SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
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 0-7771
URBAN IMPROVEMENT FUND LIMITED 1973-II
(Exact name of registrant as specified in its charter)
California 95-6398192
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1201 Third Avenue, Suite 5400, Seattle, Washington 98101 3076
(Address of principal executive offices) (ZIP code)
Registrant's telephone number, including area code: (206) 622-9900
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 and (2) has been subject to such
filing requirements for the past 90 days. Yes X 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 definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to Form 10-K. [ ]
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of December 31, 1997: No established
market value.
<PAGE>
PART I
Item 1. Business
(a) General Development of Business Urban Improvement Fund
Limited 1973-II, a California limited partnership (the "Registrant"), was
formed in 1973 for the purpose of investing, through Local Limited
Partnerships (LLP's), in federally and state-assisted low and moderate
income housing projects. Units of Limited Partnership Interest were sold
in a public offering to investors who required tax shelter for income from
other sources. The Registrant acquired equity interests as a limited partner
in eleven (11) such Local Limited Partnerships. One of these projects was
sold in 1978 through a trustee's sale (foreclosure). One of the
Partnerships, 808 Memorial Drive, sold its interest in real estate during
July 1997 in a tax-free exchange. The Partnership also changed its name
to 808 Investments Limited Partnership and reinvested the proceeds in
three properties that are conventional, multi-family residential projects
during December 1997. Two of these properties, Mott Haven Apartment
VII and Mott Haven Apartments VIII are either in default on their
mortgage or technical default due to physical condition of property.
Despite the efforts of the General Partner, the owners and managers of
Mott Haven Apartments VII and Mott Haven Apartments VIII to preserve
the developments and provide decent and affordable housing, the financial
stability of the developments is threatened by the imminent expiration of
the Section 8 loan management set-aside contracts and the likelihood that
they will not be renewed on this property for federal budget and policy
reasons. HUD, the owners and the General Partner of Mott Haven
Apartments VII and Mott Haven Apartments VIII believe that it is in the
best interests of the developments and their tenants that the projects be
renovated and reconfigured, and that such result can best be accomplished
through replacement of the existing management and ownership structure
with community-based owners and managers. The General Partner has
taken steps to transfer these properties to HUD. The remaining seven (7)
partnerships are described in Item 2 hereof.
<PAGE>
(b) Financial Information about Industry Segment The Registrant is
engaged in only one line of business.
(c) Narrative Description of Business The real estate business is
highly competitive. The Registrant competes with numerous established
apartment owners and real estate developers of low income housing
having greater financial resources. There are additional risks of new
construction of low income housing occurring in an area where the
Registrant has invested in existing government-assisted housing projects.
Moreover, the outlook for subsidized housing is not determinable, given
existing and proposed federal legislation.
(d) Financial information about foreign and domestic operations and
export sales - The Registrant's income is entirely dependent upon revenues
received from the limited partnerships in which it is a limited partner.
Investment in federal, state and local government-assisted housing is
subject to significant regulation. These regulations limit, among other
things, the amount of return allowed on the initial equity investment, the
manner in which such properties may be sold and persons to whom such
properties may be sold. In 1987, fearing the loss of affordable housing
units, Congress passed emergency legislation which prohibited
prepayment of all FHA insured Section 236 or Section 221(d)(3)
mortgages. Congress passed additional legislation in 1990 known as
LIHPRHA (the Low Income Housing Preservation and Resident
Homeownership Act). However, by 1995, Congress had determined the
program was too expensive to continue. In March 1996, Congress
changed the compensation program, severely limited funding, and restored
the property owners' right to prepay the FHA mortgages and change the
use of the properties under legislation known as the Housing Opportunity
Program Extension Act of 1996. The General Partner of the Partnership
has initiated steps to ensure that the Local Limited Partnerships comply
with the provisions of LIHPRHA and subsequent legislation. See
financial information in Item 6, Selected Financial Data, in this report.
<PAGE>
Item 2. Partnerships
The Registrant owns equity interests as a Limited Partner in the
following Partnership as of December 31, 1997:
<TABLE>
<S>
<C> <C> <C> <C>
1997
Partnership Name No. of Percent of
Real Estate Location Type Units Occupancy
Community Circle
Cleveland, Ohio 236 New 160 98%
Crowninshield Apartments
Peabody, MA MHFA Rehab.* 284 99%
Holly Street
Lawrence, MA MHFA Rehab.* 71 98%
King Drive
Chicago, IL 236 New 315 96%
Met-Paca Section 1
New York, NY 236 Rehab. 37 100%
Morrisania II
New York, NY 236 Rehab. 161 96%
Southern Boulevard
Phase One
New York, NY 236 Rehab. 72 100%
</TABLE>
*Developed under auspices of Massachusetts Housing Finance Agency.
Mortgage indebtedness associated with each project is shown in Schedule
XI of this report.
The following properties were assigned to HUD at December 31, 1997:
<TABLE>
<S>
<C> <C> <C> <C>
Mott Haven 7
New York, NY 236 Rehab. 165 100%
Mott Haven 8
New York, NY 236 Rehab. 171 98%
</TABLE>
The following properties were purchased by 808 Investment Limited
Partnership in December 1997:
<TABLE>
<S>
<C> <C> <C> <C>
Sedgefield Square
Greensboro, NC Conventional 124 N/A
Windsor Station
Dallas, TX Conventional 399 N/A
The Summit
Escondido, CA Conventional 128 N/A
</TABLE>
<PAGE>
The following is a description of each of the above listed properties:
COMMUNITY CIRCLE is a 160-unit project located in Cleveland, Ohio,
consisting of seven frame and brick two-story buildings and one masonry
and pre-cast concrete ten-story building. The project was constructed
under Section 236 of the National Housing Act.
<TABLE>
<S> <C> <C>
Type of Unit No. of Units
1 Bedroom 78
2 Bedroom 50
3 Bedroom 20
4 Bedroom 12
</TABLE>
CROWNINSHIELD APARTMENTS consists of 284 rental units
rehabilitated under the auspices of the Massachusetts Housing Finance
Agency. The project is located in Peabody, Massachusetts.
<TABLE>
<S>
<C> <C>
Type of Unit No. of Units
Studio 19
1 Bedroom 233
2 Bedroom 31
3 Bedroom 1
</TABLE>
HOLLY STREET is a 71-unit project located in the cities of Methuen and
Lawrence, Massachusetts, consisting of eleven two-, three- and four-story
buildings of frame and brick construction. The project was rehabilitated
pursuant to authority granted by the Massachusetts Housing Finance
Agency, with subsidy under Section 236 of the National Housing Act.
<TABLE>
<S>
<C> <C>
Type of Unit No. of Units
Studio 6
1 Bedroom 20
2 Bedroom 28
3 Bedroom 11
4 Bedroom 5
5 Bedroom 1
</TABLE>
<PAGE>
KING DRIVE APARTMENTS is a 315-unit project located in Chicago,
Illinois. It is a 22-story building of concrete construction. The building
contains space for two commercial shops. The project was constructed
under Section 236 of the National Housing Act.
<TABLE>
<S> <C> <C>
Type of Unit No. of Units
Studio 21
1 Bedroom 168
2 Bedroom 126
</TABLE>
MET-PACA I consists of 37 units in four buildings rehabilitated under
Section 236 of the National Housing Act. This project is located in New
York City, New York.
<TABLE>
<S>
<C> <C>
Type of Unit No. of Units
1 Bedroom 4
2 Bedroom 18
3 Bedroom 15
</TABLE>
MORRISANIA II ASSOCIATES is a 161-unit project located at
1104-1148 Clay Avenue, Bronx, New York, consisting of twelve
five-story buildings of brick construction. The development was
rehabilitated under Section 236 of the National Housing Act.
<TABLE>
<S>
<C> <C>
Type of Unit No. of Units
1 Bedroom 68
2 Bedroom 24
3 Bedroom 36
4 Bedroom 33
</TABLE>
SOUTHERN BOULEVARD REHAB PHASE I is a 72-unit project
located in the Bronx, New York, consisting of two six-story, wood joist
and brick exterior buildings. The project is located in the same area as
Mott Haven 7. The project was rehabilitated under Section 236 of the
National Housing Act.
<TABLE>
<S>
<C> <C>
Type of Unit No. of Units
1 Bedroom 27
2 Bedroom 22
3 Bedroom 13
4 Bedroom 10
</TABLE>
<PAGE>
The following properties were assigned to HUD at December 31, 1997:
MOTT HAVEN 7 is a 165-unit project located in the Bronx, New York,
and consists of four-, five- and six-story buildings of brick and masonry
construction. The project was rehabilitated under Section 236 of the
National Housing Act.
<TABLE>
<S>
<C> <C>
Type of Unit No. of Units
1 Bedroom 41
2 Bedroom 65
3 Bedroom 47
4 Bedroom 12
</TABLE>
MOTT HAVEN 8 is a 171-unit project located in the Bronx, New York,
consisting of four-, five- and six-story buildings of brick and masonry
construction. The project is located in the same area as Mott Haven 7.
The project was rehabilitated under Section 236 of the National Housing
Act.
<TABLE>
<S>
<C> <C>
Type of Unit No. of Units
1 Bedroom 41
2 Bedroom 74
3 Bedroom 42
4 Bedroom 14
</TABLE>
808 INVESTMENTS LIMITED PARTNERSHIP owned a 301-unit
project located in Cambridge, Massachusetts, consisting of two buildings
of steel and brick construction and a five-level parking structure. The
buildings are eleven and twenty stories and they are centrally
air-conditioned. The project has two small landscaped plazas. There is
approximately 57,000 square feet of commercial space and 2,000 square
feet of retail spaces. The project was constructed under the auspices of the
Massachusetts Housing Finance Agency.
<TABLE>
<S>
<C> <C>
Type of Unit No. of Units
1 Bedroom 128
2 Bedroom 139
3 Bedroom 30
4 Bedroom 4
</TABLE>
<PAGE>
During July 1997, the Partnership sold its real estate project located in
Cambridge, Massachusetts in a tax free exchange. During December
1997, the Partnership purchased a 124 unit project located in Greensboro,
North Carolina, a 399 unit project in Dallas, Texas and a 128 unit project
in Escondido, California. These projects were financed with conventional
mortgages which are not insured by HUD or any state agency.
Item 3. Legal Proceedings.
There are no material pending legal proceedings at this time, other than
ordinary routine litigation incidental to the Partnership's business,
including the Local Limited Partnerships in which the Partnership is a
Limited Partner.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through the solicitation
of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters.
(a) There is not a ready market for the transfer of limited partnership
interests. Limited partnership interests may be transferred between
individuals with the consent of the General Partner.
(b) Holders
<TABLE>
<S>
<C> <C> <C> <C>
Title of Name & Address of Amount and Nature of % of
Class Beneficial Owner Beneficial Ownership Class
General Partner Interfinancial Real 100 Units 100%
Interest Estate Management Co. ($95,000)
1201 Third Avenue, Suite 5400
Seattle, Washington 98101-3076
Limited Partner 629 Limited Partners 11,335 Units 100%
Interest ($11,335,000)
</TABLE>
The Registrant has no officers or directors. Interfinancial Real Estate
Management Company, the General Partner of the Registrant, is a
corporation.
(c) There have been no distributions to partners during the five year
period ending December 31, 1997.
Item 6. Selected Financial Data
These statements do not include all disclosures required under generally
accepted accounting principles; however, when read in conjunction with
the related financial statements and notes thereto included under Item 8,
the statements include all generally accepted accounting principles
disclosures for the latest three years.
<PAGE>
<TABLE>
<S>
<C> <C> <C> <C> <C>
Year Ended December 31,
1997 1996 1995 1994 1993
Operating Income:
Interest income $ 214 $ 796 $ 765 $ 836 $ 315
Other income -0- 6,250 8,125 8,750 5,000
214 7,046 8,890 9,586 5,315
Expenses:
Professional fees 18,492 16,623 18,409 15,546 13,325
Management fee 70,000 70,000 70,000 70,000 70,000
Incentive
management fee 22,349 -0- 23,501 12,030 701
Amortization
expense 16,863 -0- -0- -0- -0-
Other expenses 6,813 250 313 645 6,309
134,517 86,873 112,223 98,221 90,335
Loss before equity
in income (loss) of
Local Limited
Partnerships (134,303) (79,827) (103,333) (88,635) (85,020)
Equity in income
(loss) of
Local Limited
Partnerships 4,009,902 (2,500) 48,765 16,212 (7,827)
Net income (loss) $3,875,599 $(82,327) $(54,568) $(72,423) $(92,847)
Allocation of net
income (loss):
Net loss
allocated
to General
Partner 193,780 (4,116) $ (2,728) $ (3,621) $ (4,642)
Net loss
allocated
to Limited
Partners 3,681,819 (78,211) (51,840) (68,802) (88,205)
$3,875,599 $(82,327) $(54,568) $(72,423) $(92,847)
Net financial
reporting income
(loss) per unit:
General
Partnership
units (100
units outstanding
allocated to
General
Partner) $ 1,938 $ (41) $ (27) $ (36) $ (46)
Limited
Partnership
units (11,335
units outstanding
allocated to
Limited
Partners) $ 325 $ (7) $ (5) $ (6) $ (8)
Total assets $4,624,029 $ 4,876 $ 34,577 $ 36,645 $ 12,025
Long-term
obligations $ -0- $ -0- $ -0- $ -0- $ -0-
Cash dividends $ -0- $ -0- $ -0- $ -0- $ -0-
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Partnership has followed the practice of investing available
funds, not used in the purchase of properties or in operations, in short-term
investments. Interest income resulted from such short-term investments.
The Partnership is dependent upon interest earned and the distributions
and repayment of advances from Local Limited Partnerships for cash flow.
As shown in the table below, the Partnership has received distributions in
recent years. This trend is expected to continue. The Partnership has
advanced funds to and received repayments of such advances from
selected Local Limited Partnerships. The General Partner believes these
net advances will not significantly affect the operations of the Partnership.
<TABLE>
<S>
<C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
Urban's share of
distribution $ 79,570 $ -0- $ 68,247 $ 50,087 $ 14,673
Advances (made to)
repaid by
Local Limited
Partnerships $ -0- $ (2,500) $(19,482) $(33,875) $(22,500)
</TABLE>
Under the terms of the Limited Partnership Agreement, the Partnership
is required to pay the General Partner an annual management fee equal to
one-quarter of one percent of invested assets or $136,548. (The fee will
not be more than fifty percent of the Partnership's annual net cash flow, as
defined, subject to an annual minimum of $70,000.) The Partnership
recorded management fee expense of $70,000 per year from 1993 through
1997. The Partnership will also pay the General Partner a liquidation fee
for the sale of projects. The liquidation fee is the lesser of (i) ten
percent of the net proceeds to the Partnership from the sale of a project(s)
or (ii) one percent of the sales price plus three percent of the net
proceeds after deducting an amount sufficient to pay long-term capital gains
taxes. No part of such fee shall accrue or be paid unless: (i) the Limited
Partners'share of the
<PAGE>
proceeds has been distributed to them, (ii) the Limited Partners shall have
first received an amount equal to their invested capital attributable to the
project(s) sold, and (iii) the Limited Partners have received an amount
sufficient to pay long-term capital gains taxes from the sale of the
project(s), if any, calculated at the maximum rate then in effect.
During the period 1993 to 1997, the Partnership paid incentive
management fees to the General Partner of a Local Limited Partnership.
These fees were paid from distributions received from this Local Limited
Partnership.
At December 31, 1997, the Partnership had investments in eight active
real estate limited partnerships as a Limited Partner. The Partnership
carries such investments on the equity method of accounting. The
Partnership discontinues recording losses for financial reporting purposes
when its investment in a particular Local Limited Partnership is reduced to
zero, unless the Partnership intends to commit additional funds to the
Local Limited Partnership. At year-end, all of the investments were
reduced to zero except for 808. The equity in income in Local Limited
Partnerships resulted from either Local Limited Partnerships, whose
investments have not been reduced to zero, reporting income from
operations and Local Limited Partnerships, whose investments have been
reduced to zero, who paid distributions or repaid an advance. Additional
advances to Local Limited Partnerships, after an investment is reduced to
zero, are recorded as losses.
<PAGE>
The components of the Partnership's equity in net income (loss) of the
Local Limited Partnerships for 1997, 1996 and 1995 is summarized as
follows:
<TABLE>
<S>
<C> <C> <C>
1997 1996 1995
Income from Partnerships
with non-zero
investments:
808 Investments Limited
Partnership $3,930,332 $ -0- $ -0-
Repayment of advances
from (advances to)
Partnerships with zero
investments:
808 Investments Limited
Partnership -0- $ (2,500) $ (19,482)
Distributions received
from Partnerships
with zero investments:
Southern Boulevard I -0- -0- 34,105
Crowninshield 79,570 -0- 34,142
$4,009,902 $ (2,500) $ 48,765
</TABLE>
The net income from 808 Investments Limited Partnership was a result of
the sale of real estate and represents Urban's share of the sales proceeds
which were reinvested in the tax-free exchange.
The actual combined losses of Local Limited Partnerships will generally
decrease as depreciation and interest decreases and the projects achieve
stable operations. The distributions to the Partnership from Local Limited
Partnerships are the result of positive cash flow from the operations of
these projects.
Liquidity
The Partnership is dependent upon distributions from its investments in
Local Limited Partnerships for cash flow. The Partnership may not be
able to generate sufficient cash flow from operations or from distributions
from its interests in Local Limited Partnerships to pay future obligations
as they become due without additional financing or advances from the
General Partner. The General Partner is under no obligation to advance
additional funds to the Partnership. The General Partner is monitoring the
operations of the Local Limited Partnerships to ensure that sufficient cash
will be received from the Local Limited Partnerships to sustain operations.
The General Partner anticipates it will receive adequate distributions from
the Local Limited Partnerships to maintain operations.
<PAGE>
Capital Resources
The General Partner believes that additional situations may arise where it
would be advantageous to the Partners to exchange properties in a tax-free
transaction. The Partnership's basis in its properties has been reduced
through depreciation deductions and other losses to levels substantially
below the amount of debt secured by the properties. Additionally, the
rental properties owned and operated by the Local Limited Partnerships
have typically computed depreciation for financial reporting purposes
using the straight-line method over the estimated economic useful life of
the property. For income tax reporting purposes, depreciation generally
has been computed over the same or shorter periods using accelerated
methods. As a result, the carrying values of the Partnership's investments
in Local Limited Partnerships are substantially greater for financial
reporting purposes than for income tax reporting purposes. Upon sale or
other disposition of a property by the Local Limited Partnership, the gain
recognized by the Partnership for income tax reporting purposes may be
substantially greater than the gain recorded for financial reporting
purposes. Accordingly, if the properties are sold, the Partnership, in all
likelihood, would recognize taxable gain in excess of the cash available for
distribution. If sale proceeds are reinvested in a manner which permits the
original sale to be treated as a like-kind exchange, the Partnership can
defer this gain until the new property is sold. Additionally, the Partnership
will receive the benefit of any cash flow or appreciation in value of the
new property. If reinvestments were made, it is likely that the acquired
properties would be conventional, multi-family residential projects.
The Partnership has made no material commitments for capital
expenditures.
<PAGE>
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted in a separate section of this report.
Item 9. Change in and Disagreements With Accountants on Accounting
and Financial Disclosure
There have been no disagreements on any matters of accounting
principles or practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) The General Partner of the Registrant is Interfinancial Real Estate
Management Company. The Registrant does not have directors as such.
The following is a listing of the Directors of the General Partner of the
Registrant. These Directors are elected to serve one-year terms and until
their successors are duly elected and qualified as directors.
<TABLE>
<S>
<C> <C> <C>
Name Age Office
Paul H. Pfleger 62 Director/President
John M. Orehek 43 Director/Senior Vice President
</TABLE>
(b) The General Partner of the Registrant is Interfinancial Real Estate
Management Company. The Registrant does not have executive officers
as such. The following is a listing of the executive officers of the General
Partner of the Registrant. These executive officers are elected to serve
one-year terms and will continue to serve until their successors are duly
elected and qualified as executive officers.
<TABLE>
<S>
<C> <C> <C>
Name Age Office
Paul H. Pfleger 62 Chairman of the Board
John M. Orehek 43 Senior Vice President
Michael Fulbright 43 Secretary
</TABLE>
(c) The Registrant has no employees.
(d) There are no family relationships between any directors or
executive officers.
(e) The principal occupation and employment of each of the executive
officers and directors of the General Partner are as follows:
<PAGE>
Paul H. Pfleger, President/Director. Mr. Pfleger organized and was
Chairman of the Board of Security Properties Inc. (formerly Security
Pacific, Inc.) from 1969 to the present, except for a period between 1984
and 1986. Farmers Savings acquired Security Properties Inc. as a
wholly-owned subsidiary during 1984 and sold the company back to the
original owners during 1987. The major line of business of Security
Properties Inc. is the administration of previously syndicated, subsidized
multifamily residential real estate. Mr. Pfleger was first elected an officer
and director of the General Partner, Interfinancial Real Estate Management
Company, in July 1981 and has maintained his dual status since that time.
Mr. Pfleger is the General Partner in over 280 properties with
approximately 38,000 housing units throughout the United States.
John M. Orehek, Senior Vice President. Mr. Orehek is the Chief
Executive Officer and President of Security Properties Investment Inc.
From 1982 to 1987, he was employed by Security Properties Inc. (SPI) as
President of First Columbia Corporation, its affiliated broker/dealer, and
Senior Vice President of SPI. From 1987 to 1991, when he rejoined SPI,
he was President of Hallmark Capital Partners, Ltd., a Seattle real estate
development corporation. From 1979 to 1982 he was a member of the tax
department in the Cleveland, Ohio and Seattle, Washington offices of
Arthur Andersen & Co., Certified Public Accountants. He received a B.S.
degree in Economics from Allegheny College, Meadville, Pennsylvania
and a law degree from Case Western Reserve University School of Law.
Mr. Orehek was first elected a director of the General Partner,
Interfinancial Real Estate Management Company, during 1992.
<PAGE>
Michael Fulbright, Secretary. Mr. Fulbright is General Counsel for
Security Properties Inc. (SPI). He joined the Company in 1989 as Special
Counsel responsible for new development activities and sales and
financing transactions in the syndication portfolio. Prior to joining SPI, he
was a partner at Tousley Brain, a Seattle law firm that specializes in
commercial real estate matters. His practice there included representation
of lenders, institutional investors and commercial developers. He received
a Masters of Business Administration degree from Texas A&M and a law
degree from the University of Washington. He is a member of the
Washington State Bar Association. Mr. Fulbright was first elected an
officer of the General Partner, Interfinancial Real Estate Management
Company, during 1994.
(f) Section 20 of the Amended Certificate and Agreement of Limited
Partnership of the Registrant provides for the indemnification of the
General Partner and its designees and nominees against liability resulting
from errors in judgment or any acts or omissions, whether or not
disclosed, unless caused by a breach of fiduciary duty of such parties to
the Registrant or its Limited Partners. None of the officers or directors of
the General Partner of the Registrant have filed a petition under the federal
bankruptcy laws or any state insolvency act, nor have they been engaged
in any acts over the past five years that would impair their ability or
integrity as directors or executive officers of the General Partner of the
Registrant.
<PAGE>
Item II. Executive Compensation
(a) The Registrant will not pay directly any salary or other
remuneration to the officers of the General Partner of the Registrant.
(b) The Registrant has no plan or arrangement to pay directly any
salary or other remuneration to the officers in the future.
(c) There are no such options, warrants, rights or any other
remuneration available to the General Partner of the Registrant.
(d) The Registrant will not pay directly any salary or other
remuneration to the directors of the General Partner of the Registrant.
(e) There are no such retirement benefit plans or other remuneration
that would result from the resignation, retirement, termination or any other
change in control of any officer or director of the General Partner of the
Registrant.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) Security Ownership of Certain Beneficial Owners
(b) Holders
<TABLE>
<S>
<C> <C> <C> <C>
Title of Name & Address of Amount and Nature of % of
Class Beneficial Owner Beneficial Ownership Class
General Partner Interfinancial Real 100 Units 100%
Interest Estate Management Co. ($95,000)
1201 Third Avenue, Suite 5400
Seattle, Washington 98101 3076
</TABLE>
(b) No officers or directors of the General Partner of the Registrant own
a Partnership interest.
(c) No change in control of the Registrant is anticipated.
Item 13. Certain Relationships and Related Transactions
(a) There are no transactions in which the directors or officers of the
General Partner or security holder of the Registrant have a material
interest.
(b) There are no transactions in which the directors of the General
Partner have a material interest.
(c) There is no indebtedness of the management of the General Partner
of the Registrant to the Registrant.
PART IV
Item 14. Exhibits, Financial Statements, Schedules, Exhibits and Reports
on Form 8-K.
(a) 1. Financial Statements:
Report of independent certified public accountants.
Balance Sheets at December 31, 1997 and 1996.
Statements of Income (Loss) for the years ended December 31,
1997, 1996 and 1995.
Statements of Changes in Partners' Capital for the years ended
December 31, 1997, 1996 and 1995.
Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995.
Notes to Financial Statements.
(a) 2. Financial Statement Schedules:
IV Indebtedness of and to Related Parties
XI Real Estate and Accumulated Depreciation and
Amortization of Local Limited Partnerships.
All other schedules are omitted because they are not applicable or the
required information is included in the Financial Statements or the notes
thereto.
FINANCIAL STATEMENTS OF UNCONSOLIDATED
SUBSIDIARIES FIFTY PERCENT OWNED PERSONS OR
OTHER UNCONSOLIDATED PERSONS ACCOUNTED
FOR ON THE EQUITY METHOD
Separate financial statements of the ten limited partnerships accounted
for on the equity method have been omitted because combined financial
statements are included in Note 4 to the financial statements.
(a) 3. Exhibits:
1.A. Form of proposed Selling Brokers' Agreement,
incorporated by reference from Registration
Statement on Form S-11 filed August, 1973.
<PAGE>
3.A. Amended Certificate and Agreement of Limited
Partnership, incorporated by reference from
Registration Statement on Form S-11 filed August,
1973.
3.B. Amendment to Certificate of Limited Partnership,
incorporated by reference from Registration Statement
on Form S-11 filed August, 1973.
3.C. Amendment to certificate of Limited Partnership.
Incorporated by reference from proxy statement filed
September 18, 1991.
4.A. Subscription agreement incorporated by reference from
Registration Statement on Form S-11 filed August,
1973.
5.A. Opinion and Consent of Counsel, incorporated by
reference from Pre-Effective Amendment No. 1 to
Registration Statement on Form S-11 filed October,
1973.
8.A. Opinion and Consent of Tax Counsel, incorporated by
reference from Pre-Effective Amendment No. 1 to
Registration Statement on Form S-11 filed October,
1973.
8.B. Tax Ruling request, incorporated by reference from
Pre-Effective Amendment No. 1 to Registration
Statement on Form S-11 filed October, 1973.
10.A. Copy of Agreement between Registrant, the General
Partner and Income-Equities Corporation with respect
to certain commitments made on behalf of the
Registrant, incorporated by reference from Pre-
Effective Amendment No. 1 to Registration Statement
on Form S-11 filed October, 1973.
10.B. Copy of the Management Agreement between the
Registrant and Income-Equities Corporation,
incorporated by reference from Registration Statement
on Form S-11 filed August, 1973.
10.C. Correspondence between the Management Company on
behalf of the General Partner, with various
developers, constituting agreements to invest in
Local Limited Partnerships, incorporated by reference
from Pre-Effective Amendment No. 1 to Registration
Statement on Form S-11 filed October, 1973.
<PAGE>
10.D. Copy of form of Limited Partnership Agreement between
the Registrant and Local Limited Partnerships in
which it becomes a limited partner, incorporated by
reference from Registration Statement on Form S-11
filed August, 1973.
28.A. Letters dated August 2, 1974 and August 15, 1974 to
investors from the General Partner and Management
Company regarding tax information matters,
incorporated by reference from Form 8-K filed August,
1974.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the last quarter of 1995.
(c) Exhibits:
Form 12b-25
(d) Financial Statement Schedules:
IV Indebtedness of and to Related Parties
XI Real Estate and Accumulated Depreciation and Amortization
of Local Limited Partnerships.
All other schedules are omitted because they are not applicable or the
required information is included in the financial statements or the notes
thereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed, on its behalf by the undersigned, thereunto duly authorized.
(REGISTRANT) URBAN IMPROVEMENT FUND LIMITED 1973-II
BY: INTERFINANCIAL REAL ESTATE MANAGEMENT COMPANY
Date: October 15, 1998
By: Paul H. Pfleger
President
Interfinancial Real Estate Management Company
Date: October 15, 1998
By: John M. Orehek
Senior Vice President
Interfinancial Real Estate Management Company
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: October 15, 1998
By: Paul H. Pfleger, Director
Interfinancial Real Estate Management Company
Date: October 15, 1998
By: John M. Orehek, Director
Interfinancial Real Estate Management Company.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1973-II
SEATTLE, WASHINGTON
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2) AND ITEM 14(d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED December 31, 1997
<PAGE>
Form 10-K Items 14(a)(1) and (2)
Form 10-K Item 14(d)
Urban Improvement Fund Limited 1973-II
(A Limited Partnership)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements of Urban Improvement Fund Limited
1973-II are included in Item 8 and Item 14(a)(1)
Independent Auditors' Report . . . . . . . . . . . . . . . F-3
Balance sheets at December 31, 1997 and 1996 . . . . . . . F-4
Statements of income (loss) for the years ended
December 31, 1997, 1996 and 1995. . . . . . . . . . . F-5
Statements of changes in partners' capital (deficit)
for the years ended December 31, 1997, 1996 and 1995. F-5
Statements of cash flows for the years ended
December 31, 1997, 1996 and 1995. . . . . . . . . . . F-6
Notes to financial statements. . . . . . . . . . . . . . . F-7
The following financial statement schedules of Urban Improvement Fund
Limited 1973-II are included in Item 14(a)(2) and 14(d):
IV. Indebtedness of and to Related Parties. . . . . . . .F-22
XI. Real Estate and Accumulated Depreciation
of Local Limited Partnerships. . . . . . . . .. .F-23
All other schedules are omitted because they are not applicable. Required
information is shown in the financial statements or notes thereto.
FINANCIAL STATEMENTS OF UNCONSOLIDATED
SUBSIDIARIES FIFTY PERCENT OWNED PERSONS OR
OTHER UNCONSOLIDATED PERSONS ACCOUNTED
FOR ON THE EQUITY METHOD
Separate financial statements of the eight limited partnerships accounted
for on the equity method have been omitted because combined financial
statements are included in Note 4 to the financial statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Urban Improvement Fund Limited - 1973-II
We have audited the accompanying balance sheets of Urban Improvement
Fund Limited 1973-II (a Limited Partnership) as of December 31, 1997
and 1996, and the related statements of income (loss), changes in partners'
capital (deficit) and cash flows for the years ended December 31, 1997,
1996 and 1995, and the related schedules listed in Item 14(a)(2) of the
annual report on Form 10-K of Urban Improvement Fund Limited
1973-II for the years ended December 31, 1997, 1996 and 1995. These
financial statements and financial statement schedules are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits. We did not audit four in 1997 and 1996
and six in 1995 of the financial statements of Urban Improvement Fund
Limited - 1973-II's Local Limited Partnership investments whose
combined financial statements are shown in Note 4. These statements
were audited by other auditors whose reports have been furnished to us,
and our opinion, to the extent it relates to the amounts included for these
Local Limited Partnership investments, is based solely on the reports of
the other auditors. Urban Investment Fund Limited - 1973-II's investment
in these partnerships has been reduced to zero.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of Urban Improvement Fund Limited
1973-II as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997, 1996
and 1995, in conformity with generally accepted accounting principles. In
addition, in our opinion, based upon our audits and the reports of other
auditors, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required therein.
Atlanta, Georgia
June 15, 1998
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
BALANCE SHEETS
ASSETS
<TABLE>
<S>
<C> <C>
December 31,
1997 1996
Cash and cash equivalents $ 11,750 $ 4,876
Investments in and advances
to Local Limited Partnerships
accounted for on the equity
method - Note 4
(Schedule IV and XI) 4,612,279 -0-
$ 4,624,029 $ 4,876
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Management fee payable
Note 3 (Schedule IV) $ 1,068,167 $ 1,033,167
Accounts payable -0- 126
Advance from general partner 732,923 24,243
1,801,090 1,057,536
Partners' capital (deficit)
Note 2 General Partner -
100 Partnership units
authorized, issued and
outstanding (335,352) (529,132)
Limited partners - 11,335
Partnership units
authorized, issued
and outstanding 3,158,291 (523,528)
2,822,939 (1,052,660)
Commitments and contingencies -
Note 3
$ 4,624,029 $ 4,876
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
STATEMENTS OF INCOME (LOSS)
<TABLE>
<S>
<C> <C> <C>
Year Ended December 31,
1997 1996 1995
Interest income $ 214 $ 796 $ 765
Other income -0- 6,250 8,125
214 7,046 8,890
Expenses:
Professional Fees 18,492 16,623 18,409
Management fees -
Note 3 70,000 70,000 70,000
Incentive management
fee 22,349 -0- 23,501
Amortization expense 16,863 -0- -0-
Other expenses 6,813 250 313
134,517 86,873 112,223
Loss before equity in
income (loss) of
Local Limited
Partnerships (134,303) (79,827) (103,333)
Equity in income
(loss) of Local
Limited Partnerships -
Note 4 4,009,902 (2,500) 48,765
Net income (loss) $3,875,599 $ (82,327) $ (54,568)
Allocation of net
income (loss):
Net loss allocated to
General Partner 193,780 (4,116) (2,728)
Net loss allocated to
Limited Partners 3,681,819 (78,211) (51,840)
$3,875,599 $ (82,327) $ (54,568)
Net financial
reporting income
(loss) per unit:
General partnership
units (100 units
outstanding allocated
to General Partner) $ 1,938 $ (41) $ (27)
Limited partnership
units (11,335 units
outstanding allocated
to Limited Partners) $ 325 $ (7) $ (5)
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<S>
<C> <C> <C>
General Limited
Partner Partners Total
Partners' capital (deficit) at
January 1, 1995 $ (522,288) $ (393,477) $ (915,765)
Net loss - 1995 (2,728) (51,840) (54,568)
Partners' capital (deficit) at
December 31, 1995 (525,016) (445,317) (970,333)
Net loss - 1996 (4,116) (78,211) (82,327)
Partners' capital (deficit) at
December 31, 1996 (529,132) (523,528) (1,052,660)
Net income - 1997 193,780 3,681,819 3,875,599
Partners' capital (deficit) at
December 31, 1997 $ (335,352) $3,158,291 $2,822,939
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<S>
<C> <C> <C>
Year Ended December 31,
1997 1996 1995
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ 3,875,599 $ (82,327) $( 54,568)
Adjustments to
reconcile net loss
to net cash used by
operating activities:
Amortization of costs
of acquisition 16,863 -0- -0-
Equity in net loss
(income) of Local
Limited Partnerships (4,009,902) 2,500 (48,765)
Increase (decrease) in
accounts payable (126) 126 -0-
Increase in accrued
management fees 35,000 52,500 70,000
Total adjustments (3,958,165) 55,126 21,235
Net cash used by
operating
activities (82,566) (27,201) (33,333)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Current year distributions 79,570 -0- 68,247
Contributions (1,581,837) -0- -0-
Net advances to
Local Limited
Partnerships 883,027 (2,500) (19,482)
Net cash provided
(used) by
investing activities (619,240) (2,500) 48,765
CASH FLOWS FROM
FINANCING ACTIVITIES:
Advances from
(repayments to)
General Partner 708,680 -0- (17,500)
NET INCREASE
(DECREASE) IN
CASH AND
CASH EQUIVALENTS 6,874 (29,701) (2,068)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF YEAR 4,876 34,577 36,645
CASH AND CASH
EQUIVALENTS AT
END OF YEAR $ 11,750 $ 4,876 $ 34,577
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements
Note 1 - Organization and Accounting Policies
Organization
Urban Improvement Fund Limited - 1973-II (the Partnership) was formed
under the California Uniform Limited Partnership Act on July 1, 1973, for
the principal purpose of investing in other limited partnerships (Local
Limited Partnerships), which own federal and state-assisted housing
projects. The Partnership issued 11,335 units of limited partnership
interests pursuant to a public offering of such units which terminated on
December 31, 1973. The Partnership also issued 100 units of general
partnership interests to Interfinancial Real Estate Management Company
(the General Partner).
The Urban Improvement Fund Limited - 1973-II prospectus, dated
October 24, 1973, specified that the General Partner has a five percent
interest in profits, losses and special allocations, and the limited partners
will share the remaining 95 percent interest in profits, losses and special
allocations in proportion to their respective units of limited partnership
interests.
Investment in Local Limited Partnerships
As of December 31, 1997, the Partnership has investments in eight active
real estate limited partnerships (Local Limited Partnerships), which are
accounted for on the equity method (Note 4). The investment account
represents the sum of the capital investment and unamortized cost of
acquisition less the Partnership's share in losses since the date of
acquisition. The Partnership discontinues recognizing losses and
amortizing cost of acquisition under the equity method when the
investment in a particular Local Limited Partnership is reduced to zero,
unless the Partnership intends to commit additional funds to the Local
Limited Partnership. Repayment of advances and cash distributions by the
Local Limited Partnerships, after the Partnership investment has been
reduced to zero, are recognized as income by the Partnership in the year
received. Additional advances to a Local Limited Partnership, after an
investment is reduced to zero, are recognized as losses.
Initial rent-up fees paid by the Partnership to the General Partner, deducted
when paid for income tax reporting purposes (Note 2), are capitalized as
costs of acquisition of the Local Limited Partnerships for financial
reporting purposes. These costs and other costs of acquisition are
amortized using the straight-line method over the lives (fifteen to forty
years) of the Local Limited Partnerships' properties. Amortization is
discontinued when the investment is reduced to zero.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements
Note 1 - Organization and Accounting Policies Continued
The Partnerships' equity in net income (loss) of the Local Limited
Partnerships is summarized as follows:
<TABLE>
<S>
<C> <C> <C>
1997 1996 1995
Income from Partnership
with non-zero
investments:
808 Investments Limited
Partnership $3,930,332 $ -0- $ -0-
Repayment of advances
from (advances to)
Partnerships with
zero investments:
808 Investments Limited
Partnership -0- $ (2,500) $(19,482)
Distributions received
from Partnerships
with zero investments:
Southern Boulevard I -0- -0- 34,105
Crowninshield 79,570 -0- 34,142
$4,009,902 $ (2,500) $ 48,765
</TABLE>
The net income from 808 Investments Limited Partnership was a result of
the sale of real estate and represents Urban's share of the sales proceeds
which were reinvested in the tax-free exchange.
Significant accounting policies followed by the Local Limited
Partnerships are summarized in Note 4.
Taxes on Income
No provision for taxes on income has been recorded in the financial
statements, since all taxable income or loss of the Partnership is allocated
to the partners for inclusion in their respective tax returns.
Fair Value of Financial Instruments and Use of Estimates
The Partnership estimates that the aggregate fair value of all financial
instruments at December 31, 1997 does not differ materially from the
aggregate carrying values of its financial instruments recorded in the
balance sheet. These estimates are not necessarily indicative of the
amounts that the Partnership could realize in a current market exchange.
The preparation of financial statements requires the use of estimates and
assumptions. Actual results could differ from those estimates.
Cash Equivalents
Marketable securities that are highly liquid and have maturities of three
months or less at the date of purchase are classified as cash equivalents.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 2 Reconciliation Between Net Loss and Partners' Capital (Deficit)
of the Partnership For Financial Reporting Purposes and Income
Tax Reporting Purposes
A reconciliation of the Partnership's loss for financial reporting purposes
and the Partnership's loss for income tax reporting purposes follows:
<TABLE>
<S>
<C> <C> <C>
For the Year Ended
December 31,
1997 1996 1995
Net income (loss) for
financial reporting
purposes $3,875,599 $ (82,327) $ (54,568)
Amortization of initial
or rent-up fees and
other costs of acquisition
capitalized for financial
reporting purposes and
previously deducted for
income tax reporting
purposes. 16,863 -0- -0-
Equity in income (losses)
reported by Local
Limited Partnerships
for income tax
reporting purposes
in excess of income
(losses) for financial
reporting purposes (4,562,763) 299,304 727,712
Accrual and other
adjustments for
financial reporting
purposes 1,249,090 126,168 196,423
Net income as reported
on the federal
income tax return $ 578,789 $ 343,145 $ 869,567
</TABLE>
A reconciliation of partners' capital (deficit) for financial reporting
purposes and partners' capital (deficit) for income tax reporting purposes
follows:
<TABLE>
<S>
<C> <C> <C>
For the Year Ended
December 31,
1997 1996 1995
Partners' capital (deficit)
for financial
reporting purposes $2,822,939 $(1,052,660) $ (970,333)
Unamortized portion
of initial and rent-up
fees and other costs of
acquisition capitalized
for financial reporting
purposes and previously
deducted for income tax
reporting purposes (1,104,724) (1,087,861) (1,087,861)
Commissions and offering
expenses capitalized for
income tax reporting
purposes and charged to
capital for financial
reporting purposes 1,237,673 1,237,673 1,237,673
</TABLE>
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 2 Reconciliation Between Net Income (Loss) and Partners' Capital
(Deficit) of the Partnership for Financial Reporting Purposes and
Income Tax Reporting Purposes - Continued
<TABLE>
<S>
<C> <C> <C>
For the Year Ended
December 31,
1997 1996 1995
Equity in cumulative
losses of Local
Limited Partnerships
for income tax
reporting purposes
in excess of losses
for financial reporting
purposes $(30,890,705) $(26,327,942) $(26,713,868)
Accrual and other
adjustments for
financial reporting
purposes 2,357,741 1,033,167 980,667
Partners' capital (deficit)
as reported
on the federal
income tax return $(25,577,076) $(26,197,623) $(26,553,722)
</TABLE>
The Partnership has received a ruling from the Internal Revenue Service
that the basis of the limited partners' interests in the Partnership will
include the Partnership's allocable share of basis resulting from mortgage
debt of the Local Limited Partnerships under Section 752 of the Internal
Revenue Code.
Note 3 - Management of Urban Improvement Fund Limited - 1973-II
Under the terms of the Limited Partnership Agreement, the Partnership is
required to pay the General Partner an annual management fee equal to
one-quarter of one percent of invested assets or $136,548. (The fee will
not be more than fifty percent of the Partnership's annual net cash flow, as
defined, subject to an annual minimum of $70,000.) This fee was not
payable during the first six years unless annual tax deductions plus cash
distributions aggregated $550 per unit. The required level of tax
deductions was not achieved in these years and, accordingly, the fee was
not paid for those years. However, fees of $350,000 have been recorded
as a liability to the General Partner. Management fees payable to the
General Partner for subsequent years have been accrued if cash flow was
not sufficient to pay the fee in the year incurred. At December 31, 1997,
additional management fees of $683,167 have been recorded as a liability
to the General Partner. Upon liquidation, unpaid management fees will
have first priority to the proceeds. The Partnership will also pay the
General Partner a liquidation fee for the sale of projects. The liquidation
fee is the lesser of (i) ten percent of the net proceeds to the Partnership
from the sale of a project(s) or (ii) one percent of the sales price plus three
percent of the net proceeds after deducting an amount sufficient to pay
long-term capital gains taxes. No part of such fee shall accrue or be paid
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 3 - Management of Urban Improvement Fund Limited - 1973-II
Continued
unless: (i) the Limited Partners' share of the proceeds has been distributed
to them, (ii) the Limited Partners shall have first received an amount equal
to their invested capital attributable to the project(s) sold, and (iii) the
Limited Partners have received an amount sufficient to pay long-term
capital gains taxes from the sale of the project(s), if any, calculated at
the maximum rate then in effect.
The General Partner of the Partnership is a corporation in which Paul H.
Pfleger owns a majority interest. Partnership Services, Inc. (PSI), another
corporation in which Paul H. Pfleger is a majority shareholder, has
contracted with the General Partner and the Partnership to provide certain
management and other services to any projects in which the Partnership
has an interest. No fees were paid to PSI during 1997, 1996 or 1995. In
addition, PSI has become the General Partner in two of the Local Limited
Partnerships in which the Partnership has investments: Community
Circle, Limited and 808 Investments Limited Partnerships. During 1997,
PSI was removed as General Partner of 808 Investments Limited
Partnership and converted to a Limited Partner.
Note 4 - Investments in Local Limited Partnerships Accounted for on the
Equity Method
The Partnership has ninety-five percent to ninety-nine percent interests in
profits and losses of the Local Limited Partnerships. Investments in these
Local Limited Partnerships were made in installments based typically on
the stage of completion and/or occupancy.
Investment in and advances to the Local Limited Partnerships accounted
for on the equity method are as follows:
<TABLE>
<S>
<C> <C> <C>
Equity In
Capital Income
Contributions (Losses) Subtotal
December 31, 1997:
Community Cir.,Ltd $ 386,626 $ (936,087) $ (549,461)
Crowninshield Apts 723,327 (3,924,868) (3,201,541)
Holly Street 261,000 (1,378,402) (1,117,402)
King Drive Apts 300,640 (3,013,860) (2,713,220)
808 Investments L.P. 3,012,445 1,363,757 4,376,202
Met Paca I Assoc 159,341 (619,833) (460,492)
Morrisania II 882,740 (3,344,449) (2,461,709)
Southern Blvd. I 203,971 (695,633) (491,662)
$5,930,090 $(12,549,375) $ (6,619,285)
</TABLE>
<TABLE>
<S>
<C> <C> <C> <C>
Losses Not Costs of
Recorded Acquisition
(Note 1) Advances (Note 1) Total
December 31, 1997:
Community Cir.,Ltd $ 372,430 $ 91,949 $ 85,082 $ -0-
Crowninshield Apts 3,045,109 -0- 156,432 -0-
Holly Street 1,076,732 -0- 40,670 -0-
King Drive Apts 2,545,426 -0- 167,794 -0-
808 Investments L.P. -0- -0- 236,077 4,612,279
Met Paca I Assoc 437,197 -0- 23,295 -0-
Morrisania II 2,363,122 -0- 98,587 -0-
Southern Blvd. I 446,813 -0- 44,849 -0-
$10,286,829 $91,949 BBB$ 852,786 $4,612,279
</TABLE>
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<S>
<C> <C> <C>
Equity In
Capital Income
Contributions (Losses) Subtotal
December 31, 1996:
Community Cir.,Ltd $ 386,626 $ (1,063,386) $ (676,760)
Crowninshield Apts 802,897 (4,134,648) (3,331,751)
Holly Street 261,000 (1,359,847) (1,098,847)
King Drive Apts 300,640 (2,949,217) (2,648,577)
808 Investments L.P. 1,430,708 (10,283,403) (8,852,695)
Met Paca I Assoc 159,341 (732,775) (573,434)
Morrisania II 882,740 (3,225,636) (2,342,896)
Southern Blvd. I 203,971 (775,380) (571,409)
$4,427,923 $(24,524,292) $(20,096,369)
</TABLE>
<TABLE>
<S>
<C> <C> <C> <C>
Losses Not Costs of
Recorded Acquisition
(Note 1) Advances (Note 1) Total
December 31, 1996:
Community Cir.,Ltd $ 499,729 $ 91,949 $ 85,082 $ -0-
Crowninshield Apts 3,175,319 -0- 156,432 -0-
Holly Street 1,058,177 -0- 40,670 -0-
King Drive Apts 2,480,783 -0- 167,794 -0-
808 Investments L.P. 7,716,828 882,927 252,940 -0-
Met Paca I Assoc 550,139 -0- 23,295 -0-
Morrisania II 2,244,309 -0- 98,587 -0-
Southern Blvd. I 526,560 -0- 44,849 -0-
$18,251,844 $974,876 $ 869,649 $ -0-
</TABLE>
Note 4 - Investments in Local Limited Partnerships Accounted for on the
Equity Method
A reconciliation to combined statement of partners' deficits follows:
<TABLE>
<S>
<C> <C>
1997 1996
Urban Improvement Fund
Limited - 1973-II
capital contributions less
equity in losses $ (6,619,285) $(20,096,369)
Flexible subsidy contributed
by HUD during 1981 and
1982 allocated to
partners' capital 123,135 123,135
Urban Improvement Fund
Limited - 1973-II's
share of combined equity
of Local Limited
Partnerships per the
accompanying statement $ (6,496,150) $(19,973,234)
</TABLE>
The combined balance sheets of the Local Limited Partnerships, accounted
for on the equity method at December 31, 1997 and 1996, and the related
combined statements of operations, changes in partners' capital (deficit),
cash flows and selected footnote disclosures from the audited financial
statements of the Local Limited Partnerships for the years ended
December 31, 1997, 1996 and 1995 are summarized as follows:
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 4 - Investments in Local Limited Partnerships Accounted For on the
Equity Method - Continued
COMBINED BALANCE SHEETS OF LOCAL LIMITED
PARTNERSHIPS
Assets
<TABLE>
<S>
<C> <C>
December 31,
1997 1996
Cash $ 509,184 $ 380,480
Cash in escrow and
other restricted funds 2,259,078 3,062,658
Accounts receivable 319,843 297,447
Prepaid expenses 301,991 378,966
Other assets, net of
accumulated amortization 524,500 405,399
3,914,596 4,524,950
Property on the
basis of cost:
Land 4,771,773 2,401,004
Buildings,
improvements and
equipment 48,478,092 44,248,232
53,249,865 46,649,236
Less accumulated
depreciation (24,498,269) (34,726,868)
28,751,596 11,922,368
$ 32,666,192 $ 16,447,318
</TABLE>
Liabilities and Partners' Capital (Deficit)
<TABLE>
<S>
<C> <C>
December 31,
1997 1996
Mortgage notes payable $37,276,036 $31,995,371
Accounts payable and
accrued expenses 1,205,114 3,391,174
Notes payable 34,789 286,085
Advances from
Urban Improvement -
Fund Ltd. 1973-II 91,949 974,876
Advances from and
payables to affiliates 387,707 256,506
Payable to current and
former general partners 56,688 190,715
Tenants' security and
other deposits 368,908 419,613
39,421,191 37,514,340
Partners' capital (deficit)
per accompanying
statements (6,754,999) (21,067,022)
$ 32,666,192 $ 16,447,318
</TABLE>
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 4 - Investments in Local Limited Partnerships Accounted For on the
Equity Method - Continued
COMBINED STATEMENTS OF OPERATIONS OF LOCAL LIMITED PARTNERSHIPS
<TABLE>
<S>
<C> <C> <C>
For the Year Ended
December 31,
1997 1996 1995
Revenue:
Net rental income $ 8,762,920 $13,117,131 $13,138,527
Financial 454,541 116,499 108,001
Other 488,109 193,561 315,548
9,705,570 13,427,191 13,562,076
Expenses:
Administrative 1,754,896 2,097,899 2,274,001
Utilities 1,701,348 2,550,027 2,385,529
Operating 2,419,275 3,651,763 3,471,937
Taxes and insurance 1,444,405 2,500,249 2,353,150
Total Operating Expenses 7,319,924 10,799,938 10,484,617
Net Operating Income 2,385,646 2,627,253 3,077,459
Financial expenses 1,342,989 1,319,599 1,348,522
Income before depreciation,
amortization and other
expenses and gain on sale
of property and on transfer
of assets to HUD 1,042,657 1,307,654 1,728,937
Depreciation and
amortization
expense 1,104,799 1,651,137 1,786,714
Other expenses 141,360 26,727 62,532
1,246,159 1,677,864 1,849,246
Net loss before gain
on sale of property
and on transfer of
assets to HUD (203,502) (370,210) (120,309)
Gain on sale of property 13,801,536 -0- -0-
Gain on transfer
of assets to HUD -0- 5,223,754 -0-
Net income (loss) $13,598,034 $ 4,853,544 $ (120,309)
</TABLE>
Amortization of capitalized interest amounted to $32,716 in 1997, 1996
and 1995.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 4 - Investments in Local Limited Partnerships Accounted For on the
Equity Method - Continued
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(DEFICIT) OF LOCAL LIMITED PARTNERSHIPS
<TABLE>
<S>
<C> <C> <C> <C> <C>
Urban
Improvement Other
Fund Limited Limited General
1973-II Partners Partners Total
Partners' capital
(deficit) at
January 1, 1995 $(24,316,377) $ (508,995) $(903,046) $(25,728,418)
Net loss - 1995 (115,004) 2,730 (8,035) (120,309)
Distributions (68,247) -0- (3,592) (71,839)
Partners' capital
(deficit) at
December 31,
1995 (24,499,628) (506,265) (914,673) (25,920,566)
Net income
(loss) - 1996 4,526,394 1,025 326,125 4,853,544
Partners' capital
(deficit) at
December 31,
1996 (19,973,234) (505,240) (588,548) (21,067,022)
Contributions -
1997 1,581,837 -0- -0- 1,581,837
Net income
(loss) - 1997 11,974,817 1,310,763 312,454 13,598,034
Distributions (79,570) (784,089) (4,189) (867,848)
Partners' capital
(deficit) at
December 31,
1997 $ (6,496,150) $ 21,434 $(280,283) $ (6,754,999)
</TABLE>
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
COMBINED STATEMENTS OF CASH FLOWS OF LOCAL LIMITED PARTNERSHIPS
Note 4 - Investments in Local Limited Partnerships Accounted for on the
Equity Method - Continued
<TABLE>
<S>
<C> <C> <C>
December 31,
1997 1996 1995
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ 13,598,034 $4,853,544 $ (120,309)
Adjustments to reconcile
net loss to net cash
provided by operating
activities:
Gain on transfer of assets
to HUD -0- (5,223,754) -0-
Gain on sale
of property (13,801,536) -0- -0-
Depreciation and
amortization 1,104,799 1,601,013 1,786,714
Increase in receivables,
escrows, restricted
deposits, prepaid
expenses and
other assets 739,057 (453,315) (266,968)
Increase (decrease) in
accounts payable,
accrued expenses
and tenant security
deposit liability (2,488,061) (355,544) 685,961
Total adjustments (14,445,741) (4,431,600) 2,205,707
Net cash provided
by operating
activities (847,707) 421,944 2,085,398
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures (23,789,949) (1,384,098) (902,216)
Proceeds from sale
of capital assets 19,657,458 -0- -0-
Net cash provided
by investing
activities (4,132,491) (1,384,098) (901,216)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Capital contributions
received 1,581,837 -0- -0-
Mortgage proceeds 19,300,000 -0- -0-
Mortgage principal
payments (14,019,335) 356,099 (860,647)
Distributions paid (867,847) -0- (71,839)
Net advances from
(to) affiliates (885,753) 309,008 (282,731)
Net cash provided
(used) by financing
activities 5,108,902 665,107 (1,215,217)
INCREASE (DECREASE)
IN CASH 128,704 (297,047) (32,035)
CASH BALANCE AT
BEGINNING OF YEAR 380,480 677,527 709,562
CASH BALANCE
AT END OF YEAR $ 509,184 $ 380,480 $ 677,527
SUPPLEMENTAL
INFORMATION REGARDING
INTEREST PAYMENTS
IS AS FOLLOWS:
Interest paid $ 687,099 $ 740,682 $ 805,812
</TABLE>
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 4 - Investments in Local Limited Partnerships Accounted for on the
Equity Method - Continued
A reconciliation between combined net loss for financial reporting
purposes and the combined net income for income tax reporting purposes
follows:
<TABLE>
<S>
<C> <C> <C>
December 31,
1997 1996 1995
Combined net income
(loss) for financial
reporting purposes $13,598,036 $4,853,544 $ (120,309)
Gain on transfer of
assets to HUD -0- (5,223,754) -0-
Excess depreciation
for financial
reporting purposes
over depreciation
for income tax
reporting purposes 498,526 896,803 848,302
Accrual adjustments
for financial
reporting purposes (167,034) (151,529) 201,567
Other - 1031 tax-
free exchange (13,017,447) -0- -0-
Combined net income
as reported on the
federal income tax
returns $ 912,081 $ 375,064 $ 929,560
</TABLE>
A reconciliation of combined partners' capital (deficit) for financial
reporting purposes and combined partners' capital (deficit) for income tax
reporting purposes follows:
<TABLE>
<S>
<C> <C> <C>
December 31,
1997 1996 1995
Combined partners'
capital (deficit)
for financial
reporting purposes $ (6,754,999) $(21,067,022) $(25,920,566)
Carrying costs
during construction
capitalized for
financial reporting
purposes, excess
of depreciation for
income tax reporting
purposes and accrual
adjustments for
financial reporting
purposes (14,746,825) (8,936,845) (3,639,549)
Combined partners'
capital (deficit)
as reported on the
federal income
tax returns $(21,501,824) $(30,003,867) $(29,560,115)
</TABLE>
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 4 - Investments in Local Limited Partnerships Accounted for on the
Equity Method - Continued
Cost of Buildings
For financial statement purposes, the Local Limited Partnerships generally
capitalize all project costs, including payments to the general partners,
interest, taxes, carrying costs and operating expenses offset by incidental
rental income, up to the cutoff date for cost certification purposes. For
income tax reporting purposes, certain of these amounts were deducted
when paid.
Depreciation and Amortization
For financial statement purposes, depreciation is computed using the
straight-line and various accelerated methods over useful lives of fifteen to
forty years from the date of completion of the building or rehabilitation,
and three to twelve years for equipment and land improvements. For
income tax reporting purposes, provisions for depreciation are generally
computed over the same or shorter periods using accelerated methods and
certain rehabilitation costs are amortized using the straight-line method
over sixty months under the provisions of Section 167(k) of the Internal
Revenue Code.
Certain expenses related to obtaining permanent financing for the projects
have been deferred and are being amortized for financial reporting
purposes using the straight-line method over periods of five to forty years.
Mortgage Notes Payable
The Local Limited Partnerships have mortgages which are payable to or
are insured by the Department of Housing and Urban Development (HUD)
and the Massachusetts Housing Financing Agency (MHFA) totaling
$17,976,036 at December 31, 1997 ($12,056,743 by HUD and $5,919,293
by MHFA) and $31,995,371 at December 31, 1996 ($12,384,030 by HUD
and $19,611,341 by MHFA). The mortgage notes payable by 808
Investment Limited Partnership at December 31, 1997 totaling
$19,300,000 are not insured. The mortgage notes payable are secured by
deeds of trust on rental property and bear interest at the rate of seven
percent to thirteen and one half percent per annum. The mortgages will be
repaid in monthly installments of principal and interest aggregating
approximately $282,000 over periods of forty years. HUD will make
interest assistance payments to seven Local Limited Partnerships whose
mortgages are insured under Section 236 in amounts which will reduce the
mortgage payments to those required for mortgages carrying a one percent
interest rate.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 4 - Investments in Local Limited Partnerships Accounted for on the
Equity Method - Continued
Mortgage Notes Payable - Continued
The scheduled principal reductions for the next five years are as follows:
<TABLE>
<S>
<C> <C>
Year Ended
December 31, Amount
1998 $ 856,617
1999 1,050,295
2000 1,143,318
2001 1,244,989
2002 1,354,605
Beyond 31,626,212
$37,276,036
</TABLE>
Notes Payable
Notes payable include a residual receipts note of $250,000 that is payable
to a former General Partner of a Local Limited Partnership. The residual
receipts note was paid in 1997 in conjunction with the sale of real property
by 808 Investments Limited Partnership. A Local Limited Partnership has
a low interest rate flexible subsidy note payable in the amount of $36,085.
The note is payable from surplus cash.
National Approved Housing Act Subsidies and Restrictions
Under terms of the regulatory agreements with HUD and MHFA, the
Local Limited Partnerships cannot make cash distributions to partners of
the Local Limited Partnerships in excess of six percent per annum of
stated equity in the respective partnerships. Such distributions are
cumulative but can only be paid from "surplus cash," as defined in the
agreements. The Local Limited Partnerships must deposit all cash in
excess of the distributable amounts into residual receipts funds which are
under the control of the mortgagees, and from which disbursements must
be approved by the respective agencies. As of December 31, 1997,
approximately $1,459,713 could be paid to partners of the Local Limited
Partnerships as surplus cash becomes available.
Under terms of the regulatory agreements, the Local Limited Partnerships
are required to make monthly deposits into replacement funds which are
under the control of the mortgagees. Such deposits commence with the
initial principal payments on the mortgage loans. Expenditures from the
replacement funds must be approved by the respective agencies.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 4 - Investments in Local Limited Partnerships Accounted for on the
Equity Method - Continued
The Local Limited Partnerships have entered into rent supplement and/or
Section 8 contracts with HUD or state agencies to provide financial
assistance to qualified tenants of the apartment units. Under terms of these
contracts, HUD will pay a portion of the rent on behalf of qualified
tenants. The maximum dollar amount of these payments is limited by
HUD. A substantial portion of rental income is collected through these
contracts. During 1997, 1996 and 1995, the Local Limited Partnerships
received approximately $3,275,000, $4,991,000 and $4,618,000,
respectively, in Section 8 and rent supplement funds.
Management
The Local Limited Partnerships have entered into property management
contracts with various agents under which the agents are paid property
management fees of approximately five percent to ten and one-half percent
of the gross revenues of the respective projects. The management agents
are affiliated with or are the general partners of the Local Limited
Partnerships.
Note 5 - Investment in Mott Haven VII and Mott Haven VIII
Mott Haven VII and Mott Haven VIII have experienced cash flow deficits
from operations. Mott Haven VIII has incurred financial default and Mott
Haven VII may be in non-monetary default due to the physical condition
of the project. Despite the efforts of the General Partner, the owners and
managers to preserve the developments and provide decent and affordable
housing, the financial stability of the developments is threatened by the
imminent expiration of the Section 8 loan management set-aside contracts
and the likelihood that they will not be renewed on this property for
federal budget and policy reasons. HUD, the owners and the General
Partner believe that it is in the best interests of the development and its
tenants that the projects be renovated and reconfigured, and that such
result can best be accomplished through replacement of the existing
management and ownership structure with community-based owners and
managers. The General Partner has taken steps to transfer the property to
HUD.
For financial reporting purposes, the Partnership has recorded the
disposition of its investment in Mott Haven VII and Mott Haven VIII
during November 1996. The components of the gain on the transfer of
property to HUD is summarized as follows:
<TABLE>
Assets transferred:
<S>
<C> <C>
Cash $ 106,472
Cash in escrow and
other restricted funds 998,644
Accounts receivable 44,798
Prepaid expenses 158,181
Other assets 3,893
Property on the basis of cost 11,861,790
Accumulated depreciation (9,824,110)
3,349,668
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 5 - Investment in Mott Haven VII and Mott Haven VIII - Continued
</TABLE>
<TABLE>
Liabilities transferred:
<S>
<C> <C>
Mortgage note payable 7,749,161
Accounts payable and accrued
expenses 695,039
Advance from general partner 50,001
Tenant security and other deposits 79,221
8,573,422
Gain on transfer of property to HUD $ 5,223,754
</TABLE>
The General Partner believes that if the Partnership did not consent to the
Workout Agreement (transfer of properties to HUD), it is more likely than
not that HUD would take the necessary steps to sell the properties at
foreclosure sales during 1997. Such foreclosure sales will most probably
not result in the return of any cash to the Limited Partners but would
result in the recognition of a significant taxable gain by each limited
partner. The taxable gain for the limited partners or Urban Improvement
Fund Limited '73-II in the aggregate is estimated to be $5,167,883 or
approximately $429.55 for each unit. This gain would be passive in nature
and could be offset by any suspended passive loss carryforwards. It is
estimated that the maximum tax due on this gain would total
approximately $1,990,927 for all limited partners or $165.48 per unit.
Note 6 - Investment in 808 Investments Limited Partnership
808 Memorial Drive Associates sold its real estate project located in
Cambridge, Massachusetts during July 1997 in a tax free exchange. The
Partnership changed its name to 808 Investments Limited Partnership and
reinvested the proceeds in three properties that are conventional,
multi-family residential projects during December 1997.
The components of the gain on the sale of property is summarized as
follows:
<TABLE>
Assets sold:
<S>
<C> <C>
Insurance escrow $ 420,698
Land 1,469,231
Building and equipment 16,901,919
Accumulated depreciation (11,320,883)
7,470,965
Liabilities sold:
Mortgage note payable $16,029,977
Escrow accounts 3,681,999
Distribution 784,089
Residual receipts 250,000
Prepaid rent 170,388
Property tax payable 237,520
Interest payable 70,844
Accounts payable 47,684
21,272,501
Gain on sale of property $13,801,536
</TABLE>
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
SCHEDULE IV
INDEBTEDNESS OF RELATED PARTIES
<TABLE>
<S>
<C> <C> <C> <C> <C>
December 31,
1997 1996
1997 Change 1996 Change 1995
Advances to
local limited
partnerships: (A)
Community
Circle, Ltd. $ 91,949 $ -0- $ 91,949 $ -0- $ 91,949
808 Investments
Limited
Partnership -0- (882,927) 882,927 2,501 880,426
$ 91,949 $(882,297) $974,876 $ 2,501 $972,375
</TABLE>
(A) All advances are included in the balance sheet caption "Investments in
and advances to Local Limited Partnerships accounted for on the
equity method." See Note 4 to the financial statements. The advances
have been reduced to zero on the books of the Partnership because the
investment in these partnerships have been Reduced to zero under the
equity method of accounting.
<TABLE>
<S>
<C> <C> <C> <C> <C>
December 31,
1997 1996
1997 Change 1996 Change 1995
Indebtedness to
General Partner:
Management fee
payable to
General
Partner $1,068,167 $ 35,000 $1,033,167 $52,500 $980,667
Advance from
General
Partner $ 732,923 $708,680 $ 24,243 $ -0- $ 24,243
</TABLE>
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION OF LOCAL
LIMITED PARTNERSHIPS - COMBINED WORKPAPERS
December 31, 1997
<TABLE>
<S>
<C> <C> <C>
Outstanding
Description Mortgage
Partnership/Location No. of Units Balance
Community Circle, Ltd.
Cleveland, OH 160 apartments $ 2,278,965
Crowninshield Apartments
Associates, Peabody, MA 284 apartments 4,701,451
Holly Street Associates
Lawrence and Matheun, MA 71 apartments 1,217,842
King Drive Apartments
Assoc., Chicago, IL 315 apartments 4,485,228
Met-Paca I Associates
New York, New York 37 apartments 699,278
Morrisania II Associates
New York, New York 161 apartments 3,312,860
Southern Boulevard
Partners, Bronx, NY 72 apartments 1,280,412
808 Investments Limited
Partnership:
Sedgefield 124 apartments 3,600,000
Summit 128 apartments 6,000,000
Windsor 399 apartments 9,700,000
$37,276,036
</TABLE>
<TABLE>
<S>
<C> <C> <C> <C> <C>
Buildings
and Accumulated
Partnership/Location Land Improvement Total Depreciation
Community Circle, Ltd.
Cleveland, OH $240,000 $4,117,931 $ 4,357,931 $(2,719,295)
Crowninshield Apartments
Associates,
Peabody, MA 128,109 6,622,507 6,750,616 (6,062,130)
Holly Street Associates
Lawrence and
Matheun, MA 28,353 2,143,941 2,172,294 (1,713,666)
King Drive Apartments
Assoc., Chicago, IL 340,494 6,767,935 7,108,429 (5,689,519)
Met-Paca I Associates
New York, New York 83,642 1,138,422 1,222,064 (988,733)
Morrisania II Associates
New York, New York 91,956 5,463,312 5,555,268 (4,957,174)
Southern Boulevard
Partners, Bronx, NY 19,219 2,723,466 2,742,685 (2,306,016)
808 Investments Limited
Partnership:
Sedgefield 550,000 3,666,553 4,216,553 (11,608)
Summit 1,790,000 6,415,990 8,206,990 (20,315)
Windsor 1,500,000 9,417,035 10,917,035 (29,813)
$4,771,773 $48,478,092 $53,249,865 $(24,498,269)
</TABLE>
<TABLE>
<S>
<C> <C> <C> <C>
Life in Which
Depreciation
in Latest
Date of Income
Completion of Date Statement
Partnership/Location Construction Acquired is Computed
Community Circle, Ltd.
Cleveland, OH 1974 1973 3-40 years
Crowninshield Apartments
Associates, Peabody, MA 1975 1973 10-20 years
Holly Street Associates
Lawrence and Matheun, MA 1975 1973 22-40 years
King Drive Apartments
Assoc., Chicago, IL 1974 1973 12-20 years
Met-Paca I Associates
New York, New York 1974 1973 5-20 years
Morrisania II Associates
New York, New York 1975 1973 10 25 years
Southern Boulevard
Partners, Bronx, NY 1974 1973 20-25 years
808 Investments Limited
Partnership:
Sedgefield 1988 1997 7-27.5 years
Summit 1987 1997 7-27.5 years
Windsor 1986 1997 7-27.5 years
</TABLE>
<TABLE>
<S>
<C> <C> <C> <C>
Balance at
January 1, 1996 $2,639,104 $54,487,824 $57,126,928 $42,949,965
Additions
during year -0- 1,384,098 1,384,098 -0-
Assignment of
mortgages
to HUD Mott
Haven VII
and VIII (238,100) (11,623,690) (11,861,790) (9,824,110)
Depreciation
expense -0- -0- -0- 1,601,013
Balance at
December 31,
1996 2,401,004 44,248,232 46,649,236 34,726,868
Additions
during year 3,840,000 19,949,949 23,789,949 -0-
Disposals
during year (1,469,231) (15,720,089) (17,189,320) (11,333,398)
Depreciation
expense -0- -0- -0- 1,104,799
Balance at
December 31,
1997 $4,771,773 $48,478,092 $53,249,865 $ 24,498,269
NOTE: Capital improvements since original construction or rehabilitation
are not material to the combined financial statements and, as
such, are not disclosed separately. The financial statement
category of buildings and improvements is composed substantially
of cost plus the initial renovation upon acquisition. Total cost
of land and building for federal income tax purposes amounts to
approximately $33,400,000.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 11,750
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,750
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,624,029
<CURRENT-LIABILITIES> 1,801,090
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,822,939
<TOTAL-LIABILITY-AND-EQUITY> 4,624,029
<SALES> 0
<TOTAL-REVENUES> 214
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 134,517
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,875,599
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,875,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,875,599
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
