<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
COMMISSION FILE NUMBER 0-13465
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
(Exact name of registrant as specified in its charter)
MARYLAND 52-1358879
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
8065 LEESBURG PIKE, SUITE 400
VIENNA, VIRGINIA 22182
(Address of principal executive offices)
(Zip Code)
(703) 394-2400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
March 31,
1997 December 31,
(Unaudited) 1996
----------- ------------
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 61,567 $ 62,193
Investments in and advances to Local Limited Partnerships (Note 2) 796,214 828,284
-------- --------
$857,781 $890,477
======== ========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
------------------------------------------
Liabilities:
Administrative and reporting fee payable to General Partner (Note 3) $765,170 $743,572
Due to General Partner 9,911 9,911
Accrued interest on partner loans 1,122 844
Accrued expenses 50,920 38,920
-------- --------
827,123 793,247
-------- --------
Partners' equity (deficit):
General Partner -- The National Housing Partnership (NHP) (95,058) (94,392)
Original Limited Partner -- 1133 Fifteenth Street Associates (99,958) (99,292)
Other Limited Partners -- 11,519 investment units 225,674 290,914
-------- --------
30,658 97,230
-------- --------
$857,781 $890,477
======== ========
</TABLE>
See notes to financial statements.
-1-
<PAGE> 3
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
1997 1996
-------- ---------
<S> <C> <C>
REVENUES:
Interest income $ 336 $ 335
-------- --------
COSTS AND EXPENSES:
Share of losses from Local Limited Partnerships 32,070 -
Administrative and reporting fees to
General Partner (Note 3) 21,598 21,598
Interest on partner loans 278 62
Other operating expenses 12,962 15,581
-------- --------
66,908 37,241
-------- --------
NET LOSS $(66,572) $(36,906)
======== ========
NET LOSS ASSIGNABLE TO LIMITED PARTNERS $(65,240) $(36,168)
======== ========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST $ (6) $ (3)
======== ========
</TABLE>
See notes to financial statements.
-2-
<PAGE> 4
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
STATEMENT OF PARTNER'S EQUITY (DEFICIT)
(UNAUDITED)
<TABLE>
<CAPTION>
The National 1133
Housing Fifteenth Other
Partnership Street Limited
(NHP) Associates Partners Total
----------- ---------- -------- -----
<S> <C> <C> <C> <C>
Deficit at January 1, 1997 $(94,392) $(99,292) $290,914 $ 97,230
Net loss -- three months ended
March 31, 1997 (666) (666) (65,240) (66,572)
-------- -------- -------- ----------
Deficit at March 31, 1997 $(95,058) $(99,958) $225,674 $ 30,658
======== ======== ======== ==========
Percentage interest at March 31, 1997 1% 1% 98% 100%
========= ========= ======== ==========
(A) (B) (C)
</TABLE>
(A) General Partner
(B) Original Limited Partner
(C) Consists of 11,519 investment units of 0.0085% held by 1,113 investors
See notes to financial statements.
-3-
<PAGE> 5
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------
1997 1996
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received $ 336 $ 335
Operating expenses paid (962) (6,632)
---------- -----------
Net cash used in operating activities (626) (6,297)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from General Partner - 6,911
---------- -----------
Net (decrease) increase in cash and cash equivalents (626) 614
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 62,193 356
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 61,567 $ 970
========== ===========
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Net loss $ (66,572) $ (36,906)
---------- -----------
Adjustments to reconcile net loss to net cash used in
operating activities:
Share of losses from Local Limited Partnerships 32,070 -
Increase in administrative and reporting fees
payable 21,598 21,598
Increase in accrued interest on partner loans 278 92
Increase in other accrued expenses 12,000 8,919
---------- -----------
Total adjustments 65,946 30,609
---------- -----------
Net cash used in operating activities $ (626) $ (6,297)
========== ===========
</TABLE>
See notes to financial statements.
-4-
<PAGE> 6
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(1) 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").
The General Partner raised capital for the Partnership by offering and
selling to additional limited partners 11,519 investment units at a
price of $1,000 per unit. The Partnership acquired limited partnership
interests ranging from 98% to 99% in ten Local Limited Partnerships,
each of which was organized to acquire and operate an existing rental
housing project.
BASIS OF PRESENTATION
The accompanying unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary to a
fair statement of the financial condition and results of operations
for the interim periods presented. All such adjustments are of a
normal and recurring nature.
While the General Partner believes that the disclosures presented are
adequate to make the information not misleading, it is suggested that
these financial statements be read in conjunction with the financial
statements and notes included in NHP Realty Fund I's Annual Report
filed in Form 10-K for the year ended December 31, 1996.
(2) 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. Because the Partnership, as a
limited partner, does not exercise control over the activities of the
Local Limited Partnerships in accordance with the partnership
agreements, the investments in Local Limited Partnerships are
accounted for using the equity method. Thus, the investments (and the
advances made to the Local Limited Partnerships as discussed below)
are carried at cost less the Partnership's share of the Local Limited
Partnerships' losses and distributions. However, because the
Partnership is not legally liable for the obligations of the Local
Limited Partnerships, and is not otherwise committed to provide
additional support to them, it does not recognize losses once its
investments, reduced for its share of losses and cash distributions,
reach zero in each of the individual Local Limited Partnerships. As of
March 31, 1997 and December 31, 1996, investments in eight of the ten
Local Limited Partnerships had been reduced to zero. As a result, the
Partnership did not recognize $375,456 and $527,546 of losses from
Local Limited Partnerships during the three months ended March 31,
1997 and 1996, respectively. As of March 31, 1997 and December 31,
1996, the Partnership has not recognized a total of $13,592,840 and
$13,217,384, respectively, of its allocated share of cumulative losses
from the Local Limited Partnerships in which its investment is zero.
Advances made by the Partnership to the individual Local Limited
Partnerships are considered part of the Partnership's investment in
Local Limited Partnerships. When advances are made, they are charged
to operations as a loss on investment in the Local Limited Partnership
using previously unrecognized cumulative losses. As discussed above,
due to the cumulative losses incurred by eight of the Local Limited
Partnerships,
-5-
<PAGE> 7
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
the aggregate balance of investments in and advances to Local Limited
Partnerships, for these eight Local Limited Partnerships, has been
reduced to zero at March 31, 1997 and December 31, 1996. To the extent
these advances are repaid by the Local Limited Partnerships in the
future, the repayments will be credited as distributions in excess of
investment in Local Limited Partnerships. These advances are carried
as a payable to the Partnership by the Local Limited Partnerships.
No working capital advances or repayments occurred between the
Partnership and the Local Limited Partnerships during the three months
ended March 31, 1997 and 1996. The combined amount carried as due to
the Partnership by the Local Limited Partnerships was $379,590 as of
March 31, 1997.
The following are combined statements of operations for the three
months ended March 31, 1997 and 1996, respectively, of the Local
Limited Partnerships in which the Partnership has invested. The
statements are compiled from financial statements of the Local Limited
Partnerships, prepared on the accrual basis of accounting, as supplied
by the management agents of the projects, and are unaudited.
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------
1997 1996
------------ -----------
<S> <C> <C>
Rental income $1,834,432 $1,799,088
Other income 44,304 81,158
---------- ----------
Total income 1,878,736 1,880,246
---------- ----------
Operating expenses 1,345,952 1,236,035
Interest, taxes and insurance 645,662 889,834
Depreciation 299,659 288,014
---------- ----------
Total expenses 2,291,273 2,413,883
---------- ----------
Net loss $ (412,537) $ (533,637)
========== ==========
National Housing Partnership Realty Fund I
share of losses $ (407,526) $ (527,546)
========== ==========
</TABLE>
(3) TRANSACTIONS WITH THE GENERAL PARTNER
During the three month periods ended March 31, 1997 and 1996, the
Partnership accrued administrative and reporting fees payable to the
General Partner in the amount of $21,598 for services provided to the
Partnership. The Partnership did not make any payments to the General
Partner for these fees during each of the respective periods. The
amount due the General Partner by the Partnership for administrative
and reporting fees was $765,170 and $743,572 at March 31, 1997 and
December 31, 1996, respectively.
During the three months ended March 31, 1996 the General Partner
advanced $6,911 to the Partnership to fund operating expenses. No
advances were made during the three months ended March 31, 1997. No
repayments of working capital advances were made during the three
months ended March 31, 1997 and 1996. The amount owed to the General
Partner at March 31, 1997 and December 31, 1996, was $9,911. Interest
is charged on
-6-
<PAGE> 8
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
borrowings at the Chase Manhattan Bank rate of prime plus 2%. Accrued
interest on this loan amounted to $1,122 and $844 at March 31, 1997
and December 31, 1996, respectively.
The advances and accrued administrative and reporting fees payable to
the General Partner will be paid as cash flow permits or from proceeds
generated from the sale or refinancing of one or more of the
underlying properties of the Local Limited Partnerships.
-7-
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements in certain circumstances. Certain information
included in this Report and other Partnership filings (collectively "SEC
Filings") under the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended (as well as information communicated orally or
in writing between the dates of such SEC Filings) contains or may contain
information that is forward looking, including statements regarding the effect
of government regulations. Actual results may differ materially from those
described in the forward-looking statements and will be affected by a variety
of factors including national and local economic conditions, the general level
of interest rates, terms of governmental regulations that affect the
Partnership and interpretations of those regulations, the competitive
environment in which the properties owned by the Local Limited Partnerships
operate, the availability of working capital and dispositions of properties
owned by the Partnership.
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
Federal, state or local governments or agencies. As a result, the Local Limited
Partnerships' 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.
For the past several years, various proposals have been advanced by the United
States Department of Housing and Urban Development ("HUD"), Congress and others
proposing the restructuring of HUD's rental assistance programs under Section 8
of the United States Housing Act of 1937 ("Section 8"), under which many
affiliated properties receive rental subsidies. One such proposal has recently
been introduced in the U.S. Senate, and two such proposals have recently been
introduced in the U.S. House of Representatives. These proposals generally seek
to lower subsidized rents to market levels and to lower required debt service
costs as needed to ensure financial viability at the reduced rents, but utilize
varying approaches to achieve that goal. Congress is currently also considering
various proposals for the renewal of Section 8 contracts that will expire
during the federal fiscal year 1998 (October 1997 through September 1998).
While the Partnership does not believe that the proposed changes would result
in a significant number of tenants relocating from properties owned by the
Local Limited Partnerships, there can be no assurance that the proposed changes
would not significantly affect the operations of the properties of the Local
Limited Partnerships. Furthermore, there can be no assurance that changes in
federal subsidies will not be more restrictive than those currently proposed or
that other changes in policy will not occur. Any such changes could have an
adverse effect on the operation of the Partnership.
Net cash used in operations for the three months ended March 31, 1997 was $626
as compared to cash used in operations of $6,297 for the three months ended
March 31, 1996. The decrease in cash used in operations resulted from a
decrease in operating expenses paid during the three months ended March 31,
1997 compared to the three months ended March 31,1996.
No working capital advances or repayments occurred between the Partnership and
the Local Limited Partnerships during the three months ended March 31, 1997 and
1996. The combined amount carried as due to the Partnership by the Local
Limited Partnerships was $379,590 as of March 31, 1997.
-8-
<PAGE> 10
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Distributions received from 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 investments, as of March 31, 1997,
investments in eight Local Limited Partnerships had been reduced to zero. For
these investments, cash distributions received are recorded in income as
distributions received in excess of investment in Local Limited Partnerships.
For those investments not reduced to zero, distributions received are recorded
as distributions from Local Limited Partnerships. There were no cash
distributions during the three months ended March 31, 1997 and 1996. The
receipt of distributions in future quarters and years is dependent upon the
operations of the underlying properties of the Local Limited Partnerships.
Cash and cash equivalents amounted to $61,567 at March 31, 1997. The ability of
the Partnership to meet its on-going cash requirements, in excess of cash on
hand at March 31, 1997, is dependent upon the future receipt of distributions
from the Local Limited Partnerships or proceeds from sales or refinancing of
one or more of the underlying properties of the Local Limited Partnerships.
Cash on hand at March 31, 1997, plus any distributions from the underlying
operations of the combined Local Limited Partnerships is expected to adequately
fund the operations of the Partnership in the current year. However, there can
be no assurance that future distributions will be adequate to fund the
operations beyond the current year.
The Partnership currently owes the General Partner $765,170 for administrative
and reporting services performed. The payment of the unpaid administrative and
reporting fees will most likely result from the sale or refinancing of the
underlying properties of the Local Limited Partnerships, rather than through
recurring operations.
Eight of the Local Limited Partnerships in which the Partnership has invested
have deferred acquisition notes due the original owner of each Property. With
the exception of Fairmeadows and Southridge, whose notes were extended to 2011
during 1996, 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.
Griffith Limited Partnership has a deferred acquisition note and related
accrued interest due on October 31, 1997, which raises substantial doubt about
the Local Limited Partnership's ability to continue as a going concern. The
Local Limited Partnership's continued existence as a going concern is dependent
on the ability to repay, refinance, restructure, or renegotiate this note.
NHP's intentions are to negotiate with the noteholder to arrange a satisfactory
workout plan which will allow the Local Limited Partnership to maintain
ownership of the property. Should no agreement be reached and the note matures
absent a sale or refinancing which produces sufficient funds to repay the note
in full, a default would occur on the note. Such default could lead to a
foreclosure by the noteholder of the security underlying the note such that the
Partnership may lose its interest in the Griffith Limited Partnership. Should
the Partnership lose its interest in Griffith 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.
RESULTS OF OPERATIONS
The Partnership has invested as a limited partner in Local Limited Partnerships
which operate ten rental housing properties. In prior years, results of
operations of NHP Realty Fund I were significantly impacted by the
Partnership's share of the losses of the Local Limited Partnerships. These
losses included depreciation and accrued deferred acquisition note interest
expense which are noncash in nature. Eight of the ten investments in Local
Limited Partnerships have been reduced to zero. As a result, the Partnership's
operations are no longer being affected by its share of the operations from
these eight partnerships. The Partnership has recorded its share of losses in
the remaining two Local Limited Partnerships which amounted to $32,070 for the
three months ended March 31, 1997.
-9-
<PAGE> 11
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Partnership's net loss increased to $66,572 for the three months ended
March 31, 1997, from a net loss of $36,906 for the three months ended March 31,
1996. Net loss per unit of limited partnership interest increased from $3 to $6
for the 11,519 units outstanding for both periods. The increase in net loss was
primarily due to an increase in the Partnership's share of losses from Local
Limited Partnerships. The Partnership did not recognize $375,456 of its
allocated share of losses from eight Local Limited Partnerships for the three
months March 31, 1997, as the Partnership's net carrying basis in these Local
Limited Partnerships had been reduced to zero. The Partnership's share of
losses from the Local Limited Partnerships, if not limited to its investment
account balance, would have decreased $120,020 between periods, primarily due
to a decrease in interest accrued on deferred acquisition notes for Forest
Green, Village Green, Fairmeadows and Southridge, partially offset by an
increase in operating expenses.
-10-
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
------------------------------------------
(Registrant)
By: The National Housing Partnership,
its sole General Partner
By: National Corporation for Housing
Partnerships, its sole General Partner
May 12, 1997 By: /s/
- ------------ ----------------------------------------------
Jeffrey J. Ochs
As Vice President and Chief Accounting Officer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 61,567
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 61,567
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 857,781
<CURRENT-LIABILITIES> 827,123
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 30,658
<TOTAL-LIABILITY-AND-EQUITY> 857,781
<SALES> 0
<TOTAL-REVENUES> 336
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 66,630
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 278
<INCOME-PRETAX> (66,572)
<INCOME-TAX> 0
<INCOME-CONTINUING> (66,572)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (66,572)
<EPS-PRIMARY> (6)
<EPS-DILUTED> (6)
</TABLE>
