SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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, 1998
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, 1998: 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, 1998:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998
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%
*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:
Mott Haven 7
New York, NY 236 Rehab. 165 100%
Mott Haven 8
New York, NY 236 Rehab. 171 98%
The following properties were purchased by 808 Investment Limited Partnership
in December 1997:
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>
<CAPTION>
<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>
<CAPTION>
<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>
<CAPTION>
<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>
<CAPTION>
<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>
<CAPTION>
<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>
<CAPTION>
<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>
<CAPTION>
<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>
<CAPTION>
<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>
<CAPTION>
<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>
<CAPTION>
<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>
<CAPTION>
<S> <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, 1998.
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>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1998 1997 1996 1995 1994
Operating Income:
Interest income $ 861 $ 214 $ 796 $ 765 $ 836
Other income -0- -0- 6,250 8,125 8,750
861 214 7,046 8,890 9,586
Expenses:
Professional fees 19,448 18,492 16,623 18,409 15,546
Management fee 70,000 70,000 70,000 70,000 70,000
Incentive
management fee -0- 22,349 -0- 23,501 12,030
Amortization
expense 16,863 16,863 -0- -0- -0-
Other expenses 837 6,813 250 313 645
107,148 134,517 86,873 112,223 98,221
Loss before equity
in income (loss)
of Local Limited
Partnerships (106,287) (134,303) (79,827) (103,333) (88,635)
Equity in income
(loss) of Local
Limited
Partnerships (219,376) 4,009,902 (2,500) 48,765 16,212
Net income
(loss) $ (325,663) $3,875,599 $(82,327) $(54,568) $(72,423)
Allocation of
net income (loss):
Net loss
allocated to
General
Partner (16,283) 193,780 (4,116) $ (2,728) $ (3,621)
Net loss
allocated to
Limited
Partners (309,380) 3,681,819 (78,211) (51,840) (68,802)
$(325,663) $3,875,599 $(82,327) $(54,568) $(72,423)
Net financial
reporting
income (loss)
per unit:
General
Partnership
units (100
units
outstanding
allocated to
General
Partner) $ (163) $ 1,938 $ (41) $ (27) $ (36)
Limited
Partnership
units (11,335
units
outstanding
allocated
to Limited
Partners) $ (27) $ 325 $ (7) $ (5) $ (6)
Total assets $4,359,066 $4,624,029 $ 4,876 $ 34,577 $ 36,645
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>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
Urban's share of
distribution $248,975 $ 79,570 $ -0- $ 68,247 $ 50,087
Advances (made to)
repaid by
Local Limited
Partnerships $(32,107) $ -0- $ (2,500) $(19,482) $(33,875)
</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 1994 through 1998. 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 1994 to 1998, 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, 1998, 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 1998, 1997 and 1996 is summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Year Ended
December 31,
1998 1997 1996
Income (loss) from
Partnerships with
non-zero
investments:
808 Investments
Limited
Partnership $ (194,200) $3,930,332 $ -0-
Repayment of advances
from (advances to)
Partnerships with
zero investments:
808 Investments Limited
Partnership -0- -0- (2,500)
Community Circle 32,107 -0- -0-
Distributions received
from Partnerships
with zero investments:
Crowninshield 40,639 79,570 -0-
$ (121,454) $4,009,902 $ (2,500)
</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>
<CAPTION>
<S> <C> <C> <C>
Name Age Office
Paul H. Pfleger 63 Director/President
John M. Orehek 44 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>
<CAPTION>
<S> <C> <C> <C>
Name Age Office
Paul H. Pfleger 63 Chairman of the Board
John M. Orehek 44 Senior Vice President
Michael Fulbright 44 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>
<CAPTION>
<S> <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.
<PAGE>
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, 1998 and 1997.
Statements of Income (Loss) for the years ended December 31,
1998, 1997 and 1996.
Statements of Changes in Partners' Capital for the years ended
December 31, 1998, 1997 and 1996.
Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996.
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 1998.
(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
requiredinformation 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 1, 1999 By: Paul H. Pfleger
Paul H. Pfleger
President
Interfinancial Real Estate Management Company
Date: October 1, 1999 By: John M. Orehek
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.
By: Paul H. Pfleger October 1, 1999
Paul H. Pfleger, Director Date
Interfinancial Real Estate Management Company
By: John M. Orehek October 1, 1999
John M. Orehek, Director Date
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, 1998
<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, 1998 and 1997 . . . . . . . . . . F-4
Statements of income (loss) for the years ended
December 31, 1998, 1997 and 1996. . . . . . . . . . . . . . F-5
Statements of changes in partners' capital (deficit)
for the years ended December 31, 1998, 1997 and 1996. .. . . F-5
Statements of cash flows for the years ended
December 31, 1998, 1997 and 1996. . . . . . . . . . . . . . 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-23
XI. Real Estate and Accumulated Depreciation
of Local Limited Partnerships. . . . . . . . . . . . F-24
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, 1998 and 1997,
and the related statements of income (loss), changes in partners' capital
(deficit) and cash flows for the years ended December 31, 1998, 1997 and 1996,
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, 1998, 1997 and 1996. 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
1998 and 1997 and six in 1996 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, 1998 and 1997, and the results of its operations and its
cash flows for the years ended December 31, 1998, 1997 and 1996, 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
July 22, 1999
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31,
1998 1997
Cash and cash equivalents $ 47,049 $ 11,750
Investments in and advances
to Local Limited Partnerships
accounted for on the equity
method - Note 4
(Schedule IV and XI) 4,192,881 4,612,279
$ 4,239,930 $ 4,624,029
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Management fee payable -
Note 3 (Schedule IV) $1,138,167 $ 1,068,167
Accounts payable 8,200 -0-
Advance from general partner 507,088 732,923
1,653,455 1,801,090
Partners' capital (deficit) -
Note 2 General Partner -
100 Partnership units
authorized, issued and
outstanding (347,175) (335,352)
Limited partners - 11,335
Partnership units authorized,
issued and outstanding 2,933,650 3,158,291
2,586,475 2,822,939
Commitments and contingencies - Note 3
$ 4,239,930 $ 4,624,029
</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>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
1998 1997 1996
Interest income $ 861 $ 214 $ 796
Other income -0- -0- 6,250
861 214 7,046
Expenses:
Professional Fees 19,448 18,492 16,623
Management fees - Note 3 70,000 70,000 70,000
Incentive management fee 8,724 22,349 -0-
Amortization expense 16,863 16,863 -0-
Other expenses 836 6,813 250
115,871 134,517 86,873
Loss before equity in
income (loss) of
Local Limited
Partnerships (115,010) (134,303) (79,827)
Equity in income
(loss) of Local
Limited
Partnerships - Note 4 (121,454) 4,009,902 (2,500)
Net income (loss) $ (236,464) $3,875,599 $ (82,327)
Allocation of net
income (loss):
Net loss allocated
to General Partner $ (11,823) $ 193,780 $ (4,116)
Net loss allocated
to Limited Partners (224,641) 3,681,819 (78,211)
$ (236,464) $3,875,599 $ (82,327)
Net financial reporting
income (loss)
per unit:
General partnership units
(100 units outstanding
allocated to General
Partner) $ (118) $ 1,938 $ (41)
Limited partnership units
(11,335 units outstanding
allocated to Limited
Partners) $ (20) $ 325 $ (7)
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
General Limited
Partner Partners Total
Partners' capital (deficit)
at January 1, 1997 $ (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
Net income - 1998 (11,823) (224,641) (236,464)
Partners' capital (deficit)
at December 31, 1998 $ (347,175) $2,933,650 $ 2,586,475
</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>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
1998 1997 1996
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ (236,464) $ 3,875,599 $ (82,327)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Amortization of costs
of acquisition 16,863 16,863 -0-
Equity in net loss
(income) of Local
Limited Partnerships 121,454 (4,009,902) 2,500
Increase (decrease)
in accounts payable 8,200 (126) 126
Increase in accrued
management fees 70,000 35,000 52,500
Total adjustments 216,517 (3,958,165) 55,126
Net cash used by
operating activities (19,947) (82,566) (27,201)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Current year distributions 248,974 79,570 -0-
Contributions -0- (1,581,837) -0-
Net advances to Local
Limited Partnerships 32,107 883,027 (2,500)
Net cash provided (used)
by investing activities 281,081 (619,240) (2,500)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Advances from
(repayments to)
General Partner (225,835) 708,680 -0-
NET INCREASE
(DECREASE) IN CASH
AND CASH EQUIVALENTS 35,299 6,874 (29,701)
CASH AND CASH
EQUIVALENTS AT
BEGINNING OF YEAR 11,750 4,876 34,577
CASH AND CASH
EQUIVALENTS AT
END OF YEAR $ 47,049 $ 11,750 $ 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)
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, 1998, 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 Partner-
ship's share in losses since the date of acquisition. The Partnership dis-
continues 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 distribu-
tions 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>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
Income from Partnership
with non-zero
investments:
808 Investments
Limited Partnership $ (194,200) $3,930,332 $ -0-
Repayment of advances
from (advances to)
Partnerships with
zero investments:
808 Investments
Limited Partnership -0- -0- $ (2,500)
Community Circle 32,107 -0- -0-
Distributions received
from Partnerships
with zero investments:
Crowninshield 40,639 79,570 -0-
$ (121,454) $4,009,902 $ (2,500)
</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, 1998 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>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
1998 1997 1996
Net income (loss) for
financial reporting
purposes $ (236,464) $3,875,599 $ (82,327)
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 16,863 -0-
Equity in income
(losses) reported by
Local Limited Partner-
ships for income tax
reporting purposes
in excess of income
(losses) for financial
reporting purposes 228,191 (4,562,763) 299,304
Accrual and other
adjustments for
financial reporting
purposes 146,829 1,249,090 126,168
Net income as
reported on the
federal income
tax return $ 155,419 $ 578,789 $ 343,145
</TABLE>
A reconciliation of partners' capital (deficit) for financial reporting
purposes and partners' capital (deficit) for income tax reporting purposes
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
1998 1997 1996
Partners' capital (deficit)
for financial
reporting purposes $2,586,475 $2,822,939 $(1,052,660)
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 (1,121,587) (1,104,724) (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>
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>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
1998 1997 1996
Equity in cumulative losses
of Local Limited Partnerships
for income tax reporting
purposes in excess of
losses for financial
reporting purposes $(30,662,514) $(30,890,705) $(26,327,942)
Accrual and other
adjustments for
financial reporting
purposes 2,550,003 2,357,741 1,033,167
Partners' capital
(deficit) as reported
on the federal
income tax return $(25,409,950) $(25,577,076) $(26,197,623)
</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. Manage-
ment 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, 1998, management fees of $1,138,167 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
<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
taxes. No part of such fee shall accrue or be paid 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 1998, 1997 or 1996. In addition, PSI has become the
General Partner in two of the Local Limited Partnerships in which the Part-
nership has investments: Community Circle, Limited and 808 Investments Limited
Partnerships. During 1997, PSI was removed as General Partner of 808 Invest-
ments 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>
<CAPTION>
<S> <C> <C> <C>
Equity In
Capital Income
Contributions (Losses) Subtotal
December 31, 1998:
Community Cir.,Ltd $ 386,626 $ (712,758) $ (326,132)
Crowninshield Apts 682,687 (3,699,606) (3,016,919)
Holly Street 261,000 (1,329,346) (1,068,346)
King Drive Apts 300,640 (3,160,797) (2,860,157)
808 Investments L.P. 2,804,110 1,169,557 3,973,667
Met Paca I Assoc 159,341 (562,749) (403,408)
Morrisania II 882,740 (3,512,655) (2,629,915)
Southern Blvd. I 203,971 (644,053) (440,082)
$5,681,115 $(12,452,407) $ (6,771,292)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Losses Not Costs of
Recorded Acquisition
(Note 1) Advances (Note 1) Total
December 31, 1998:
Community Cir.,Ltd $ 181,208 $ 59,842 $ 85,082 $ -0-
Crowninshield Apts 2,860,487 -0- 156,432 -0-
Holly Street 1,027,676 -0- 40,670 -0-
King Drive Apts 2,692,363 -0- 167,794 -0-
808 Investments L.P. -0- -0- 219,214 4,192,881
Met Paca I Assoc 380,113 -0- 23,295 -0-
Morrisania II 2,531,328 -0- 98,587 -0-
Southern Blvd. I 395,233 -0- 44,849 -0-
$10,068,408 $ 59,842 $ 835,923 $4,192,881
</TABLE>
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
<TABLE>
<CAPTION>
<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>
<CAPTION>
<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 $ 852,786 $4,612,279
</TABLE>
Note 4 - Investments in Local Limited Partnerships Accounted for on the Equity
Method
A reconciliation to combined statement of partners' deficits follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
Urban Improvement Fund
Limited - 1973-II capital
contributions less equity in
losses $(6,771,292) $(6,619,285)
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 $(6,648,157) $(6,496,150)
</TABLE>
The combined balance sheets of the Local Limited Partnerships, accounted for
on the equity method at December 31, 1998 and 1997, 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, 1998, 1997
and 1996 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>
<CAPTION>
<S> <C> <C>
December 31,
1998 1997
Cash $ 604,533 $ 509,184
Cash in escrow and other
restricted funds 2,353,169 2,259,078
Accounts receivable 242,371 319,843
Prepaid expenses 348,691 301,991
Other assets, net of
accumulated amortization 673,588 524,500
4,222,352 3,914,596
Property on the basis of cost:
Land 4,771,773 4,771,773
Buildings, improvements
and equipment 49,286,355 48,478,092
54,058,128 53,249,865
Less accumulated depreciation (26,022,869) (24,498,269)
28,035,259 28,751,596
$ 32,257,611 $32,666,192
</TABLE>
Liabilities and Partners' Capital (Deficit)
<TABLE>
<CAPTION>
<S> <C> <C>
December 31,
1998 1997
Mortgage notes payable $36,644,624 $37,276,036
Accounts payable and
accrued expenses 1,560,931 1,205,114
Notes payable 51,782 34,789
Advances from Urban
Improvement Fund Ltd.-
1973-II 59,842 91,949
Advances from and payables
to affiliates 387,707 387,707
Payable to current and
former general partners 58,901 56,688
Tenants' security and
other deposits 413,467 368,908
39,177,254 39,421,191
Partners' capital (deficit)
per accompanying
statements (6,919,643) (6,754,999)
$32,257,611 $32,666,192
</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>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
1998 1997 1996
Revenue:
Net rental income $11,183,697 $ 8,762,920 $13,117,131
Financial 395,314 454,541 116,499
Other 255,109 488,109 193,561
11,829,120 9,705,570 13,427,191
Expenses:
Administrative 2,081,847 1,754,896 2,097,899
Utilities 1,672,837 1,701,348 2,550,027
Operating 2,623,630 2,419,275 3,651,763
Taxes and insurance 1,689,778 1,444,405 2,500,249
Total Operating
Expenses 8,068,092 7,319,924 10,799,938
Net Operating Income 3,761,028 2,385,646 2,627,253
Financial expenses 2,092,645 1,342,989 1,319,599
Income before depreciation,
amortization and other
expenses and gain on sale
of property and on
transfer of assets to HUD 1,668,383 1,042,657 1,307,654
Depreciation and
amortization
expense 1,524,600 1,104,799 1,651,137
Other expenses 45,188 141,360 26,727
1,569,788 1,246,159 1,677,864
Net income (loss) before
gain on sale of property
and on transfer of assets
to HUD 98,595 (203,502) (370,210)
Gain on sale of property -0- 13,801,536 -0-
Gain on transfer of assets
to HUD -0- -0- 5,223,754
Net income (loss) $ 98,595 $13,598,034 $ 4,853,544
</TABLE>
Amortization of capitalized interest amounted to $32,716 in 1998, 1997
and 1996.
<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>
<CAPTION>
<S> <C> <C> <C> <C>
Urban
Improvement Other
Fund Limited Limited General
1973-II Partners Partners Total
Partners' capital
(deficit) at
January 1, 1996 $(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)
Net income (loss) -
1998 96,968 2,384 (757) 98,595
Distributions (248,975) -0- (14,264) (263,239)
Partners' capital
(deficit) at
December 31, 1998 $ (6,648,157) $ 23,818 $(295,304) $(6,919,643)
</TABLE>
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>
<CAPTION>
<S> <C> <C> <C>
December 31,
1998 1997 1996
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ 98,595 $ 13,598,034 $ 4,853,544
Adjustments to
reconcile net loss
to net cash provided
(used) by operating
activities:
Gain on transfer of
assets to HUD -0- -0- (5,223,754)
Gain on sale of
property -0- (13,801,536) -0-
Depreciation 1,524,600 1,104,799 1,601,013
Increase (decrease)
in receivables, escrows,
restricted deposits,
prepaid expenses and
other assets (212,407) 739,057 (453,315)
Increase (decrease) in
accounts payable,
accrued expenses and
tenant security deposit
liability 400,376 (2,488,061) (355,544)
Total adjustments 1,712,569 (14,445,741) (4,431,600)
Net cash provided
(used) by operating
activities 1,811,164 (847,707 421,944
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures (808,263) (23,789,949) (1,384,098)
Proceeds from sale
of capital assets -0- 19,657,458 -0-
Net cash provided
(used) by
investing activities (808,263) (4,132,491) (1,384,098)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Capital contributions
received -0- 1,581,837 -0-
Mortgage proceeds -0- 19,300,000 -0-
Proceeds from note payable 16,993 -0- -0-
Mortgage principal payments (631,412) (14,019,335) 356,099
Distributions paid (263,239) (867,847) -0-
Net advances from (to)
affiliates (29,894) (885,753) 309,008
Net cash provided (used)
by financing activities (907,552) 5,108,902 665,107
INCREASE (DECREASE) IN CASH 95,349 128,704 (297,047)
CASH BALANCE AT
BEGINNING OF YEAR 509,184 380,480 677,527
CASH BALANCE AT
END OF YEAR $ 604,533 $ 509,184 $ 380,480
SUPPLEMENTAL INFORMATION
REGARDING INTEREST
PAYMENTS IS AS FOLLOWS:
Interest paid $ 1,899,953 $ 687,099 $ 740,682
</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>
<CAPTION>
<S> <C> <C> <C>
December 31,
1998 1997 1996
Combined net income
(loss) for financial
reporting purposes $ 98,595 $ 13,598,036 $ 4,853,544
Gain on transfer of
assets to HUD -0- -0- (5,223,754)
Excess depreciation
for financial
reporting purposes
over depreciation
for income tax
reporting purposes 116,804 498,526 896,803
Accrual adjustments
for financial
reporting purposes 77,445 (167,034) (151,529)
Other - 1031 tax-free
exchange -0- (13,017,447) -0-
Combined net income
as reported on the
federal income tax
returns $ 292,844 $ 912,081 $ 375,064
</TABLE>
A reconciliation of combined partners' capital (deficit) for financial
reporting purposes and combined partners' capital (deficit) for income tax
reporting purposes follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
Combined partners'
capital (deficit)
for financial
reporting purposes $ (6,919,643) $ (6,754,999) $(21,067,022)
Carrying costs
during construction
capitalized for
financial report-
ing purposes,
excess of
depreciation for
income tax reporting
purposes and accrual
adjustments for
financial reporting
purposes (14,133,482) (14,746,825) (8,936,845)
Combined partners'
capital (deficit)
as reported on
the federal income
tax returns $(21,053,125) $(21,501,824) $(30,003,867)
</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 $17,492,431 at December
31, 1998 ($11,711,272 by HUD and $5,781,159 by MHFA) and $17,976,036 at
December 31, 1997 ($12,056,743 by HUD and $5,919,293 by MHFA). The mortgage
notes payable by 808 Investment Limited Partnership at December 31, 1998
totaling $19,152,193 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 approxi-
mately $285,000 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>
<CAPTION>
<S> <C> <C>
Year Ended
December 31, Amount
1999 $ 704,689
2000 757,087
2001 814,797
2002 874,680
2003 942,304
Beyond 32,551,067
$36,644,624
</TABLE>
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, 1998, approximately $1,249,373 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.
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 1998, 1997 and
1996, the Local Limited Partnerships received approximately $2,257,000,
$3,275,000, and $4,991,000, respectively, in Section 8 and rent supplement
funds.
<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
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:
Assets transferred:
<TABLE>
<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
Liabilities transferred:
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>
<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
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 recog-
nition 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>
<S> <C> <C>
Assets sold:
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>
Note 7 - Investment in Met Paca I Associates
Met Paca II Associates has a severe working capital deficiency primarily
resulting from the loss of its real estate tax abatement. This deficiency
caused the Partnership to become delinquent in meeting its obligation under
the mortgage note payable to HUD. Although the Partnership is attempting to
obtain additional real
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
Notes to Financial Statements - Continued
Note 7 - Investment in Met Paca I Associates - Continued
estate tax abatements, there is no assurance that the Partnership will be
successful. This raises substantial doubt about the Partnership's ability
to continue as a going concern. The financial statements do not include any
adjustments that might be necessary if the Partnership is unable to continue
as a going concern.
Note 8 - Year 2000 Risk Assessment and Action Plan
The Partnership is aware of the current concerns throughout the business
community of reliance upon computer software that does not properly recognize
the year 2000 in date formats, often referred to as the "Year 2000 Problem."
The Year 2000 Problem is the result of software being written using two digits
rather than four digits to define the applicable year (i.e., "98" rather than
"1998"). A failure by a business to properly identify and correct a Year 2000
Problem in its operations could result in system failures or miscalculations.
In turn, this could result in disruptions of operations, including, among other
things, a temporary inability to process transactions, or otherwise engage in
routine business transactions on a day-to-day basis.
Operations of the Partnership are not dependent upon the successful operation
on a daily basis of its computer software programs. The Partnership relies
upon software purchased from third-party vendors rather than internally-
generated software. In its analysis of software, and based upon its ongoing
discussions with these vendors, a plan of action has been put in place by the
Partnership to minimize its risk exposure to the Year 2000 Problem. The
properties that the Partnership has invested in may be dependent upon the
successful operation on a daily basis of its computer software programs. The
Partnership has not been informed by any of these properties that they are
not Year 2000 compliant.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1973-II
(A Limited Partnership)
SCHEDULE IV
INDEBTEDNESS OF RELATED PARTIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
December 31,
1998 1997
1998 Change 1997 Change 1996
Advances to local
limited
partnerships: (A)
Community Circle, Ltd. $ 59,842 $(32,107) $ 91,949 $ -0- $ 91,949
808 Investments
Limited Partnership -0- -0- -0- (882,927) 882,927
$ 59,842 $(32,107) $ 91,949 $(882,297) $974,876
</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 invest-
ment in these partnerships have been reduced to zero under the equity
method of accounting.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
December 31,
1998 1997
1998 Change 1997 Change 1996
Indebtedness to General
Partner:
Management fee
payable to General
Partner $1,138,167 $70,000 $1,068,167 $ 35,000 $1,033,167
Advance from General
Partner $ 507,008 $ 225,835 $ 732,923 $708,680 $ 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, 1998
<TABLE>
<S>
<C> <C> <C>
Outstanding
Description Mortgage
Partnership/Location No. of Units Balance
Community Circle, Ltd.
Cleveland, OH 160 apartments $ 2,210,093
Crowninshield Apartments
Associates, Peabody, MA 284 apartments 4,588,755
Holly Street Associates
Lawrence and Matheun, MA 71 apartments 1,192,404
King Drive Apartments
Assoc., Chicago, IL 315 apartments 4,341,552
Met-Paca I Associates
New York, New York 37 apartments 677,646
Morrisania II Associates
New York, New York 161 apartments 3,236,323
Southern Boulevard
Partners, Bronx, NY 72 apartments 1,245,658
808 Investments Limited
Partnership:
Sedgefield 124 apartments 3,571,423
Summit 128 apartments 5,956,113
Windsor 399 apartments 9,624,657
$36,644,624
</TABLE>
<TABLE>
<S>
<C> <C> <C> <C>
Buildings
and
Partnership/Location Land Improvement Total
Community Circle, Ltd.
Cleveland, OH $ 240,000 $ 4,237,486 $ 4,477,486
Crowninshield Apartments
Associates, Peabody, MA 128,109 6,767,222 6,895,331
Holly Street Associates
Lawrence and Matheun, MA 28,353 2,243,841 2,272,194
King Drive Apartments
Assoc., Chicago, IL 340,494 6,783,200 7,123,694
Met-Paca I Associates
New York, New York 83,642 1,161,370 1,245,012
Morrisania II Associates
New York, New York 91,956 5,463,312 5,555,268
Southern Boulevard
Partners, Bronx, NY 19,219 2,751,006 2,770,225
808 Investments Limited
Partnership:
Sedgefield 550,000 3,711,936 4,261,936
Summit 1,790,000 6,576,615 8,366,615
Windsor 1,500,000 9,590,367 11,090,367
$4,771,773 $49,286,355 $54,058,128
</TABLE>
<TABLE>
<S>
<C> <C> <C> <C> <C>
Life in which
Depreciation
in Latest
Date of Income
Accumulated Completion of Date Statement
Partnership/Location Depreciation Construction Acquired s Computed
Community Circle, Ltd.
Cleveland, OH $ (2,822,238) 1974 1973 3-40 years
Crowninshield Apartments
Associates, Peabody, MA (6,136,895) 1975 1973 10-20 years
Holly Street Associates
Lawrence and Matheun, MA (1,761,611) 1975 1973 22-40 years
King Drive Apartments
Assoc., Chicago, IL (5,929,648) 1974 1973 12-20 years
Met-Paca I Associates
New York, New York (999,996) 1974 1973 5-20 years
Morrisania II Associates
New York, New York (5,198,733) 1975 1973 10 25 years
Southern Boulevard
Partners, Bronx, NY (2,352,455) 1974 1973 20-25 years
808 Investments Limited
Partnership:
Sedgefield (154,601) 1988 1997 7-27.5 years
Summit (264,836) 1987 1997 7-27.5 years
Windsor (401,856) 1986 1997 7-27.5 years
$(26,022,869)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Balance at
January 1, 1997 $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
Additions during year -0- 808,263 808,263 -0-
Disposals during year -0- -0- -0- -0-
Depreciation expense -0- -0- -0- 1,524,600
Balance at
December 31, 1998 $4,771,773 $49,286,355 $54,058,128 $26,022,869
</TABLE>
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 $45,581,000.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 47,049
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,192,881
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,239,930
<CURRENT-LIABILITIES> 1,653,455
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,586,475
<TOTAL-LIABILITY-AND-EQUITY> 4,239,930
<SALES> 0
<TOTAL-REVENUES> (120,593)
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 115,871
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (236,464)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (236,464)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
