value of a Unit at any given date is not
available. The number of record holders of Units as of approximately
June 15, 2010 was approximately 1,390, holding an aggregate of 35,883
Units.
Merrill
Lynch follows internal guidelines for providing estimated values of limited
partnerships and other direct investments reported on client account
statements. Pursuant to such guidelines, estimated values for limited
partnership interests reported on Merrill Lynch client account statements (such
as Registrant’s Units) are provided to Merrill Lynch by independent valuation
services, whose estimated values are based on financial and other information
available to them. In addition, Registrant may provide an estimate of
value to Unit holders from time to time in Registrant's reports to Limited
Partners. The estimated values provided by the independent services
and Registrant, which may differ, are not market values and Unit holders may not
be able to sell their Units or realize either amount upon a sale of their
Units. Unit holders may not realize such estimated values upon the
liquidation of Registrant.
Distributions
Registrant
owns a Local Partnership Interest in Local Partnerships that are the owners of
Properties that are leveraged and receive government assistance in various forms
of rental and debt service subsidies. The distribution of cash flow
generated by the Local Partnerships may be restricted, as determined by each
Local Partnership's financing and subsidy agreements. Accordingly,
Registrant does not anticipate that it will provide significant cash
distributions to its Limited Partners in the future. There were no
cash distributions to the Limited Partners during the years ended March 30, 2010
and 2009.
Low-income
Tax Credits, which are subject to various limitations, may be used by the
Limited Partners to offset federal income tax liabilities. Registrant
generated total Low-income Tax Credits from investments in Local Partnerships of
approximately $1,559 per Unit. The Ten Year Credit Period with
respect to the Properties was fully exhausted as of December 31, 2003 and the
Compliance Periods of the Local Partnerships had expired as of December 31,
2007. Registrant has served a demand on the Local General Partners of
all remaining Local Partnerships to commence a sale process to dispose of the
Properties. In the event a sale cannot be consummated, it is the
General Partner’s intention to sell or assign Registrant’s Local Partnership
Interests. It is not possible to ascertain the amount, if any, that
Registrant will receive with respect to each specific Property from such sales
or assignments.
Recent Sales of Unregistered
Securities
None.
|
Item
6.
|
Selected Financial
Data.
|
Registrant
is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and
is not required to provide the information required under this
Item.
Item
7. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Capital Resources and
Liquidity
Registrant
admitted limited partners (the “Limited Partners”) in four closings with
aggregate Limited Partners’ capital contributions of $35,883,000. In
connection with the offering of the sale of units (the “Units”), Registrant
incurred organization and offering costs of approximately $4,419,000 and
established a working capital reserve of approximately
$2,153,000. The remaining net proceeds of approximately $29,311,000
(the “Net Proceeds”) were available to be applied to the acquisition of limited
partner interests (the “Local Partnership Interests”) in partnerships (the
“Local Partnerships”) that own low-income multifamily residential complexes (the
“Property” or “Properties”) that qualified for the low-income tax credit in
accordance with Section 42 of the Internal Revenue Code (the “Low-income Tax
Credit”). The Net Proceeds were utilized in acquiring a Local
Partnership Interest in forty-three Local Partnerships.
13
Item
7. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued).
As of
March 30, 2010, Registrant has cash and cash equivalents and investment in
mutual fund totaling $825,089, which is available for operating expenses of
Registrant and circumstances which may arise in connection with the Local
Partnerships. Future sources of Registrant funds are expected to be
primarily from interest earned on working capital and limited cash distributions
from Local Partnerships. In addition, although it is not possible to
ascertain the amount, if any, that Registrant will receive with respect to each
specific Property, Registrant may be entitled to sales proceeds of certain Local
Partnerships’ Properties.
During
the year ended March 30, 2010, Registrant received cash from interest revenue
and distributions from Local Partnerships and utilized cash for operating
expenses. Cash and cash equivalents and investment in mutual fund
decreased, in the aggregate, by approximately $122,000 during the year ended
March 30, 2010.
During
the year ended March 30, 2010, the investment in local partnerships decreased as
a result of cash distributions received from Local Partnerships of $20,000
(excluding $53,075 of distributions classified as other income from local
partnerships), partially offset by Registrant’s equity in the Local
Partnerships’ net income for the year ended December 31, 2009 of
$6,193. Accounts payable and accrued expenses and payable to general
partner and affiliates in the accompanying balance sheet as of March 30, 2010
include cumulative deferred administration fees and management fees of
$3,657,862.
Results of
Operations
Registrant’s
operating results are dependent, in part, upon the operating results of the
Local Partnerships and are impacted by the Local Partnerships’
policies. In addition, the operating results herein are not
necessarily the same for tax reporting. Registrant accounts for its
investment in local partnerships in accordance with the equity method of
accounting. Accordingly, the investment is carried at cost and is
adjusted for Registrant’s share of each Local Partnership’s results of
operations and by cash distributions received. In the event the
operations of a Local Partnership result in a loss, equity in loss of each
investment in Local Partnership allocated to Registrant is recognized to the
extent of Registrant’s investment balance in each Local
Partnership. Equity in loss in excess of Registrant’s investment
balance in a Local Partnership is allocated to other partners’ capital in any
such Local Partnership. The combined statements of operations of the
Local Partnerships reflected in Note 6 to Registrant’s financial statements
include the operating results of all Local Partnerships, irrespective of
Registrant’s investment balances.
Cumulative
losses and cash distributions in excess of investment in local partnerships may
result from a variety of circumstances, including a Local Partnership's
accounting policies, subsidy structure, debt structure and operating deficits,
among other things. In addition, the book value of Registrant’s
investment in each Local Partnership (the “Local Partnership Carrying Value”)
may be reduced if the Local Partnership Carrying Value is considered to exceed
the estimated value derived by management. Accordingly, cumulative
losses and cash distributions in excess of the investment or an adjustment to a
Local Partnership’s Carrying Value are not necessarily indicative of adverse
operating results of a Local Partnership.
Registrant’s
operations for the years ended March 30, 2010, 2009, and 2008 resulted in net
losses of $413,184, $474,101, and $551,682, respectively. The
decrease in net loss from fiscal 2009 to fiscal 2010 is primarily attributable
to a decrease in administration and management fees in the cumulative
amount of approximately $93,000 as a result of Registrant’s disposal of its
Local Partnership Interests in Westminster Apartments Limited Partnership
(“Westminster”) and Justin Associates (“Justin”) and one-half of its Local
Partnership Interest in Sydney Engel Associates L.P. (“Sydney Engel”) (see
discussion below under Local Partnership
Matters), partially offset by a decrease in equity in income of
investment in local partnerships of approximately $19,000, which decrease is
attributable to a decrease in the net operating income of the Local Partnership
in which Registrant continues to have an investment balance. The
decrease in net loss from fiscal 2008 to fiscal 2009 is primarily attributable
to a decrease in equity in loss of investment in local partnerships of
approximately $93,000, which decrease is primarily the result of a decrease in
the net operating loss of the Local Partnership in which Registrant continues to
have an investment balance.
The Local
Partnerships’ net loss of approximately $2,151,000 for the year ended December
31, 2009 includes depreciation and amortization expense of approximately
$3,835,000 and interest on non-mandatory debt of approximately $351,000, and
does not include required principal payments on permanent mortgages of
approximately $897,000. The Local Partnerships’ net loss of
approximately $2,394,000 for the year ended December 31, 2008 includes
depreciation and amortization expense of approximately $3,880,000 and interest
on non-mandatory debt of approximately $375,000, and does not include required
principal payments on permanent mortgages of approximately
$882,000. The Local Partnerships’ net loss of approximately
$2,712,000 for the year ended December 31, 2007 includes depreciation and
amortization expense of approximately $3,938,000 and interest on non-mandatory
debt of approximately $392,000, and does not include required principal payments
on permanent mortgages of approximately $826,000. The results of
operations of the Local Partnerships for the year ended December 31, 2009 are
not necessarily indicative of the results that may be expected in future
periods.
14
Item
7. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued).
Local Partnership
Matters
Registrant's
primary objective, to provide Low-income Tax Credits to its Limited Partners,
has been completed. The relevant state tax credit agency allocated
each of the Local Partnerships an amount of Low-income Tax Credits, which are
generally available for a ten year period from the year the Property is placed
in service (the “Ten Year Credit Period”). The Ten Year Credit Period
was fully exhausted with respect to all of the Properties as of December 31,
2003. The required holding period of each Property, in order to avoid
Low-income Tax Credit recapture, is fifteen years from the year in which the
Low-income Tax Credits commence on the last building of the Property (the
"Compliance Period"). The Compliance Period of all of the Local
Partnerships had expired as of December 31, 2007. In addition,
certain of the Local Partnerships entered into agreements with the relevant
state tax credit agencies whereby the Local Partnerships must maintain the
low-income nature of the Properties for a period which exceeds the Compliance
Period (in certain circumstances, up to 50 years from when the Property is
placed in service, but commonly 30 years from the date any such Property is
placed in service), regardless of a sale of the Properties by the Local
Partnerships after the Compliance Period (the “Extended Use
Provisions”). Although the Extended Use Provisions do not extend the
Compliance Period of the respective Local Partnerships, such provisions limit
the number and availability of potential purchasers of the
Properties. Accordingly, a sale of a Property may happen well after
the expiration of the Compliance Period and/or may be significantly
discounted. Registrant is in the process of disposing of its Local
Partnership Interests. As of March 30, 2010, Registrant owns
thirty-nine of the forty-three Local Partnership Interests originally
acquired. Registrant has served a demand on the local general
partners (the “Local General Partners”) of all remaining Local Partnerships to
commence a sale process to dispose of the Properties. In the event a
sale cannot be consummated, it is the General Partner’s intention to sell or
assign Registrant’s Local Partnership Interests. Following the final
disposition of its Local Partnership Interests, Registrant intends to
dissolve. It is uncertain as to the amount, if any, that Registrant
will receive with respect to each specific Property from such sales or
assignments. There can be no assurance as to when Registrant will
dispose of its remaining Local Partnership Interests.
The
Properties are principally comprised of subsidized and leveraged low-income
multifamily residential complexes located throughout the United States and
Puerto Rico. Many of the Local Partnerships receive rental subsidy
payments, including payments under Section 8 of Title II of the Housing and
Community Development Act of 1974 ("Section 8"). The subsidy
agreements expire at various times. Since October 1997, the United
States Department of Housing and Urban Development (“HUD”) has issued a series
of directives related to project based Section 8 contracts that define owners’
notification responsibilities, advise owners of project based Section 8
properties of what their options are regarding the renewal of Section 8
contracts, provide guidance and procedures to owners, management agents,
contract administrators and HUD staff concerning renewal of Section 8 contracts,
provide policies and procedures on setting renewal rents and handling renewal
rent adjustments and provide the requirements and procedures for opting-out of a
Section 8 project based contract. Registrant cannot reasonably
predict legislative initiatives and governmental budget negotiations, the
outcome of which could result in a reduction in funds available for the various
federal and state administered housing programs including the Section 8
program. Such changes could adversely affect the future net operating
income (“NOI”) before debt service and debt structure of any or all Local
Partnerships currently receiving such subsidy or similar
subsidies. Two Local Partnerships’ Section 8 contracts are currently
subject to renewal under applicable HUD guidelines.
The Local
Partnerships have various financing structures which include (i) required debt
service payments ("Mandatory Debt Service") and (ii) debt service payments which
are payable only from available cash flow subject to the terms and conditions of
the notes, which may be subject to specific laws, regulations and agreements
with appropriate federal and state agencies ("Non-Mandatory Debt Service or
Interest"). Registrant has no legal obligation to fund any operating
deficits of the Local Partnerships.
In July
2009, Registrant withdrew from Westminster, in connection with which Registrant
received $10. Such amount is reflected as gain on sale of limited
partner interests/local partnership properties in the accompanying unaudited
statement of operations for the year ended March 30,
2010. Registrant’s investment balance in Westminster, after
cumulative equity losses, became zero during the year ended March 30,
1999.
In
December 2009, Registrant assigned one-half of its 99% Local Partnership
Interest in Sydney Engel to an affiliate of the Local General Partner of Sydney
Engel. Registrant did not receive any proceeds in connection with the
assignment. Registrant’s investment balance in Sydney Engel, after
cumulative equity losses, became zero during the year ended March 30,
1997.
In March
2010, Registrant sold its Local Partnership Interest in Justin to an affiliate
of the Local General Partner of Justin. Registrant did not receive
any proceeds in connection with the sale. Registrant’s investment
balance in Justin, after cumulative equity losses, became zero during the year
ended March 30, 2002.
15
Item
7. Management's Discussion and
Analysis of Financial Condition and Results of Operations
(Continued).
The Local
General Partner of Queen Lane Investors (“Queen Lane”) represents that, as a
result of a dispute between the local housing agency (the “Agency”) and the
Local General Partner of Queen Lane regarding the adequacy of certain unit
repairs mandated by the Agency, the Local General Partner of Queen Lane
requested that the Agency cancel the Section 8 voucher contract in connection
with the Property. As a result, the Property has been vacant since
October 2007. Two of Queen Lane’s mortgages matured in 2007 but have
not been repaid or formally extended, representing principal and accrued
interest of approximately $2,015,000 as of June 2010. The Local
General Partner of Queen Lane further represents that the lender has not issued
a notice of default and that real estate taxes are in arrears approximately
$19,000 as of June 2010. The Local General Partner of Queen Lane is
attempting to refinance the mortgages and make the necessary repairs to the
Property. Registrant’s investment balance in Queen Lane, after
cumulative equity losses, became zero during the year ended March 30,
2001.
Inflation
Inflation
is not expected to have a material adverse impact on Registrant’s
operations.
Contractual
Obligations
Registrant
is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and
is not required to provide the information required under this
Item.
Off - Balance Sheet
Arrangements
Registrant
does not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on Registrant’s financial condition,
changes in financial condition, revenue or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
investors.
Critical Accounting Policies
and Estimates
The
accompanying financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”), which
requires Registrant to make certain estimates and assumptions. A
summary of significant accounting policies is provided in Note 1 to the
accompanying financial statements. The following section is a summary
of certain aspects of those accounting policies that may require subjective or
complex judgments and are most important to the portrayal of Registrant’s
financial condition and results of operations. Registrant believes
that there is a low probability that the use of different estimates or
assumptions in making these judgments would result in materially different
amounts being reported in the accompanying financial statements.
|
|
·
|
Registrant
accounts for its investment in local partnerships in accordance with the
equity method of accounting.
|
|
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·
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If
the book value of Registrant’s investment in a Local Partnership exceeds
the estimated value derived by management, Registrant reduces its
investment in any such Local Partnership and includes such reduction in
equity in loss of investment in local partnerships. Registrant
makes such assessment at least annually in the fourth quarter of its
fiscal year or whenever there are indications that a permanent impairment
may have occurred. A loss in value of an investment in a Local
Partnership other than a temporary decline would be recorded as an
impairment loss. Impairment is measured by comparing the
investment carrying amount to the estimated residual value of the
investment.
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·
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Registrant
does not consolidate the accounts and activities of the Local
Partnerships, which are considered Variable Interest Entities as defined
by Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Topic 810; Subtopic 10, because Registrant is not
considered the primary beneficiary. Registrant’s balance in
investment in local partnerships represents the maximum exposure to loss
in connection with such investments. Registrant’s exposure to
loss on the Local Partnerships is mitigated by the condition and financial
performance of the underlying Properties as well as the financial strength
of the Local General Partners.
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16
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Item
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued).
|
Recent Accounting
Pronouncements
ASC Topic
740; Subtopic 10 requires all taxpayers to analyze all material positions they
have taken or plan to take in all tax returns that have been filed or should
have been filed with all taxing authorities for all years still subject to
challenge by those taxing authorities. If the position taken is
“more-likely-than-not” to be sustained by the taxing authority on its technical
merits and if there is more than a 50% likelihood that the position would be
sustained if challenged and considered by the highest court in the relevant
jurisdiction, the tax consequences of that position should be reflected in the
taxpayer’s GAAP financial statements. Because Registrant is a
pass-through entity and is not required to pay income taxes, ASC Topic 740;
Subtopic 10 does not currently have any impact on its financial
statements.
ASC Topic
820 defines fair value, establishes a framework for measuring fair value in
accordance with GAAP and expands disclosures about fair value
measurements. ASC Topic 820 applies to other accounting
pronouncements that require or permit fair value measurements. Accordingly, ASC
Topic 820 does not require any new fair value measurements. ASC Topic
820 is effective for fiscal years beginning after November 15,
2007. Registrant adopted ASC Topic 820 effective March 31,
2008. On February 6, 2008 FASB deferred the effective date of ASC
Topic 820 by one year for nonfinancial assets and liabilities that are
recognized or disclosed at fair value in the financial statements on a
nonrecurring basis. The partial adoption of ASC Topic 820 for
financial assets and liabilities did not have a material impact on Registrant’s
financial position, results of operations or cash flows. Registrant
adopted ASC Topic 820 as of March 31, 2008, with the exception of the
application of this topic to nonrecurring nonfinancial assets and nonfinancial
liabilities. Nonrecurring nonfinancial assets and liabilities for
which Registrant had not applied the provisions of ASC Topic 820 to include
investment in local partnerships, which is accounted for under the equity method
of accounting. Registrant’s full adoption of ASC Topic 820 as of
March 31, 2009 did not have an impact on its financial statements.
ASC Topic
825; Subtopic 10 permits entities to choose to measure many financial
instruments and certain other items at fair value. The fair value
election is designed to improve financial reporting by providing entities with
the opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge
accounting provisions. ASC Topic 825; Subtopic 10 is effective for
fiscal years beginning after November 15, 2007. On March 31, 2008,
Registrant adopted ASC Topic 825; Subtopic 10 and elected not to apply the
provisions to its eligible financial assets and financial liabilities on the
date of adoption. Accordingly, the initial application of ASC Topic
825; Subtopic 10 had no effect on Registrant’s financial
statements.
ASC Topic
825; Subtopic 10 requires disclosure about the method and significant
assumptions used to establish the fair value of financial instruments for
interim reporting periods as well as annual statements. ASC Topic
825; Subtopic 10 is effective for Registrant as of June 30, 2009 and its
adoption did not impact Registrant’s financial condition or results of
operations. Registrant had no financial instruments during any
interim reporting period during the year ended March 30, 2010.
ASC Topic
810; Subtopic 10 amends existing consolidation guidance for variable interest
entities, requires ongoing reassessment to determine whether a variable interest
entity must be consolidated, and requires additional disclosures regarding
involvement with variable interest entities and any significant changes in risk
exposure due to that involvement. ASC Topic 810; Subtopic 10 is
effective for Registrant’s fiscal year beginning March 31, 2010 and its adoption
did not have an impact on Registrant’s financial
statements.
17
|
Item
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of Operations
(Continued).
|
In
January 2010, ASC Topic 820 was amended to increase disclosure requirements
regarding recurring and nonrecurring fair value
measurements. Registrant adopted ASC 820, as amended, for the period
ending March 30, 2010, except for the disclosures about activity in Level 3 fair
value measurements which are effective for Registrant’s fiscal year beginning
March 31, 2010. The initial adoption of ASC Topic 820 and the full
implementation thereof did not have a material impact on Registrant’s financial
statements.
Forward-Looking
Information
As a
cautionary note, with the exception of historical facts, the matters discussed
in this annual report on Form 10-K are “forward-looking” statements within the
meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform
Act”). Forward-looking statements may relate to, among other things,
current expectations, forecasts of future events, future actions, future
performance generally, business development activities, capital expenditures,
strategies, the outcome of contingencies, future financial results, financing
sources and availability and the effects of regulation and
competition. Words such as “anticipate,” “expect,” “intend,” “plan,”
“seek,” “estimate” and other words and terms of similar meaning in connection
with discussions of future operating or financial performance signify
forward-looking statements. Registrant may also provide written
forward-looking statements in other materials released to the
public. Such statements are made in good faith by Registrant pursuant
to the “Safe Harbor” provisions of the Reform Act. Registrant
undertakes no obligation to update publicly or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise. Such forward-looking statements involve known risks,
uncertainties and other factors that may cause Registrant’s actual results of
operations or actions to be materially different from future results of
operations or actions expressed or implied by the forward-looking
statements.
Item
7a. Quantitative and Qualitative
Disclosure About Market Risk.
Registrant’s
investment in mutual fund (the “Fund”) is subject to certain
risk. The fixed income securities in which the Fund invests are
subject to interest rate risk, credit risk, prepayment risk, counterparty risk,
municipal securities risk, liquidity risk, management risk, government security
risk and valuation risk. Typically, when interest rates rise, the
market prices of fixed income securities go down. The Fund is
classified as “non-diversified,” and thus may invest most of its assets in
securities issued by or representing a small number of issuers. As a
result, the Fund may be more susceptible to the risks associated with these
particular issuers, or to a single economic, political or regulatory occurrence
affecting these issuers. These risks could adversely affect the
Fund’s net asset value (“NAV”), yield and total return.
18
AMERICAN
TAX CREDIT PROPERTIES III L.P.
|
Item
8.
|
Financial Statements
and Supplementary Data.
|
Table of
Contents
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Page
|
|
|
Report
of Independent Registered Public Accounting Firm
|
20
|
|
Balance
Sheets
|
21
|
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Statements
of Operations
|
22
|
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Statements
of Changes in Partners' Equity (Deficit)
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23
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Statements
of Cash Flows
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24
|
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Notes
to Financial Statements
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26
|
No
financial statement schedules are included because of the absence of the
conditions under which they are required or because the information is included
in the financial statements or the notes thereto.
19