<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
-----------------
Commission file number 0-11149
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CAPITAL REALTY INVESTORS, LTD.
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
District of Columbia 52-1219926
- ----------------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number,
including area code) (301) 468-9200
---------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ----------------------------------------- ---------------------
NONE N/A
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP UNITS
- --------------------------------------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [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 this
Form 10-K (X)
The partnership interests of the Registrant are not traded in any market.
Therefore, the partnership interests had neither a market selling price nor an
average bid or asked price within the 60 days prior to the date of this filing.
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
(a limited partnership)
1995 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
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Page
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Item 1. Business . . . . . . . . . . . . . . . . . . . . I-1
Item 2. Properties . . . . . . . . . . . . . . . . . . . I-5
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . I-5
Item 4. Submission of Matters to a Vote
of Security Holders . . . . . . . . . . . . . . I-5
PART II
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Item 5. Market for the Registrant's Partnership
Interests and Related Partnership Matters . . II-1
Item 6. Selected Financial Data . . . . . . . . . . . . . II-1
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . II-2
Item 8. Financial Statements and Supplementary Data . . . II-9
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . II-9
PART III
--------
Item 10. Directors and Executive Officers
of the Registrant . . . . . . . . . . . . . . . III-1
Item 11. Executive Compensation . . . . . . . . . . . . . III-2
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . III-4
Item 13. Certain Relationships and Related Transactions . III-4
PART IV
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Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . IV-1
Signatures . . . . . . . . . . . . . . . . . . . . . . . . IV-3
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . IV-30
<PAGE>
PART I
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ITEM 1. BUSINESS
--------
Capital Realty Investors, Ltd. (the Partnership) is a limited partnership
which was formed under the District of Columbia Limited Partnership Act on June
1, 1981. On December 31, 1981, the Partnership commenced offering 30,000 units
of limited partnership interests through a public offering which was managed by
Merrill Lynch, Pierce, Fenner & Smith, Incorporated. The Partnership closed the
offering on December 31, 1982 when 24,837 units of limited partnership interests
became fully subscribed.
The General Partners of the Partnership are C.R.I., Inc. (CRI), the
Managing General Partner, current and former shareholders of CRI and Rockville
Pike Associates, Ltd., a Maryland limited partnership which includes the
shareholders of CRI and several officers and former employees of CRI. Services
for the Partnership are performed by CRI, as the Partnership has no employees of
its own.
The Partnership was formed to invest in real estate, which is the
Partnership's principal business activity, by acquiring and holding a limited
partner interest in limited partnerships (Local Partnerships). As of December
31, 1995, the Partnership had invested in eighteen Local Partnerships. Each of
these Local Partnerships owns a federal or state government-assisted or
conventionally financed apartment complex, which provides housing principally to
the elderly or to individuals and families of low or moderate income. The
original objectives of these investments, not necessarily in order of
importance, were to:
(1) preserve and protect the Partnership's capital;
(2) provide, during the early years of the Partnership's operations,
current tax benefits to the partners in the form of tax losses which
the partners may use to offset income from other sources;
(3) provide capital appreciation through increases in the value of the
Partnership's investments and increased equity through periodic
payments on the indebtedness on the apartment complexes; and
(4) provide cash distributions from sale or refinancing of the
Partnership's investments and, on a limited basis, from rental
operations.
See Part II, Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations, for a discussion of factors affecting the original
investment objectives.
The Local Partnerships in which the Partnership has invested were organized
by private developers who acquired the sites, or options thereon, applied for
applicable mortgage insurance and/or subsidies, and remain as the local general
partners in the Local Partnerships. The Partnership became the principal
limited partner in these Local Partnerships pursuant to negotiations with these
developers who act as the local general partners. However, in the event of
non-compliance with the Local Partnerships' partnership agreements, the local
general partner may be removed and replaced with another local general partner
or with an affiliate of the Partnership's Managing General Partner. As a limited
partner, the Partnership's legal liability for obligations of the Local
Partnership is limited to its investment. An affiliate of the Managing General
Partner of the Partnership is also generally a general partner of the Local
Partnerships. In most cases, the local general partners of the Local
Partnerships retain responsibility for developing, constructing, maintaining,
operating and managing the projects. Additionally, the local general partners
and affiliates of the Managing General Partner may operate other apartment
I-1
<PAGE>
PART I
------
ITEM 1. BUSINESS - continued
--------
complexes which may be in competition for eligible tenants with the Local
Partnerships' apartment complexes.
Although each of the Local Partnerships in which the Partnership has
invested owns an apartment complex which must compete in the market place for
tenants, interest subsidies and/or rent supplements from governmental agencies
generally make it possible to offer certain of these dwelling units to eligible
tenants at a cost significantly below the market rate for comparable
conventionally financed dwelling units. Based on available data, the General
Partners believe there to be no material risk of market competition in the
operations of the apartment complexes described below which would adversely
impact the Partnership, except in specific circumstances as described in Part
II, Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following is a schedule of the apartment complexes owned by Local
Partnerships in which the Partnership is a limited partner:
I-2
<PAGE>
SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
IN WHICH CAPITAL REALTY INVESTORS, LTD.
HAS AN INVESTMENT(1)
<TABLE>
<CAPTION>
Units
Mortgage Authorized for
Name and Location Payable at Financed and/or Insured Number of Rental Asst.
of Apartment Complex 12/31/95 (2) and/or Subsidized Under Rental Units Under Sec. 8
- -------------------- ------------ ----------------------------- ------------ --------------
<S> <C> <C> <C> <C>
Baltic Plaza $ 8,341,796 New Jersey Housing and 169 168
Atlantic City, NJ Mortgage Finance Agency
Capitol Commons 7,304,701 Michigan State Housing 200 200
Lansing, MI Development Authority
Chestnut 2,759,068 California Housing 90 86
Fresno, CA Finance Agency
Court Place 6,889,698 Illinois Housing 160 160
Pekin, IL Development Authority (IHDA)
Frederick Heights 3,204,793 Section 221(d)(4) of the National 156 0
Frederick, MD Housing Act (NHA)
Frenchman's Wharf I 6,499,180 Section 221(d)(4) 320 31
New Orleans, LA of the NHA
Hillview Terrace 2,729,581 Farmers Home Administration 125 100
Traverse City, MI Section 515 (FmHA)
Lihue Gardens 2,872,220 FmHA 58 58
Lihue, Kauai, HI
Linden Place 9,837,673 IHDA 190 190
Arlington Heights, IL
New Sharon Woods Apts. 2,537,836 Section 221(d)(4) of the NHA 50 50
Deptford, NJ
Park Glen 5,372,880 IHDA 125 125
Taylorville, IL
Shallowford Oaks 5,838,177 Section 221(d)(4) of the NHA 204 41
Chamblee, GA
Sundance Apts. 2,556,042 Section 221(d)(4) of the NHA 60 60
Bakersfield, CA
Tandem Townhouses 1,584,797 Pennsylvania Housing 48 47
Fairview Borough, PA Finance Agency
Tanglewood I 1,218,281 Section 221(d)(3) of the NHA 192 0
Westwego, LA
Warner House 2,108,682 Section 221(d)(4) of the NHA 60 60
Warren, OH
</TABLE>
I-3
<PAGE>
PART I
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ITEM 1. BUSINESS - continued
--------
SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
IN WHICH CAPITAL REALTY INVESTORS, LTD.
HAS AN INVESTMENT(1) - Continued
<TABLE>
<CAPTION>
Units
Mortgage Authorized for
Name and Location Payable at Financed and/or Insured Number of Rental Asst.
of Apartment Complex 12/31/95 (2) and/or Subsidized Under Rental Units Under Sec. 8
- -------------------- ------------ ----------------------------- ------------ --------------
<S> <C> <C> <C> <C>
Westwood Village 1,635,358 Connecticut Housing Finance 48 48
New Haven, CT Authority
Winthrop Beach 1,165,825 First mortgage loan by First 69 0
Chicago, IL Federal Savings and Loan
Association of Chicago;
second mortgage loan by
Chicago Department of Housing
- -------------------- ------------ -------- ------
Totals (3) 18 $ 74,456,588 2,324 1,424
============ ======== ======
</TABLE>
I-4
<PAGE>
SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
IN WHICH CAPITAL REALTY INVESTORS, LTD.
HAS AN INVESTMENT(1) - Continued
<TABLE>
<CAPTION>
Average Effective Annual
Units Occupied As Rental Per Unit
Percentage of Total Units for the Years Ended
As of December 31, December 31,
Name and Location ----------------------------- -----------------------------------------------
of Apartment Complex 1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
- -------------------- ---- ---- ---- ---- ---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Baltic Plaza 99% 99% 98% 96% 98% $ 13,106 $ 13,102 $ 12,205 $ 12,075 $ 11,844
Atlantic City, NJ
Capitol Commons 99% 99% 100% 99% 99% 9,335 9,296 9,153 9,007 8,886
Lansing, MI
Chestnut 98% 97% 99% 94% 92% 7,369 7,441 7,343 7,382 7,108
Fresno, CA
Court Place 100% 100% 100% 100% 100% 11,997 11,657 11,410 11,202 10,717
Pekin, IL
Frederick Heights 97% 97% 97% 93% 89% 6,809 6,841 6,741 6,782 6,690
Frederick, MD
Frenchman's Wharf I 92% 91% 86% 92% 90% 4,246 4,148 4,071 3,971 3,928
New Orleans, LA
Hillview Terrace 99% 100% 100% 100% 100% 2,555 3,694 3,532 2,493 3,537
Traverse City, MI
Lihue Gardens 100% 100% 88% 98% 98% 11,164 10,552 10,056 9,165 8,511
Lihue, Kauai, HI
Linden Place 100% 100% 100% 100% 100% 12,637 12,387 11,974 11,645 11,326
Arlington Heights, IL
New Sharon Woods Apts. 94% 100% 88% 100% 100% 11,589 11,060 10,076 10,644 10,480
Deptford, NJ
Park Glen 100% 100% 100% 100% 100% 9,250 9,221 9,159 9,045 9,617
Taylorville, IL
Shallowford Oaks 100% 91% 80% 78% 90% 6,934 5,930 4,393 4,822 5,729
Chamblee, GA
Sundance Apts. 98% 100% 100% 100% 100% 8,387 8,294 9,419 9,698 7,290
Bakersfield, CA
Tandem Townhouses 100% 100% 100% 100% 98% 8,798 8,789 8,676 8,545 8,132
Fairview Borough, PA
Tanglewood I 98% 99% 100% 100% 100% 4,195 4,007 4,013 4,004 3,749
Westwego, LA
Warner House 98% 95% 100% 100% 98% 7,505 7,420 7,294 7,148 6,918
Warren, OH
</TABLE>
I-5
<PAGE>
PART I
------
ITEM 1. BUSINESS - continued
--------
SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
IN WHICH CAPITAL REALTY INVESTORS, LTD.
HAS AN INVESTMENT(1) - Continued
<TABLE>
<CAPTION>
Average Effective Annual
Units Occupied As Rental Per Unit
Percentage of Total Units for the Years Ended
As of December 31, December 31,
Name and Location --------------------------------- -----------------------------------------------------
of Apartment Complex 1995 1994 1993 1992 1991 1995 1994 1993 1992 1991
- -------------------- ---- ---- ---- ---- ---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Westwood Village 94% 100% 96% 100% 100% 11,294 10,908 10,849 10,826 10,670
New Haven, CT
Winthrop Beach 96% 94% 97% 88% 86% 4,007 3,886 3,841 3,472 3,429
Chicago, IL
- -------------------- ---- ---- ---- ---- ---- -------- -------- -------- -------- --------
Totals (3) 18 98% 98% 96% 97% 97% $ 8,399 $ 8,257 $ 8,011 $ 7,885 $ 7,698
==== ==== ==== ==== ==== ======== ======== ======== ======== ========
</TABLE>
(1) All properties are multifamily housing complexes. No single
tenant/resident rents 10% or more of the rentable square footage.
Residential leases are typically one year or less in length, with varying
expiration dates, and substantially all rentable space is for residential
purposes.
(2) The amounts provided are the balances of mortgage loans payable of the
Local Partnerships as of December 31, 1995.
(3) The totals for the percentage of units occupied and the average effective
annual rental per unit are based on a simple average.
For additional information regarding the real estate of Local Partnerships
in which the Partnership has invested, see Part IV, Schedule III - "Real Estate
and Accumulated Depreciation of Local Partnerships in which Capital Realty
Investors, Ltd. has Invested."
There were no contemplated sales of investments in partnerships as of
March 8, 1996.
ITEM 2. PROPERTIES
----------
Through its ownership of limited partnership interests in Local
Partnerships, Capital Realty Investors, Ltd. indirectly holds an interest in the
underlying real estate. See Part 1, Item 1 and Schedule III of Part IV, Item 14
for information pertaining to these properties.
I-6
<PAGE>
PART I
------
ITEM 3. LEGAL PROCEEDINGS
-----------------
Information concerning potential future legal proceedings is contained in
Part II, Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations and Note 6 of the notes to financial statements in Part
IV, Item 14.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
I-7
<PAGE>
PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND
-----------------------------------------------------
RELATED PARTNERSHIP MATTERS
---------------------------
(a) It is not anticipated that there will be any market for resale of
interests in the Partnership. As a result, investors may be unable to
sell or otherwise dispose of their interests in the Partnership.
(b) As of March 8, 1996, there were approximately 1,800 registered holders
of limited partnership interests in the Partnership.
(c) No distributions were declared or paid by the Partnership during 1995
or 1994. The Partnership received distributions of $434,022 and
$433,794 from Local Partnerships during 1995 and 1994, respectively.
Some of the Local Partnerships operate under restrictions imposed by
the pertinent governmental agencies that limit the cash return
available to the Partnership.
II-1
<PAGE>
PART II
-------
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Share of income (loss) from
partnerships $ 100,806 $ (117,238) $ (44,674) $ (464,667) $ (232,802)
Interest and other income 114,423 75,477 54,264 78,336 122,180
Expenses (938,076) (1,008,892) (1,040,741) (983,173) (971,645)
Extraordinary gain from early
extinguishment of debt -- -- -- -- 190,848
------------ ------------ ------------ ------------ ------------
Net loss $ (722,847) $ (1,050,653) $ (1,031,151) $ (1,369,504) $ (891,419)
============ ============ ============ ============ ============
Loss allocated to Limited
Partners (97%) $ (701,162) $ (1,019,133) $ (1,000,216) $ (1,328,419) $ (864,676)
============ ============ ============ ============ ============
Loss per unit of Limited Partnership
Interest based on 24,837 units
outstanding $ (28.23) $ (41.03) $ (40.27) $ (53.49) $ (34.81)
============ ============ ============ ============ ============
Cash distribution per unit of Limited
Partnership Interest based on 24,837
units outstanding $ -- $ -- $ -- $ -- $ --
============ ============ ============ ============ ============
Total assets $ 6,209,709 $ 6,263,561 $ 6,936,156 $ 7,260,424 $ 7,946,581
============ ============ ============ ============ ============
Total remaining amounts due on
investments, including accrued
interest on purchase money notes
and capital contributions $ 14,273,800 $ 13,608,255 $ 13,205,616 $ 12,541,139 $ 11,899,809
============ ============ ============ ============ ============
</TABLE>
II-2
<PAGE>
PART II
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
General
-------
The Partnership has invested, through Local Partnerships, primarily in
federal or state government-assisted apartment complexes intended to provide
housing to low and moderate income tenants. In conjunction with such government
assistance, which includes federal and/or state financing at below-market
interest rates and rental subsidies, the Local Partnerships agreed to regulatory
limitations on (i) cash distributions, (ii) use of the properties and (iii) sale
or refinancing. These limitations typically were designed to remain in place
for the life of the mortgage.
The original investment objectives of the Partnership primarily were to
deliver tax benefits, as well as cash proceeds upon disposition of the
properties through the Partnership's investment in local limited partnerships.
Only limited annual cash distributions from property operations were projected
because of the regulatory restrictions on cash distributions from the
properties.
The original investment objectives of the Partnership have been affected by
the Tax Reform Act of 1986 which virtually eliminated many of the incentives for
the new construction of or the sale of existing low income housing properties by
limiting the use of passive loss deductions. Therefore, the Managing General
Partner continues to concentrate on transferring the source of investment yield
from tax benefits to cash flow wherever possible and potentially enhancing the
ability of the Partnership to share in the appreciated value of the properties.
The acquisition of interests in certain Local Partnerships resulted in
purchase money note obligations of the Partnership. The purchase money notes
are nonrecourse obligations of the Partnership which typically mature fifteen
years from the dates of acquisition of the interests in particular Local
Partnerships.
The Managing General Partner has been working to develop a strategy to sell
certain properties by utilizing opportunities presented by federal affordable
housing legislation, favorable financing terms and preservation incentives
available to nonprofit purchasers. The Managing General Partner intends to
utilize part or all of the Partnership's net proceeds (after 50% distribution to
limited partners) received from the sales of properties to fund reserves for
paying at maturity, prepaying or purchasing prior to maturity, at a discount
where possible, currently outstanding purchase money notes. The Managing
General Partner believes that this represents an opportunity to reduce the
Partnership's long-term obligations.
The rental property owned by Tanglewood Apartments Associates I (Tanglewood
I) has a mortgage which is federally insured under Section 221(d)(3) of the
National Housing Act, as amended. This property may be eligible for sale or
refinancing, subject to numerous requirements, under the Low Income Housing
Preservation and Resident Homeownership Act of 1990 (LIHPRHA). This program may
provide incentives to owners of qualifying multifamily housing who commit to
permanently maintain their properties as low to moderate income housing.
Incentives available under LIHPRHA include selling the property to qualified
buyers or obtaining supplemental financing for the property. As of March 8,
1996, members of Congress are recommending substantial changes to the LIHPRHA
program ranging from the elimination of the program to the redesigning of the
II-3
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
program. Substantial doubt exists as to whether Tanglewood I, which filed the
notice of intent to participate under the LIHPRHA program on May 23, 1994, will
qualify under a redesigned program, or whether the program will continue at all.
There is no assurance that a sale or supplemental financing of this property
will occur.
Some of the rental properties owned by the Local Partnerships are financed
by state housing agencies. The Managing General Partner has been working to
develop a strategy to sell or refinance certain properties by utilizing programs
developed by these agencies. These programs may include opportunities to sell
the property to a qualifying purchaser who would agree to maintain the property
as low to moderate income housing in perpetuity, or may include opportunities to
refinance the property through supplemental financing. The Managing General
Partner continues to monitor these certain state housing agency programs to
ascertain whether the properties would qualify within the parameters of these
programs and whether these programs would provide an appropriate economic
benefit to the limited partners of the Partnership.
Many other rental properties owned by the Local Partnerships are dependent
on the receipt of housing assistance payments guaranteed by contract under the
Department of Housing and Urban Development (HUD) Section 8 program. The level
of funding for the Section 8 program, and HUD-insured multifamily housing in
general, is dependent upon the continuation of appropriations approved by
Congress for subsidy payments. In the event that the rental subsidy programs
are reduced or phased out, there is no assurance that the rental properties will
be able to maintain the occupancy levels necessary to pay debt service and
operating costs or that the rents necessary to pay debt service and operating
costs will be competitive with rents for comparable units in the rental
properties' market areas. While the Managing General Partner has no reason to
believe that HUD will not honor its obligations under the contracts, some
uncertainty exists in light of the recent Congressional scrutiny of
appropriations for HUD programs.
In 1990, CRI, as Managing General Partner of the Partnership and various
other entities, subcontracted certain property-level asset management functions
for certain properties to Capital Management Strategies, Inc. (CMS). Among
these properties were properties owned by certain of the Local Partnerships in
which the Partnership invested. CMS was formed by Martin C. Schwartzberg, a
nominal general partner of the Partnership and a former stockholder of CRI, when
he cashed out of CRI and its related businesses as of January 1, 1990. Mr.
Schwartzberg agreed not to act as a general partner with respect to any of the
CRI-sponsored partnerships, including this Partnership, and has not done so
since that time. In late 1995, a dispute arose between CRI and CMS over the
funding level of the 1996 contract for CMS. On November 9, 1995, CRI filed a
complaint against CMS to determine the proper amount of fees to be paid in 1996
under the asset management agreement. CMS answered on January 10, 1996, but
asserted no counterclaims.
Thereafter, Mr. Schwartzberg launched a hostile consent solicitation to be
designated as managing general partner of approximately 125 private partnerships
sponsored by CRI. On January 18, 1996, Mr. Schwartzberg and CMS filed a
complaint in the Circuit Court of Montgomery County, Maryland (the Circuit
Court), against CRI and Messrs. Dockser and Willoughby (who are general partners
of the Partnership) alleging, among other things, that CRI and Messrs. Dockser
and Willoughby have breached the asset management agreement pursuant to which
II-4
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
Mr. Schwartzberg's company, CMS, agreed to perform limited functions related to
property-level issues for a portion of CRI's subsidized housing portfolio
(including some of the properties in which the Partnership invested), by
reducing the proposed budget for 1996. The Partnership is not named as a
defendant in this action. Messrs. Dockser and Willoughby have entered an answer
denying all of Mr. Schwartzberg's claims. Messrs. Dockser and Willoughby have
publicly responded that Mr. Schwartzberg's suit is motivated by his budget
dispute with CRI and personal animosity. On February 6, 1996, CRI terminated
the CMS contract for cause. Mr. Schwartzberg and CMS responded by filing a
motion for injunctive relief in the Circuit Court, asking the court to enjoin
CRI from terminating the contract. In a ruling issued on February 12, 1996, the
Circuit Court, among other things, refused to grant the injunction requested by
CMS. A hearing in this case is scheduled for April 29, 1996. On February 12,
1996, the Circuit Court also issued a memorandum opinion and order enjoining CMS
and Mr. Schwartzberg from disclosing information made confidential under the
asset management agreement.
On February 1, 1996 and February 16, 1996, Mr. Schwartzberg sent letters to
the Partnership requesting investor lists and other forms of investor
information. On February 5, 1996, the Partnership, acting through its managing
general partner, CRI, denied Mr. Schwartzberg's request. On February 20, 1996,
counsel for the Partnership responded to Mr. Schwartzberg's second request,
denying that Mr. Schwartzberg had standing or a proper purpose for requesting
the investor lists. In view of Mr. Schwartzberg's solicitation efforts against
other CRI-sponsored partnerships, CRI anticipates that litigation may arise from
this request.
Financial Condition/Liquidity
-----------------------------
As of December 31, 1995, the Partnership had approximately 1,800 investors
who subscribed to a total of 24,837 units of limited partnership interests in
the original amount of $24,837,000. The Partnership has made investments in
eighteen Local Partnerships. The Partnership's liquidity, with unrestricted
cash resources of $1,823,863 as of December 31, 1995, along with anticipated
future cash distributions from the Local Partnerships, is expected to meet its
current and anticipated operating cash needs. As of December 31, 1995, $189,000
of cash resources are restricted for the purpose of collateralizing a letter of
credit until the mortgage loan outstanding on a certain Local Partnership is
repaid. As of March 8, 1996, there were no material commitments for capital
expenditures. Statement of Financial Accounting Standards No. 107, "Disclosure
About Fair Value of Financial Instruments" (SFAS 107), requires the disclosure
of fair value information about financial instruments for which it is
practicable to estimate that value. The Partnership implemented SFAS 107 in
1995, and has determined that the carrying amounts of its cash and cash
equivalents and its restricted cash equivalents approximate fair value.
During 1995, 1994 and 1993, the Partnership received cash distributions of
$434,022, $433,794 and $471,842, respectively, from the Local Partnerships.
As of December 31, 1995, the Partnership's obligations with respect to its
investments in Local Partnerships in the form of purchase money notes of
$6,422,800, plus accrued interest of $7,851,000, are payable upon the earliest
of: (1) sale or refinancing of the respective Local Partnership's rental
property; (2) payment in full of the respective Local Partnership's permanent
II-5
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
loan; or (3) maturity. The Partnership's purchase money notes mature during
1997 and 1998. The purchase money notes are generally secured by the
Partnership's interest in the respective Local Partnerships. There is no
assurance that the underlying properties will have sufficient appreciation and
equity to enable the Partnership to pay the purchase money notes' principal and
accrued interest when due. If a purchase money note is not paid in accordance
with its terms, the Partnership will either have to renegotiate the terms of
repayment or risk losing its partnership interest in the Local Partnership. The
Managing General Partner is continuing to investigate possible alternatives to
reduce the Partnership's long-term debt obligations. These alternatives
include, among others, retaining the cash available for distribution to meet the
purchase money note requirements, buying out certain purchase money notes at a
discounted price, extending the due dates of certain purchase money notes, or
refinancing the respective properties' underlying debt and using the
Partnership's share of the proceeds to pay off or buy down certain purchase
money note obligations.
SFAS 107 requires the disclosure of fair value information about financial
instruments for which it is practicable to estimate that value. The Partnership
has determined that it is not practicable to estimate the fair value of the
purchase money notes, either individually or in the aggregate, due to: (1) the
lack of an active market for this type of financial instrument, (2) the variable
nature of purchase money note interest payments as a result of fluctuating cash
flow distributions received from the related Local Partnerships, and (3) the
excessive costs associated with an independent appraisal of the purchase money
notes.
The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient cash is available for operating requirements.
In 1995, the receipt of distributions from Local Partnerships was adequate to
support operating cash requirements.
In 1994, the receipt of distributions from Local Partnerships, less
advances to Local Partnerships, was adequate to support operating cash
requirements. Cash and cash equivalents decreased in 1994 from 1993 primarily
due to the release of outstanding capital contributions related to New Sharon
Woods, as discussed below.
Results of Operations
---------------------
The Partnership's net loss decreased in 1995 from 1994 principally due to
an increase in share of income from Local Partnerships primarily as a result of
one property's accumulated losses exceeding the Partnership's basis in the
related investment in Local Partnership during 1995. The Partnership does not
record losses from the Local Partnerships in excess of its investment, as
discussed below. Contributing to the decrease in net loss was a decrease in
interest expense incurred during 1995, resulting from the release of the
outstanding capital contributions of New Sharon Woods during 1994, as discussed
below. Also contributing to the decrease in net loss was an increase in
interest income as a result of higher cash balances and increased yields on
investments.
The Partnership's net loss increased in 1994 from 1993 primarily due to an
increase in the share of loss from Local Partnerships principally due to a
II-6
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
retroactive rent adjustment received by one property in 1993 and an increase in
operating expenses at one property in 1994. Contributing to the increase in net
loss was an increase in interest expense, resulting from interest due on the
outstanding capital contributions of New Sharon Woods, as discussed below.
Partially offsetting the increase in net loss was a decrease in general and
administrative expenses primarily relating to the payment of 1992 expenses in
1993 and a decrease in annual report printing costs. Also partially offsetting
the increase in net loss was a decrease in professional fees primarily due to
the payment of 1992 expenses in 1993, as well as a decrease in proxy
solicitation costs relating to the proxy solicitation submitted to investors
during the first quarter of 1993.
For financial reporting purposes, the Partnership, as a limited partner in
the Local Partnerships, does not record losses from the Local Partnerships in
excess of its investment to the extent that the Partnership has no further
obligation to advance funds or provide financing to the Local Partnerships. As
a result, the Partnership's recognized losses for the years ended December 31,
1995, 1994 and 1993 did not include losses of $526,346, $862,598 and $1,043,927,
respectively. The Partnership's net loss recognized from the Local
Partnerships is generally expected to decrease in subsequent years as the
Partnership's investments in the Local Partnerships are reduced to zero.
Accordingly, excludable losses are generally expected to increase.
Distributions of $248,578, $256,261 and $236,746, received from nine, eight and
eight Local Partnerships, respectively, during 1995, 1994 and 1993,
respectively, were offset against the respective years' recorded losses because
these amounts were in excess of the Partnership's investment.
The local general partner of Lake Properties Limited Partnership
(Frenchman's Wharf I), in conjunction with the Managing General Partner, applied
to HUD, holder of the mortgage on the property, for a three-year extension of
the previous workout arrangement, which expired in December 1990. The local HUD
office verbally agreed to an extension expiring December 31, 1993 and
recommended approval of the extension to the HUD central office in Washington,
D.C. In December 1993, the local HUD office requested that a new workout
proposal be submitted, and in January 1994, the local general partner met with
HUD to discuss the long-term capital needs of the property in connection with a
workout proposal. On March 1, 1994, the local general partner submitted a nine-
year workout proposal to HUD. This proposal was rejected by HUD in December
1995. As of March 8, 1996, the local general partner is continuing to work
directly with the HUD central office to submit a five-year workout proposal.
There is no assurance that approval for a workout will be received. If a
workout proposal is not accepted and another alternative is not found, then HUD
could foreclose on the property. Frenchman's Wharf I was notified by HUD that
HUD had planned to offer its mortgage loan for sale in September of 1995. HUD
later notified Frenchman's Wharf I that its loan was not included in the pool of
loans sold by HUD in September 1995. As of March 8, 1996, Frenchman's Wharf I
has not been notified as to whether HUD will offer the Frenchman's Wharf I loan
for sale at a later date. If the mortgage is eventually sold by HUD, a new
mortgagee would service the loan and could foreclose on the property.
Currently, debt-service payments are being made from available cash flow. To
cover operating deficits incurred in prior years for Frenchman's Wharf I, the
Partnership advanced funds totalling $305,398 as of both December 31, 1995 and
1994. The last advance was made to Frenchman's Wharf I in March 1987. The
Partnership does not expect to advance any additional funds in connection with
Frenchman's Wharf I's loan workout with HUD. These loans, together with accrued
II-7
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
interest of $183,102 as of both December 31, 1995 and 1994, are payable from
cash flow of Frenchman's Wharf I after payment of first-mortgage debt service
and after satisfaction by the Partnership of certain other interest obligations
on the purchase money notes relating to the Local Partnership. There is no
assurance that the Local Partnership, upon expiration of any workout, will be
able to repay any loans in accordance with the terms.
In addition, the Local Partnership has entered into an agreement with the
Frenchman's Wharf I's purchase money noteholders which, among other things,
provides that, in the event of a default under the purchase money notes and
related pledge agreement, the noteholders will not exercise any rights or
remedies under the purchase money notes and related pledge agreement during the
term of any subsequent loan modification or workout agreement, as long as HUD
does not commence foreclosure action under the mortgage loan. The purchase
money notes were made by the Partnership in connection with its investment in
the Local Partnership, and are non-recourse notes secured only by the
Partnership's interest in the Local Partnership.
On March 1, 1993, the Local Partnership for Shallowford Oaks Apartments
defaulted on its mortgage loan after the property had experienced continuing
operating deficits. The loan was assigned to HUD on October 4, 1993. On
January 5, 1994, the local general partner submitted a six-year workout proposal
to HUD, to which HUD did not respond. On March 4, 1994, the local general
partner submitted a new six-year workout proposal to HUD. In June 1994, at
HUD's request, the six-year workout proposal was increased to seven years. HUD
withheld approval of the new seven-year proposal until the local general partner
reimbursed HUD for the property's prior years' real estate tax bills which were
paid by HUD. The local general partner was also required to pay all past due
mortgage service charges owed to HUD. In November 1994, the local general
partner satisfied the outstanding obligations to HUD and received formal
approval of the seven-year workout, effective December 1, 1994. On November 23,
1994, the Partnership advanced $72,195 to the Local Partnership to help repay
the Local Partnership's outstanding obligations to HUD. This loan, along with
accrued interest of $6,784 and $648 as of December 31, 1995 and 1994,
respectively, is payable from cash flow of Shallowford Oaks Apartments after
payment of first-mortgage debt service and after satisfaction by the Partnership
of certain other interest obligations on the related purchase money notes.
There is no assurance that the Local Partnership, upon expiration of any
workout, will be able to repay any loans in accordance with the terms.
The report of the auditors on the financial statements of Shallowford Oaks
Apartments and Frenchman's Wharf I for the years ended December 31, 1995 and
1994 indicated that substantial doubt exists about the ability of the Local
Partnerships to continue as going concerns due to the respective property's
recurring operating deficits and, in the case of Frenchman's Wharf I, the Local
Partnership's default on its mortgage. The uncertainty about the Local
Partnerships' continued ownership of the properties does not impact the
Partnership's financial condition because the related purchase money notes are
nonrecourse and secured solely by the Partnership's interest in the respective
Local Partnerships. Therefore, should the investment in Frenchman's Wharf I and
Shallowford Oaks Apartments not produce sufficient value to satisfy the
respective purchase money notes, the Partnership's exposure to loss is limited
since the respective amounts of non recourse indebtedness exceeds the respective
carrying amounts of the investments in and advances to these Local Partnerships.
Thus, even a complete loss of either or both of these investments would not have
II-8
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
a material impact on the operations of the Partnership.
On March 23, 1993, New Sharon Woods Associates achieved HUD final
endorsement closing. In connection with the closing, Philadelphia National
Bank, the bond trustee, released the Partnership's letters of credit totaling
$170,076. On April 19, 1994, the Partnership concluded negotiations with the
local general partner and executed the partnership agreement as well as the
first and second amendments to the partnership agreement. In accordance with
the agreement, on May 2, 1994, the Partnership released the outstanding capital
contributions of $185,975, along with accrued interest thereon of $33,700, to
the local managing general partner. The remaining accrued interest of $62,332,
which is included in interest expense in the accompanying statements of
operations, was released in 1994 to establish an operating deficit escrow
account for New Sharon Woods Associates.
During February 1992, an oil leak was detected from an underground tank at
Frederick Heights Apartments located in Frederick, Maryland. The total cost of
the clean-up was approximately $83,000 and was partially paid from the
operations of the property. On February 12, 1993, the Maryland Environmental
Protection Agency approved the completed clean-up of the leak. Because the
local general partner of Frederick Heights Apartments was not successful in
obtaining reimbursement of the costs from its insurance carrier, the Local
Partnership received an advance of $50,000 from the Partnership on July 20, 1992
to cover the shortfall in the payment of these costs. In 1993, the Local
Partnership repaid $41,865 of the advance. The remaining balance of $8,135 was
repaid in April 1994.
On April 28, 1994, the Partnership extended an offer to purchase, at a
discount, the purchase money notes for Frederick Heights Apartments, which
mature in 1997, in the aggregate original principal amount of $650,000. This
offer was not accepted by the noteholders.
Inflation
---------
Inflation allows for increases in rental rates, usually offsetting any
higher operating and replacement costs. Furthermore, inflation generally does
not impact the fixed rate long-term financing under which the Partnership's real
property investments were purchased. Future inflation could allow for
appreciated values of the Local Partnerships' properties over an extended period
of time as rental revenue and replacement values gradually increase.
The following table reflects the combined rental revenues of the properties
for the five years ended December 31, 1995.
II-9
<PAGE>
PART II
-------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Combined Rental
Revenue $18,603,454 $18,103,428 $17,412,828 $17,280,736 $17,004,730
Annual Percentage
Increase 2.8% 4.0% 0.8% 1.6%
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The information required by this item is contained in Part IV.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None.
II-10
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
(a), (b) and
(c) The Partnership has no directors, executive officers or
significant employees of its own.
(a), (b), (c)
and (e) The names, ages and business experience of the directors and
executive officers of C.R.I., Inc. (CRI), the Managing General
Partner of the Partnership, are as follows:
William B. Dockser, 59, has been the Chairman of the Board of CRI and a Director
since 1974. Prior to forming CRI, he served as President of Kaufman and Broad
Asset Management, Inc., an affiliate of Kaufman and Broad, Inc., which managed a
number of publicly held limited partnerships created to invest in low and
moderate income multifamily apartment complexes. For a period of 2-1/2 years
prior to joining Kaufman and Broad, he served in various positions at HUD,
culminating in the post of Deputy FHA Commissioner and Deputy Assistant
Secretary for Housing Production and Mortgage Credit, where he was responsible
for all federally insured housing production programs. Before coming to
Washington, Mr. Dockser was a practicing attorney in Boston and also was a
special Assistant Attorney General for the Commonwealth of Massachusetts. He
holds a Bachelor of Laws degree from Yale University Law School and a Bachelor
of Arts degree, cum laude, from Harvard University. He is also Chairman of the
Board of CRIIMI MAE Inc., CRIIMI, Inc. and CRI Liquidating REIT, Inc.
H. William Willoughby, 49, President, Secretary and a Director of CRI since
January 1990 and Senior Executive Vice President, Secretary and a Director of
CRI from 1974 to 1989. He is principally responsible for the financial
management of CRI and its associated partnerships. Prior to joining CRI in
1974, he was Vice President of Shelter Corporation of America and a number of
its subsidiaries dealing principally with real estate development and equity
financing. Before joining Shelter Corporation, he was a senior tax accountant
with Arthur Andersen & Company. He holds a Juris Doctorate degree, a Master of
Business Administration degree and a Bachelor of Science degree in Business
Administration from the University of South Dakota. He is also a Director and
executive officer of CRIIMI MAE Inc., CRIIMI, Inc. and CRI Liquidating REIT,
Inc.
Richard J. Palmer, 44, Senior Vice President-Chief Financial Officer. Prior to
joining CRI in 1983 as Director of Tax Policy, he was a Tax Manager at Grant
Thornton (formerly Alexander Grant & Company). He also served in the Tax and
Audit Departments of Peat, Marwick, Main and Company (formerly Peat, Marwick,
Mitchell and Company) prior to his seven years at Grant Thornton. He holds a
Bachelor of Business Administration degree from the Florida Atlantic University
and is also a Certified Public Accountant.
III-1
<PAGE>
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - Continued
--------------------------------------------------
Ronald W. Thompson, 49, Group Executive Vice President-Hotel Asset Management.
Prior to joining CRI in 1985, he was employed at the Hyatt Organization where he
most recently served as the General Manager of the Hyatt Regency in Flint,
Michigan. During his nine year tenure with Hyatt, he held senior management
positions with the Hyatt Regency in Dearborn, Michigan, the Hyatt in Richmond,
Virginia, the Hyatt in Winston-Salem, North Carolina and the Hyatt Regency in
Atlanta, Georgia. Before joining Hyatt, Mr. Thompson worked in London, England
for the English Tourist Board as well as holding management positions in Europe,
Australia, and New Zealand in the hotel industry. Mr. Thompson received his
education in England where he received a business degree in Hotel Administration
from Winston College.
Susan R. Campbell, 37, Senior Vice President-CRI Realty Services. Prior to
joining CRI in March 1985, she was a budget analyst for the B. F. Saul Advisory
Company. She holds a Bachelor of Science degree in General Business from the
University of Maryland.
Melissa Cecil Lackey, 40, Senior Vice President and General Counsel. Prior to
joining CRI in 1990, she was associated with the firms of Zuckerman, Spaeder,
Goldstein, Taylor & Kolker in Washington, D.C. and Hirsch & Westheimer in
Houston, Texas. She holds a Juris Doctorate from the University of Virginia
School of Law and a Bachelor of Arts degree from the College of William & Mary.
(d) There is no family relationship between any of the foregoing directors
and executive officers.
(f) Involvement in certain legal proceedings.
None.
(g) Promoters and control persons.
Not applicable.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
(a), (b), (c) and (d)
The Partnership has no officers or directors. However, in accordance with
the Partnership Agreement, and as disclosed in the public offering, various
kinds of compensation and fees were paid or are payable to the General
Partners and their affiliates. Additional information required in these
sections is included in Notes 3 and 4 to the financial statements contained
in Part IV, Item 14.
Additionally, the General Partners may receive an annual distribution from
the Partnership if there is cash available for distribution, as defined in
the Partnership Agreement.
III-2
<PAGE>
PART III
--------
ITEM 11. EXECUTIVE COMPENSATION - Continued
----------------------
The General Partners are also entitled to the following payments:
(1) Annual incentive management fee for managing the affairs and business
of the Partnership in an amount not to exceed .25% of invested assets,
including the Partnership's allocable share of the mortgages, payable
first, in an annual amount equal to $95,208; and second, after
distributions to investors in the amount of 1% of the gross proceeds
of the offering, the balance of such .25% of invested assets. The
annual incentive management fee amounted to $95,208 for each of the
years ended December 31, 1995, 1994 and 1993.
(2) 15% of sale and refinancing proceeds remaining after the limited
partners have received a return of all their capital contributions,
adjusted as provided in the Partnership Agreement, and the General
Partners have received a return of all their capital contributions and
the property disposition fees described below. The General Partners
may also receive a return of their capital contributions and repayment
of any loans made to the Partnership. No sale or refinancing proceeds
were paid to the General Partners during the years ended December 31,
1995, 1994 and 1993.
(3) 1% of the aggregate selling prices including any amounts previously
unpaid upon prior sales of apartment complexes, payable after the
limited partners have received a return of all their capital
contributions, adjusted as provided in the Partnership Agreement.
This amount and any other commissions or fees payable upon the sale of
apartment complexes shall not in the aggregate exceed the lesser of
the competitive rate or 6% of the sales price of the apartment
complexes. No such amounts were paid to the General Partners during
the years ended December 31, 1995, 1994 and 1993.
(4) In addition, the Managing General Partner and/or its affiliates may
receive a fee in an amount of not more than 2% of the sales price of
the investment in a Local Partnership or the property it owns. The
fee would only be payable upon the sale of the investment in a Local
Partnership or the property it owns and would be subject to certain
restrictions, including achievement of a certain level of sales
proceeds and making certain minimum distributions to limited partners.
No such fees were paid to the Managing General Partner and/or its
affiliates during the years ending December 31, 1995, 1994 and 1993.
(e) Termination of employment and changes in control arrangements.
None.
III-3
<PAGE>
PART III
--------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT
----------
(a) Security ownership of certain beneficial owners.
No person or "group", as that term is used in Section 13(d)(3) of the
Securities Exchange Act 1934, is known by the Partnership to be the
beneficial owner of more than 5% of the issued and outstanding
partnership units at December 31, 1995.
(b) Security ownership of management.
The following table sets forth certain information concerning all
units beneficially owned, as of December 31, 1995, by each director
and by all directors and officers as a group of the Partnership's
Managing General Partner.
Name of Amount and Nature % of total
Beneficial Owner of Beneficial Ownership Units issued
---------------- ----------------------- ------------
William B. Dockser None 0%
H. William Willoughby None 0%
All Directors and Officers
as a Group (6 persons) None 0%
(c) Changes in control.
There exists no arrangement known to the Partnership, the operation of
which may, at a subsequent date, result in a change in control of the
Partnership. There is a provision in the Limited Partnership
Agreement which allows, under certain circumstances, the ability to
change control.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
(a) Transactions with management and others.
The Partnership has no directors or officers. In addition, the
Partnership has had no transactions with individual officers or
directors of the Managing General Partner of the Partnership other
than any indirect interest such officers and directors may have in the
amounts paid to the Managing General Partner or its affiliates by
virtue of their stock ownership in CRI. Item 11 of this report, which
contains a discussion of the fees and other compensation paid or
accrued by the Partnership to the General Partners or their
affiliates, is incorporated herein by reference. Note 3 of the notes
to financial statements, which contains disclosure of related party
transactions, is also incorporated herein by reference.
(b) Certain business relationships.
The Partnership's response to Item 13(a) is incorporated herein by
reference. In addition, the Partnership has no business relationship
III-4
<PAGE>
PART III
--------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Continued
----------------------------------------------
with entities of which the officers and directors of the Managing
General Partner of the Partnership are officers, directors or equity
owners other than as set forth in the Partnership's response to Item
13(a).
(c) Indebtedness of management.
None.
(d) Transactions with promoters.
Not applicable.
III-5
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
-------------------------------------------------------
FORM 8-K
--------
(a) 1. Financial Statements Page
-------------------- ----
Report of Independent Certified Public
Accountants - Capital Realty Investors, Ltd. IV-4
Reports of Independent Certified Public
Accountants - Local Partnerships in which
Capital Realty Investors, Ltd. has invested IV-5
Balance Sheets as of December 31, 1995 and 1994 IV-6
Statements of Operations for the years
ended December 31, 1995, 1994 and 1993 IV-7
Statements of Changes in Partners'
Deficit for the years ended December 31,
1995, 1994 and 1993 IV-8
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 IV-9
Notes to Financial Statements IV-10
(a) 2. Financial Statement Schedules
-----------------------------
Included in Part IV of this report are the
following schedules for the year ended
December 31, 1995, which are applicable to the
Local Partnerships in which Capital Realty
Investors, Ltd. has invested:
Report of Independent Certified Public
Accountants on Financial Statement Schedule IV-26
Schedule III - Real Estate and Accumulated
Depreciation IV-27
The remaining schedules are omitted because the required
information is included in the financial statements and notes
thereto or they are not applicable or not required.
(a) 3. Exhibits (listed according to the number assigned in the table
in Item 601 of Regulation S-K).
Exhibit No. 4 - Instruments defining the rights of security
holders, including indentures.
IV-1
<PAGE>
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
-------------------------------------------------------
FORM 8-K - Continued
--------
a. Amended Certificate and Limited Partnership Agreement of
Capital Realty Investors Limited Partnership. (Incorporated
by reference from Exhibit 4 to Registrant's Registration
Statement on Form S-11, as amended, dated December 4, 1981.)
Exhibit No. 10 - Material Contracts.
a. Management Services Agreement between CRI and Capital Realty
Investors Limited Partnership. (Incorporated by reference
from Exhibit No. 10(b) to the Registrant's Registration
Statement on Form S-11, as amended, dated December 4, 1981.)
Exhibit No. 27 - Financial Data Schedule.
Exhibit No. 99 - Additional Exhibits.
a. Prospectus of the Partnership, dated December 31, 1981.
(Incorporated by reference to the Registrant's Registration
Statement on Form S-11, as amended, dated December 4, 1981.)
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended December
31, 1995.
(c) Exhibits
--------
The list of Exhibits required by Item 601 of Regulation S-K is
included in Item (a)3., above.
(d) Financial Statement Schedules
-----------------------------
See (a)2., above.
IV-2
<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 Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Capital Realty Investors, Ltd.
By: C.R.I., Inc.
General Partner
March 26, 1996 /s/ William B. Dockser
- --------------------------- --------------------------------
DATE William B. Dockser, Director
Chairman of the Board and
Treasurer and Principal
Executive Officer
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:
March 26, 1996 /s/ H. William Willoughby
- --------------------------- --------------------------------
DATE H. William Willoughby
Director, President and
Secretary
March 26, 1996 /s/ Richard J. Palmer
- --------------------------- --------------------------------
DATE Richard J. Palmer
Senior Vice President,
Chief Financial Officer,
Principal Financial and
Principal Accounting Officer
IV-3
<PAGE>
REPORT OF INDEPENDENT CERTIFIED
-------------------------------
PUBLIC ACCOUNTANTS
------------------
To the Partners
Capital Realty Investors, Ltd.
We have audited the accompanying balance sheets of Capital Realty
Investors, Ltd. as of December 31, 1995 and 1994 and the related statements of
operations, changes in partners' deficit and cash flows for the years ended
December 31, 1995, 1994 and 1993. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did not
audit the financial statements for seventeen of the eighteen Local Partnerships
in 1995, 1994 and 1993, which are accounted for as described in Note 1c. The
financial statements of these Local Partnerships were audited by other auditors
whose reports thereon have been furnished to us, and our opinion expressed
herein, insofar as it relates to the amounts included for these Local
Partnerships, is based solely upon the reports of the other auditors.
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 upon our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of Capital Realty Investors, Ltd. (a limited
partnership) as of December 31, 1995 and 1994 and the results of its operations,
changes in partners' deficit and cash flows for the years ended December 31,
1995, 1994 and 1993, in conformity with generally accepted accounting
principles.
Vienna, VA Grant Thornton LLP
March 8, 1996
IV-4
<PAGE>
REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -
LOCAL PARTNERSHIPS IN WHICH
CAPITAL REALTY INVESTORS, LTD.
HAS INVESTED*
* The reports of independent certified public accountants - Local
Partnerships in which Capital Realty Investors, Ltd. has invested were
filed in paper format under Form SE on March 26, 1996, in accordance with
the Securities and Exchange Commission's continuing hardship exemption
granted December 21, 1995.
IV-5
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
1995 1994
----------- -----------
<S> <C> <C>
Investments in and advances to partnerships $ 3,350,703 $ 3,677,783
Cash and cash equivalents 1,823,863 1,522,120
Restricted cash equivalents 189,000 189,000
Acquisition fees, principally paid to related parties, net of
accumulated amortization of $324,572 and $299,734, respectively 668,908 693,746
Property purchase costs, net of accumulated amortization of
$83,991 and $77,645, respectively 169,850 176,196
Other assets 7,385 4,716
----------- -----------
Total assets $ 6,209,709 $ 6,263,561
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Due on investments in
partnerships $ 6,422,800 $ 6,422,800
Accrued interest payable 7,851,000 7,185,455
Accounts payable and accrued expenses 63,292 59,842
----------- -----------
Total liabilities 14,337,092 13,668,097
----------- -----------
Commitments and contingencies
Partners' capital (deficit):
Capital paid in:
General Partners 14,000 14,000
Limited Partners 24,837,000 24,837,000
----------- -----------
24,851,000 24,851,000
Less:
Accumulated distributions to partners (512,029) (512,029)
Offering costs (2,689,521) (2,689,521)
Accumulated losses (29,776,833) (29,053,986)
----------- -----------
Total partners' deficit (8,127,383) (7,404,536)
----------- -----------
Total liabilities and partners' deficit $ 6,209,709 $ 6,263,561
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
IV-6
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Share of income (loss) from partnerships $ 100,806 $ (117,238) $ (44,674)
----------- ----------- -----------
Other revenue and expenses:
Revenue
Interest and other income 114,423 75,477 54,264
----------- ----------- -----------
Expenses
Interest 665,545 726,809 664,477
Management fee 95,208 95,208 95,208
General and administrative 82,193 79,205 121,838
Professional fees 63,946 76,486 105,314
Amortization 31,184 31,184 31,185
Proxy solicitation -- -- 22,719
----------- ----------- -----------
938,076 1,008,892 1,040,741
----------- ----------- -----------
Total other revenue and expenses (823,653) (933,415) (986,477)
----------- ----------- -----------
Net loss $ (722,847) $(1,050,653) $(1,031,151)
=========== =========== ===========
Loss allocated to General Partners (3%) $ (21,685) $ (31,520) $ (30,935)
=========== =========== ===========
Loss allocated to Limited Partners (97%) $ (701,162) $(1,019,133) $(1,000,216)
=========== =========== ===========
Loss per unit of Limited Partnership Interest based
on 24,837 units outstanding $ (28.23) $ (41.03) $ (40.27)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
IV-7
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
--------- ----------- -----------
<S> <C> <C> <C>
Partners' deficit, January 1, 1993 $(810,527) $(4,512,205) $(5,322,732)
Net loss (30,935) (1,000,216) (1,031,151)
--------- ----------- -----------
Partners' deficit, December 31, 1993 (841,462) (5,512,421) (6,353,883)
Net loss (31,520) (1,019,133) (1,050,653)
--------- ----------- -----------
Partners' deficit, December 31, 1994 (872,982) (6,531,554) (7,404,536)
Net loss (21,685) (701,162) (722,847)
--------- ----------- -----------
Partners' deficit, December 31, 1995 $(894,667) $(7,232,716) $(8,127,383)
========= =========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
IV-8
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (722,847) $(1,050,653) $(1,031,151)
Adjustments to reconcile net loss to net cash
used in operating activities:
Share of (income) loss from partnerships (100,806) 117,238 44,674
Increase in accrued interest receivable
on advances to partnerships (6,136) (648) --
Payment of purchase money note interest -- (42,163) --
Payment of interest due on investments in partnerships -- (96,032) --
Amortization of deferred costs 31,184 31,184 31,185
Changes in assets and liabilities:
(Increase) decrease in other assets (2,669) 3,279 7,863
Increase in accrued interest payable 665,545 726,809 664,477
Increase (decrease) in accounts payable 3,450 (24,581) 42,406
----------- ----------- -----------
Net cash used in operating activities (132,279) (335,567) (240,546)
----------- ----------- -----------
Cash flows from investing activities:
Receipt of distributions from partnerships 434,022 433,794 471,842
Release of restricted cash equivalents -- -- 170,076
Repayment of advances to partnerships -- 8,135 41,865
Advances to partnerships -- (72,195) --
----------- ----------- -----------
Net cash provided by investing activities 434,022 369,734 683,783
----------- ----------- -----------
Cash flows from financing activities:
Decrease in amount due on investments in partnerships -- (185,975) --
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 301,743 (151,808) 443,237
Cash and cash equivalents, beginning of year 1,522,120 1,673,928 1,230,691
----------- ----------- -----------
Cash and cash equivalents, end of year $ 1,823,863 $ 1,522,120 $ 1,673,928
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
IV-9
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
------------
Capital Realty Investors, Ltd. (the Partnership) was formed under the
District of Columbia Limited Partnership Act on June 1, 1981 and shall
continue until December 31, 2030 unless sooner dissolved in accordance with
the Partnership Agreement. The Partnership was formed to invest in real
estate by acquiring and holding a limited partner interest in limited
partnerships (Local Partnerships) which own and operate federal or state
government-assisted or conventionally financed apartment complexes located
throughout the United States, which provide housing principally to the
elderly or to individuals and families of low or moderate income.
The General Partners of the Partnership are C.R.I., Inc. (CRI), the
Managing General Partner, current and former shareholders of CRI and
Rockville Pike Associates, Ltd., a Maryland limited partnership which
includes the shareholders of CRI and certain officers and former employees
of CRI.
The Partnership sold 24,837 units at $1,000 per unit of Limited
Partnership Interest through a public offering. The offering period was
terminated on December 31, 1982.
b. Method of accounting
--------------------
The financial statements of the Partnership are prepared on the
accrual basis of accounting in accordance with generally accepted
accounting principles.
c. Investments in and advances to partnerships
-------------------------------------------
The investments in and advances to Local Partnerships (see Note 2) are
accounted for by the equity method because the Partnership is a limited
partner in the Local Partnerships. Under this method, the carrying amount
of the investments in and advances to Local Partnerships is (i) reduced by
distributions received and (ii) increased or reduced by the Partnership's
share of earnings or losses, respectively, of the Local Partnerships. As
of December 31, 1995 and 1994, the Partnership's share of cumulative losses
of eleven of the Local Partnerships exceeds the amount of the Partnership's
investment in and advances to those Local Partnerships by $7,060,300 and
$7,029,690, respectively. Since the Partnership has no further obligation
to advance funds or provide financing to these Local Partnerships, the
excess losses have not been reflected in the accompanying financial
statements. As of December 31, 1995 and 1994, cumulative cash
distributions of $2,052,712 and $1,804,134, respectively, have been
received from the Local Partnerships for which the Partnership's carrying
value is zero. These distributions are recorded as increases in the
Partnership's share of income from partnerships.
Costs incurred in connection with acquiring these investments have
been deferred and are being amortized using the straight-line method over
the estimated useful lives of the properties owned by the Local
Partnerships.
IV-10
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
d. Fair value of financial instruments
-----------------------------------
Statement of Financial Accounting Standards No. 107, "Disclosures
About Fair Value of Financial Instruments" (SFAS 107), requires the
disclosure of fair value information about financial instruments for which
it is practicable to estimate that value. The Partnership implemented SFAS
107 in 1995.
e. Cash and cash equivalents
-------------------------
Cash and cash equivalents consist of all money market funds, time and
demand deposits, repurchase agreements, commercial paper and certificates
of deposit with original maturities of three months or less. The
Partnership has determined that the carrying amount of its cash and cash
equivalents approximates fair value.
f. Restricted cash equivalents
---------------------------
Restricted cash equivalents consist of a certificate of deposit with a
bank to collateralize a letter of credit of $189,000. The Partnership
issued the letter of credit to satisfy the requirements of its investment
in Baltic Plaza. The letter of credit serves as supplemental collateral to
the Local Partnership mortgage loan and it is required to remain
outstanding until the mortgage loan is repaid. As of December 31, 1995, no
amounts have been drawn under the letter of credit. The Partnership has
determined that the carrying amount of its restricted cash equivalents
approximates fair value.
g. Offering costs
--------------
The Partnership incurred certain costs in connection with the offering
and selling of limited partnership interests. Such costs were recorded as
a reduction of partners' capital when incurred.
h. Income taxes
------------
For federal and state income tax purposes, each partner reports on his
or her personal income tax return his or her share of the Partnership's
income or loss as determined for tax purposes. Accordingly, no provision
(credit) has been made for income taxes in these financial statements.
IV-11
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
i. Use of estimates
----------------
In preparing financial statements in conformity with generally
accepted accounting principles, the Partnership is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS
a. Due on investments in partnerships
----------------------------------
As of December 31, 1995 and 1994, the Partnership had acquired limited
partnership interests in eighteen Local Partnerships, which were organized
to develop, construct, own, maintain and operate apartment complexes which
provide housing principally to the elderly and to individuals and families
of low or moderate income. The remaining principal amounts due on
investments in the Local Partnerships as of December 31, 1995 and 1994 are
as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Purchase money notes due:
1997 $1,350,000 $1,350,000
1998 5,072,800 5,072,800
---------- ----------
$6,422,800 $6,422,800
========== ==========
</TABLE>
Outstanding capital contributions of $185,975 were released in May
1994 in accordance with the amended partnership agreement.
The Partnership's purchase money notes relate to four Local
Partnerships and have stated interest rates ranging from 6% to 12%. The
purchase money notes are payable upon the earliest of: (1) sale or
refinancing of the respective Local Partnership's rental property; (2)
payment in full of the respective Local Partnership's permanent loan; or
(3) maturity. The Partnership's purchase money notes mature during 1997
and 1998. The purchase money notes are generally secured by the
Partnership's interest in the respective Local Partnerships. There is no
assurance that the underlying properties will have sufficient appreciation
and equity to enable the Partnership to pay the purchase money notes'
principal and accrued interest when due. If a purchase money note is not
paid in accordance with its terms, the Partnership will either have to
renegotiate the terms of repayment or risk losing its partnership interest
in the Local Partnership. The Managing General Partner is continuing to
investigate possible alternatives to reduce the Partnership's long-term
debt obligations. These alternatives include, among others, retaining the
cash available for distribution to meet the purchase money note
IV-12
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
requirements, buying out certain purchase money notes at a discounted
price, extending the due dates of certain purchase money notes, or
refinancing the respective properties' underlying debt and using the
Partnership's share of the proceeds to pay off or buy down certain purchase
money note obligations.
Interest expense on the Partnership's purchase money notes for the
years ended December 31, 1995, 1994 and 1993 was $665,545, $664,477 and
$664,477, respectively. The accrued interest on the purchase money notes
of $7,851,000 and $7,185,455, as of December 31, 1995 and 1994,
respectively, is due on the respective maturity dates of the purchase money
notes or earlier if the Local Partnerships have distributable net cash
flow, as defined in the relevant Local Partnership agreements. In May
1994, accrued interest of $33,700 on previously outstanding capital
contributions was released in accordance with the amended partnership
agreement.
SFAS 107 requires the disclosure of fair value information about
financial instruments for which it is practicable to estimate that value.
The Partnership has determined that it is not practicable to estimate the
fair value of the purchase money notes, either individually or in the
aggregate, due to: (1) the lack of an active market for this type of
financial instrument, (2) the variable nature of purchase money note
interest payments as a result of fluctuating cash flow distributions
received from the related Local Partnerships, and (3) the excessive costs
associated with an independent appraisal of the purchase money notes.
b. Interests in profits, losses and cash distributions
---------------------------------------------------
The Partnership has a 74.99% to 98.99% interest in profits, losses and
cash distributions (as restricted by various federal and state housing
agencies) of each Local Partnership. An affiliate of the General Partners
of the Partnership is also a general partner of each Local Partnership. The
Partnership received cash distributions from the rental operations of the
Local Partnerships totaling $434,022, $433,794 and $471,842 during the
years ended December 31, 1995, 1994 and 1993, respectively. As of December
31, 1995, eleven of the Local Partnerships had surplus cash, as defined by
their respective agencies, in the amount of $1,489,287, which is available
for distribution in accordance with their respective agencies' regulations.
The cash distributions to the Partnership from the operations of the
rental properties may be limited by Department of Housing and Urban
Development (HUD) regulations. Such regulations limit annual cash
distributions to a percentage of the owner's equity investment in a rental
property. Funds in excess of those which may be distributed to owners are
required to be placed in a residual receipts account held by the governing
state or federal agency for the benefit of the property.
Upon sale, refinancing or liquidation of each Local Partnership, the
proceeds from the sale, refinancing or liquidation shall be distributed in
accordance with the respective provisions of each Local Partnership's
partnership agreement. In accordance with such provisions, the Partnership
would receive from such proceeds its respective percentage interest of any
remaining proceeds, after payment of (1) all debts and liabilities of the
Local Partnership and certain other items, (2) the Partnership's capital
IV-13
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
contributions plus certain specified amounts as outlined in each
partnership agreement, and (3) certain special distributions to general
partners and related entities of the Local Partnership.
c. Property matters
----------------
The following table reflects the amounts of advances, and accrued
interest thereon, made to the Local Partnerships as of December 31, 1995
and 1994.
<TABLE>
<CAPTION>
December 31,
1995 1994
----------- -----------
<S> <C> <C>
Local Partnership
- -----------------
Frenchman's Wharf I:
Principal amount of funds advanced $ 305,398 $ 305,398
Accrued interest on advances 183,102 183,102
Shallowford Oaks Apts:
Principal amount of funds advanced 72,195 72,195
Accrued interest on advances 6,784 648
----------- -----------
$ 567,479 $ 561,343
=========== ===========
</TABLE>
The local general partner of Lake Properties Limited Partnership
(Frenchman's Wharf I), in conjunction with the Managing General Partner,
applied to HUD, holder of the mortgage on the property, for a three-year
extension of the previous workout arrangement, which expired in December
1990. The local HUD office verbally agreed to an extension expiring
December 31, 1993 and recommended approval of the extension to the HUD
central office in Washington, D.C. In December 1993, the local HUD office
requested that a new workout proposal be submitted, and in January 1994,
the local general partner met with HUD to discuss the long-term capital
needs of the property in connection with a workout proposal. On March 1,
1994, the local general partner submitted a nine-year workout proposal to
HUD. This proposal was rejected by HUD in December 1995. As of March 8,
1996, the local general partner is continuing to work directly with the HUD
central office to submit a five-year workout proposal. There is no
assurance that approval for a workout will be received. If a workout
proposal is not accepted and another alternative is not found, then HUD
could foreclose on the property. Frenchman's Wharf I was notified by HUD
that HUD had planned to offer its mortgage loan for sale in September of
1995. HUD later notified Frenchman's Wharf I that its loan was not
included in the pool of loans sold by HUD in September 1995. As of March
8, 1996, Frenchman's Wharf I has not been notified as to whether HUD will
offer the Frenchman's Wharf I loan for sale at a later date. If the
mortgage is eventually sold by HUD, a new mortgagee would service the loan
IV-14
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
and could foreclose on the property. Currently, debt-service payments are
being made from available cash flow. To cover operating deficits incurred
in prior years for Frenchman's Wharf I, the Partnership advanced funds
totalling $305,398 as of both December 31, 1995 and 1994. The last advance
was made to Frenchman's Wharf I in March 1987. The Partnership does not
expect to advance any additional funds in connection with Frenchman's Wharf
I's loan workout with HUD. These loans, together with accrued interest of
$183,102 as of both December 31, 1995 and 1994, are payable from cash flow
of Frenchman's Wharf I after payment of first-mortgage debt service and
after satisfaction by the Partnership of certain other interest obligations
on the purchase money notes relating to the Local Partnership. There is no
assurance that the Local Partnership, upon expiration of any workout, will
be able to repay any loans in accordance with the terms.
In addition, the Local Partnership has entered into an agreement with
the Frenchman's Wharf I's purchase money noteholders which, among other
things, provides that, in the event of a default under the purchase money
notes and related pledge agreement, the noteholders will not exercise any
rights or remedies under the purchase money notes and related pledge
agreement during the term of any subsequent loan modification or workout
agreement, as long as HUD does not commence foreclosure action under the
mortgage loan. The purchase money notes were made by the Partnership in
connection with its investment in the Local Partnership, and are
nonrecourse notes secured only by the Partnership's interest in the Local
Partnership.
On March 1, 1993, the Local Partnership for Shallowford Oaks
Apartments defaulted on its mortgage loan after the property had
experienced continuing operating deficits. The loan was assigned to HUD on
October 4, 1993. On January 5, 1994, the local general partner submitted a
six-year workout proposal to HUD, to which HUD did not respond. On March
4, 1994, the local general partner submitted a new six-year workout
proposal to HUD. In June 1994, at HUD's request, the six-year workout
proposal was increased to seven years. HUD withheld approval of the new
seven-year proposal until the local general partner reimbursed HUD for the
property's prior years' real estate tax bills which were paid by HUD. The
local general partner was also required to pay all past due mortgage
service charges owed to HUD. In November 1994, the local general partner
satisfied the outstanding obligations to HUD and received formal approval
of the seven-year workout, effective December 1, 1994. On November 23,
1994, the Partnership advanced $72,195 to the Local Partnership to help
repay the Local Partnership's outstanding obligations to HUD. This loan,
along with accrued interest of $6,784 and $648 as of December 31, 1995 and
1994, respectively, is payable from cash flow of Shallowford Oaks
Apartments after payment of first-mortgage debt service and after
satisfaction by the Partnership of certain other interest obligations on
the related purchase money notes. There is no assurance that the Local
Partnership, upon expiration of any workout, will be able to repay any
loans in accordance with the terms.
The report of the auditors on the financial statements of Shallowford
Oaks Apartments and Frenchman's Wharf I for the years ended December 31,
1995 and 1994 indicated that substantial doubt exists about the ability of
the Local Partnerships to continue as going concerns due to the respective
property's recurring operating deficits and, in the case of Frenchman's
Wharf I, the Local Partnership's default on its mortgage. The uncertainty
IV-15
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
about the Local Partnerships' continued ownership of the properties does
not impact the Partnership's financial condition because the related
purchase money notes are non-recourse and secured solely by the
Partnership's interest in the respective Local Partnerships. Therefore,
should the investment in Frenchman's Wharf I and Shallowford Oaks
Apartments not produce sufficient value to satisfy the respective purchase
money notes, the Partnership's exposure to loss is limited since the
respective amounts of non-recourse indebtedness exceeds the respective
carrying amounts of the investments in and advances to these Local
Partnerships. Thus, even a complete loss of either or both of these
investments would not have a material impact on the operations of the
Partnership.
On March 23, 1993, New Sharon Woods Associates achieved HUD final
endorsement closing. In connection with the closing, Philadelphia National
Bank, the bond trustee, released the Partnership's letters of credit
totaling $170,076. On April 19, 1994, the Partnership concluded
negotiations with the local general partner and executed the partnership
agreement as well as the first and second amendments to the partnership
agreement. In accordance with the agreement, on May 2, 1994, the
Partnership released the outstanding capital contributions of $185,975,
along with accrued interest thereon of $33,700, to the local managing
general partner.
IV-16
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
The remaining accrued interest of $62,332, which is included in interest
expense in the accompanying statements of operations, was released in 1994
to establish an operating deficit escrow account for New Sharon Woods
Associates.
During February 1992, an oil leak was detected from an underground
tank at Frederick Heights Apartments located in Frederick, Maryland. The
total cost of the clean-up was approximately $83,000 and was partially paid
from the operations of the property. On February 12, 1993, the Maryland
Environmental Protection Agency approved the completed clean-up of the
leak. Because the local general partner of Frederick Heights Apartments
was not successful in obtaining reimbursement of the costs from its
insurance carrier, the Local Partnership received an advance of $50,000
from the Partnership on July 20, 1992 to cover the shortfall in the payment
of these costs. In 1993, the Local Partnership repaid $41,865 of the
advance. The remaining balance of $8,135 was repaid in April 1994.
On April 28, 1994, the Partnership extended an offer to purchase, at a
discount, the purchase money notes for Frederick Heights Apartments, which
mature in 1997, in the aggregate original principal amount of $650,000.
This offer was not accepted by the noteholders.
The rental property owned by Tanglewood Apartments Associates I
(Tanglewood I) has a mortgage which is federally insured under Section
221(d)(3) of the National Housing Act, as amended. This property may be
eligible for sale or refinancing, subject to numerous requirements, under
the Low Income Housing Preservation and Resident Homeownership Act of 1990
(LIHPRHA). This program may provide incentives to owners of qualifying
multifamily housing who commit to permanently maintain their properties as
low to moderate income housing. Incentives available under LIHPRHA include
selling the property to qualified buyers or obtaining supplemental
financing for the property. As of March 8, 1996, members of Congress are
recommending substantial changes to the LIHPRHA program ranging from the
elimination of the program to the redesigning of the program. Substantial
doubt exists as to whether Tanglewood I, which filed the notice of intent
to participate under the LIHPRHA program on May 23, 1994, will qualify
under a redesigned program, or whether the program will continue at all.
There is no assurance that a sale or supplemental financing of this
property will occur.
Some of the rental properties owned by the Local Partnerships are
financed by state housing agencies. The Managing General Partner has been
working to develop a strategy to sell or refinance certain properties by
utilizing programs developed by these agencies. These programs may include
opportunities to sell the property to a qualifying purchaser who would
agree to maintain the property as low to moderate income housing in
perpetuity, or may include opportunities to refinance the property through
supplemental financing. The Managing General Partner continues to monitor
these certain state housing agency programs to ascertain whether the
properties would qualify within the parameters of these programs and
whether these programs would provide an appropriate economic benefit to the
limited partners of the Partnership.
Many other rental properties owned by the Local Partnerships are
dependent on the receipt of housing assistance payments guaranteed by
contract under the HUD Section 8 program. The level of funding for the
IV-17
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
Section 8 program, and HUD-insured multifamily housing in general, is
dependent upon the continuation of appropriations approved by Congress for
subsidy payments. In the event that the rental subsidy programs are
reduced or phased out, there is no assurance that the rental properties
will be able to maintain the occupancy levels necessary to pay debt service
and operating costs or that the rents necessary to pay debt service and
operating costs will be competitive with rents for comparable units in the
rental properties' market areas. While the Managing General Partner has no
reason to believe that HUD will not honor its obligations under the
contracts, some uncertainty exists in light of the recent Congressional
scrutiny of appropriations for HUD programs.
d. Summarized financial information
--------------------------------
Summarized financial information for the Local Partnerships as of
December 31, 1995 and 1994 and for the years ended December 31, 1995, 1994
and 1993 is as follows:
IV-18
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1995 1994*
------------ ------------
<S> <C> <C>
Rental property, at cost, net of accumulated depreciation
of $44,203,590 and $40,981,892 $ 51,922,086 $ 54,331,908
Land 8,354,484 8,354,484
Other assets 13,377,120 12,045,511
------------ ------------
Total assets $ 73,653,690 $ 74,731,903
============ ============
Mortgage notes payable $ 74,456,588 $ 75,371,578
Other liabilities 7,638,224 7,255,591
------------ ------------
Total liabilities 82,094,812 82,627,169
Partners' deficit (8,441,122) (7,895,266)
------------ ------------
Total liabilities and partners' deficit $ 73,653,690 $ 74,731,903
============ ============
</TABLE>
* Certain amounts in the above 1994 summarized financial information have
been reclassified to conform to 1995 presentation.
IV-19
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenue:
Rental $ 18,603,454 $ 18,103,428 $ 17,412,828
Interest 501,649 389,062 391,576
Other 583,178 526,649 431,504
------------ ------------ ------------
Total revenue 19,688,281 19,019,139 18,235,908
------------ ------------ ------------
Expenses:
Operating 9,656,615 9,846,610 9,064,143
Interest 6,799,235 7,022,133 7,087,227
Depreciation 3,369,059 3,382,048 3,274,774
Amortization 35,436 28,665 37,694
------------ ------------ ------------
Total expenses 19,860,345 20,279,456 19,463,838
------------ ------------ ------------
Net loss $ (172,064) $ (1,260,317) $ (1,227,930)
============ ============ ============
</TABLE>
The above rental property and partners' capital (deficit) amounts
include $1,700,000 of the Partnership's purchase money notes payable which
were issued to partners of the Local Partnerships and $4,123,844 of
purchase price paid by the Partnership which had not been recorded in the
rental property basis by the Local Partnerships. Accordingly, depreciation
expense as reflected above includes $177,980 for the years ended December
31, 1995, 1994 and 1993, to recognize the Partnership's increased
depreciable basis for the Local Partnerships' rental properties.
e. Reconciliation of the Local Partnerships' financial statement
-------------------------------------------------------------
net loss to income tax loss
---------------------------
For federal income tax purposes, the Local Partnerships report on a
basis whereby: (1) certain revenue and the related assets are recorded
when received rather than when earned; (2) certain costs are expensed when
paid or incurred rather than capitalized and amortized over the period of
benefit; and (3) a shorter life is used to compute depreciation of the
property for tax purposes as permitted by Internal Revenue Service (IRS)
Regulations. These returns are subject to audit and, therefore, possible
adjustment by the IRS.
A reconciliation of the Local Partnerships' financial statement net
loss reflected above to the income tax loss for the years ended December
31, 1995, 1994 and 1993 is as follows:
IV-20
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Financial statement net loss $ (172,064) $ (1,260,317) $ (1,227,930)
Adjustments:
Additional tax depreciation using accelerated methods,
net of depreciation on construction period expenses
capitalized for financial statement purposes (888,691) (1,168,016) (1,315,782)
Amortization for financial statement purposes not
deducted for income tax purposes 46,717 47,469 45,655
Miscellaneous, net 72,037 (139,666) (34,300)
------------ ------------ ------------
Income tax loss $ (942,001) $ (2,520,530) $ (2,532,357)
============ ============ ============
</TABLE>
3. RELATED-PARTY TRANSACTIONS
In accordance with the Partnership Agreement, the Partnership paid the
Managing General Partner a fee for services in connection with the review,
selection, evaluation, negotiation and acquisition of the interests in the Local
Partnerships. The fee amounted to $993,480 which is equal to 4% of the Limited
Partners' capital contributions to the Partnership. The acquisition fee was
capitalized and is being amortized over a forty-year period using the
straight-line method.
In accordance with the terms of the Partnership Agreement, the Partnership
is obligated to reimburse the Managing General Partner for its direct expenses
in managing the Partnership and to pay an annual incentive management fee (the
Management Fee), after all other expenses of the Partnership are paid. For the
years ended December 31, 1995, 1994 and 1993, the Partnership paid $58,095,
$69,620 and $63,032, respectively, as direct reimbursement of expenses incurred
on behalf of the Partnership. Such expenses are included in the accompanying
statements of operations as general and administrative expenses.
The amount of the Management Fee shall be equal to .25% of invested assets,
as defined in the Partnership Agreement, and shall be payable from the
Partnership's cash available for distribution, as defined in the Partnership
Agreement, as of the end of each calendar year, as follows:
a. First, on a monthly basis as an operating expense before any
distributions to limited partners in an annual amount equal to
$95,208; and
b. Second, after distributions to the limited partners in the amount of
1% of the gross proceeds of the offering, the balance of such .25% of
invested assets.
IV-21
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
3. RELATED-PARTY TRANSACTIONS - Continued
For each of the years ended December 31, 1995, 1994 and 1993, the Part-
nership paid the Managing General Partner a Management Fee of $95,208.
From August 1990 through January 1994, CRICO Management Corporation
(CRICO), an affiliate of the Managing General Partner, provided consulting,
accounting and other services to Frederick Heights Apartments. Fees paid or
accrued to CRICO for these services amounted to $4,733 for the month ended
January 31, 1994. Fees paid or accrued were $60,723 for the year ended December
31, 1993. On February 1, 1994, CRICO contributed its property management and/or
consulting contracts and personnel to CAPREIT Residential Corporation (CAPREIT).
CAPREIT was formed by CRI but is not currently owned or controlled by CRI and/or
its affiliates. On April 12, 1995, HUD approved CAPREIT as the new management
agent.
4. PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS
All profits and losses are allocated 97% to the limited partners and 3% to
the General Partners. The net proceeds resulting from the liquidation of the
Partnership or the Partnership's share of the net proceeds from any sale or
refinancing of the projects or their rental properties which are not reinvested
shall be distributed and applied as follows:
(i) to the payment of debts and liabilities of the Partnership
(including all expenses of the Partnership incident to the sale
or refinancing) other than loans or other debts and liabilities
of the Partnership to any partner or any affiliate; such debts
and liabilities, in the case of a non-liquidating distribution,
to be only those which are then required to be paid or, in the
judgment of the Managing General Partner, required to be provided
for;
(ii) to the establishment of any reserves which the Managing General
Partner deems reasonably necessary for contingent, unmatured or
unforeseen liabilities or obligations of the Partnership;
(iii) to the limited partners in the amount of their capital
contributions without deduction for prior cash distributions
other than prior distributions of proceeds from any sale or
refinancing;
(iv) to the repayment of any unrepaid loans theretofore made by any
partner or any affiliate to the Partnership for Partnership
obligations and to the payment of any unpaid amounts owing to the
General Partners pursuant to the Partnership Agreement;
(v) to the General Partners in the amount of their capital
contributions;
(vi) thereafter, for their services to the Partnership, in equal
shares to certain general partners (or their designees), whether
or not any is then a general partner, an aggregate fee of 1% of
the gross proceeds resulting from (A) such sale (if the proceeds
are from a sale rather than a refinancing) and (B) any prior
sales from which such 1% fee was not paid to the General Partners
or their designees and,
(vii) the remainder, 15% to the General Partners (or their assignees)
and 85% to the limited partners (or their assignees).
Fees payable to certain general partners (or their designees) under (vi)
above, together with all other property disposition fees and any other
commissions or fees payable upon the sale of apartment complexes, shall not in
IV-22
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
4. PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS - Continued
the aggregate exceed the lesser of the competitive rate or 6% of the sales price
of the apartment complexes.
In addition, the Managing General Partner and/or its affiliates may receive
a fee in an amount of not more than 2% of the sales price of the investment in a
Local Partnership or the property it owns. The fee would only be payable upon
the sale of the investment in a Local Partnership or the property it owns and
would be subject to certain restrictions, including achievement of a certain
level of sales proceeds and making certain minimum distributions to limited
partners. No such amounts were paid to the Managing General Partner and/or its
affiliates during 1995, 1994 and 1993.
Pursuant to the Partnership Agreement, all cash available for distribution,
as defined, shall be distributed, not less frequently than annually, 97% to the
limited partners and 3% to the General Partners after payment of the Management
Fee (see Note 3), as specified in the Partnership Agreement. As defined in the
Partnership Agreement, prior to the establishment of any reserves deemed
necessary by the Managing General Partner and after payment of the Management
Fee, the Partnership had cash available for distribution of approximately
$298,000, $219,000 and $188,000 for the years ended December 31, 1995, 1994 and
1993, respectively. At December 31, 1995, eleven of the Local Partnerships had
surplus cash, as defined by their respective agencies, in the amount of
$1,489,287, which is available for distribution to the Partnership in accordance
with the respective agencies regulations. No distributions were declared or paid
during 1995, 1994 and 1993 because any cash available for distribution is
currently being retained by the Partnership, as previously discussed.
5. RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET
LOSS TO INCOME TAX LOSS
For federal income tax purposes, the Partnership reports on a basis
whereby: (1) certain expenses are amortized rather than expensed when incurred;
(2) certain costs are amortized over a shorter period for tax purposes, as
permitted by IRS Regulations, and (3) certain costs are amortized over a longer
period for tax purposes. The Partnership records its share of losses from its
investments in limited partnerships for federal income tax purposes as reported
on the Local Partnerships' federal income tax returns (see Note 2e), including
losses in excess of related investments amounts. These returns are subject to
audit and, therefore, possible adjustment by the IRS.
A reconciliation of the Partnership's financial statement net loss to the
income tax loss for the years ended December 31, 1995, 1994 and 1993 is as
follows:
IV-23
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
5. RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET
LOSS TO INCOME TAX LOSS - Continued
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Financial statement net loss $ (722,847) $ (1,050,653) $ (1,031,151)
Adjustments:
Differences between the income tax losses and
financial statement losses related to the
Partnership's equity in the Local Partnerships'
losses (782,540) (2,122,159) (1,648,930)
Costs amortized over a shorter period for income
tax purposes (58,300) (58,300) (59,182)
------------ ------------ ------------
Income tax loss $ (1,563,687) $ (3,231,112) $ (2,739,263)
============ ============ ============
</TABLE>
6. CONTINGENCIES
In 1990, CRI, as Managing General Partner of the Partnership and various
other entities, subcontracted certain property-level asset management functions
for certain properties to Capital Management Strategies, Inc. (CMS). Among
these properties were properties owned by certain of the Local Partnerships in
which the Partnership invested. CMS was formed by Martin C. Schwartzberg, a
nominal general partner of the Partnership and a former stockholder of CRI, when
he cashed out of CRI and its related businesses as of January 1, 1990. Mr.
Schwartzberg agreed not to act as a general partner with respect to any of the
CRI-sponsored partnerships, including this Partnership, and has not done so
since that time. In late 1995, a dispute arose between CRI and CMS over the
funding level of the 1996 contract for CMS. On November 9, 1995, CRI filed a
complaint against CMS to determine the proper amount of fees to be paid in 1996
under the asset management agreement. CMS answered on January 10, 1996, but
asserted no counterclaims.
Thereafter, Mr. Schwartzberg launched a hostile consent solicitation to be
designated as managing general partner of approximately 125 private partnerships
sponsored by CRI. On January 18, 1996, Mr. Schwartzberg and CMS filed a
complaint in the Circuit Court of Montgomery County, Maryland (the Circuit
Court), against CRI and Messrs. Dockser and Willoughby (who are general partners
of the Partnership) alleging, among other things, that CRI and Messrs. Dockser
and Willoughby have breached the asset management agreement pursuant to which
Mr. Schwartzberg's company, CMS, agreed to perform limited functions related to
property-level issues for a portion of CRI's subsidized housing portfolio
(including some of the properties in which the Partnership invested), by
reducing the proposed budget for 1996. The Partnership is not named as a
defendant in this action. Messrs. Dockser and Willoughby have entered an answer
denying all of Mr. Schwartzberg's claims. Messrs. Dockser and Willoughby have
publicly responded that Mr. Schwartzberg's suit is motivated by his budget
IV-24
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
NOTES TO FINANCIAL STATEMENTS
6. CONTINGENCIES - Continued
dispute with CRI and personal animosity. On February 6, 1996, CRI terminated
the CMS contract for cause. Mr. Schwartzberg and CMS responded by filing a
motion for injunctive relief in the Circuit Court, asking the court to enjoin
CRI from terminating the contract. In a ruling issued on February 12, 1996, the
Circuit Court, among other things, refused to grant the injunction requested by
CMS. A hearing in this case is scheduled for April 29, 1996. On February 12,
1996, the Circuit Court also issued a memorandum opinion and order enjoining CMS
and Mr. Schwartzberg from disclosing information made confidential under the
asset management agreement.
On February 1, 1996 and February 16, 1996, Mr. Schwartzberg sent letters to
the Partnership requesting investor lists and other forms of investor
information. On February 5, 1996, the Partnership, acting through its managing
general partner, CRI, denied Mr. Schwartzberg's request. On February 20, 1996,
counsel for the Partnership responded to Mr. Schwartzberg's second request,
denying that Mr. Schwartzberg had standing or a proper purpose for requesting
the investor lists. In view of Mr. Schwartzberg's solicitation efforts against
other CRI-sponsored partnerships, CRI anticipates that litigation may arise from
this request.
IV-25
<PAGE>
FINANCIAL STATEMENT SCHEDULES
IV-26
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
-----------------------------------------------------
FINANCIAL STATEMENT SCHEDULE
----------------------------
To the Partners
Capital Realty Investors, Ltd.
In connection with our audit of the financial statements of Capital Realty
Investors, Ltd. referred to in our report dated March 8, 1996, which is included
in this Form 10-K, we have also audited Schedule III as of December 31, 1995,
1994 and 1993. We did not audit the financial statements for seventeen of the
eighteen Local Partnerships in 1995, 1994 and 1993, which are accounted for as
described in Note 1c. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.
Grant Thornton LLP
Vienna, VA
March 8, 1996
IV-27
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
(a limited partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF
LOCAL PARTNERSHIPS IN WHICH CAPITAL REALTY INVESTORS, LTD. HAS INVESTED
December 31, 1995
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
- -------------------- ------- ------------------------------- -------------------------------
Initial Costs Capitalized
Cost to Local Subsequent
Partnership to Acquisition
------------------------------- -------------------------------
Building
Description Encum- and Carrying
Operating Properties brances Land Improvements Improvements Costs (B)
- -------------------- ------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Baltic Plaza (A) $ 556,500 $ -- $ 8,850,043 $ 1,386,885
Atlantic City, NJ
(169 units-elderly
apartment complex)
Capitol Commons (A) 337,000 925,000 7,416,901 504,635
Lansing, MI
(200 units-elderly
apartment complex)
Court Place (A) 519,821 -- 7,291,124 254,477
Pekin, IL
(110 units-elderly;
50 units-family
apartment complex)
Frederick Heights (A) 319,785 2,035,217 4,036,588 --
Frederick, MD
(156 units-family
apartment complex)
Frenchman's Wharf I (A) 2,196,412 10,693,539 383,657 --
New Orleans, LA
(320 units-family
apartment complex)
Linden Place (A) 731,109 -- 9,883,736 389,892
Arlington Heights, IL
(110 units-elderly;
80 units-family
apartment complex)
Park Glen (A) 293,524 -- 5,762,171 270,485
Taylorville, IL
(125 units-elderly
apartment complex)
</TABLE>
IV-28
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
(a limited partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF
LOCAL PARTNERSHIPS IN WHICH CAPITAL REALTY INVESTORS, LTD.
HAS INVESTED - Continued
December 31, 1995
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
- -------------------- ------- ------------------------------- -------------------------------
Initial Costs Capitalized
Cost to Local Subsequent
Partnership to Acquisition
------------------------------- -------------------------------
Building
Description Encum- and Carrying
Operating Properties brances Land Improvements Improvements Costs (B)
- -------------------- ------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Shallowford Oaks Apts (A) 920,396 6,848,692 640,392 --
Chamblee, GA ----------- ------------ ------------ -----------
(204 units-family
apartment complex)
Sub-total $ 5,874,547 $ 20,502,448 $ 44,264,612 $ 2,806,374
----------- ------------ ------------ -----------
Aggregate of
remaining
properties which
are individually
less than 5% of the
total in Column E 1,783,054 8,007,232 20,322,551 919,342
----------- ------------ ------------ -----------
Total $ 7,657,601 $ 28,509,680 $ 64,587,163 $ 3,725,716
=========== ============ ============ ===========
</TABLE>
IV-29
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
(a limited partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF
LOCAL PARTNERSHIPS IN WHICH
CAPITAL REALTY INVESTORS, LTD. HAS INVESTED - Continued
December 31, 1995
<TABLE>
<CAPTION>
COL. A COL. E COL. F COL. G COL. H COL. I
- -------------------- ------------------------------------------- ------------ ------- ------- --------------
Gross amount at which Life upon
carried at close of period which dep-
------------------------------------------- Date reciation in
Building Accumulated of latest income
Description and depreciation Const- Date statement is
Operating Properties Land Improvements Total (C) (D) (D) ruction Acquired computed (years)
- -------------------- ----------- ------------ ------------- ------------ ------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Baltic Plaza $ 673,807 $ 10,119,621 $ 10,793,428 $ (3,209,006) 2/83 6/81 5-40
Atlantic City, NJ
(169 units-elderly
apartment complex)
Capitol Commons 346,103 8,837,433 9,183,536 (4,254,478) 6/82 8/81 5-30
Lansing, MI
(200 units-elderly
apartment complex)
Court Place 519,821 7,545,601 8,065,422 (3,182,083) 3/83 10/81 5-40
Pekin, IL
(110 units-elderly;
50 units-family
apartment complex)
Frederick Heights 319,785 6,071,805 6,391,590 (2,645,407) 2/79 10/81 5-40
Frederick, MD
(156 units-family
apartment complex)
Frenchman's Wharf I 2,196,412 11,077,196 13,273,608 (5,668,972) 8/78 9/82 5-30
New Orleans, LA
(320 units-family
apartment complex)
Linden Place 772,635 10,232,102 11,004,737 (4,483,379) 9/82 3/82 5-30
Arlington Heights, IL
(110 units-elderly;
80 units-family
apartment complex)
Park Glen 293,524 6,032,656 6,326,180 (2,488,523) 9/83 8/82 5-30
Taylorville, IL
(125 units-elderly
apartment complex)
</TABLE>
IV-30
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
(a limited partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF
LOCAL PARTNERSHIPS IN WHICH
CAPITAL REALTY INVESTORS, LTD. HAS INVESTED - Continued
December 31, 1995
<TABLE>
<CAPTION>
COL. A COL. E COL. F COL. G COL. H COL. I
- -------------------- ------------------------------------------- ------------ ------- ------- --------------
Gross amount at which Life upon
carried at close of period which dep-
------------------------------------------- Date reciation in
Building Accumulated of latest income
Description and depreciation Const- Date statement is
Operating Properties Land Improvements Total (C) (D) (D) ruction Acquired computed (years)
- -------------------- ----------- ------------ ------------- ------------ ------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shallowford Oaks Apts 920,396 7,489,084 8,409,480 (4,223,922) 7/81 1/82 5-25
Chamblee, GA ----------- ------------ ------------- ------------
(204 units-family
apartment complex)
Sub-total $ 6,042,483 $ 67,405,498 $ 73,447,981 $(30,155,770)
----------- ------------ ------------- ------------
Aggregate of
remaining
properties which
are individually
less than 5% of the
total in Column E 2,312,001 28,720,178 31,032,179 (14,047,820)
----------- ------------ ------------- ------------
Total $ 8,354,484 $ 96,125,676 $ 104,480,160 $(44,203,590)
=========== ============ ============= ============
</TABLE>
IV-31
<PAGE>
CAPITAL REALTY INVESTORS, LTD.
(a limited partnership)
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
OF LOCAL PARTNERSHIPS IN WHICH
CAPITAL REALTY INVESTORS, LTD. HAS INVESTED
December 31, 1995
(A) Secured by mortgage loans.
(B) Consists of capitalized construction period interest and real estate taxes
during construction.
(C) The aggregate cost of land for federal income tax purposes is $8,035,463
and the aggregate costs of buildings and improvements for federal income
tax purposes is $94,902,093. The total of the above-mentioned items is
$102,937,556.
IV-32
<PAGE>
(D) Reconciliation of real estate
-----------------------------
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $103,668,284 $102,672,550 $102,178,396
Improvements during period: 959,888 995,734 861,331
Deletions during period (148,012) -- (367,177)
------------ ------------ ------------
Balance at end of period $104,480,160 $103,668,284 $102,672,550
============ ============ ============
</TABLE>
Reconciliation of accumulated depreciation
------------------------------------------
<TABLE>
<CAPTION>
For the years ended December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $ 40,981,892 $ 37,599,844 $ 34,692,247
Depreciation expense for the period, net of deletions 3,221,698 3,382,048 2,907,597
------------ ------------ ------------
Balance at end of period $ 44,203,590 $ 40,981,892 $ 37,599,844
============ ============ ============
</TABLE>
IV-33
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Method of Filing
- ------- -----------------------------
27 Financial Data Schedule Filed herewith electronically
IV-34
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL
REPORT ON FORM 10-K.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,823,863
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,209,709
<CURRENT-LIABILITIES> 0
<BONDS> 14,273,800
<COMMON> 0
0
0
<OTHER-SE> (8,127,383)
<TOTAL-LIABILITY-AND-EQUITY> 6,209,709
<SALES> 0
<TOTAL-REVENUES> 215,229
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 272,531
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 665,545
<INCOME-PRETAX> (722,847)
<INCOME-TAX> 0
<INCOME-CONTINUING> (722,847)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (722,847)
<EPS-PRIMARY> (28.23)
<EPS-DILUTED> (28.23)
</TABLE>
