<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995...... Commission file number 0-13465
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NATIONAL HOUSING PARTNERSHIP REALTY FUND I (A MARYLAND LIMITED PARTNERSHIP)
---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 52-1358879
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(State or other Jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
1225 EYE STREET, N.W. WASHINGTON, D.C. 20005
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 347-6247
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Securities registered pursuant to Section 12(b) of the Act: NONE
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Securities registered pursuant to Section 12(g) of the Act: 11,519 LIMITED
PARTNERSHIP
INTERESTS
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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 twelve 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 ninety days. Yes X No
--- ---
The registrant is a partnership. Accordingly, no voting stock is held by
non-affiliates of the registrant.
Documents incorporated by reference. NONE
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NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 1. Business 2
Item 2. Properties 6
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
<CAPTION>
PART II
<S> <C> <C>
Item 5. Market for the Registrant's Partnership
Interests and Related Partnership Matters 6
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 8. Financial Statements and Supplementary Data 9
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 27
<CAPTION>
PART III
<S> <C> <C>
Item 10. Directors and Executive Officers of the Registrant 28
Item 11. Executive Compensation 30
Item 12. Security Ownership of Certain Beneficial
Owners and Management 31
Item 13. Certain Relationships and Related Transactions 31
<CAPTION>
PART IV
<S> <C> <C>
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 32
</TABLE>
1
<PAGE> 3
PART I
Item 1. Business
National Housing Partnership Realty Fund I (A Maryland Limited
Partnership) (the Partnership) was formed under the Maryland Revised Uniform
Limited Partnership Act as of October 21, 1983. On May 25, 1984, the
Partnership commenced offering 20,000 limited partnership interests, at a price
of $1,000 per interest, through a public offering registered with the
Securities and Exchange Commission (the Offering). The Offering was managed by
Dean Witter Reynolds, Inc. and was terminated on November 29, 1984, with
subscriptions for 11,519 limited partnership interests.
The General Partner with a 1% interest in the Partnership is The
National Housing Partnership (NHP), a District of Columbia limited partnership,
whose sole general partner (0.2%) is National Corporation for Housing
Partnerships (NCHP). Following a corporate reorganization in August 1995,
which involved an initial public offering of NHP Incorporated's
management-related service companies (the "Reorganization"), the remaining
99.8% of NHP's limited partnership interest is owned by NHP Partners Two
Limited Partnership (Partners Two), a Delaware limited partnership. NCHP is
wholly owned by NHP Partners, Inc. (Partners), a Delaware corporation.
Notwithstanding the Reorganization, control of NCHP, Partners Two and Partners
remains with Demeter Holdings Corporation (a Massachusetts nonprofit
corporation, which is wholly-owned/controlled by the President and Fellows of
Harvard College, a Massachusetts educational corporation created by the
constitution of Massachusetts), Capricorn Investors, L.P. (a Delaware
investment limited partnership, whose general partner is Capricorn Holdings,
G.P., a Delaware general partnership), and J. Roderick Heller, III (Chairman,
President and Chief Executive Officer of NCHP and Partners).
The Original Limited Partner of the Partnership is 1133 Fifteenth
Street Associates, a District of Columbia limited partnership, whose general
partner is NHP and whose limited partners were key employees of NCHP at the
time the Partnership was formed. The Original Limited Partner holds a 1%
interest in the Partnership.
The remaining 98% limited partnership interests in the Partnership are
held by the investors who subscribed to the Offering.
The Partnership's business is to hold limited partnership interests in
ten limited partnerships (Local Limited Partnerships), each of which owns and
operates multi-family rental housing properties (Properties) which receive one
or more forms of assistance from the Federal Government.
The Partnership acquired interests in the Local Limited Partnerships
from sellers who originally developed the Properties. In each instance, NHP is
the general partner of the Local Limited Partnership and the Partnership is the
principal limited partner. As a limited partner, the Partnership's liability
for obligations of the Local Limited Partnerships is limited to its investment,
and the Partnership does not exercise control over the activities of the Local
Limited Partnerships in accordance with the partnership agreements.
The Partnership's investment objectives are to:
(1) preserve and protect Partnership capital;
(2) provide current tax benefits to Limited Partners to the extent
permitted by law, including, but not limited to,
deductions that Limited Partners may use to offset otherwise
taxable income from other sources;
(3) provide capital appreciation through increase in value of the
Partnership's investments, subject to considerations
of capital preservation and tax planning; and
2
<PAGE> 4
(4) provide potential cash distributions from sales or refinancings
of the Partnership's investments and, on a limited
basis, from operations.
The Partnership does not have any employees. Services are performed for
the Partnership by the General Partner and agents retained by it.
The following is a schedule of the Properties owned by the Local
Limited Partnerships in which the Partnership is a limited partner:
SCHEDULE OF PROPERTIES OWNED BY LOCAL LIMITED PARTNERSHIPS
IN WHICH NATIONAL HOUSING PARTNERSHIP REALTY FUND I HAS AN INVESTMENT
<TABLE>
<CAPTION>
Units Authorized Units Occupied as a
Financed, Insured for Rental Percentage of Total
Property Name, Location and Number and Subsidized Assistance Under Units as of
Partnership Name of Units Under Section 8 (B) December 31, 1995
- ------------------------------------- -------- ------------------ ----------------- -------------------
<S> <C> <C> <C> <C>
Fairmeadows 200 (A) 90 94%
Duncanville, Texas
(Fairmeadows Limited Partnership)
Forest Green 100 (A) 85 95%
Gainesville, Florida
(Forest Green Limited Partnership)
Howard F. Robbins Tower 191 (A) 183 100%
Mayfield Heights, Ohio
(Gates Mills I Limited
Partnership)
Lakeview Apartments 100 (A) 95 99%
Fresno, California
(Griffith Limited Partnership)
Northgate Village 150 (A) 49 99%
Columbus, Georgia
(Northgate Village Limited
Partnership)
Parker Square 175 (A) 140 98%
Houston, Texas
(Southward Limited Partnership)
San Jose 220 (A) 220 100%
San Antonio, Texas
(San Jose Limited Partnership)
Southridge 232 (A) 174 99%
Austin, Texas
(Southridge apartments Limited
Partnership)
Talladega Downs 100 (A) 100 100%
Talladega, Alabama
(Hurbell IV Limited Partnership)
Village Green 100 (A) 77 97%
Gainesville, Florida
(Village Green Limited
Partnership)
</TABLE>
(A) The mortgage is insured by the Federal Housing Administration under the
provisions of Section 236 of the National Housing Act.
(B) Section 8 of Title II of the Housing and Community Development Act of
1974.
3
<PAGE> 5
Although each Local Limited Partnership in which the Partnership has
invested owns an apartment complex which must compete with other apartment
complexes for tenants, government mortgage interest and rent subsidies make it
possible to rent units to eligible tenants at below market rates. In general,
this insulates the Properties from market competition. Fairmeadows and Lakeview
Apartments Section 8 subsidy contracts covering 90 and 60 units, respectively,
are scheduled to expire in September 1996. Additionally, Gates Mills I and
Hurbell IV have contracts for 107 and 60 units, respectively, scheduled to
expire in June, 1996. In January 1996, President Clinton signed into law H.R.
2880. This legislation includes a provision that requires HUD to provide a
one-year renewal for Section 8 contracts scheduled to expire during the first
nine months of 1996. All other Section 8 contracts are scheduled to expire
between 1997 and 2003.
On August 1, 1989, an order was entered in the condemnation proceeding
before the Superior Court of Muscogee County, Georgia, condemning a portion of
Northgate Village Apartments' land for a city right of way to build a road. The
city of Columbus, Georgia, has released damage proceeds of approximately
$84,500 to the mortgage lender, Federal National Mortgage Association (FNMA),
which have been placed in an escrow account which the property can draw upon to
cover the cost of repairs and construction related to damages resulting from
the condemnation. As of December 31, 1994, $66,999 had been drawn from the
escrow to cover the cost of engineering studies for the damage repair work at
the site, reconstruction of one of the property's parking areas, relocating
dumpster pads, resurfacing the parking lot and stripe painting. During 1995,
the remaining $17,501 was released to the property for final repairs to the
parking lot.
Operations at all other Properties were generally satisfactory during
the period.
NCHP was a significant participant in the drafting and passage of the
Low Income Housing Preservation and Resident Homeownership Act of 1990
(LIHPRHA). LIHPRHA creates a procedure under which owners of properties
assisted under the HUD Section 236 or 221(d)(3) program may be eligible to
receive financial incentives in return for agreeing to extend their property's
use as low income housing. Virtually all of the Local Limited Partnership
Properties may be eligible for these incentives; however, not all may benefit
from the particular incentives provided for under LIHPRHA. The appropriation
for the Department of Housing and Urban Development (which administers LIHPRHA)
for the 1996 fiscal year has not yet been approved, and NHP management expects
that funding for the 1996 fiscal year, if approved, will be limited. Management
also expects that funding for LIHPRHA is unlikely to be renewed in future
fiscal years. Anticipating these developments, Notices of Intent to participate
in the LIHPRHA program have been filed for Fairmeadows, Southridge, Gates Mills
I, Northgate, San Jose and Talladega. All filings except San Jose are in the
early stages of processing, and only San Jose is anticipated to be in a
position to receive incentives. Depending on the outcome of this process, the
ability of the Partnership to sell or refinance any of the Local Limited
Partnership Properties under LIHPRHA could be adversely affected.
As discussed in Note 7 to the combined financial statements, all of the
Local Limited Partnerships in which the Partnership has invested carry deferred
acquisition notes due the original owner of each Property. With the exception
of Fairmeadows and Southridge, these notes will reach final maturity between
1997 and 1999. These notes are secured by both the Partnership's and NHP's
interests in the Local Limited Partnerships. In the event of a default on the
notes, the noteholders would be able to assume NHP's and the Partnership's
interests in the Local Limited Partnerships.
The Fairmeadows and Southridge notes finally matured on September 24,
1994 and October 18, 1994, respectively. The noteholders have not yet formally
declared the notes in default. The General Partner has been negotiating with
the noteholders to extend the maturity date of the notes and to discount the
notes to protect the Partnership's interest. To date, these negotiations have
been unsuccessful. Should no agreement be reached, and the noteholders declare
the notes in default, the Partnership may lose its interest in these Local
Limited Partnerships. Should the Partnership lose its interest in the Local
Limited Partnership, partners in the Partnership may incur adverse tax
consequences. The impact of the tax consequences is dependent upon each
partner's individual tax situation.
On October 2, 1995, Forest Green and Village Green Limited Partnerships
entered into a discount buyout agreement for early settlement of their deferred
acquisition notes and related accrued interest payable. The agreements
4
<PAGE> 6
provide for a total buyout amount of $175,000 per Partnership, payable in two
installments. The first installments of $120,000 each, which were applied
against accrued interest on deferred acquisition note payable, were paid upon
execution of the agreements. The final installments of $55,000 each are due on
or before May 1, 1996. The Local Limited Partnerships have the option of
extending the due date of the final installment to June 3, 1996. The first
installments were paid with $104,395 and $40,375, respectively, in available
surplus cash and $15,605 and $79,625, respectively in proceeds from a General
Partner loan (see Note 3 to the Partnership's financial statements).
The Forest Green Local Limited Partnership anticipates paying the final
installments with surplus cash generated during 1995. Village Green Local
Limited Partnership, however, did not generate sufficient surplus cash during
1995 to fully fund the final installment and will require a loan from the
Partnership of $23,709 to complete the payment of the final installment. Upon
payment of the final installment, the balances of the total deferred
acquisition notes payable and related accrued interest ($1,398,910 and
$1,409,813, respectively, as of December 31, 1995) will be relieved. The
deferred acquisition notes will remain in full force and effect until the final
installments are paid. If the final installments are not made before the due
date, the buyout agreements are terminated and the deferred acquisition notes
will remain in force through their original maturity date of September 6, 1999.
The following details the Partnership's ownership percentages of the
Local Limited Partnerships and the cost of acquisition of such ownership. All
interests are limited partner interests. Also included is the total mortgage
encumbrance on each property for each of the Local Limited Partnerships as of
December 31, 1995.
<TABLE>
<CAPTION>
NHP Realty Fund I Cost of Deferred Acquisition
Percentage Ownership Notes and
Partnership Interest Interest Mortgage Notes Accrued Interest
- ------------------------ -------------------- ------------ -------------- -----------------
<S> <C> <C> <C> <C>
Fairmeadows L.P 99% $1,090,611 $2,039,230 $4,576,743
Forest Green L.P. 99% 419,918 986,535 1,398,910
Gates Mills I L.P. 98% 1,560,737 2,292,209 5,666,575
Griffith L.P. 99% 631,329 1,028,553 2,404,166
Northgate Village L.P. 99% 620,869 1,424,749 2,076,580
Southward L.P. 99% 916,991 1,585,444 3,235,920
San Jose L.P. 99% 1,155,959 2,123,013 3,624,152
Southridge Apts L.P. 99% 1,343,517 2,364,728 4,802,535
Hurbell IV L.P. 99% 372,361 1,100,720 1,300,246
Village Green L.P. 99% 429,704 908,957 1,409,813
</TABLE>
Item 2. Properties
See Item 1 for the real estate owned by the Partnership through the
ownership of limited partnership interests in Local Limited Partnerships.
Item 3. Legal Proceedings
The Partnership is not involved in any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted.
5
<PAGE> 7
PART II
Item 5. Market for the Registrant's Partnership Interests and Related
Partnership Matters
(a) Interests in the Partnership were sold through a public
offering managed by Dean Witter Reynolds, Inc. There is no
established market for resale of interests in the Partnership.
Accordingly, an investor may be unable to sell or otherwise
dispose of his or her interest in the Partnership.
(b) As of December 31, 1995, there were 1,108 registered holders
of limited partnership interests (in addition to 1133
Fifteenth Street Associates - See Item 1).
(c) No cash dividends or distributions have been declared from the
inception of the Partnership to December 31, 1995.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Share of losses from Local Limited
Partnerships (A) $ - $ - $ - $ - $ -
Other revenue and expenses:
Interest income 38,532 1,097 1,421 5,018 8,835
Loss on investment in Local
Limited Partnerships (95,230) (2,300) (295,200) - -
Distributions received in excess of
investment in Local Limited
Partnerships 65,099 91,746 20,600 13,393 30,851
Partnership operating expenses (135,627) (139,341) (134,575) (120,221) (138,920)
-------- -------- -------- -------- --------
Net loss $(127,226) $ (48,798) $(407,754) $(101,810) $ (99,234)
======== ======== ======== ======== ========
Loss per unit of limited partnership
interest based on units outstanding
during the period $ (11) $ (4) $ (35) $ (9) $ (8)
======== ======== ======== ======== ========
Total assets, at December 31 $ 12,313 $ 47,636 $ 86,538 $ 405,150 $ 431,605
======== ======== ======== ======== ========
Cash distributions per unit of
limited partnership interest $ - $ - $ - $ - $ -
======== ======== ======== ======== ========
</TABLE>
(A) The Partnership holds limited partnership interests in the Local
Limited Partnerships, and since its liability for obligations is
limited to its original investment, its investment account is not
reduced below zero (creating a liability) for the investments in Local
Limited Partnerships. As a result, during 1995, 1994, 1993, 1992 and
1991, $1,751,784, $1,604,334, $3,186,365, $1,413,722 and $1,531,646,
respectively, of losses from ten Local Limited Partnerships have not
been recognized by the Partnership.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Properties in which the Partnership has invested, through its
investments in the Local Limited Partnerships, receive one or more forms of
assistance from the Federal Government. As a result, the Local Limited
Partnerships'
6
<PAGE> 8
ability to transfer funds either to the Partnership or among themselves in the
form of cash distributions, loans or advances is generally restricted by these
government assistance programs. These restrictions, however, are not expected
to impact the Partnership's ability to meet its cash obligations.
Some of the Properties in which the Partnership has invested may be
eligible to participate in LIHPRHA. LIHPRHA creates a procedure under which
properties assisted under the HUD Section 236 or 221(d)(3) program may be
eligible to receive financial incentives in return for agreeing to extend their
property's use as low income housing.
All the Local Limited Partnerships in which the Partnership has invested
carry deferred acquisition notes due to the original owners of the Properties.
In the event of a default on these notes, the noteholders would re-assume both
NHP's and the Partnership's interests in the Local Limited Partnerships. Notes
related to the acquisition of Fairmeadows and Southridge had final maturity
dates in 1994. All of the other notes have final maturity dates between 1997
and 1999.
The Fairmeadows and Southridge notes finally matured on September 24,
1994 and October 18, 1994, respectively. The noteholders have not yet formally
declared the notes in default. The General Partner has been negotiating with
the noteholders to extend the maturity date of the notes and to discount the
notes in order that both the noteholders and the partners can receive a
financial benefit from participation in LIHPRHA. To date, these negotiations
have been unsuccessful. The General Partner has filed Notice of Intent to have
Fairmeadows and Southridge participate in LIHPRHA and has begun processing the
properties through the program. Should no agreement be reached, and the
noteholders declare the notes in default, these Local Limited Partnerships may
not be able to participate in the LIHPRHA program and the Partnership may lose
its interest in these Local Limited Partnerships. A loss of interests in these
Local Limited Partnerships may cause the partners in the Partnership to incur
adverse tax consequences. The impact of the tax consequences is dependent upon
each partner's individual tax situation. There can be no assurance that the
General Partner will be successful in its efforts to renegotiate the terms of
these notes.
On October 2, 1995, Forest Green and Village Green Limited Partnerships
entered into a discount buyout agreement for early settlement of their deferred
acquisition notes and related accrued interest payable. The agreements provide
for a total buyout amount of $175,000 per Partnership, payable in two
installments. The first installments of $120,000 each, which were applied
against accrued interest on deferred acquisition note payable, were paid upon
execution of the agreements. The final installments of $55,000 each are due on
or before May 1, 1996. The Local Limited Partnerships have the option of
extending the due date of the final installment to June 3, 1996. The first
installments were paid with $104,395 and $40,375, respectively, in available
surplus cash and $15,605 and $79,625, respectively in proceeds from a partner
loan (see Note 3 to the Partnership's financial statements).
The Forest Green and Village Green Local Limited Partnerships
anticipate paying the final installments with surplus cash generated during
1995. If surplus cash is insufficient to pay the final installment, these Local
Limited Partnerships anticipate obtaining a partner loan from the General
Partner to make the final payment. Upon payment of the final installment, the
balances of the total deferred acquisition notes payable and related accrued
interest ($1,398,910 and $1,409,813, respectively, as of December 31, 1995)
will be relieved. The deferred acquisition notes will remain in full force and
effect until the final installments are paid. If the final installment is not
made before the due date, the buyout agreements are terminated and the deferred
acquisition notes will remain in force through their original maturity date of
September 6, 1999.
During 1995, the Partnership advanced $95,230 to two Local Limited
Partnerships as discussed in the preceding paragraph. During 1994, the
Partnership advanced $2,300 to Local Limited Partnerships by paying expenses on
the behalf of the Local Limited Partnerships. During 1995 and 1994, there were
no repayments of advances to the Partnership. During 1995, one Local Limited
Partnership paid $37,561 of interest on advances to the Partnership. At
December 31, 1995, the Partnership's working capital advances to Local Limited
Partnerships amounted to $392,730. During 1993, the Partnership re-evaluated
the timing of the collectibility of the advances, and determined, based on the
Local Limited Partnerships' current operations, that such advances are not
likely to be collected currently and, for accounting purposes, treated the
advances balance as additional "Investment in Local Limited Partnerships." The
advance balance was then reduced to zero, with a corresponding charge to
operations (shown as "Loss on Investment in
7
<PAGE> 9
Local Limited Partnerships" in the Statement of Operations) to reflect a
portion of the cumulative unrecognized losses on investments. Advances to the
Local Limited Partnerships remain due and payable to the Partnership.
During 1995 and 1994, NHP advanced $39,049 and $9,553 to six Local
Limited Partnerships for expenses incurred relating to potential sales or
refinancing under LIHPRHA. During 1995 and 1994, one and two Local Limited
Partnerships made payments of principal of $6,927 and $9,803 and interest of
$1,749 and $890, respectively. Eight Local Limited Partnerships owe a total of
$62,518 to NHP at December 31, 1995 and seven Local Limited Partnerships owed
$30,396 to NHP at December 31, 1994. Interest on these advances is charged at a
rate equal to the Chase Manhattan Bank prime interest rate plus 2%.
Net cash provided by operations for the year ended December 31, 1995
was $47,950 compared to cash used in operations of $36,602 in 1994 and $23,412
in 1993. The increase in cash provided by operations from 1994 to 1995 was the
result of no payments for administrative and reporting fees to the General
Partner being made in 1995 compared to $82,996 paid in 1994. The increase in
cash used in operations from 1993 to 1994 was a result of a payment to the
General Partner for administrative and reporting fees made during 1994.
Distributions received in excess of investment in Local Limited
Partnerships represent the Partnership's proportionate share of the excess cash
available for distribution from the Local Limited Partnerships. As a result of
the use of the equity method of accounting for the Partnership's investment in
Local Limited Partnerships, investment carrying values for each of the Local
Limited Partnerships has decreased to zero. Cash distributions received are
recorded in revenues as distributions received in excess of investment in Local
Limited Partnerships. Cash distributions were received from two Local Limited
Partnerships during the years ended December 31, 1995 and 1994, respectively.
Total cash distributions received were $53,142 and $91,746 for those years,
respectively. The receipt of these distributions in future years is dependent
on the operations of the underlying properties of the Local Limited
Partnerships.
During 1995, one Local Limited Partnership distributed $11,957 from
surplus cash to the Partnership. At December 31, 1995, the distribution was not
received by the Partnership. Thus, a distribution receivable was recorded by
the Partnership for $11,957.
Cash and cash equivalents amounted to $356 at December 31, 1995. The
ability of the Partnership to meet its on-going cash requirements, in excess of
cash on hand at December 31, 1995, is dependent on distributions from recurring
operations received from the Local Limited Partnerships, and proceeds from the
sales or refinancings of the underlying properties. Total distributions
received from Local Limited Partnerships decreased to $53,142 in 1995 from
$91,746 in 1994 which was an increase from $20,600 in 1993. Cash on hand at
December 31, 1995 coupled with projected distributions from Local Limited
Partnerships should provide sufficient capital to fund the Partnership's
operations during 1996.
As of December 31, 1995, the Partnership owes the General Partner
$657,180 for administrative and reporting services performed. During the year
ended December 31, 1994, the Partnership paid $82,996 to the General Partner
for administrative and reporting services. This payment was made with
distributions received from the Local Limited Partnerships. No payments were
made during 1995. There is no guarantee that the Local Limited Partnerships
will generate future surplus cash sufficient to distribute to the Partnership
in amounts adequate to repay administrative and reporting fees owed; rather,
the payment of the unpaid administrative and reporting fees and other advances
to the General Partner will most likely result from the sale or refinancing of
the underlying properties of the Local Limited Partnerships, rather than
through recurring operations.
Results of Operations
The Partnership has invested as a limited partner in Local Limited
Partnerships which operate ten rental housing properties. Due to the use of the
equity method of accounting as discussed in Note 1 to the Partnership's
financial statements, to the extent the Partnership still has a carrying basis
in a respective Local Limited Partnership, results of operations would be
impacted by the Partnership's share of the losses of the Local Limited
Partnerships. As of December 31, 1995
8
<PAGE> 10
and 1994, the Partnership had no carrying basis in any of the Local Limited
Partnerships and reflected no share of losses for Local Limited Partnerships in
1995, 1994, and 1993.
The Partnership's net loss increased to $127,226 in 1995 from a net
loss of $48,798 in 1994. Net loss per unit of limited partnership interest
approximated $11 and $4 for the year ended December 31, 1995 and 1994,
respectively. The increase in the net loss was primarily due to the loss on the
investment in advances to Local Limited Partnerships. The Partnership did not
recognize $1,751,781 of its allocated share of losses from ten Local Limited
Partnerships for the year ended December 31, 1995, as the Partnership's net
carrying basis in them was reduced to zero in a prior year (see Note 3 to the
Partnership's financial statements). The Partnership's share of losses from the
Local Limited Partnerships, if not limited to its investment account balance,
would have increased $240,380 between years. The increase primarily was the
result of an approximately $520,000 increase in interest on acquisition notes
partially offset by an approximately $240,000 increase in rental revenues
between years.
The Partnership's net loss decreased to $48,798 in 1994 from a net loss
of $407,754 in 1993. Net loss per unit of limited partnership interest
approximated $4 and $35 for the year ended December 31, 1994 and 1993,
respectively. The decrease in the net loss was primarily due to increase in
distributions received in excess of investment in Local Limited Partnerships
and a decrease in the loss on the investment in advances to Local Limited
Partnerships. The Partnership did not recognize $1,604,334 of its allocated
share of losses from ten Local Limited Partnerships for the year ended December
31, 1994, as the Partnership's net carrying basis in them was reduced to zero
in a prior year (see Note 3 to the Partnership's financial statements). The
Partnership's share of losses from the Local Limited Partnerships, if not
limited to its investment account balance, would have decreased $1,874,934
between years. The decrease was the result of two Local Limited Partnerships,
during 1993, recording a loss on reduction of carrying value of their
respective rental property which totaled $1,900,000 as the estimated future
undiscounted cash flows from operations and ultimate sale is less than the
current net book value (discussed more fully in Note 3 to the Partnership's
financial statements). No such losses were recorded during 1994.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary schedule of the Partnership
are included on pages 10 through 25 of this report.
9
<PAGE> 11
Independent Auditors' Report
To The Partners of
National Housing Partnership Realty Fund I
Washington, D.C.
We have audited the accompanying statements of financial position of National
Housing Partnership Realty Fund I (the Partnership) as of December 31, 1995 and
1994, and the related statements of operations, partners' equity (deficit), and
cash flows for each of the three years in the period ended December 31, 1995,
and the supporting schedule listed in the Index at Item 14. These financial
statements and schedule are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements and
schedule based on our audits. We did not audit the financial statements of
Hurbell IV Limited Partnership and Gates Mills I Limited Partnership (investees
of the Partnership) for the years ended December 31, 1995, 1994 and 1993. The
Partnership's equity in the net assets of these investees has been reduced to
zero in accordance with the equity method of accounting. The accompanying
statement of operations includes $29,506 of revenue from distributions in
excess of investment for these two investees for the year ended December 31,
1995. The financial statements do not include any equity, earnings or losses
from these investees for the years ended December 31, 1994 and 1993. The
financial statements of these investees were audited by other auditors whose
reports thereon have been furnished to us, and our opinion, insofar as it
relates to amounts included for these investees, 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 and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, such
financial statements present fairly, in all material respects, the financial
position of the Partnership as of December 31, 1995 and 1994, and the results
of its operations and cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles, and the schedule referred to above presents fairly, in all material
respects, when read in conjunction with the related financial statements, the
information therein set forth.
Deloitte & Touche LLP
March 11, 1996
Washington, D.C.
10
<PAGE> 12
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1995 1994
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents (Note 2) $ 356 $ 47,636
Distribution receivable 11,957 -
Investments in and advances to Local Limited
Partnerships (Note 3) - -
-------- --------
$ 12,313 $ 47,636
======== ========
<CAPTION>
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
<S> <C> <C>
Liabilities:
Administrative and reporting
fees payable to General Partner (Note 4) $ 657,180 $ 570,788
Accrued expenses 42,761 37,250
-------- --------
699,941 608,038
-------- --------
Partners' equity (deficit):
General Partner - The National Housing Partnership (NHP) (102,241) (100,969)
Original Limited Partner -
1133 Fifteenth Street Associates (107,141) (105,869)
Other Limited Partners - 11,519
investment units (478,246) (353,564)
-------- --------
(687,628) (560,402)
-------- --------
$ 12,313 $ 47,636
======== ========
</TABLE>
11
<PAGE> 13
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Interest income $ 971 $ 1,097 $ 1,421
Interest received on advances to Local
Limited Partnerships 37,561 - -
Distributions in excess of investment in
Local Limited Partnership 65,099 91,746 20,600
-------- ------- --------
103,631 92,843 22,021
-------- ------- --------
COSTS AND EXPENSES:
Loss on investment in Local Limited
Partnerships (Note 3) 95,230 2,300 295,200
Administrative and reporting fees to
General Partner (Note 4) 86,392 86,392 86,392
Other operating expenses 49,235 52,949 48,183
-------- ------- --------
230,857 141,641 429,775
-------- ------- --------
NET LOSS $(127,226) $(48,798) $(407,754)
======== ======= ========
ALLOCATION OF NET LOSS:
General Partner - NHP $ (1,272) $ (488) $ (4,078)
Original Limited Partner -
1133 Fifteenth Street Associates (1,272) (488) (4,078)
Other Limited Partners - 11,519
investment units (124,682) (47,822) (399,598)
-------- ------- --------
$(127,226) $(48,798) $(407,754)
======== ======= ========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST (Note 3) $ (11) $ (4) $ (35)
======== ======= ========
</TABLE>
See notes to financial statements.
12
<PAGE> 14
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
The
National 1133
Housing Fifteenth Other
Partnership Street Limited
(NHP) Associates Partners Total
--------------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Equity (deficit) at
January 1, 1993 $ (96,403) $(101,303) $ 93,856 $(103,850)
Net loss (4,078) (4,078) (399,598) (407,754)
-------- -------- -------- --------
Equity (deficit) at
December 31, 1993 (100,481) (105,381) (305,742) (511,604)
Net loss (488) (488) (47,822) (48,798)
-------- -------- -------- --------
Equity (deficit) at
December 31, 1994 (100,969) (105,869) (353,564) (560,402)
Net loss (1,272) (1,272) (124,682) (127,226)
-------- --------- -------- --------
Equity (deficit) at
December 31, 1995 $(102,241) $(107,141) $(478,246) $(687,628)
======== ======== ======== ========
Percentage interest at
December 31,1993,
1994 and 1995 1% 1% 98%
-------- -------- --------
(A) (B) (C)
======== ======== ========
</TABLE>
(A) General Partner
(B) Original Limited Partner
(C) Consists of 11,519 investment units of .0085% held by 1,113 investors.
See notes to financial statements.
13
<PAGE> 15
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 971 $ 1,097 $ 1,421
Interest received on advances to Local Limited
Partnerships 37,561 - -
Distributions in excess of investment
in Local Limited Partnerships 53,142 91,746 20,600
Operating expenses paid (43,724) (46,449) (45,433)
Administrative and reporting fees paid to
General Partner - (82,996) -
-------- ------- --------
Net cash provided by (used in) operating activities 47,950 (36,602) (23,412)
-------- ------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Advances to Local Limited Partnerships (95,230) (2,300) (2,025)
-------- ------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (47,280) (38,902) (25,437)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 47,636 86,538 111,975
-------- ------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 356 $ 47,636 $ 86,538
======== ======= ========
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss $(127,226) $(48,798) $(407,754)
-------- ------- --------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Loss on investment in Local Limited Partnerships 95,230 2,300 295,200
Increase in administrative and reporting
fees payable to General Partner 86,392 3,396 86,392
Increase in distribution receivable (11,957) - -
Increase in accrued expenses 5,511 6,500 2,750
-------- ------- --------
Total adjustments 175,176 12,196 384,342
-------- ------- --------
Net cash provided by (used in) operating activities $ 47,950 $(36,602) $ (23,412)
======== ======= ========
</TABLE>
See notes to financial statements.
14
<PAGE> 16
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF PARTNERSHIP ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
National Housing Partnership Realty Fund I (the Partnership) is a
limited partnership organized under the laws of the State of Maryland under the
Maryland Revised Uniform Limited Partnership Act on October 21, 1983. The
Partnership was formed for the purpose of raising capital by offering and
selling limited partnership interests and then investing in limited
partnerships (Local Limited Partnerships), each of which owns and operates an
existing rental housing project which is financed and/or operated with one or
more forms of rental assistance or financial assistance from the U.S.
Department of Housing and Urban Development (HUD). On May 25, 1984, inception
of operations, the Partnership began raising capital and acquiring interests in
Local Limited Partnerships.
The General Partner was authorized to raise capital for the Partnership
by offering and selling not more than 20,000 limited partnership interests at a
price of $1,000 per interest. During 1984, the sale of interests was closed
after the sale of 11,519 interests to limited partners.
During 1984, the Partnership acquired limited partnership interests of
99% in nine Local Limited Partnerships and 98% in one Local Limited
Partnership. Each Local Limited Partnership was organized to acquire and
operate an existing rental housing project.
Significant Accounting Policies
The financial statements of the Partnership are prepared on the accrual
basis of accounting. Direct costs of acquisition, including acquisition fees
and reimbursable acquisition expenses paid to the General Partner, have been
capitalized as investments in the Local Limited Partnerships. Other fees and
expenditures of the Partnership are recognized as expenses in the period the
related services are performed.
Investments in Local Limited Partnerships are accounted for using the
equity method and thus are carried at cost less the Partnership's share of the
Local Limited Partnerships' losses and distributions (see Note 3). An
investment account is maintained for each of the limited partnership
investments and losses are not recognized once an investment account has
decreased to zero. Cash distributions are limited by the Regulatory Agreements
between the Local Limited Partnerships and HUD to the extent of surplus cash as
defined by HUD. Undistributed amounts are cumulative and may be distributed in
subsequent years if future operations provide surplus cash in excess of current
requirements. Distributions received from Local Limited Partnerships in which
the Partnership's investment account has decreased to zero are recorded as
revenue in the year they are received. Advances to Local Limited Partnerships
are included with Investments in Local Limited Partnerships to the extent that
the advances are not temporary advances of working capital.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
For purposes of the Statements of Cash Flows, the Partnership considers
all highly liquid debt instruments purchased with original maturities of three
months or less to be cash equivalents.
15
<PAGE> 17
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following:
<TABLE>
<CAPTION>
December 31,
---------------------------
1995 1994
------ ------
<S> <C> <C>
Cash in demand accounts $ 356 $ 307
Money market account - 47,329
------ ------
$ 356 $47,636
====== ======
</TABLE>
3. INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS
The Partnership owns a 98% limited partnership interest in Gates Mills
I Limited Partnership and 99% limited partnership interests in nine other Local
Limited Partnerships: Fairmeadows Limited Partnership, Forest Green Limited
Partnership, Griffith Limited Partnership, Northgate Village Limited
Partnership, Southward Limited Partnership, San Jose Limited Partnership,
Southridge Apartments Limited Partnership, Hurbell IV Limited Partnership and
Village Green Limited Partnership. Since the Partnership, as a limited partner,
does not exercise control over the activities of the Local Limited Partnerships
in accordance with the partnership agreements, these investments are accounted
for using the equity method. Thus, the investments are carried at cost less the
Partnership's share of the Local Limited Partnerships' losses and
distributions. However, since the Partnership is not legally liable for the
obligations of the Local Limited Partnerships, or is not otherwise committed to
provide additional support to them, it does not recognize losses once its
investment in each of the individual Local Limited Partnerships, reduced for
its share of losses and cash distributions, reaches zero. As a result, the
Partnership did not recognize $1,751,784, $1,604,334 and $3,186,365 of losses
from ten Local Limited Partnerships during 1995, 1994 and 1993, respectively.
As of December 31, 1995 and 1994, the Partnership has not recognized
$12,930,693 and $11,178,909, respectively, of its allocated share of cumulative
losses from the Local Limited Partnerships in which its investment is zero.
During 1995, the Partnership advanced $95,230 to two Local Limited
Partnerships to fund the early settlement of their deferred acquisition notes.
During 1994, the Partnership advanced $2,300 for working capital purposes.
During 1995 and 1994, there were no repayments of advances to the Partnership.
At December 31, 1995, the Partnership's working capital advances to Local
Limited Partnerships amounted to $392,730. During 1993, the Partnership
re-evaluated the timing of the collectibility of certain advances and
determined, based on the Local Limited Partnerships' current operations, that
such advances are not likely to be collected currently and, for accounting
purposes, treated the advances balance as additional Investment in Local
Limited Partnerships. The balance was then reduced to zero, with a
corresponding charge to operations (shown as "Loss on Investment in Local
Limited Partnerships" in the Statement of Operations) to reflect a portion of
the cumulative unrecognized losses on investments.
Advances to the Local Limited Partnerships remain due and payable to
the Partnership. Interest is calculated at the Chase Manhattan Bank prime rate
plus 2%. Payment of principal and interest is contingent upon the Local Limited
Partnerships having available surplus cash, as defined by HUD regulations, from
operations or from refinancing or sale of the Local Limited Partnership
properties. Any future repayment of advances or interest will be reflected as
16
<PAGE> 18
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Partnership income when received. During 1995, the Partnership received a
payment of interest of $37,561 from one Local Limited Partnership.
Summaries of the combined financial position of the aforementioned
Local Limited Partnerships as of December 31, 1995 and 1994, and the combined
results of operations for each of the three years in the period ended December
31, 1995, are provided on the following page.
17
<PAGE> 19
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
COMBINED FINANCIAL POSITION
OF THE LOCAL LIMITED PARTNERSHIPS
<TABLE>
<CAPTION>
December 31,
------------------------------------
1995 1994
---- ----
<S> <C> <C>
Assets:
Land $ 3,559,204 $ 3,559,204
Buildings and improvements,
net of accumulated
depreciation of $11,969,090 and $10,821,214 27,438,238 27,955,485
Other assets 3,762,849 3,656,684
----------- -----------
$ 34,760,291 $ 35,171,373
=========== ===========
Liabilities and Partners' Deficit:
Liabilities:
Mortgage notes payable $ 15,854,138 $ 16,332,048
Acquisition notes payable 14,236,437 14,236,437
Other liabilities 18,494,622 16,493,709
----------- -----------
48,585,197 47,062,194
Partners' Deficit:
National Housing Partnership Realty Fund I (13,564,346) (11,652,236)
Other partners (260,560) (238,585)
----------- -----------
$ 34,760,291 $ 35,171,373
=========== ===========
</TABLE>
COMBINED RESULTS OF OPERATIONS
OF THE LOCAL LIMITED PARTNERSHIPS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Revenue $ 7,462,834 $ 7,224,681 $ 6,915,922
---------- ---------- ----------
Expenses:
Operating expenses 5,749,032 5,813,755 5,576,002
Financial expenses 358,438 347,204 406,892
Interest on acquisition notes 2,075,693 1,555,715 1,389,084
Depreciation 1,147,876 1,134,639 1,163,045
Loss on reduction in carrying value of rental property - - 1,900,000
---------- ----------- ----------
Total expenses 9,331,039 8,851,313 10,435,023
---------- ---------- ----------
Net loss $(1,868,205) $(1,626,632) $(3,519,101)
========== ========== ==========
</TABLE>
18
<PAGE> 20
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
The combined financial statements of the Local Limited Partnerships are
prepared on the accrual basis of accounting. Each Local Limited Partnership
was formed during 1984 for the purpose of acquiring and operating a rental
housing project originally organized under Section 236 of the National Housing
Act. During the year ended December 31, 1995, all of the projects received a
substantial amount of rental assistance from HUD.
Depreciation of the buildings and improvements for nine of the Local
Limited Partnerships is computed on a straight-line method, assuming a 50-year
life from the date of initial occupancy at the time of construction or after
substantial rehabilitation of the building, and depreciation of equipment is
calculated using accelerated methods over estimated useful lives of 5 to 27
years. Depreciation for one of the Local Limited Partnerships is computed using
the straight-line method, assuming a 30-year life and a 30% salvage value.
The mortgage notes payable are insured by the Federal Housing
Administration (FHA) and collateralized by first deeds of trust on the rental
properties. The notes bear interest at rates ranging from 7% to 8.5% per annum.
However, FHA makes subsidy payments directly to the mortgage lender reducing
the monthly principal and interest payments of the project owner to an
effective interest rate of 1% over the forty-year term of the notes. The
liability of the Local Limited Partnerships under the mortgage notes is limited
to the underlying value of the real estate collateral plus other amounts
deposited with the lenders.
Deferred acquisition notes of $14,236,437 at both December 31, 1995 and
1994 bear simple interest at rates of 9% or 10% per annum except for two notes
which matured in 1994 and now bear interest at the rate of 18% per annum. These
notes are collateralized by security interests in all partnership interests of
the Local Limited Partnerships. Neither principal nor interest are payable
currently; all principal and accrued interest are payable upon the earlier of
the sale, transfer, or refinancing of the project or maturity of the notes.
Notes for two Local Limited Partnerships have matured and are due and payable.
Other notes mature between 1997 and 1999.
The notes may be extended for periods ranging from two to five years
except for the notes on Fairmeadows and Southridge which were extended
previously to September 1994 and October 1994, respectively. As a result of the
1994 note maturities on Fairmeadows and Southridge, there is substantial doubt
about the ability of these two Local Limited Partnerships to continue as going
concerns. The General Partner has been negotiating with the noteholders to
extend the maturity date of the notes and to discount the notes in order that
both the noteholders and the partners can receive a financial benefit from
participation in LIHPRHA. To date, these negotiations have been unsuccessful.
The General Partner has filed Notices of Intent to have Fairmeadows and
Southridge participate in LIHPRHA and has begun processing the properties
through the program. Should no agreement be reached, and the noteholders
declare the notes in default, the Partnership may not be able to participate in
the LIHPRHA program and may lose its interest in these Local Limited
Partnerships.
On October 2, 1995, Forest Green and Village Green Limited Partnerships
entered into a discount buyout agreement for the deferred acquisition notes and
related accrued interest payable. The agreements provide for a total buyout
amount of $175,000 per Partnership, payable in two installments. The first
installments of $120,000 each, which were applied against accrued interest on
deferred acquisition note payable, were paid upon execution of the agreements.
The final installments of $55,000 each are due on or before May 1, 1996. The
Local Limited Partnerships have the option of extending the due date of the
final installments to June 3, 1996. The first installments were paid with
$104,395 and $40,375, respectively, in available surplus cash and $15,605 and
$79,625, respectively in proceeds from a partner loan.
19
<PAGE> 21
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
The Local Limited Partnerships anticipate paying the final installments
with surplus cash generated during 1995. If surplus cash is insufficient to pay
the final installment, the Partnerships anticipate obtaining a loan from the
General Partner to make the final payment. Upon payment of the final
installment, the balance of the two deferred acquisition notes payable and
related accrued interest ($1,398,910 and $1,409,813, respectively, as of
December 31, 1995) will be relieved. The deferred acquisition notes will remain
in full force and effect until the final installment is paid. If the final
installment is not made before the due date, the buyout agreements are
terminated and the deferred acquisition notes will remain in force through
their original maturity date of September 6, 1999.
For operating real estate property, generally accepted accounting
principles (GAAP) require that the Local Limited Partnerships evaluate whether
it is probable that the estimated undiscounted future cash flows of each of its
properties, plus cash projected to be received upon an assumed sale of the
property (Net Realizable Value) is less than the net carrying value of the
property. If such a shortfall exists, is material, and is deemed to be other
than temporary in nature, then a write-down equal to the shortfall would be
warranted. The Local Limited Partnerships perform such evaluations on an
ongoing basis.
During 1993, using a methodology consistent with GAAP, two of the Local
Limited Partnerships, Griffith Limited Partnership and Southward Limited
Partnership, determined that the net book value of their respective rental
property exceeded the rental properties' estimated Net Realizable Value. As a
result, these two Local Limited Partnerships recorded adjustments aggregating
$1,900,000 to reduce the carrying value of the rental properties to their
estimated net realizable value.
Additionally, regardless of whether a write-down of an individual
property has been recorded or not, the carrying value of each of these
properties may still exceed their fair market value as of December 31, 1995.
Should a Local Limited Partnership be forced to dispose of any of its
properties, it could incur a loss.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 "Accounting For The
Impairment of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of"
(the "Statement") effective for financial statements for fiscal years beginning
after December 15, 1995. Adoption of this Statement during the year ending
December 31, 1996 will require an impairment loss to be recognized if the sum
of estimated future cash flows (undiscounted and without interest charges) is
less than the carrying amount of rental property. The impairment loss would be
the amount by which the carrying value exceeds the fair value of the rental
property. If the rental property is to be disposed of, fair value is calculated
net of costs to sell. The Local Limited Partnerships have not estimated the
effect of implementing the Statement. Adoption of the Statement for the year
ending December 31, 1996 will not have a significant impact on the results of
operations and financial position of the Partnership because its investment in
each Local Limited Partnership has been reduced to zero.
4. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES OF THE GENERAL
PARTNER
The General Partner of the Partnership is The National Housing
Partnership (NHP). National Corporation for Housing Partnerships (NCHP) is the
sole general partner of NHP and NHP Partners Two Limited Partnership is the
sole limited partner of NHP. The Original Limited Partner of the Partnership is
1133 Fifteenth Street Associates, whose limited partners were key employees of
NCHP at the time the Partnership was formed and whose general partner is NHP.
The Partnership accrued administrative and reporting fees
payable to the General Partner of $86,392 annually during 1995, 1994, and 1993.
During 1994, the Partnership paid the General Partner $82,996 for such fees
accrued in
20
<PAGE> 22
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
prior years. No payments for such fees were made in 1995 and 1993. As of
December 31, 1995 and 1994, the Partnership owed $657,180 and $570,788,
respectively, to the General Partner for accrued administrative and reporting
fees.
An affiliate of the General Partner, NHP Management Company
(NHPMC) is the project management agent for the projects operated by eight of
the Local Limited Partnerships. NHPMC and other affiliates of NCHP earned
$756,629, $729,364 and $672,982 from the Local Limited Partnerships for
management fees and other services provided to the Local Limited Partnerships
during 1995, 1994 and 1993, respectively.
Personnel working at the project sites, which are managed by
NHPMC, were NCHP employees and, therefore, the projects reimbursed NCHP for the
actual salaries and related benefits. Beginning January 1, 1996, project
employees became employees of NHP Incorporated. At December 31, 1995 and 1994,
other liabilities include $60 and $9,151, respectively, due to NCHP. Total
reimbursements earned for salaries and benefits for the years ended December
31, 1995, 1994 and 1993, were approximately $795,000, $828,000 and $747,000,
respectively.
5. INCOME TAXES
The Partnership is not taxed on its income. The partners are
taxed in their individual capacities upon their distributive share of the
Partnership's taxable income and are allowed the benefits to be derived from
off-setting their distributive share of the tax losses against taxable income
from other sources subject to passive loss limitations. The taxable income or
loss differs from amounts included in the statements of operations because
different methods are used in determining the losses of the Local Limited
Partnerships as discussed below. The tax loss is allocated to the partner
groups in accordance with Section 704(b) of the Internal Revenue Code and
therefore is not necessarily proportionate to the interest percentage owned.
For Federal income tax purposes, the ten Local Limited
Partnerships compute depreciation of the buildings and improvements using the
Accelerated Cost Recovery System (ACRS) and the Modified Accelerated Cost
Recovery System (MACRS). Rent received in advance is included as income in
determining the taxable income or loss for Federal income tax purposes, while,
for financial statement purposes, the amount is considered a liability. In
addition, interest expense on the acquisition notes payable by the Local
Limited Partnerships is computed for Federal income tax purposes using the
economic accrual method; while for financial statement purposes interest is
computed using a simple interest rate. The Partnership's allocable share of
losses from the Local Limited Partnerships is not recognized for financial
statement purposes when its investment account is decreased to zero while, for
income tax purposes, losses continue to be recognized. Other differences result
from the allocation of tax losses in accordance with Section 704(b) of the
Internal Revenue Code.
21
<PAGE> 23
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
A reconciliation follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net loss per financial statements $ (127,226) $ (48,798) $ (407,754)
Timing differences in determining losses of
Local Limited Partnerships:
Depreciation (850,217) (862,038) (920,266)
Interest on acquisition notes payable (186,609) (226,479) (162,048)
Rents received in advance 191 (3,577) 1,119
Losses in excess of financial statement
investment amount (1,795,796) (1,696,078) (1,208,005)
Accrued interest on partner loans 24,387 44,934 141,556
Other 74,606 16,238 53,642
---------- ---------- ----------
Loss per tax return $(2,860,664) $(2,775,798) $(2,501,756)
========== ========== ==========
</TABLE>
As discussed in Note 3, two of the Local Limited Partnerships in which the
Partnership has invested may not be able to continue as a going concern. Should
a Local Limited Partnership not continue as a going concern, or the Partnership
itself not continue as a going concern (see Note 7), there could be adverse tax
consequences to the partners in the Partnership. The impact of the tax
consequences is dependent upon each partner's individual tax situation.
6. ALLOCATION OF RESULTS OF OPERATIONS, CASH DISTRIBUTIONS AND GAINS AND
LOSSES FROM SALES OR REFINANCING
Cash received by the Partnership from the sale or refinancing of any
underlying property of the Local Limited Partnerships, after payment of the
applicable mortgage debt and the payment of all expenses related to the
transaction is to be distributed in the following manner in accordance with
Realty Fund I's Partnership Agreement.
First, to the General Partner for any unrepaid loans to the Partnership
and any unpaid fees (other than disposition and refinancing fees);
Second, to the Limited Partners until the Limited Partners have
received a return of their capital contributions, after deduction for
prior cash distributions from sales or refinancing, but without
deduction for prior cash distributions from operations;
Third, to the Limited Partners, until each Limited Partner has received
an amount equal to a cumulative noncompounded 6% annual return on its
capital contribution, after deduction of (a) an amount equal to 50% of
the tax losses allocated to the Limited Partner and (b) prior cash
distributions from operations and prior cash distributions from sales
or refinancing;
Fourth, to the General Partner until the General Partner has received a
return of its capital contribution, after deduction for prior cash
distributions from sales or refinancing, but without deduction for
prior cash distributions from operations;
22
<PAGE> 24
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
Fifth, to the General Partner for disposition and refinancing fees,
including prior disposition and refinancing fees which have been
accrued but are unpaid;
Sixth, to the partners with positive capital accounts to bring such
accounts to zero; and
Finally, 85% of the remaining sales proceeds to the Limited Partners
and 15% to the General Partner.
Net income or loss from operations of the Partnership is allocated 98%
to the Limited Partners, 1% to the General Partner and 1% to the Original
Limited Partner. Cash distributions from operations, after payment of certain
obligations including reimbursement on a cumulative basis of direct expenses
incurred by the General Partner or its affiliate in managing the properties and
payment of annual cumulative administrative and reporting fees, is distributed
98% to the Limited Partners, 1% to the General Partner and 1% to the Original
Limited Partner.
Gain for federal income tax purposes realized in the event of
dissolution of the Partnership or upon sale of interests in a Local Limited
Partnership or underlying property will be allocated in the following manner:
First, to the Limited Partners in an amount up to the negative balances
of the capital accounts of Limited Partners in the same proportion as
each Limited Partner's negative capital account bears to such aggregate
negative capital accounts;
Second, to the General Partner in an amount up to the General Partner's
negative capital account, if any;
Third, to the Limited Partners up to the aggregate amount of capital
contributions of the Limited Partners, after deduction for prior cash
distributions from sales or refinancing, but without deduction for
prior cash distributions from operations, in the same proportion that
each Limited Partner's capital contribution bears to the aggregate of
all Limited Partners' capital contributions;
Fourth, to the Limited Partners, until each Limited Partner has been
allocated an amount equal to a cumulative noncompounded 6% annual
return on its capital contribution, after deduction of (a) an amount
equal to 50% of the tax losses allocated to the Limited Partner and (b)
prior cash distributions from operations and prior cash distributions
from sales or refinancing;
Fifth, to the General Partner up to the aggregate amount of capital
contributions made by the General Partner, after deduction for prior
cash distributions from sales or refinancing, but without deduction for
prior cash distributions from operations; and
Finally, 85% of the remaining gain to the Limited Partners and 15% to
the General Partner.
Losses for federal income tax purposes realized in the event of
dissolution of the Partnership or upon sale of interests in a Local Limited
Partnership or underlying property will be allocated 85% to the Limited
Partners and 15% to the General Partner.
7. FUTURE OPERATIONS AND CASH FLOWS
In recent years, the Partnership has incurred operating expenses,
exclusive of amounts due to the General Partner, in excess of operating
revenues. Should cash and cash equivalents on hand, coupled with future
distributions
23
<PAGE> 25
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
from the Local Limited Partnerships not be adequate to fund operating expenses,
the Partnership may need other sources of funding such as loans from the
General Partner. However, the General Partner is under no obligation to provide
such loans.
The Partnership's continued existence as a going concern is dependent
upon maintaining positive cash flows from operations, obtaining additional
capital from partners, or borrowing additional funds. NHP intends to manage the
Partnership prudently so as to produce positive cash flows from its operations.
********************
24
<PAGE> 26
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION OF
LOCAL LIMITED PARTNERSHIPS IN WHICH NHP REALTY FUND I HAS INVESTED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Initial Cost Capitalized Gross Amount at which
Cost to Local Subsequent Carried at Close of
Limited Partnership to Acquisition Period
---------------------------- -------------------------------- ---------------------
Buildings Carrying
and Cost
Partnership Name Encumbrances Land Improvements Improvements Adjustments Land
- --------------------------- -------------- ------------ --------------- -------------- --------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Fairmeadows Limited (1) $ 650,000 $ 4,807,825 $ 749,246 $ - $ 650,000
Partnership
Forest Green Limited (1) 170,000 2,062,075 228,157 - 170,000
Partnership
Gates Mills I Limited (1) 668,500 6,058,342 42,658 - 668,500
Partnership
Griffith Limited (1) 270,000 2,623,687 341,378 (1,000,000) 270,000
Partnership
Northgate Village Limited (1) 220,500 2,952,548 294,250 (16,796) 203,704
Partnership
Southward Limited (1) 220,000 4,109,695 334,208 (900,000) 220,000
Partnership
San Jose Limited (1) 440,000 4,728,658 1,155,798 - 440,000
Partnership
Southridge Apartments (1) 700,000 5,603,238 564,159 - 700,000
Limited Partnership
Hurbell IV Limited (1) 100,000 2,159,021 110,721 - 100,000
Partnership
Village Green Limited (1) 137,000 2,096,097 285,567 - 137,000
Partnership ---------- ----------- ------------ ------------ -----------
TOTAL, December 31, 1995 $ 3,576,000 $ 37,201,186 $ 4,106,142 $ (1,916,796) $ 3,559,204
========== =========== ============ ============ ===========
<CAPTION>
Gross Amount at which Carried
at Close of Period
-------------------------------
Life upon which
depreciation in
Buildings latest statement of
and Total Accumulated Date of Date operations is
Partnership Name Improvements (2) (3) Depreciation (3) Construction Acquired computed (years)
- ------------------- --------------- -------------- -------------------- ------------- --------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Fairmeadows Limited $ 5,557,071 $ 6,207,071 $ 1,599,699 1970 9/84 5-50
Partnership
Forest Green Limited 2,290,232 2,460,232 690,225 1972 8/84 5-50
Partnership
Gates Mills I Limited 6,101,000 6,769,500 1,602,579 1972 10/84 5-50
Partnership
Griffith Limited 1,965,065 2,235,065 819,297 1973 11/84 5-50
Partnership
Northgate Village Limited 3,246,798 3,450,502 988,509 1973 7/84 5-50
Partnership
Southward Limited 3,543,903 3,763,903 1,254,977 1972 10/84 5-50
Partnership
San Jose Limited 5,884,456 6,324,456 1,889,839 1970 9/84 5-50
Partnership
Southridge Apartments 6,167,397 6,867,397 1,748,243 1970 10/84 5-50
Limited Partnership
Hurbell IV Limited 2,269,742 2,369,742 649,142 1974 11/84 5-50
Partnership
Village Green Limited 2,381,664 2,518,664 726,580 1971 8/84 5-50
Partnership ------------ ------------ -------------
TOTAL, December 31, 1995 $ 39,407,328 $ 42,966,532 $ 11,969,090
============ ============ =============
</TABLE>
See notes to Schedule XI
25
<PAGE> 27
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO SCHEDULE XI - REAL ESTATE AND
ACCUMULATED DEPRECIATION OF LOCAL LIMITED
PARTNERSHIPS IN WHICH NHP REALTY FUND I HAS INVESTED
DECEMBER 31, 1995
(1) Schedule of Encumbrances
<TABLE>
<CAPTION>
Acquisition
Notes
Mortgage and Accrued
Partnership Name Notes Interest Total
---------------- ----- -------- -----
<S> <C> <C> <C>
Fairmeadows Limited Partnership $ 2,039,230 (a) $ 4,576,743 $6,615,973
Forest Green Limited Partnership 986,535 1,398,910 2,385,445
Gates Mills I Limited Partnership 2,292,209 5,666,575 7,958,784
Griffith Limited Partnership 1,028,553 2,404,166 3,432,719
Northgate Village Limited Partnership 1,424,749 2,076,580 3,501,329
Southward Limited Partnership 1,585,444 3,235,920 4,821,364
San Jose Limited Partnership 2,123,013 3,624,152 5,747,165
Southridge Apartments Limited Partnership 2,364,728 (a) 4,802,535 7,167,263
Hurbell IV Limited Partnership 1,100,720 1,300,246 2,400,966
Village Green Limited Partnership 908,957 1,409,813 2,318,770
---------- ----------- -----------
TOTAL - December 31, 1995 $15,854,138 $30,495,640 $46,349,778
========== ========== ==========
</TABLE>
(a)Currently due and payable - see Note 7 to the partnership financial
statements.
(2) The aggregate cost of land for Federal income tax purposes is
$3,559,204 and the aggregate costs of buildings and improvements for
Federal income tax purposes is $41,302,508. The total of the
above-mentioned items is $44,861,712.
26
<PAGE> 28
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO SCHEDULE XI - REAL ESTATE AND
ACCUMULATED DEPRECIATION OF LOCAL LIMITED
PARTNERSHIPS IN WHICH NHP REALTY FUND I HAS INVESTED
DECEMBER 31, 1995
(CONTINUED)
(3) Reconciliation of real estate
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $42,335,903 $41,993,284 $43,467,827
Improvements during the period 630,629 342,619 425,457
Reduction of carrying value of rental property - - (1,900,000)
---------- ---------- ----------
Balance at end of period $42,966,532 $42,335,903 $41,993,284
========== ========== ==========
</TABLE>
Reconciliation of accumulated depreciation
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of period $10,821,214 $ 9,686,575 $8,523,530
Depreciation expense for the period 1,147,876 1,134,639 1,163,045
---------- ---------- ---------
Balance at end of period $11,969,090 $10,821,214 $9,686,575
========== ========== =========
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
27
<PAGE> 29
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), (e) and (f). The names, ages, business
experience and involvement in legal proceedings of the
directors and executive officers of National Corporation for
Housing Partnerships (NCHP), the sole general partner of The
National Housing Partnership, the sole general partner of the
Partnership, and certain of its affiliates, are as follows:
Directors of NCHP
Seven individuals comprise the Board of Directors of NCHP.
Three directors were appointed by the President of the United States, by and
with the advice and consent of the Senate.
J. Roderick Heller, III (age 58) was elected President, Chief
Operating Officer and a Director of NCHP in 1985, Chief Executive Officer of
NCHP in 1986 and Chairman in 1988. He currently serves as Chairman, President
and Chief Executive Officer of NHP Incorporated and NCHP and their affiliate,
NHP Real Estate Corporation. Mr. Heller also serves as Chairman and Chief
Executive Officer of NHP Management Company, another principal affiliate of
NCHP. He had been President and Chief Executive Officer of Bristol Compressors,
Inc., Bristol, Virginia, a manufacturer of air conditioning compressors, from
1982 until 1985. Prior to that, he was a partner in the Washington, D.C. law
firm of Wilmer, Cutler & Pickering from 1971 until 1982, and while there,
represented NCHP on legal matters from its organization in 1970. He serves on
the boards of directors of Auto-Trol Technology Corporation and a number of
nonprofit organizations, including the National Trust for Historic
Preservation. Mr. Heller was re-elected to the Board of Directors in 1992 and
continues to serve.
Susan R. Baron (age 44) is an attorney specializing in
conventional and government-assisted real estate development and finance in the
residential and commercial markets. From 1978 to 1993 she was with the
Washington, D.C. law firm of Dunnells, Duvall & Porter. Ms. Baron serves on the
board of directors of Seeds of Peace and is a past president of the National
Leased Housing Association. She was appointed to the Board of Directors by the
President of the United States in September 1994 to complete a term expiring in
October 1994 and continues to serve until the appointment of a successor.
Danny K. Davis (age 54) has been a Commissioner on the Cook
County Board of Commissioners since November 1990. Prior to his service on the
Cook County Board, he served as an Alderman on the Chicago City Council for 11
years. Mr. Davis is also a member of numerous civic and professional
organizations. He was appointed to the Board of Directors by the President of
the United States in September 1994 for a term to expire on October 27, 1996.
Alan A. Diamonstein (age 64) has been a member of the Virginia
House of Delegates since 1967, currently serving as Chairman of the General
Laws Committee and a member of the standing committees on Appropriations,
Education and Rules. He is chairman of the Virginia Housing Study Commission
and is a member of the Peninsula Board of Advisors for Signet Bank, the
Jamestown-Yorktown Board of Trustees, as well as a number of educational and
civic organizations. Mr. Diamonstein is the senior partner in the law firm of
Diamonstein, Becker and Staley. He was appointed to the Board of Directors by
the President of the United States in October 1994 and continues to serve until
the appointment of a successor.
Michael R. Eisenson (age 40) is the President and Chief
Executive Officer of Harvard Private Capital Group, Inc., the wholly-owned
subsidiary of Harvard Management Company, Inc. which manages the direct
investment and private equity portfolio of the Harvard University endowment
fund. Between 1981 and 1986, Mr. Eisenson was a principal with the Boston
Consulting Group. Mr. Eisenson serves on the boards of directors of Harken
Energy Corporation, ImmunoGen, Inc. and Somatix Therapy Corporation, as well as
a number of private companies. Under a
28
<PAGE> 30
Shareholders Agreement between NHP Incorporated, Demeter Holdings Corporation
and Capricorn Investors, L.P. (see Item 1, above), Demeter is entitled to elect
two members of the NCHP Board of Directors. Pursuant to this agreement, Mr.
Eisenson was re-elected to the Board of Directors in 1992 and continues to
serve.
Tim R. Palmer (age 38) is a Managing Director of Harvard
Private Capital Group, the wholly-owned subsidiary of Harvard Management
Company, Inc. which manages the direct investment and private equity portfolio
of the Harvard University endowment fund. Prior to joining Harvard Private
Capital in 1990, Mr. Palmer was a manager of business development at The Field
Corporation and an attorney with Sidley & Austin. Mr. Palmer serves on the
board of directors of PriCellular Corporation, as well as on the boards of
several private companies. Under a Shareholders Agreement between NHP
Incorporated, Demeter Holdings Corporation and Capricorn Investors, L.P. (see
Item 1, above), Demeter is entitled to elect two members of the NCHP Board of
Directors. Pursuant to this agreement, Mr. Palmer was re-elected to the Board
of Directors in June 1994, for a term to expire in 1997.
Herbert S. Winokur, Jr. (age 52) has been the President of
Winokur & Associates, Inc. and Winokur Holdings, Inc., and the Managing General
Partner of Capricorn Investors, L.P. since 1987. Mr. Winokur is the Chairman of
DynCorp and serves on the boards of directors of Enron Corporation, Marine
Drilling Companies, Inc. and NacRe Corporation. Under a Shareholders Agreement
between NHP Incorporated, Demeter Holdings Corporation and Capricorn Investors,
L.P. (see Item 1, above), Capricorn is entitled to elect one member of the NCHP
Board of Directors. Pursuant to this agreement, Mr. Winokur was re-elected to
the Board of Directors in 1994, for a term to expire in 1997.
EXECUTIVE OFFICERS
The current executive officers of NCHP and a description of
their principal occupations in recent years are listed below. Also listed and
described are certain of the executive officers of NHP Incorporated, NCHP's
parent company, and both NHP Real Estate Corporation (Realco) and NHP
Management Company (NHP Management), two principal affiliates of NCHP.
References below to "NHP" are intended to include NCHP and its principal
affiliates, as appropriate.
J. Roderick Heller, III (age 58). See "Directors of NCHP."
Ann Torre Grant (age 38) has served as Executive Vice
President, Chief Financial Officer and Treasurer of NHP since February 1995.
She was Vice President and Treasurer of USAir, Inc. and USAir Group, Inc. from
1991 through January 1995, and held other finance positions at the airline
between 1988 and 1991. From 1983 to 1988, she held various finance positions
with American Airlines, Inc. Ms. Grant is a graduate of the University of Notre
Dame and has a Masters of Business from Cornell University. Ms. Grant serves as
a director of the Mutual Series Funds.
Linda J. Brower (age 44) has served as Executive Vice
President of NHP since March 1994 and served as Senior Vice President of NCHP
from February 1992 to March 1994. Ms. Brower is responsible for asset
management of the multifamily portfolio. From 1984 to 1991, Ms. Brower was Vice
President and Area Director for the Orange County, California and Washington,
D.C. offices of Citicorp Real Estate and was responsible for analyzing
investment proposals, asset management and restructuring. She is a graduate of
UCLA, holds a Masters degree in finance from the University of Texas and is a
licensed real estate broker.
Linda G. Davenport (age 46) has served as Executive Vice
President of the Company since March 1994. She is primarily responsible for
corporate and portfolio acquisitions. Ms. Davenport served as Executive Vice
President and Chief Operating Officer of NCHP from 1990 to January 1994 and as
General Counsel and Senior Vice President of the Company from 1986 to 1989.
Prior to joining NCHP in 1979 as Assistant General Counsel, Ms. Davenport was
employed in the Office of the General Counsel of the Federal Deposit Insurance
Corporation. She is a graduate of Michigan State University and holds J.D.
degree form California Western School of Law.
Robert M. Greenfield (age 48) has served as Executive Vice
President of NHP since March 1994. He joined NCHP in October 1991 as Senior
Vice President. Mr. Greenfield is primarily responsible for corporate and
portfolio acquisitions. From 1978 to 1984, and from 1990 to 1991, Mr.
Greenfield was a consultant in corporate strategy for the
29
<PAGE> 31
Boston Consulting Group, providing analyses and recommendations to clients in
the areas of corporate strategy, business development and diverstiture. From
1984 to 1991, he was a principal in Schindler Greenfield, Inc. and OCC, Inc.,
closely held real estate development firms. In February of 1992, Mr. Greenfield
and his wife filed for protection under Chapter 7 of the United States
Bankruptcy Code as a result of their inability to meet certain direct and
guaranteed obligations on borrowings by or on behalf of Schindler Greenfield,
Inc. and its affiliates. Mr. Greenfield graduated with honors from the
University of Chicago and holds a Masters of Business Administration with
honors from Harvard Business School.
J. Robert Hiner (age 44) has served as Executive Vice
President of NHP Management Co. since October 1993. He previously served as
Senior Vice President of NHP Management Co. from 1991 to 1993. During 1990, Mr.
Hiner served as President of Shadwell-Jefferson Property Management, Inc., a
retail property management company formed to manage 71 shopping centers in the
midwestern and southern United States. From 1986 to 1990, he served as
President of Cardinal Apartment Management Group, Inc., which was responsible
for the management of 55,000 apartment units. Mr. Hiner is a graduate of the
University of Virginia and holds a Masters of Business Administration from
Capital University.
Joel F. Bonder (age 47) has served as Senior Vice President
and General Counsel of the Company since April 1994. Mr. Bonder also served as
Vice President and Deputy General Counsel from June 1991 to March 1994, as
Associate General Counsel from 1986 to 1991, and as Assistant General Counsel
of the Company from 1985 to 1986. From 1983 to 1985, he was with the
Washington, D.C. law firm of Lane & Edson, P.C. From 1979 to 1983, Mr. Bonder
practiced with the Chicago law firm of Ross and Hardies. He is a graduate of
the University of Rochester and received a J.D. degree from the Washington
University School of Law.
Charles S. Wilkins, Jr. (age 45) has served as Senior Vice
President of NCHP since September 1988 and is currently responsible for
legislative and regulatory affairs. He was formerly responsible for asset and
property management of the affordable multifamily portfolio. Prior to joining
NCHP, Mr. Wilkins was Senior Vice President of Westminster Company, a regional
real estate development firm where he was responsible for the property
management of a diverse portfolio of properties. Mr. Wilkins is immediate
past-president of the National Assisted Housing Management Association and is a
director of the National Leased Housing Association, as well as various
regulatory committees, including the Executive Committee of the HUD Occupancy
Task Force. He graduated with honors from the University of North Carolina at
Chapel Hill, is a Certified Property Manager and a licensed real estate broker.
Jeffrey J. Ochs (age 38) has served as Vice President and
Chief Accounting Officer of NHP since September 1995. From 1994 until
September 1995, Mr. Ochs was Assistant Controller of USAir, Inc. From 1987 to
1994, he held various accounting positions with USAir, Inc. Mr. Ochs is a CPA
and has a Masters of Business Administration from Clarion University of
Pennsylvania, where he also earned a B.S. in Business Administration.
Eugene H. Goodsell (age 42) serves as Vice President and
Controller of NHP Incorporated, NCHP, Realco and NHP Management. He has been
with NCHP since 1983. Prior to joining NHP, Mr. Goodsell, a CPA, was an audit
manager with the public accounting firm of Arthur Andersen LLP.
(d) There is no family relationship between any of the foregoing
directors and executive officers.
Item 11. Executive Compensation
National Housing Partnership Realty Fund I has no officers or
directors. However, as outlined in the prospectus, various fees and
reimbursements are paid to the General Partner and its affiliates. Following is
a summary of such fees paid or accrued during the year ended December 31, 1995:
(i) Administrative and reporting fees of $86,392 accrued during the
year but not yet paid to the General Partner for managing the
affairs of the Partnership and for investor services.
30
<PAGE> 32
(ii) Annual partnership administration fee of $75,000, payable but not
yet paid, to the General Partner for its services as General
Partner of the Local Limited Partnerships. Payments of $52,500
were made in 1995.
(iii) An affiliate of the General Partner, NHP Management Company
(NHPMC) is the project management agent for the Properties
operated by the Local Limited Partnerships. During 1995, NHPMC
and other affiliates of NCHP earned $756,629 for management fees
and other services provided to the Local Limited Partnerships.
(iv) In 1995, personnel working at the project sites which were
managed by NHPMC were NCHP employees, and therefore the project
reimbursed NCHP for the actual salaries and related benefits. At
December 31, 1995, $60 was due to NCHP. Total reimbursements for
salaries and benefits earned for the year ended December 31,
1995, was approximately $795,000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
1133 Fifteenth Street Associates, a Maryland Limited Partnership, whose
general partner is NHP and whose limited partners were key employees of NCHP at
the time the Partnership was formed, owns a 1% interest in the Partnership.
Item 13. Certain Relationships and Related Transactions
The Partnership has had no material transactions or business
relationships with NHP or its affiliates except as described in Items 8, 10,
and 11, above.
31
<PAGE> 33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of this report:
1. Financial statements
The financial statements, notes, and reports listed below are
included herein:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 10
Statements of Financial Position, December 31, 1995 and 11
1994
Statements of Operations for the Years Ended
December 31, 1995, 1994, and 1993 12
Statements of Partners' Equity (Deficit) for the Years
Ended December 31, 1995, 1994, and 1993 13
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994, and 1993 14
Notes to Financial Statements 15
Schedule XI - Real Estate and Accumulated Depreciation
of Local Limited Partnerships in which NHP Realty
Fund I has invested, December 31, 1995 25
</TABLE>
2. Financial statement schedules
Financial statement schedules for the Registrant:
Schedule XI is included in the financial statements
listed under Item 14(a)(1) above. All other schedules
have been omitted as the required information is
inapplicable or the information is presented in the
financial statements or related notes.
Financial statements required by Regulation S-X which
are excluded from the annual report of shareholders by
Rule 14a-3(b): See 3 below.
32
<PAGE> 34
3. Exhibits
The following combined financial statements of the
Local Limited Partnerships in which the Partnership
has invested are included as an exhibit to this report
and are incorporated herein by reference:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 36
Combined Statements of Financial Position, December 31,
1995 and 1994 43
Combined Statements of Operations for the Years Ended
December 31, 1995, 1994, and 1993 44
Combined Statements of Partners' Equity (Deficit) for the
Years Ended December 31, 1995, 1994, and 1993 45
Combined Statements of Cash Flows for the Years Ended
December 31, 1995, 1994, and 1993 46
Notes to Combined Financial Statements 48
</TABLE>
(b) Reports on Form 8-K
None.
33
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
National Housing Partnership Realty Fund I
By: The National Housing Partnership, its sole general
partner
By: National Corporation for Housing Partnerships, its
sole general partner
March 28, 1996 /s/ J. Roderick Heller, III
- -------------- -----------------------------------------------
Date J. Roderick Heller, III, Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
March 28, 1996 /s/ J. Roderick Heller, III
- -------------- -----------------------------------------------
Date J. Roderick Heller, III
Chairman, President, Chief Executive
Officer and Director
March 28, 1996 /s/ Ann Torre Grant
- -------------- -----------------------------------------------
Date Ann Torre Grant
Executive Vice President, Chief Financial Officer
and Treasurer
March 28, 1996 /s/ Jeffrey J. Ochs
- -------------- -----------------------------------------------
Date Jeffrey J. Ochs
Vice President and Chief Accounting Officer
34
<PAGE> 36
March 28, 1996 *
- -------------- -----------------------------------------------
Date Susan R. Baron, Director
March 28, 1996 *
- -------------- -----------------------------------------------
Date Michael R. Eisenson, Director
March 28, 1996 *
- -------------- -----------------------------------------------
Date Danny K. Davis, Director
March 28, 1996 *
- -------------- -----------------------------------------------
Date Tim R. Palmer, Director
March 28, 1996 *
- -------------- -----------------------------------------------
Date Alan A. Diamonstein, Director
March 28, 1996 *
- -------------- -----------------------------------------------
Date Herbert S. Winokur, Jr., Director
This registrant is a limited partnership whose sole general partner,
The National Housing Partnership, is also a limited partnership. The sole
general partner of The National Housing Partnership is National Corporation for
Housing Partnerships. The persons indicated are Directors of National
Corporation for Housing Partnerships. Powers of Attorney are on file in
Registration Statement No. 33-1141 and as Exhibit 25 to the Partnership's Form
10-K for the fiscal years ended December 31, 1987, December 31, 1988, December
31, 1990 and December 31, 1991. Other than the Form 10-K report, no annual
report or proxy materials have been sent to security holders.
*By J. Roderick Heller, III pursuant to Power of Attorney.
/s/ J. Roderick Heller, III
---------------------------
35
<PAGE> 37
Independent Auditors' Report
To The Partners of
National Housing Partnership Realty Fund I
Washington, D.C.
We have audited the accompanying combined statements of financial position of
the Local Limited Partnerships in which National Housing Partnership Realty
Fund I (the Partnership) holds a limited partnership interest as of December
31, 1995 and 1994, and the related combined statements of operations, partners'
equity (deficit), and cash flows for each of the three years in the period
ended December 31, 1995. 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 Hurbell IV Limited Partnership and Gates Mills I Limited
Partnership (two of the ten Local Limited Partnerships) for the years ended
December 31, 1995, 1994 and 1993 which statements represent total assets
constituting 23% of combined total assets at December 31, 1995 and 1994,
respectively, and net losses constituting 15%, 26% and 9% of combined net loss
for each of the three years in the period ended December 31, 1995. The
financial statements of these two Local Limited Partnerships were audited by
other auditors whose reports have been furnished to us, and our opinion,
insofar as it relates to amounts included for these Local Limited Partnerships,
is based solely on 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 and the reports of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, such
financial statements present fairly, in all material respects, the combined
financial position of the Local Limited Partnerships in which National Housing
Partnership Realty Fund I holds a limited partnership interest as of December
31, 1995 and 1994, and the combined results of their operations and cash flows
for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
March 11, 1996
Washington, D.C.
36
<PAGE> 38
Independent Auditor's Report
Partners
Hurbell IV Limited Partnership -
Talladega Downs
Reston, VA
We have audited the accompanying statement of financial position of Hurbell IV
Limited Partnership (Talladega Downs), A Limited Partnership, FHA Project No.
062-44054-LD, as of December 31, 1995, and the related statements of profit and
loss (on HUD Form No. 92410), changes in partners' equity (deficit), and cash
flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards, Government Auditing Standards, issued by the Comptroller General of
the United States, and the Consolidated Audit Guide for Audits of HUD Programs,
issued by the U.S. Department of Housing and Urban Development, Office of
Inspector General, in July 1993. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hurbell IV Limited Partnership
(Talladega Downs), a Limited Partnership, at December 31, 1995, and the results
of its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information, as referred
to in the Table of Contents, is presented for purposes of additional analysis
and is not a required part of the basic financial statements. Such information
has been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated, in all material
respects, in relation to the basic financial statements taken as a whole.
Russell, Thompson, Butler & Houston
Mobile, Alabama
January 20, 1996
37
<PAGE> 39
Independent Auditor's Report
Partners
Hurbell IV Limited Partnership -
Talladega Downs
Reston, VA
We have audited the accompanying statement of financial position of Hurbell IV
Limited Partnership (Talladega Downs), A Limited Partnership, FHA Project No.
062-44054-LD, as of December 31, 1994, and the related statements of profit and
loss (on HUD Form No. 92410), changes in partners' equity (deficit), and cash
flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards, and Government Auditing Standards, issued by the Comptroller General
of 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 audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Hurbell IV Limited Partnership (Talladega
Downs), a Limited Partnership, at December 31, 1994, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information, as referred
to in the Table of Contents, is presented for purposes of additional analysis
and is not a required part of the basic financial statements. This additional
information is the responsibility of the Partnership's management. Such
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated, in all
material respects, in relation to the basic financial statements taken as a
whole.
Russell, Thompson, Butler & Houston
Mobile, Alabama
January 21, 1995
38
<PAGE> 40
Independent Auditor's Report
Partners
Hurbell IV Limited Partnership -
Talladega Downs
Reston, VA
We have audited the accompanying statement of financial position of Hurbell IV
Limited Partnership (Talladega Downs), A Limited Partnership, FHA Project No.
062-44054-LD, as of December 31, 1993, and the related statements of profit and
loss (on HUD Form No. 92410), changes in partners' equity (deficit), and cash
flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards, and Government Auditing Standards, issued by the Comptroller General
of 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 audit provides a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Hurbell IV Limited Partnership (Talladega
Downs), a Limited Partnership, at December 31, 1993, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information, as referred
to in the Table of Contents, is presented for purposes of additional analysis
and is not a required part of the basic financial statements. This additional
information is the responsibility of the Partnership's management. Such
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated, in all
material respects, in relation to the basic financial statements taken as a
whole.
Russell, Thompson, Butler & Houston
Mobile, Alabama
January 15, 1994
39
<PAGE> 41
Independent Auditors' Report
Partners
Gates Mills I Limited Partnership
Washington, D.C.
We have audited the accompanying statement of financial position of Gates Mills
I Limited Partnership, An Ohio Limited Partnership, FHA Project No.
042-44062-LDP, as of December 31, 1995, and the related statements of profit
and loss (on HUD Form No. 92410), partners' deficit and cash flows for the year
then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gates Mills I Limited
Partnership as of December 31, 1995, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information, as referred to in
the Table of Contents, is presented for purposes of additional analysis and is
not a required part of the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, the supplemental information is
fairly stated, in all material respects, in relation to the basic financial
statements taken as a whole.
Reznick Fedder & Silverman
Bethesda, Maryland
January 30, 1996
40
<PAGE> 42
Independent Auditors' Report
Partners
Gates Mills I Limited Partnership
Washington, D.C.
We have audited the accompanying statement of financial position of Gates Mills
I Limited Partnership, An Ohio Limited Partnership, FHA Project No.
042-44062-LDP, as of December 31, 1994, and the related statements of profit
and loss (on HUD Form No. 92410), partners' deficit and cash flows for the year
then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gates Mills I Limited
Partnership as of December 31, 1994, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information, as referred to in
the Table of Contents, is presented for purposes of additional analysis and is
not a required part of the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, the supplemental information is
fairly stated, in all material respects, in relation to the basic financial
statements taken as a whole.
Reznick Fedder & Silverman
Bethesda, Maryland
February 1, 1995
41
<PAGE> 43
Independent Auditors' Report
Partners
Gates Mills I Limited Partnership
Washington, D.C.
We have audited the accompanying statement of financial position of Gates Mills
I Limited Partnership, An Ohio Limited Partnership, FHA Project No.
042-44062-LDP, as of December 31, 1993, and the related statements of profit
and loss (on HUD Form No. 92410), partners' deficit and cash flows for the year
then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gates Mills I Limited
Partnership as of December 31, 1993, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information, as referred to in
the Table of Contents, is presented for purposes of additional analysis and is
not a required part of the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, the supplemental information is
fairly stated, in all material respects, in relation to the basic financial
statements taken as a whole.
Reznick Fedder & Silverman
Bethesda, Maryland
February 1, 1994
42
<PAGE> 44
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
December 31,
----------------------------------------------
1995 1994
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 638,126 $ 713,441
Accounts receivable (Note 3) 182,924 188,222
Tenants' security deposits held in trust funds 226,270 244,292
Prepaid taxes and insurance 64,554 69,535
Deposits 6,825 6,825
Deferred Financing Costs 8,870 3,210
Mortgage escrow deposits (Note 6) 2,635,280 2,431,159
Rental property, net (Notes 2, 5 and 10) 30,997,442 31,514,689
----------- -----------
$ 34,760,291 $ 35,171,373
=========== ===========
<CAPTION>
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
<S> <C> <C>
Accounts payable and accrued expenses:
Trade payables $ 487,510 $ 607,054
Accrued real estate taxes 380,802 273,902
Due to management agent - NHPMC (Note 11) 48,092 47,793
Accrued interest on mortgage notes 8,168 9,275
Due to partners (Note 8) 843,017 692,117
Accrued interest on partner loans (Note 8) 213,417 188,784
----------- -----------
1,981,006 1,818,925
Tenants' security deposits payable 220,495 233,703
Deferred income 33,918 17,472
Deferred acquisition notes payable (Note 7) 14,236,437 14,236,437
Accrued interest on deferred acquisition notes (Note 7) 16,259,203 14,423,609
Mortgage notes payable (Note 6) 15,854,138 16,332,048
Partners' equity (deficit) (13,824,906) (11,890,821)
----------- -----------
$ 34,760,291 $ 35,171,373
=========== ===========
</TABLE>
43
<PAGE> 45
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Rental income (Note 4) $ 7,213,519 $ 6,990,750 $ 6,695,958
Interest income 121,956 77,631 58,288
Other income 127,359 156,300 161,676
---------- ---------- ----------
7,462,834 7,224,681 6,915,922
---------- ---------- ----------
EXPENSES:
Administrative expenses (Note 11) 445,966 488,722 487,069
Operating and maintenance expenses 2,751,798 2,769,888 2,682,895
Management and other services from
related party (Note 11) 756,629 729,364 672,982
Salaries and related benefits to
related party (Note 11) 794,572 828,907 714,683
Depreciation (Note 2) 1,147,876 1,134,639 1,163,045
Taxes and insurance 1,000,067 996,874 943,373
Financial expenses - primarily interest (Note 6) 242,692 258,500 406,892
Interest on acquisition notes (Note 7) 2,075,693 1,555,715 1,389,084
Annual partnership administrative fees to
General Partner (Note 8) 75,000 75,000 75,000
Loss on reduction of carrying value of rental
property (Note 10) - - 1,900,000
Other entity expenses 40,746 13,704 -
---------- ---------- ----------
9,331,039 8,851,313 10,435,023
---------- ---------- ----------
NET LOSS $(1,868,205) $(1,626,632) $(3,519,101)
========== ========== ==========
</TABLE>
44
<PAGE> 46
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
National The
Housing National Jeffrey
Partnership Housing I.
Realty Fund I Partnership Friedman Total
------------- ----------- -------- -----
<S> <C> <C> <C> <C>
Equity (deficit) at
January 1, 1993 $ (6,450,944) $(151,972) $(27,687) $ (6,630,603)
Net loss (3,481,565) (35,191) (2,345) (3,519,101)
Distributions (21,350) (217) (122) (21,689)
----------- -------- ------- -----------
Equity (deficit) at
December 31, 1993 (9,953,859) (187,380) (30,154) (10,171,393)
Net loss (1,606,631) (16,267) (3,734) (1,626,632)
Distributions (91,746) (928) (122) (92,796)
----------- -------- ------- -----------
Equity (deficit) at
December 31, 1994 (11,652,236) (204,575) (34,010) (11,890,821)
Net loss (1,847,011) (18,681) (2,513) (1,868,205)
Distributions (65,099) (659) (122) (65,880)
----------- -------- ------- -----------
Equity (deficit) at
December 31, 1995 $(13,564,346) $(223,915) $(36,645) $(13,824,906)
=========== ======== ======= ===========
Percentage interest at
December 31, 1993,
1994 and 1995 (A) (B) (C)
=== === ===
</TABLE>
(A) Holds a 98% limited partnership interest in Gates Mills I Limited
Partnership and a 99% limited partnership interest in the nine
remaining Local Limited Partnerships.
(B) Holds a 1% general partnership interest in ten Local Limited
Partnerships.
(C) Holds a 1% limited partnership interest in Gates Mills I Limited
Partnership.
45
<PAGE> 47
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Rental receipts $ 7,115,216 $7,003,836 $6,653,357
Interest receipts 113,545 72,667 61,524
Other receipts 145,928 145,190 160,707
Administrative expenses paid (298,941) (362,318) (316,677)
Administrative salaries paid (Note 11) (400,145) (386,854) (366,940)
Management fees paid (Note 11) (657,060) (672,354) (561,690)
Computer and accounting fees paid (Note 11) (77,684) (77,658) (77,989)
Utilities paid (1,384,518) (1,391,254) (1,332,581)
Operating and maintenance expenses paid (1,377,259) (1,330,226) (1,383,251)
Operating and maintenance payroll paid (Note 11) (551,700) (592,368) (492,300)
Real estate taxes paid (412,255) (431,657) (442,695)
Payroll taxes paid (86,895) (84,541) (77,800)
Miscellaneous taxes paid (15,229) (16,177) (14,060)
Property insurance paid (201,675) (191,051) (198,057)
Miscellaneous insurance paid (174,094) (194,606) (159,188)
Interest on mortgage notes paid (97,890) (130,428) (160,831)
Mortgage insurance premium paid (79,255) (82,162) (84,217)
Partnership administrative fee paid to General Partner (52,500) (94,494) (42,878)
Partnership entity expense paid (752) - -
Interest on partner loans paid (39,310) - -
Miscellaneous financial expenses paid (200) 10,779 (14,573)
---------- ---------- ----------
Net cash provided by rental operating activities 1,467,327 1,194,324 1,149,861
Decrease in tenants' security deposits
held in trust fund 18,220 6,050 11,294
Decrease in tenants' security deposits payable (13,406) (8,864) (7,939)
---------- ---------- ----------
Net cash provided by operating activities 1,472,141 1,191,510 1,153,216
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (552,612) (392,456) (372,187)
Payments to mortgage escrow deposits (1,321,316) (1,212,686) (1,119,760)
Disbursements from mortgage escrow deposits 1,186,710 1,163,538 1,030,899
Increase in receivable from mortgagee (97,282) - -
Payment of deferred costs 2,046 - -
Interest earned on mortgage escrow deposits (69,515) (56,323) (43,475)
Interest withdrawn from mortgage escrow deposits - 668 2,431
---------- ---------- ----------
Net cash used in investing activities (851,969) (497,259) (502,092)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of principal on mortgage notes payable (477,910) (442,742) (410,172)
Distributions to partners (65,880) (92,796) (21,689)
Payment of accrued interest on deferred acquisition note (144,770) - -
Loans from General Partner - - 2,000
Repayment of loans from partner (6,927) (9,803) -
---------- ---------- ----------
Net cash used in financing activities (695,487) (545,341) (429,861)
---------- ---------- ----------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (75,315) 148,910 221,263
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 713,441 564,531 343,268
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 638,126 $ 713,441 $ 564,531
========== ========== ==========
</TABLE>
46
<PAGE> 48
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net loss $(1,868,205) $(1,626,632) $(3,519,101)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 1,147,876 1,134,639 1,163,045
Loss on reduction of carrying value of rental property - - 1,900,000
Mortgagor entity expenses
(primarily interest on acquisition notes) 2,255,382 1,688,228 1,652,145
Decrease (increase) in receivable from tenants, net 4,610 33,555 (16,464)
Decrease (increase) in other receivables 1,160 16,151 (18,248)
Decrease (increase) in insurance proceeds receivable 111,963 (129,586) -
Decrease (increase) in receivable for FHA subsidy (8,342) 19,856 26,060
(Increase) decrease in interest receivable (6,811) (3,322) 5,596
Decrease (increase) in prepaid taxes and insurance 4,981 24,358 84,837
Increase in deferred costs (7,706) - -
(Decrease) increase in trade payables and accrued
expenses (199,112) 92,212 (92,708)
(Decrease) increase in excess rents due HUD (515) 28,786 5,624
Decrease in accrued interest on mortgage notes (1,107) (2,749) (2,438)
Increase (decrease) in accrued real estate taxes 106,900 53,766 (30,141)
(Decrease) increase in management fee payable (1,522) (35,780) 27,847
Increase (decrease) in deferred income 20,337 (4,664) 6,661
Decrease in tenants' security deposits held in
trust fund 18,022 6,050 10,546
Decrease in tenants' security deposits payable (13,208) (8,864) (7,167)
Partnership administrative fee paid to General Partner (52,500) (94,494) (42,878)
Partnership entity expense paid (752) - -
Interest on partner loans (39,310) - -
---------- ---------- ----------
Total adjustments 3,340,346 2,818,142 4,672,317
---------- ---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,472,141 $ 1,191,510 $ 1,153,216
========== ========== ==========
</TABLE>
47
<PAGE> 49
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF PARTNERSHIP ORGANIZATION, BASIS OF COMBINATION AND
SIGNIFICANT ACCOUNTING POLICIES
Organization
National Housing Partnership Realty Fund I (the Partnership) is a
limited partnership organized on October 21, 1983, under the laws of the State
of Maryland under the Maryland Revised Uniform Limited Partnership Act. The
Partnership was formed for the purpose of raising capital by offering and
selling limited partnership interests and then investing in Local Limited
Partnerships, each of which owns and operates an existing rental housing
project which is financed and/or operated with one or more forms of rental
assistance or financial assistance from the U.S. Department of Housing and
Urban Development (HUD). A substantial portion of each Local Limited
Partnership is received from the housing assistance agreement discussed in Note
4 below. On May 25, 1984, inception of operations, the Partnership began
raising capital and acquiring interests in Local Limited Partnerships.
During 1984, the Partnership acquired a 98% limited partnership
interest in Gates Mills I Limited Partnership and 99% limited partnership
interests in nine other Local Limited Partnerships, each of which was organized
during 1984 to acquire and operate an existing rental housing project
originally organized under Section 236 of the National Housing Act. As a
limited partner in these Local Limited Partnerships, the Partnership does not
exercise control over the activities of the Local Limited Partnerships in
accordance with the partnership agreements.
Basis of Combination
The combined financial statements include the accounts of the following
ten Local Limited Partnerships in which the Partnership holds a limited
partnership interest.
Fairmeadows Limited Partnership
Forest Green Limited Partnership
Gates Mills I Limited Partnership
Griffith Limited Partnership
Hurbell IV Limited Partnership
Northgate Village Limited Partnership
San Jose Limited Partnership
Southridge Apartments Limited Partnership
Southward Limited Partnership
Village Green Limited Partnership
Significant Accounting Policies
The financial statements of the Local Limited Partnerships are prepared
on the accrual basis of accounting. For nine of the Local Limited Partnerships,
depreciation of the buildings and improvements is computed using the
straight-line method, assuming a 50-year life from the date of initial
occupancy, and depreciation of equipment is calculated using accelerated
methods over estimated useful lives of 5 to 27 years. Depreciation of the
buildings and improvements is computed using the straight-line method, assuming
a 30-year life and a 30% salvage value for one of the Local Limited
Partnerships. Cash distributions are limited by the Regulatory Agreement
between the Local Limited
48
<PAGE> 50
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
Partnerships and HUD to the extent of surplus cash as defined by HUD.
Undistributed amounts are cumulative and may be distributed in subsequent years
if future operations provide surplus in excess of current requirements.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
For purposes of the statements of cash flows, the Local Limited
Partnerships consider all highly liquid debt instruments purchased with initial
maturities of three months or less to be cash equivalents.
2. CHANGE IN ESTIMATE
During 1993, for nine of the Local Limited Partnerships, depreciation
of the building has been computed using the straight-line method, assuming a
50-year life from the date of initial occupancy at the time of construction or
after substantial rehabilitation of the building. Depreciation of the building
in prior years was computed using the straight-line method, assuming a 30-year
life and 30% salvage value. This change in the estimate of the life and salvage
value of the building decreased the combined net loss in 1993 by $45,125.
3. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1995 1994
---- ----
<S> <C> <C>
Due from tenants $ 35,720 $ 31,504
Rental assistance receivable (see Note 4) 25,759 17,417
Accrued interest receivable 23,129 16,318
Due from mortgagee 97,282 -
Insurance proceeds 17,623 129,586
Other 6,105 7,265
------- -------
205,618 202,090
Less allowance for uncollectible accounts (22,694) (13,868)
------- -------
Net accounts receivable $182,924 $188,222
======= =======
</TABLE>
4. HOUSING ASSISTANCE AGREEMENTS
The Federal Housing Administration (FHA) has contracted with the ten
Local Limited Partnerships under Section 8 of Title II of the Housing and
Community Development Act of 1974, to make housing assistance payments to the
Local Limited Partnerships on behalf of qualified tenants. The terms of the
agreements are five years with either one or two five-year renewal options. The
agreements expire at various dates over the next ten years. Each Local Limited
49
<PAGE> 51
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
Partnership has an agreement in effect during 1996. Four Local Limited
Partnerships have assistance agreements which expire during June and September
1996. Fairmeadows and Lakeview Apartments Section 8 subsidy contracts covering
90 and 60 units, respectively, are scheduled to expire in September 1996.
Additionally, Gates Mills I and Hurbell IV have contracts for 107 and 60 units,
respectively, scheduled to expire in June, 1996. In January 1996, President
Clinton signed into law H.R. 2880. This legislation includes a provision that
requires HUD to provide a one-year renewal for Section 8 contracts scheduled to
expire during the first nine months of 1996. All other Section 8 contracts are
scheduled to expire between 1997 and 2003. The Local Limited Partnerships
received a total of $3,467,209, $3,291,320 and $2,973,210 in the form of
housing assistance payments during 1995, 1994 and 1993, respectively, which is
included in "Rental Income" on the combined statements of operations.
5. RENTAL PROPERTY
Rental property consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------
1995 1994
---- ----
<S> <C> <C>
Land $ 3,559,204 $ 3,559,204
Buildings and improvements 35,436,379 35,436,379
Equipment and furniture 3,970,949 3,340,320
----------- -----------
42,966,532 42,335,903
Less accumulated depreciation (11,969,090) (10,821,214)
----------- -----------
Net rental property $ 30,997,442 $ 31,514,689
=========== ===========
</TABLE>
As further described in Note 10, during 1993 two of the Local Limited
Partnerships recorded adjustments aggregating $1,900,000 to reduce the carrying
value of the rental properties to their estimated net realizable value.
6. MORTGAGE NOTES PAYABLE
The mortgage notes payable are insured by FHA and collateralized by
first deeds of trust on the rental properties. The notes bear interest at rates
ranging from 7% to 8.5% per annum. However, FHA makes subsidy payments directly
to the mortgage lender reducing the monthly principal and interest payments of
the project owner to an effective interest rate of 1% over the forty-year term
of the notes. The liability of the Local Limited Partnerships under the
mortgage notes is limited to the underlying value of the real estate
collateral, plus other amounts deposited with the lenders.
Under agreements with the mortgage lenders and FHA, the Local Limited
Partnerships are required to make monthly escrow deposits for taxes, insurance
and reserves for the replacement of project assets, and are subject to
restrictions as to operating policies, rental charges, operating expenditures
and distributions to partners.
50
<PAGE> 52
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
Approximate maturities of mortgage notes payable for the next five
years are as follows:
1996 $516,000
1997 $557,000
1998 $601,000
1999 $649,000
2000 $701,000
7. DEFERRED ACQUISITION NOTES PAYABLE
The deferred acquisition notes bear simple interest at rates of 9% and
10% per annum. These notes are nonrecourse and are collateralized by security
interests in all partnership interests of the Local Limited Partnerships. All
principal balances and accrued interest are payable upon the earlier of the
sale, transfer or refinancing of the projects, or the final maturity date of
the notes. The notes may be extended for periods ranging from two to five
years. The notes may be prepaid in whole or in part at any time without
penalty.
Maturities of deferred acquisition notes payable as of December 31,
1995, are as follows:
Matured, due and payable $ 4,015,475
1996 -
1997 1,199,396
1998 1,608,550
1999 and thereafter 7,413,016
----------
$14,236,437
==========
The deferred acquisition notes on Fairmeadows and Southridge apartments
matured in September and October 1994. From the date of maturity, interest
accrues at 18% per annum. The noteholders have not declared the notes to be in
default, and the General Partner is negotiating with the noteholders to obtain
an amendment of the notes to extend the due date.
On October 2, 1995, Forest Green and Village Green Limited Partnerships
entered into a discount buyout agreement for early settlement of their deferred
acquisition notes and related accrued interest payable. The agreements provide
for a total buyout amount of $175,000 per Partnership, payable in two
installments. The first installments of $120,000 each, which were applied
against accrued interest on deferred acquisition note payable, were paid upon
execution of the agreements. The final installments of $55,000 each are due on
or before May 1, 1996. The Local Limited Partnerships have the option of
extending the due date of the final installments to June 3, 1996. The first
installments were paid with $104,395 and $40,375, respectively, in available
surplus cash and $15,605 and $79,625, respectively in proceeds from a partner
loan.
The Partnerships anticipate paying the final installments with surplus
cash generated during 1995. If surplus cash is insufficient to pay the final
installment, the Local Limited Partnerships anticipate obtaining a loan from
the General Partner to make the final payment. Upon payment of the final
installment, the balance of the deferred acquisition notes payable and related
accrued interest ($1,398,910 and $1,409,813, respectively, as of December 31,
1995) will be relieved. The deferred acquisition notes will remain in full
force and effect until the final installments are
51
<PAGE> 53
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
paid. If the final installments are not made before the due date, the buyout
agreements are terminated and the deferred acquisition notes will remain in
force through their original maturity date of September 6, 1999.
During 1993, the deferred acquisition notes on five Local Limited
Partnerships were extended to due dates in 1999 or later.
8. DUE TO PARTNERS
The Local Limited Partnerships accrued annual partnership
administration fees payable to the General Partner, The National Housing
Partnership (NHP), of $75,000 during 1995, 1994 and 1993, respectively.
Payments of these fees are made to NHP without interest from surplus cash
available for distribution to partners pursuant to HUD regulations. During
1995, 1994 and 1993, the Local Limited Partnerships paid $52,500, $94,494 and
$42,878, respectively. The accumulated fees owed to NHP are $387,769, $365,269
and $384,763, at December 31, 1995, 1994 and 1993, respectively.
During 1995 and 1994, NHP advanced $39,049 and $9,553 to six Local
Limited Partnerships for expenses incurred relating to potential sales or
refinancing under the Low Income Housing Preservation and Resident
Homeownership Act of 1990 (LIHPRHA). During 1995 and 1994, one and two Local
Limited Partnerships made payments of principal of $6,927 and $9,803 and
interest of $1,749 and $890, respectively. Eight Local Limited Partnerships owe
a total of $62,518 to NHP at December 31, 1995 and seven Local Limited
Partnerships owed $30,396 to NHP at December 31, 1994. Interest on these
advances is charged at a rate equal to the Chase Manhattan Bank prime interest
rate plus 2%.
During 1995, the Partnership advanced $96,280 and $2,300 to two Local
Limited Partnerships. No advances were repaid to the Partnership in 1995 and
1994. During 1995, one Local Limited Partnership made a payment of interest at
$37,561. At December 31, 1994 and December 31, 1993, the balance owed the
Partnership by six Local Limited Partnerships was $392,730 and $296,450,
respectively. Interest is charged at the Chase Manhattan Bank rate of prime
plus 2%.
During 1993, the Local Limited Partnerships revised their estimate of
interest to be paid due to a trend in government initiatives providing economic
incentives to owners of subsidized multifamily housing, which may someday
result in refinancing opportunities and increased allowable distributions,
which would provide cash to pay interest. Accordingly, accrued interest of
$143,396 owed on the above loans was recorded. Of this amount, $102,867 relates
to periods prior to 1993 and $40,529 relates to 1993. During 1995 and 1994,
interest of $63,943 and $46,278, respectively, were accrued. Accrued interest
at December 31, 1995 and 1994 was $213,417 and $188,784, respectively.
All advances and accumulated interest will be paid in conformity with
HUD and/or other regulator requirements and applicable partnership agreements.
9. FEDERAL AND STATE INCOME TAXES
The Local Limited Partnerships are not taxed on their income. The
partners are taxed in their individual capacities upon their distributive share
of the partnerships' taxable income and are allowed the benefits to be derived
from offsetting their distributive share of the tax losses against taxable
income from other sources subject to passive
52
<PAGE> 54
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
loss rule limitations. The taxable income or loss differs from amounts included
in the statement of operations primarily because of different methods used in
determining depreciation expense and interest on acquisition notes for tax
purposes.
For Federal income tax purposes, the Local Limited Partnerships compute
depreciation of the buildings and improvements using the Accelerated Cost
Recovery System (ACRS) and the Modified Accelerated Cost Recovery System
(MACRS). Rent received in advance is included as income in determining the
taxable income or loss for Federal income tax purposes; while for financial
statement purposes the amount is considered a liability. In addition, interest
expense on the acquisition notes payable by the Local Limited Partnerships is
computed for Federal income tax purposes using the economic accrual method;
while for financial statement purposes interest is computed using a simple
interest rate. Other differences result from the allocation of tax losses in
accordance with Section 704(b) of the Internal Revenue Code.
A reconciliation follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net loss per financial statements $(1,868,205) $(1,626,632) $(3,519,101)
Depreciation (870,916) (872,269) (811,735)
Interest on acquisition notes payable (188,974) (229,057) (163,801)
Rent received in advance 195 (3,622) (1,133)
Accrued interest on partner loans 24,633 45,388 142,986
Loss on reduction of carrying value
of rental property - - 1,900,000
Other 33,251 7,743 8,203
---------- ---------- ----------
Loss per tax returns $(2,870,016) $(2,678,449) $(2,444,581)
========== ========== ==========
</TABLE>
10. LOSS ON REDUCTION OF CARRYING VALUE OF RENTAL PROPERTY
For operating real estate property, generally accepted accounting
principles (GAAP) require that the Local Limited Partnership evaluate whether
it is probable that the estimated undiscounted future cash flows of its
property, plus cash projected to be received upon an assumed sale of the
property (Net Realizable Value) is less than the net carrying value of the
property. If such a shortfall exists, is material, and is deemed to be other
than temporary in nature, then a write-down equal to the shortfall would be
warranted. The Local Limited Partnership performs such evaluations on an
ongoing basis.
During 1993, using a methodology consistent with GAAP, two of the Local
Limited Partnerships, Griffith Limited Partnership and Southward Limited
Partnership, determined that the net book value of their respective rental
property exceeded the rental properties' estimated net realizable value. As
required by GAAP, the Local Limited Partnerships recorded adjustments
aggregating $1,900,000 to reduce the carrying value of the rental properties to
their estimated net realizable value.
53
<PAGE> 55
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
Additionally, regardless of whether a write-down of an individual
property has been recorded or not, the carrying value of each of these
properties may still exceed their fair market value as of December 31, 1995.
Should a Local Limited Partnership be forced to dispose of any of its
properties, it could incur a loss.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 "Accounting For The
Impairment of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of"
(the "Statement") effective for financial statements for fiscal years beginning
after December 15, 1995. Adoption of this Statement during the year ending
December 31, 1996 will require an impairment loss to be recognized if the sum
of estimated future cash flows (undiscounted and without interest charges) is
less than the carrying amount of rental property. The impairment loss would be
the amount by which the carrying value exceeds the fair value of the rental
property. If the rental property is to be disposed of, fair value is calculated
net of costs to sell. The Local Limited Partnerships have not estimated the
effect of implementing the Statement. Adoption of the Statement for the year
ending December 31, 1996 could have a significant impact (noncash) on the
results of operations and financial position.
11. RELATED-PARTY TRANSACTIONS
The General Partner of the Partnership is NHP. National Corporation for
Housing Partnerships (NCHP) is the sole general partner of NHP. NHP is the sole
general partner of the Local Limited Partnerships. An affiliate of the General
Partner, NHP Management Company (NHPMC) is the project management agent for the
projects operated by eight of the Local Limited Partnerships. NHPMC and other
affiliates of NCHP earned $756,629, $729,364 and $672,982, for management fees
and other services provided to the Local Limited Partnerships during 1995, 1994
and 1993, respectively. As of December 31, 1995 and 1994, amounts due NHPMC and
unpaid by the Local Limited Partnerships amounted to $48,092 and $47,793,
respectively.
Personnel working at the project sites, which are managed by NHPMC, are
NCHP employees, and therefore the projects reimburse NCHP for the actual
salaries and related benefits. At December 31, 1995 and 1994, trade payables
include $60 and $9,151, respectively, due to NCHP. Total reimbursements for
salaries and benefits for the years ended December 31, 1995, 1994 and 1993,
were approximately $795,000, $828,000 and $747,000, respectively.
An affiliate of the Local Partner of one of the Local Limited
Partnerships provides management services for the property owned by the Local
Limited Partnership. During 1995, they received $69,977 for these services, and
in 1994 they received $73,541 for these services. Additionally, in 1995 and
1994, $4,949 and $4,593, respectively, was paid to another affiliate of this
Local Partner for painting services.
12. FUTURE OPERATIONS AND CASH FLOWS
As discussed in Note 7, all of the Local Limited Partnerships in which
the Partnership has invested carry deferred acquisition notes due the original
owner of each property. With the exception of Fairmeadows Limited Partnership
and Southridge Limited Partnership, these notes will reach final maturity
between 1997 and 1999. Fairmeadows and Southridge notes matured on September
24, 1994 and October 18, 1994, respectively. These notes are secured by both
the Partnership's and NHP's interests in the respective Local Limited
Partnerships. In the event of a default on the notes, the noteholder would be
able to assume NHP's and the Partnership's interests in Fairmeadows and
Southridge. Currently, the noteholder has not declared the notes to be in
default.
54
<PAGE> 56
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
(CONTINUED)
Due to the weakness in the rental market conditions where the
Fairmeadows and Southridge properties are located, the General Partner believes
the amounts due on the acquisition notes will likely exceed the value to be
obtained through the properties' participation in LIHPRHA or other sale or
refinancing opportunities. The General Partner is negotiating with the
noteholder to obtain an amendment of the note to extend the due date. Should no
agreement be reached, the Partnership may lose its interest in these Local
Limited Partnerships. Should the Partnership lose its interest in these Local
Limited Partnerships, the partners in the Partnership may incur adverse taxable
consequences. The impact of the tax consequences is dependent upon each
partner's individual tax situation.
The total assets, deficit, revenues, and net loss of Fairmeadows and
Southridge represent 30%, 27%, 31% and 58%, respectively, of the applicable
amounts included in the accompanying combined financial statements as of
December 31, 1995 and for the year then ended.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
FASB Statement No. 107, "Disclosures About Fair Value of Financial
Instruments," requires disclosure of fair value information about financial
instruments, when it is practicable to estimate that value. The mortgage notes
payable are insured by the FHA and are secured by the rental property. The
operations generated by the rental property are subject to various government
rules, regulations and restrictions which make it impracticable to obtain the
information to estimate the fair value of the mortgage note and the partner
loans and related accrued interest. For the deferred acquisition notes and
related accrued interest, a reasonable estimate of fair value could not be made
without incurring excessive costs. The carrying amount of other assets and
liabilities reported on the statement of financial position that require such
disclosure approximates fair value.
14. NON-CASH INVESTING ACTIVITY
During 1995, six of the Local Limited Partnerships incurred costs in
the aggregate of $98,696 for buildings and equipment which are included in
trade payables as of December 31, 1995. Included in trade payables as of
December 31, 1994 is $22,570 of such costs incurred by five Local Limited
Partnerships.
15. CONTINGENCY
For Fairmeadows Limited Partnership, the local taxing authority has
assessed the value of the rental property much higher than in prior years. As a
result, real estate taxes for 1995 have been increased by the taxing authority
to approximately $120,000 from approximately $50,000 in the prior year. The
Local Limited Partnership has appealed the new assessment and has accrued
$74,000 for real estate tax expense in the accompanying financial statements.
The remaining balance of $46,000 is in dispute and no provision for this amount
has been included in the financial statements.
55
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 356
<SECURITIES> 0
<RECEIVABLES> 11,957
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,313
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,313
<CURRENT-LIABILITIES> 699,941
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (687,628)
<TOTAL-LIABILITY-AND-EQUITY> 12,313
<SALES> 0
<TOTAL-REVENUES> 103,631
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 230,857
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (127,226)
<INCOME-TAX> 0
<INCOME-CONTINUING> (127,226)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (127,226)
<EPS-PRIMARY> (11)
<EPS-DILUTED> (11)
</TABLE>
