CAPITAL REALTY INVESTORS LTD, 10KSB, 2000-03-23

CAPITAL REALTY INVESTORS LTD
10KSB, 2000-03-23
REAL ESTATE INVESTMENT TRUSTS

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<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB

ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999
-----------------

Commission file number 0-11149
-----------------

CAPITAL REALTY INVESTORS, LTD.
- -----------------------------------------------------------------------
(Name of small business issuer 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
- ----------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)

Issuer's telephone number (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 INTERESTS
- ------------------------------------------------------------------------
(Title of class)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]

Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB [X]

State issuer's revenues for its most recent fiscal year $1,429,977.

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.

1999 ANNUAL REPORT ON FORM 10-KSB

TABLE OF CONTENTS

Page
----
PART I
------

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
-------

Item 5. Market for the Registrant's Partnership
Interests and Related Partnership Matters . . II-1
Item 6. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . II-1
Item 7. Financial Statements . . . . . . . . . . . . . . II-6
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . II-6

PART III
--------

Item 9. Directors and Executive Officers
of the Registrant . . . . . . . . . . . . . . . III-1
Item 10. Executive Compensation . . . . . . . . . . . . . III-2
Item 11. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . . . III-2
Item 12. Certain Relationships and Related Transactions . III-3
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . III-4

Signatures . . . . . . . . . . . . . . . . . . . . . . . . III-5

Financial Statements . . . . . . . . . . . . . . . . . . . III-8
<PAGE>
PART I
------

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), which is
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 former officers and 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). The Partnership
originally made investments in 18 Local Partnerships. As of December 31, 1999,
the Partnership had investments in 17 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 6, 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. As a result of its investment in the Local
Partnership, the Partnership became the principal limited partner in these Local
Partnerships. 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 Partnerships is limited to its
investment. In most cases, an affiliate of the Managing General Partner of the
Partnership is also 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 complexes which may be in competition for
eligible tenants with the Local Partnerships' apartment complexes.

I-1
<PAGE>
PART I
------

ITEM 1. BUSINESS - continued
--------

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 Managing
General Partner believes 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 6, Management's Discussion and Analysis of Financial Condition and
Results of Operations.

I-2
<PAGE>

A schedule of the apartment complexes owned by Local Partnerships in
which the Partnership has an investment follows.

SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS IN WHICH
CAPITAL REALTY INVESTORS, LTD. HAS AN INVESTMENT(1)

Units Expiration
Mortgage Authorized for of
Name and Location Payable at Financed and/or Insured Number of Rental Asst. Section 8
of Apartment Complex 12/31/99 (2) and/or Subsidized Under Rental Units Under Sec. 8 HAP Contract
- -------------------- ------------ ----------------------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Baltic Plaza $ 7,526,301 New Jersey Housing and 169 168 02/10/03
Atlantic City, NJ Mortgage Finance Agency

Capitol Commons 6,631,517 Michigan State Housing 200 200 05/31/02
Lansing, MI Development Authority

Chestnut 2,447,173 California Housing 90 88 01/13/13
Fresno, CA Finance Agency

Court Place 6,313,723 Illinois Housing 160 160 02/01/13
Pekin, IL Development Authority (IHDA)

Frederick Heights 2,970,047 Section 221(d)(4) of the National 156 0 N/A
Frederick, MD Housing Act (NHA)

Frenchman's Wharf I 6,499,180 Section 221(d)(4) 320 31 11/30/00 (4)
New Orleans, LA of the NHA

Hillview Terrace 2,460,741 Rural Economic Community 125 115 10/01/01
Traverse City, MI Development (RECD)

Lihue Gardens 2,769,176 RECD 58 58 02/22/03
Lihue, Kauai, HI

Linden Place 9,456,114 IHDA 190 190 01/01/22
Arlington Heights, IL

New Sharon Woods Apts. 2,474,108 FHA 50 50 07/31/04
Deptford, NJ

Park Glen 5,221,460 IHDA 125 125 08/01/23
Taylorville, IL

Shallowford Oaks 5,838,177 FHA 204 41 11/26/00
Chamblee, GA

Sundance Apts. 2,415,571 GNMA/FHA 60 60 05/07/02
Bakersfield, CA

Tandem Townhouses 1,396,775 Pennsylvania Housing 48 47 08/28/12
Fairview Borough, PA Finance Agency

Warner House 1,989,396 Section 221(d)(4) of the NHA 60 60 09/01/01
Warren, OH

</TABLE>

I-3
<PAGE>

SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS IN WHICH
CAPITAL REALTY INVESTORS, LTD. HAS AN INVESTMENT(1) - Continued

Units Expiration
Mortgage Authorized for of
Name and Location Payable at Financed and/or Insured Number of Rental Asst. Section 8
of Apartment Complex 12/31/99 (2) and/or Subsidized Under Rental Units Under Sec. 8 HAP Contract
- -------------------- ------------ ----------------------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Westwood Village 1,460,711 Connecticut Housing Finance 48 48 02/01/12
New Haven, CT Authority

Winthrop Beach 1,040,895 First mortgage loan by First 69 0 N/A
Chicago, IL Federal Savings and Loan Assoc.
of Chicago; second mortgage loan
by Chicago Department of Housing
- -------------------- ------------ -------- ------
Totals 17 $ 68,911,065 2,132 1,441
============ ======== ======

</TABLE>

I-4
<PAGE>

SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS IN WHICH
CAPITAL REALTY INVESTORS, LTD. HAS AN INVESTMENT(1) - Continued

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 1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
- -------------------- ---- ---- ---- ---- ---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Baltic Plaza 100% 99% 97% 100% 99% $ 13,212 $ 13,014 $ 12,981 $ 13,143 $ 13,106
Atlantic City, NJ

Capitol Commons 97% 96% 94% 98% 99% 9,479 9,464 9,340 9,451 9,335
Lansing, MI

Chestnut 97% 98% 98% 98% 98% 7,451 7,523 7,459 7,580 7,369
Fresno, CA

Court Place 98% 100% 100% 100% 100% 12,928 12,555 12,483 12,191 11,997
Pekin, IL

Frederick Heights 99% 97% 96% 96% 97% 7,677 7,360 7,164 6,983 6,809
Frederick, MD

Frenchman's Wharf I 94% 88% 91% 89% 92% 4,753 4,514 4,499 4,403 4,246
New Orleans, LA

Hillview Terrace 100% 99% 100% 99% 99% 2,757 2,759 2,752 3,930 3,779
Traverse City, MI

Lihue Gardens 100% 100% 95% 100% 100% 10,657 10,792 11,139 11,359 11,164
Lihue, Kauai, HI

Linden Place 99% 100% 100% 99% 100% 14,256 13,944 13,246 12,880 12,637
Arlington Heights, IL

New Sharon Woods Apts. 96% 90% 100% 100% 94% 11,882 11,401 11,826 11,805 11,589
Deptford, NJ

Park Glen 99% 100% 100% 100% 100% 9,744 9,535 9,415 9,303 9,250
Taylorville, IL

Shallowford Oaks 99% 99% 99% 95% 100% 7,663 7,379 7,162 7,002 6,934
Chamblee, GA

Sundance Apts. 100% 100% 100% 100% 98% 8,305 8,365 8,559 8,390 8,387
Bakersfield, CA

Tandem Townhouses 100% 100% 100% 100% 100% 9,240 9,289 9,223 8,859 8,798
Fairview Borough, PA

Warner House 99% 100% 100% 98% 98% 7,457 7,635 7,624 7,584 7,505
Warren, OH

</TABLE>

I-5
<PAGE>

SCHEDULE OF APARTMENT COMPLEXES OWNED BY LOCAL PARTNERSHIPS IN WHICH
CAPITAL REALTY INVESTORS, LTD. HAS AN INVESTMENT(1) - Continued

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 1999 1998 1997 1996 1995 1999 1998 1997 1996 1995
- -------------------- ---- ---- ---- ---- ---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Westwood Village 98% 100% 98% 96% 94% 11,544 11,416 11,217 11,017 11,294
New Haven, CT

Winthrop Beach 90% 90% 93% 94% 96% 4,111 4,133 4,076 3,903 4,007
Chicago, IL
- -------------------- ---- ---- ---- ---- ---- -------- -------- -------- -------- --------
Totals (3) 17 98% 97% 98% 98% 98% $ 9,007 $ 8,887 $ 8,833 $ 8,811 $ 8,718
==== ==== ==== ==== ==== ======== ======== ======== ======== ========

</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 first mortgage loans payable of
the Local Partnerships as of December 31, 1999.

(3) The totals for the percentage of units occupied and the average effective
annual rental per unit are based on a simple average.

(4) The Section 8 contract expiration date reflects an extension from the
original expiration date, in accordance with Federal legislation.

The local managing general partner of Winthrop Beach has received an offer
for the purchase of the property and the parties have executed a sales contract
dated as of February 11, 2000. See the notes to the financial statements for
further information concerning the sale.

ITEM 2. PROPERTIES
----------

Through its ownership of limited partner interests in Local Partnerships,
Capital Realty Investors, Ltd. indirectly holds an interest in the underlying
real estate. See Part I, Item 1 for information concerning these properties.

ITEM 3. LEGAL PROCEEDINGS
-----------------

There are no material legal proceedings to which the Partnership is a
party.

I-6
<PAGE>
PART I
------

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 1999.

I-7
<PAGE>
PART II
-------

ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND
-----------------------------------------------------
RELATED PARTNERSHIP MATTERS
---------------------------

(a) It is not anticipated that there will be any formal 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 23, 2000, there were approximately 1,700 registered
holders of limited partnership interests in the Partnership.

(c) No distributions were declared or paid by the Partnership during 1999
or 1998. The Partnership received distributions of $593,125 and
$495,696 from Local Partnerships during 1999 and 1998, respectively.
Some of the Local Partnerships operate under restrictions imposed by
the pertinent governmental agencies that limit the cash return
available to the Partnership.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------

Capital Realty Investors, Ltd.'s (the Partnership) Management's Discussion
and Analysis of Financial Condition and Results of Operations section contains
information that may be considered forward looking, including statements
regarding the effect of governmental regulations. Actual results may differ
materially from those described in the forward looking statements and will be
affected by a variety of factors including national and local economic
conditions, the general level of interest rates, terms of governmental
regulations that affect the Partnership and interpretations of those
regulations, the competitive environment in which the Partnership operates, and
the availability of working capital.

General
-------

The Partnership has invested, through Local Partnerships, primarily in
federal or state government-assisted apartment complexes (the properties)
intended to provide housing to low and moderate income tenants. In conjunction
with such governmental 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 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

II-1
<PAGE>
PART II
-------

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

from tax benefits to cash flow wherever possible, thereby potentially enhancing
the ability of the Partnership to share in the appreciated value of the
properties.

The acquisition of interests in certain Local Partnerships was paid for in
part by purchase money notes of the Partnership. The purchase money notes are
nonrecourse obligations of the Partnership which typically mature 15 years from
the date of acquisition of the interest in a particular Local Partnership, and
are generally secured by the Partnership's interest in the Local Partnership.

C.R.I., Inc. (the Managing General Partner) continues to evaluate the
Partnership's underlying apartment complexes to develop strategies that make
sense for all parties involved. Issues that are at the forefront of the
Managing General Partner's strategic planning include: the resolution of
purchase money notes which have matured, expiring Section 8 Housing Assistance
Payment (HAP) contracts, properties with state housing financing or Rural
Economic Community Development (RECD) agency financing, the cessation of losses
to the Partnership due to the complete depletion of low-income housing
accelerated depreciation deductions on the Local Partnerships' properties, and
declining mortgage interest deductions as the mortgage loans move closer to
maturity.

Most of the Local Partnerships in which the Partnership is invested have
mortgage loans financed by various state housing agencies, and two Local
Partnerships have mortgage loans financed by the Rural Economic Community
Development (RECD) agency. Further, these Local Partnerships have Section 8 HAP
contracts in place for all or substantially all of their apartment units which
are generally regulated by the Department of Housing and Urban Development (HUD)
(collectively, the Agencies). These Section 8 HAP contracts begin to expire, or
have been extended to expire, in November 2000. Currently, the Managing General
Partner believes that the Agencies will strive to preserve the units as low
income, or affordable, housing. Therefore, it appears unlikely that the
Agencies will allow a prepayment of the respective mortgage loans or a
conversion of the units to market rate housing, primarily because the Agencies
have the right under the mortgage and/or regulatory agreement to disallow the
mortgage prepayment. The Managing General Partner continues to monitor the
actions of these financing Agencies to assess how these Agencies will deal with
expiring Section 8 HAP contracts and what impact these Agencies' strategies will
have on the operations of the Local Partnerships and, consequently, the impact
on the Partnership's investments in the Local Partnerships.

Sales of properties with state Agency or RECD financing will be extremely
difficult. Since the Agencies are unlikely to allow mortgage prepayment and/or
sale for a conversion to market rate housing, prospective buyers are generally
limited to non-profit organizations. Generally, purchase offers received from
non-profit organizations tend to be much lower per apartment unit than those
from profit-motivated companies.

The Managing General Partner is considering marketing, on a state-by-state
basis, one or more of the properties in which the Partnership is invested with
properties in other portfolios sponsored by the Managing General Partner. This
may enhance the opportunity to sell these properties. Each property is
different, so it is impossible to predict if any of the Partnership's properties
might be included in such a combination sale.

II-2
<PAGE>
PART II
-------

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

The Managing General Partner is working diligently on behalf of the
Partnership to produce the best results possible under these difficult
circumstances. While the Managing General Partner cannot predict the outcome
for any particular property at this time, the Managing General Partner will
continue to work with the Local Partnerships to develop strategies that make
sense for all parties involved.

Financial Condition/Liquidity
-----------------------------

As of December 31, 1999, the Partnership had approximately 1,700 investors
who originally subscribed to a total of 24,837 units of limited partnership
interests in the original amount of $24,837,000. The Partnership originally
made investments in 18 Local Partnerships, of which 17 remain at December 31,
1999. The Partnership's liquidity, with unrestricted cash resources of
$2,711,200 as of December 31, 1999, along with anticipated future cash
distributions from the Local Partnerships, is expected to be adequate to meet
its current and anticipated operating cash needs. As of December 31, 1999,
$140,000 of cash equivalents were restricted for the collateralization of a
letter of credit which secures a surety bond related to the stay of foreclosure
action on Shallowford Oaks. See the notes to the financial statements for
further discussion concerning Shallowford Oaks. As of March 23, 2000, there
were no material commitments for capital expenditures.

During 1999 and 1998, the Partnership received cash distributions of
$593,125 and $495,696, respectively, from the Local Partnerships.

The Partnership is the maker of purchase money notes which have matured and
have not been paid with respect to two Local Partnerships, Lake Properties
Limited Partnership (Frenchman's Wharf I) and ARA Associates-Shangri-La Ltd.
(Shallowford Oaks). The purchase money notes accrue interest and require
payment in full of all unpaid accrued interest and principal upon the occurrence
of certain events, such as the sale or refinancing of the underlying apartment
complex or the maturity of the respective purchase money note. The purchase
money notes, which are nonrecourse to the Partnership, are generally secured by
the Partnership's interest in the respective Local Partnerships. The total
amounts due on the purchase money notes consist of outstanding principal and
accrued interest of approximately $4.479 million and $7.664 million,
respectively, as of December 31, 1999, and $4.479 million and $7.194 million,
respectively, as of December 31, 1998. The Managing General Partner is hopeful
that an extension of the purchase money notes' maturity dates can be negotiated.
It is possible, however, that the noteholders could refuse to negotiate or, even
if extensions are obtained, that the underlying properties' values will be
insufficient to pay off the purchase money notes at the time of sale or
refinancing.

II-3
<PAGE>
PART II
-------

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

maturing purchase money notes exceeds the carrying amount of the investment in,
and advances to, the related Local Partnerships. Thus, even a complete loss of
the Partnership's interest in one or both of these Local Partnerships would not
have a material adverse impact on the financial condition of the Partnership.
However, since these notes remain unpaid, the noteholders have the right to
foreclose on the Partnership's interest in the related Local Partnerships. In
the event of a foreclosure, the excess of the nonrecourse indebtedness over the
carrying amount of the Partnership's investment in the related Local Partnership
would be deemed cancellation of indebtedness income, which would be taxable to
Limited Partners at a federal tax rate of up to 39.6%. Additionally, in the
event of a foreclosure, the Partnership would lose its investment in the Local
Partnership and, likewise, its share of any future cash flow distributed by the
Local Partnership from rental operations, mortgage debt refinancings, or the
sale of the real estate. The Partnership did not receive any distributions from
Frenchman's Wharf I or Shallowford Oaks during 1999 and 1998, and its aggregate
share of loss for these two Local Partnerships was $52,342 and $112,349 for the
years ended December 31, 1999 and 1998, respectively. See the notes to the
financial statements for additional information concerning these 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 1999 and 1998, the receipt of distributions from Local Partnerships was
adequate to support operating cash requirements. Cash and cash equivalents
increased during 1999, as receipt of distributions from partnerships exceeded
net cash used in operating activities and cash advanced to a local partnership.

Results of Operations
---------------------

1999 versus 1998
- ----------------

The Partnership's net income for the year ended December 31, 1999 increased
from the corresponding period in 1998 primarily due to an increase in share of
income from partnerships due to increased rental income and decreased operating
expenses. Contributing to the increase in the Partnership's net income was an
increase in interest income due to higher interest earning balances. Also
contributing to the increase in the Partnership's net income was the decrease in
professional fees due to Shallowford Oaks litigation and a market study for
Frederick Heights in 1998. Offsetting the increase in the Partnership's net
income were increases in Letter of Credit fees for Shallowford Oaks, and in
partnership tax and audit fees and costs.

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,
1999 and 1998 did not include losses of $586,110 and $891,272, 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 Partnership's are reduced to zero. Accordingly, excludable losses are
generally expected to increase. Distributions of $315,213 and $211,030,
received from nine and eight Local Partnerships during 1999 and 1998,

II-4
<PAGE>
PART II
-------

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

respectively, were offset against the respective years' recorded losses because
these amounts were in excess of the Partnership's investment.

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 revenues and replacement values gradually increase.

The combined rental revenues of the Partnership's remaining 17 properties
for the five years ended December 31, 1999, follow. Combined rental revenue
amounts have been adjusted to reflect property sales and interests transferred
in prior years.

II-5
<PAGE>
PART II
-------

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------

For the years ended December 31,
-----------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Combined Rental
Revenue $18,859,599 $18,496,980 $18,256,810 $18,203,181 $17,950,982

Annual Percentage
Increase 2.0% 1.3% 0.3% 1.4%

</TABLE>

Year 2000 Computer Issue
------------------------

The Partnership experienced little to no interruption in its computer
operations, or otherwise, as a result of the transition from the year 1999 to
2000. The Partnership's expenses associated with upgrading and testing its
internal hardware and software systems, data interfaces, business operations and
non-information technology functions which could have been affected by the
transition were not material.

ITEM 7. FINANCIAL STATEMENTS
--------------------

The information required by this item is contained in Part III.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------

None.

II-6
<PAGE>
PART III
--------

ITEM 9. 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, follows.

William B. Dockser, 63, 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 properties. 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 and a Director of CRIIMI MAE Inc. and CRIIMI, Inc.

H. William Willoughby, 53, has been President, Secretary and a Director of CRI
since January 1990 and was 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 & Co. He holds a Juris Doctor 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. and CRIIMI, Inc.

Susan R. Campbell, 41, is Executive Vice President and Chief Operating Officer.
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, 44, is 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 Doctor degree 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.

III-1
<PAGE>
PART III
--------

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - Continued
--------------------------------------------------

(g) Promoters and control persons.

Not applicable.

ITEM 10. EXECUTIVE COMPENSATION
----------------------

(a), (b), (c), (d), (e), (f), (g), (i), (j), (k) and (l)

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 incorporated herein by
reference to Notes 3 and 4 of the notes to the financial statements
contained in Part III.

(h) Termination of employment and changes in control arrangements.

None.

ITEM 11. 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 of 1934, is known by the Partnership to be the
beneficial owner of more than five percent of the issued and
outstanding partnership units at December 31, 1999.

(b) Security ownership of management.

The following table sets forth certain information concerning all
units beneficially owned, as of December 31, 1999, by each director
and by all directors and officers as a group of the Managing General
Partner of the Partnership.

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 (4 persons) None 0%

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.

III-2
<PAGE>
PART III
--------

ITEM 12. 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 10 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 12(a) is incorporated herein by
reference. In addition, the Partnership has no business relationship
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
12(a).

None.

(d) Transactions with promoters.

Not applicable.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------

(a) Index of Exhibits (Listed according to the number assigned in
----------------- the table in Item 601 of Regulation S-B.)

Exhibit No. 4 - Instruments defining the rights of security holders,
including indentures.

a. Amended Certificate and Limited Partnership Agreement of Capital
Realty Investors, Ltd. (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, Ltd. (Incorporated by reference from Exhibit No.
10(b) to Registrant's Registration Statement on Form S-11, as
amended, dated December 4, 1981.)

Exhibit No. 27 - Financial Data Schedule.

a. Filed herewith electronically.

III-3
<PAGE>
PART III
--------

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K - Continued
--------------------------------

Exhibit No. 99 - Additional Exhibits.

a. Prospectus of the Partnership, dated December 31, 1981.
(Incorporated by reference to 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, 1999.

III-4
<PAGE>
SIGNATURES
----------

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

CAPITAL REALTY INVESTORS, LTD.
--------------------------------------------
(Registrant)

by: C.R.I., Inc.
----------------------------------------
Managing General Partner

March 23, 2000 by: /s/ William B. Dockser
- ----------------- ------------------------------------
DATE William B. Dockser, Director
Chairman of the Board,
and Treasurer
(Principal Executive Officer)

In accordance with the Exchange Act, 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 23, 2000 by: /s/ H. William Willoughby
- ----------------- ------------------------------------
DATE H. William Willoughby,
Director, President
and Secretary

March 23, 2000 by: /s/ Michael J. Tuszka
- ----------------- ------------------------------------
DATE Michael J. Tuszka
Vice President
and Chief Accounting Officer
(Principal Financial Officer
and Principal Accounting Officer)

III-5
<PAGE>

REPORT OF INDEPENDENT CERTIFIED
-------------------------------
PUBLIC ACCOUNTANTS
------------------

To the Partners
Capital Realty Investors, Ltd.

We have audited the balance sheets of Capital Realty Investors, Ltd. (a
District of Columbia limited partnership) as of December 31, 1999 and 1998, and
the related statements of operations, changes in partners' deficit and cash
flows for the years ended December 31, 1999 and 1998. 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 of certain Local
Partnerships. The Partnership's share of income from these Local Partnerships
constitutes $1,056,190 and $542,557 of income in 1999 and 1998, respectively,
included in the Partnership's net income. 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 auditing standards generally
accepted in the United States. 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. as of
December 31, 1999 and 1998 and the results of its operations, changes in
partners' deficit and cash flows for the years ended December 31, 1999 and 1998,
in conformity with accounting principles generally accepted in the United
States.

Vienna, VA Grant Thornton LLP
March 8, 2000

III-6
<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 24, 2000, in accordance with
the Securities and Exchange Commission's continuing hardship exemption
granted January 14, 2000.

III-7
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
December 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Investments in and advances to partnerships $ 3,265,726 $ 2,506,524
Investment in partnership held for sale 15,439 --
Cash and cash equivalents 2,711,200 2,318,302
Restricted cash equivalents 140,000 140,000
Acquisition fees, principally paid to related parties, net of
accumulated amortization of $384,432 and $367,498, respectively 513,960 544,922
Property purchase costs, net of accumulated amortization of
$97,035 and $96,333, respectively 127,032 140,234
Other assets 778 1,669
------------ ------------

Total assets $ 6,774,135 $ 5,651,651
============ ============

LIABILITIES AND PARTNERS' DEFICIT

Due on investments in partnerships $ 4,478,800 $ 4,478,800
Accrued interest payable 7,663,972 7,193,776
Accounts payable and accrued expenses 93,514 83,805
------------ ------------
Total liabilities 12,236,286 11,756,381
------------ ------------

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 (996,102) (996,102)
Offering costs (2,689,521) (2,689,521)
Accumulated losses (26,627,528) (27,270,107)
------------ ------------
Total partners' deficit (5,462,151) (6,104,730)
------------ ------------

Total liabilities and partners' deficit $ 6,774,135 $ 5,651,651
============ ============

</TABLE>

The accompanying notes are an integral part
of these financial statements.

III-8
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

STATEMENTS OF OPERATIONS

For the years ended
December 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Share of income from partnerships $ 1,288,874 $ 723,509
----------- -----------

Other revenue and expenses:

Revenue:
Interest and other income 141,103 126,716
----------- -----------

Expenses:
Interest 470,196 470,196
Management fee 95,208 95,208
General and administrative 128,627 122,754
Professional fees 64,642 68,264
Amortization of deferred costs 28,725 28,724
----------- -----------
787,398 785,146
----------- -----------
Total other revenue and expenses (646,295) (658,430)
----------- -----------

Net income $ 642,579 $ 65,079
=========== ===========

Net income allocated to General Partners (3%) $ 19,277 $ 1,952
=========== ===========

Net income allocated to Limited Partners (97%) $ 623,302 $ 63,127
=========== ===========

Net income per unit of Limited Partnership Interest based
on 24,737 and 24,797 units outstanding, respectively $ 25.20 $ 2.55
=========== ===========

</TABLE>

The accompanying notes are an integral part
of these financial statements.

III-9
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

STATEMENTS OF CHANGES IN PARTNERS' DEFICIT

General Limited
Partners Partners Total
--------- ----------- -----------
<S> <C> <C> <C>
Partners' deficit, January 1, 1998 $(821,418) $(5,348,391) $(6,169,809)

Net income 1,952 63,127 65,079
--------- ----------- -----------

Partners' deficit, December 31, 1998 (819,466) (5,285,264) (6,104,730)

Net income 19,277 623,302 642,579
--------- ----------- -----------

Partners' deficit, December 31, 1999 $(800,189) $(4,661,962) $(5,462,151)
========= =========== ===========

</TABLE>

The accompanying notes are an integral part
of these financial statements.

III-10
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

STATEMENTS OF CASH FLOWS

For the years ended
December 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 642,579 $ 65,079

Adjustments to reconcile net income to net cash
used in operating activities:
Share of income from partnerships (1,288,874) (723,509)
Amortization of deferred costs 28,725 28,724

Changes in assets and liabilities:
Increase in accrued interest receivable
on advances to partnerships (6,135) (6,137)
Decrease in other assets 891 4,851
Increase in accrued interest payable 470,196 470,196
Increase in accounts payable and accrued expenses 9,709 25,062
----------- -----------
Net cash used in operating activities (142,909) (135,734)
----------- -----------

Cash flows from investing activities:
Receipt of distributions from partnerships 593,125 495,696
Advances made to local partnerships (57,318) (106,212)
Investment held in escrow -- (140,000)
----------- -----------
Net cash provided by investing activities 535,807 249,484
----------- -----------

Net increase in cash and cash equivalents 392,898 113,750

Cash and cash equivalents, beginning of year 2,318,302 2,204,552
----------- -----------

Cash and cash equivalents, end of year $ 2,711,200 $ 2,318,302
=========== ===========

</TABLE>

The accompanying notes are an integral part
of these financial statements.

III-11
<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 properties 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), which
is 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 former officers and 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 conformity with accounting principles
generally accepted in the United States.

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, 1999 and 1998, the Partnership's share of cumulative losses
of nine of the Local Partnerships exceeded the amount of the Partnership's
investments in and advances to those Local Partnerships by $8,965,422 and
$8,698,644, 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, 1999 and 1998, cumulative cash
distributions of $2,859,015 and $2,626,331, 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 capitalized and are being amortized using the straight-line method
over the estimated useful lives of the properties owned by the Local
Partnerships.

III-12
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

d. 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.

e. 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.

f. 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
has been made for income taxes in these financial statements.

g. Use of estimates
----------------

In preparing financial statements in conformity with accounting
principles generally accepted in the United States, 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 of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.

h. Fair Value of Financial Instruments
-----------------------------------

The financial statements include estimated fair value information as
of December 31, 1999, as required by Statement of Financial Accounting
Standards (SFAS) No. 107, "Disclosure About Fair Value of Financial
Instruments." Such information, which pertains to the Partnership's
financial instruments (primarily cash and cash equivalents and purchase
money notes), is based on the requirements set forth in SFAS No. 107 and
does not purport to represent the aggregate net fair value of the
Partnership.

The balance sheet carrying amounts for cash and cash equivalents
approximate estimated fair values of such assets.

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.

III-13
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

a. Due on investments in partnerships
----------------------------------

As of both December 31, 1999 and 1998, the Partnership held limited
partner interests in 17 Local Partnerships which were organized to develop,
construct, own, maintain and operate rental apartment properties which
provide housing principally to the elderly or to individuals and families
of low or moderate income. The remaining principal amounts due on
investments in the Local Partnerships were as follows.

<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Purchase money notes due in:
1997 $ 700,000 $ 700,000
1998 3,778,800 3,778,800
---------- ----------
Total $4,478,800 $4,478,800
========== ==========
</TABLE>

The purchase money notes have stated interest rates ranging from 7.25%
to 11.10%. 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 amounts due on the purchase money notes consist of
outstanding principal and accrued interest of approximately $4.479 million
and $7.664 million, respectively, as of December 31, 1999, and $4.479
million and $7.194 million, respectively, as of December 31, 1998. The
Managing General Partner is hopeful that an extension of the purchase money
notes' maturity dates can be negotiated. It is possible, however, that the
noteholders could refuse to negotiate or, even if extensions are obtained,
that the underlying properties' values will be insufficient to pay off the
purchase money notes at the time of sale or refinancing.

The Partnership's inability to pay these purchase money note principal
and accrued interest balances when due, and the resulting uncertainty
regarding the Partnership's continued ownership interest in the related
Local Partnerships, does not adversely impact the Partnership's financial
condition because the purchase money notes are nonrecourse and secured
solely by the Partnership's interest in the related Local Partnerships.
Therefore, should the investment in Frenchman's Wharf I and/or Shallowford
Oaks not produce sufficient value to satisfy the related purchase money
notes, the Partnership's exposure to loss is limited because the amount of
the nonrecourse indebtedness of each of the maturing purchase money notes
exceeds the carrying amount of the investment in, and advances to, the
related Local Partnerships. Thus, even a complete loss of the
Partnership's interest in one or both of these Local Partnerships would not
have a material adverse impact on the financial condition of the
Partnership. However, since these notes remain unpaid, the noteholders
have the right to foreclose on the Partnership's interest in the related
Local Partnerships. In the event of a foreclosure, the excess of the
nonrecourse indebtedness over the carrying amount of the Partnership's

III-14
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

investment in the related Local Partnership would be deemed cancellation of
indebtedness income, which would be taxable to Limited Partners at a
federal tax rate of up to 39.6%. Additionally, in the event of a
foreclosure, the Partnership would lose its investment in the Local
Partnership and, likewise, its share of any future cash flow distributed by
the Local Partnership from rental operations, mortgage debt refinancings,
or the sale of the real estate. The Partnership did not receive any
distributions from Frenchman's Wharf I or Shallowford Oaks during 1999 and
1998, and its aggregate share of loss from these two Local Partnerships was
$52,342 and $112,349 for the years ended December 31, 1999 and 1998,
respectively. See further discussion of these purchase money notes, below.

Interest expense on the Partnership's purchase money notes for the
years ended December 31, 1999 and 1998 was $470,196 and $470,196,
respectively. The accrued interest payable on the purchase money notes of
$7,663,972 and $7,193,776 as of December 31, 1999 and 1998, respectively,
is due on the respective maturity dates of the purchase money notes or
earlier, in some instances, if (and to the extent of a portion thereof) the
related Local Partnership has distributable net cash flow, as defined in
the relevant Local Partnership agreement.

Frenchman's Wharf I
-------------------

The Partnership defaulted on its purchase money notes related to
Frenchman's Wharf I on June 1, 1998 when the notes matured and were not
paid. The default amount included principal and accrued interest of
$3,778,800 and $6,086,253, respectively. As of March 23, 2000, principal
and accrued interest of $3,778,800 and $6,845,853, respectively, were due.
The purchase money notes were initially due to mature on June 1, 1988, but
were extended to mature on June 1, 1998. The Partnership requested another
extension of the maturity date of the purchase money notes until May 2000,
to be coterminous with the expiration of the Local Partnership's
provisional workout agreement with HUD related to its mortgage loan. In
1996, HUD sold the mortgage loan to the same lender as Shallowford Oaks
(see discussion concerning Shallowford Oaks, below). The local managing
general partner has had several conversations with the lender regarding the
upcoming maturity of the workout. There is no assurance these discussions
will achieve a solution and it is possible the lender will initiate a
foreclosure action. As of March 23, 2000, the local managing general
partner is still awaiting a response from the purchase money noteholders
and the lender.

Due to the uncertainties regarding the outcome of an extension of the
maturity date of the purchase money notes, and the possibility of a
foreclosure proceeding on the Local Partnership's mortgage loan, there is
no assurance that the Partnership will be able to retain its interest in
Frenchman's Wharf I. In the event of a foreclosure, the Partnership would
also lose its share of any future cash flow distributed by the Local
Partnership from rental operations, mortgage debt refinancings, or the sale
of the real estate. The uncertainty regarding the continued ownership of
the Partnership's interest in Frenchman's Wharf I does not adversely impact
the Partnership's financial condition, as discussed above.

III-15
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Shallowford Oaks
----------------

The Partnership defaulted on its purchase money note relating to
Shallowford Oaks on January 1, 1997 when the note matured and was not paid.
The default amount included principal and accrued interest of $700,000 and
$761,389, respectively. As of March 23, 2000, principal and accrued
interest of $700,000 and $925,040, respectively, were due. The Managing
General Partner has proposed to extend the maturity date of the note until
November 2001, coterminous with the expiration of the Local Partnership's
provisional workout agreement related to its mortgage loan. As of March
23, 2000, the Managing General Partner is awaiting a response from the
noteholders. There is no assurance that any agreement will be reached with
the noteholders.

In addition, Shallowford Oaks' mortgage lender filed notice on
November 3, 1997 accelerating the maturity of the Local Partnership's
mortgage loan and demanding payment in full due to a purported nonmonetary
default of the provisional workout agreement. Subsequently, the local
managing general partner filed an action to enjoin the attempted
foreclosure. The court entered an order for equitable relief in
Shallowford's favor on November 12, 1998. The lender filed a motion for a
new trial and a motion to alter or amend judgment in December 1998. The
court denied the lender's motions by order dated March 24, 1999. The
lender filed an appeal to the order for equitable relief and oral arguments
were held on October 13, 1999. In February 2000, the Partnership received
written notification of the court's ruling in its favor. For the years
ended December 31, 1999 and 1998, the Partnership advanced Shallowford Oaks
$57,318 and $106,212, respectively, for legal costs.

Due to the uncertainties regarding the outcome of an extension of the
maturity date of the purchase money note, there is no assurance that the
Partnership will be able to retain its interest in Shallowford Oaks. In
the event of a foreclosure, the Partnership would also lose its share of
any future cash flow distributed by the Local Partnership from rental
operations, mortgage debt refinancings, or the sale of the real estate.
The uncertainty regarding the continued ownership of the Partnership's
interest in Shallowford Oaks does not adversely impact the Partnership's
financial condition, as discussed above.

b. Interests in profits, losses and cash distributions
---------------------------------------------------
made by Local Partnerships
--------------------------

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) (collectively, the 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
$593,125 and $495,696 during the years ended December 31, 1999 and 1998,
respectively. As of both December 31, 1999 and 1998, 12 of the Local
Partnerships had surplus cash, as defined by their respective regulatory
Agencies, in the aggregate amounts of $2,978,040 and $2,898,316,
respectively, which may be available for distribution in accordance with
their respective regulatory Agencies' regulations.

III-16
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

The cash distributions to the Partnership from the operations of the
rental properties may be limited by the Agencies' 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 generally 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 or refinancing of a property owned by a Local Partnership,
or upon the liquidation of a Local Partnership, the proceeds from such
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
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. Advances to Local Partnerships
------------------------------

The advances, and accrued interest thereon, due from the Local
Partnerships were as follows.

<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
----------- -----------
<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:
Principal amount of funds advanced 235,725 178,407
Accrued interest on advances 31,331 25,196
----------- -----------
Total $ 755,556 $ 692,103
=========== ===========
</TABLE>

Frenchman's Wharf I
-------------------

To cover operating deficits incurred in prior years for Frenchman's
Wharf I, the Partnership advanced funds totaling $305,398 as of both
December 31, 1999 and 1998. No advances have been made to Frenchman's
Wharf I since March 1987, and the Partnership does not expect to advance
any additional funds to the Local Partnership. These loans, together with
accrued interest of $183,102 as of both December 31, 1999 and 1998, are
payable from cash flow of Frenchman's Wharf I after payment of first

III-17
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

mortgage debt service and after satisfaction by the Partnership of certain
other interest obligations on the purchase money notes relating to the
Local Partnership. No interest has been accrued since 1992 due to the
uncertainty of future collection. There is no assurance that the Local
Partnership, upon expiration of the workout of its mortgage loan, will be
able to repay the loans in accordance with the terms thereof. For
financial reporting purposes, these loans have been reduced to zero by the
Partnership as a result of losses from the Local Partnership during prior
years.

Shallowford Oaks
----------------

On November 23, 1994, the Partnership advanced $72,195 to Shallowford
Oaks to help repay the Local Partnership's outstanding obligations related
to its mortgage loan. This loan, along with accrued interest of $31,331
and $25,196 as of December 31, 1999 and 1998, respectively, is payable from
cash flow of Shallowford Oaks after payment of first mortgage debt service
and after satisfaction by the Partnership of certain other interest
obligations on the related purchase money note. The Partnership advanced
additional amounts of $57,318 and $106,212 during the years ended December
31, 1999 and 1998, respectively, to Shallowford Oaks to help fund legal
expenses relating to the Shallowford litigation. Due to the non-payment of
the purchase money note when due, as discussed above, it is probable that
the Partnership will not receive any repayment of its loans. For financial
reporting purposes, these loans have been reduced to zero by the
Partnership as a result of losses from the Local Partnership during prior
years.

d. Property matters
----------------

Frenchman's Wharf I
-------------------

The reports of the auditors on the financial statements of Frenchman's
Wharf I for the years ended December 31, 1999 and 1998 indicated that
substantial doubt exists about the ability of the Local Partnership to
continue as a going concern due to the Local Partnership's default on its
mortgage loan and the expiration of its Section 8 Rental Housing Assistance
Payments (HAP) contract with HUD on November 30, 2000. The uncertainty
about the Local Partnership's continued ownership of the property does not
adversely impact the Partnership's financial condition, as discussed above.

Winthrop Beach
--------------

Winthrop Beach Associates (Winthrop Beach) received an offer for the
purchase of the property and executed a sales contract dated as of February
11, 2000. The contract is subject to customary contingencies.
Accordingly, there is no assurance that a sale will occur.

Due to the impending and likely sale of the property related to the
Partnership's investment in Winthrop Beach, the net unamortized amounts of
acquisition fees and property purchase costs related to Winthrop Beach,
which totaled $15,439, have been reclassified to investment in partnership
held for sale in the accompanying balance sheet at December 31, 1999. For

III-18
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

the years ended December 31, 1999 and 1998, distributions from Winthrop
Beach represented approximately 0% of total distributions from Local
Partnerships. The Partnership's share of income from Winthrop Beach was
$50,881 and $31,649 for the years ended December 31, 1999 and 1998,
respectively.

e. Affordable housing legislation
------------------------------

Frenchman's Wharf I and Shallowford Oaks have Section 8 HAP contracts
covering 10% and 20%, respectively, of their apartment units which expire
during 2000. A Section 8 HAP contract provides rental subsidies to a
property owner for units occupied by low income tenants. If either
contract is not extended, there will likely be a temporary increase in
vacancy during the 6-12 months after expiration. As residents in the low-
income units move out, the units will be made available to market-rate
residents, as market conditions allow.

Most of the Local Partnerships in which the Partnership is invested
have mortgage loans financed by various state housing agencies, and two
Local Partnerships have mortgage loans financed by the Rural Economic
Community Development (RECD) agency. Further, these Local Partnerships
have Section 8 HAP contracts in place for all or substantially all of their
apartment units which are generally regulated by the Department of Housing
and Urban Development (HUD) (collectively, the Agencies). These Section 8
HAP contracts begin to expire, or have been extended to expire, in November
2000. Currently, the Managing General Partner believes that the Agencies
will strive to preserve the units as low income, or affordable, housing.
Therefore, it appears unlikely that the Agencies will allow a prepayment of
the respective mortgage loans or a conversion of the units to market rate
housing, primarily because the Agencies have the right under the mortgage
and/or regulatory agreement to disallow the mortgage prepayment. The
Managing General Partner continues to monitor the actions of these
financing Agencies to assess how these Agencies will deal with expiring
Section 8 HAP contracts and what impact these Agencies' strategies will
have on the operations of the Local Partnerships and, consequently, the
impact on the Partnership's investments in the Local Partnerships. As of
December 31, 1999, the Partnership's investment in Local Partnerships with
Section 8 HAP contracts expiring in the year 2000 was $11,112.

III-19
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

f. Summarized financial information
--------------------------------

Summarized financial information for the Local Partnerships at
December 31, 1999 and 1998 and for the years ended December 31, 1999
and 1998 follows.

COMBINED BALANCE SHEETS

December 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Rental property, at cost, net of accumulated depreciation
of $55,195,378 and $51,933,415, respectively $ 34,902,249 $ 42,892,787
Land 7,605,686 8,029,484
Other assets 17,421,264 16,028,469
------------ ------------
Total assets $ 59,929,199 $ 66,950,740
============ ============

Mortgage notes payable $ 68,911,065 $ 70,166,935
Other liabilities 8,036,335 8,192,897
------------ ------------
Total liabilities 76,947,400 78,359,832

Partners' deficit (17,018,201) (11,409,092)
------------ ------------
Total liabilities and partners' deficit $ 59,929,199 $ 66,950,740
============ ============

</TABLE>

III-20
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

COMBINED STATEMENTS OF OPERATIONS

For the years ended
December 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenue:
Rental $ 18,859,599 $ 18,496,980
Interest 647,297 605,272
Other 413,480 378,041
------------ ------------
Total revenue 19,920,376 19,480,293
------------ ------------

Expenses:
Operating 9,396,165 9,677,356
Interest 6,323,999 6,401,747
Depreciation 3,355,890 3,309,526
Amortization 39,830 39,720
------------ ------------
Total expenses 19,115,884 19,428,349
------------ ------------
Net income $ 804,492 $ 51,944
============ ============

</TABLE>

g. Reconciliation of the Local Partnerships' financial statement
-------------------------------------------------------------
net income to taxable income
----------------------------

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 on the
property as permitted by Internal Revenue Service (IRS) Regulations. These
returns are subject to examination and, therefore, possible adjustment by
the IRS.

III-21
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

A reconciliation of the Local Partnerships' financial statement net
income reflected above to taxable income follows.

For the years ended
December 31,
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Financial statement net income $ 804,492 $ 51,944

Adjustments:
Additional book depreciation, net of depreciation
on construction period expenses capitalized for
financial statement purposes 1,947,285 2,039,802

Amortization for financial statement purposes not
deducted for income tax purposes 101,541 40,974

Miscellaneous, net 288,836 268,095
------------ ------------
Taxable income $ 3,142,154 $ 2,400,815
============ ============

</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 40-year period using the straight-line
method.

III-22
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

3. RELATED-PARTY TRANSACTIONS - Continued

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. For the years ended December 31, 1999 and 1998,
the Partnership paid $93,608 and $96,498, 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.

In addition, in accordance with the terms of the Partnership Agreement, the
Partnership is obligated to pay the Managing General Partner an annual incentive
management fee (the Management Fee), after all other expenses of the Partnership
are paid. 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.

For each of the years ended December 31, 1999 and 1998, the Partnership
paid the Managing General Partner a Management Fee of $95,208.

The Managing General Partner and/or its affiliates may receive a fee of not
more than 2% of the sales price of an investment in a Local Partnership or the
property it owns, payable under certain conditions upon the sale of an
investment in a Local Partnership or the property it owns. The payment of the
fee is subject to certain restrictions, including the 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 1999 or 1998.

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 Local Partnerships 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-23
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

4. PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS - Continued

(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 Partner (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 properties, shall not in
the aggregate exceed the lesser of the competitive rate or 6% of the sales price
of the apartment properties.

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 1999 or 1998.

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 reserves deemed necessary
by the Managing General Partner and after payment of the Management Fee, the
Partnership had cash available for distribution of $374,954 and $325,197 for the
years ended December 31, 1999 and 1998, respectively.

No distributions were declared or paid by the Partnership during 1999 or
1998. The Managing General Partner has reserved all of the Partnership's
undistributed cash for the possible repayment, prepayment or purchase of the
Partnership's outstanding purchase money notes related to Local Partnerships.

5. RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET
INCOME TO TAXABLE INCOME

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 2.g.), including

III-24
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

5. RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET
INCOME TO TAXABLE INCOME - Continued

losses in excess of related investment amounts. These returns are subject to
examination and, therefore, possible adjustment by the IRS.

III-25
<PAGE>
CAPITAL REALTY INVESTORS, LTD.

NOTES TO FINANCIAL STATEMENTS

5. RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET
INCOME TO TAXABLE INCOME - Continued

A reconciliation of the Partnership's financial statement net income to
taxable income follows.

For the years ended
December 31,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Financial statement net income $ 642,579 $ 65,079

Adjustments:
Differences between taxable income and
financial statement net income related to the
Partnership's equity in the Local Partnerships'
income 1,838,684 1,653,347

Costs amortized over a shorter period for
income tax purposes 28,326 18,468

------------ ------------
Taxable income $ 2,509,589 $ 1,736,894
============ ============

</TABLE>

III-26
<PAGE>

EXHIBIT INDEX
-------------

Exhibit Method of Filing
- ------- -----------------------------

27 Financial Data Schedule Filed herewith electronically

III-27

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE ANNUAL REPORT ON FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-KSB.
</LEGEND>

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,851,200
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,774,135
<CURRENT-LIABILITIES> 0
<BONDS> 12,142,772
0
0
<COMMON> 0
<OTHER-SE> (5,462,151)
<TOTAL-LIABILITY-AND-EQUITY> 6,774,135
<SALES> 0
<TOTAL-REVENUES> 1,429,977
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 317,202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 470,196
<INCOME-PRETAX> 642,579
<INCOME-TAX> 0
<INCOME-CONTINUING> 642,579
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 642,579
<EPS-BASIC> 25.20
<EPS-DILUTED> 25.20

</TABLE>