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American Affordable Housing Ii Limited Partnership (AAHII) SEC Filing 10-Q Quarterly report for the period ending Thursday, September 30, 2010

American Affordable Housing Ii Limited P

CIK: 815024 Ticker: AAHII

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, 2010

or

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

For the transition period from _______ to _______

Commission file number        033-14852-01

AMERICAN AFFORDABLE HOUSING II LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)

Massachusetts

04-2992309

(State or other jurisdiction

(I.R.S. Employer

of incorporation or organization)

Identification No.)

One Boston Place, Suite 2100, Boston, Massachusetts  02108

(Address of principal executive offices)           (Zip Code)

                   (617) 624-8900                   

(Registrant's telephone number, including area code)

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

ý

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 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company

ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes 

No

ý

 

 

 

 

 

AMERICAN AFFORDABLE HOUSING II LIMITED PARTNERSHIP

QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2010

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

 

 

 

Pages

 

Item 1. Financial Statements

 

 

 

 

 

Condensed Balance Sheets

3

 

 

Condensed Statements of Operations

4-5

 

 

Condensed Statements of Changes in Partners' Deficit

6

 

 

Condensed Statements of Cash Flows

7

 

 

Notes to Condensed Financial Statements

8-12

 

 

 

Item 2. Management's Discussion and Analysis of Financial Condition 

and Results of Operations


13-18

 

 

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

19

 

 

 

 

Item 4. Controls and Procedures

19

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

Item 1. Legal Proceedings

20

 

 

 

 

Item 1A. Risk Factors

20

 

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

20

 

 

 

 

Item 3. Defaults Upon Senior Securities

20

 

 

 

 

Item 4. (Removed and Reserved)

20

 

 

 

 

Item 5. Other Information

20

 

 

 

 

Item 6. Exhibits

20

 

 

 

 

Signatures

21

 

 

 

 

 

 

 

 

 

 

American Affordable Housing II Limited Partnership

CONDENSED BALANCE SHEETS

 

 

September 30,
2010
(Unaudited)

March 31,
2010
(Audited)

ASSETS

 

 

 

Cash and cash equivalents

$ 101,597

$ 189,859

 

$  101,597

$  189,859

 

 

 

 

LIABILITIES AND PARTNERS' DEFICIT

 

 

 

LIABILITIES

Accounts payable

$   -

$   22,500

Accounts payable affiliates

6,419,230

6,442,351

6,419,230

6,464,851

PARTNERS' DEFICIT

Limited Partners

Units of limited partnership 
interest, $1,000 stated value per
unit; issued and outstanding,
26,501 units (Note A)




(6,032,435)




 (5,990,220)

General Partner

    (285,198)

    (284,772)

(6,317,633)

(6,274,992)

$  101,597

$  189,859

 

 

The accompanying notes are an integral part of this condensed statement

 

 

 

 

 

American Affordable Housing II Limited Partnership

CONDENSED STATEMENTS OF OPERATIONS

Three Months Ended September 30,
(Unaudited)


 2010


 2009

Income

Interest income

$ 77

$ 69

Other income

  -

  -

      77

      69

Share of income from Operating Partnerships (Note D)

  -

    10,000

Expenses

Professional fees

20,369

17,174

General and administrative expenses

3,490

6,887

Asset management fees (Note C)

   11,979

     15,744

  

   35,838

   39,805

  NET LOSS

$ (35,761)

$ (29,736)

Net loss allocated to general partner

$  (358)

$  (297)

Net loss allocated to limited partners

$ (35,403)

$ (29,439)

Net loss per unit of limited partnership interest

$    (1.34)

$    (1.11)

 

 

 

 

 

 

The accompanying notes are an integral part of this condensed statement

 

 

 

American Affordable Housing II Limited Partnership

CONDENSED STATEMENTS OF OPERATIONS

Six Months Ended September 30,
(Unaudited)


 2010


 2009

Income

Interest income

$ 193

$ 131

Other income

  374

  1,734

  567

    1,865

Share of income from Operating Partnerships (Note D)

    857

    34,517

Expenses

Professional fees

20,679

20,943

General and administrative expenses

6,205

10,392

Asset management fees (Note C)

   17,181

     8,559

  

    44,065

    39,894

  NET LOSS

$ (42,641)

$   (3,512)

Net loss allocated to general partner

$ (426)

$    (35)

Net loss allocated to limited partners

$ (42,215)

$   (3,477)

Net loss per unit of limited partnership interest

$ (1.59)

$     (0.13)

 

 

 

 

 

 

The accompanying notes are an integral part of this condensed statement

 

 

 

American Affordable Housing II Limited Partnership

CONDENSED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT

Six Months Ended September 30,
(Unaudited)

 



Limited
Partners



General
Partner





Total

 

 

 

 

Partners' deficit
 April 1, 2010



$(5,990,220)



$(284,772)



$(6,274,992)

    

 

 

 

Net loss

   (42,215)

  (426)

  (42,641)

 

 

 

 

Partners' deficit

  September 30, 2010


$(6,032,435)


$(285,198)


$(6,317,633)

 

 

 

 

 

 

 

The accompanying notes are an integral part of this condensed statement

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American Affordable Housing II Limited Partnership

CONDENSED STATEMENTS OF CASH FLOWS

Six Months Ended September 30,
(Unaudited)

2010

2009

Cash flows from operating activities:

Net loss

$   (42,641)

$    (3,512)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Share of (income) from Operating Partnerships

(857)

(34,517)

Changes in assets and liabilities:

Increase (decrease) in accounts payable

(22,500)

15,000

Increase (decrease) in accounts payable affiliates

  (23,121)

  38,253

 

 

 

 

Net cash provided by (used in) operating activities

(89,119)

15,224

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Proceeds from the disposition of Operating Partnerships

857

34,517

 

 

 

 

Net cash provided by (used in) investing activities

857

34,517

 

 

 

 

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(88,262)

49,741

 

 

 

Cash and cash equivalents, beginning

  189,859

   19,850

 

 

 

Cash and cash equivalents, ending

$    101,597

$     69,591

The accompanying notes are an integral part of this condensed statement

 

 

 

American Affordable Housing II Limited Partnership

NOTES TO CONDENSED FINANCIAL STATEMENTS

September 30, 2010
(Unaudited)

NOTE A - ORGANIZATION

American Affordable Housing II Limited Partnership ("Partnership") was formed under the laws of The Commonwealth of Massachusetts on May 13, 1987, for the purpose of acquiring, holding, and disposing of limited
partnership interests in operating partnerships which were to acquire, develop, rehabilitate, operate and own newly constructed, existing or rehabilitated low-income apartment complexes. Effective as of June 1, 2001 there was a restructuring, and as a result, the Partnership's general partner was reorganized as follows. The general partner of the Partnership continues to be Boston Capital Associates Limited Partnership, a Massachusetts limited partnership. The general partner of the Partnership's general partner is BCA Associates Limited Partnership, a Massachusetts limited partnership, whose sole general partner is C&M Management, Inc., a Massachusetts corporation and whose limited partners are Herbert F. Collins and John P. Manning. Mr. Manning is the principal of Boston Capital Partners, Inc.

Pursuant to the Securities Act of 1933, the Partnership filed a Form S-11 Registration Statement with the Securities and Exchange Commission, effective September 21, 1987, which covered the offering (the "Public Offering") of the Partnership's units of limited partner interest, as well as the units of limited partner interest offered by American Affordable Housing I, III, IV, and V Limited Partnerships (together with the Partnership, the
"Partnerships"). The Partnerships registered 50,000 units of limited partner interest at $1,000 each unit for sale to the public. The Partnership sold 26,501 units of limited partner interest, representing $26,501,000 of capital contributions.

NOTE B - ACCOUNTING AND FINANCIAL REPORTING POLICIES

The condensed financial statements included herein as of September 30, 2010 and for the six months then ended have been prepared by the Registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The Registrant's accounting and financial reporting policies are in conformity with generally accepted accounting principles and include adjustments in interim periods considered necessary for a fair presentation of the results of operations. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed financial statements are read in conjunction with the financial statements and the notes thereto included in the Registrant's Annual Report Statement on Form 10-K.

The accompanying financial statements reflect the Partnership's results of operations for an interim period and are not necessarily indicative of the results of operations for the fiscal year ending March 31, 2011.

 

 

 

American Affordable Housing II Limited Partnership


NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)


September 30, 2010

(Unaudited)

NOTE C - RELATED PARTY TRANSACTIONS

An annual partnership management fee based on 0.5 percent of the aggregate cost of all apartment complexes owned by the Operating Partnerships has been accrued as payable to Boston Capital Asset Management Limited Partnership. Partnership management fees paid for the six months ended September 30, 2010 and 2009 were $50,000 and $0, respectively. The annual partnership management fee accrued for the quarters ended September 30, 2010 and 2009, was $11,979 and $17,004, respectively. Total partnership management fees accrued as of September 30, 2010 are $6,095,780.

During the quarters ended September 30, 2010 and 2009, affiliates of the Partnership's general partner did not advance any money to the Partnership to pay operating expenses of the Partnership, or make advances and/or loans to Operating Partnerships. Total advances for these costs at September 30, 2010 were $261,667. These and any additional advances will be repaid, without interest, from available cash flow or the proceeds of sales or refinancing of the Partnership's interests in Operating Partnerships.

The Partnership also accrued various affiliate administrative expenses including travel, printing, salaries, postage, and overhead allocations. Total accruals at September 30, 2010 were $61,783.

NOTE D - INVESTMENTS IN OPERATING PARTNERSHIPS

At September 30, 2010 and 2009, the Partnership had limited partnership equity interests in 7 and 13 Operating Partnerships, each of which owned an apartment complex.

Under the terms of the Partnership's investment in each Operating Partnership, the Partnership was required to make capital contributions to the Operating Partnerships. These contributions were payable in installments upon each Operating Partnership achieving specified levels of construction and/or operations. At September 30, 2010 and 2009, all such capital contributions had been paid to the Operating Partnerships.

The Partnership's fiscal year ends March 31st of each year, while all the Operating Partnerships' fiscal years are the calendar year. Pursuant to the provisions of each Operating Partnership Agreement, financial results for each of the Operating Partnerships are provided to the Partnership within 45 days after the close of each Operating Partnership's quarterly period. Accordingly, the current financial results available for the Operating Partnerships are for the six months ended June 30, 2010.

 

 

 

 

 

 

 

 

 

 

 

 

American Affordable Housing II Limited Partnership

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

September 30, 2010
(Unaudited)

COMBINED SUMMARIZED STATEMENTS OF OPERATIONS

NOTE D - INVESTMENTS IN OPERATING PARTNERSHIPS (continued)

The unaudited combined statements of operations of the Operating

Partnerships for the six months ended June 30, 2010 and 2009 are as follows:

 

2010

2009

 

 

 

Revenues

 

 

   Rental income

$ 684,654

$ 1,095,413

   Interest and other

20,744

89,436

 

 

 

 

705,398

1,184,849

 

 

 

Expenses

 

 

   Interest expense

92,375

154,020

   Depreciation and amortization

192,126

309,122

   Operating expenses

550,523

864,112

 

835,024

1,327,254

 

 

 

NET LOSS

$  (129,626)

$   (142,405)

 

 

 

Net loss allocation to American
  Affordable Housing II Limited
  Partnership*



$ (128,330)



$ (140,981)

 

 

 

 

 

 

Net loss allocated to other 
  partners


$ (1,296)


$ (1,424)

 

 

 

*Amounts include $128,330 and $140,981 for 2010 and 2009, respectively, of loss not recognized under the equity method of accounting.

The Partnership accounts for its investments using the equity method of accounting. Under the equity method of accounting, the Partnership adjusts its investment cost for its share of each Operating Partnership's results of
operations and for any distributions received or accrued. However, the Partnership recognizes individual operating losses only to the extent of capital contributions. Excess losses are suspended for use in future years to
offset excess income.

American Affordable Housing II Limited Partnership

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)


September 30, 2010

(Unaudited)

NOTE D - INVESTMENTS IN OPERATING PARTNERSHIPS (CONTINUED)

At September 30, 2010 and 2009, the Partnership has limited partnership equity interests in 7 and 13 Operating Partnerships, respectively, which own apartment complexes. During the quarters ended September 30, 2010 and 2009, none of the Operating Partnerships were sold. For the six months ended September 30, 2010, the Partnership transferred 1% of its interest in 3 Operating Partnerships. The transfers resulted in cash proceeds to the Partnership of $857 and a gain on the disposal of the asset of $857. For the six months ended September 30, 2009, the Partnership transferred 99% of its interest in 3 Operating Partnerships. The transfers resulted in cash proceeds to the Partnership of $34,517 and a gain on the disposal of the asset of $34,517.

NOTE E - TAXABLE LOSS

The Partnership's taxable loss for the calendar year ended December 31, 2010 is expected to differ from its loss for financial reporting purposes. This is primarily due to accounting differences in depreciation incurred by the Operating Partnerships and also differences between the equity method of accounting and IRS accounting methods.


NOTE F - INCOME TAXES

The Partnership has elected to be treated as a pass-through entity for income tax purposes and, as such, is not subject to income taxes. Rather, all items of taxable income, deductions and tax credits are passed through to and are reported by its owners on their respective income tax returns. The Partnership's federal tax status as a pass-through entity is based on its legal status as a Partnership. Accordingly, the Partnership is not required to take any tax positions in order to qualify as a pass-through entity. The Partnership is required to file and does file tax returns with the Internal Revenue Service and other taxing authorities. Accordingly, these financial statements do not reflect a provision for income taxes and the Partnership has no other tax positions, which must be considered for disclosure.

NOTE G - PLAN OF LIQUIDATION

On January 10, 2008, our General Partner recommended that the Unit holders approve a plan of liquidation and dissolution for the Partnership, or the "Plan." The Plan was approved by the Unit holders on April 1, 2008, and was adopted by the General Partner on April 1, 2008. Pursuant to the Plan, the General Partner may, without further action by the Unit holders:

    • liquidate the assets and wind up the business of the Partnership;
    • make liquidating distributions in cancellation of the Unit;
    • dissolve the Partnership after the sale of all of the Partnership's assets; and
    • take, or cause the Partnership to take, such other acts and deeds and shall do, or cause the Partnership to do, such other things, as are necessary or appropriate in connection with the dissolution, winding up and liquidation of the Partnership, the termination of the responsibilities and liabilities of the Partnership under applicable law, and the termination of the existence of the Partnership.

American Affordable Housing II Limited Partnership

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)


September 30, 2010

(Unaudited)

NOTE G - PLAN OF LIQUIDATION (CONTINUED)

Since the approval of the Plan by the Unit holders, we have continued to seek to sell the assets of the Partnership and use the sales proceeds and/or other Partnership funds to pay all expenses in connection with such sales, pay or make provision for payment of all Partnership obligations and liabilities, including accrued fees and unpaid loans to the General Partner, and distribute the remaining assets as set forth in the Partnership Agreement. We expect to complete the sale of the apartment complexes approximately three to four years after the Unit holders' approval of the Plan, which was April 1, 2008. However, because of numerous uncertainties, the liquidation may take longer or shorter than expected, and the final liquidating distribution may occur months after all of the apartment complexes have been sold. Because the liquidation of the Partnership was not imminent, as of September 30, 2010, the financial statements are presented assuming the Partnership will continue as a going concern.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements including our intentions, hopes, beliefs, expectations, strategies and predictions of our future activities, or other future events or conditions. These statements are "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbors created by these acts. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including, for example, the factors identified in Part I, Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended March 31, 2010. Although we believe that the assumptions underlying these forward-looking statements are reasonable, any of the assumptions could be inaccurate, and there can be no assurance that the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in these forward-looking statements, the inclusion of this information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved.

Liquidity

The Partnership's primary source of funds was the proceeds of its Public Offering. Other sources of liquidity have included (i) interest earned on working capital reserves, and (ii) cash distributions from operations of the Operating Partnerships in which the Partnership has invested. Both of these sources of liquidity are available to meet the obligations of the Partnership.

The Partnership is currently accruing the annual partnership management fee. Partnership management fees accrued during the quarter ended September 30, 2010 were $11,979 and total partnership management fees accrued as of September 30, 2010 were $6,095,780. During the quarter ended September 30, 2010, none of the accrued partnership management fees were paid. Pursuant to the Partnership Agreement, these liabilities will be deferred until the Partnership receives sales or refinancing proceeds from Operating Partnerships, which will be used to satisfy these liabilities.

As of September 30, 2010, an affiliate of the general partner of the Partnership advanced a total of $323,450 to the Partnership to pay various operating expenses of the Partnership, and to make advances and/or loans to Operating Partnerships. These advances are included in Accounts payable-affiliates. There was an advance of $2,906 during the six months ended September 30, 2010.

All payables to affiliates will be paid, without interest, from available cash flow or the proceeds of sales or refinancing of the Partnership's interests in Operating Partnerships. There were no payments to an affiliate of the general partner during the six months ended September 30, 2010.

Capital Resources

The Partnership received $26,501,000 in subscriptions for Units (at $1,000 per Unit) during the period February 2, 1988 to December 21, 1988 pursuant to the Public Offering, resulting in net proceeds available for investment in Operating Partnerships (after payment of acquisition fees and expenses and funding of a reserve) of $18,550,700.

As of September 30, 2010, the Partnership had committed to investments requiring cash payments of $18,613,793, all of which has been paid. At September 30, 2010, the Partnership held $101,597, which is comprised of working capital. Since the Partnership has completed funding of all investments, it anticipates that there should be no significant need for capital resources in the future.

 

Results of Operations

As of September 30, 2010 and 2009, the Partnership held limited partnership interests in 7 and 13 Operating Partnerships. In each instance the apartment complex owned by the applicable Operating Partnership is eligible for the federal housing tax credit. Initial occupancy of a unit in each apartment complex which complied with the minimum set-aside test (i.e., initial occupancy by tenants with incomes equal to no more than a certain percentage of area median income) and the rent restriction test (i.e., gross rent charged tenants does not exceed 30% of the applicable income standards) is referred to as "Qualified Occupancy." Each of the Operating Partnerships and each of the respective apartment complexes are described more fully in the Prospectus or applicable report on Form 8-K. The general partner of the Partnership believes that there is adequate casualty insurance on the properties.

As of September 30, 2010 and 2009, the Qualified Occupancy of the Operating Partnerships was 100%. The Partnership had a total of 7 properties at September 30, 2010, all of which were at 100% Qualified Occupancy.

The Partnership incurs an annual partnership management fee to Boston Capital Asset Management Limited Partnership, which we also refer to as BCAMLP, in an amount equal to 0.5% of the aggregate cost of the apartment complexes owned by the Operating Partnerships, less the amount of various partnership management and reporting fees paid by the Operating Partnerships. The annual partnership management fee incurred net of reporting fees and the reporting fees paid by the Operating Partnerships for the three and six months ended September 30, 2010 are as follows:

3 Months
Management Fee Net

of Reporting Fee


3 Months
Reporting Fee

6 Months
Management Fee Net of Reporting Fee


6 Months
Reporting Fee

$ 11,979

$ -

$ 17,181

$ 6,792

The Partnership's investment objectives do not include receipt of significant cash distributions from the Operating Partnerships in which it has invested. The Partnership's investments in Operating Partnerships have been made principally with a view towards realization of federal housing tax credits for allocation to its partners and Unit holders.

In June 2007, the investment general partner of Lovington Housing approved an agreement to sell the property and the transaction closed on December 22, 2009. The sales price was $1,180,279, which includes the outstanding mortgage balance of approximately $974,813 and cash proceeds to the investment limited partners of $105,248. Of the total proceeds received, $76,000 represents reporting fees due to an affiliate of the investment partnership and the balance represents proceeds from the sale. Of the remaining proceeds, $7,500 was paid to BCAMLP for expenses related to the sale, which includes third party legal costs. The remaining proceeds from the sale of $21,748 were returned to cash reserves held by the Partnership. The monies held in cash reserves will be utilized to pay current operating expenses, accrued but unpaid partnership management fees, and accrued but unpaid expenses of the investment partnership. After all outstanding obligations of the investment partnership are satisfied, any remaining monies will be distributed based on the number of Units held by each investor at the time of distribution. Annual losses generated by the Operating Partnership, which were applied against the investment limited partnership's investment in the Operating Partnership in accordance with the equity method of accounting, had previously reduced the investment in the Operating Partnership to zero. Accordingly, a gain on the sale of the Operating Partnership of the proceeds from the sale, net of the overhead and expense reimbursement, has been recorded in the amount of $21,748 as of December 31, 2009.

In January 2009, the investment general partner of Belen Apartments LP approved an agreement to sell the property and the transaction closed on December 31, 2009. The sales price was $2,150,000, which includes the outstanding mortgage balance of approximately $1,443,323 and cash proceeds to the investment limited partners of $463,319. Of the total proceeds received, $900 represents reporting fees due to an affiliate of the investment partnership and the balance represents proceeds from the sale. Of the remaining proceeds, $15,000 was paid to BCAMLP for expenses related to the sale, which includes third party legal costs. The remaining proceeds from the sale of $447,419 were returned to cash reserves held by the Partnership. The monies held in cash reserves will be utilized to pay current operating expenses, accrued but unpaid partnership management fees, and accrued but unpaid expenses of the investment limited partnership. After all outstanding obligations of the investment partnership are satisfied, any remaining monies will be distributed based on the number of Units held by each investor at the time of distribution. Annual losses generated by the Operating Partnership, which were applied against the investment limited partnership's investment in the Operating Partnership in accordance with the equity method of accounting, had previously reduced the investment in the Operating Partnership to zero. Accordingly, a gain on the sale of the Operating Partnership of the proceeds from the sale, net of the overhead and expense reimbursement, was recorded in the amount of $447,419 as of December 31, 2009. The sale of the Operating Partnership had been recognized as of December 31, 2009, and the proceeds were received in the first quarter of 2010. In March 2010, additional sale proceeds of $5,456 were received and returned to the cash reserves held by the Partnership.

In April 2009, the investment general partner transferred 99% of its interest in Shelbyville FH, Limited to a non-affiliated entity for its assumption of the outstanding mortgage balance of approximately $580,848 and cash proceeds to the investment limited partner of $17,411. Of the total proceeds received, $5,000 represents reporting fees due to an affiliate of the investment partnership and the balance represents proceeds from the transfer. Of the remaining proceeds, $7,500 was paid to BCAMLP for expenses related to the transfer, which includes third party legal costs. The remaining proceeds of $4,911 were returned to cash reserves held by the Partnership. The monies held in cash reserves will be utilized to pay current operating expenses, accrued but unpaid asset management fees, and accrued but unpaid expenses of the investment partnership. After all outstanding obligations of the investment partnership are satisfied, any remaining monies will be distributed based on the number of Units held by each investor at the time of distribution. Annual losses generated by the Operating Partnership, which were applied against the investment limited partnership's investment in the Operating Partnership in accordance with the equity method of accounting, had previously reduced the investment in the Operating Partnership to zero. Accordingly, a gain on the sale of the Operating Partnership of the proceeds from the sale, net of the overhead and expense reimbursement, has been recorded in the amount of $4,911 as of April 30, 2009. The transfer of the remaining 1% investment partnership interest in the Operating Partnership closed in May 2010 for its assumption of the outstanding mortgage balance of approximately $5,867 and cash proceeds of $176. The remaining proceeds of $176 were returned to cash reserves and recorded as a gain as of June 30, 2010.

In April 2009, the investment general partner transferred 99% of its interest in Suncrest, Limited to a non-affiliated entity for its assumption of the outstanding mortgage balance of approximately $917,468 and cash proceeds to the investment limited partner of $27,550. Of the total proceeds received, $872 represents reporting fees due to an affiliate of the investment partnership and the balance represents proceeds from the transfer. Of the remaining proceeds, $7,500 was paid to BCAMLP for expenses related to the transfer, which includes third party legal costs. The remaining proceeds of $19,178 were returned to cash reserves held by the Partnership. The monies held in cash reserves will be utilized to pay current operating expenses, accrued but unpaid asset management fees, and accrued but unpaid expenses of the investment partnership. After all outstanding obligations of the investment partnership are satisfied, any remaining monies will be distributed based on the number of Units held by each investor at the time of distribution. Annual losses generated by the Operating Partnership, which were applied against the investment limited partnership's investment in the Operating Partnership in accordance with the equity method of accounting, had previously reduced the investment in the Operating Partnership to zero. Accordingly, a gain on the sale of the Operating Partnership of the proceeds from the sale, net of the overhead and expense reimbursement, has been recorded in the amount of $19,178 as of April 30, 2009. The transfer of the remaining 1% investment partnership interest in the Operating Partnership closed in May 2010 for its assumption of the outstanding mortgage balance of approximately $9,267 and cash proceeds of $278. The remaining proceeds of $278 were returned to cash reserves and recorded as a gain as of June 30, 2010.

In April 2009, the investment general partner transferred 99% of its interest in Warren Properties, Limited to a non-affiliated entity for its assumption of the outstanding mortgage balance of approximately $1,330,935 and cash proceeds to the investment limited partner of $39,928. Of the total proceeds received, $12,000 represents reporting fees due to an affiliate of the investment partnership and the balance represents proceeds from the transfer. Of the remaining proceeds, $10,000 was paid for real estate taxes due and $7,500 was paid to BCAMLP for expenses related to the transfer, which includes third party legal costs. The remaining proceeds of $10,428 were returned to cash reserves held by the Partnership. The monies held in cash reserves will be utilized to pay current operating expenses, accrued but unpaid asset management fees, and accrued but unpaid expenses of the investment partnership. After all outstanding obligations of the investment partnership are satisfied, any remaining monies will be distributed based on the number of Units held by each investor at the time of distribution. Annual losses generated by the Operating Partnership, which were applied against the investment limited partnership's investment in the Operating Partnership in accordance with the equity method of accounting, had previously reduced the investment in the Operating Partnership to zero. Accordingly, a gain on the sale of the Operating Partnership of the proceeds from the sale, net of the overhead and expense reimbursement, has been recorded in the amount of $428 as of June 30, 2009. An adjustment to the gain on sale has been recorded in the amount of $10,000 as of September 30, 2009. The transfer of the remaining 1% investment partnership interest in the Operating Partnership closed in May 2010 for its assumption of the outstanding mortgage balance of approximately $13,444 and cash proceeds of $403. The remaining proceeds of $403 were returned to cash reserves and recorded as a gain as of June 30, 2010.

In January 2010, the investment general partner transferred its interest in Brookhollow Manor Limited to an entity affiliated with the operating general partner for its assumption of the outstanding mortgage balance of approximately $1,322,745 and cash proceeds to the investment limited partner of $25,000. Of the total proceeds received, $7,594 represents reporting fees due to an affiliate of the investment partnership and the balance represents proceeds from the transfer. Of the remaining proceeds, $7,500 was paid to BCAMLP for expenses related to the transfer, which includes third party legal costs. The remaining proceeds of $9,906 were returned to cash reserves held by the Partnership. The monies held in cash reserves will be utilized to pay current operating expenses, accrued but unpaid asset management fees, and accrued but unpaid expenses of the investment partnership. After all outstanding obligations of the investment partnership are satisfied, any remaining monies will be distributed based on the number of BACs held by each investor at the time of distribution. Annual losses generated by the Operating Partnership, which were applied against the investment partnership's investment in the Operating Partnership in accordance with the equity method of accounting, had previously reduced the investment in the Operating Partnership to zero. Accordingly, a gain on the sale of the Operating Partnership of the proceeds from the sale, net of the overhead and expenses, has been recorded in the amount of $9,906 as of March 31, 2010.

Off Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP), which require the Partnership to make various estimates and assumptions. The following section is a summary of some aspects of those accounting policies that may require subjective or complex judgments and are most important to the portrayal of the Partnership's financial condition and results of operations. The Partnership 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 financial statements.

The Partnership is required to assess potential impairments to its long-lived assets, which are primarily investments in limited partnerships. The Partnership accounts for its investment in limited partnerships in accordance with the equity method of accounting since the Partnership does not control the operations of the Operating Partnerships. The purpose of an impairment analysis is to verify that the real estate investment balance reflected on the balance sheet does not exceed the value of the underlying investments.

If the book value of the Partnership's investment in an Operating Partnership exceeds the estimated value derived by management, which generally consists of the remaining future Low-Income Housing Credits allocable to the Partnership and the estimated residual value to the Partnership, the Partnership reduces its investment in the Operating Partnership and includes this reduction in equity in loss of investment of limited partnerships.

In accordance with the accounting guidance for the consolidation of variable interest entities, the Partnership determines when it should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors.  A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has (1) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and (2) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE. 

Based on this guidance, the Operating Partnerships in which the Partnership invests meet the definition of a VIE.  However, management does not consolidate the Partnership's interests in these VIEs, as it is not considered to be the primary beneficiary.  The Partnership currently records the amount of its investment in these partnerships as an asset on its balance sheets, recognizes its share of partnership income or losses in the statements of operations, and discloses how it accounts for material types of these investments in its financial statements. The Partnership's balance in investment in Operating Partnerships, plus the risk of recapture of tax credits previously recognized on these investments, represents its maximum exposure to loss.  The Partnership's exposure to loss on these partnerships is mitigated by the condition and financial performance of the underlying Housing Complexes as well as the strength of the local general partners and their guarantee against credit recapture.

Recent Accounting Changes

 

In September 2006, the Financial Accounting Standards Board ("FASB") issued accounting guidance for Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. This guidance is effective for financial statements issued for fiscal years beginning after November 15, 2007 and shall be applied prospectively except for very limited transactions. In February 2008, the FASB delayed for one year implementation of the guidance as it pertains to certain non-financial assets and liabilities. The Partnership adopted GAAP for Fair Value Measurements effective April 1, 2008, except as it applies to those non-financial assets and liabilities, for which the effective date was April 1, 2009. The Partnership has determined that adoption of this guidance has no material impact on the Partnership's financial statements.

In November 2008, the FASB issued accounting guidance on Equity Method Investment Accounting Considerations that addresses how the initial carrying value of an equity method investment should be determined, how an impairment assessment of an underlying indefinite-lived intangible asset of an equity method investment should be performed, how an equity method investee's issuance of shares should be accounted for, and how to account for a change in an investment from the equity method to the cost method. This guidance is effective in fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. The Partnership adopted the guidance for the interim quarterly period beginning April 1, 2009. The impact of adopting it does not have a material impact on the Partnership's financial condition or results of operations.

In April 2009, the FASB issued accounting guidance for Interim Disclosures about Fair Value of Financial Instruments.  This 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.  It became effective for American Affordable Housing II L.P. as of and for the interim period ended June 30, 2009 and has no impact on the Partnership's financial condition or results of operations.

In May 2009, the FASB issued guidance regarding subsequent events, which was subsequently updated in February 2010. This guidance established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this guidance sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This guidance was effective for financial statements issued for fiscal years and interim periods ending after June 15, 2009, and was therefore adopted by the Partnership for the quarter ended June 30, 2009. The adoption did not have a significant impact on the subsequent events that the Partnership reports, either through recognition or disclosure, in the financial statements. In February 2010, the FASB amended its guidance on subsequent events to remove the requirement to disclose the date through which an entity has evaluated subsequent events, alleviating conflicts with current SEC guidance. This amendment was effective immediately and therefore the Partnership did not include the disclosure in this Form 10-Q.

In June 2009, the FASB issued the Accounting Standards Codification (Codification). Effective July 1, 2009, the Codification is the single source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP. The Codification is intended to reorganize, rather than change, existing GAAP. Accordingly, all references to currently existing GAAP have been removed and have been replaced with plain English explanations of the Partnership's accounting policies. The adoption of the Codification did not have a material impact on the Partnership's financial position or results of operations.

Item 3.

Quantitative and Qualitative Disclosure About Market Risk

 

 

 

Not Applicable

 

Item 4.

Controls & Procedures

 

 

 

 

(a)

Evaluation of Disclosure Controls and Procedures

 

 

As of the end of the period covered by this report, the Partnership's general partner, under the supervision and with the participation of the Principal Executive Officer and Principal Financial Officer of C&M Management, Inc., carried out an evaluation of the effectiveness of the Partnership's "disclosure controls and procedures" as defined in the Securities Exchange Act of 1934 Rules 13a-15 and 15d-15. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that as of the end of the period covered by this report, the Partnership's disclosure controls and procedures were adequate and effective in timely alerting them to material information relating to the Partnership required to be included in the Partnership's periodic SEC filings.

 

 

 

 

(b)

Changes in Internal Controls

 

 

There were no changes in the Partnership's internal control over financial reporting that occurred during the quarter ended September 30, 2010 that materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting.

 

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

 

 

 

None

 

 

Item 1A.

Risk Factors

 

 

 

There have been no material changes from the risk factors set forth under Part I, Item 1A. "Risk Factors" in our Form 10-K for the fiscal year ended March 31, 2010.

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

 

None

 

 

Item 3.

Defaults upon Senior Securities

 

 

 

None

 

 

Item 4.

(Removed and Reserved.)

 

 

Item 5.

Other Information

 

 

 

None

 

 

Item 6.

Exhibits

 

 

 

(a)Exhibits

 

 

 

 

31.a Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of John P. Manning, Principal Executive Officer, filed herein

 

 

 

 

31.b Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of Marc N. Teal, Principal Financial Officer, filed herein

 

 

 

 

32.a Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of John P. Manning, Principal Executive Officer, filed herein

 

 

 

 

 

32.b Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Marc N. Teal, Principal Financial Officer, filed herein

 

 

 

 

 

 

 

 

 

 

SIGNATURES

Pursuant to the requirements of Section 13 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.

 

American Affordable Housing II

 

Limited Partnership

 

 

 

 

 

By:

Boston Capital Associates Limited

 

 

Partnership, General Partner

 

 

 

 

 

 

By:

BCA Associates Limited Partnership,

 

 

 

General Partner

 

 

 

 

 

 

By:

C&M Management Inc.,

 

 

 

General Partner

 

 

 

 

Date: November 15, 2010

 

By:

/s/ John P. Manning

 

 

 

John P. Manning

 

 

 

 



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

DATE

SIGNATURE

TITLE

 

 

 

November 15, 2010

/s/ John P. Manning

Director, President

 

John P. Manning

(Principal Executive

 

 

Officer), C&M

 

 

Management Inc;

DATE

SIGNATURE

TITLE

 

 

 

November 15, 2010

/s/ Marc N. Teal

Senior Vice President, Chief Financial Officer

 

Marc N. Teal

(Principal Accounting and Financial Officer)

 

 

C&M Management Inc.




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Ticker: AAHII
CIK: 815024
Form Type: 10-Q Quarterly Report
Accession Number: 0000815024-10-000003
Submitted to the SEC: Mon Nov 15 2010 11:50:08 AM EST
Accepted by the SEC: Mon Nov 15 2010
Period: Thursday, September 30, 2010
Industry: Operators Of Apartment Buildings

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