SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the fiscal year ended December 31, 1999.... 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
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(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9200 Keystone Crossing, Suite 500 46240
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Indianapolis, IN (Zip Code)
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(Address of principal executive offices)
Registrant's telephone number, including area code: (317) 817-7500
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Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act: 11,509 Limited
Partnership Interests
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State Issuer's revenue for its most recent fiscal year $123,000.
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within the past 60 days prior to the date of
filing. No market for the Registrant's limited partnership interests exists,
and, therefore, a market value for such interests cannot be determined.
Documents incorporated by reference. None
<PAGE>
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
(A MARYLAND LIMITED PARTNERSHIP)
1999 FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
PART I
Page
Item 1. Business 2
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders
7
PART II
Item 5. Market for the Registrant's Partnership 8
Interests and Related Partnership Matters
Item 6. Management's Discussion and Analysis or Plan
of Operations 8
Item 7. Financial Statements 12
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 31
PART III
Item 9. Directors and Executive Officers of the Registrant32
Item 10. Executive Compensation 33
Item 11. Security Ownership of Certain Beneficial
Owners and Management 33
Item 12. Certain Relationships and Related Transactions 33
PART IV
Item 13. Exhibits and Reports on Form 8-K 35
<PAGE>
PART I
Introduction
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
Item 1. Business
National Housing Partnership Realty Fund I (A Maryland Limited
Partnership) (the "Partnership" or the "Registrant") 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.
On June 3, 1997, Apartment Investment and Management Company, a
Maryland corporation ("AIMCO" and, together with its subsidiaries and other
controlled entities, the "AIMCO Group"), acquired all of the issued and
outstanding capital stock of NHP Partners, Inc., a Delaware corporation ("NHP
Partners"), and the AIMCO Group acquired all of the outstanding interests in NHP
Partners Two Limited Partnership, a Delaware limited partnership ("NHP Partners
Two"). The acquisitions were made pursuant to a Real Estate Acquisition
Agreement, dated as of May 22, 1997 (the "Agreement"), by and among AIMCO, AIMCO
Properties, L.P., a Delaware limited partnership (the "Operating Partnership"),
Demeter Holdings Corporation, a Massachusetts corporation ("Demeter"), Phemus
Corporation, a Massachusetts corporation ("Phemus"), Capricorn Investors, L.P.,
a Delaware limited partnership ("Capricorn"), J. Roderick Heller, III and NHP
Partners Two LLC, a Delaware limited liability company ("NHP Partners Two LLC").
NHP Partners owns all of the outstanding capital stock of the National
Corporation for Housing Partnerships, a District of Columbia corporation
("NCHP"), which is the general partner of The National Housing Partnership, a
District of Columbia limited partnership ("NHP" or the "General Partner").
Together, NCHP and NHP Partners Two own all of the outstanding partnership
interests in NHP. NHP is the general partner of the Registrant. As a result of
these transactions, the AIMCO Group acquired control of the general partner of
the Registrant and, therefore, may be deemed to have acquired control of the
Registrant.
Receipt of HUD Subpoena/Tolling Agreement
In October 1997, NHP received a subpoena from the Inspector General of the
United States Department of Housing and Urban Development ("HUD") requesting
documents relating to any agreement whereby NHP or any of its affiliates
provides or has provided compensation to owners (or their affiliates) of
HUD-assisted properties in connection with management of a HUD-assisted property
(the "Transactions"). This matter has been disclosed in all filings by NHP with
the Securities and Exchange Commission. Documents were produced which may have
been responsive to the HUD subpoena and submitted to the HUD Inspector General
("HUD 16") in 1998.
On or about February 26, 1998, Counsel for NHP and the U.S. government
entered into a Tolling Agreement with respect to any applicable statues of
limitations related to certain civil claims the government may have against NHP
in connection with the Transactions. The Tolling Agreement expired in August
1998.
In July 1999, NHP received a grand jury subpoena requesting documents
relating to the same subject matter as the HUD IG subpoenas and NHP's operation
of a group purchasing program created by NHP, known as Buyers Access. To date,
neither the HUD IG nor the grand jury has initiated any action against NHP or
Apartment Investment and Management Company ("AIMCO"), the ultimate controlling
entity of NHP or, to NHP's or AIMCO's knowledge, any owner of a HUD property
managed by NHP. AIMCO believes that NHP's operations and programs are in
compliance, in all material respects, with all laws, rules and regulations
relating to HUD-assisted or HUD-insured properties. NHP and AIMCO are
cooperating with investigations and does not believe that the investigations
will result in a material adverse impact on its operations. However, as with any
similar investigation, there can be no assurance that these will not result in
material fines, penalties or other costs.
NHP believes its operations are in compliance, in all material respects
with all laws, rules, and regulations related to HUD-assisted or HUD-insured
properties and has retained counsel in connection with NHP's response to the
subpoena. Although no action has been initiated against the Partnership, NHP, or
AIMCO or, to AIMCO's knowledge, any owner of a HUD property managed by NHP or
AIMCO, if any such action is taken in the future, it could ultimately affect
existing arrangements with respect to HUD projects or otherwise have a material
adverse affect on the results of operations of AIMCO.
The Partnership's business is to hold limited partnership interests in ten
limited partnerships ("Local Limited Partnerships"), each of which owns and
operates a multi-family rental housing property ("Properties") which receives
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. See "Item 6,
Management's Discussion and Analysis or Plan of Operations" for information
relating to the Registrant's rights and obligations to make additional
contributions or loans to Local Limited Partnerships.
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
(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.
<PAGE>
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 Occupancy
Financed, Authorized Percentage
Insured for Rental for the Year
Number and Assistance Ended
Property Name, Location of Subsidized Under December 31,
and Partnership Name Units Under Section 8 (D) 1999 1998
-------------------- ----- ----- ------------- ---- ----
<S> <C> <C> <C>
Fairmeadows 200 (A) -- 99% 99%
Duncanville, Texas
(Fairmeadows Limited
Partnership)
Forest Green 100 (A) 85 86% 95%
Gainesville, Florida
(Forest Green Limited
Partnership)
Howard F. Robbins Tower 191 (A) 183 98% 100%
Mayfield Heights, Ohio
(Gates Mills I Limited
Partnership)
Lakeview Apartments 100 (A) 95 99% 98%
Fresno, California
(Griffith Limited
Partnership)
Northgate Village 150 (A) 49 98% 99%
Columbus, Georgia
(Northgate Village
Limited
Partnership)
Parker Square 175 (A) 113 99% 100%
Houston, Texas
(Southward Limited
Partnership)
San Jose 220 (A) 215 100% 100%
San Antonio, Texas
(San Jose Limited
Partnership)
Southridge 232 (A) 172 99% 98%
Austin, Texas
(Southridge Apartments
Limited
Partnership)
Talladega Downs 100 (A) 100 100% 100%
Talladega, Alabama
(Hurbell IV Limited
Partnership)
Village Green 100 (A) 77 88% 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.
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.
The Federal Housing Administration (FHA) has contracted with the ten
subsidized rental projects 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 one or two five year renewal options.
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
1,089 units, 69 percent of the total units owned by the properties in which the
Partnership has invested, receive rental subsidies. On October 27, 1997, the
President signed into law the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (the "1997 Housing Act"). Under the 1997 Housing Act,
certain properties assisted under Section 8, with rents above market levels and
financed with HUD-insured mortgage loans, will be restructured by adjusting
subsidized rents to market levels, thereby potentially reducing rent subsidies,
and lowering required debt service costs as needed to ensure financial viability
at the reduced rents and rent subsidies. The 1997 Housing Act retains
project-based subsidies for most properties (properties in rental markets with
limited supply, properties serving the elderly, and certain other properties).
The 1997 Housing Act phases out project-based subsidies on selected properties
servicing families not located in rental markets with limited supply, converting
such subsidies to a tenant-based subsidy. Under a tenant-based system, rent
vouchers would be issued to qualified tenants who then could elect to reside at
properties of their choice, provided such tenants have the financial ability to
pay the difference between the selected properties' monthly rent and the value
of the vouchers, which would be established based on HUD's regulated fair market
rent for the relevant geographical areas. With respect to Housing Assistance
Payments Contracts ("HAP Contracts") expiring before October 1, 1998, Congress
elected to renew them for one-year terms, generally at existing rents, so long
as the properties remain in compliance with the HAP Contracts. While the
Partnership does not expect the provisions of the 1997 Housing Act to result in
a significant number of tenants relocating from properties owned by the Local
Limited Partnerships, there can be no assurance that the provisions will not
significantly affect the operations of the properties of the Local Limited
Partnerships. Furthermore, there can be no assurance that other changes in
Federal housing subsidy policy will not occur. Any such changes could have an
adverse effect on the operation of the Partnership.
The following table indicates the year within which the Section 8 rent
subsidy contracts expire:
Subsidized Units Subsidized Units
Expiring as a Expiring as a
Number Percentage of Total Percentage of
of Units Subsidized Units Total Units
2000 1,073 99% 68%
2001 -- -- --
Thereafter 16 1% 1%
------ ---- ---
Total 1,089 100% 69%
===== === ==
Of the units (1,089 in total) receiving rent subsidies from Section 8,
1,073 of the units have their contracts expiring during the year ending December
31, 2000. HUD has issued new regulations that govern the continuance of
project-based subsidies. Under the new regulations, owners with HAP contracts
expiring after September 30, 1998 may elect to (1) renew the contract without
restructuring for one year, (2) opt out of the contract, or (3) enter into the
Mark-to Market program, which includes a potential restructuring of the mortgage
and renewal of the contract. At this time it is not possible to determine which
option each of the Local Limited Partnerships will elect, and accordingly, it is
not possible to determine the ultimate impact on the operations of the Local
Limited Partnerships.
Regulation
General
Multifamily apartment properties are subject to various laws, ordinances
and regulations, including regulations relating to recreational facilities such
as swimming pools, activity centers and other common areas. Changes in laws
increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions, as
well as changes in laws effecting development, construction and safety
requirements, may result in significant unanticipated expenditures, which would
adversely affect the Partnership's cash flow from operating activities. In
addition, future enactment of rent control or rent stabilization laws or other
laws regulating multi-family housing may reduce rental revenue or increase
operating costs in particular markets.
HUD Approval and Enforcement
A significant number of properties owned by the Partnership are subject to
regulations by HUD. Under its regulations, HUD reserves the right to approve the
owner and the manager of HUD-insured and HUD-assisted properties, as well as
their "principals" (e.g. general partners, stockholders with 10% or greater
interest, officers and directors) in connection with the acquisition of a
property, participation in HUD programs or the award of a management contract.
This approval process is commonly referred to as "2530 Clearance." HUD monitors
the performance of properties with HUD-insured mortgage loans. HUD also monitors
compliance with applicable regulations, and takes performance and compliance
into account in approving the acquisition of management of HUD-assisted
properties. In the event of instances of unsatisfactory performances or
regulatory violations, the HUD office with jurisdiction over the applicable
property has the authority to enter a "flag" into the computerized 2530
Clearance system. If one or more flags have been entered, a decision whether to
grant 2530 Clearance is then subject to review by HUD's Multifamily
Participation Review Committee in Washington, D.C. (the 2530 Committee). As a
result of certain mortgage defaults and unsatisfactory ratings received by NHP
Incorporated in years prior to its acquisition by AIMCO in December, 1997, HUD
believes that the 2530 Committee must review any application for 2530 Clearance
filed by AIMCO. On December 18, 1998, AIMCO received approval of approximately
fifty 2530 applications and had no unresolved flags in the 2530 system as of
December 31, 1998. As a result of HUD's review of 2530 applications during 1999
two unresolved flags existed at December 31, 1999. Subsequent to December 31,
1999 one of these flags was resolved and the other is currently being addressed.
Laws Benefiting Disabled Persons
Under the Americans with Disabilities Act of 1990, all places of public
accommodations are required to meet certain Federal requirements related to
access and use by disabled persons. These requirements became effective in 1992.
A number of additional Federal, state and local laws may also require
modifications to the Properties, or restrict certain further renovations of the
Properties, with respect to access thereto by disabled persons. For example, the
Fair Housing Amendments Act of 1988 requires apartment properties first occupied
after March 13, 1990 to be accessible to the handicapped. Noncompliance with
these laws could result in the imposition of fines or an award of damages to
private litigants and also could result in an order to correct any non-complying
feature, which could result in substantial capital expenditures. Although the
Partnership believes that its properties are substantially in compliance with
present requirements, it may incur unanticipated expenses to comply with these
laws.
Regulation of Affordable Housing
As of December 31, 1999, the Partnership held an equity interest in 10
properties that benefit from government programs intended to provide housing to
people of low or moderate incomes. These programs, which are usually
administered by the HUD or state housing finance agencies, typically provide
mortgage insurance, favorable financing terms or rental assistance payments to
the property owners. As a condition to the receipt of assistance under these
programs, the properties must comply with various requirements, which typically
limit rents to pre-approved amounts. If permitted rents on a property are
insufficient to cover costs, a sale of the property may become necessary, which
could result in a loss of the Partnership's interest in the property, as well as
any benefits flowing from the property. The Partnership must obtain the approval
of HUD in order to acquire a significant interest in a HUD-assisted or
HUD-insured property. The Partnership can make no assurance that it will always
receive such approval.
Environment
Various Federal, state and local laws subject property owners or operators
to liability for the costs of removal or remediation of certain hazardous
substances present on a property. Such laws often impart liability without
regard to whether the owner or operator knew of, or was responsible for, the
release of the hazardous substances. The presence of, or failure to properly
remediate, hazardous substances may adversely affect occupancy at contaminated
apartment communities and the Partnership's ability to sell or borrow against
contaminated properties. In addition to the costs associated with investigation
and remediation actions brought by governmental agencies, the presence of
hazardous wastes on a property could result in personal injury or similar claims
by private plaintiffs. Various laws also impose liability for the cost of
removal or remediation of hazardous or toxic substances is potentially liable
under such laws. These laws often impose liability whether or not the person
arranging for the disposal ever owned or operated the disposal facility. In
connection with the ownership or operation of properties, the Partnership could
potentially be liable for environmental liabilities or costs associated with its
properties or properties it may acquire in the future.
Management believes that the Partnership's properties are covered by
adequate fire, flood and property insurance provided by reputable companies and
with commercially reasonable deductibles and limits.
Ownership Percentages
The following table 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, 1999.
NHP Realty Fund I Original Cost
Percentage of Ownership Mortgage Notes Payable and
Partnership Interest Interest Notes Accrued Interest (1)
(in thousands)
Fairmeadows L.P. 99% $1,091 $ 1,676 $5,266
Forest Green L.P. 99% 420 850 --
Gates Mills I L.P. 98% 1,561 2,021 6,733
Griffith L.P. 99% 631 909 2,836
Northgate Village 99% 621 1,246 2,464
L.P.
Southward L.P. 99% 917 1,384 3,815
San Jose L.P. 99% 1,156 1,791 4,306
Southridge Apts. 99% 1,344 1,971 5,515
L.P.
Hurbell IV L.P. 99% 372 967 1,534
Village Green L.P. 99% 430 716 --
(1) See "Item 6. Management's Discussion and Analysis or Plan of
Operations" for further details.
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
In 1997, NHP received subpoenas from the HUD Inspector General ("IG")
requesting documents relating to arrangements whereby NHP or any of its
affiliates provided compensation to owners of HUD-assisted or HUD-insured
multi-family projects in exchange for or in connection with property management
of a HUD project.
In July 1999, NHP received a grand jury subpoena requesting documents
relating to the same subject matter as the HUD IG subpoenas and NHP's operation
of a group purchasing program created by NHP, known as Buyers Access. To date,
neither the HUD IG nor the grand jury has initiated any action against NHP or
Apartment Investment and Management Company ("AIMCO"), the ultimate controlling
entity of NHP or, to NHP's or AIMCO's knowledge, any owner of a HUD property
managed by NHP. AIMCO believes that NHP's operations and programs are in
compliance, in all material respects, with all laws, rules and regulations
relating to HUD-assisted or HUD-insured properties. NHP and AIMCO are
cooperating with investigations and does not believe that the investigations
will result in a material adverse impact on its operations. However, as with any
similar investigation, there can be no assurance that these will not result in
material fines, penalties or other costs.
The partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
No matters were submitted.
<PAGE>
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, 1999, there were 1,111 registered holders of
11,509 limited partnership interests (in addition to 1133
Fifteenth Street Associates - See "Item 7. Financial Statements -
Note 1"). In 1999, the number of Limited Partnership Units
decreased by 10 units due to Limited Partners abandoning his or
her units. In abandoning his or her Limited Partnership Unit(s),
a Limited Partner relinquishes all rights, title and interest in
the Partnership as of the date of abandonment.
(c) No cash dividends or distributions have been declared from the
inception of the Partnership to December 31, 1999.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
This item should be read in conjunction with the financial statements and
other items contained elsewhere in this report.
Year 2000 Compliance
General Description
The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. The
Partnership is dependent upon the General Partner and its affiliates for
management and administrative services ("Managing Agent"). Any of the Managing
Agent's computer programs or hardware that had date-sensitive software or
embedded chips might have recognized a date using "00" as the year 1900 rather
than the year 2000. This could have resulted in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
Computer Hardware, Software and Operating Equipment
In 1999, the Managing Agent completed all phases of its Year 2000 program
by completing the replacement and repair of any hardware or software system or
operating equipment that was not yet Year 2000 compliant. The Managing Agent's
hardware and software systems and its operating equipment are now Year 2000
compliant. No material failure or erroneous results have occurred in the
Managing Agent's computer applications related to the failure to reference the
Year 2000 to date.
Third Parties
To date, the Managing Agent is not aware of any significant supplier or
subcontractor (external agent) or financial institution of the Partnership that
has a Year 2000 issue that would have a material impact on the Partnership's
results of operations, liquidity or capital resources. However, the Managing
Agent has no means of ensuring or determining the Year 2000 compliance of
external agents. At this time, the Managing Agent does not believe that a Year
2000 issue of any non-compliant external agent will have a material impact on
the Partnership's financial position or results of operations.
Costs
The total cost of the Managing Agent's Year 2000 project was approximately
$3.2 million and was funded from operating cash flows.
Risks Associated with the Year 2000
The Managing Agent completed all necessary phases of its Year 2000 program
in 1999, and did not experience system or equipment malfunctions related to a
failure to reference the Year 2000. The Managing Agent or Partnership have not
been materially adversely effected by disruptions in the economy generally
resulting from the Year 2000 issue.
At this time, the Managing Agent does not believe that the Partnership's
businesses, results of operations or financial condition will be materially
adversely effected by the Year 2000 issue.
Contingency Plans Associated with the Year 2000
The Managing Agent has not had to implement contingency plans such as
manual workarounds or selecting new relationships for its banking or elevator
operation activities in order to avoid the Year 2000 issue.
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' 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.
As discussed in Note 6 to the combined financial statements, eight of the
Local Limited Partnerships in which the Partnership has invested have notes
payable to the original owner of each Property. With the exception of
Fairmeadows and Southridge, these notes were due between 1997 and 1999, and are
currently in default. Fairmeadows and Southridge are currently in default due to
non-payment of required annual interest payments for 1999 (see below). These
notes are secured by both the Partnership's and NHP's interests in the Local
Limited Partnerships. The noteholders have not exercised their rights under the
notes, including the foreclosure on NHP's and the Partnership's interests in the
Local Limited Partnerships. There can be no assurance as to when, or if, such
holders may seek to exercise such rights.
The Fairmeadows and Southridge note, both of which were issued in
connection with the Partnership's initial acquisition of the property, initially
accrued interest at the rate of 10% per annum. The notes are nonrecourse and are
secured by a security interest in all partnership interests in the Partnership.
In 1996, the Partnership and the holders of the Fairmeadows and Southridge notes
entered into a Modification, Renewal and Extension of Liens Agreement (the
Agreement) which extended the maturity of the notes to December 1, 2011.
Interest on the notes continues to accrue at 10% and is due and payable at
maturity; provided, however, that minimum annual installments of interest are
paid on or before December 31 of each year through December 31, 2010. Such
minimum annual installment increases each year by not less than 2.5% and not
more than 5%, based on the Consumer Price Index for All Urban Consumers (CPI-U).
No minimum payments were paid in 1999 on either note.
The difference between the accrued interest recorded as of December 31,
1995 and the amount specified in the Agreements is being amortized over the
remaining term of the notes as a reduction of interest expense using the
effective interest rate yield method. Amortization of accrued interest of
approximately $60,000 and $18,000 for Fairmeadows and Southridge respectively,
was recorded in 1999.
Griffith, Southward, Northgate Village, San Jose, Gates Mill I and Hurbell
IV Limited Partnerships all have notes which were executed by the respective
Local Limited Partnerships with the seller as part of the acquisition of the
property by the Local Limited Partnership. The notes were nonrecourse notes
secured by a security interest in all partnership interests in the Local Limited
Partnership and are subordinated to the respective mortgage notes on each
property for as long as the mortgage notes are insured by HUD. Any payments due
from project income are payable from surplus cash, as defined by the HUD
Regulatory Agreement. Neither the Limited Partnership nor any partner thereof,
present or future, assume any personal liability for the payment of the notes.
The notes were due October 31, 1997, October 4, 1998, July 26, 1999, August 29,
1999, October 1, 1999, and November 9, 1999, respectively. Interest continues to
be paid or accrued under the original terms of the respective agreements. Each
note is in default and the Local Limited Partnership interests are subject to
potential foreclosure. Continuation of the Local Limited Partnerships'
operations in the present form is dependent on its ability to extend the
maturity date of their respective notes, or to repay or refinance their note.
The financial statements do not include any adjustments which might result from
the outcome of this uncertainty.
During 1999 and 1998, no advances were made by the Partnership to Local
Limited Partnerships. Repayments of advances of approximately $8,000, and $7,000
and accrued interest of approximately $9,000 and $18,000 were received from one
and two Local Limited Partnerships during 1999 and 1998, respectively.
During 1998, the General Partner advanced approximately $101,000, to five
Local Limited Partnerships, to fund partnership entity expenses, including
expenses incurred relating to potential sales or refinancing under the Low
Income Housing Preservation and Resident Homeownership Act of 1990 (LIHPRHA). No
advances were made in 1999. During 1999 and 1998, two and three Local Limited
Partnerships, respectively, made payments of principal of approximately $8,000
and $4,000. At December 31, 1999, the balance owed to the General Partner by the
Local Limited Partnerships was approximately $363,000, including accrued
interest of approximately $9,000. Interest on these advances is charged at a
rate equal to the Chase Manhattan Bank prime interest rate plus 2%. Chase
Manhattan Bank prime was 8.25% at December 31, 1999.
Net cash provided by operations for the year ended December 31, 1999 was
approximately $14,000 compared to net cash used in operations of approximately
$36,000 in 1998. The increase in cash provided by operations was a result of an
increase in the receipt distributions in excess of the investment in Local
Limited Partnerships partially offset by slight increase in operating expenses.
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 of approximately $79,000 and $19,000
were received from five and one Local Limited Partnerships during the years
ended December 31, 1999 and 1998, respectively. The receipt of these
distributions in future years is dependent on the operations of the underlying
properties of the Local Limited Partnerships.
The Partnership had cash and cash equivalents of approximately $23,000 at
December 31, 1999. The Partnership had no cash and cash equivalents at December
31, 1998. The ability of the Partnership to meet its on-going cash requirements,
in excess of cash on hand at December 31, 1999, 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 increased to
approximately $79,000 in 1999 from $19,000 in 1998. The Partnership's only other
form of liquidity is from General Partner loans. The General Partner will
evaluate lending the Partnership additional funds as such funds are needed, but
is in no way legally obligated to make such loans.
During 1999 and 1998, the General Partner advanced approximately $1,000
and $3,000 respectively, to the Partnership to pay operating expenses. No
repayments of advances were made by the Partnership during 1999 and 1998.
Interest is charged on borrowing at the Chase Manhattan Bank prime interest rate
plus 2%. Chase Manhattan Bank prime was 8.25% at December 31, 1999. Interest
accrued for both the years ended December 31, 1999 and 1998 was approximately
$1,000 which is included in other operating expenses on the Partnership's
Statement of Operations.
As of December 31, 1999, the Partnership owes the General Partner
approximately $1,003,000 for administrative and reporting services performed.
During the years ended December 31, 1999 and 1998, no payments were made by the
Partnership to the General Partner for administrative and reporting services.
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.
<PAGE>
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 profits or losses of the Local
Limited Partnerships. As of December 31, 1995, 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. However, during the year ended December
31, 1996, Forest Green and Village Green Limited Partnerships completed
discounted buyout agreements for early settlement of their notes payable and
related accrued interest payable to former owner, resulting in gains of
approximately $1,368,000 and $1,379,000, respectively, for the two Local Limited
Partnerships. The Partnership has recorded its net share of profits of
approximately $35,000 and $32,000 in the two Local Limited Partnerships for the
years ended December 31, 1999 and 1998, respectively.
The Partnership realized a net loss of approximately $21,000 for the year
ended December 31, 1999, compared to a net loss of approximately $99,000 for the
year ended December 31, 1998. Net loss per unit of limited partnership interest
decreased from $8.40 to $1.82 for the units outstanding at December 31, 1998 and
1999, respectively. The decrease in net loss was primarily due to the increase
in the receipt of distributions in excess of investment in Local Limited
Partnerships which were slightly offset by a decrease in interest received on
advances to Local Limited Partnerships.
The Partnership did not recognize approximately $1,183,000 of its
allocated share of losses from seven Local Limited Partnerships for the year
ended December 31, 1999, as the Partnership's net carrying basis in them was
reduced to zero in a prior year (see Note 2 to the Partnership's financial
statements). The Partnership's share of profits and losses from the Local
Limited Partnerships, if not limited to its investment account balance, would
have decreased by approximately $126,000 between years.
Item 7. Financial Statements
The financial statements of the Partnership are included on pages 12
through 30 of this report.
<PAGE>
Independent Auditors' Report
To The Partners of
National Housing Partnership Realty Fund I
Indianapolis, Indiana
We have audited the accompanying statement of financial position of National
Housing Partnership Realty Fund I (the Partnership) as of December 31, 1999, and
the related statements of operations, partners' (deficit) equity, and cash flows
for each of the two years in the period ended December 31, 1999. 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 Gates Mills I Limited
Partnership or Hurbell IV Limited Partnership (investees of the Partnership) for
the year ended December 31, 1999 or Gates Mill I Limited Partnership for the
year ended December 31, 1998. The accompanying statement of operations includes
approximately $12,000 of distributions in excess of investment from Gates Mill I
Limited Partnership for both the year ended December 31, 1999 and 1998. The
financial statements of these investees were audited by other auditors whose
reports have been furnished to us, and our opinion, insofar as it relates to
amounts included for these investees, is based solely on the reports of the
other auditors.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the reports of other auditors
provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of National Housing Partnership Realty Fund I at December
31, 1999, and the results of its operations and its cash flows for each of the
two years in the periods ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
As discussed in Note 6 to the financial statements, the due dates of certain of
the Local Partnership's notes payable have expired, and therefore, the notes are
in default. These conditions raise substantial doubt about their ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
/s/Ernst & Young LLP
Indianapolis, Indiana
March 6, 2000
<PAGE>
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
STATEMENTS OF FINANCIAL POSITION
December 31, 1999
(in thousands, except unit data)
ASSETS
Cash and cash equivalents
$ 23
Investments in and advances to Local Limited
Partnerships (Note 2) 1,840
-----
$1,863
LIABILITIES AND PARTNERS' (DEFICIT)
Liabilities:
Administrative and reporting fee payable to
General Partner (Note 3)
1,003
Due to General Partner (Note 3)
9
Accrued interest on partner loans (Note 3)
2
Accrued expenses
38
1,052
Partners' (deficit) equity:
General Partner -- The National Housing Partnership(NHP) (87)
Original Limited Partner -- 1133 Fifteenth Street
Associates (92)
Other Limited Partners -- 11,509 investment units 990
811
$ 1,863
See notes to financial statements.
<PAGE>
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1999 1998
---- ----
REVENUES:
Share of profits from Local Limited Partnerships
(Note 2) 35 32
Interest income -- 1
Interest received on advances to Local Limited
Partnerships (Note 2) 9 17
Distributions in excess of investment in Local
Limited Partnership (Note 2) 79 19
123 69
COST AND EXPENSES:
Administrative and reporting fees to General
Partner (Note 3) 86 86
Interest expense on loan from General Partner
(Note 3) 1 1
Other operating expenses 57 81
144 168
NET LOSS (21) (99)
ALLOCATION OF NET LOSS:
General Partner - NHP -- (1)
Original Limited Partner - 1133 Fifteenth Street
Four Associates -- (1)
Other Limited Partners (21) (97)
(21) (99)
NET LOSS PER OTHER LIMITED PARTNERSHIP
INTEREST (Note 2) (1.82) (8.40)
See notes to financial statements.
<PAGE>
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' (DEFICIT) EQUITY
(in thousands, except unit data)
The
National 1133
Housing Fifteenth Other
Partnership Street Limited
(NHP) Associates Partners Total
(Deficit) equity at
January 1, 1998 $ (86) $ (91) $ 1,108 $ 931
Net loss for the year ended
December 31, 1998 (1) (1) (97) (99)
(Deficit) Equity at
December 31, 1998 (87) (92) 1,011 832
Net loss for the year ended
December 31, 1999 -- -- (21) (21)
(Deficit) equity at
December 31, 1999 $ (87) $ (92) $ 990 $ 811
Percentage interest at
December 31, 1999 and 1998 1% 1% 98%
(A) (B) (C)
(A) General Partner
(B) Original Limited Partner
(C) Consists of 11,509 investment units at December 31, 1999 and 11,519
investment units at December 31, 1998. During 1999, 10 units were abandoned
(Note 7).
See notes to financial statements.
<PAGE>
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Interest received -- 1
Interest received on advances to Local
Limited Partnerships 9 17
Distributions in excess of investment
in Local Limited Partnerships 79 12
Operating expenses paid (74) (66)
Net cash provided by (used in) operating
activities 14 (36)
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment of advances to Local Limited
Partnerships 8 7
Net cash provided by investing activities 8 7
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from General Partner 1 3
Net cash provided by financing activities 1 3
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 23 (26)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR -- 26
CASH AND CASH EQUIVALENTS, END OF YEAR $ 23 $ --
RECONCILIATION OF NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Net loss $ (21)$ (99)
Adjustments to reconcile net loss to net cash
used in operating activities:
Share of profits from Local Limited
Partnerships (35) (32)
Repayment of advances to Local Limited
Partnerships -- (7)
Increase in administrative and reporting
fees payable to General Partner 86 86
Increase in accrued interest
on partner loans 1 1
(Decrease) increase in accrued expenses (17) 15
Total adjustments 35 63
Net cash provided by (used in) operating
activities $ 14 $ (36)
See notes to financial statements.
<PAGE>
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" or the
"Registrant") 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.
On June 3, 1997, Apartment Investment and Management Company, a Maryland
corporation ("AIMCO" and, together with its subsidiaries and other controlled
entities, the "AIMCO Group"), acquired all of the issued and outstanding capital
stock of NHP Partners, Inc., a Delaware corporation ("NHP Partners"), and the
AIMCO Group acquired all of the outstanding interests in NHP Partners Two
Limited Partnership, a Delaware limited partnership ("NHP Partners Two"). The
acquisitions were made pursuant to a Real Estate Acquisition Agreement, dated as
of May 22, 1997 (the "Agreement"), by and among AIMCO, AIMCO Properties, L.P., a
Delaware limited partnership (the "Operating Partnership"), Demeter Holdings
Corporation, a Massachusetts corporation ("Demeter"), Phemus Corporation, a
Massachusetts corporation ("Phemus"), Capricorn Investors, L.P., a Delaware
limited partnership ("Capricorn"), J. Roderick Heller, III and NHP Partners Two
LLC, a Delaware limited liability company ("NHP Partners Two LLC"). NHP Partners
owns all of the outstanding capital stock of the National Corporation for
Housing Partnerships, a District of Columbia corporation ("NCHP"), which is the
general partner of The National Housing Partnership, a District of Columbia
limited partnership ("NHP" or the "General Partner"). Together, NCHP and NHP
Partners Two own all of the outstanding partnership interests in NHP. NHP is the
general partner of the Registrant. As a result of these transactions, the AIMCO
Group has acquired control of the general partner of the Registrant and,
therefore, may be deemed to have acquired control of the Registrant.
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.
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 plus the Partnership's share of the Local
Limited Partnerships' profits less the Partnership's share of the Local Limited
Partnerships' losses and distributions (see Note 2). 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.
Certain reclassifications of prior years' amounts have been made to
conform with the current year's presentation.
Cash and Cash Equivalents
Includes cash on hand, in banks and money market accounts. At certain
times, the amount of cash deposited at a bank may exceed the limit on insured
deposits.
Fair Value of Financial Instruments
FASB Statement No. 107, "Disclosures About Fair Value of Financial
Instruments," requires disclosure of fair value information about significant
financial instruments, when it is practicable to estimate that value and
excessive costs would not be incurred. To estimate the fair value of the
balances due to the General Partner and accrued interest thereon, excessive
costs would be incurred and, therefore, no estimate has been made. The
Partnership believes that the carrying value of other assets and liabilities
reported on the statement of financial position that require such disclosure
approximates fair value.
Segment Reporting
Statement of Financial Accounting Standards No. 131, Disclosure about
Segments of an Enterprise and Related Information established standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. The Partnership has only one reportable
segment.
<PAGE>
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: 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 plus the
Partnership's share of the Local Limited Partnerships' profits 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, increased for its share of profits,
reduced for its share of losses and cash distributions, reaches zero. As of
December 31, 1995, investments in all ten of the Local Limited Partnerships had
been reduced to zero. However, during 1996, Forest Green and Village Green
Limited Partnerships completed discounted buyout agreements for early settlement
of their notes payable to former owner and related accrued interest payable,
resulting in gains of approximately $1,368,000 and $1,379,000, respectively, for
the two Local Limited Partnerships. The Partnership's share of net profits from
both Local Limited Partnerships was approximately $35,000 and $32,000 for the
years ended December 31, 1999 and 1998, respectively. The Partnership did not
recognize approximately $1,183,000 and $1,057,000 of losses from seven Local
Limited Partnerships during 1999 and 1998, respectively. As of December 31,
1999, the Partnership has not recognized approximately $17,904,000 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 the Local Limited Partnerships, the aggregate balance of investments
in and advances to Local Limited Partnerships has been reduced to zero at
December 31, 1999 for eight Local Limited Partnerships. To the extent these
advances are repaid by the Local Limited Partnerships in the future, the
repayments will be credited as distributions and repayments received in excess
of investment in Local Limited Partnerships. These advances remain due and
payable to the Partnership. Interest is calculated at the Chase Manhattan prime
rate plus 2% (10.25% at December 31, 1999). 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.
During 1999 and 1998, the Partnership made no advances for working capital
purposes. Repayments of advances of approximately $8,000 and $7,000 and accrued
interest of approximately $9,000 and $17,000 were received from one and two
Local Limited Partnerships during 1999 and 1998, respectively. At December 31,
1999, the amount owed to the Partnership for working capital advances to Local
Limited Partnerships amounted to approximately $362,000.
Summaries of the combined financial position of the aforementioned Local
Limited Partnerships as of December 31, 1999, and the combined results of
operations for each of the two years in the period ended December 31, 1999, are
provided on the following page.
<PAGE>
CONDENSED COMBINED FINANCIAL POSITION
OF THE LOCAL LIMITED PARTNERSHIPS
(in thousands)
December 31,1999
Assets:
Land $ 3,635
Buildings and improvements,
net of accumulated depreciation
of $16,071 23,813
Other assets 4,422
$ 31,870
Liabilities and Partners' Deficit:
Liabilities:
Mortgage notes payable $ 13,531
Notes payable 12,806
Accrued interest on notes payable 19,662
Other liabilities 2,806
48,805
Partners' Deficit:
National Housing Partnership Realty Fund I (16,629)
Other partners (306)
(16,935)
$ 31,870
CONDENSED COMBINED RESULTS OF OPERATIONS
OF THE LOCAL LIMITED PARTNERSHIPS
(in thousands)
Years Ended December 31,
1999 1998
Revenue $ 7,777 $ 7,595
Expenses:
Operating expenses 5,824 6,093
Financial expenses 85 99
Interest on notes payable 1,294 1,286
Depreciation and amortization 1,184 1,155
Impairment loss on rental property 422 --
Total expenses 8,809 8,633
Net loss $ (1,032)$ (1,038)
<PAGE>
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, 1999 and 1998 the projects received a total
of approximately $3,161,000 and $3,427,000, respectively of rental assistance
from HUD.
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
1,089 units, 69 percent of the total units owned by the properties in which the
Partnership has invested, receive rental subsidies. On October 27, 1997, the
President signed into law the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (the "1997 Housing Act"). Under the 1997 Housing Act,
certain properties assisted under Section 8, with rents above market levels and
financed with HUD-insured mortgage loans, will be restructured by adjusting
subsidized rents to market levels, thereby potentially reducing rent subsidies,
and lowering required debt service costs as needed to ensure financial viability
at the reduced rents and rent subsidies. The 1997 Housing Act retains
project-based subsidies for most properties (properties in rental markets with
limited supply, properties serving the elderly, and certain other properties).
The 1997 Housing Act phases out project-based subsidies on selected properties
servicing families not located in rental markets with limited supply, converting
such subsidies to a tenant-based subsidy. Under a tenant-based system, rent
vouchers would be issued to qualified tenants who then could elect to reside at
properties of their choice, provided such tenants have the financial ability to
pay the difference between the selected properties' monthly rent and the value
of the vouchers, which would be established based on HUD's regulated fair market
rent for the relevant geographical areas. With respect to Housing Assistance
Payments Contracts ("HAP Contracts") expiring before October 1, 1998, Congress
elected to renew them for one-year terms, generally at existing rents, so long
as the properties remain in compliance with the HAP Contracts. While the
Partnership does not expect the provisions of the 1997 Housing Act to result in
a significant number of tenants relocating from properties owned by the Local
Limited Partnerships, there can be no assurance that the provisions will not
significantly affect the operations of the properties of the Local Limited
Partnerships. Furthermore, there can be no assurance that other changes in
Federal housing subsidy policy will not occur. Any such changes could have an
adverse effect on the operation of the Partnership.
The following table indicates the year within which the Section 8 rent
subsidy contracts expire:
Subsidized Units Subsidized Units
Expiring as a Expiring as a
Number Percentage of Total Percentage of
of Units Subsidized Units Total Units
2000 1,073 99% 68%
2001 -- -- --
Thereafter 16 1% 1%
------ ---- ---
Total 1,089 100% 69%
===== === ==
Of the units (1,089 in total) receiving rent subsidies from Section 8,
1,073 of the units have their contracts expiring during the year ending December
31, 2000. HUD has issued new regulations that govern the continuance of
project-based subsidies. Under the new regulations, owners with HAP contracts
expiring after September 30, 1998 may elect to (1) renew the contract without
restructuring for one year, (2) opt out of the contract, or (3) enter into the
Mark-to Market program, which includes a potential restructuring of the mortgage
and renewal of the contract. At this time it is not possible to determine which
option each of the Local Limited Partnerships will elect, and accordingly, it is
not possible to determine the ultimate impact on the operations of the Local
Limited Partnerships.
<PAGE>
Depreciation of the buildings and improvements for eight 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, while
depreciation for another Local Limited Partnership is computed using the
straight-line method assuming a 40-year life.
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.
Notes payable were executed by the Local Limited Partnerships with the
former owners as part of the acquisition of the properties by the Local Limited
Partnerships. These notes bear simple interest at rates of 9% or 10% per annum.
The notes are nonrecourse notes secured by a security interest in all
partnership interests in the respective Local Limited Partnership and are
subordinated to the respective mortgage note for as long as the mortgage note is
insured by HUD. Any payments due from project income are payable from the
respective Local Limited Partnership's surplus cash, as defined by the
respective HUD Regulatory Agreement. The notes may be prepaid in whole or in
part at any time without penalty. Neither the respective Local Limited
Partnership nor any partner thereof, present or future, assumes any personal
liability for the payment of these notes.
These notes mature as follows:
Local Partnership Due Date Note Amount Accrued Interest
(in thousands)
Griffith Limited Partnership October 31, 1997* $ 1,199 $ 1,636
Southward Limited Partnership October 4, 1998* 1,609 2,206
Northgate Village Limited
Partnership July 26, 1999* 969 1,495
San Jose Limited Partnership August 29, 1999* 1,699 2,607
Gates Mill I Limited Partnership October 1, 1999* 2,667 4,066
Hurbell IV Limited Partnershi November 9, 1999* 648 886
Total Delinquent 8,791 12,896
Fairmeadows Limited Partnership December 1, 2011 1,849 3,417
Southridge Apartments
Limited Partnership December 1, 2011 2,166 3,349
Total Due 2011 4,015 6,766
-------- --------
Total Due $12,806 $19,662
====== ======
* Notes are in default.
In 1996, Fairmeadows and Southridge Apartments Limited Partnerships
and the holders of the $1,849,000 and $2,166,000 notes, respectively, entered
into Modification, Renewal and Extension of Liens Agreements ("Agreement") which
extended the maturity of the notes to December 1, 2011. Interest on the notes
continues to accrue at 10% and is due and payable at Maturity; provided,
however, that minimum annual installments of interest are paid on or before
December 31 of each year through December 31, 2010. Such minimum annual
installment increases each year by not less than 2.5% and not more than 5%,
based on the Consumer Price Index for All Urban Consumers (CPI-U). The
<PAGE>
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
A LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Continued)
minimum payments due and paid for Fairmeadows was $48,000 for 1998 and for
Southridge was $53,000 for 1998. No minimum payments were paid in 1999. The
Partnership is currently in default on the required annual interest payments and
the Partnership interests are subject to potential foreclosure.
The difference between the accrued interest recorded as of December 31,
1995 and the amount specified in the Agreements is being amortized over the
remaining term of the note as a reduction of interest expense using the
effective interest rate yield method. Amortization of accrued interest of
approximately $60,000 and $18,000 for Fairmeadows and Southridge, respectively,
was recorded in 1999.
The Financial Accounting Standards Board 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") requires 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.
During 1999, Hurbell IV Limited Partnership recognized an impairment loss
on its rental property in the amount of approximately $422,000. The Limited
Partner is actively attempting to sell its net assets. This impairment loss was
the result of the net carrying value of the assets exceeding the estimated net
sales value.
Additionally, regardless of whether an impairment loss of an individual
property has been recorded or not, the carrying value of each of the rental
properties may still exceed their fair market value as of December 31, 1999.
Should a Local Limited Partnership be forced to dispose of any of its
properties, it could incur a loss.
3. TRANSACTIONS WITH THE GENERAL PARTNER AND AFFILIATES OF THE GENERAL
PARTNER
The Partnership accrued administrative and reporting fees payable to the
General Partner of approximately $86,000 annually during 1999 and 1998. No
payments for such fees were made to the General Partner in 1999 and 1998. As of
December 31, 1999, the Partnership owed approximately $1,003,000 to the General
Partner for accrued administrative and reporting fees.
During 1999 and 1998, the General Partner advanced approximately $1,000
and $3,000, respectively, to the Partnership to pay operating expenses. No
repayments were made by the Partnership during 1999 and 1998. Interest is
charged on the borrowing at the Chase Manhattan Bank prime interest rate plus
2%. Chase Manhattan Bank prime was 8.25% at December 31, 1999. Interest accrued
for the years ended December 31, 1999 and 1998 was approximately $2,000 and
$1,000 respectively, which is included in other operating expenses on the
Partnership's Statement of Operations.
An affiliate of the General Partner, NHP Management Company
("NHPMC"), formerly a wholly owned subsidiary of NHP Incorporated ("NHPI"), is
the project management agent for the projects operated by eight of the Local
Limited Partnerships. NHPMC and other affiliates of NCHP earned approximately
$645,000 and $663,000 from the Local Limited Partnerships for management fees
and other services provided to the Local Limited Partnerships during 1999 and
1998, respectively. At December 31, 1999, the amount due NHPMC and unpaid by the
Local Limited Partnerships amounted to approximately $34,000.
<PAGE>
Personnel working at the project sites, which are managed by NHPMC, were
employees of NHPI during the period January 1, 1996 through December 8, 1997 and
became employees of NHPMC (as a successor employer) as of December 8, 1997 and,
therefore, the projects reimbursed NHPI and NHPMC for the actual salaries and
related benefits. Total reimbursements earned for salaries and benefits for the
years ended December 31, 1999 and 1998, were approximately $1,029,000 and
$1,010,000, respectively.
An affiliate of the Local Partner of Gate Mills I Limited Partnership
provides management services for the property owned by the Local Limited
Partnership. During 1999 and 1998, the affiliate received approximately $69,000
and $66,000, respectively, for these services. Additionally, in 1998,
approximately $7,000 was paid to another affiliate of this Local Partner for
painting services. No such payments were made in 1999.
4. INCOME TAXES
The Partnership is not taxed on its income. The partners are taxed in
their individual capacities based upon their distributive share of the
Partnership's taxable income or loss 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.
A reconciliation follows:
Years Ended December 31,
1999 1998
---- ----
(in thousands)
Net loss per financial statements $ (21) (99)
Other 66 7
Partnership's share of limited local
partnership's loss (13) (520)
------------ ----------
Profit (loss) per tax return $ 22 $ (612)
============= ==========
The following is a reconciliation between the Partnership's reported amounts and
the federal tax basis of net assets:
December 31, 1999
-----------------
(in thousands)
Net assets as reported $ 811
Add (deduct):
Investment in Partnerships (26,694)
Other 68
----------
Net deficit - federal tax basis $(24,815)
=======
5. 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 establishment of any reserves which the General Partner
deems reasonably necessary for contingent, unmatured or unforeseen liabilities
or obligations of the Partnership.
Third, 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;
Fourth, 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;
Fifth, 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;
Sixth, to the General Partner for disposition and refinancing fees,
including prior disposition and refinancing fees which have been accrued
but are unpaid;
Seventh, 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.
6. GOING CONCERN
Certain of the Local Partnership's notes payable are past due (see Note
2). Continuation of the Local Partnerships' operations in the present form is
dependent on its ability to extend the maturity date of these notes, or to repay
or to refinance the notes. These conditions raise substantial doubt about their
ability to continue as a going concern. The financial statements do not include
any adjustments which might result from the outcome of this uncertainty.
7. ABANDONMENT OF LIMITED PARTNERSHIP UNITS
In 1999, the number of Limited Partnership Units decreased by 10 units due
to limited partners abandoning their units. In abandoning his or her Limited
Partnership Unit(s), a limited partner relinquishes all right, title, and
interest in the partnership as of the date of abandonments. However, the limited
partner is allocated his or her share of net income or loss for that year. The
income or loss per Limited Partnership Unit in the accompanying consolidated
statements of operations is calculated based on the number of units outstanding
at the beginning of the year. There were no such abandonments in 1998.
8. LEGAL PROCEEDINGS
In 1997, NHP received subpoenas from the HUD Inspector General ("IG")
requesting documents relating to arrangements whereby NHP or any of its
affiliates provided compensation to owners of HUD-assisted or HUD-insured
multi-family projects in exchange for or in connection with property management
of a HUD project. In July 1999, NHP received a grand jury subpoena requesting
documents relating to the same subject matter as the HUD IG subpoenas and NHP's
operation of a group purchasing program created by NHP, known as Buyers Access.
To date, neither the HUD IG nor the grand jury has initiated any action against
NHP or Apartment Investment and Management Company ("AIMCO"), the ultimate
controlling entity of NHP or, to NHP's or AIMCO's knowledge, any owner of a HUD
property managed by NHP. AIMCO believes that NHP's operations and programs are
in compliance, in all material respects, with all laws, rules and regulations
relating to HUD-assisted or HUD-insured properties. NHP and AIMCO are
cooperating with investigations and does not believe that the investigations
will result in a material adverse impact on its operations. However, as with any
similar investigation, there can be no assurance that these will not result in
material fines, penalties or other costs.
<PAGE>
9. REAL ESTATE AND ACCUMULATED DEPRECIATION OF LOCAL LIMITED PARTNERSHIPS
IN WHICH NHP REALTY FUND I HAS INVESTED
<TABLE>
<CAPTION>
Initial Cost Cost
To Partnership Capitalized
(in thousands) (Removed)
Net Subsequent
to Acquisition
(in thousands)
Buildings
and Related
Personal Carrying Cost
Description Encumbrances Land Property Improvements Adjustments
Fairmeadows
<S> <C> <C> <C> <C> <C>
Limited Partnership $ (1) $650 $4,808 $ 1,040 $ --
Forest Green (1) 170 2,062 352 --
Limited Partnership
Gates Mills I (1) 669 6,058 43 --
Limited Partnership
Griffith (1) 270 2,624 452 (1,000)
Limited Partnership
Northgate Village (1) 220 2,953 658 (17)
Limited Partnership
Southward (1) 220 4,110 662 (900)
Limited Partnership
San Jose (1) 440 4,728 1,448 --
Limited Partnership
Southridge
Apartments (1) 700 5,613 888 --
Limited Partnership
Hurbell IV (1) 100 2,159 163 (1,460)
Limited Partnership
Village Green (1) 137 2,096 403 --
Limited Partnership
Totals 3,576 37,211 6,109 (3,377)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Gross Amount At Which
Carried
At December 31, 1999
--------------------
(in thousands)
Life upon
which
Buildings depreciation
in
And latest
statement
Related of
operations
is
Personal Accumulated Date of Date computed
Description Land Property Total(2)(3) Depreciation (3) Construction Acquired (years)
<S> <C> <C> <C> <C> <C> <C> <C>
Fairmeadows $680 $5,818 $6,498 $2,301 1970 9/84 5-50
Limited
Partnership
Forest Green 170 2,414 2,584 1,000 1972 8/84 5-50
Limited
Partnership
Gates Mills I 669 6,101 6,770 2,173 1972 10/84 5-30
Limited
Partnership
Griffith Limited 271 2,075 2,346 1,027 1973 11/84 5-50
Partnership
Northgate Village 212 3,602 3,814 1,438 1973 7/84 5-50
Limited
Partnership
Southward 221 3,871 4,092 1,682 1972 10/84 5-50
Limited
Partnership
San Jose Limited 461 6,155 6,616 2,663 1970 9/84 5-50
Partnership
Southridge 707 6,494 7,201 2,509 1970 10/84 5-50
Apartments
Limited
Partnership
Hurbell IV 101 861 962 243 1974 11/84 5-40
Limited
Partnership
Village Green 143 2,493 2,636 1,035 1971 8/84 5-50
Limited
Partnership
Totals $3,635 $39,884 $43,519 $16,071
</TABLE>
<PAGE>
(1) Schedule of Encumbrances
Notes
Payable
Mortgage and Accrued
Partnership Name Notes Interest Total
---------------- ----- -------- -----
(in thousands)
Fairmeadows Limited Partnership$ 1,676 $ 5,266 $ 6,942
Forest Green Limited Partnership 850 - 850
Gates Mills I Limited Partnership 2,021 6,733 8,754
Griffith Limited Partnership 909 2,835 3,744
Northgate Village Limited Partnership 1,246 2,464 3,710
Southward Limited Partnership 1,384 3,815 5,199
San Jose Limited Partnership 1,791 4,306 6,097
Southridge Apartments Limited Partnership 1,971 5,515 7,486
Hurbell IV Limited Partnership 967 1,534 2,501
Village Green Limited Partnership 716 -- 716
TOTAL - December 31, 1999 $ 13,531 $ 32,468 $ 45,999
========== ========== ==========
(2) The aggregate cost of land for Federal income tax purposes is
approximately $3,252,000 and the aggregate costs of buildings and
improvements for Federal income tax purposes is approximately $43,234,000.
The total of the above-mentioned items is approximately $46,486,000.
<PAGE>
(3) Reconciliation of real estate
-----------------------------
Years Ended December 31,
1999 1998
---- ----
(in thousands)
Balance at beginning of period $ 43,136 $ 42,797
Improvements during the period 805 339
Impairment loss on rental property (422) --
Balance at end of period $ 43,519 $ 43,136
Reconciliation of accumulated depreciation
Years Ended December 31,
1999 1998
---- ----
(in thousands)
Balance at beginning of period $ 14,887 $ 13,732
Depreciation expense for the period 1,184 1,155
Balance at end of period $ 16,071 $ 14,887
========== ==========
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant
(a), (b) and (c). The Partnership has no directors, executive officers
or significant employees of its own.
(a), (b), (c), (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
Two individuals comprise the Board of Directors of NCHP. One director was
appointed by the President of the United States, by and with the advice and
consent of the Senate.
Thomas W. Toomey (age 39) was elected Executive Vice President Finance and
Administration and a Director of NCHP in 1997. Mr. Toomey has served as Senior
Vice President--Finance and Administration of AIMCO from January 1996 to March
1997, when he was promoted to Executive Vice President--Finance and
Administration until December 1999, when he was appointed Chief Operating
Officer. From 1990 until 1995, Mr. Toomey served in a similar capacity with
Lincoln Property Company ("LPC") as Vice President/Senior Controller and
Director of Administrative Services of Lincoln Property Services where he was
responsible for LPC's computer systems, accounting, tax, treasury services and
benefits administration. From 1984 to 1990, he was an audit manager with Arthur
Andersen & Co. where he served real estate and banking clients. Mr. Toomey
received a B.S. in Business Administration/Finance from Oregon State University.
Patrick J. Foye (age 42) has been Executive Vice President of NCHP
since October 1, 1998 and was appointed President in September 1999. Mr.
Foye has served as Executive Vice President of AIMCO since May 1998. Prior
to joining AIMCO, Mr. Foye was a partner in the law firm of Skadden, Arps,
Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing Partner of the
firm's Brussels, Budapest and Moscow offices from 1992 through 1994. Mr.
Foye is also Deputy Chairman of the Long Island Power Authority and serves as
a member of the New York State Privatization Council. He received a B.A.
from Fordham College and a J.D. from Fordham University Law School.
Executive Officers
The current executive officers of NCHP and a description of their
principal occupations in recent years are listed below.
Thomas W. Toomey (age 39). See "Directors of NCHP."
Patrick J. Foye (age 42). See "Directors of NCHP."
----------------
Steven D. Ira (age 48) has served as Executive Vice President of NCHP
since 1997 and of AIMCO since 1994. From 1987 until July 1994, he served as
President of Property Asset Management ("PAM"). Prior to merging his firm with
PAM in 1987, Mr. Ira acquired extensive experience in property management.
Between 1977 and 1981 he supervised the property management of over 3,000
apartment and mobile home units in Colorado, Michigan, Pennsylvania and Florida,
and in 1981 he joined with others to form the property management firm of
McDermott, Stein and Ira. Mr. Ira served for several years on the National
Apartment Manager Accreditation Board and is a former president of the National
Apartment Association and the Colorado Apartment Association. Mr. Ira is the
sixth individual elected to the Hall of Fame of the National Apartment
Association in its 54-year history. He holds a Certified Apartment Property
Supervisor (CAPS) and a Certified Apartment Manager designation from the
National Apartment Association, a Certified Property Manager (CPM) designation
from the National Institute of Real Estate Management (IREM) and he is a member
of the Boards of Directors of the National Multi-Housing Council, the National
Apartment Association and the Apartment Association of Metro Denver. Mr. Ira
received a B.S. from Metropolitan State College in 1975.
Joel F. Bonder (age 57) was appointed Executive Vice President, General
Counsel and Secretary of NCHP and AIMCO effective December 1997. Prior to
jointing the Company, Mr. Bonder served as Senior Vice President and General
Counsel of NHP from April 1994 until December 1997. Mr. Bonder served as
Vice President and Deputy General Counsel of NHP from June 1991 to March 1994
and as Associate General Counsel of NHP Incorporated from 1986 to 1991. From
1983 to 1985, Mr. Bonder practiced with the Washing, D.C. law firm of Lane &
Edson, P.C. and from 1979 to 1983 practiced with the Chicago law firm of Ross
and Hardines. Mr. Bonder received a B.A. from the University of Rochester
and a J.D. from Washington University School of Law.
Paul J. McAuliffe (age 43) has been Executive Vice President of NCHP
and AIMCO since February 1999 and was appointed Chief Financial Officer in
October 1999. Prior to joining the Company, Mr. McAuliffe was Senior
Managing Director of Secured Capital Corp and prior to that time had been a
Managing Director of Smith Barney, Inc. from 1993 to 1996, where he was
senior member of the underwriting team that lead AIMCO's initial public
offering in 1994. Mr. McAuliffe was also a Managing Director and head of the
real estate group at CS First Boston from 1990 to 1993 and he was a Principal
in the real estate group at Morgan Stanley & Co., Inc. where he worked from
1983 to 1990. Mr. McAuliffe received a B.A. from Columbia College and an
M.B.A. from University of Virginia, Darden School.
Martha L. Long (age 40) has been Senior Vice President and Controller of
NCHP and AIMCO since October 1998, as a result of the acquisition of Insignia
Financial Group, Inc. From June 1994 until January 1997, she was the Controller
for Insignia, and was promoted to Senior Vice President - Finance and Controller
in January 1997, retaining that title until October 1998. From 1988 to June
1994, Ms. Long was Senior Vice President and Controller for The First Savings
Bank, FSB in Greenville, South Carolina.
(d) There is no family relationship between any of the foregoing
directors and executive officers.
Item 10. Executive Compensation
National Housing Partnership Realty Fund I has no officers or directors.
No direct form of compensation or remuneration was paid by the Partnership to
any officer or director of the General Partner. However, reimbursements and
other payments have been made to the Partnership's General Partner and its
affiliates, as described in "Item 13.Certain Relationships and Related
Transactions."
Item 11. 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.
The following table sets forth certain information regarding limited
partnership units of the Registrant owned by each person or entity is known by
the Registrant to own beneficially or exercise voting or dispositive control
over more than 5% of the Registrant's limited partnership units as of December
31, 1999.
Name of
Beneficial Owner Number of Units % of Class
AIMCO and affiliates 1,286.5 11.18%
(affiliates of the General Partner)
The business address of AIMCO is 2000 South Colorado Boulevard, Denver, CO 80222
Item 12. Certain Relationships and Related Transactions
The Partnership accrued administrative and reporting fees payable to the
General Partner of approximately $86,000 annually during 1999 and 1998. No
payments for such fees were made to the General Partner in 1999 and 1998. As of
December 31, 1999, the Partnership owed approximately $1,003,000 to the General
Partner for accrued administrative and reporting fees.
During 1999 and 1998, the General Partner advanced approximately $1,000
and $3,000, respectively, to the Partnership to pay operating expenses. No
repayments were made by the Partnership during 1999 and 1998. Interest is
charged on the borrowing at the Chase Manhattan Bank prime interest rate plus
2%. Chase Manhattan Bank prime was 8.25% at December 31, 1999. Interest accrued
for the years ended December 31, 1999 and 1998 was approximately $2,000 and
$1,000 respectively, which is included in other operating expenses on the
Partnership's Statement of Operations.
An affiliate of the General Partner, NHP Management Company
("NHPMC"), formerly a wholly owned subsidiary of NHP Incorporated ("NHPI"), is
the project management agent for the projects operated by eight of the Local
Limited Partnerships. NHPMC and other affiliates of NCHP earned approximately
$645,000 and $663,000 from the Local Limited Partnerships for management fees
and other services provided to the Local Limited Partnerships during 1999 and
1998, respectively. At December 31, 1999, the amount due NHPMC and unpaid by the
Local Limited Partnerships amounted to approximately $34,000.
Personnel working at the project sites, which are managed by NHPMC, were
employees of NHPI during the period January 1, 1996 through December 8, 1997 and
became employees of NHPMC (as a successor employer) as of December 8, 1997 and,
therefore, the projects reimbursed NHPI and NHPMC for the actual salaries and
related benefits. Total reimbursements earned for salaries and benefits for the
years ended December 31, 1999 and 1998, were approximately $1,029,000 and
$1,010,000, respectively.
An affiliate of the Local Partner of Gate Mills I Limited Partnership
provides management services for the property owned by the Local Limited
Partnership. During 1999 and 1998, the afiliate received approximately $69,000
and $66,000, respectively, for these services. Additionally, in 1998,
approximately $7,000 was paid to another affiliate of this Local Partner for
painting services. No such payments were made in 1999.
<PAGE>
PART IV
Item 13. Exhibits Reports on Form 8-K
(a) Exhibits
Exhibit 27 Financial Data Schedule, is filed as an exhibit to
this report.
Exhibit 99.1 Audited Combined Financial Statements of the
Local Limited Partnerships in which the
Partnership has invested are included as an
exhibit to this report:
(b) Reports on Form 8-K filed during the fourth quarter of 1999:
None.
<PAGE>
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 31, 2000 /s/Patrick J. Foye
Date Patrick J. Foye
President
March 31, 2000 /s/Martha L. Long
Date Martha L. Long
Senior Vice President and
Controller
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 31, 2000 /s/Patrick J. Foye
Date Patrick J. Foye
President
March 31, 2000 /s/Martha L. Long
Date Martha L. Long
Senior Vice President and
Controller
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERS REALTY FUND I
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1999 AND 1998
<PAGE>
Independent Auditors' Report
To The Partners of
National Housing Partnership Realty Fund I
Indianapolis, Indiana
We have audited the accompanying combined statement 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, 1999,
and the related combined statements of operations, partners' deficit, and cash
flows for each of the two years in the period ended December 31, 1999. These
combined 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
Gates Mills I Limited Partnership or Hurbell IV Limited Partnership (two of the
ten Local Limited Partnerships) for the year ended December 31, 1999 which
reflect total assets of 20% of combined total assets as of December 31, 1999,
and net losses which reflect 68% of combined net loss for the year then ended.
We did not audit the financial statements of Gates Mills I Limited Partnership
for the year ended December 31, 1998 which reflect total assets of 18% of
combined total assets as of December 31, 1998, and net losses which reflect 35%
of combined net loss for the year then ended. The financial statements of these
Local Limited Partnerships were audited by other auditors whose reports have
been furnished to us, and our opinion, insofar as it relates to the amounts
included for these Local Limited Partnerships, is based solely on the reports of
the other auditors.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, the
financial statements referred to above 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, 1999, and the combined results of their operations and their
cash flows for each of the two years in the period ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
As discussed in Notes 6 and 11 to the combined financial statements, the due
dates of certain of the Local Partnership's notes payable have expired, and
therefore, the notes are in default. These conditions raise substantial doubt
about their ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
/s/Ernst & Young LLP
Indianapolis, Indiana
March 6, 2000
<PAGE>
Independent Auditor's Report
Partners Hurbell IV 1999
We have audited the accompanying balance sheet of Hurbell IV Limited
Partnership, (the Project) FHA Project No. 062-44054-LD (A Limited Partnership)
as of December 31, 1999, and the related statements of income, changes in
partners' deficit, and cash flows for the year then ended. These financial
statements are the responsibility of the Project'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.
As described in Note A, these financial statements were prepared in conformity
with the accounting practices prescribed or permitted by the U.S. Department of
Housing and Urban Development, which is a comprehensive basis of accounting
other than generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hurbell IV Limited Partnership
at December 31, 1999, and the results of its operations, changes in partners'
deficit and cash flows for the years then ended on the basis of accounting
described in Note A.
As discussed in Note G to the financial statements, the partnership has notes
payable that matured on November 9, 1999. This condition raises substantial
doubt about its ability to continue as a going concern. The financial statements
doe not include any adjustments that might result from the outcome of this
uncertainty.
In accordance with Government Auditing Standards, we have also issued a report
dated February 1, 2000 on our consideration of Hurbell IV Limited Partnership's
internal controls and a report dated February 1, 2000 on its compliance with
laws and regulations applicable to the basic financial statements.
<PAGE>
Independent Auditor's Report
Partners
Gates Mills I Limited Partnership
We have audited the accompanying statement of financial position of Gates Mills
I Limited Partnership, An Ohio Limited Partnership, F.H.A. Project No.:
042-44062-LDP, as of December 31, 1998, 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, 1998, and the results of its operations, changes
in partners' deficit and cash flows for the year then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Gates
Mills I Limited Partnership will continue as a going concern. As discussed in
Note C to the financial statements, the Partnership's notes payable are due
October 1, 1999. As of the date of this report, the Partnership has not
renegotiated the terms of the notes which raises substantial doubt about the
Partnership's ability to continue as a going concern. The Partnership's plans in
regard to this matter are also described in Note C. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 23 through 25
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 audit
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.
In accordance with Government Auditing Standards, and the Consolidated Audit
Guide for Audits of HUD Programs, we have also issued reports dated January 26,
1999, on our consideration of Gates Mills I Limited Partnership's internal
control structure and on its compliance with specific requirements applicable to
major HUD programs and fair housing and non-discrimination.
Reznick Fedder & Silverman
Bethesda, Maryland
January 26 ,1999
<PAGE>
Independent Auditor's Report
Partners
Gates Mills I Limited Partnership
We have audited the accompanying statement of financial position of Gates Mills
I Limited Partnership, An Ohio Limited Partnership, F.H.A. Project No.:
042-44062-LDP, as of December 31, 1999, 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, 1999, and the results of its operations, changes
in partners' deficit and cash flows for the year then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Gates
Mills I Limited Partnership will continue as a going concern. As discussed in
Note C to the financial statements, the Partnership's notes payable were due
October 1, 1999. As of the date of this report, the Partnership has not
renegotiated the terms of the notes which raises substantial doubt about the
Partnership's ability to continue as a going concern. The Partnership's plans in
regard to this matter are also described in Note C. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 23 through 25
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 audit
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.
In accordance with Government Auditing Standards, and the Consolidated Audit
Guide for Audits of HUD Programs, we have also issued reports dated February 2,
2000, on our consideration of Gates Mills I Limited Partnership's internal
control structure and on its compliance with specific requirements applicable to
major HUD programs and fair housing and non-discrimination.
Reznick Fedder & Silverman
Bethesda, Maryland
February 2, 2000
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF FINANCIAL POSITION
December 31, 1999
(in thousands)
ASSETS
Cash and cash equivalents $ 713
Accounts receivable, net (Note 2) 331
Tenants' security deposits held in trust funds 237
Prepaid taxes and insurance 69
Deposits 1
Mortgage escrow deposits (Note 5) 3,071
Rental property, net (Notes 4, 5 and 9) 27,448
$ 31,870
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable and accrued expenses:
Trade payables $ 575
Accrued real estate taxes 217
Due to management agent - NHPMC (Note 10) 34
Due to partners (Note 7) 1,213
Accrued interest on partner loans (Note 7) 536
2,575
Tenants' security deposits payable 231
Notes payable (Note 6) 12,806
Accrued interest on notes payable (Note 6) 19,662
Mortgage notes payable (Note 5) 13,531
Partners' deficit (16,935)
$ 31,870
See notes to combined financial statements.
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF OPERATIONS
Years Ended December 31,
1999 1998
---- ----
(in thousands)
REVENUES:
Rental income (Note 3) $ 7,417 $ 7,278
Interest income 161 101
Other income 199 216
7,777 7,595
EXPENSES:
Administrative expenses (Note 10) 1,760 1,662
Operating and maintenance expenses 1,590 2,005
Utilities expenses 1,519 1,335
Depreciation (Note 1) 1,184 1,155
Taxes and insurance 880 1,016
Financial expenses - primarily interest
(Note 5) 85 99
Interest on notes payable (Notes 6 and 7) 1,294 1,286
Annual partnership administrative fees to
General Partner (Note 7) 75 75
Impairment loss on rental property (Note 9) 422 --
8,809 8,633
NET LOSS $ (1,032)$ (1,038)
See notes to combined financial statements.
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF PARTNERS' DEFICIT
(in thousands)
National The
Housing National Jeffrey
Partnership Housing I.
Realty Fund I Partnership Friedman Total
Deficit at
January 1, 1998$ (14,496) $ (234) $ (43) $ (14,773)
Net loss (1,024) (10) (4) (1,038)
Distributions (12) -- -- (12)
Deficit at
December 31, 1998 (15,532) (244) (47) (15,823)
Net loss (1,018) (10) (4) (1,032)
Distributions (79) (1) -- (80)
Deficit at
December 31, 1999$ (16,629) $ (255) $ (51) $ (16,935)
Percentage interest at
December 31, 1999
and 1998 (A) (B) (C)
(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.
See notes to combined financial statements.
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Receipts:
Rental receipts $ 7,533 $ 7,209
Interest receipts 163 105
Other operating receipts 231 252
Entity receipts:
Interest receipts -- 1
Miscellaneous receipts 2 4
Total Receipts 7,929 7,571
Disbursements:
Administrative (558) (440)
Management fees (681) (700)
Utilities paid (1,503) (1,326)
Salaries and wages (1,206) (1,158)
Operating and maintenance (770) (1,604)
Real estate taxes (600) (514)
Property insurance (192) (231)
Miscellaneous taxes and insurance (236) (223)
Tenant security deposits (1) (5)
Other operating disbursements (34) (45)
Interest on mortgage (8) (26)
Mortgage insurance premium (56) (70)
Miscellaneous financial (12) (5)
Entity disbursements:
Interest on notes payable (10) (142)
Miscellaneous disbursements (97) (14)
Total disbursements 5,964 (6,503)
Net cash provided by operating activities 1,965 1,068
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in mortgage escrow deposits (157) 44
Net purchase of fixed assets (805) (339)
Other investing 5 (14)
Net cash used in investing activities (957) (309)
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage principal payments (649) (601)
Distributions to partners (80) (12)
Proceeds from loans or notes payable -- 101
Principal payments on loans or notes payable (8) (12)
Other financing (54) (71)
Net cash used in financing activities (791) (595)
NET INCREASE IN CASH AND
CASH EQUIVALENTS 217 164
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 496 332
CASH AND CASH EQUIVALENTS, END OF YEAR $ 713$ 496
See notes to combined financial statements.
<PAGE>
EXHIBIT 99.1
NATIONAL HOUSING PARTNERSHIP REALTY FUND I
LOCAL LIMITED PARTNERSHIPS
COMBINED STATEMENTS OF CASH FLOWS
(Continued)
Years Ended December 31,
1999 1998
RECONCILIATION OF NET LOSS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net loss $ (1,032)$ (1,038)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 1,184 1,155
Impairment loss on rental property 422 --
Changes in operating assets and
liabilities:
Tenants accounts receivable 8 (69)
Accounts receivable - other 64 19
Accrued receivables (1) --
Prepaid expenses (2) --
Cash restricted for tenant security
deposits 11 (11)
Accounts payable trade 122 (275)
Accrued liabilities (143) 72
Accrued interest - notes payable 1,285 1,145
Tenant security deposits held in trust (12) 6
Prepaid revenue 76 (4)
Entity liability accounts (17) 68
Total adjustments 2,997 2,106
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,965 $ 1,068
See notes to combined financial statements.
<PAGE>
EXHIBIT 99.1
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" or the
"Registrant") 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 agreements discussed in Note
3 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.
On June 3, 1997, Apartment Investment and Management Company, a Maryland
corporation ("AIMCO" and, together with its subsidiaries and other controlled
entities, the "AIMCO Group"), acquired all of the issued and outstanding capital
stock of NHP Partners, Inc., a Delaware corporation ("NHP Partners"), and the
AIMCO Group acquired all of the outstanding interests in NHP Partners Two
Limited Partnership, a Delaware limited partnership ("NHP Partners Two"). The
acquisitions were made pursuant to a Real Estate Acquisition Agreement, dated as
of May 22, 1997 (the "Agreement"), by and among AIMCO, AIMCO Properties, L.P., a
Delaware limited partnership (the "Operating Partnership"), Demeter Holdings
Corporation, a Massachusetts corporation ("Demeter"), Phemus Corporation, a
Massachusetts corporation ("Phemus"), Capricorn Investors, L.P., a Delaware
limited partnership ("Capricorn"), J. Roderick Heller, III and NHP Partners Two
LLC, a Delaware limited liability company ("NHP Partners Two LLC"). NHP Partners
owns all of the outstanding capital stock of the National Corporation for
Housing Partnerships, a District of Columbia corporation ("NCHP"), which is the
general partner of The National Housing Partnership, a District of Columbia
limited partnership ("NHP" or the "General Partner"). Together, NCHP and NHP
Partners Two own all of the outstanding partnership interests in NHP. NHP is the
general partner of the Registrant. As a result of these transactions, the AIMCO
Group acquired control of the general partner of the Registrant and, therefore,
may be deemed to have acquired control of the Registrant.
<PAGE>
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 eight 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, while a
40-year life is assumed for the tenth Local Limited Partnership. Cash
distributions are limited by the Regulatory Agreement 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 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.
Certain reclassifications of prior year's amounts have been made to
conform with the current year's presentation.
2. ACCOUNTS RECEIVABLE
-------------------
Accounts receivable consist of the following:
December 31, 1999
-----------------
(in thousands)
Net tenants accounts receivable $ 75 Housing assistance receivable
(see Note 3) 127 Accounts receivable - interest 18 Reserve releases
receivable 37 Interest reduction payment receivable 4 Accounts and
notes receivable - operations 70
Net accounts receivable $ 331
=======
3. 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 six years. Each Local Limited Partnership
has an agreement in effect during 1999. The Local Limited Partnerships received
a total of approximately $3,161,000 and $3,427,000 in the form of housing
assistance payments during 1999 and 1998, respectively, which is included in
"Rental Income" on the combined statements of operations.
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
1,089 units, 69% of the total units owned by the properties in which the
Partnership has invested, receive rental subsidies. On October 27, 1997, the
President signed into law the Multifamily Assisted Housing Reform and
Affordability Act of 1997 (the "1997 Housing Act"). Under the 1997 Housing Act,
certain properties assisted under Section 8, with rents above market levels and
financed with HUD-insured mortgage loans, will be restructured by adjusting
subsidized rents to market levels, thereby potentially reducing rent subsidies,
and lowering required debt service costs as needed to ensure financial viability
at the reduced rents and rent subsidies. The 1997 Housing Act retains
project-based subsidies for most properties (properties in rental markets with
limited supply, properties serving the elderly, and certain other properties).
The 1997 Housing Act phases out project-based subsidies on selected properties
servicing families not located in rental markets with limited supply, converting
such subsidies to a tenant-based subsidy. Under a tenant-based system, rent
vouchers would be issued to qualified tenants who then could elect to reside at
properties of their choice, provided such tenants have the financial ability to
pay the difference between the selected properties' monthly rent and the value
of the vouchers, which would be established based on HUD's regulated fair market
rent for the relevant geographical areas. With respect to Housing Assistance
Payments Contracts ("HAP Contracts") expiring before October 1, 1998, Congress
elected to renew them for one-year terms, generally at existing rents, so long
as the properties remain in compliance with the HAP Contracts. While the
Partnership does not expect the provisions of the 1997 Housing Act to result in
a significant number of tenants relocating from properties owned by the Local
Limited Partnerships, there can be no assurance that the provisions will not
significantly affect the operations of the properties of
the Local Limited Partnerships. Furthermore, there can be no assurance that
other changes in Federal housing subsidy policy will not occur. Any such
changes could have an adverse effect on the operation of the Partnership.
The following table indicates the year within which the Section 8
rent subsidy contracts expire:
Subsidized Units Subsidized Units
Expiring as a Expiring as a
Number Percentage of Total Percentage of
of Units Subsidized Units Total Units
2000 1,073 99% 68%
2001 -- -- --
Thereafter 16 1% 1%
Total 1,089 100% 69%
Of the units (1,089 in total) receiving rent subsidies from Section 8,
1,073 of the units have their contracts expiring during the year ending December
31, 2000. HUD has issued new regulations that govern the continuance of
project-based subsidies. Under the new regulations, owners with HAP contracts
expiring after September 30, 1998 may elect to (1) renew the contract without
restructuring for one year, (2) opt out of the contract, or (3) enter into the
Mark-to Market program, which includes a potential restructuring of the mortgage
and renewal of the contract. At this time it is not possible to determine which
option each of the Local Limited Partnerships will elect, and accordingly, it is
not possible to determine the ultimate impact on the operations of the Local
Limited Partnerships.
4. RENTAL PROPERTY
---------------
Rental property consists of the following:
December 31, 1999
-----------------
(in thousands)
Land $ 3,635
Buildings and improvements 37,223
Equipment and furniture 2,661
43,519
Less accumulated depreciation (16,071)
Net rental property $ 27,448
5. 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.
Approximate maturities of mortgage notes payable for the next five years
are as follows (in thousands):
2000 $ 701
2001 757
2002 817
2003 883
2004 953
Thereafter 9,420
--------
$13,531
6. NOTES PAYABLE
-------------
Notes payable were executed by the Local Partnerships with the former
owners as part of the acquisition of the properties by the Local Partnerships.
These notes bear simple interest at rates of 9% or 10% per annum. The notes are
nonrecourse notes secured by a security interest in all partnership interests in
the respective Local Partnership and are subordinated to the respective mortgage
note for as long as the mortgage note is insured by HUD. Any payments due from
project income are payable from the respective Local Limited Partnership's
surplus cash, as defined by the respective HUD Regulatory Agreement. The notes
may be prepaid in whole or in part at any time without penalty. Neither the
respective Local Partnership nor any partner thereof, present or future, assumes
any personal liability for the payment of these notes.
These notes mature as follows:
Local Partnership Due Date Note Amount Accrued Interest
(in thousands)
Griffith Limited Partnership October 31, 1997* $ 1,199 $ 1,636
Southward Limited Partnership October 4, 1998* 1,609 2,206
Northgate Village Limited
Partnership July 26, 1999* 969 1,495
San Jose Limited Partnership August 29, 1999* 1,699 2,607
Gates Mill I Limited
Partnership October 1, 1999* 2,667 4,066
Hurbell IV Limited
Partnership November 9, 1999* 648 886
Total Delinquent 8,791 12,896
Fairmeadows Limited
Partnership December 1, 2011 1,849 3,417
Southridge Apartments
Limited Partnership December 1, 2011 2,166 3,349
Total Due 2011 4,015 6,766
Total Due $12,806 $19,662
* Notes are in default.
In 1996, Fairmeadows Limited and Southridge Apartments Limited
Partnerships and the holders of the $1,849,004 and $2,166,000 notes,
respectively, entered into Modification, Renewal and Extension of Liens
Agreements ("Agreement") which extended the maturity of the notes to December 1,
2011. Interest on the notes continues to accrue at 10% and is due and payable at
Maturity; provided, however, that minimum annual installments of interest are
paid on or before December 31 of each year through December 31, 2010. Such
minimum annual installment increases each year by not less than 2.5% and not
more than 5%, based on the Consumer Price Index for All Urban Consumers (CPI-U).
The minimum payments due and paid for Fairmeadows was $48,000 for 1998 and for
Southridge was $53,000 for 1998. No minimum payments were paid in 1999.
The difference between the accrued interest recorded as of December 31,
1995 and the amount specified in the Agreement is being amortized over the
remaining term of the note as a reduction of interest expense using the
effective interest rate yield method. Amortization of accrued interest of
approximately $60,000 and $18,000 for Fairmeadows and Southridge, respectively,
was recorded in 1999 and 1998.
The Limited Partnerships are currently in default on the required annual
interest payments and the Partnership interests are subject to potential
foreclosure.
7. DUE TO PARTNERS
---------------
The Local Limited Partnerships accrued annual partnership administration
fees payable to the General Partner, of $75,000 during 1999 and 1998,
respectively. Payments of these fees are made to the General Partner without
interest from surplus cash available for distribution to partners pursuant to
HUD regulations. During 1999 and 1998, the Local Limited Partnerships paid
approximately $96,000 and $11,000, respectively. The accumulated fees owed to
NHP are approximately $429,000 at December 31, 1999.
During 1998, the General Partner advanced approximately $101,000, to five
Local Limited Partnerships, to fund partnership entity expenses, including
expenses incurred relating to potential sales or refinancing under the Low
Income Housing Preservation and Resident Homeownership Act of 1990 (LIHPRHA). No
advances were made in 1999. During 1999 and 1998, two and three Local Limited
Partnerships, respectively, made payments of principal of approximately $8,000
and $4,000. At December 31, 1999, the balance owed to the General Partner by
Local Limited Partnerships was approximately $363,000, including accrued
interest of approximately $9,000. Interest on these advances is charged at a
rate equal to the Chase Manhattan Bank prime interest rate plus 2%. Chase
Manhattan Bank prime was 8.25% at December 31, 1999.
During 1999 and 1998, no advances were made by the Partnership to Local
Limited Partnerships. Repayments of advances of approximately $8,000, and $7,000
and accrued interest of approximately $9,000 and $18,000 were received from one
and two Local Limited Partnerships during 1999 and 1998, respectively. At
December 31, 1999, the Partnership's working capital advances to Local Limited
Partnership's amounted to approximately $362,000. Interest is charged at the
Chase Manhattan Bank rate of price plus 2%. Chase Manhattan Bank prime was 8.25%
at December 31, 1999.
All advances and accumulated interest will be paid in conformity with HUD
and/or other regulator requirements and applicable partnership agreements.
8. FEDERAL AND STATE INCOME TAXES
------------------------------
The Local Limited Partnerships are not taxed on their income. The partners
are taxed in their individual capacities based upon their distributive share of
the Local Limited 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 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 for tax purposes. The tax loss is allocated to partner
groups in accordance with Section 704(b) of the Internal Revenue Code and
therefore is not necessarily proportionate to the interest percentage owned.
9. IMPAIRMENT LOSS ON RENTAL PROPERTY
----------------------------------
The Financial Accounting Standards Board 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") requires 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.
During 1999, Hurbell IV Limited Partnership recognized an impairment loss
on its rental property in the amount of approximately $422,000. The Local
Limited Partnership is actively attempting to sell its net assets. This
impairment loss was the result of the net carrying value of the assets exceeding
the estimated net sales value.
Additionally, regardless of whether an impairment loss of an individual
property has been recorded or not, the carrying value of each of the rental
properties may still exceed their fair market value as of December 31, 1999.
Should a Local Limited Partnership be forced to dispose of any of its
properties, it could incur a loss.
10. RELATED-PARTY TRANSACTIONS
--------------------------
An affiliate of the General Partner, NHP Management Company ("NHPMC"), formerly
a wholly owned subsidiary of NHP Incorporated ("NHPI"), is the project
management agent for the projects operated by eight of the Local Limited
Partnerships. During May 1997, AIMCO acquired approximately 51% of the voting
stock of NHPI. An additional 3% of the voting stock was acquired by AIMCO in
August 1997. On December 8, 1997, the NHPI stockholders elected to merge with
AIMCO. After the merger, NHPMC became a preferred stock subsidiary of AIMCO.
NHPMC and other affiliates of NCHP earned approximately $645,000 and $663,000
from the Local Limited Partnerships for management fees and other services
provided to the Local Limited Partnerships during 1999 and 1998, respectively.
At December 31, 1999, the amount due NHPMC and unpaid by the Local Limited
Partnerships amounted to approximately $34,000.
Personnel working at the project sites, which are managed by NHPMC, were
employees of NHPI during the period January 1, 1996 through December 8, 1997 and
became employees of NHPMC (as a successor employer) as of December 8, 1997 and,
therefore, the projects reimbursed NHPI and NHPMC for the actual salaries and
related benefits. Total reimbursements earned for salaries and benefits for the
years ended December 31, 1999 and 1998, were approximately $1,029,000 and
$1,010,000, respectively.
An affiliate of the Local Partner of Gate Mills I Limited Partnership
provides management services for the property owned by the Local Limited
Partnership. During 1999 and 1998, they received approximately $69,000 and
$66,000, respectively, for these services. Additionally, in 1998, approximately
$7,000 was paid to another affiliate of this Local Partner for painting
services. No such payments were made in 1999.
11. GOING CONCERN
-------------
Certain of the Local Limited Partnership's notes payable are past due at
December 31, 1999 (see Note 6). Continuation of the Local Limited Partnerships'
operations in the present form is dependent on its ability to extend the
maturity date of these notes, or to repay or to refinance the notes. The
financial statements do not include any adjustments which might result from the
outcome of this uncertainty.
12. 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. For the mortgage
notes payable and the notes payable 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from National
Housing Partnership Realty Fund I 1999 Fourth Quarter 10-KSB and is qualified in
its entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000731131
<NAME> National Housing Partnership Realty Fund I
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 23
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0
0
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<FN>
<F1> Registrant has an unclassified balance sheet. <F2> Multiplier is 1.
</FN>
</TABLE>
