SEC Company Response from CENTURY PACIFIC TAX CREDIT HOUSING FUND II (CIK 0000840258) — Jun 6, 2005
CENTURY PACIFIC TAX CREDIT HOUSING FUND II (CIK 0000840258)
Date: June 6, 2005 · CIK: 0000840258 · Accession: 0000950116-05-002095
AI Filing Summary & Sentiment
Letter
June 6, 2005 United States Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Mail Stop 4561 Attention: Cicely Luckey, Accounting Branch Chief
RE: Century Pacific Tax Credit Housing Fund - II Form 10-K for the fiscal year ended March 31, 2004 Filed January 25, 2005 File No. 033-24537
Dear Ms. Luckey:
We are responding to the letter from the United States Securities and Exchange Commission dated May 19, 2005 regarding the above referenced filing.
Notes to the Financial Statements, pages F-7 - F-14 ---------------------------------------------------
Note 1. Summary of Significant Accounting Policies, pages F-7 - F-8 --------------------------------------------------------------------
Investments in Operating Partnerships, page F-7
1. We note your response to comment 1 and your reliance on paragraph 4h of FIN46R as your basis for not evaluating whether the Laurel-Clayton limited partnership is a variable interest entity ("VIE"). Supplementally, please provide us with a detailed analysis that shows how the Laurel-Clayton limited partnership meets the definition of a business. In addition, please provide an expanded response to how you determined that you did not trigger the conditions in parts (2) and (3) of paragraph 4h that would require you to determine whether this is a variable interest entity under FIN 46R.
Response:
Appendix C of FIN 46R ("the Interpretation"), related to EITF Issue No.98-3, defines a business for use in the Interpretation as follows:
"A business is a self-sustaining integrated set of activities and assets conducted and managed for the purpose of providing a return to investors. A business consists of (a) inputs, (b) processes applied to those inputs, and (c) resulting outputs that are used to generate revenues. For a set of activities and assets to be a business, it must contain all of the inputs and processes necessary for it to conduct normal operations, which include the ability to sustain a revenue stream by providing its outputs to customers."
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CENTURY PACIFIC TAX CREDIT HOUSING FUND II 1 E. STOW ROAD MARLTON, NEW JERSEY 08053
As noted in the December 31, 2003 financial statements of Laurel-Clayton Limited Partnership ("Laurel-Clayton"), Laurel-Clayton owns and operates a 430 unit apartment complex in Worcester, Massachusetts. Further review of these financial statements reveals that the inputs, processes and outputs described in Appendix C exist within the operations of Laurel-Clayton. On this basis, the Registrant determined that Laurel-Clayton is a business within the definition of FIN46R. The December 31, 2003 financial statements of Laurel-Clayton Limited Partnership are attached to this response.
Paragraph 4h of FIN46R list four conditions which would require a business to be evaluated as a variable interest entity, including condition (2) "the entity is designed so that substantially all of it activities either involve or are conducted on behalf of the reporting enterprise and its related parties" and condition (3) the reporting enterprise and its related parties provide more than half of the total of the equity, subordinated debt, and other forms of subordinated financial support to the entity based on an analysis of the fair values of the interests in the entity.
As it relates to condition (2), the Registrant is a limited partner of Laurel-Clayton. In that capacity, the Registrant did not participate in the design of Laurel-Clayton, whose apartment complex is operated under an agreement with, and subsidized by, the U.S. Department of Housing and Urban Development. As it relates to condition (3), the Laurel-Clayton financial statements state that the general partner, an unrelated entity of the Registrant, provided more than half of the total equity and subordinated debt of Laurel-Clayton.
On the basis of the above, Laurel-Clayton does not meet the criteria for consideration as a VIE with respect to the Registrant.
In connection with the SEC's comments, Century Pacific Tax Credit Housing Fund II acknowledges the following:
1. Century Pacific Tax Credit Housing Fund II is responsible for the adequacy and accuracy of the disclosure in our filings;
2. staff comments or changes to disclosures in response to staff comments do not foreclose the Commission from taking any action with respect to the filings; and
3. Century Pacific Tax Credit Housing Fund II may not assert staff comments as a defense in any proceedings initiated by the Commission or any person under the federal securities laws of the United States.
Sincerely,
/s/ James V. Bleiler
Show Raw Text
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CENTURY PACIFIC TAX CREDIT HOUSING FUND II
1 E. STOW ROAD
MARLTON, NEW JERSEY 08053
VIA FEDEX and FAX (202)772-9209
June 6, 2005
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Mail Stop 4561
Attention: Cicely Luckey, Accounting Branch Chief
RE: Century Pacific Tax Credit Housing Fund - II
Form 10-K for the fiscal year ended March 31, 2004
Filed January 25, 2005 File No. 033-24537
Dear Ms. Luckey:
We are responding to the letter from the United States Securities and Exchange
Commission dated May 19, 2005 regarding the above referenced filing.
Notes to the Financial Statements, pages F-7 - F-14
---------------------------------------------------
Note 1. Summary of Significant Accounting Policies, pages F-7 - F-8
--------------------------------------------------------------------
Investments in Operating Partnerships, page F-7
1. We note your response to comment 1 and your reliance on paragraph 4h
of FIN46R as your basis for not evaluating whether the Laurel-Clayton
limited partnership is a variable interest entity ("VIE").
Supplementally, please provide us with a detailed analysis that shows
how the Laurel-Clayton limited partnership meets the definition of a
business. In addition, please provide an expanded response to how you
determined that you did not trigger the conditions in parts (2) and
(3) of paragraph 4h that would require you to determine whether this
is a variable interest entity under FIN 46R.
Response:
Appendix C of FIN 46R ("the Interpretation"), related to EITF Issue No.98-3,
defines a business for use in the Interpretation as follows:
"A business is a self-sustaining integrated set of activities and assets
conducted and managed for the purpose of providing a return to investors. A
business consists of (a) inputs, (b) processes applied to those inputs, and (c)
resulting outputs that are used to generate revenues. For a set of activities
and assets to be a business, it must contain all of the inputs and processes
necessary for it to conduct normal operations, which include the ability to
sustain a revenue stream by providing its outputs to customers."
<PAGE>
CENTURY PACIFIC TAX CREDIT HOUSING FUND II
1 E. STOW ROAD
MARLTON, NEW JERSEY 08053
As noted in the December 31, 2003 financial statements of Laurel-Clayton Limited
Partnership ("Laurel-Clayton"), Laurel-Clayton owns and operates a 430 unit
apartment complex in Worcester, Massachusetts. Further review of these financial
statements reveals that the inputs, processes and outputs described in Appendix
C exist within the operations of Laurel-Clayton. On this basis, the Registrant
determined that Laurel-Clayton is a business within the definition of FIN46R.
The December 31, 2003 financial statements of Laurel-Clayton Limited Partnership
are attached to this response.
Paragraph 4h of FIN46R list four conditions which would require a business to be
evaluated as a variable interest entity, including condition (2) "the entity is
designed so that substantially all of it activities either involve or are
conducted on behalf of the reporting enterprise and its related parties" and
condition (3) the reporting enterprise and its related parties provide more than
half of the total of the equity, subordinated debt, and other forms of
subordinated financial support to the entity based on an analysis of the fair
values of the interests in the entity.
As it relates to condition (2), the Registrant is a limited partner of
Laurel-Clayton. In that capacity, the Registrant did not participate in the
design of Laurel-Clayton, whose apartment complex is operated under an agreement
with, and subsidized by, the U.S. Department of Housing and Urban Development.
As it relates to condition (3), the Laurel-Clayton financial statements state
that the general partner, an unrelated entity of the Registrant, provided more
than half of the total equity and subordinated debt of Laurel-Clayton.
On the basis of the above, Laurel-Clayton does not meet the criteria for
consideration as a VIE with respect to the Registrant.
In connection with the SEC's comments, Century Pacific Tax Credit Housing Fund
II acknowledges the following:
1. Century Pacific Tax Credit Housing Fund II is responsible for the
adequacy and accuracy of the disclosure in our filings;
2. staff comments or changes to disclosures in response to staff comments
do not foreclose the Commission from taking any action with respect to
the filings; and
3. Century Pacific Tax Credit Housing Fund II may not assert staff
comments as a defense in any proceedings initiated by the Commission
or any person under the federal securities laws of the United States.
Sincerely,
/s/ James V. Bleiler
Mr. James V. Bleiler
Chief Financial Officer
cc: Michael D. Byrnes, CPA, Asher & Company, Ltd.
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Laurel-Clayton Limited Partnership
HUD Project No.: 023-44012-LDC
TABLE OF CONTENTS
PAGE
MORTGAGOR'S CERTIFICATION 4
MANAGING AGENT'S CERTIFICATION 5
INDEPENDENT AUDITORS' REPORT 6
FINANCIAL STATEMENTS
BALANCE SHEET 8
STATEMENT OF OPERATIONS 10
STATEMENT OF PARTNERS' EQUITY (DEFICIT) 13
STATEMENT OF CASH FLOWS 14
NOTES TO FINANCIAL STATEMENTS 16
SUPPLEMENTAL INFORMATION
BALANCE SHEET DATA 26
STATEMENT OF OPERATIONS DATA 28
STATEMENT OF PARTNERS' EQUITY (DEFICIT) DATA 32
STATEMENT OF CASH FLOWS DATA 33
RESERVE FOR REPLACEMENTS 35
COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND
RESIDUAL RECEIPTS 36
CHANGES IN FIXED ASSET ACCOUNTS 37
DETAIL OF ACCOUNTS - BALANCE SHEET 39
<PAGE>
Laurel-Clayton Limited Partnership
HUD Project No.: 023-44012-LDC
TABLE OF CONTENTS
PAGE
SUPPLEMENTAL INFORMATION (CONTINUED)
OTHER INFORMATION 40
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL 41
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE
WITH SPECIFIC REQUIREMENTS APPLICABLE TO
MAJOR HUD PROGRAMS 43
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH
SPECIFIC REQUIREMENTS APPLICABLE TO FAIR HOUSING
AND NON-DISCRIMINATION 45
<PAGE>
Laurel-Clayton Limited Partnership
HUD Project No.: 023-44012-LDC
TABLE OF CONTENTS
MORTGAGOR'S CERTIFICATION
We hereby certify that we have examined the accompanying financial
statements and supplemental data of Laurel-Clayton Limited Partnership and, to
the best of our knowledge and belief, the same are complete and accurate.
GENERAL PARTNER
______________________________________
Charles M. Moran, Jr. Date
______________________________________
Beverly Bates Date
Telephone Number: (617) 695-9595
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Laurel-Clayton Limited Partnership
HUD Project No.: 023-44012-LDC
TABLE OF CONTENTS
MANAGING AGENT'S CERTIFICATION
I hereby certify that I have examined the accompanying financial
statements and supplemental data of Laurel-Clayton Limited Partnership and, to
the best of my knowledge and belief, the same are complete and accurate.
MANAGING AGENT
The Community Builders, Inc.
______________________________________
Maria Correla
Keven Spillane
Property Manager Managing Agent Taxpayer
Identification Number:
04-2324773
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Reznick Group, P.C.
7700 Old Georgetown Road * Suite 400 * Bethesda, MD 20814-6224
(301) 652-9100 * Fax (301) 652-1848
INDEPENDENT AUDITORS' REPORT
To the Partners
Laurel-Clayton Limited Partnership
We have audited the accompanying balance sheet of Laurel-Clayton
Limited Partnership as of December 31, 2003, and the related statements of
operations, partners' equity (deficit) and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Laurel-Clayton
Limited Partnership as of December 31, 2003, and the results of its operations,
the changes in partners' equity (deficit) and cash flows for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
In accordance with Government Auditing Standards and the "Consolidated
Audit Guide for Audits of HUD Programs," we have also issued reports dated
January 28, 2004 on our consideration of Laurel-Clayton Limited Partnership's
internal control and on its compliance with specific requirements applicable to
major HUD programs and fair housing and non-discrimination. Those reports are an
integral part of an audit performed in accordance with Government Auditing
Standards and should be read in conjunction with this report in considering the
results of our audit.
Our audit was conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The accompanying supplemental
information on pages 26 through 40 is presented for purposes of additional
analysis and is not a required part of the basic financial
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statements of the Partnership. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated, in all material respects, in relation to the
basic financial statements taken as a whole.
Bethesda, Maryland Taxpayer Identification Number:
January 28, 2004 52-1088612
Lead Auditor: Karen D. Donahoe, CPA
<PAGE>
Laurel-Clayton Limited Partnership
HUD Project No.: 023-44012-LDC
BALANCE SHEET
December 31, 2003
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents - operations $ 483,213
Tenant accounts receivable $ 17,578
Allowance for doubtful accounts (13,000)
-----------
4,578
Accounts receivable - HUD 8,854
Accounts and notes receivable - operations 5,624
Interest reduction payment receivable 4,622
Payroll deposit 106,999
Miscellaneous prepaid expenses 138,535
------------
Total current assets 752,425
DEPOSITS HELD IN TRUST - FUNDED
Tenant deposits 93,012
RESTRICTED DEPOSITS AND FUNDED RESERVES
Escrow deposits 225,537
Reserve for replacements 989,007
-----------
1,214,544
RENTAL PROPERTY
Land 1,100,000
Buildings 23,197,918
Office furniture and equipment 1,342,476
Maintenance equipment 22,139
Motor vehicles 6,400
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25,668,933
Less accumulated depreciation (11,893,951)
-----------
13,774,982
------------
$ 15,834,963