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, 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 0-8071
URBAN IMPROVEMENT FUND LIMITED - 1974
(Exact name of registrant as specified in its charter)
California 95-6504946
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 - 1974, a California limited partnership (the "Registrant"), was
formed in 1974 for the purpose of investing, through local limited real
estate 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 require tax shelter for
income from other sources. The Registrant originally acquired equity
interests as a limited partner in twelve (12) such LLPs. The Elk Grove
Village property was sold through a resyndication in 1984. The Elk Grove
Village partnership is still in existence with a note receivable for the
sales proceeds of the property. The TDC & Associates property was donated
in December 1985 to the Tenant's Development Association. The
Logan-Washington Associates property foreclosed in 1993. The
remaining nine (9) properties are described in Item 2 hereof.
(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 is additional risk of new
construction occurring in areas where the Registrant has invested in
existing government-assisted housing projects. The outlook for subsidized
housing is not determinable, given existing and proposed federal
legislation.
<PAGE>
(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 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 the 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. Properties.
The Registrant owns equity interests as a Limited Partner in the following
real estate projects as of December 31, 1997:
<TABLE>
<S> <C> <C> <C>
1997
No. of Percent of
Name Type Units Occupancy
Weyerbacher Terrace
Associates
Indianapolis, IN 236 Rehab. 296 85%
Capitol Hill
Associates
Denver, CO 236 Rehab. 121 95%
Community
Apartments Ltd.
Cleveland, OH 221 (d)(3) Rehab. 148 99%
51st and King Drive
Partnership
Chicago, IL 236 Rehab. 96 96%
Met-Paca II
Associates
New York, NY 236 Rehab. 192 98%
Monatiquot Village
Associates
Braintree, MA MHFA-New* 324 93%
Norway Housing
Associates
Boston, MA MHFA-Rehab.* 136 99%
Notre Dame
Apartments
San Francisco, CA 236 Rehab. 205 100%
Southern Boulevard
Partners II
New York, NY 236 Rehab. 175 100%
</TABLE>
* Developed under the auspices of the Massachusetts Housing Finance
Agency.
Mortgage indebtedness associated with each project is shown in Schedule
XI of this report.
The following is a description of each of the above listed properties:
<PAGE>
WEYERBACHER TERRACE ASSOCIATES (also known as Boulevard Terrace Associates)
is a 296 unit project located in Indianapolis, Indiana consisting of four
and five-story buildings of masonry construction. This project was
formerly St. Vincent's Hospital and was extensively rehabilitated and
converted into apartments designed for elderly tenants. The project
was rehabilitated under Section 236 of the National Housing Act.
<TABLE>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
16 Efficiency 400
201 1 Bedroom 570
79 2 Bedroom 710
</TABLE>
CAPITOL HILL ASSOCIATES, is a multi-site 121-unit project, located
one mile from downtown Denver, Colorado. It is situated within an
established area of the city that is evenly mixed with apartment complexes
and single-family dwellings. The project was financed under the auspices
of the United States Department of Housing and Urban Development
(HUD).
<TABLE>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
58 Efficiency 350
35 1 Bedroom 480
20 2 Bedroom 650
8 3 Bedroom 850
</TABLE>
The Partnership sold one of its buildings containing 26 rental units on
December 31, 1986.
COMMUNITY APARTMENTS, LTD. is a 148-unit project located in
Cleveland, Ohio. The project consists of two-story row-type buildings of
wood frame construction with a masonry exterior. The project was
rehabilitated under Section 221(d)(3) of the National Housing Act.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
122 2 Bedroom 675
26 3 Bedroom 870-980
</TABLE>
51st AND KING DRIVE PARTNERSHIP (also known as Cummings Building) is a
96-unit project located at 51st and King Drive in Chicago, Illinois,
consisting of a four-story building of brick and masonry construction.
The project was rehabilitated under Section 236 of the National Housing Act.
<TABLE>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
9 1 Bedroom 750
55 2 Bedroom 935
2 3 Bedroom 1,120
21 4 Bedroom 1,302
9 5 Bedroom 1,488
</TABLE>
MET-PACA II ASSOCIATES is a multi-site 192-unit project located in
New York City in the area bounded by East 118th and 123rd streets and
Park and Lexington Avenues. The project consists of nine four- and
five-story buildings of masonry and brick construction. The project was
rehabilitated under Section 236 of the National Housing Act.
<TABLE>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
44 1 Bedroom 500
96 2 Bedroom 600
41 3 Bedroom 850
11 4 Bedroom 1,110
</TABLE>
MONATIQUOT VILLAGE ASSOCIATES is a 324-unit project located
in Braintree, Massachusetts consisting of 27 three-story buildings of
pre-fabricated concrete construction. The project was constructed under
the auspices of the Massachusetts Housing Finance Agency.
<PAGE>
<TABLE>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
80 1 Bedroom 990
40 1 Bedroom 990
134 2 Bedroom 1,170
25 2 Bedroom 1,170
29 3 Bedroom 1,370
16 3 Bedroom 1,370
</TABLE>
NORWAY HOUSING ASSOCIATES is a 136-unit project located in Boston,
Massachusetts. It is situated in a fine residential area surrounded
by the Fenway District and Northeastern University. The project was
financed under the auspices of the Massachusetts Housing Finance
Agency (MHFA).
<TABLE>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
14 Efficiency 500
92 1 Bedroom 625
26 2 Bedroom 850
4 3 Bedroom 1,050
</TABLE>
NOTRE DAME APARTMENTS is a 205-unit project located in the Pacific Heights
area of San Francisco, California, consisting of a five-story building of
reinforced concrete, cement and plaster construction. The project is
designed for elderly residents and is a converted hospital. The project
was rehabilitated under Section 236 of the National Housing Act.
<TABLE>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
147 Efficiency 310
58 1 Bedroom 474
</TABLE>
<PAGE>
SOUTHERN BOULEVARD PARTNERS II is a 175-unit project located
in the Bronx, New York, consisting of 5 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> <C>
Number of Units Type Average Size (Sq. Ft.)
1 Efficiency 420
24 1 Bedroom 535
101 2 Bedroom 665
40 3 Bedroom 865
9 4 Bedroom 1,010
</TABLE>
Item 3. Legal Proceedings
There are no material legal proceedings pending, 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) Market Information - 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>
Title of Name & Address of Amount and Nature of % of
Class Beneficial Owner Beneficial Ownership Class
General Partner Interfinancial Real 115 Units 100%
Interest Estate Management Co. ($5,000)
1201 Third Avenue,
Suite 5400
Seattle, Washington 98101 3076
Limited Partner C. T. Holland 625 Units 5.425%
Interest Henderson, Texas 75652 ($625,000)
711 other Limited Partners 10,779 Units
($10,779,000) 94.575%
100.000%
</TABLE>
The Registrant has no officers or directors. Interfinancial Real Estate
Management Company, the General Partner of the Registrant, is a
corporation.
(c) Dividends - There were no distributions to partners during 1993, 1994,
1995, 1996 or 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
Interest income $ 59,661 $ 70,644 $ 31,093 $ 1,434 $ 896
Expenses:
Professional fees 17,666 15,024 14,07 14,310 13,325
Management fee 57,020 57,020 57,020 57,020 57,020
Amortization of
costs of
acquisition 3,333 3,333 3,333 6,821 6,821
Other expenses 33,639 2,971 4,185 3,954 8,471
111,658 78,348 78,616 82,105 85,637
Loss before equity
in income (loss)
of Local Limited
Partnerships (51,997) (7,704) (47,523) (80,671) (84,741)
Equity in income
(loss) of Local
Limited
Partnerships 298,881 256,509 (1,186,846) 536,636 642,177
Net income
(loss) $246,884 $248,805 $(1,234,369) $455,965 $557,436
Allocation of net
income (loss):
Net income (loss)
allocated to
General Partner 2,469 2,488 (12,344) $ 4,560 $ 5,574
Net income (loss)
allocated to
Limited Partners 244,415 246,317 (1,222,025) 451,405 551,862
$246,884 $248,805 $(1,234,369) $455,965 $557,436
Net financial
reporting income
(loss) per units:
General partnership
units (115 units
outstanding
allocated
to General
Partner) $ 21 $ 22 $ (107) $ 40 $ 48
Limited Partnership
units (11,404 units
outstanding
allocated to
Limited
Partners) $ 21 $ 22 $ (107) $ 40 $ 48
Total Assets $2,803,522 $2,556,685 $2,293,578 $3,514,400 $3,058,517
Long-term
obligations $ -0- $ -0- $ -0- $ -0- $ -0-
Cash
distributions $ -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 into 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 (including $15,216 in 1993 through 1997 from the sale of Elk
Grove Village). This trend is expected to continue. The Partnership has
advanced funds to selected Local Limited Partnerships. The General
Partner does not believe these net advances will significantly affect the
operations of the Partnership.
<TABLE>
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
Urban's share of
distributions $78,807 $60,553 $1,290,551 $82,596 $40,101
Advances
(made to)
repaid by
Local Limited
Partnerships $29,730 $21,343 $ (1,890) $ 9,723 $ 2,034
</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 $146,065. (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 $57,020.) The Partnership
recorded management fee expense of $57,020 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
<PAGE>
gains 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.
At December 31, 1997, the Partnership had investments in nine 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. The equity in income in Local Limited Partnerships
resulted from several Local Limited Partnerships, whose investments have
not been reduced to zero, reporting income from operations and/or 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. The real estate of the Elk Grove Village Partnership was sold
during 1984. The Partnership holds a note receivable that accrues interest.
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:
<PAGE>
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Net repayments of advances
by (advances to)
Partnerships with zero
investments:
Capitol Hill $ 26,598 $ 19,871 $ 4,860
Distributions received
from Partnerships
with zero investments:
51st and King 4,766 3,375 5,103
Elk Grove Village 15,217 15,217 15,216
Norway House -0- 10,654 -0-
Southern Boulevard III 24,700 -0- -0-
Income (loss) from
investments with
non-zero investment:
Norway House -0- -0- (1,347,256)
Notre Dame 27,600 207,392 135,231
$ 298,881 $ 256,509 $(1,186,846)
</TABLE>
The actual combined losses of Local Limited Partnerships will generally
decrease as depreciation and interest decreases and the projects achieve
stable operations. Much of the rental revenue of the Local Limited
Partnerships is dependent on subsidy. The rents have increased for
inflation and operating costs. In recent years, several Local Limited
Partnerships increased operating expenses to fund repairs and maintenance
on the projects. Such repairs are limited by available cash flow. The
distributions to the Partnership from Local Limited Partnerships are the
result of the profitable 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
<PAGE>
is under no obligation to advance additional funds to the Partnership. The
General Partner, however, anticipates it will receive adequate distributions
from the Local Limited Partnerships to maintain operations.
Capital Resources
The General Partner believes that situations may arise where it would be
advantageous to the Partnership 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 may 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 are made, it is
<PAGE>
likely that the acquired properties will be conventional, multi-family
residential projects. The Partnership has had inquiries about the sale or
exchange of properties in its portfolio, but no offers have been made.
The partnership has made no material commitments for capital
expenditures.
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 with accountants 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 will
continue to serve 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. 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 11. Executive Compensation
(a) The Registrant does not pay 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 any salary or other
remuneration to the officers in the future.
(c) There are no options, warrants, rights or any other such remuneration
available to the General Partner of the Registrant.
(d) The Registrant will not pay any salary or other remuneration to the
directors of the General Partner of the Registrant.
(e) There are no 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
<TABLE>
<S> <C> <C> <C>
Title of Name & Address of Amount and Nature of % of
Class Beneficial Owner Beneficial Ownership Class
General Partner Interfinancial Real 115 Units 100%
Interest Estate Management Co. ($5,000)
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 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 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 nine 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 Pre-Effective
Amendment No. 2 to Registration Statement on Form
S-11 filed July, 1974.
3.A. Amended Certificate and Agreement of Limited
Partnership, incorporated by reference from Pre-
Effective Amendment No. 2 on form S-11 filed July,
1974.
<PAGE>
3.B. Amendment to Certificate of Limited Partnership,
incorporated by reference from Pre-Effective
Amendment No. 2 to Registration Statement on Form
S-11 filed July, 1974.
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 Pre-Effective Amendment No. 2 to Registration
Statement on Form S-11 filed July, 1974.
5.A. Opinion and Consent of Counsel, incorporated by
reference from Pre-Effective Amendment No. 2 to
Registration Statement on Form S-11 filed July,
1974.
8.A. Opinion and Consent of special Tax Counsel,
incorporated by reference from Pre-Effective
Amendment No. 2 to Registration Statement on Form
S-11 filed July, 1974.
8.B-1 Tax Ruling from the Internal Revenue Service dated
July 10, 1974, incorporated by reference from Pre-
Effective Amendment No. 2 to Registration Statement
on Form S-11 filed July, 1974.
8.B-2 Supplemental Tax ruling from the Internal Revenue
Service dated July 19, 1974, incorporated by
reference from Pre-Effective Amendment No. 2 to
Registration Statement on Form S-11 filed July,
1974.
10.A. 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. 2 to
Registration Statement on Form S-11 filed July,
1974.
10.B. Extension of Maturity Date of promissory note dated
April 18, 1990 on behalf of Elk Grove Village
Associates by Elk Grove Investors, Ltd.
16.A. Copy of letter of Price Waterhouse & Co. regarding
change in certifying accountant, incorporated by
reference from Form 8-K filed July, 1976.
28.A. Letter to investors dated August 28, 1974 regarding
status of the offering, incorporated by reference
from Post-Effective Amendment No. 1 to Registration
Statement on Form S-11 filed August, 1974.
<PAGE>
28.B. Sticker Supplement dated August 28, 1974 to
Prospectus dated July 23, 1974, incorporated by
reference from Pre-Effective Amendment No. 1 to
Registration Statement on Form S-11 filed August,
1974.
28.C. Balance Sheet (unaudited) dated June 30, 1974 of
Interfinancial Real Estate Management Company,
incorporated by reference from Pre-Effective
Amendment No. 1 to Registration Statement on Form
S-11 filed August, 1974.
28.D. Letters to Subscribers dated January 21, 1975 and
February 7, 1975 relating to tax reporting
information and status of the offering,
incorporated by reference from Pre-Effective
Amendment No. 2 to Registration Statement on Form
S-11 filed February, 1975.
28.E. Net worth statements by general partners of local
limited partnerships, incorporated by reference
from Pre-Effective Amendment No. 3 to Registration
Statement on Form S-11 filed March, 1975.
28.F. Table of limited partnership interests acquired in
local distribution entities, incorporated by
reference from Form 8-K filed December, 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 - 1974
BY: INTERFINANCIAL REAL ESTATE MANAGEMENT COMPANY
Date: July 29, 1998 By: Paul H. Fleger
Paul H. Pfleger
President
Interfinancial Real Estate
Management Company
Date: July 29, 1998 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 July 29, 1998
Paul H. Pfleger, Director Date
Interfinancial Real Estate Management
Company
By: John M. Orehek July 29, 1998
John M. Orehek, Director Date
Interfinancial Real Estate Management
Company.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED 1974
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>
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
Form 10-K Items 14(a)(1) and (2)
Form 10-K Item 14(d)
INDEX TO FINANCIAL STATEMENTS
The following financial statements of Urban Improvement Fund Limited
1974 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
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
1974 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 or
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 nine 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 - 1974
We have audited the accompanying balance sheets of Urban Improvement
Fund Limited - 1974 (a Limited Partnership), as of December 31, 1997
and 1996, and the related statements of changes in partners' capital,
income (loss) 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 1974
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 the financial statements of seven of Urban
Improvement Fund Limited 1974's investments in local limited
partnerships whose combined financial statements are included 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's investment in these Partnerships
represents zero of total assets at December 31, 1997 and 1996; and its
equity in their operations represents twelve percent of the net income for
1997 and 1996, and ninety-seven percent of the net loss for 1995.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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
and the reports of other auditors 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
1974 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
May 1, 1998
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
BALANCE SHEETS
ASSETS
<TABLE>
<S> <C> <C>
December 31,
1997 1996
Cash and cash equivalents $1,454,456 $1,394,990
Investments in and advances
to Local Limited Partnerships
accounted for on the equity
method - Notes 4, 5, 6 and 7
(Schedules IV and XI) 1,349,066 1,161,695
$2,803,522 $2,556,685
LIABILITIES AND PARTNERS' CAPITAL
Distributions payable $ 2,096 $ 2,096
Accounts payable -0- 47
Management fee payable 28,510 28,510
Partners' capital - Note 2
General Partners - 115 partnership
units
Authorized, issued and
outstanding 27,729 25,260
Limited Partners - 11,404
partnership units
Authorized, issued and
outstanding 2,745,187 2,500,772
2,772,916 2,526,032
Commitments and contingent
liabilities -Note 3 $2,803,522 $2,556,685
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
STATEMENTS OF INCOME (LOSS)
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
1997 1996 1995
Interest income $ 59,661 $ 70,644 $ 31,093
Expenses:
Professional fees 17,666 15,024 14,078
Management fees - Note 3 57,020 57,020 57,020
Amortization of costs
of acquisition 3,333 3,333 3,333
Other expenses 33,639 2,971 4,185
111,658 78,348 78,616
Loss before equity in
income (loss) of Local
Limited Partnerships (51,997) (7,704) (47,523)
Equity in income (loss)
of Local Limited
Partnerships - Note 4 298,881 256,509 (1,186,846)
Net income (loss) $ 246,884 $ 248,805 $(1,234,369)
Allocation of net
income (loss):
Net income (loss)
allocated to
General Partners $ 2,469 $ 2,488 $ (12,344)
Net income (loss)
allocated to
Limited Partners 244,415 246,317 (1,222,025)
$ 246,884 $ 248,805 $(1,234,369)
Net financial reporting
income (loss) per unit:
General partnership
units (115 units
outstanding allocated
to General Partner) $ 21 $ 22 $ (107)
Limited partnership
units (11,404 units
outstanding allocated
to Limited Partners) $ 21 $ 22 $ (107)
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<S> <C> <C> <C>
General Limited
Partner Partners Total
Partners' capital at
January 1, 1996 $ 22,772 $ 2,254,455 $ 2,277,227
Net income - 1996 2,488 246,317 248,805
Partners' capital at
December 31, 1996 25,260 2,500,772 2,526,032
Net income - 1997 2,469 244,415 246,884
Partners' capital at
December 31, 1997 $ 27,729 $ 2,745,187 $ 2,772,916
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
(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) $ 246,884 $ 248,805 $(1,234,369)
Adjustments to reconcile
net income (loss) to net
cash provided (used)
by operating activities:
Amortization of initial
and rent up fees 3,333 3,333 3,333
Increase (decrease) in
accounts payable (47) 47 -0-
Increase in management
fee payable -0- 14,257 14,255
Equity in loss (income)
of Local Limited
Partnerships (298,881) (256,509) 1,186,846
Total adjustments (295,595) (238,872) 1,204,434
Net cash provided
(used) by
operating activities (48,711) 9,933 (29,935)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Current year distributions 78,807 60,553 1,290,551
Net repayments from
(advances to) Local
Limited Partnerships 29,370 21,343 (1,890)
Net cash provided by
investing activities 108,177 81,896 1,288,661
CASH FLOWS FROM
FINANCING ACTIVITIES:
Increase (decrease) in
distribution payable -0- -0- (708)
Net cash provided
(used) by
financing activities -0- -0- (708)
NET INCREASE IN
CASH AND
CASH EQUIVALENTS 59,466 91,829 1,258,018
CASH BALANCE
AT BEGINNING
OF YEAR 1,394,990 1,303,161 45,143
CASH BALANCE
AT END OF YEAR $1,454,456 $1,394,990 $1,303,161
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
Note 1 - Organization and Accounting Policies
Organization
Urban Improvement Fund Limited (the Partnership) was formed under the
California Uniform Limited Partnership Act on January 13, 1974, for the
principal purpose of investing in other limited partnerships (Local Limited
Partnerships), which own federal and state-assisted housing projects. The
Partnership issued 11,404 units of limited partnership interest pursuant to
a public offering of such units which terminated on December 31, 1974.
The Partnership also issued 115 units of general partnership interest to
Interfinancial Real Estate Management Company (the General Partner).
The Urban Improvement Fund Limited-1974 prospectus, dated July 23,
1974, specified that the General Partner will have at least a one percent
interest in profits, losses and special allocations, and the limited partners
will share the remainder of the interest in profits, losses and special
allocations in proportion to their respective units of limited partnership
interests. It is the General Partners' intention to allocate, for income tax
and financial reporting purposes, the profits, losses and special allocations
in the ratio of ninety-nine percent to the limited partners and one percent
to the General Partner.
Investment in Local Limited Partnerships
As of December 31, 1997 and 1996, the Partnership had investments in
nine 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 acquisitions 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 purposes, are capitalized as acquisition costs 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 (15 to 40 years) of the Local Limited Partnership
properties. Amortization is discontinued when the investment is reduced
to zero.
<PAGE>
Note 1 - Organization and Accounting Policies - Continued
The Partnership has an investment in one Limited Partnership that sold its
real estate during 1984 (Note 6). This Partnership (Elk Grove Elderly)
holds a note receivable for a portion of the sales proceeds.
The Partnerships' equity in income (loss) of the Local Limited
Partnerships is summarized as follows:
<TABLE>
<S> <C> <C> <C>
1997 1996 1995
Repayment of advances by
(advances to) Partnerships
with zero investments:
Capitol Hill $ 26,598 $ 19,871 $ 4,860
Distributions received
from Partnerships with
zero investments:
51st and King 4,766 3,375 5,103
Elk Grove 15,217 15,217 15,216
Norway House -0- 10,654 -0-
Southern Boulevard III 24,700 -0- -0-
Income (loss) from
investments with
non-zero investment:
Norway House -0- -0- (1,347,256)
Notre Dame 227,600 207,392 135,231
$ 298,881 $ 256,509 $(1,186,846)
</TABLE>
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 since all taxable
income or loss of the Partnership is allocated to the partners for inclusion
in their respective tax returns.
<PAGE>
Note 1 - Organization and Accounting Policies - Continued
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.
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.
Note 2 - Reconciliation Between Net Income (Loss) and Partners' Capital
(Deficit) of the Partnership For Financial Reporting Purposes
and Income Tax Reporting Purposes
A reconciliation of the Partnership's income (loss)for financial reporting
purposes and the Partnership's income (loss) for income tax reporting
purposes follows:
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
1997 1996 1995
Net income (loss) for
financial reporting
purposes $ 246,884 $ 248,805 $(1,234,369)
Amortization of initial
and rent-up fees and
other costs of acquisition
capitalized for financial
reporting purposes and
previously deducted for
income tax purposes 3,333 3,333 3,333
Equity in losses reported
by Local Limited
Partnerships for income
tax reporting purposes
in excess of income
(losses) for financial
reporting purposes 652,520 663,282 (2,443,172)
Accrual and other
adjustments for
financial reporting
purposes 3,189 19,370 256,027
Net income (loss) as
reported on the federal
income tax return $ 905,926 $ 934,790 $(3,418,181)
</TABLE>
<PAGE>
Note 2 - Reconciliation Between Net Income (Loss) and Partners' Capital
(Deficit) of the Partnership For Financial Reporting Purposes
and Income Tax Reporting Purposes - Continued
A reconciliation between partners' capital for financial reporting purposes
and partners' capital (deficit) for income tax reporting purposes follows:
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
1997 1996 1995
Partners' capital for
financial reporting
purposes $ 2,772,916 $ 2,526,032 $ 2,277,227
Unamortized portion
of initial and rent-up
fees and other costs of
acquisition capitalized
for financial reporting
purposes and previously
deducted for income tax
purposes (905,690) (909,023) (912,356)
Commissions and offering
expenses capitalized for
income tax purposes
and charged to capital
for financial reporting
purposes 1,315,039 1,315,039 1,315,039
Equity in cumulative
losses of Local Limited
Partnerships for income
tax reporting purposes
in excess of losses
for financial
reporting purposes (23,369,438) (24,005,801) (24,669,082)
Accrual and other
adjustments for
financial reporting
purposes 52,971 33,625 14,255
Partners' capital
(deficit) as reported
on the federal
income tax return $(20,134,202) $(21,040,128) $(21,974,917)
</TABLE>
The Partnership has received a ruling from the Internal Revenue Service
that the basis of the limited partners' interest 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.
<PAGE>
Note 3 - Management of Urban Improvement Fund Limited
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 $146,065. (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 $57,020.) In 1997, 1996 and
1995, the minimum annual management fee of $57,020 was earned and
recorded as an expense of the Partnership. 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 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, as shown in the following table, PSI has become the General
Partner in three of the Local Limited Partnerships in which the Partnership
has or had investments:
<TABLE>
<S> <C> <C>
Date PSI Became
Local Limited Partnership General Partner
Notre Dame Apartments March 1977
Capitol Hill Associates December 1978
Logan-Washington Associates December 1978
</TABLE>
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 stages of completion and/or occupancy.
<PAGE>
Note 4 - Investments in Local Limited Partnerships Accounted for on the
Equity Method - Continued
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:
Capitol Hill $ 277,900 $ (899,718) $ (621,818)
Community Apts. 287,244 (1,189,220) (901,976)
51st & King Drive 187,582 (822,134) (634,552)
Met-Paca II 1,219,550 (5,602,267) (4,382,717)
Monatiquot Village 940,000 (8,722,221) (7,782,221)
Norway Housing (1,053,606) 101,132 (952,474)
Notre Dame 253,871 1,032,268 1,286,139
Southern Boulevard II 563,764 (2,393,654) (1,829,890)
Weyerbacher Terrace 703,080 (2,280,608) (1,577,528)
$ 3,379,385 $(20,776,422) $(17,397,037)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Losses Not Costs of
Recorded Acquisition
(Note 1) Advances (Note 1) Total
December 31, 1997:
Capitol Hill $ 407,203 $ 150,633 $ 63,982 $ -0-
Community Apts. 847,050 -0- 54,926 -0-
51st & King Drive 587,582 -0- 46,970 -0-
Met-Paca II 4,251,385 -0- 131,332 -0-
Monatiquot Village 7,496,556 -0- 285,665 -0-
Norway Housing 921,946 -0- 30,528 -0-
Notre Dame -0- 2,501 60,426 1,349,066
Southern Boulevard II 1,725,498 -0- 104,392 -0-
Weyerbacher Terrace 1,450,059 -0- 127,469 -0-
$17,687,279 $ 153,134 $ 905,690 $1,349,066
</TABLE>
<TABLE>
<S> <C> <C> <C>
Equity In
Capital Income
Contributions (Losses) Subtotal
December 31, 1996:
Capitol Hill $ 277,900 $ (1,043,449) $ (765,549)
Community Apts. 287,244 (1,139,924) (852,680)
Elk Grove Village (30,434) 30,434 -0-
51st & King Drive 192,349 (948,683) (756,334)
Met-Paca II 1,219,550 (5,676,866) (4,457,316)
Monatiquot Village 940,000 (8,406,176) (7,466,176)
Norway Housing (1,053,606) (95,223) (1,148,829)
Notre Dame 287,991 804,668 1,092,659
Southern Boulevard II 588,464 (2,543,146) (1,954,682)
Weyerbacher Terrace 703,080 (2,320,601) (1,617,521)
$3,412,538 $(21,338,966) $(17,926,428)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Losses Not Costs of
Recorded Acquisition
(Note 1) Advances (Note 1) Total
December 31, 1996:
Capitol Hill $ 524,336 $ 177,231 $ 63,982 $ -0-
Community Apts. 797,754 -0- 54,926 -0-
Elk Grove Village -0- -0- -0- -0-
51st & King Drive 709,364 -0- 46,970 -0-
Met-Paca II 4,325,984 -0- 131,332 -0-
Monatiquot Village 7,180,511 -0- 285,665 -0-
Norway Housing 1,118,302 -0- 30,527 -0-
Notre Dame -0- 5,278 63,758 1,161,695
Southern Boulevard II 1,850,290 -0- 104,392 -0-
Weyerbacher Terrace 1,490,053 -0- 127,468 -0-
$17,996,594 $ 182,509 $ 909,020 $1,161,695
</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 income, changes in partners capital (deficit) and
cash flows and selected footnote disclosures from the audited financial
statements for the years ended December 31, 1997, 1996 and 1995, are
summarized as follows:
<PAGE>
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 $ 1,207,917 $ 1,154,174
Cash in escrow and
other restricted funds 4,497,543 4,018,535
Accounts receivable 304,643 140,742
Prepaid expenses 544,078 508,995
Other assets (net of
accumulated amortization) 275,442 501,213
6,829,623 6,323,659
Property on the basis of cost:
Land 1,637,381 1,637,381
Buildings and improvements 50,144,891 49,259,098
51,782,272 50,896,479
Less accumulated depreciation (40,287,794) (39,024,325)
11,494,478 11,872,154
$ 18,324,101 $ 18,195,813
Liabilities and Partners' Capital (Deficit)
Mortgage notes payable $ 31,781,655 $ 32,806,320
Accounts payable and
accrued expenses 1,403,802 1,186,924
Notes payable 4,354,660 3,926,789
Advances from Urban
Improvement Fund
Limited - 1974 153,134 182,509
Tenants' security and
other deposits 415,849 400,547
38,109,100 38,503,089
Partners' capital (deficit)
per accompanying
statements (19,784,999) (20,307,276)
$ 18,324,101 $ 18,195,813
</TABLE>
<PAGE>
Note 4 - Investments in Local Limited Partnerships Accounted for on
the Equity Method - Continued
COMBINED STATEMENTS OF INCOME (LOSS) OF LOCAL LIMITED PARTNERSHIPS
<TABLE>
<S> <C> <C> <C>
December 31,
1997 1996 1995
Revenue:
Net rental income $12,169,958 $12,423,399 $12,152,955
Financial income 439,839 412,522 459,080
Other income 335,088 108,247 131,608
12,944,885 12,944,168 12,743,643
Expenses:
Administrative 2,084,812 2,118,987 2,132,480
Utilities 2,375,107 2,341,588 2,238,369
Operating 3,189,805 3,347,357 3,429,303
Taxes and insurance 1,576,715 1,552,464 1,428,173
Total Operating Expenses 9,226,439 9,360,396 9,228,325
Net Operating Income 3,718,446 3,583,772 3,515,318
Non-operating expenses:
Financial expenses 1,721,987 1,753,314 4,621,490
Depreciation expense 1,316,907 1,503,842 1,747,112
Other expenses 35,225 24,302 30,283
3,074,119 3,281,458 6,398,885
Net income (loss) $ 644,327 $ 302,314 $(2,883,567)
</TABLE>
Amortization of capitalized interest was $44,436 in 1997, 1996 and 1995.
<PAGE>
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>
Urban
Improvement Other
Fund Limited General
Limited Partners Partners Total
Partners capital
(deficit)
at January 1, 1995 $(13,973,219) $ (3,057) $ (846,145) $(14,822,421)
Net income - 1995 (2,752,441) 223 (131,349) (2,883,567)
Distributions - 1995 (1,437,431) -0- (1,404,960) (2,842,391)
Partners capital
(deficit) at
December 31, 1995 (18,163,091) (2,834) (2,382,454) (20,548,379)
Net income - 1996 297,216 335 4,763 302,314
Distributions - 1996 (60,553) -0- (658) (61,211)
Partners capital
(deficit) at
December 31, 1996 (17,926,428) (2,499) (2,378,349) (20,307,276)
Net income - 1997 608,198 287 35,842 644,327
Distributions - 1997 (78,807) -0- (43,243) (122,050)
Partners capital
(deficit) at
December 31, 1997 $(17,397,037) $ (2,212) $(2,385,750) $(19,784,999)
</TABLE>
<PAGE>
STATEMENTS OF CASH FLOWS OF LOCAL LIMITED PARTNERSHIPS
<TABLE>
<S> <C> <C> <C>
December 31,
1997 1996 1995
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) $ 644,327 $ 302,314 $(2,883,567)
Adjustments to reconcile
net income (loss) to net
cash provided (used) by
operating activities:
Depreciation 1,316,907 1,503,842 1,747,112
Decrease (increase) in
receivables, escrows,
restricted deposits,
prepaid expenses
and other assets (452,223) (335,714) (323,452)
Increase (decrease)
in accounts payable,
accrued expenses,
notes payable and
tenant security
deposit liability 232,181 (164,171) 183,808
Total adjustments 1,096,865 1,003,957 1,607,468
Net cash provided
(used) by operating
activities 1,741,192 1,306,271 (1,276,099)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures (939,231) (526,994) (580,266)
Net cash used by
investing activities (939,231) (526,994) (580,266)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Mortgage principal
payments (1,024,665) (1,226,989) (912,763)
Proceeds from
recapitalization
of mortgage -0- -0- 2,623,679
Increase (decrease)
in notes payable 406,696 371,628 (146,583)
Distributions paid (122,050) (61,211) (2,842,391)
Advances from
(repayments to)
affiliates - net (8,199) (13,674) 1,890
Net cash used
by financing
activities (748,218) (930,246) (1,276,168)
INCREASE IN CASH AND
CASH EQUIVALENTS 53,743 (150,969) (3,132,533)
CASH BALANCE AT
BEGINNING OF YEAR 1,154,174 1,305,143 4,437,676
CASH BALANCE AT
END OF YEAR $ 1,207,917 $ 1,154,174 $ 1,305,143
SUPPLEMENTAL INFORMATION
REGARDING INTEREST
PAYMENTS IS AS FOLLOWS:
Interest paid, net
of subsidy $ 1,157,659 $ 1,274,606 $ 1,498,104
</TABLE>
<PAGE>
Note 4 - Investments in Local Limited Partnerships Accounted for on
the Equity Method - Continued
A reconciliation between the combined net income (loss) for financial
reporting purposes and the combined income (loss) for income tax
reporting purposes follows:
<TABLE>
<S> <C> <C> <C>
For the Year Ended December 31,
1997 1996 1995
Combined net income
(loss) for financial
reporting purposes $ 644,327 $ 302,314 $ (2,883,567)
Excess of depreciation
for financial reporting
purposes over depreciation
for tax reporting purposes 397,834 439,323 653,149
Accrual adjustments
for financial
reporting purposes (45,732) 27,285 12,033
Combined net income
(loss) for income
tax purposes as reported
on the federal income
tax returns $ 996,429 $ 768,922 $ (2,218,385)
</TABLE>
A reconciliation between combined partners' capital (deficit) for financial
reporting purposes and combined partners' capital (deficit) for income tax
reporting purposes follows:
<TABLE>
<S> <C> <C> <C>
For the Year Ended December 31,
1997 1996 1995
Combined partners'
capital (deficit)
for financial reporting
purposes $(19,784,999) $(20,307,276) $(20,548,379)
Carrying costs during
construction capitalized
for financial reporting
purposes, excess of
depreciation for tax
reporting purposes over
depreciation for financial
reporting purposes
and accrual adjustments
for financial reporting
purposes (2,669,638) (2,869,058) (3,336,027)
Combined partners'
capital (deficit)
as reported on the
federal income
tax returns $(22,454,637) $(23,176,334) $(23,884,406)
</TABLE>
<PAGE>
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
capitalized all project costs, including payments to the general partners,
interest, taxes, carrying costs and operating expenses offset by incidental
rental income during the construction period. For income tax purposes,
certain of these amounts were deducted when paid.
Depreciation and amortization
For financial statement purposes, depreciation is computed using straight-
line and various accelerated methods over useful lives of fifteen to
forty years from the date of completion of the building or rehabilitation.
For income tax purposes, buildings are depreciated over fifteen to forty
years using various accelerated methods and certain rehabilitation costs
are amortized on 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
partnerships 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 Partnerships have mortgages which are payable to or are insured
by the Department of Housing and Urban Development (HUD) and the
Massachusetts Housing Finance Agency (MHFA) totaling $31,781,655 at
December 31, 1997 ($20,517,357 by HUD and $11,264,298 by MFHA) and
$32,806,320 at December 31, 1996 ($20,996,289 by HUD and $11,810,031
by MFHA). The mortgage notes payable are secured by deeds of trust
on rental property and bear interest at rates of seven to nine percent
per annum. The mortgages are payable in monthly installments of
principal and interest of approximately $269,000 over periods of
forty years. HUD makes interest reduction payments on the mortgages
insured under Section 236 in amounts which effectively reduce the
mortgage payments to those required for mortgages carrying a one
percent interest rate.
<PAGE>
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 $ 1,078,156
1999 1,139,749
2000 1,197,104
2001 963,211
2002 1,035,020
Beyond 26,368,415
$31,781,655
</TABLE>
National 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 $3,588,297 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.
All of 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, the Local Limited Partnerships received approximately
$6,230,501 in rent supplement and Section 8 funds.
<PAGE>
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 four percent to eleven percent of the
gross revenues of the respective projects. The management agents are
affiliated with the general partners of the Local Limited Partnerships.
Note 5 - Sale of the Assets of Elk Grove Village
The property of Elk Grove Village was sold during 1984. The sales
price of $11,235,930 was composed of $5,855,464 for assumption of
the underlying mortgage and installment payments as follows:
<TABLE>
<S> <C> <C>
Urban 74 General Partner
1985 $ 651,191 $ -0-
1986 411,116 70,059
1987 -0- 176,425
1989 -0- 171,675
1999 1,950,000 1,950,000
$3,012,307 $2,368,159
</TABLE>
The final installment is due on December 31, 1999 along with accrued
interest. Interest will continue to accrue at nine and one-half percent per
annum and is payable on the anniversary date of the note to the extent that
the property has distributable cash flow in excess of $10,000. The gain on
the sale of the real estate is recognized on the cost recovery method to
first recognize the recovery of the asset value, then recognize the gain as
the proceeds are received. For each of the years ended December 31, 1997,
1996 and 1995, the Partnership received and recorded interest income of
$15,217.
Note 6 - Recapitalization
In April 1995, Norway Housing Associates entered into an agreement with
MHFA to borrow $2,623,679 under a second mortgage and to distribute
the proceeds of this borrowing, together with the Partnership's surplus
cash, as determined by MHFA. Approximately fifty-one percent of the
available funds after payment of allowable fees and expenses were paid to
MHFA and $2,787,584 was distributed to the partners. The MHFA
required that approximately $348,000 be retained as debt service and
operating reserves controlled by MHFA. $2,841,242, the amount paid to
MHFA was deemed to be residual receipts, i.e., an accumulation of
operating funds in excess of current requirements. Payment of these funds
to MHFA has been treated as a charge against operations for financial and
tax reporting purposes.
<PAGE>
Note 7 - Investment in Met Paca II 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 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.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
SCHEDULE IV
INDEBTEDNESS OF RELATED PARTIES
<TABLE>
<S> <C> <C> <C> <C> <C>
December 31,
Change Change
1997 1997 1996 1996 1995
Advances to
(repayments from)
local limited
partnerships:
Capitol Hill $150,635 $(26,596) $177,231 $(19,871) $197,102
Notre Dame 2,504 (2,774) 5,278 (1,472) 6,750
$153,139 $(29,370) $182,509 $(21,343) $ 203,852
</TABLE>
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 for Capitol Hill Associates
because the investment in this partnership has been reduced to zero under
the equity method of accounting.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION OF LOCAL LIMITED PARTNERSHIPS
December 31, 1997
<TABLE>
<S> <C> <C> <C>
Outstanding
Description mortgage
Partnership/location No. of units balance Land
Capitol Hill Associates
Denver, Colorado 121 apartments $ 1,805,808 $ 300,990
Community Apartments, Ltd.
Cleveland, OH 148 apartments 1,310,978 182,031
51st and King Drive
Chicago, IL 96 apartments 1,468,410 100,858
Met-Paca II Associates
New York, New York 192 apartments 5,185,027 205,597
Monatiquot Village Associates
Braintree, MA 324 apartments 7,402,998 393,928
Norway Housing Associates
Boston, MA 136 apartments 3,861,300 150,026
Notre Dame
San Francisco, CA 205 apartments 3,358,502 244,847
Southern Boulevard II
New York, New York 175 apartments 3,359,538 37,441
Weyerbacher Terrace
Indianapolis, IN 296 apartments 4,029,094 21,663
$31,781,655 $ 1,637,381
</TABLE>
<TABLE>
<S> <C> <C> <C>
Description Buildings &
Partnership/location No. of units Improvements Total
Capitol Hill Associates
Denver, Colorado 121 apartments $2,243,435 $ 2,544,425
Community Apartments, Ltd.
Cleveland, OH 148 apartments 2,075,954 2,257,985
51st and King Drive
Chicago, IL 96 apartments 2,593,650 2,694,508
Met-Paca II Associates
New York, New York 192 apartments 7,664,422 7,870,019
Monatiquot Village Associates
Braintree, MA 324 apartments 11,620,743 12,014,671
Norway Housing Associates
Boston, MA 136 apartments 3,331,715 3,481,741
Notre Dame
San Francisco, CA 205 apartments 6,705,736 6,950,583
Southern Boulevard II
New York, New York 175 apartments 6,501,036 6,538,477
Weyerbacher Terrace
Indianapolis, IN 296 apartments 7,408,200 7,429,863
$50,144,891 $51,782,272
</TABLE>
<TABLE>
<S> <C> <C> <C>
Date of
Description Accumulated completion of
Partnership/location No. of units Depreciation construction
Capitol Hill Associates
Denver, Colorado 121 apartments $ (1,686,857) 1975
Community Apartments, Ltd.
Cleveland, OH 148 apartments (1,872,670) 1975
51st and King Drive
Chicago, IL 96 apartments (2,332,997) 1975
Met-Paca II Associates
New York, New York 192 apartments (7,454,896) 1976
Monatiquot Village Associates
Braintree, MA 324 apartments (9,648,450) 1975
Norway Housing Associates
Boston, MA 136 apartments (2,969,110) 1975
Notre Dame
San Francisco, CA 205 apartments (3,366,933) 1976
Southern Boulevard II
New York, New York 175 apartments (5,768,013) 1975
Weyerbacher Terrace
Indianapolis, IN 296 apartments (5,187,868) 1976
$(40,287,794)
</TABLE>
<TABLE>
<S> <C> <C> <C>
Life over which
depreciation
in latest
income
Description Date statement
Partnership/location No. of units Acquired is computed
Capitol Hill Associates
Denver, Colorado 121 apartments 1974 5-25 years
Community Apartments, Ltd.
Cleveland, OH 148 apartments 1974 15-25 years
51st and King Drive
Chicago, IL 96 apartments 1974 15 years
Met-Paca II Associates
New York, New York 192 apartments 1974 7-27.5 years
Monatiquot Village Associates
Braintree, MA 324 apartments 1974 4-40 years
Norway Housing Associates
Boston, MA 136 apartments 1974 3-25 years
Notre Dame
San Francisco, CA 205 apartments 1974 5-40 years
Southern Boulevard II
New York, New York 175 apartments 1974 7-27.5 years
Weyerbacher Terrace
Indianapolis, IN 296 apartments 1974 5-30 years
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Building and Accumulated
Land Improvements Cost Depreciation
Balance at
January 1, 1996 $1,637,381 $48,732,104 $50,369,485 $37,571,751
Additions -0- 526,994 526,994 1,452,574
Deletions -0- -0- -0- -0-
Balance at
December 31,
1996 1,637,381 49,259,098 50,896,479 39,024,325
Additions -0- 939,231 939,231 1,316,907
Deletions -0- (53,438) (53,438) (53,438)
Balance at
December 31,
1997 $1,637,381 $50,144,891 $51,782,272 $40,287,794
</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 buildings for federal income
tax purposes is approximately $48,000,000.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,454,456
<SECURITIES> 0
<RECEIVABLES> 1,349,066
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,454,456
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,803,522
<CURRENT-LIABILITIES> 30,606
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,745,187
<TOTAL-LIABILITY-AND-EQUITY> 2,772,916
<SALES> 0
<TOTAL-REVENUES> 358,542
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 111,658
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 246,884
<INCOME-TAX> 0
<INCOME-CONTINUING> 246,884
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 246,884
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
