UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1996
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 0-13520
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2828131
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
27 Christina Street, Suite 203, Newton, Massachusetts 02161
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 244-2242
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interest
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of voting stock held by non-affiliates of the registrant:
Not applicable
Documents incorporated by reference: None
Exhibits Index on Pages: 165-178
Page 1 of 180
<PAGE>
PART I
Item 1. Business
The Registrant, Liberty Housing Partners Limited Partnership (the
"Partnership"), is a limited partnership organized under the provisions of the
Massachusetts Uniform Limited Partnership Act on March 20, 1984. Until December
27, 1995, the partners in the Partnership consisted of Liberty Real Estate
Corporation, the managing general partner (the "Former Managing General
Partner"), LHP Associates Limited Partnership, the associate general partner
(the "Former Associate General Partner") and, together with the Former Managing
General Partner, (the "Former General Partners"), and 998 Limited Partners
owning 21,576 units of Limited Partnership Interest ("Units").
The Units were offered and sold commencing July 13, 1984, pursuant to a
Registration Statement on Form S-11 under the Securities Act of 1933. The
offering was completed on July 12, 1985.
On December 27, 1995, the Former General Partners withdrew from the
Partnership and TNG Properties, Inc., a Massachusetts corporation (the "Managing
General Partner"), was admitted to the Partnership as a substitute general
partner with an interest equivalent to the aggregate interests of the Former
General Partners.
The Partnership will terminate on December 31, 2020, unless sooner
dissolved or terminated as provided in Section 11 of the Amended Agreement of
Limited Partnership dated as of July 13, 1984, as amended to date (the
"Partnership Agreement").
The Partnership has no employees. Under the Partnership Agreement, the
Managing General Partner is solely responsible for the operation of the
Partnership and its properties.
The Partnership is engaged in only one industry segment, the business of
investing in, operating, owning, leasing and improving interests in real estate
through ownership of interests in other limited partnerships (the "Local Limited
Partnerships") which own and operate government- assisted, multi-family rental
housing complexes. As described in Item 2, the Partnership owns interests in 13
Local Limited Partnerships, each of which owns and operates a
government-assisted, garden-style, residential multi-family housing complex.
Each complex consists of one-to-three- story buildings of wood frame and brick
construction located on landscaped lots. The apartments within each of the
complexes contain fully equipped kitchens and some of the complexes include
swimming pools.
The Partnership paid for two of the 13 limited partnership interests in
cash upon acquisition. The Partnership paid for 11 of such limited partnership
interests by delivery of cash, short-term promissory notes (which have all been
paid in full) and nonrecourse promissory notes which bear interest at the rate
of 9% per annum ("Purchase Money Notes"). Each Purchase Money Note permits
interest to accrue to the extent cash distributions to the Partnership from the
applicable Local Limited Partnership are insufficient to enable the Partnership
to pay the Purchase Money Note on a current basis. The Purchase Money Notes do
not require payment of any portion of the principal amount of the notes prior to
maturity (except that the Purchase Money Notes require immediate payment
following a default (as defined therein) by the Partnership thereunder).
2
<PAGE>
Item 1. Business, continued
As a result of these interest accrual and payment provisions, each Purchase
Money Note will require a substantial balloon payment at maturity. The payment
of each Purchase Money Note is secured by a pledge of the Partnership's interest
in the Local Limited Partnership to which the note relates. The Purchase Money
Notes had an original term of from 15 to 17 years and mature at varying dates
during 1999, 2000 and 2001. Additional information concerning the Purchase Money
Notes is set forth below under "Management's Discussion and Analysis of
Financial Condition and Results of Operations." One of the two Local Limited
Partnerships in which the Partnership acquired its interest for cash issued
purchase money notes in connection with the purchase of its housing complex.
Such notes have terms which are substantially identical to those of the Purchase
Money Notes, and are secured by a pledge by all of the partners in such Local
Limited Partnership (including the Partnership) of their respective partnership
interests therein. See the table under Item 2 (Properties) below.
The Partnership does not intend to make any additional investments. The
Partnership's business is not seasonal.
In connection with the Partnership's investment in the Local Limited
Partnerships, Liberty LGP Limited Partnership, an affiliate of the Former
General Partners ("Liberty LGP") acquired co-general partnership interests or
special limited partnership interests in each of the Local Limited Partnerships.
In some cases, such interests entitle Liberty LGP to approve or disapprove
certain actions proposed to be taken by the unaffiliated general partners of the
Local Limited Partnership (the "Local General Partners"). In all cases, Liberty
LGP, acting alone, is authorized to cause each Local Limited Partnership to sell
and/or refinance the project owned by such Local Limited Partnership. On
December 27, 1995, TNG Properties, Inc. acquired the 99% limited partnership
interest in Liberty LGP. Liberty Housing Corporation retained the 1% general
partner interest, and Michael A. Stoller, President and CEO of the Managing
General Partner acquired all of the outstanding stock of Liberty Housing
Corporation from the Former Managing General Partner.
The Partnership's investments are and will continue to be subject to
various risks, including the following: (1) The risk that Partnership funds will
not be sufficient to enable the Partnership to pay its debts and obligations.
Among the Partnership's liabilities are the Purchase Money Notes. Such notes do
not require payments during their term, except to the extent of cash
distributions from the Local Limited Partnerships, but will require substantial
balloon payments at maturity. The Partnership may not have funds sufficient to
repay such notes at maturity. See Item 7.
(2) Risk of recapture of previously claimed tax losses as a result of the
Partnership's inability to pay at maturity the Purchase Money Notes. As a result
of such recapture, the investors in the Partnership would have taxable income
from the Partnership, and the associated income tax liability, without cash
distributions from the Partnership with which to satisfy such income tax
liability.
(3) The risks associated with an investment in a partnership, including tax
risks as a result of possible adjustments by the IRS to federal income tax
returns filed by the Partnership and its Partners, and other tax risks.
(4) Risks that the federal government will cease or reduce funding of housing
subsidies, including subsidies under the Section 8 and Section 236 programs,
both of which provide substantial operating
3
<PAGE>
Item 1. Business, continued
revenues to many of the Local Limited Partnerships.
(5) Possible restrictions imposed by Federal, state or local agencies that
provide government assistance to the projects, which may limit the amount of
costs which may be passed on to tenants in the form of rent increases, limit
future direct government assistance to Local Limited Partnerships, or restrict
the Partnership's ability to sell or refinance its Local Limited Partnership
interests.
(6) The risk that properties owned by Local Limited Partnerships will not
generate income sufficient to meet their operating expenses and debt service or
to fund adequate reserves for capital expenditures.
(7) Continuing quality of on-site management of the local properties. Such
on-site management is subject to direct control by the Local General Partners of
the Local Limited Partnerships and not by the Partnership.
(8) Possible adverse changes in general economic conditions and adverse local
conditions, such as competitive over-building, a decrease in employment, or
adverse changes in real estate selling laws, which may reduce the desirability
of real estate in a particular area.
(9) Circumstances over which the Local Limited Partnerships may have little or
no control, such as fires, earthquakes, and floods.
Item 2. Properties
The Partnership owns limited partnership interests in 13 Local Limited
Partnerships, each of which owns the fee interest in a government-assisted
residential multi-family rental housing complex. The following table reflects:
(1) the name of each of the Local Limited Partnerships and the percentage of the
total interests in the Local Limited Partnership represented by the
Partnership's interest; (2) the date on which the Partnership acquired each of
such interests; (3) the consideration paid for each interest, (including
purchase money notes); (4) the original principal amount, the aggregate amount
of the principal and accrued and unpaid interest outstanding as of December 31,
1996, and the maturity date of the Purchase Money Notes relating to each
interest; (5) the Partnership's share of the mortgage indebtedness of each Local
Limited Partnership; (6) the size and the location of the housing project owned
by each Local Limited Partnership; and (7) the government program pursuant to
which the complex receives assistance and the number of housing units in the
project receiving such assistance.
More detailed information related to the properties owned by the Local
Limited Partnerships, including their respective amounts of mortgage
indebtedness is included in Schedule III, Real Estate and Accumulated
Depreciation, included in Item 8, and is contained in the separate financial
statements of the Local Limited Partnerships. It is unlikely that operating cash
flows from the Local Limited Partnerships will generate any distributions to
investors in the Partnership, because in nearly all cases, the Partnership's
share of operating cash flows from the properties owned by the Local Limited
Partnerships must be applied to repayment of accrued interest and principal on
the related Purchase Money Notes.
4
<PAGE>
<TABLE>
<CAPTION>
Item 2. Properties
Purchase Money Notes
-----------------------------
Unpaid
Principal At Acquisition
Total and -------------------- Description of Apartment Complex
Name/Percentage Interest Acquisi- Original Interest LHPLP Total ---------------------------------
Ownership of Local Acquisiton tion Principal as of Maturity Share of Invested Geographic Government
Limited Partnership Date Cost Amount(A) 12/31/96 Date Local Debt Assets (C) Size Location Assistance (D)
- ----------------------- ---------- -------- --------- --------- -------- ---------- ---------- ----- ---------- --------------
98% interests are owned
in the following Local
Limited Partnerships(B):
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Glendale Manor 8/31/84 $810,000 $450,000 $584,981 8/29/2000 $929,000 $1,739,000 50 Units Clinton, SC 221(d)(4)
Apartments 30,310 SF 100%
5.5 Acres Section 8(E)
2 Surry Manor, Ltd. 8/31/84 740,000 360,000 647,304 7/9/2001 1,006,000 1,746,000 44 Units Dobson, NC 221(d)(4)
27,253 SF 100%
5.0 Acres Section 8(E)
3 Oxford Homes 9/28/84 1,004,000 644,000 825,765 9/28/1999 653,000 1,657,000 50 Units Oxford, NC 221(d)(4)
for the Elderly, 26,672 SF 100%
Ltd. 4.5 Acres Section 8(E)
4 Williamston 9/28/84 1,064,000 664,000 708,395 9/28/1999 649,000 1,713,000 50 Units Williamstown, 221(d)(4)
Homes for the 26,496 SF NC 100%
Elderly, Ltd. 7 Acres Section 8(E)
5 Fuquay-Varina 9/28/84 1,118,000 707,000 753,207 9/28/1999 822,000 1,940,000 60 Units Fuqyay 221(d)(4)
Homes for the 35,056 SF -Varina, NC 100%
Elderly, Ltd. 6 Acres Section 8(E)
6 Fiddlers Creek 9/28/84 2,876,000 1,750,000 2,826,436 9/28/1999 2,396,000 5,272,000 160 Units Winston 221(d)(4)
Apartments 126,900SF -Salem, NC
15 Acres
7 Austintown 10/30/84 3,081,000 1,600,000 3,222,822 10/30/1999 3,635,000 6,716,000 200 Units Austintown, 236 HUD
Associates 189,200SF OH 100%
20 Acres Section 8(E)
8 Osuna Apartments 11/30/84 2,042,000 1,300,000 2,603,637 11/27/1999 1,527,000 3,569,000 110 Units Albuquerque, 236 HUD
Company 97,400 SF NM Section 8,(E)
7.3 Acres 22 Units
9 Linden Park 12/06/84 2,997,000 1,800,000 2,707,748 12/11/1999 3,359,000 6,356,000 198 Units Triangle, 221(d)(4)
Associates 164,327 SF VA VA Housing
Limited Partnership 10 Acres Development
Authority
Interest
Subsidy
(Continued)
5
<PAGE>
<CAPTION>
Item 2. Properties, continued
Purchase Money Notes
-----------------------------
Unpaid
Principal At Acquisition
Total and -------------------- Description of Apartment Complex
Name/Percentage Interest Acquisi- Original Interest LHPLP Total ---------------------------------
Ownership of Local Acquisiton tion Principal as of Maturity Share of Invested Geographic Government
Limited Partnership Date Cost Amount(A) 12/31/96 Date Local Debt Assets (C) Size Location Assistance (D)
- ----------------------- ---------- -------- --------- --------- -------- ---------- ---------- ----- ---------- --------------
94% interests are owned
in the following Local
Limited Partnerships(B):
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10 Pine Forest 10/29/84 736,000 350,000 702,340 10/30/1999 1,190,000 1,926,000 64 Units Cairo, GA 515 RECD
Apartments, Ltd. 53,344 SF 521 RECD
6 Acres 29 Units
11 Brierwood, Ltd. 10/29/84 563,000 270,000 550,362 10/30/1999 838,000 1,401,000 56 Units Bainbridge, 515 RECD
42,840 SF GA 521 RECD
6 Acres 33 Units
12 Meadowwood, Ltd. 10/29/84 1,001,000 610,000 1,261,185 10/30/1999 1,004,000 2,005,000 80 Units Tifton,GA 515 RECD
67,416 SF
6.8 Acres
13 Brierwood II, Ltd. 01/25/85 101,000 351,000 452,000 18 Units Bainbridge, 515 RECD
12,402 SF GA
1.4 Acres
----------- ----------- ----------- ----------- -----------
Total Acquisitions $18,133,000 $10,505,000 $17,394,182 $18,359,000 $36,492,000 1,140 units
=========== =========== =========== =========== ===========
(Continued)
6
<PAGE>
<FN>
Item 2. Properties, continued
(A) Purchase Money Notes bear interest at 9% per annum (See Note 6 to Financial Statements). Notes issued in conjuction with the
acquisition of Linden Park were issued by the Local Limited Partnership; all other notes were issued by the Partnership. Each
note requires no principal payments prior to maturity. Each note requires payment of interest prior to maturity solely to the
extent of cash distributions from the Local Limited Partnership to which the note relates. To the extent interest is not paid
currently, it accrues and is payable at maturity. Accordingly, each note will require a substantial balloon payment at
maturity.
The total of principal and accrued and unpaid interest outstanding at December 31, 1996 on the Purchase Money Notes is as
follows:
Principal Interest Total
--------- -------- -----
Obligation of:
The Partnership $8,705,000 $5,981,434 $14,686,434
Linden Park 1,800,000 907,748 2,707,748
----------- ---------- -----------
$10,505,000 $6,889,182 $17,394,182
=========== ========== ===========
(B) Where the Partnership has acquired a 98% interest as investor partner, the Local General Partner has retained a 1% general
partner interest and Liberty LGP has acquired a 1% general partner interest. Where the Partnership has acquired a 94% interest
as investor partner, the Local General Partner has retained a 5% general partner interest and Liberty LGP has acquired a 1%
Special Limited Partner interest.
(C) The amount of any partnership management fee, as defined in the Partnership Agreement, which may be accrued and unpaid for any
year is limited to a specified percentage of Invested Assets, as defined in the Partnership Agreement.
(D) Government Assistance:
221 (d) (4): Mortgage is insured by HUD
Section 8: Rental Assistance from HUD for low or elderly housing
515 RHS: Mortgage financing and interest subsidies from RHS pursuant to Section 515 of the Housing Act of 1949
521 RHS: Rental assistance from RHS pursuant to Section521 of the Housing Act of 1949
236 HUD: Mortgage insurance and interest subsidies from HUD
(E) Section 8 rental assistance contracts expire as follows:
Glendale Manor Apartments 05/2000
Surry Manor, Ltd. 07/2000
Oxford Homes for the Elderly, Ltd. 07/1998
Williamston Homes for the Elderly, Ltd. 09/1998
Fuquay-Varina Homes for the Elderly, Ltd. 05/1998
Austintown Associates 11/1998
Osuna Apartments Company 08/1999
</FN>
</TABLE>
7
<PAGE>
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the Partnership
is a party or, to the knowledge of the Managing General Partner, of which any of
the properties owned by the Local Limited Partnerships is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for the Partnership's Securities and Related Security
Holder Matters
(a) Market Information
The Partnership's outstanding securities consist of units of limited
partnership interest ("Units"). There is no public market for the Units, and it
is not anticipated that such a public market will develop. Transfer of the Units
is subject to compliance with state and federal securities laws, and in various
states is subject to compliance with the minimum investment and suitability
standards imposed by the Partnership and applicable "blue sky" laws.
(b) Holders.
As of March 18, 1997, there were 999 holders of record of the 21,576
Units outstanding.
(c) Dividends.
The Partnership Agreement requires that Distributable Cash from
Operations (as defined in the Partnership Agreement) be distributed 99% to the
Limited Partners and 1% to the General Partners, to the extent then available,
within 120 days after completion of the Partnership's fiscal year.
The Partnership Agreement provides that Cash from Sales or Refinancings
(as defined in the Partnership Agreement), if any, received by the Partnership,
will be distributed (i) first, until the Limited Partners have received an
amount equal to their total invested capital, 100% to the Limited Partners, and
(ii) the balance, 85% to the Limited Partners and 15% to the General Partners;
provided however that if the amount of Cash from Sales or Refinancings exceeds
the amount of profits for tax purposes arising from such sale or refinancing,
the amount of such excess is distributed to those Partners, if any, who have
positive balances in their capital accounts following any
8
<PAGE>
Item 5. Market for the Partnership's Securities and Related Security
Holder Matters, continued
distributions made pursuant to clause (i) in connection with such sale or
refinancing, in proportion to and to the extent of such positive balances, and
prior to any distributions pursuant to clause (ii).
No distributions have been made by the Partnership since its
organization in 1984.
Item 6. Selected Financial Data
The following table sets forth selected financial information regarding
the Partnership's financial position and operating results. This information
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Financial Statements and
Notes thereto, which are included in Items 7 and 8 of this Report. Amounts are
expressed in thousands with the exception of per Unit calculations.
For the Years Ended December 31,
----------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Interest income $ 61 $ 32 $ 36 $ 34 $ 43
Net loss (1,962) (1,564) (1,527) (1,364) (1,488)
Net loss per Unit(a) (90.02) (71.77) (69.92) (62.47) (68.15)
Total assets at
December 31 2,587 2,964 3,174 3,833 4,283
Long-term debt
(including
current portion,
net of discount)
at December 31 9,684 8,152 6,864 5,869 5,002
Distributable Cash
From Operations
per Unit(a) - - - - -
(a) Per Unit calculations as presented above are based on 21,576 Units
outstanding as of the end of December 31, 1996 and 1995 and 21,616 units
outstanding for the years ended December 31, 1992 through 1994.
9
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
The Partnership.
The Partnership is liable for the amount of the purchase money notes
delivered to purchase its interests in the Local Limited Partnerships (as
hereinafter described), and for the Partnership's day-to-day administrative and
operating expenses.
The Partnership acquired its interests in two Local Limited Partnerships
for cash. The Partnership acquired its interests in the other eleven Local
Limited Partnerships by delivery of cash, short-term promissory notes (all of
which have been paid in full) and purchase money promissory notes which bear
interest at the rate of 9% per annum (the "Purchase Money Notes"). The payment
of each Purchase Money Note is secured by a pledge of the Partnership's interest
in the Local Limited Partnership to which the note relates. Each note had an
initial term of 15 to 17 years, and the Purchase Money Notes mature at varying
dates between September 1999 and July 2001. None of the Purchase Money Notes is
cross-defaulted to the others, nor are the Purchase Money Notes cross-
collateralized in any manner.
The terms of each Purchase Money Note permit interest to accrue to the
extent cash distributions to the Partnership from the applicable Local Limited
Partnership are insufficient to enable the Partnership to pay the Purchase Money
Note on a current basis. Generally, the amount of such cash distributions have
not been sufficient in any year to pay the full amount of interest accrued for
that year on the Purchase Money Notes. The Purchase Money Notes do not require
payment of any portion of the principal amount of the note prior to maturity
(except that the Purchase Money Notes require immediate payment following a
default (as defined therein) by the Partnership thereunder). Accordingly, each
Purchase Money Note will require a substantial balloon payment at maturity. The
aggregate outstanding principal amount of and accrued and unpaid interest on the
Purchase Money Note obligations of the Partnership, as of December 31, 1996, as
set forth in the table included in Item 2 above, was $14,686,434. The
outstanding obligations are expected to increase annually until maturity as
interest continues to accrue under the Purchase Money Notes. The aggregate
outstanding principal amount of the Purchase Money Notes reported on the
Partnership's Balance Sheet ($9,684,281 at December 31, 1996), reflects a
discount using an imputed interest rate of approximately 21%, which was applied
to the face amount of the notes on the respective investment purchase dates and
which is used to calculate an annual interest accrued in accordance with
generally accepted accounting principles that will equate to the legal
obligation (as presented in Item 2 and discussed above) expected at maturity of
the notes.
Linden Park Limited Partnership, one of the two Local Limited
Partnerships in which the Partnership acquired its interest for cash ("LPLP"),
issued purchase money notes in connection with the purchase of its housing
complex. The terms of such notes are substantially identical to those of the
Partnership's Purchase Money Notes, requiring no payment of principal prior to
maturity and permitting interest to accrue prior to maturity to the extent
LPLP's cash flow is insufficient to pay such interest.
10
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources, continued
The Partnership acquired its interest in LPLP for cash, and accordingly,
no Purchase Money Notes were delivered in connection therewith. However, LPLP
delivered purchase money notes in the original principal amount of $1,800,000 in
connection with LPLP's acquisition of the housing project which it owns (the
"LPLP Notes"). The LPLP Notes are secured by a pledge of LPLP's cash flow, and
by a pledge by each of the partners in LPLP (including the Partnership) of its
respective interest in LPLP. The LPLP Notes were issued on December 6, 1984,
bear interest at the rate of 9% per annum and mature on December 11, 1999. The
LPLP Notes permit interest to accrue to the extent that cash flow of LPLP is not
sufficient to enable LPLP to pay interest on a current basis. The LPLP Notes do
not require payment of any portion of the principal amount thereof prior to
maturity (except that such notes require immediate payment following a default
(as defined therein) by LPLP thereunder). As a result of such interest accrual
and payment provisions, the LPLP Notes will require substantial balloon payments
at maturity. As of December 31, 1996 the unpaid principal amount of and accrued
and unpaid interest on the LPLP Notes equaled $2,707,748. In order for LPLP to
pay at maturity the LPLP Notes, LPLP would most likely be required to sell or
refinance its housing project in a transaction generating proceeds sufficient to
repay the notes. There can be no assurance that LPLP will be able to
successfully consummate any of such types of transactions. Accordingly, the LPLP
Notes, while not technically Purchase Money Notes issued by the Partnership,
will present the same issues to the Partnership as will the maturity of the
Purchase Money Notes.
In order to pay at maturity the Purchase Money Notes with respect to any
particular Local Limited Partnership, the Partnership will most likely be
required to (a) sell its interest in the Local Limited Partnership for a price
equal to or greater than the amounts due under the associated notes (b) obtain
financing in an amount sufficient to repay the notes or (c) cause the Local
Limited Partnership to sell or refinance its housing project in a transaction
sufficient to repay indebtedness encumbering the project and generate net
proceeds to the Partnership sufficient to enable the Partnership to repay the
notes. Alternatively, the Partnership could seek extension or modification of
the payment terms of the Purchase Money Notes. The process of exploring and
negotiating any of the foregoing alternatives will require substantial time,
effort and resources. There can be no assurance that the Partnership will be
able to successfully consummate any of such types of transactions.
If Partnership funds are insufficient to pay when due the Purchase Money
Notes, the holders of the Purchase Money Notes will have the right to foreclose
on the Partnership's respective interests in the Local Limited Partnerships. The
sale or other disposition by the Partnership of its interests in the Local
Limited Partnerships, including in connection with such a foreclosure, is likely
to result in recapture of previously claimed tax losses to the Partnership and
may have other adverse tax consequences to the Partnership and to the Limited
Partners. Such recapture may cause some or all of the Limited Partners to have
taxable income from the Partnership without cash distributions from the
Partnership with which to satisfy the tax liability resulting therefrom.
11
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources, continued
The only sources of Partnership funds are (i) distributions from the
Local Limited Partnerships (substantially all of which are presently required to
be applied to payment of interest accruing on the Purchase Money Notes), (ii)
payments to the Partnership of amounts due under certain promissory notes
acquired by the Partnership from one of the Local Limited Partnerships (as
hereinafter described) and (iii) Partnership reserves. At December 31, 1996, the
Partnership's had reserves of $163,915 (in cash and cash equivalents), compared
with $293,331 at December 31, 1995. Such reserves have partially funded the
Partnership administrative expenses, including expense reimbursement to the
Former Managing General Partner. Due to the assignment of the Former Managing
General Partner's interest to the current Managing General Partner, the
Partnership incurs certain administrative costs, including the partnership
Management Fee, which are earned by or reimbursed to the current Managing
General Partner. As discussed more fully in Note 6 to the financial statements,
such administrative costs were $98,240 and $88,771 in 1996 and 1995,
respectively.
In connection with the assignment of the Former General Partners'
interests to the current Managing General Partner, the Former Managing General
Partner refunded to the Partnership certain amounts previously received from the
Partnership as expense reimbursements. The amount refunded in respect of
expenses accrued prior to January 1, 1995 has been recorded as a $3,202
contribution to the Partnership's capital by the Former Managing General
Partner.
During 1996, 1995 and 1994, distributable cash flow from the Local
Limited Partnerships (LLP's) to which the Partnership delivered purchase money
notes was distributed to the partnership, as follows: 1996: Seven LLP's -
$288,086; 1995: Eight LLP's - $316, 819; and 1994: Eight LLP's - $298,385. On
April 30, 1996, 1995, and 1994, the Partnership used such cash distributions to
pay a portion of the accrued and unpaid interest on the related Purchase Money
Notes.
In 1989, the Partnership purchased long-term purchase money notes of
Linden Park Associates Limited Partnership, one of the Local Limited
Partnerships ("Linden Park"). Such notes represent obligations of Linden Park to
former partners whose partnership interests were purchased for resale to the
Partnership (in connection with the Partnership's acquisition of an interest in
Linden Park). The Partnership purchased such notes, which had an outstanding
principal amount of $173,803 plus accrued and unpaid interest of $49,692, as of
the date of acquisition, for $58,000. The notes mature on December 11, 1999, and
bear interest at 9% per annum, payable only to the extent of available cash from
Linden Park's operations. During 1996, the Partnership received $35,410 of
interest payments on such notes and accrued unpaid interest of $81,450. As of
December 31, 1996, the outstanding balance of principal and accrued and unpaid
interest receivable on these notes amounted to $255,253.
12
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Local Limited Partnerships.
The liquidity of the Local Limited Partnerships in which the
Partnership has invested is dependent on the ability of the respective Local
Limited Partnerships, which own and operate government assisted multi-family
rental housing complexes, to generate cash flow sufficient to fund operations
and debt service and to maintain working capital reserves. Each of the Local
Limited Partnerships is regulated by government agencies which require monthly
funding of certain operating and capital improvements reserves and which
regulate the amount of cash to be distributed to owners. Each Local Limited
Partnership's source of funds is rental income received from tenants and
government subsidies. Certain of the Local Limited Partnership's receive rental
income pursuant to Section 8 rental assistance contracts which expire beginning
in 1998 and continuing through 2000. Certain government programs are currently
in place which may allow the Local Limited Partnerships to renew or extend this
government subsidy. It is not certain whether these programs will be available
at the time the existing Section 8 contracts expire.
Each of the Local Limited Partnerships has incurred mortgage
indebtedness as reflected in Item 8 in Schedule III - Real Estate and
Accumulated Depreciation. The mortgage loans provide for equal monthly payments
of principal and interest in amounts which will reduce the principal amount of
the loans to zero at maturity. Each of the maturity dates of the respective
mortgages is substantially beyond the due date of the Purchase Money Note
obligations. Upon a sale of a property by a Local Limited Partnership the
mortgage indebtedness of such property must be satisfied prior to distribution
of any funds to the partners in the Local Limited Partnership.
Partnership Operations
The Partnership is engaged solely in the business of owning interests in
the Local Limited Partnerships rather than the direct ownership of real estate.
The Partnership's interest income reflects interest earned on reserves and
interest net of discount amortization on the long term notes receivable. Total
interest income increased to $61,407 in 1996 from $32,035 in 1995. The increase
was principally attributible to interest payments received on the long-term note
receivable ($35,410 in 1996 versus $2,919 in 1995.) Interest income was $36,118
in 1994. The decrease in 1995 over 1994 was mainly due to lower reserve balance
during the year.
The Partnership's interest expense increased to $1,904,536 in 1996 from
$1,569,007 in 1995 and $1,138,651 in 1994. Such increases are attributable to
the accrual of interest under the Purchase Money Notes. Refer to Note 7 to the
Financial Statements.
General and administrative expenses of the Partnership were $143, 556 in
1996, $121,353 in 1995 and $157,756 in 1994. In 1995, the Partnership was
charged for less expense reimbursements by the Former Managing General Partner
due to the assignment of its interest in the Partnership.
Average occupancy levels at the projects owned by the Local Limited
Partnerships ranged from 94% to 100% in 1996, and 89% to 100% in 1995 and 1994.
13
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Partnership Operations, continued
The Partnership's equity in income (losses) from the Local Limited
Partnerships was $24,678 in 1996, $94,133 in 1995 and ($86,319) in 1994. The
recognition of income in 1995 and 1996 and decrease in equity in loss of Local
Limited Partnership investments in 1994 is primarily attributable to the fact
that the Partnership did not record losses for four Local Limited Partnerships
because its related investment account in such partnerships had already been
reduced to zero. In 1996, the Partnership did not record approximately $125,000
of net losses for four Local Limited Partnerships and was able to apply $55,714
of loss carry forwards against the current year net income of one Local Limited
Partnership. In 1995 and 1994, approximately $256,000 and $259,000,
respectively, of net losses were not recorded. The Partnership is not obligated
to make additional capital contributions to fund the deficit in its capital
accounts in any of the Local Limited Partnerships.
Because of the above discussed factors, net loss increased to $1,962,007
in 1996 from $1,564,192 and $1,526,608 in 1995 and 1994, respectively.
The operations of the Partnership and of each of the Local Limited
Partnerships are subject to numerous risks, including material tax risks. See
Item 1 above.
14
<PAGE>
Item 8. Financial Statements and Supplementary Data
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
INDEX
Page
Financial Statements:
Balance Sheets, December 31, 1996 and 1995 16-17
Statements of Operations for the Years
Ended December 31, 1996, 1995 and 1994 18
Statements of Changes in Partners' Deficit
for the Years Ended December 31, 1996, 1995 and 1994 19
Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 20
Notes to Financial Statements 21-30
Independent Auditors' Report 31
Report of Independent Accountants for the year ended
December 31, 1994 32
Separate Financial Statements, including
Reports of Independent Accountants, for
Significant Subsidiaries:
Fuquay-Varina Homes for the Elderly, Ltd. 33-62
Fiddlers Creek Apartments, Ltd. 63-93
Austintown Associates 94-127
Osuna Apartments Company 128-157
Financial Statement Schedules:
Independent Auditors' Report 158
Schedule III - Real Estate and Accumulated Depreciation 159
All schedules other than those indicated in the index have been omitted as the
required information is inapplicable or the information is presented in the
financial statements or related notes.
15
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
BALANCE SHEETS
December 31,
---------------------------
1996 1995
---- ----
Assets
Current assets:
Cash and cash equivalents $ 163,915 $ 293,331
Other current assets 31 108
---------- ----------
Total current assets 163,946 293,439
Long-term notes and accrued interest
receivable 127,668 111,850
Investments in local limited
partnerships 2,295,189 2,559,088
---------- ----------
$2,586,803 $2,964,377
========== ==========
(continued)
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
BALANCE SHEETS (continued)
December 31,
----------------------------
1996 1995
---- ----
Liabilities and Partners' Deficit
Current liabilities:
Accounts payable to affiliates $ 58,271 $ 88,771
Accounts payable 1,000 --
Accrued expense 15,600 15,650
Accrued interest payable 385,901 304,628
------------ ------------
Total current liabilities 460,772 409,049
Purchase money notes 9,684,281 8,151,571
------------ ------------
Total liabilities 10,145,053 8,560,620
------------ ------------
Partners' deficit:
General partners:
Capital contributions 4,202 4,202
Accumulated losses (176,373) (156,753)
------------ ------------
(172,171) (152,551)
------------ ------------
Limited partners (21,576 Units in 1996
and in 1995):
Capital contributions (net of
offering costs of $1,134,440) 9,649,520 9,649,520
Accumulated losses (17,035,599) (15,093,212)
------------ ------------
(7,386,079) (5,443,692)
------------ ------------
Total partners' deficit (7,558,250) (5,596,243)
------------ ------------
Total liabilities and partners' deficit $ 2,586,803 $ 2,964,377
============ ============
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
--------------------------------
1996 1995 1994
---- ---- ----
Interest income $ 61,407 $ 32,035 $ 36,118
Expenses:
Interest expense 1,904,536 1,569,007 1,318,651
General and administrative
expense 143,556 121,353 157,756
----------- ----------- -----------
Total expenses 2,048,092 1,690,360 1,476,407
----------- ----------- -----------
Loss before equity in income(loss)
of local limited partnership
investment (1,986,685) (1,658,325) (1,440,289)
Equity in income (loss) of local
limited partnership
investment 24,678 94,133 (86,319)
----------- ----------- -----------
Net loss $(1,962,007) $(1,564,192) $(1,526,608)
=========== =========== ===========
Net loss per Limited
Partnership Unit, based
on 21,576 Units outstanding
in 1996 and 1995 and
21,616 units outstanding
in 1994 $ (90.02) $ (71.77) $ (69.92)
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the years ended December 31, 1996, 1995 and 1994
General Limited
Partners Partners Total
-------- -------- -----
Partners' deficit
at December 31, 1993 $ (124,845) $(2,383,800) $(2,508,645)
Net loss (15,266) (1,511,342) (1,526,608)
----------- ----------- -----------
Partners' deficit
at December 31, 1994 $ (140,111) $(3,895,142) $(4,035,253)
Net loss (15,642) (1,548,550) (1,564,192)
Capital Contributed 3,202 -- 3,202
----------- ----------- -----------
Partners' deficit
at December 31, 1995 $ (152,551) $(5,443,692) $(5,596,243)
Net loss (19,620) (1,942,387) (1,962,007)
----------- ----------- -----------
Partners' deficit
at December 31, 1996 $ (172,171) $(7,386,079) $(7,558,250)
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
<TABLE>
<CAPTION>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31
-----------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Cash distributions from local limited
partnerships $ 288,577 $ 316,819 $ 298,385
Interest payments on purchase money notes (290,554) (316,109) (298,885)
Cash paid for Partnership administration
expenses (173,106) (23,136) (310,340)
Interest received 45,667 19,300 30,721
----------- ----------- -----------
Net cash used in operating activities (129,416) (3,126) (280,119)
----------- ----------- -----------
Cash flows from financing activity:
Contributions from former general partners -- 3,202 --
----------- ----------- -----------
Net cash provided by financing activity -- 3,202 --
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents (129,416) 76 (280,119)
Cash and cash equivalents at:
Beginning of period 293,331 293,255 573,374
----------- ----------- -----------
End of period $ 163,915 $ 293,331 $ 293,255
=========== =========== ===========
Reconciliation of net loss to net cash used in operating activities:
Net loss $(1,962,007) $(1,564,192) $(1,526,608)
Adjustments to reconcile net loss to net
cash used in operating activities:
Share of (income) losses of local limited
partnership investments (24,678) (94,133) 86,319
Cash distributions from local limited
partnerships 288,577 316,819 298,385
Interest expense added to purchase money
notes, net of discount amortization 1,532,710 1,287,533 994,985
Interest income added to long-term
notes receivable, net of discount
amortization, and interest received (15,818) (14,607) (5,485)
Decrease (increase) in other current assets 77 1,870 (539)
(Decrease) increase in:
Accrued interest payable 81,273 (34,635) 25,408
Accounts payable to affiliates (30,500) 82,569 (150,752)
Accounts payable 1,000 -- (1,832)
Accrued expenses (50) 15,650 --
----------- ----------- -----------
Net cash used in operating activities $ (129,416) $ (3,126) $ (280,119)
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Organization of Partnership
Liberty Housing Partners Limited Partnership (the "Partnership") was
formed under the Massachusetts Uniform Limited Partnership Act on March 20, 1984
for the primary purpose of investing in other limited partnerships which own and
operate government assisted multi-family rental housing complexes (the "Local
Limited Partnerships").
The General Partners of the Partnership through December 27, 1995 were
Liberty Real Estate Corporation, which served as the Managing General Partner,
and LHP Associates Limited Partnership, which served as the Associate General
Partner. On December 27, 1995, Liberty Real Estate Corporation and LHP
Associates Limited Partnership withdrew from the Partnership and assigned and
transferred all of their interests in the Partnership to the Successor General
Partner, TNG Properties Inc., which was admitted to the Partnership as Successor
General Partner. TNG Properties Inc. serves as the Managing General Partner.
The Partnership Agreement authorized the sale of up to 30,010 units of
Limited Partnership Interest ("Units") of which 21,616 were subscribed for and
sold as of the completion of the offering on July 12, 1985. During fiscal 1995,
the Partnership recorded as cancelled and no longer outstanding 40 units which
were formally abandoned by the holders of such units.
Pursuant to terms of the Partnership Agreement, Profits or Losses for
Tax Purposes (other than from sales or refinancings) and Distributable Cash From
Operations, both as defined in the Partnership Agreement, are allocated 99% to
the Limited Partners and 1% to the General Partners. Different allocations of
profits or losses and cash distributions resulting from other events are
specified in the Partnership Agreement.
2. Significant Accounting Policies
The Partnership records are maintained on the accrual basis of
accounting.
Investments in Local Limited Partnerships are accounted for by the
equity method whereby costs to acquire the investments, including cash paid,
notes issued and other costs of acquisition, are capitalized as part of the
investment account. The Partnership's equity in the earnings or losses of each
of the Local Limited Partnerships is reflected as an addition to or reduction of
the respective investment account. The Partnership does not recognize losses
which reduce its investment account below zero.
Cash equivalents at December 31, 1996 and 1995, consist of a 16 day
certificate of deposit with interest accruing at a rate of 4.3 percent and a 14
day certificate of deposit with interest accruing at a rate of 4.5 percent,
respectively, and money market fund investments with no stated maturity, valued
at cost, which approximates market value.
Discounts on long-term purchase money notes are amortized over the terms
of the related notes using the effective interest method. Discounts on long-term
notes receivable are amortized
21
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
2. Significant Accounting Policies, continued
over the term of the notes using the effective interest method.
Net loss per Unit is based on the weighted average number of Units
outstanding in the applicable year. Refer to Note 1 for information regarding
profit and loss sharing ratios. No provision for income taxes has been made
since the liability for such taxes is the obligation of the Partners rather than
the Partnership.
3. Changes in Accounting Principles
In 1996, the partnership adopted the Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of." This standard requires that long-lived
assets and certain identifiable intangibles held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. No adjustment was
required as a result of the adoption of SFAS No. 121.
4. Investments in Local Limited Partnerships
The Partnership acquired Local Limited Partnership interests in thirteen
Local Limited Partnerships which own and operate government assisted
multi-family housing complexes. The Partnership, as Investor Limited Partner
pursuant to Local Limited Partnership Agreements, acquired interests ranging
from 94% to 98% in the profit or losses from operations and cash from operations
of each of the Local Limited Partnerships.
Twelve Local Limited Partnership interests were acquired from
withdrawing partners of existing Local Limited Partnerships and one Local
Limited Partnership interest was acquired from a newly formed Local Limited
Partnership. In conjunction with the acquisition of eleven of the Local Limited
Partnership interests from withdrawing partners, the Partnership issued
long-term purchase money notes in the aggregate principal amount of $8,705,000,
before discount, to such withdrawing partners. In conjunction with the
acquisition of one of the Local Limited Partnership interests, the Local Limited
Partnership issued purchase money notes to withdrawing partners amounting to
$1,800,000 with the same terms as the purchase money notes issued by the
Partnership in connection with its acquisition of interests in other Local
Limited Partnerships. All of the Purchase Money Notes carry simple interest at
9% per annum. Interest is payable annually but only to the extent of cash
distributed from the respective Local Limited Partnerships. Both principal and
unpaid interest are due at maturity. Recourse on such purchase money notes is
limited to the Partnership's respective Local Limited Partnership interests
which are pledged as security on the notes. See Note 7 for further information
on Purchase Money Notes.
The following is a summary of cumulative activity for investments in
Local Limited Partnerships since their dates of acquisition:
22
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
4. Investments in Local Limited Partnerships, continued
Years Ended December 31,
------------------------
1996 1995
---- ----
Total acquisition cost to the Partnership $ 9,356,379 $ 9,356,379
Additional capital contributed by the
Partnership 11,425 11,425
Partnership's share of losses of Local
Limited Partnerships (3,818,174) (3,842,845)
Cash distributions received from Local
Limited Partnerships (3,254,441) (2,965,871)
----------- -----------
Investments in Local Limited Partnerships $ 2,295,189 $ 2,559,088
=========== ===========
Summarized financial information from the combined financial statements
of all Local Limited Partnerships is as follows:
Summarized Balance Sheets
-------------------------
December 31,
------------
1996 1995
---- ----
Assets:
Investment property, net
of accumulated depreciation $ 17,379,631 $ 16,911,657
Current assets 2,637,472 2,847,206
Other assets 307,297 320,313
------------ ------------
Total assets $ 20,324,400 $ 20,079,176
============ ============
Liabilities and Partners' Equity (Deficit):
Current liabilities $ 1,945,146 $ 970,055
Long-term debt, net of discounts 17,217,990 17,583,554
------------ ------------
Total liabilities 19,163,136 18,553,609
Partnership's equity(deficit) 1,344,630 1,703,695
Other partners' equity(deficit) (183,366) (178,128)
------------ ------------
Total liabilities and
partners' equity(deficit) $ 20,324,400 $ 20,079,176
============ ============
23
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
4. Investments in Local Limited Partnerships, continued
Summarized Statements of Operations
-----------------------------------
For the Years Ended December 31,
-------------------------------
1996 1995 1994
---- ---- ----
Rental and other income $ 5,199,572 $ 5,191,089 $ 5,051,090
Expenses:
Operating expenses 3,298,651 3,185,215 3,340,402
Interest expense 954,170 1,242,398 1,111,356
Depreciation and amortization 991,323 922,690 951,056
----------- ----------- -----------
Total expenses 5,244,144 5,350,303 5,402,814
----------- ----------- -----------
Net loss $ (44,572) $ (159,214) $ (351,724)
=========== =========== ===========
Partnership's share of net loss $ (45,752) $ (161,616) $ (345,328)
=========== =========== ===========
Other partners' share
of net income (loss) $ 1,180 $ 2,402 $ (6,396)
=========== =========== ===========
The difference between the Partnership's share of income (loss) in Local
Limited Partnership investments in the Partnership's Statement of Operations for
the years ended December 31, 1996 through 1994 and the share of loss in the
above Summarized Statements of Operations consists of the Partnership's
unrecorded share of losses as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Share of income (loss) in Local
Limited Partnership Investments
in the Partnership's
Statement of Operations $ 24,678 $ 94,133 $ (86,319)
Partnership's share of income(loss) in
the above summarized
Statements of Operations (44,572) (161,616) (345,328)
--------- --------- ---------
Difference $ 69,250 $ 255,749 $ 259,009
========= ========= =========
Unrecorded Losses:
Linden Park (Prior year loss
carry forward applied against 1996 net income) $ (55,714) $ 192,452 $ 119,871
Brierwood, Ltd. 36,982 16,115 44,188
Brierwood II, Ltd. 20,189 4,458 14,666
Pine Forest Apartments, Ltd. 39,870 42,724 80,284
Surry Manor 28,145 -- --
Other (222) -- --
--------- --------- ---------
Total $ 69,250 $ 255,749 $ 259,009
========= ========= =========
</TABLE>
24
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
4. Investments in Local Limited Partnerships, continued
The Partnership's investment in Local Limited Partnerships reported in its
Balance Sheet at December 31, 1996 and 1995 are, respectively, $950,559 and
$855,393 greater than the Partnership's equity reported in the Summarized
Balance Sheets above. This is related to the share of unrecorded losses of the
five Local Limited Partnerships where the investment has been reduced to zero.
The Partnership recorded its share of losses in Linden Park, Brierwood
Ltd., Brierwood II, Ltd. Pine Forest Apartments, Ltd. and Surry Manor until its
related investment was reduced to zero. Subsequent to that point, any cash
distributions received from these five partnerships have been recognized as
investment income rather than as a reduction in Investment in Local Limited
Partnerships on the Partnership's Balance Sheet. The Partnership is not
obligated to make additional capital contributions to fund the deficit in its
capital accounts in these Local Limited Partnerships.
5. Long-term Notes and Interest Receivable
During 1989, the Partnership purchased long-term purchase money notes of
Linden Park Associates Limited Partnership ("Linden Park"), a Local Limited
Partnership. The notes represent obligations of Linden Park to former partners
whose partnership interests were purchased for resale to the Partnership in
connection with the Partnership's acquisition of an interest in Linden Park. The
Partnership purchased such notes, which carried a face value of $173,803 plus
accrued and unpaid interest of $49,692, for $58,000. The notes mature on
December 11, 1999 and bear interest at 9% per annum payable only from available
cash from operations of Linden Park. During the year ended December 31, 1996 the
Partnership received $35,410 of interest on such notes. Any interest that is
unpaid prior to maturity is due at maturity.
6.Transactions with Affiliates
During the years ended December 31, 1996, 1995 and 1994 the Partnership
recognized general and administrative expenses owed to the current or
predecessor Managing General Partner, as follows:
1996 1995 1994
---- ---- ----
Reimbursement of Partnership
administration expenses $48,240 $38,771 $59,211
Partnership management fees 50,000 50,000 50,000
As of December 31, 1996 and 1995, accounts payable to affiliates
totaling $58,271 and $88,771 respectively, represents amounts owed for
reimbursements of Partnership administration expenses of $7,771 and $38,771,
respectively, and partnership management fees of $50,500 and $50,000,
respectively.
25
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
NOTES TO THE FINANCIAL STATEMENTS
7. Long-term Purchase Money Notes
Long-term purchase money notes consist of the following at December 31:
1996 1995
---- ----
Purchase Money Notes, due July 9, 2001,
bearing interest at 9% per annum,
collateralized by the Partnership's
Local Limited Partnership interest
in Surry Manor, Ltd.:
Original principal balance $ 360,000 $ 360,000
Accrued and unpaid interest 287,304 254,904
Purchase Money Notes, due August 29,
2000, bearing interest at 9% per annum,
collateralized by the Partnership's
Local Limited Partnership interest in
Glendale Manor Apartments:
Original principal balance 450,000 450,000
Accrued and unpaid interest 134,981 132,680
Purchase Money Notes, due September 28,
1999, bearing interest at 9% per annum,
collateralized by the Partnership's
Local Limited Partnership interest in
Oxford Homes for the Elderly, Ltd.:
Original principal balance 643,600 643,600
Accrued and unpaid interest 182,165 159,241
Purchase Money Notes, due September 28,
1999, bearing interest at 9% per annum,
collateralized by the Partnership's
Local Limited Partnership interest in
Williamston Homes for the Elderly, Ltd.:
Original principal balance 664,100 664,100
Accrued and unpaid interest 44,295 30,892
26
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
NOTES TO THE FINANCIAL STATEMENTS
7. Long-term Purhase Money Notes (Continued)
1996 1995
------ -----
Purchase Money Notes, due September 28,
1999, bearing interest at 9% per annum,
collateralized by the Partnership's
Local Limited Partnership interest in
Fuquay-Varina Homes for the Elderly, Ltd.:
Original principal balance 707,300 707,300
Accrued and unpaid interest 45,907 51,449
Purchase Money Notes, due September 28,
1999, bearing interest at 9% per annum,
collateralized by the Partnership's
Local Limited Partnership interest in
Fiddlers Creek Apartments:
Original principal balance 1,750,000 1,750,000
Accrued and unpaid interest 1,076,436 1,067,442
Purchase Money Notes, due
October 30, 1999, bearing interest
at 9% per annum, collateralized by the
Partnership's Local Limited Partnership
interest in Meadowwood, Ltd.:
Original principal balance 610,000 610,000
Accrued and unpaid interest 651,185 596,285
Purchase Money Notes, due
October 30, 1999, bearing interest at
9% per annum, collateralized by the
Partnership's Local Limited Partnership
interest in Brierwood, Ltd.:
Original principal balance 270,000 270,000
Accrued and unpaid interest 280,362 256,062
Purchase Money Notes, due
October 30, 1999, bearing interest at
9% per annum, collateralized by the
Partnership's Local Limited Partnership
interest in Pine Forest Apartments, Ltd.:
Original principal balance 350,000 350,000
Accrued and unpaid interest 352,340 320,840
27
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
NOTES TO THE FINANCIAL STATEMENTS
7. Long-term Purhase Money Notes (Continued)
1996 1995
----- -----
Purchase Money Notes, due
October 30, 1999, bearing interest at
9% per annum, collateralized by the
Partnership's Local Limited Partnership
interest in Austintown Associates:
Original principal balance 1,600,000 1,600,000
Accrued and unpaid interest 1,622,822 1,503,918
Purchase Money Notes, due
November 27, 1999, bearing interest at
9% per annum, collateralized by the
Partnership's Local Limited Partnership
interest in Osuna Apartments Company:
Original principal balance 1,300,000 1,300,000
Accrued and unpaid interest 1,303,637 1,195,738
----------- -----------
Total principal and accrued and unpaid
interest at 9% at December 31 14,686,434 14,274,451
Aggregate discount on the above purchase
money notes plus accrued interest (based
upon average imputed interest rates of 19%) (5,002,153) (6,122,880)
----------- -----------
Long-term purchase money note liability $ 9,684,281 $ 8,151,571
=========== ===========
The purchase money notes were originally discounted using an imputed
interest rate of approximately 19% and assuming a certain level of cash flow
from distributions from the underlying Local Limited Partnerships
("distributions"). Since 1990, on an annual basis, the Partnership has reviewed
the estimated annual level of distributions expected to be received based on
historical and re-forecasted future distributions and adjusted accordingly the
future effective annual interest expense. The effective annual interest rate as
of December 31, 1996 is approximately 21%.
All of the purchase money notes and accrued interest thereon may be
repaid without penalty prior to maturity. However, it is not anticipated that
any principal payments will be made prior to maturity and therefore the
principal balances are classified as long-term.
The portion of interest which is expected to be paid currently is
classified as a current liability and the portion of interest which is not
expected to be paid until maturity has been reflected as interest added to
purchase money note debt.
28
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
8. Reconciliation of Loss in Financial Statements to Loss for Federal
Income Tax Purposes
A reconciliation of the loss reported in the Statements of Operations for
the years ended December 31, 1996, 1995 and 1994, to the loss reported for
Federal income tax purposes is as follows:
1996 1995 1994
---- ---- ----
Net loss per Statements of
Operations $(1,962,007) $(1,564,192) $(1,526,608)
Less: Excess of tax equity over
book equity in loss of
Local Limited
Partnership (746,209) (835,209) (1,019,519)
Add: Additional book basis
interest 1,033,449 728,881 520,283
Expenses not deducted
pursuant to I.R.C
Section 267 (30,500) 88,771 --
----------- ----------- -----------
Net loss for Federal income
tax purposes $(1,705,267) $(1,581,749) $(2,025,844)
=========== =========== ===========
9. Disclosure About Fair Value of Financial Instruments
Long Term Notes Receivable
Management does not believe it is practical to estimate the fair value of
the notes receivable because notes with similar terms and provisions are not
available to the partnership.
Purchase Money Mortgages Payable
Management does not believe it is practical to determine the fair value
of the Purchase Money Notes payable because notes with similar terms and
provisions are not currently available to the partnership.
10. Concentration of Credit Risk
The partnership maintains its cash and cash equivalents in one financial
institution. The balances are insured by the Federal Deposit Insurance
Corporation up to $100,000 by this bank. As of December 31, 1996, the uninsured
portion of the cash and cash equivalents balances held at this institution was
$63,915.
29
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
11. Statement of Distributable Cash from Operations (Unaudited)
Distributable Cash From Operations for the year ended December 31, 1996,
as defined in Section 17 of the Partnership Agreement, is as follows:
Interest income per Statement of Operations $ 61,407
Less: Interest income added to long-term notes
receivable, net of discount amortization (15,818)
Plus: 1996 cash distributions to be received from
Local Limited Partnerships 371,992
Less: 1996 interest payments on purchase money
notes to be paid out of 1996 cash
distributions from Local Limited Partnerships (371,992)
General and administrative expenses per
Statement of Operations (143,556)
---------
Cash from Operations, as defined (97,967)
---------
Distributable Cash from Operations, as defined $ --
=========
30
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Liberty Housing Partners Limited Partnership
We have audited the accompanying balance sheets of Liberty Housing
Partners Limited Partnership (a Massachusetts Limited Partnership) as of
December 31, 1996 and 1995, and the related statements of operations, changes in
partners' deficit, and cash flows for the years 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 audits. The financial statements of Liberty Housing Partners Limited
Partnership as of and for the year ended December 31, 1994 were audited by other
auditors whose report, dated February 24, 1995, expressed an unqualified opinion
on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1996 and 1995 financial statements referred to
above present fairly, in all material respects, the financial position of
Liberty Housing Partners Limited Partnership as of December 31, 1996 and 1995,
and the results of its operations and its cash flow for the years then ended in
conformity with general accepted accounting principles.
/s/ REZNICK FEDDER & SILVERMAN
Boston, Massachusetts REZNICK FEDDER & SILVERMAN
March 18, 1997
31
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Liberty Housing Partners Limited Partnership
(a Massachusetts Limited Partnership)
We have audited the accompanying statements of operations, change in partners'
deficit and cash flows of Liberty Housing Partners Limited Partnership (a
Massachusetts Limited Partnership) for the year ended December 31, 1994. 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.
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 results of operations and cash flows of Liberty
Housing Partners Limited partnership for the year ended December 31, 1994, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
February 24, 1995
32
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
INDEPENDENT AUDITORS' REPORTS
FINANCIAL STATEMENTS
AND
SUPPLEMENTAL INFORMATION
DECEMBER 31, 1996
33
<PAGE>
C O N T E N T S
Page
Certificate of Partners 3
Management Agent's Certification 4
Independent Auditors' Report 5
Auditor Information 6
Financial Statements:
Balance sheet 7
Statement of partners' equity 8
Statement of profit and loss 9-10
Statement of cash flows 11-12
Summary of accounting policies 13
Notes to financial statements 14-16
Supplemental Information: 17-22
Independent Auditors' Report on the Internal Control Structure 23-24
Independent Auditors' Report on Compliance Based on an Audit of
Financial Statements 25
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs 26
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Nonmajor HUD Programs 27
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Affirmative Fair Housing 28
Schedule of Findings and Questioned Costs 29
Auditors' Comments on Audit Resolution Matters Relating to
the HUD Programs 30
34
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
December 31, 1996
CERTIFICATE OF PARTNERS
We hereby certify that we have examined the accompanying financial
statements of Fuquay- Varina Homes for the Elderly, Ltd. and, to the best of our
knowledge and belief, the same are complete and accurate.
GENERAL PARTNERS
/s/ Billy P. Shadrick 2/18/97
Billy P. Shadrick Date
Liberty LGP Limited Partnership
Michael Stoller Date
Partnership Employer
Identification Number: 56-1449307
35
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
December 31, 1996
MANAGEMENT AGENT'S CERTIFICATION
I hereby certify that I have examined the accompanying financial
statements and supplemental information of Fuquay-Varina Homes for the Elderly,
Ltd. and, to the best of my knowledge and belief, the same are complete and
accurate.
/s/ Billy P. Shadrick
Billy P. Shadrick
President, Triple S Management, Inc.
2/18/97
Date
36
<PAGE>
Independent Auditors' Report
January 17, 1997
To the Partners
Fuquay-Varina Homes for the Elderly, Ltd.
We have audited the accompanying balance sheet of Fuquay-Varina Homes
for the Elderly, Ltd. , HUD Project No. 053-35198-PM-WAH-L8 (a North Carolina
limited partnership) as of December 31, 1996, and the related statements of
profit and loss, partners' equity, 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 Fuquay-Varina Homes
for the Elderly, Ltd. as of December 31, 1996, and the results of its operations
and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a
report dated January 17, 1997 on our consideration of Fuquay-Varina Homes for
the Elderly, Ltd. 's internal control structure and a report dated January 17,
1997, on its compliance with laws and regulations.
The supplemental information on pages 17-22 is presented for purposes
of additional analysis and is not a required part of the basic financial
statements of Fuquay-Varina Homes for the Elderly, Ltd. Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects, in relation to the basic financial statements taken as a whole.
SHARRARD, McGEE & CO., P.A.
37
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
December 31, 1996
AUDITOR INFORMATION
January 17, 1997
The Audit Partner on this engagement was Carroll L. Royster, 1813 North
Main Street, P.O. Box 5869, High Point, North Carolina 27262, (910)884-0410.
Sharrard, McGee & Co., P.A.'s federal employer identification number is
56-1146197.
SHARRARD, McGEE & CO., P.A.
38
<PAGE>
<TABLE>
<CAPTION>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
BALANCE SHEET
December 31, 1996
ASSETS
<S> <C> <C>
CURRENT ASSETS:
1110 Petty cash $ 250
1120 Cash in bank 71 158
1140 Accounts receivable - other 11 243
1144 Accounts receivable - HAP 495 $ 83 146
-----------
DEPOSITS HELD IN TRUST - FUNDED:
1191 Tenant security deposits (contra) 9 085
RESTRICTED DEPOSITS AND FUNDED RESERVES:
1310 Mortgage escrow deposits 14 667
1320 Reserve for replacements 25 043 39 710
------------
PROPERTY, BUILDINGS, AND EQUIPMENT - AT COST (Note 3):
1410 Land 72 396
1411 Land improvements 6 880
1420 Buildings 1 335 745
1430 Building equipment - portable 38 826
1450 Furniture for project administrative use 1 155
1460 Furnishings 26 566
1470 Maintenance equipment 5 769
1492 Computer equipment 3 829
------------
1 491 166
4100 Less accumulated depreciation 603 240 887 926
------------
OTHER ASSETS:
1902 Loan costs, net of accumulated
amortization 20 421
-------------
$ 1 040 288
=============
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
2110 Accounts payable - trade $ 2 563
2112 Accounts payable - Triple S Management,
Inc. (Note 4) 1 841
2114 Accounts payable - surplus cash
(Note 4) 4 000
2130 Accrued interest payable 4 563
2320 Mortgage payable - current maturities
(Note 3) 13 986 $ 26 953
------------
DEPOSIT AND PREPAYMENT LIABILITIES:
2191 Tenant security deposits (contra) 8 653
LONG-TERM LIABILITIES:
2320 Mortgage payable (Note 3) 730 143
Less current maturities 13 986 716 157
------------
PARTNERS' EQUITY 288 525
----------
$ 1 040 288
===========
</TABLE>
See accompanying summary of accounting
policies and notes to financial statements.
39
<PAGE>
<TABLE>
<CAPTION>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
For the Year Ended December 31, 1996
Associate
Investor Limited General Local General
Total (100%) Partner (98%) Partner (1%) Partner (1%)
-------------------- -------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
Balance at beginning
of year $ 293 964 $ 302 874 $ (4 455) $ (4 455)
Net income for the year 44 685 43 791 447 447
Withdrawals by partners (50 124) (49 122) (501) (501)
------------------- ------------------- ------------------- -------------
Balance at end of year $ 288 525 $ 297 543 $ (4 509) $ (4 509)
=================== =================== =================== =============
</TABLE>
See accompanying summary of accounting
policies and notes to financial statements.
40
<PAGE>
<TABLE>
<CAPTION>
Statement of Profit and Loss U.S. Department of Housing and Urban Development
Office of Housing
Federal Housing Commissioner
OMB Approval No. 2502-0052(Exp. 1/31/95)
Public Reporting Burden for this collection of information is estimated to average 1.0 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the
collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Reports Management Officer, Office of Information Policies and Systems, U.S.
Department of Housing and Urban Development, Washington, D.C. 20410-3600 and to the Office of Management and Budget, Paperwork
Reduction Project (2502-0052), Washington, D.C. 20503. Do not send this completed form to either of these addresses.
For Month/Period Ending: Project Project Name: FUQUAY-
Beginning Number: VARINA HOMES FOR THE
JANUARY 1, 1996 DECEMBER 31, 1996 053-35198-PM-WAH-L8 ELDERLY, LTD.
Part I Description of Account Acct. No. Amount*
<S> <C> <C> <C> <C>
Rental Income 5100 Apartments or Member Carrying Charges (Coops) 5120 $ 82,591
Tenant Assistant Payments 5121 $ 208,223
Furniture and Equipment 5130 $
Stores and Commercial 5140 $
Garage and Parking Spaces 5170 $
Flexible Subsidy Income 5180 $
Miscellaneous (specify) 5190 $
Total Rent Revenues Potential at 100% Occupancy $290,814
Vacancies 5200 Apartments 5220 $ (1,057)
Furniture and Equipment 5230
Stores and Commercial 5240
Garage and Parking Spaces 5270
Miscellaneous (specify) 5290
Total Vacancies (1,057)
Net Rental Revenue Rent Revenue Less Vacancies $289,757
Elderly and Congregate Service Income --5300
Total Service Income (Schedule Attached) 5300 $
Financial Revenue 5400 Interest Income--Project Operations 5410 $ 1,870
Income from Investments--Residual Receipts 5430 $
Income from Investments--Reserve for Replacement 5440 $ 777
Income from Investments--Miscellaneous 5490
Total Financial Revenue $ 2,647
Other Revenue 5900 Laundry and Vending 5910 $ 1,397
NSF and Late Charges 5920 $ 28
Damages and Cleaning Fees 5930 $ 54
Forfeited Tenant Security Deposits 5940 $
Other Revenue (specify) 5990 $
Total Other Revenue $ 1,479
Total Revenue $293,883
Administrative Expenses Advertising 6210 $
6200/6300 Other Administrative Expense 6250 $ 2,840
Office Salaries 6310 $ 2,891
Office Supplies 6311 $ 3,596
Office or Model Apartment Rent 6312 $
Management 6320 $ 20,376
Manager or Superintendent Salaries 6330 $ 22,948
Manager or Superintendent Rent Free Unit 6331 $
Legal Expenses (Project) 6340 $
Auditing Expenses (Project) 6350 $ 4,000
Bookkeeping Fees/Accounting Services 6351 $ 1,800
Telephone and Answering Service 6360 $ 955
Bad Debts 6370
Miscellaneous Administrative Expenses (specify) 6390 $
Total Administrative Expenses $ 59,406
Utilities Expense 6400 Fuel Oil/Coal 6420 $
Electricity (Light and Misc. Power) 6450 $ 4,249
Water 6451 $ 2,470
Gas 6452 $
Sewer 6453 $ 3,248
Total Utilities Expense $ 9,967
*All amounts must be rounded to the nearest dollar; $.50 and over, round up--$.49 and below, round down.
See accompanying summary of accounting policies and notes to financial statements.
41
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD. 053-35198-PM-WAH-L8
Operating and Janitor and Cleaning Payroll 6510 $
Maintenance Expenses Janitor and Cleaning Supplies 6515 $ 1,425
6500 Janitor and Cleaning Contract 6517 $
Exterminating Payroll/Contract 6519 $ 850
Exterminating Supplies 6520 $
Garbage and Trash Removal 6525 $ 2,488
Security Payroll/Contract 6530 $
Grounds Payroll 6535 $
Grounds Supplies 6536 $ 1,207
Grounds Contract 6537 $ 950
Repairs Payroll 6540 $ 17,770
Repairs Material 6541 $ 4,567
Repairs Contract 6542 $ 1,591
Elevator Maintenance/Contract 6545 $
Heating/Cooling Repairs and Maintenance 6546 $
Swimming Pool Maintenance/Contract 6547 $
Snow Removal 6548 $
Decorating Payroll/Contract 6560 $ 2,000
Decorating supplies 6561 $ 2,393
Other 6570 $ 673
Miscellaneous Operating and Maintenance Expenses 6590 $
Total Operating and Maintenance Expenses $ 35,914
Taxes and Insurance 6700 Real Estate Taxes 6710 $ 15,210
Payroll Taxes (FICA) 6711 $ 3,227
Miscellaneous Taxes, Licenses and Permits 6719 $
Property and Liability Insurance (Hazard) 6720 $ 7,009
Fidelity Bond Insurance 6721 $
Workmen's Compensation 6722 $ 1,474
Health Insurance and Other Employee Benefits 6723 $ 3,985
Other Insurance (specify) 6729 $
Total Taxes and Insurance $ 30,905
Financial Expenses 6800 Interest on Bonds Payable 6810 $
Interest on Mortgage Payable 6820 $ 55,213
Interest on Notes Payable (Long-Term) 6830 $
Interest on Notes Payable (Short-Term) 6840 $
Mortgage Insurance Premium/Service Charge 6850 $ 3,681
Miscellaneous Financial Expenses 6890 $
Total Financial Expenses $ 58,894
Elderly & Congregate Total Service Expenses--Schedule Attached 6900 $
Service Expenses 6900 Total Cost of Operations Before Depreciation $195,086
Profit (Loss) Before Depreciation $ 98,797
Depreciation (Total)--6600 (specify) 6600 $ 49,130
Operating Profit or (Loss) $ 49,667
Corporate or Mortgagor Office Salaries 7110 $
Entity Expenses 7100 Legal Expenses (Entity) 7120 $
Taxes (Federal-State-Entity) 7130-32 $
Other Expenses (Entity) Admin. Fee - 4,000 7190 $ 4,982
Total Corporate Expenses Amortization 982 $ 4,982
Net Profit or (Loss) $ 44,685
<CAPTION>
Warning: HUD will prosecute false claims and statements. Conviction may result lin criminal and/or civil penalties. (18 U.S.C. 1001,
1010, 1012; 31 U.S.C. 3729, 3802)
Miscellaneous or other income and expense Sub-account Groups. If miscellaneous or other income and/or expense sub- accounts (5190,
5290, 5490, 5990, 6390, 6590, 6729, 6890, and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule
describing or explaining the miscellaneous income or expense.
Part II
<S> <C> <C>
1. Total principal payments required under the mortgage, even if payments under a
Workout Agreement are less or more than those required under t he mortgage. $ 12,978
2. Replacement Reserve deposits required by the Regulatory Agreement or
Amendments thereto, even if payments may be temporarily suspended or waived. $ 10,057
3. Replacement or Painting Reserve releases which are included as expense items on
this Profit and Loss statement $ 2,500
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that
are included as expense items on this Profit and Loss Statement. $ 0
See accompanying summary of accounting policies and notes to financial statements.
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
<S> <C> <C>
Cash flows from operating activities:
Rental receipts $ 289 197
Interest receipts 2 647
Other receipts 1 479
------------
293 323
Administrative $ (11 391)
Management fees (20 352)
Accounting fees (1 800)
Operating and maintenance (19 341)
Real estate taxes (15 210)
Tenant security deposits (164)
Salaries and wages (43 609)
Miscellaneous taxes (3 227)
Insurance (12 468)
Utilities (9 967)
Interest on mortgage note (55 295)
Mortgage insurance (3 681) (196 505)
------------ ------------
Net cash provided by operating activities 96 818
Cash flows from investing activities:
Purchase of property and equipment (13 532)
Reserve for replacements - deposits (10 834)
Reserve for replacements - withdrawals 2 884
Mortgage escrow deposits (969)
------------
Net cash used in investing activities (22 451)
Cash flows from financing activities:
Partnership administrative fee (4 000)
Mortgage principal payments (12 978)
Withdrawals by partners (50 124)
------------
Net cash used in financing activities (67 102)
------------
Net increase in cash 7 265
Cash at beginning of year 64 143
------------
Cash at end of year $ 71 408
============
</TABLE>
See accompanying summary of accounting
policies and notes to financial statements.
43
<PAGE>
<TABLE>
<CAPTION>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
(Continued)
<S> <C> <C>
Reconciliation of net income to net cash provided by operating activities:
Net income $ 44 685
---------
Nonoperating expense included in determining
net income 4 000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation $ 49 130
Amortization 982 50 112
-----------
Decrease (increase) in assets:
Accounts receivable (495)
Tenant security deposits (1 307) (1 802)
-----------
Increase (decrease) in liabilities:
Accounts payable (1 173)
Accrued interest (82)
Tenant security deposits 1 143
Prepaid rents (65) (177)
----------- --------
Total adjustments 52 133
--------
Net cash provided by operating activities $ 96 818
========
</TABLE>
See accompanying summary of accounting
policies and notes to financial statements.
44
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
SUMMARY OF ACCOUNTING POLICIES
MANAGEMENT ESTIMATES
The presentation 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.
CASH EQUIVALENTS
For purposes of the Statement of Cash Flows, the Company considers all
investments purchased with a maturity of three months or less to be cash
equivalents.
BASIS OF REPORTING
This report does not give effect to any assets that the partners may
have outside their interests in the Partnership nor to any personal obligations,
including income taxes, of the partners.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is computed
over the estimated useful lives using the straight-line method.
INCOME TAXES
No provision for income taxes has been included in these financial
statements since the tax gains and losses pass through to and are reportable by
the partners on their respective income tax returns. Taxable income or loss
reported by the partners will differ from income or loss reflected in the
financial statements, due to the different bases in certain assets (primarily
property, buildings, and equipment) for financial reporting and income tax
purposes.
AMORTIZATION
Loan costs are amortized by using the straight-line method over the
life of the mortgage loan.
45
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
The Partnership was organized as a North Carolina limited partnership
on February 28, 1977 to construct, own, and operate a 60-unit garden apartment
project located in Fuquay-Varina, North Carolina, known as Fuquay-Varina Homes
for the Elderly, Ltd., under Section 221(d)(4) of the National Housing Act. Such
projects are regulated by HUD as to rent charges and operating methods. The
Regulatory Agreement limits distributions of net operating receipts to "surplus
cash" available at the end of semi-annual periods.
On September 30, 1984, pursuant to an Amended and Restated Certificate
of Limited Partnership dated as of that date, partners' ownership interests
amounting to 99% of the existing partners' interests were transferred by the
original partners to two new partners. As a result of the transfer of ownership
interests, the Partnership, as of September 30, 1984, retained one of the
original general partners as a local general partner, admitted a new general
partner as associate general partner, and admitted a sole investor limited
partner.
After the aforementioned transfer, the Amended and Restated Certificate
of Limited Partnership provides that profits and losses from operations be
allocated 1% to the local general partner, 1% to the associate general partner,
and 98% to the investor limited partner. In the case of certain events which are
specified in the Partnership Agreement (for example, a sale or refinancing of
the property), the allocation may be different than that described above for
profits and losses from operations.
NOTE 2 - CONCENTRATION OF CREDIT RISK
The Partnership's policy is to maintain its cash balances in reputable
financial institutions insured by the Federal Deposit Insurance Corporation
which provides $100,000 of insurance coverage on each customer's cash balances.
NOTE 3 - MORTGAGE PAYABLE
The mortgage, originally in the amount of $863,400, is payable in
monthly installments of $5,689, including interest at 7.5% per annum. The final
payment is due in August 2018. The loan is secured by land and buildings and is
insured by the Federal Housing Administration. Neither the Partnership nor any
of the partners assume liability in the event of default.
The maturities of this debt are as follows:
1997 $ 13 986
1998 15 072
1999 16 242
2000 17 503
2001 18 862
2002 and after 648 478
--------------
$ 730 143
==============
46
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 4 - RELATED PARTY TRANSACTIONS/IDENTITY OF INTEREST
A - Management of Project:
The Partnership contracted with Triple S Management, Inc. to
manage the project. The contract calls for a management fee of 7% of gross
revenue collections plus accounting fees of $2.50 per housing unit per month.
Management and accounting fees are analyzed as follows:
Charged to
Unpaid at Operations Unpaid at
January 1, During December 31,
1996 1996 1996
------------- ------------ -----------
Management fees $ 1 667 $ 20 376 $ 1 691
Accounting fees 150 1 800 150
---------- ---------- ----------
$ 1 817 $ 22 176 $ 1 841
========== ========== ==========
B - Partnership Administrative Fee:
For its services in overseeing the operations of the Partnership, the
Partnership has agreed to pay its associate general partner a fee of $4,000 per
annum. The Partnership administrative fee is payable from "surplus cash" as
defined by HUD regulations.
C - Other:
During 1996, the Partnership also paid Triple S Management, Inc. $2,891
for an occupancy specialist.
NOTE 5 - DISTRIBUTION
The Partnership customarily makes a cash distribution of the maximum
amount permitted by its Regulatory Agreement and other such restrictions under
which it operates. In keeping with this custom, $50,124, including a Partnership
administrative fee of $4,000, was distributed in the first quarter of 1996, and
it is anticipated that $74,611 will be distributed in the first quarter of 1997.
NOTE 6 - FAIR VALUES OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure About
Fair Value of Financial Instruments" (SFAS 107), requires disclosure of fair
value information about financial instruments, whether or not recognized on the
balance sheet, for which it is practicable to estimate that value. Such
instruments include cash and cash equivalents and long-term debt.
47
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 6 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
Cash and Cash Equivalents:
The carrying amount approximates fair value due to the short-term
nature of these instruments.
Long-Term Debt:
The fair value of long-term debt is based on current rates at which the
company could borrow funds with similar remaining maturities.
The carrying amounts and estimated fair values of Fuquay-Varina Homes
for the Elderly, Ltd.'s financial instruments as of December 31, 1996 are as
follows:
Carrying Fair Value
-------- ----------
Financial assets:
Cash and cash equivalents $ 71 408 $ 71 408
=============== =============
Financial liabilities:
Long-term debt $ 730 143 $ 730 143
=============== =============
48
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
SUPPLEMENTAL INFORMATION
For the Year Ended December 31, 1996
ACCOUNTS AND NOTES RECEIVABLE (OTHER THAN FROM REGULAR TENANTS)
Name of Original Balance
Debtor Date Terms Amount Due
---------- ------ ---------- --------- -----
None
DELINQUENT TENANT ACCOUNTS RECEIVABLE
Number of
Tenants Amount
--------- --------
Current
Delinquent 30 days
Delinquent 31-60 days NONE
Delinquent 61-90 days
Delinquent over 90 days
MORTGAGE ESCROW DEPOSITS
Estimated amounts required as of December 31, 1996 for future payment of:
City and county property taxes $ 1 254
Property insurance 7 009
Mortgage insurance 3 681
------------
11 944
Total confirmed by mortgagee 14 667
------------
Amount on deposit in excess of estimated requirements $ 2 723
============
TENANT SECURITY DEPOSITS
Tenant security deposits are held in a separate bank account(s) in the
name of the project. (See Schedule of Funds in Financial Institutions for
identification of these bank accounts.)
49
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
SUPPLEMENTAL INFORMATION
For the Year Ended December 31, 1996
(Continued)
RESERVE FOR REPLACEMENTS
In accordance with the provisions of the Regulatory Agreement,
restricted cash is held by the mortgagee to be used for replacement of property
with the approval of HUD as follows:
Balance at beginning of year $ 28 336
Monthly deposits:
8 @ $827.00 $ 6 616
1 @ $903.00 903
3 @ $846.00 2 538 10 057
------------
Interest 777
Withdrawals:
<TABLE>
<CAPTION>
Approval Purpose of
Authorized By Date Withdrawal
<S> <C> <C> <C> <C>
HUD 11/21/95 Refrigerators $ (2 684)
USCI, Inc. Various Investment
service charge (200)
HUD 12/24/96 Appliances, computer
equipment and
comprehensive needs
assessment (11 243) (14 127)
---------- -------
Balance at end of year confirmed by mortgagee $ 25 043
========
The mortgagee charged a fee of $200 for investing the reserve for replacements fund.
</TABLE>
ACCOUNTS PAYABLE (OTHER THAN TRADE CREDITORS)
Payable within 30 days None
ACCRUED TAXES (ACCOUNT 2150)
Description Basis for Period Date Amount
of Tax Accrual Covered Due Accrued
----------- ---------- ------- ---- --------
None
COMPENSATION OF PARTNERS (FROM RENTAL INCOME)
None
UNAUTHORIZED DISTRIBUTION OF PROJECT INCOME TO PARTNERS
None
50
<PAGE>
<TABLE>
<CAPTION>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
SUPPLEMENTAL INFORMATION
For the Year Ended December 31, 1996
(Continued)
CHANGES IN PROPERTY, BUILDINGS, AND EQUIPMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
Cost Accumulated Depreciation
--------------------------------------------------- --------------------------------------------------
Balance Balance Balance Balance
January 1, December January 1, Current December
1996 Additions Deletions 31, 1996 1996 Provisions Deletions 31, 1996
------ --------- --------- ---------- ------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Land $ 72 396 $ 72 396
Land improvements 6 880 6 880 $ 3 361 $ 689 $ 4 050
Buildings 1 335 745 1 335 745 500 342 44 550 544 892
Building equipment -
portable 36 869 $ 7 866 $ 5 909 38 826 28 272 1 751 $ 5 909 24 114
Furniture for
project
administrative use 1 155 1 155 745 100 845
Computer equipment 3 829 3 829 558 558
Furnishings 26 566 26 566 26 499 67 26 566
Maintenance
equipment 4 273 1 837 341 5 769 1 141 1 415 341 2 215
---------- --------- ------- ---------- ---------- ---------- --------- ----------
$1 483 884 $ 13 532 $ 6 250 $1 491 166 $ 560 360 $ 49 130 $ 6 250 $ 603 240
========== ========= ======= ========== ========== ========== ========= ==========
</TABLE>
NOTE:
Additions to fixed assets were: Dispositions of fixed assets included:
Item Cost Item Cost
----------------- ---------- --------------- -----------
1 Storage Cabinet $ 1 030 1 Edger $ 341
1 Edger 383 11 Refrigerators 3 095
1 Blower 424 10 Ranges 2 814
----------
11 Refrigerators 4 929 $ 6 250
==========
10 Ranges 2 937
Computer equipment 3 829
----------
$ 13 532
==========
51
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
SUPPLEMENTAL INFORMATION
For the Year Ended December 31, 1996
(Continued)
SCHEDULE OF FUNDS IN FINANCIAL INSTITUTIONS AS OF DECEMBER 31, 1996
A. Funds Held by Mortgagor - Regular Operating Account
1. Lexington State Bank, Lexington, NC 1
a. Fuquay-Varina Homes for the Elderly Rental
Trust Account $ 66 338
b. Fuquay-Varina Homes for the Elderly Rental
Trust Account 3 120
2. The Fidelity Bank, Fuquay-Varina, NC 2
a. Fuquay-Varina Homes for the Elderly Rental
Account 1 700
b. Fuquay-Varina Homes for the Elderly Petty
Cash Account 250
----------
Operating Accounts - Subtotal 71 408
----------
B. Funds Held by Mortgagor in Trust - Tenant Security Deposit
1. Lexington State Bank, Lexington, NC 1
a. Fuquay-Varina Homes for the Elderly Security
Deposit - Trust Account - Interest Bearing 6 859
2. The Fidelity Bank, Fuquay-Varina, NC 2
a. Fuquay-Varina Homes for the Elderly Security
Account/Trust Account - Noninterest Bearing 2 226
----------
Tenant Security Deposit Accounts - Subtotal 9 085
----------
Funds Held By Mortgagor - Total 80 493
----------
C. Funds Held By Mortgagee in Trust 3
1. Tax and Insurance Escrow
a. Bankers' Trust of New York - Demand Deposit 14 667
2. Reserve Fund for Replacements
a. Bankers' Trust of New York - Money Market 25 043
----------
Funds Held by Mortgagee - Total 39 710
----------
Total Funds in Financial Institutions $ 120 203
==========
1 Balances Confirmed by Lexington State Bank - January 13, 1997
2 Balances Confirmed by The Fidelity Bank - January 2, 1997
3 Balances Confirmed by Reilly Mortgage Associates, L.P. - January 21,
1997
52
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD PROJECT NO. 053-35198-PM-WAH-L8
(A Limited Partnership)
SUPPLEMENTAL INFORMATION
For the Year Ended December 31, 1996
(Continued)
LISTING OF IDENTITY OF INTEREST COMPANIES AND ACTIVITIES DOING BUSINESS WITH
OWNER/AGENT DURING THE YEAR ENDED DECEMBER 31, 1996:
<TABLE>
<CAPTION>
Company Name Type of Service Amount Paid
------------ --------------- -----------
<S> <C> <C>
Triple S Management, Inc. Management and accounting service $ 22 176
==========
Liberty LGP Limited Partnership Partnership administrative fee $ 4 000
==========
Triple S Management, Inc. Occupancy specialist $ 2 891
==========
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
COMPUTATION OF SURPLUS CASH, U.S. DEPARTMENT OF HOUSING
DISTRIBUTIONS AND RESIDUAL AND URBAN DEVELOPMENT
RECEIPTS OFFICE OF HOUSING COMMISSIONER
PROJECT NAME
FISCAL PERIOD ENDED: PROJECT NUMBER
FUQUAY-VARINA HOMES FOR THE
ELDERLY, LTD 12/31/96 053-35198-PM-WAH-L8
PART A - COMPUTE SURPLUS CASH
<S> <C> <C> <C>
Cash
1. Cash (Accounts 1110,1120,1191,1192) $80,493
2. Tenant subsidiary vouchers due for period covered
by financial statement $ 495
3. Other (describe) RESERVE REPLACEMENT
$11,243
(a) Total Cash (Add Lines 1, 2, and 3) $92,231
Current Obligations
4. Accrued mortgage interest payable $ 4,563
5. Delinquent mortgage principal payments $
6. Delinquent deposits to reserve for replacements $
7. Accounts payable (due within 30 days) $ 4,404
8. Loans and notes payable
(due within 30 days) $
9. Deficient Tax Insurance or MIP Escrow Deposits $
10. Accrued expenses (not escrowed) $
11. Prepaid Rents (Account 2210) $
12. Tenant security deposits liability (Account 2191) $ 8,653
13. Other (Describe) Excess Income $
(b) Less Total Current Obligations (Add Lines 4 through 13) $17,620
(c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $74,611
<CAPTION>
PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS
<S> <C> <C>
1. Surplus Cash $74,611
Limited Dividend Projects
2a. Distribution Earned During Fiscal Period
Covered by the Statement $
2b. Distribution Accrued and Unpaid as of the
End of the Prior Fiscal Period $
2c. Distributions Paid During Fiscal Period Covered by Statement $
3. Distributions Earned but Unpaid as of the End of
the Fiscal Period Under Review (Line 2a + 2b - 2c) $
4. Amount Available for Distribution During Next Fiscal Period $74,611
5. Deposit Due Residual Receipts
(Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $ 0
PREPARED BY REVIEWED BY
LOAN TECHNICIAN LOAN SERVICERIAN
DATE DATE
</TABLE>
54
<PAGE>
Independent Auditors' Report on the Internal Control Structure
January 17, 1997
To the Partners
Fuquay-Varina Homes for the Elderly, Ltd.
We have audited the financial statements of Fuquay-Varina Homes for the
Elderly, Ltd. , HUD Project No. 053-35198-PM-WAH-L8 (a North Carolina limited
partnership), as of and for the year ended December 31, 1996, and have issued
our report thereon dated January 17, 1997. We have also audited Fuquay-Varina
Homes for the Elderly, Ltd. 's compliance with requirements applicable to major
HUD-assisted programs and have issued our reports thereon dated January 17,
1997.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States and the Consolidated Audit Guide for Audits of HUD Programs
(the "Guide"), issued by the U.S. Department of Housing and Urban Development,
Office of the Inspector General in July, 1993. Those standards and the Guide
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and about
whether Fuquay-Varina Homes for the Elderly, Ltd. complied with laws and
regulations, noncompliance with which would be material to a major HUD-assisted
program.
The management of Fuquay-Varina Homes for the Elderly, Ltd. is
responsible for establishing and maintaining an internal control structure. In
fulfilling this responsibility, estimates and judgments by management are
required to assess the expected benefits and related costs of internal control
structure policies and procedures. The objectives of an internal control
structure are to provide management with reasonable, but not absolute, assurance
that assets are safeguarded against loss from unauthorized use or disposition
and that transactions are executed in accordance with management's authorization
and recorded properly to permit the preparation of financial statements in
accordance with generally accepted accounting principles and that HUD-assisted
programs are managed in compliance with applicable laws and regulations. Because
of inherent limitations in any internal control structure, errors,
irregularities or instances of noncompliance may nevertheless occur and not be
detected. Also, projection of any evaluation of the structure to future periods
is subject to the risk that procedures may become inadequate because of changes
in conditions or that effectiveness of the design and operation of policies and
procedures may deteriorate.
55
<PAGE>
(Continued)
In planning and performing our audit, we obtained an understanding of
the design of relevant internal control structure policies and procedures and
determined whether they had been placed in operation, and we assessed control
risk in order to determine our auditing procedures for the purpose of expressing
our opinions on the financial statements of Fuquay-Varina Homes for the Elderly,
Ltd. and on its compliance with specific requirements applicable to its major
HUD-assisted programs and to report on the internal control structure in
accordance with the provisions of the Guide and not to provide any assurance on
the internal control structure.
We performed tests of controls, as required by the Guide, to evaluate
the effectiveness of the design and operation of internal control structure
policies and procedures that we considered relevant to preventing or detecting
material noncompliance with specific requirements applicable to Fuquay-Varina
Homes for the Elderly, Ltd. 's major HUD-assisted programs. Our procedures were
less in scope than would be necessary to render an opinion on internal control
structure policies and procedures. Accordingly, we do not express such an
opinion.
Our consideration of the internal control structure policies and
procedures used in administering HUD- assisted programs would not necessarily
disclose all matters in the internal control structure that might constitute
material weaknesses under standards established by the American Institute of
Certified Public Accountants. A material weakness is a condition in which the
design or operation of one or more of the internal control structure elements
does not reduce to a relatively low level the risk that noncompliance with laws
and regulations that would be material to a HUD-assisted program may occur and
not be detected within a timely period by employees in the normal course of
performing their assigned functions. We noted no matters involving the internal
control structure and its operations that we consider to be material weaknesses
as defined above.
This report is intended for the information of the partners,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
SHARRAD, McGEE & CO. P.A.
56
<PAGE>
Independent Auditors' Report on Compliance Based
on an Audit of Financial Statements
January 17, 1997
To the Partners
Fuquay-Varina Homes for the Elderly, Ltd.
We have audited the financial statements of Fuquay-Varina Homes for the
Elderly, Ltd. , HUD Project No. 053-35198-PM-WAH-L8 (a North Carolina limited
partnership), as of and for the year ended December 31, 1996, and have issued
our report thereon dated January 17, 1997.
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.
Compliance with laws, regulations, contracts and grants applicable to
Fuquay-Varina Homes for the Elderly, Ltd. is the responsibility of Fuquay-Varina
Homes for the Elderly, Ltd. 's management. As part of obtaining reasonable
assurance about whether the financial statements are free of material
misstatement, we performed tests of Fuquay-Varina Homes for the Elderly, Ltd. 's
compliance with certain provisions of laws, regulations, and contracts. However,
the objective of our audit of the financial statements was not to provide an
opinion on overall compliance with such provisions. Accordingly, we do not
express such an opinion.
The results of our tests disclosed no instances of noncompliance that
are required to be reported herein under Government Auditing Standards.
This report is intended for the information of the partners,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
SHARRAD, McGEE & CO. P.A.
57
<PAGE>
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs
January 17, 1997
To the Partners
Fuquay-Varina Homes for the Elderly, Ltd.
We have audited the financial statements of Fuquay-Varina Homes for the
Elderly, Ltd. , HUD Project No. 053-35198-PM-WAH-L8 (a North Carolina limited
partnership), as of and for the year ended December 31, 1996, and have issued
our report thereon dated January 17, 1997. In addition, we have audited
Fuquay-Varina Homes for the Elderly, Ltd. 's compliance with specific program
requirements governing Management, Maintenance and Replacement Reserve; Federal
Financial Reports; Application, Eligibility, and Reexamination of Tenants;
Security Deposits; Mortgage Status; Cash Receipts and Disbursements; and
Management Functions that are applicable to each of its major HUD-assisted
programs, for the year ended December 31, 1996. The management of Fuquay-Varina
Homes for the Elderly, Ltd. is responsible for compliance with those
requirements. Our responsibility is to express an opinion on compliance with
those requirements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards, Government Auditing Standards, issued by the Comptroller General of
the United States, and the Consolidated Audit Guide for Audits of HUD Programs
(the "Guide") issued by the U.S. Department of Housing and Urban Development,
Office of Inspector General in July, 1993. Those standards and the Guide require
that we plan and perform the audit to obtain reasonable assurance about whether
material noncompliance with the requirements referred to above occurred. An
audit includes examining, on a test basis, evidence about Fuquay-Varina Homes
for the Elderly, Ltd. 's compliance with those requirements. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, Fuquay-Varina Homes for the Elderly, Ltd. complied, in
all material respects, with the requirements described above that are applicable
to each of its major HUD-assisted programs for the year ended December 31, 1996.
This report is intended for the information of the partners,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
SHARRAD, McGEE & CO. P.A.
58
<PAGE>
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Nonmajor HUD Programs
January 17, 1997
To the Partners
Fuquay-Varina Homes for the Elderly, Ltd.
We have audited the financial statements of Fuquay-Varina Homes for the
Elderly, Ltd. , HUD Project No. 053-35198-PM-WAH-L8 (a North Carolina limited
partnership), as of and for the year ended December 31, 1996, and have issued
our report thereon dated January 17, 1997.
In connection with our audit of the 1996 financial statements of
Fuquay-Varina Homes for the Elderly, Ltd. and with our consideration of
Fuquay-Varina Homes for the Elderly, Ltd. 's internal control structure used to
administer HUD programs, as required by the Consolidated Audit Guide for Audits
of HUD Programs (the "Guide") issued by the U.S. Department of Housing and Urban
Development in July, 1993, we selected certain transactions applicable to
certain nonmajor HUD-assisted programs for the year ended December 31, 1996.
As required by the Guide, we performed auditing procedures to test
compliance with the requirements governing Federal Financial Reports;
Management, Maintenance, and Replacement Reserve; Application, Eligibility, and
Reexamination of Tenants; and Security Deposits that are applicable to those
transactions. Our procedures were substantially less in scope than an audit, the
objective of which is the expression of an opinion on Fuquay-Varina Homes for
the Elderly, Ltd. 's compliance with these requirements. Accordingly, we do not
express such an opinion.
The results of our tests disclosed no instances of noncompliance that
are required to be reported herein under the Guide.
This report is intended for the information of the partners,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
SHARRAD, McGEE & CO. P.A.
59
<PAGE>
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Affirmative Fair Housing
January 17, 1997
To the Partners
Fuquay-Varina Homes for the Elderly, Ltd.
We have audited the financial statements of Fuquay-Varina Homes for the
Elderly, Ltd. , HUD Project No. 053-35198-PM-WAH-L8 (a North Carolina limited
partnership), as of and for the year ended December 31, 1996, and have issued
our report thereon dated January 17, 1997.
We have applied procedures to test Fuquay-Varina Homes for the Elderly,
Ltd. 's compliance with the Affirmative Fair Housing requirements applicable to
its HUD-assisted programs, for the year ended December 31, 1996.
Our procedures were limited to the applicable compliance requirements
described in the Consolidated Audit Guide for Audits of HUD Programs issued by
the U.S. Department of Housing and Urban Development, Office of Inspector
General in July, 1993. Our procedures were substantially less in scope than an
audit, the objective of which would be the expression of an opinion on
Fuquay-Varina Homes for the Elderly, Ltd. 's compliance with the Affirmative
Fair Housing requirements. Accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance that
are required to be reported herein under the Guide.
This report is intended for the information of the partners,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
SHARRAD, McGEE & CO. P.A.
60
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD Project No. 053-35198-PM-WAH-L8
(A Limited Partnership)
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
For the Year Ended December 31, 1996
NONE
61
<PAGE>
FUQUAY-VARINA HOMES FOR THE ELDERLY, LTD.
HUD Project No. 053-35198-PM-WAH-L8
(A Limited Partnership)
AUDITORS' COMMENTS ON AUDIT RESOLUTION MATTERS
RELATING TO THE HUD PROGRAMS
For the Year Ended December 31, 1996
We performed a review of findings, if any, from previous HUD required
annual audits, HUD-OIG audits, or HUD management reviews and determined that no
significant findings remained uncorrected at the time of our review.
62
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
INDEPENDENT AUDITORS' REPORTS
FINANCIAL STATEMENTS
AND
SUPPLEMENTAL INFORMATION
December 31, 1996
63
<PAGE>
TABLE OF CONTENTS
Page
CERTIFICATE OF PARTNERS 1
MANAGEMENT AGENT'S CERTIFICATION 2
INDEPENDENT AUDITORS' REPORT ON
AUDITED FINANCIAL STATEMENTS AND
SUPPLEMENTAL INFORMATION 3 - 4
FINANCIAL STATEMENTS
BALANCE SHEET 5
STATEMENT OF PARTNERS' EQUITY 6
STATEMENT OF PROFIT AND LOSS 7 - 8
STATEMENT OF CASH FLOWS 9 - 10
NOTES TO FINANCIAL STATEMENTS 11 - 14
SUPPLEMENTAL INFORMATION 15 - 21
INDEPENDENT AUDITORS' REPORT ON
THE INTERNAL CONTROL STRUCTURE 22 - 23
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE
WITH SPECIFIC REQUIREMENTS APPLICABLE
TO MAJOR HUD PROGRAMS 24
SCHEDULE OF FINDINGS AND QUESTIONED COSTS 26 - 28
AUDITORS' COMMENTS ON AUDIT RESOLUTION MATTERS
RELATING TO THE HUD PROGRAMS 29
64
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
December 31, 1996
CERTIFICATE OF PARTNERS
We hereby certify that we have examined the accompanying financial statements
and supplemental information of Fiddlers Creek Apartments, Ltd. and, to the best
of our knowledge and belief, the same is complete and accurate.
GENERAL PARTNERS
/s/Bob R. Badgett 2-7-97
----------------------------------------
Bob R. Badgett Date
----------------------------------------
Date
Liberty LGP Limited Partnership
Partnership Employer Identification
Number: 56-1449286
65
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
December 31, 1996
MANAGEMENT AGENT'S CERTIFICATION
I hereby certify that I have examined the accompanying financial statements and
supplemental information of Fiddlers Creek Apartments, Ltd. and, to the best of
my knowledge and belief, the same is complete and accurate.
/s/Bob R. Badgett
----------------------------------------
Bob R. Badgett, President
Housing Management, Inc.
2-7-97
----------------------------------------
Date
66
<PAGE>
[Turlington and Company, L.L.P. Letterhead]
INDEPENDENT AUDITORS' REPORT ON AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION
To the Partners HUD Field Office Director
Fiddlers Creek Apartments, Ltd. Greensboro, North Carolina
We have audited the accompanying balance sheet of Fiddlers Creek Apartments,
Ltd., HUD Project No. 053-35163-PM (a North Carolina limited partnership), as of
December 31, 1996, and the related statements of profit and loss, partners'
equity, 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 Fiddlers Creek Apartments, Ltd.
at December 31, 1996, and the results of its operations, and the changes in
partners' equity, and cash flows for the year then ended, in conformity with
generally accepted accounting principles.
In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U. S. Department of Housing and
Urban Development, we have also issued a report dated January 15, 1997 on our
consideration of Fiddlers Creek Apartments, Ltd.'s internal control structure,
and reports dated January 15, 1997 on its compliance with specific requirements
applicable to major HUD programs, and specific requirements applicable to
Affirmative Fair Housing.
Our audit was made for the purpose of formulating the opinion stated above. The
supplemental information identified in the Table of Contents is presented for
purposes of additional analysis and is not a required part of the basic
financial statements of Fiddlers Creek Apartments, Ltd. Such information has
67
<PAGE>
INDEPENDENT AUDITORS' REPORT ON AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION (CONTINUED)
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated, in all material
respects, in relation to the basic financial statements taken as a whole.
/s/Turlington and Company, L.L.P.
January 15, 1997
68
<PAGE>
<TABLE>
<CAPTION>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
BALANCE SHEET
December 31, 1996
-----------------
ASSETS
<S> <C> <C>
Current Assets
1110 Petty cash $ 400
1120 Cash in bank 202,544
1130 Accounts receivable - tenants 2,010
1140 Accounts receivable - other
(net of allowance of $14,687) 1,244 $ 206,198
------------
Deposits Held in Trust - Funded
1191 Tenant security deposits (contra) 41,739
Prepaid Expenses
1250 Mortgage insurance 1,794
1252 Fidelity bond insurance 24 1,818
------------
Restricted Deposits and Funded Reserves
1310 Mortgage escrow deposits 17,506
1320 Reserve for replacements 147,271 164,777
------------
Property, Buildings, and Equipment - At Cost
1410 Land 275,147
1411 Land improvements 6,530
1420 Buildings 3,017,603
1440 Building equipment - portable 107,127
1450 Furniture for project administrative use 2,321
1452 Computer equipment 786
1460 Furnishings 50,953
1470 Maintenance equipment 7,066
1490 Miscellaneous fixed assets 5,375
------------
3,472,908
4100 Less, accumulated depreciation 1,392,211 2,080,697
------------
Other Assets
1902 Loan costs, net of accumulated
amortization 100,394
------------
$ 2,595,623
============
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities
2110 Accounts payable - trade $ 2,000
2111 Accounts payable - Housing Management, Inc. 18,111
2114 Accounts payable - surplus cash 15,000
2130 Accrued interest payable 14,276
2320 Mortgage payable - current maturities 40,337 $ 89,724
------------
Deposit and Prepayment Liabilities
2191 Tenant security deposits (contra) 36,921
2210 Prepaid rents 1,408 38,329
------------
Long-term Liabilities
2320 Mortgage payable 2,141,365
Less, current maturities 40,337 2,101,028
------------
Partners' Equity 366,542
------------
$ 2,595,623
------------
</TABLE>
The accompanying notes are an integral part of the financial statements
67
<PAGE>
<TABLE>
<CAPTION>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
For the Year Ended December 31, 1996
------------------------------------
Investor Associate Local
Limited General General
Total Partner Partner Partner
(100%) (98%) (1%) (1%)
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
Balances at
beginning of year $ 363,723 $ 384,147 ($ 10,212) ($ 10,212)
Net income for
the year 92,546 90,696 925 925
Withdrawals ( 89,727) ( 87,933) ( 897) ( 897)
------------ ------------ ------------ ------------
Balances at end
of year $ 366,542 $ 386,910 ($ 10,184) ($ 10,184)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
70
<PAGE>
<TABLE>
<CAPTION>
Statement of Profit and Loss U.S. Department of Housing and Urban Development
Office of Housing
Federal Housing Commissioner
OMB Approval No. 2502-0052(Exp. 1/31/95)
Public Reporting Burden for this collection of information is estimated to average 1.0 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the
collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Reports Management Officer, Office of Information Policies and Systems, U.S.
Department of Housing and Urban Development, Washington, D.C. 20410-3600 and to the Office of Management and Budget, Paperwork
Reduction Project (2502-0052), Washington, D.C. 20503. Do not send this completed form to either of these addresses.
For Month/Period Ending: Project Project Name:
Beginning Number: Fiddlers Creek
January 1, 1996 December 31, 1996 053-35163-PM Apartments, Ltd.
Part I Description of Account Acct. No. Amount*
<S> <C> <C> <C> <C>
Rental Income 5100 Apartments or Member Carrying Charges (Coops) 5120 $ 721,680
Tenant Assistant Payments 5121 $
Furniture and Equipment 5130 $
Stores and Commercial 5140 $
Garage and Parking Spaces 5170 $
Flexible Subsidy Income 5180 $
Miscellaneous (specify) 5190 $
Total Rent Revenues Potential at 100% Occupancy $721,680
Vacancies 5200 Apartments 5220 $ (35,441)
Furniture and Equipment 5230
Stores and Commercial 5240
Garage and Parking Spaces 5270
Miscellaneous (specify) 5290
Total Vacancies (35,441)
Net Rental Revenue Rent Revenue Less Vacancies $686,239
Elderly and Congregate Service Income --5300
Total Service Income (Schedule Attached) 5300 $
Financial Revenue 5400 Interest Income--Project Operations 5410 $ 5,134
Income from Investments--Residual Receipts 5430 $
Income from Investments--Reserve for Replacement 5440 $ 3,583
Income from Investments--Miscellaneous 5490
Total Financial Revenue $ 8,717
Other Revenue 5900 Laundry and Vending 5910 $ 3,597
NSF and Late Charges 5920 $ 2,472
Damages and Cleaning Fees 5930 $ 753
Forfeited Tenant Security Deposits 5940 $ 167
Other Revenue (specify) 5990 $ 2,620
Total Other Revenue $ 9,609
Total Revenue $704,565
Administrative Expenses Advertising 6210 $ 5,787
6200/6300 Other Administrative Expense 6250 $ 1,935
Office Salaries 6310 $
Office Supplies 6311 $ 3,021
Office or Model Apartment Rent 6312 $ 3,657
Management 6320 $ 47,766
Manager or Superintendent Salaries 6330 $ 25,652
Manager or Superintendent Rent Free Unit 6331 $ 5,700
Legal Expenses (Project) 6340 $
Auditing Expenses (Project) 6350 $ 4,450
Bookkeeping Fees/Accounting Services 6351 $ 5,200
Telephone and Answering Service 6360 $ 2,743
Bad Debts 6370 14,986
Miscellaneous Administrative Expenses (specify) 6390 $ 215
Total Administrative Expenses $121,112
Utilities Expense 6400 Fuel Oil/Coal 6420 $
Electricity (Light and Misc. Power) 6450 $ 12,180
Water 6451 $ 5,506
Gas 6452 $
Sewer 6453 $
Total Utilities Expense $ 17,686
*All amounts must be rounded to the nearest dollar; $.50 and over, round up--$.49 and below, round down.
The accompanying notes are an integral part of the financial statements.
71
<PAGE>
FIDDLER CREEK APARTMENTS, LTD. 053-35163-PM
Operating and Janitor and Cleaning Payroll 6510 $
Maintenance Expenses Janitor and Cleaning Supplies 6515 $ 381
6500 Janitor and Cleaning Contract 6517 $ 5,537
Exterminating Payroll/Contract 6519 $ 2,333
Exterminating Supplies 6520 $
Garbage and Trash Removal 6525 $ 2,181
Security Payroll/Contract 6530 $ 1,200
Grounds Payroll 6535 $ 1,203
Grounds Supplies 6536 $ 3,850
Grounds Contract 6537 $ 6,618
Repairs Payroll 6540 $ 25,724
Repairs Material 6541 $ 14,470
Repairs Contract 6542 $ 10,819
Elevator Maintenance/Contract 6545 $
Heating/Cooling Repairs and Maintenance 6546 $ 4,257
Swimming Pool Maintenance/Contract 6547 $ 870
Snow Removal 6548 $ 472
Decorating Payroll/Contract 6560 $ 13,045
Decorating supplies 6561 $ 3,882
Other 6570 $ 240
Miscellaneous Operating and Maintenance Expenses 6590 $
Total Operating and Maintenance Expenses $ 97,082
Taxes and Insurance 6700 Real Estate Taxes 6710 $ 47,787
Payroll Taxes (FICA) 6711 $ 4,144
Miscellaneous Taxes, Licenses and Permits 6719 $ 5
Property and Liability Insurance (Hazard) 6720 $ 10,172
Fidelity Bond Insurance 6721 $ 269
Workmen's Compensation 6722 $ 2,398
Health Insurance and Other Employee Benefits 6723 $ 2,953
Other Insurance (specify) 6729 $
Total Taxes and Insurance $ 67,728
Financial Expenses 6800 Interest on Bonds Payable 6810 $
Interest on Mortgage Payable 6820 $ 172,694
Interest on Notes Payable (Long-Term) 6830 $
Interest on Notes Payable (Short-Term) 6840 $
Mortgage Insurance Premium/Service Charge 6850 $ 10,792
Miscellaneous Financial Expenses Amort Fin Costs 6890 $
Total Financial Expenses $183,486
Elderly & Congregate Total Service Expenses--Schedule Attached 6900 $
Service Expenses 6900 Total Cost of Operations Before Depreciation $487,094
Profit (Loss) Before Depreciation $217,471
Depreciation (Total)--6600 (specify) 6600 $104,822
Operating Profit or (Loss) $112,649
Corporate or Mortgagor Office Salaries 7110 $
Entity Expenses 7100 Legal Expenses (Entity) 7120 $
Taxes (Federal-State-Entity) 7130-32 $
Other Expenses (Entity) Ptrshp. Admin. Fee-$15,000 and 7190 $ 20,103
Total Corporate Expenses Amortization - $5,103 $ 20,103
Net Profit or (Loss) $ 92,546
<CAPTION>
Warning: HUD will prosecute false claims and statements. Conviction may result lin criminal and/or civil penalties. (18 U.S.C. 1001,
1010, 1012; 31 U.S.C. 3729, 3802)
Miscellaneous or other income and expense Sub-account Groups. If miscellaneous or other income and/or expense sub- accounts (5190,
5290, 5490, 5990, 6390, 6590, 6729, 6890, and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule
describing or explaining the miscellaneous income or expense.
Part II
<S> <C> <C>
1. Total principal payments required under the mortgage, even if payments under a
Workout Agreement are less or more than those required under t he mortgage. $ 37,246
2. Replacement Reserve deposits required by the Regulatory Agreement or
Amendments thereto, even if payments may be temporarily suspended or waived. $ 27,216
3. Replacement or Painting Reserve releases which are included as expense items on
this Profit and Loss statement $ 3,571
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that
are included as expense items on this Profit and Loss Statement. $ 0
The accompanying notes are an integral part of the financial statements.
</TABLE>
72
<PAGE>
<TABLE>
<CAPTION>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Rental receipts $ 677,872
Interest receipts 8,717
Insurance proceeds for
loss of rents 33,493
Other receipts 9,609
Administrative ( 23,859)
Management fees ( 43,618)
Accounting fees ( 5,120)
Operating and maintenance ( 70,425)
Real estate taxes ( 47,787)
Salaries and wages ( 52,579)
Miscellaneous taxes ( 4,149)
Insurance ( 6,902)
Utilities ( 18,892)
Interest on mortgage note ( 172,942)
Mortgage insurance ( 10,762)
------------
Net cash provided by operating activities $ 272,656
Cash flows from investing activities:
Purchase of property and equipment ( 3,240)
Cash flows from financing activities:
Partnership administrative fee ( 15,000)
Mortgage principal payments ( 37,246)
Reserve for replacements - deposits ( 30,799)
Reserve for replacements - withdrawals 6,400
Mortgage escrow deposits ( 11,940)
Tenant security deposits ( 1,165)
Withdrawals by partners ( 89,727)
------------
Net cash used for financing activities ( 179,477)
------------
Net increase in cash and cash equivalents 89,939
Cash and cash equivalents - beginning of year 113,005
------------
Cash and cash equivalents - end of year $ 202,944
============
<CAPTION>
The accompanying notes are an integral part of the financial statements
73
<PAGE>
STATEMENT OF CASH FLOWS (CONTINUED)
-----------------------------------
<S> <C> <C>
Reconciliation of net income to net cash provided by
(used for) operating activities:
Net income $ 92,546
Nonoperating expense included in determining
net income 15,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation $ 104,822
Amortization 5,103 109,925
------------
Changes in assets and liabilities arising
from operations:
Accounts receivable 45,193
Prepaid expenses 10,178
Accounts payable 248
Accrued interest ( 248)
Prepaid rents ( 186) 55,185
------------ ------------
Net cash provided by operating activities $ 272,656
============
</TABLE>
The accompanying notes are an integral part of the financial statements
74
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
As of and for the Year Ended December 31, 1996
Note A - Summary of Accounting Policies
A summary of the partnership's significant accounting policies
consistently applied in the preparation of the accompanying financial
statements follows:
1. Depreciation
Depreciation is computed over the estimated useful lives of the
depreciable assets using the straight-line method.
2. Amortization
Loan costs are amortized by using the straight-line method over the life
of the mortgage loan.
3. Statement of Cash Flows
Cash and cash equivalents, as presented in the Statement of Cash Flows,
consists entirely of interest and noninterest bearing cash accounts and
petty cash. The partnership has no other assets that qualify as cash or
cash equivalents.
4. Income Taxes
No provision for income taxes has been included in these financial
statements since the tax gains and losses pass through to and are
reportable by the partners on their respective income tax returns.
Taxable income or loss reported by the partners will differ from income
or loss reflected in the financial statements, due to the different
bases in certain assets (primarily property, buildings, and equipment)
for financial reporting and income tax purposes.
5. Estimates
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.
Note B - Organization
The partnership was organized as a North Carolina limited partnership on
April 21, 1975 to construct, own, and operate a 160 unit apartment
project located in Winston-Salem, North Carolina, known as Fiddlers
Creek Apartments, under Section 221(d)(4) of the National Housing Act.
The Regulatory Agreement limits distributions of net operating receipts
to "surplus cash" available at the end of semi-annual periods.
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note B - Organization (Continued)
On September 30, 1984, pursuant to an Amended and Restated Certificate
of Limited Partnership dated as of that date, partners' ownership
interests amounting to 99% of the existing partners' interests were
transferred by the original partners to two new partners. As a result of
the transfer of ownership interests, the partnership, as of September
30, 1984, retained one of the original general partners as a local
general partner, admitted a new general partner as associate general
partner, and admitted a sole investor limited partner.
After the aforementioned transfer, the Amended and Restated Certificate
of Limited Partnership provides that profits and losses from operations
be allocated 1% to the local general partner, 1% to the associate
general partner, and 98% to the investor limited partner. In the case of
certain events which are specified in the Partnership Agreement (for
example, a sale or refinancing of the property), the allocation may be
different than that described above for profits and losses from
operations.
Note C - Concentration of Credit Risk
The partnership's policy is to maintain its cash balances in reputable
financial institutions insured by the Federal Deposit Insurance
Corporation which provides $100,000 of insurance coverage on each
customer's cash balances. At times during the year, the partnership's
cash balances exceeded $100,000. Management believes this policy will
not cause any adverse effect to the partnership.
Note D - Mortgage Payable
The mortgage, originally in the amount of $2,519,100, is payable in
monthly installments of $17,515.73, including interest at 8.0% per
annum. The final payment is due in February 2018. The loan is secured by
the land and buildings and is insured by the Federal Housing
Administration.
The maturities of this debt are as follows:
1997 $ 40,337
1998 43,685
1999 47,311
2000 51,238
2001 55,491
2002 and After 1,903,303
Note E - Related Party Transactions/Identity of Interest
1. Management of Project
The partnership contracted with Housing Management, Inc. (HMI) to manage
the project. The local general partner is an officer of HMI. The
contract in effect through July 31, 1996 called for a management fee of
6.0% of gross revenue collections plus accounting fees of $2.50 per
housing unit per month. Effective
76
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note E - Related Party Transactions/Identity of Interest (Continued)
1. Management of Project (Continued)
Effective August 1, 1996, the management fee was increased to 7.5% of
gross revenue collections and the accounting fees were increased to
$3.00 per housing unit per month. Management and accounting fees are
analyzed as follows:
<TABLE>
<CAPTION>
Charged to
Unpaid at Operations Unpaid at
January 1 During December 31
1996 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Management fees $ 12,283 $ 47,766 $ 16,431
Accounting fees 1,600 5,200 1,680
------------ ------------ ------------
$ 13,883 $ 52,966 $ 18,111
============ ============ ============
</TABLE>
2. Partnership Administrative Fee
For its services in overseeing the operations of the partnership, the
partnership has agreed to pay its associate general partner a fee of
$15,000 per annum. The partnership administrative fee is payable from
surplus cash as defined by HUD regulations.
3. Other
The partnership also paid $600 to HMI for a computer and printer during
1996.
The partnership contracted with Housing Projects, Inc. (HPI) to repair
the damages caused by a fire in one of the apartments. The local general
partner is an officer of HPI. The partnership paid HPI $17,970 for these
repairs.
Note F - Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable
to estimate that value:
1. Cash and Security Deposits Funded
The carrying amount approximates fair value because of the short
maturity of these instruments.
2. Restricted Deposits and Funded Reserves
The carrying amounts approximates fair value because of the short
maturity of these instruments.
3. Long-term Debt
The fair value of the partnership's long-term debt is estimated based on
the quoted market prices for the same or similar issues.
77
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Note F - Disclosures About Fair Value of Financial Instruments (Continued)
The estimated fair values of the partnership's financial instruments are
as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
------------ ------------
<S> <C> <C>
Cash and security deposits funded $ 244,683 $ 244,683
Restricted deposits and funded reserves 164,777 164,777
Long-term debt 2,141,365 1,949,152
</TABLE>
Note G - Fire Casualty
1. Property Damage
On January 26, 1996, one of the apartments suffered a fire. During 1996,
the partnership received insurance reimbursement in the amount of
$20,288 for removal of debris and repairs at the sight of the fire.
These proceeds were offset against the expenses on the partnership's
1996 financial statements.
2. Loss of Rents
On May 19, 1995, one of the ten apartment buildings that comprise
Fiddlers Creek Apartments suffered a fire.
In January 1996, the partnership received $32,280 of insurance proceeds
to cover lost rents for six months of 1995 due to the fire damage of May
19, 1995. In May 1996, the partnership received $1,213 of insurance
proceeds to cover lost rents for the fire in the one apartment on
January 26, 1996.
Note H - Distribution
The partnership customarily makes a cash distribution of the maximum
amount permitted by its Regulatory Agreement and other such restrictions
under which it operates. In keeping with this custom, $104,727,
including a partnership administrative fee of $15,000, was distributed
during 1996, and it is anticipated that $166,536 will be distributed in
the first quarter of 1997.
78
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
SUPPLEMENTAL INFORMATION
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Accounts and Notes Receivable (Other Than From Regular Tenants)
Name of Original Balance
Debtor Date Terms Amount Due
------------------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Calvin Wiley School February 28
Apartments 1993 Open $ 1,244 $ 1,244
Triple S Management, September 25
Inc. 1995 Open 14,687 14,687
------------
15,931
Less, allowance for doubtful accounts ( 14,687)
------------
$ 1,244
============
<CAPTION>
Delinquent Tenant Accounts Receivable
Number of
Tenants Amount
------------ -------------
<S> <C> <C>
Delinquent 30 days 4 $ 1,520
Delinquent 31-60 days 1 350
Delinquent 61-90 days
Delinquent over 90 days 1 140
------------ -------------
6 $ 2,010
============ ============
<CAPTION>
Mortgage Escrow Deposits
Estimated amounts required as of December 31, 1996 for future payment
of:
<S> <C> <C>
City and county property taxes $ 3,961
Property insurance 10,172
Mortgage insurance 8,804 $ 22,937
------------
Total confirmed by mortgagee 17,506
------------
Amount on deposit in excess (deficit)
of estimated requirements ($ 5,431)
============
</TABLE>
Tenant Security Deposits
Tenant security deposits are held in a separate bank account(s) in the
name of the project. (See Schedule of Funds in Financial Institutions
for specific information on these accounts.)
79
<PAGE>
SUPPLEMENTAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Reserve for Replacements
In accordance with the provisions of the Regulatory Agreement,
restricted cash is held by the mortgagee to be used for replacement of
property with the approval of HUD as follows:
<S> <C> <C> <C> <C>
Balance at beginning of year $ 122,872
Monthly deposits:
12 @ $2,268.00 27,216
Interest 3,583
Withdrawals:
Approval Purpose of
Authorized By Date Withdrawal
------------- --------- ----------
Department of September Appliances,
HUD 1996 drapes, smoke
alarms, and
blinds $ 6,300
WMF/Huntoon Investment
Paige Associates Various service charge 100 ( 6,400)
------------ ------------
Balance at end of year confirmed by mortgagee $ 147,271
============
The mortgagee charged a fee of $100 for investing the reserve for
replacements fund.
<CAPTION>
Accounts Payable (Other Than Trade Creditors)
<S> <C>
Payable within 30 days None
============
<CAPTION>
Accrued Taxes (Account 2150)
Description Basis Period Date Amount
of Tax for Accrual Covered Due Accrued
---------------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
None
</TABLE>
Loans and Notes Payable (Other Than Insured Mortgage)
None
80
<PAGE>
SUPPLEMENTAL INFORMATION (CONTINUED)
Compensation of Partners (From Rental Income)
None
Unauthorized Distribution of Project Income to Partners
None
Changes in Partnership Interests
None
81
<PAGE>
SUPPLEMENTAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Changes in Property, Buildings, and Equipment
For the Year Ended December 31, 1996
Cost Accumulated Depreciation
----------------------------------------------- -----------------------------------------------
Balance Balance Balance Balance
January 1 December 31 January 1 Current December 31
1996 Additions Deletions 1996 1996 Provisions Deletions 1996
---------- --------- --------- ---------- ---------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Land $ 275,147 $ 275,147
Land improvements 6,530 6,530 $ 1,164 $ 218 $ 1,382
Buildings 3,017,603 3,017,603 1,131,081 100,587 1,231,668
Building equipment -
portable 106,186 $ 2,454 $ 1,513 107,127 93,123 2,879 $ 1,513 94,489
Furniture for project
administrative use 2,321 2,321 1,552 185 1,737
Computer equipment 786 786 78 78
Furnishings 50,953 50,953 50,953 50,953
Maintenance equipment 7,066 7,066 6,294 619 6,913
Miscellaneous
fixed assets 5,375 5,375 4,735 256 4,991
---------- --------- --------- ---------- ---------- --------- --------- ----------
$3,471,181 $ 3,240 $ 1,513 $3,472,908 $1,288,902 $ 104,822 $ 1,513 $1,392,211
========== ========= ========= ========== ========== ========= ========= ==========
<FN>
Note:
Additions to fixed assets were:
Item Cost
---------
3 ranges $ 960
3 refrigerators 1,494
1 computer with printer 786
---------
$ 3,240
=========
Disposition of fixed assets included:
Item Cost
---------
3 ranges $ 757
3 refrigerators 756
---------
$ 1,513
=========
</FN>
</TABLE>
82
<PAGE>
SUPPLEMENTAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Schedule of Funds in Financial Institutions
As of December 31, 1996
<S> <C>
A. Funds Held by Mortgagor - Regular Operating Account
1. Lexington State Bank, Lexington, NC 1
a. Fiddlers Creek Apartments Petty Cash Fund $ 400
b. Fiddlers Creek Apartments Rental Agency Trust Account 12,877
c. Fiddlers Creek Apartments Rental Agency Trust Account 189,667
------------
Operating Accounts - Subtotal 202,944
------------
B. Funds Held by Mortgagor in Trust - Tenant Security Deposit
1. Lexington State Bank, Lexington, NC 1
a. Fiddlers Creek Apartments Security Deposit
Trust Account - Noninterest Bearing 2,294
b. Fiddlers Creek Apts. Security Deposit Trust Account -
Interest Bearing 39,445
------------
Tenant Security Deposit Accounts - Subtotal 41,739
------------
Funds Held by Mortgagor - Total 244,683
------------
C. Funds Held by Mortgagee in Trust 2
1. Tax and Insurance Escrow
a. Bank United of Texas - Custodial Escrow Fund 17,506
------------
2. Reserve Fund for Replacements
a. Prudential Bank and Trust Company -
Money Market Account 117,607
b. Prudential Savings Bank - Money Market Account 29,664
------------
Reserve Fund for Replacements - Subtotal 147,271
------------
Funds Held by Mortgagee - Total 164,777
------------
Total Funds in Financial Institutions $ 409,460
============
<FN>
1 Balances Confirmed by Lexington State Bank - January 21, 1997
2 Balances Confirmed by WMF/Huntoon Paige Associates - January 10, 1997
</FN>
</TABLE>
83
<PAGE>
SUPPLEMENTAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Listing of Identity of Interest Companies and Activities
Doing Business With Owner/Agent During the Year Ended
December 31, 1996
Amount
Company Name Type of Service Paid
------------------------------ ---------------------------------- ------------
<S> <C> <C>
Housing Management, Inc. Management and Accounting Services $ 48,738
============
Liberty LGP Limited Partnership Partnership Administrative Fee $ 15,000
============
Housing Management, Inc. Computer and Printer $ 600
============
Housing Projects, Inc. Fire Damage Repairs $ 17,970
============
</TABLE>
84
<PAGE>
<TABLE>
<CAPTION>
COMPUTATION OF SURPLUS CASH, U.S. DEPARTMENT OF HOUSING
DISTRIBUTIONS AND RESIDUAL AND URBAN DEVELOPMENT
RECEIPTS OFFICE OF HOUSING
FEDERAL HOUSING COMMISSIONER
PROJECT NAME FISCAL PERIOD ENDED: PROJECT NUMBER
Fiddlers Creek Apartments, Ltd. December 31, 1996 053-35163-PM
ELDERLY, LTD
PART A - COMPUTE SURPLUS CASH
<S> <C> <C> <C>
Cash
1. Cash (Accounts 1110,1120,1191,1192) $244,683
2. Tenant subsidiary vouchers due for period covered
by financial statement $
3. Other (describe) RESERVE REPLACEMENT
$
(a) Total Cash (Add Lines 1, 2, and 3) $244,683
Current Obligations
4. Accrued mortgage interest payable $ 14,276
5. Delinquent mortgage principal payments $
6. Delinquent deposits to reserve for replacements $
7. Accounts payable (due within 30 days) $ 20,111
8. Loans and notes payable
(due within 30 days) $
9. Deficient Tax Insurance or MIP Escrow Deposits $ 5,431
10. Accrued expenses (not escrowed) $
11. Prepaid Rents (Account 2210) $ 1,408
12. Tenant security deposits liability (Account 2191) $ 36,921
13. Other (Describe) Excess Income $
(b) Less Total Current Obligations (Add Lines 4 through 13) $ 78,147
(c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $166,536
<CAPTION>
PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS
<S> <C> <C>
1. Surplus Cash $166,536
Limited Dividend Projects
2a. Distribution Earned During Fiscal Period
Covered by the Statement $
2b. Distribution Accrued and Unpaid as of the
End of the Prior Fiscal Period $
2c. Distributions Paid During Fiscal Period Covered by Statement $
3. Distributions Earned but Unpaid as of the End of
the Fiscal Period Under Review (Line 2a + 2b - 2c) $
4. Amount Available for Distribution During Next Fiscal Period $
5. Deposit Due Residual Receipts
(Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $
PREPARED BY REVIEWED BY
LOAN TECHNICIAN LOAN SERVICERIAN
DATE DATE
</TABLE>
85
<PAGE>
Turlington and Company L.L.P. 509 East Center Street
Certified Public Accountants Post Office Box 1697
Lexington, North Carolina 27293-1697
Office 910-249-6856
Facsimile 910-248-8697
INDEPENDENT AUDITORS' REPORT
ON THE INTERNAL CONTROL STRUCTURE
To the Partners HUD Field Office Director
Fiddlers Creek Apartments, Ltd. Greensboro, North Carolina
We have audited the financial statements of Fiddlers Creek Apartments, Ltd., HUD
Project No. 053-35163-PM (a North Carolina limited partnership), as of and for
the year ended December 31, 1996, and have issued our report thereon dated
January 15, 1997. We have also audited Fiddlers Creek Apartments, Ltd.'s
compliance with requirements applicable to major HUD-assisted programs and have
issued our reports thereon dated January 15, 1997.
We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States, and the Consolidated Audit Guide for Audits of HUD Programs (the
"Guide"), issued by the U. S. Department of Housing and Urban Development,
Office of the Inspector General, in July 1995. Those standards and the Guide
require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and about
whether Fiddlers Creek Apartments, Ltd. complied with laws and regulations,
noncompliance with which would be material to a major HUD-assisted program.
The management of Fiddlers Creek Apartments, Ltd. is responsible for
establishing and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of internal control structure policies and
procedures. The objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit the preparation of financial statements in
accordance with generally accepted accounting principles, and that HUD-assisted
programs are managed in compliance with applicable laws and regulations. Because
of inherent limitations in any internal control structure, errors,
irregularities, or instances of noncompliance may nevertheless occur and not be
detected. Also, projection of any evaluation of the structure to future periods
is subject to the risk that procedures may become inadequate because of changes
in conditions or that the effectiveness of the design and operation of policies
and procedures may deteriorate.
In planning and performing our audits, we obtained an understanding of the
design of relevant internal control structure policies and procedures and
determined whether they had been placed in operation, and we assessed control
risk in order to determine our auditing procedures for the purpose of expressing
our opinions on the basic financial statements of Fiddlers Creek Apartments,
Ltd. and on its compliance with specific requirements applicable to
86
<PAGE>
its major HUD-assisted programs and to report on the internal control structure
in accordance with the provisions of the Guide and not to provide any assurance
on the internal control structure.
We performed tests of controls, as required by the Guide, to evaluate the
effectiveness of the design and operation of internal control structure policies
and procedures that we considered relevant to preventing or detecting material
noncompliance with specific requirements applicable to Fiddlers Creek
Apartments, Ltd.'s major HUD-assisted programs. Our procedures were less in
scope than would be necessary to render an opinion on such internal control
structure policies and procedures. Accordingly, we do not express such an
opinion.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of one or more of the internal control structure elements does not
reduce to a relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial statements or that
noncompliance with laws and regulations that would be material to a HUD assisted
program may occur and not be detected within a timely period by employees in the
normal course of performing their assigned functions. We noted no matters
involving the internal control structure and its operations that we consider to
be material weaknesses as defined above.
This report is intended for the information of the partners, management, and the
Department of Housing and Urban Development. However, this report is a matter of
public record and its distribution is not limited.
Turlington and Company, L.L.P.
January 15, 1997
87
<PAGE>
Turlington and Company, L.L.P. 509 East Center Street
Certified Public Accountants Post Office Box 1697
Lexington, North Carolina 27293-1697
Office 910-249-6856
Facsimile 910-248-8697
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE
WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR HUD PROGRAMS
To the Partners HUD Field Office Director
Fiddlers Creek Apartments, Ltd. Greensboro, North Carolina
We have audited the financial statements of Fiddlers Creek Apartments, Ltd., HUD
Project No. 053-35163-PM (a North Carolina limited partnership), as of and for
the year ended December 31, 1996, and have issued our report thereon dated
January 15, 1997.
We have also audited Fiddlers Creek Apartments, Ltd. 's compliance with the
specific program requirements governing Federal Financial Reports; Mortgage
Status; Replacement Reserve; Security Deposits; Cash Receipts and Disbursements;
Distributions to Owners; Tenant Application, Eligibility, and Reexamination; and
Management Functions that are applicable to each of its major HUD-assisted
programs, for the year ended December 31, 1996. The management of Fiddlers Creek
Apartments, Ltd. is responsible for compliance with those requirements. Our
responsibility is to express an opinion on compliance with those requirements
based on our audit.
We conducted our audit of compliance with those requirements in accordance with
generally accepted auditing standards, Government Auditing Standards, issued by
the Comptroller General of the United States, and the Consolidated Audit Guide
for Audits of HUD Programs (the "Guide"), issued by the U.S. Department of
Housing and Urban Development, Office of Inspector General, in July 1995. Those
standards and the Guide require that we plan and perform the audit to obtain
reasonable assurance about whether material noncompliance with the requirements
referred to above occurred. An audit includes examining, on a test basis,
evidence about Fiddlers Creek Apartments, Ltd.'s compliance with those
requirements. We believe that our audit provides a reasonable basis for our
opinion.
The results of our audit procedures disclosed immaterial instances of
noncompliance with the requirements referred to above, which are described in
the accompanying Schedule of Findings and Questioned Costs. We considered these
instances of noncompliance in forming our opinion on compliance which is
expressed in the following paragraph.
In our opinion, Fiddlers Creek Apartments, Ltd. complied, in all material
respects, with the requirements described above that are applicable to each of
its major HUD-assisted programs for the year ended December 31, 1996.
This report is intended for the information of the partners, management, and the
Department of Housing and Urban Development. However, this report is a matter of
public record and its distribution is not limited.
Turlington and Company, L.L.P.
January 15, 1997
88
<PAGE>
Turlington and Company, L.L.P. 509 East Center Street
Certified Public Accountants Post Office Box 1697
Lexington, North Carolina 27293-1697
Office 910-249-6856
Facsimile 910-248-8697
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE
WITH SPECIFIC REQUIREMENTS APPLICABLE TO
AFFIRMATIVE FAIR HOUSING
To the Partners HUD Field Office Director
Fiddlers Creek Apartments, Ltd. Greensboro, North Carolina
We have audited the financial statements of Fiddlers Creek Apartments, Ltd., HUD
Project No. 053-35163-PM (a North Carolina limited partnership), as of and for
the year ended December 31, 1996, and have issued our report thereon dated
January 15, 1997.
We have also applied procedures to test Fiddlers Creek Apartments, Ltd.'s
compliance with the Affirmative Fair Housing requirements applicable to its
HUD-assisted programs, for the year ended December 31, 1996.
Our procedures were limited to the applicable compliance requirements described
by the Consolidated Audit Guide for Audits of HUD Programs (the "Guide") issued
by the U. S. Department of Housing and Urban Development, Office of Inspector
General, in July 1995. Our procedures were substantially less in scope than an
audit, the objective of which is the expression of an opinion on Fiddlers Creek
Apartments, Ltd.'s compliance with the Affirmative Fair Housing requirements.
Accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance that are
required to be reported herein under the Guide.
This report is intended for the information of the partners, management, and the
Department of Housing and Urban Development. However, this report is a matter of
public record and its distribution is not limited.
Turlington and Company, L.L.P.
January 15, 1997
89
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Program Finding/Noncompliance Cost
- -------------- ---------------------- -----
<S> <C> <C>
Finding 1
Section 221(d)(4) Criteria $ -0-
HUD-insured ==========
In accordance with HUD Handbook 4370.2 REV-1, the
requirement applicable in this case, owners must
ensure that security deposit balances are fully
insured
Condition
Of the 5 bank accounts held by the mortgagor, we
examined 5 and noted that the balance in aggregate
for the bank involved exceeded Federal Deposit
Insurance Corporation limits by $148,238
Effect
Noncompliance with HUD Handbook 4370.2 REV-l and
risk of loss of funds in excess of insurance limits
Cause
Human error
Recommendation
We recommend that, in the future, if there is
surplus cash available, a June 30 distribution be
made to partners
Auditee's Summary Comments on Finding
and Recommendation
We concur. We will make every effort to
distribute surplus cash to partners semi-
annually to reduce the risk of loss
90
<PAGE>
<CAPTION>
Program Finding/Noncompliance Cost
- -------------- ---------------------- -----
<S> <C> <C>
Finding 2
Section 221(d)(4) Criteria $ -0-
HUD-insured ==========
In accordance with HUD Handbook 4350.3, the
requirement applicable in this case, owners must
retain move-in inspections in the tenant's file
Condition
Of the 6 tenant files tested, 1 did not contain
a move-in inspection
Effect
Noncompliance with HUD Handbook 4350.3
Cause
Human error
Recommendation
We recommend that, in the future, more care
be exercised when preparing tenant files
Auditee's Summary Comments on Findings
and Recommendation
We concur. We will make every effort to
exercise more care when preparing tenant
files
91
<PAGE>
<CAPTION>
Program Finding/Noncompliance Cost
- -------------- ---------------------- -----
<S> <C> <C>
Finding 3
Section 221(d)(4) Criteria $ 14,687
HUD-insured =========
In accordance with HUD Handbook 4381.5 REV-2, the
requirement applicable in this case, the managing
agent must obtain a HUD- approved management
certification
Condition
During the course of 1995, specifically during the
months of June through September, the project paid
Triple S Management, Inc. for management services
and, at that time, Triple S Management, Inc. was not
certified to manage the project.
Effect
Noncompliance with HUD Handbook 4381.5
REV-2
Cause
Change in management of managing agent
Recommendation
We recommend that the project be reimbursed
for these expenses
Auditee's Summary Comments on Findings
and Recommendation
We concur. Steps will be taken to obtain
reimbursement for these expenses
92
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
AUDITORS' COMMENTS ON AUDIT RESOLUTION MATTERS
RELATING TO THE HUD PROGRAMS
For the Year Ended December 31, 1996
We performed a review of findings, if any, from previous HUD required annual
audits, HUD-OIG audits, or HUD management reviews and determined that three
findings remained uncorrected at the time of our review.
1. The security deposit cash balances are not fully insured.
2. The move-in inspections are not being retained in the tenants' files.
3. Triple S Management, Inc. did not reimburse the project for the management
and accounting fees paid to them in error.
93
<PAGE>
AUSTINTOWN ASSOCIATES
FHA PROJECT NO. 042-44213
--------------------
FINANCIAL STATEMENTS
and
SUPPLEMENTARY INFORMATION
with
INDEPENDENT AUDITOR'S REPORT
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
94
<PAGE>
1. LEAD AUDITOR ON ENGAGEMENT:
Mary Ann Gehringer
Audit Partner
Bick Fredman & Co.
1228 Euclid Avenue
880 Halle Building
Cleveland, Ohio 44115
(216) 696-9860
2. INFORMATION ON LICENSING FOR AN OUT-OF-STATE CPA:
n/a
3. CPA'S FEDERAL EMPLOYER ID NUMBER:
34-1285712
95
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS:
Balance sheets 2
Statement of operations 3
Statement of changes in partners' equity 4
Statement of cash flows 5-6
Notes to financial statements 7-11
SUPPLEMENTARY INFORMATION:
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION 12
Statement of profit and loss (HUD Form 92410) 13-14
Computation of surplus cash, distributions and
residual receipts (HUD Form 93486) 15
Changes in fixed asset accounts 16
Other supporting data required by HUD 17-20
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH SPECIFIC
REQUIREMENTS APPLICABLE TO MAJOR HUD-ASSISTED PROGRAMS 21-22
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH SPECIFIC
REQUIREMENTS APPLICABLE TO AFFIRMATIVE FAIR HOUSING 23
INDEPENDENT AUDITOR'S REPORT ON THE INTERNAL CONTROL STRUCTURE 24-25
Schedule of findings and questioned costs 26
Auditor's comments on audit resolution matters 27
MORTGAGOR'S CERTIFICATION 28
MANAGING AGENT'S CERTIFICATION 29
96
<PAGE>
[Bick Fredman & Co Letterhead]
Independent Auditor's Report
Austintown Associates HUD Field Office Director
Youngstown, Ohio Cleveland, Ohio
We have audited the accompanying balance sheets of Austintown Associates,
HUD Project No. 042-44213 as of December 31, 1996 and 1995, and the related
statements of operations, changes in partners' equity and cash flows for the
years 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 audits.
We conducted our audits 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 audits provide 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 Austintown
Associates as of December 31, 1996 and 1995 and the results of its operations
and cash flows for the years then ended, in conformity with generally accepted
accounting principles.
In accordance with Government Auditing Standards, we have also issued a
report dated January 9, 1997 on our consideration of Austintown Associates'
internal control structure and a report dated January 9, 1997 on its compliance
with laws and regulations.
/s/Bick Fredman & Co
Cleveland, Ohio
January 9, 1997
97
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
1996 1995
---------- ----------
CURRENT ASSETS:
1120 Cash and cash equivalents $ 87,531 $ 18,899
1130 Accounts receivable - tenants 2,158 7,834
1144 Accounts receivable - HUD 155 1,200
1210 Inventory supplies 5,381 3,967
---------- ----------
95,225 31,900
---------- ----------
DEPOSITS HELD IN TRUST - FUNDED:
1191 Tenant security deposits 35,573 33,352
---------- ----------
RESTRICTED DEPOSITS AND FUNDED RESERVES:
1320 Reserve for Replacements 181,814 242,293
1310 Mortgage escrow deposits 49,116 34,718
---------- ----------
230,930 277,011
---------- ----------
FIXED ASSETS, AT COST:
1410 Land 397,105 397,105
1420 Buildings 4,999,696 4,987,520
1440 Equipment 150,485 150,485
---------- ----------
5,547,286 5,535,110
4120 Less: accumulated depreciation 2,145,754 1,968,599
---------- ----------
3,401,532 3,566,511
---------- ----------
OTHER ASSETS:
1810 Unamortized loan costs - net 14,693 15,351
1900 Deposit 433 433
---------- ----------
15,126 15,784
---------- ----------
TOTAL ASSETS $3,778,386 $3,924,558
========== ==========
The accompanying notes are an integral part of these financial statements.
98
<PAGE>
LIABILITIES AND PARTNERS' EQUITY
1996 1995
---------- -------
CURRENT LIABILITIES:
2110 Accounts payable - trade $ 51,646 $ 80,983
- insurance 14,957 -
2210 Deferred rent 117 -
2140 Distribution payable - management fee 7,500 7,500
2141 Distribution payable 33,308 200
2150 Accrued real estate taxes 87,213 77,544
2130 Accrued interest payable 2,367 2,787
2320 Current portion of long-term debt 82,690 77,052
---------- ----------
279,798 246,066
---------- ----------
DEPOSIT LIABILITIES:
2191 Tenant security deposits 26,491 26,020
---------- ----------
LONG-TERM LIABILITIES:
2320 Mortgage payable 2,954,665 3,033,945
2390 Operating loss loan 19,507 22,917
---------- ----------
2,974,172 3,056,862
---------- ----------
TOTAL LIABILITIES 3,280,461 3,328,948
---------- ----------
PARTNERS' EQUITY
3130 Partners' equity 497,925 595,610
---------- ----------
TOTAL LIABILITIES AND
PARTNERS' EQUITY $3,778,386 $3,924,558
========== ==========
The accompanying notes are an integral part of these financial statements.
99
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
---------- ----------
REVENUE:
Rental $ 806,224 $ 811,637
Interest 13,390 13,391
Other 16,499 14,664
---------- ----------
836,113 839,692
---------- ----------
EXPENSES:
Administrative 163,887 154,588
Utilities 120,618 117,070
Operating and maintenance 243,485 288,002
Taxes and insurance 134,064 123,573
Interest and mortgage insurance 45,752 51,299
Depreciation and amortization 192,884 191,406
Entity expense 7,500 7,500
---------- ----------
908,190 933,438
---------- ----------
NET (LOSS) $ (72,077) $ (93,746)
========== ==========
The accompanying notes are an integral part of these financial statements.
100
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
STATEMENT OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
General Limited
Partners Partner Total
--------- ---------- ----------
Balance, December 31, 1994 $ (2,465) $ 692,021 $ 689,556
Net loss - (93,746) (93,746)
Earned distribution currently
payable (4) (196) (200)
--------- ---------- ----------
Balance, December 31, 1995 (2,469) 598,079 595,610
Net loss - (72,077) (72,077)
Return of prior year distribution 7,700 - 7,700
Earned distribution currently
payable (8,212) (25,096) (33,308)
--------- ---------- ----------
Balance, December 31, 1996 $ (2,981) $ 500,906 $ 497,925
========= ========== ==========
The accompanying notes are an integral part of these financial statements.
101
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
--------- ---------
CASH FLOWS FROM:
OPERATING ACTIVITIES:
Rental receipts $ 811,929 $ 805,531
Interest receipts 13,390 13,391
Other receipts 19,639 14,120
--------- ---------
844,958 833,042
--------- ---------
Administrative 35,047 29,827
Management fees 76,800 76,800
Utilities 120,356 110,757
Payroll and related expenses 173,415 149,170
Operating and maintenance 189,156 175,016
Taxes - real estate 77,544 75,932
Property insurance 12,369 15,517
Miscellaneous taxes and insurance 456 228
Interest on mortgage 30,975 36,350
Mortgage insurance 240 15,341
Entity expense 7,500 7,500
--------- ---------
723,858 692,438
--------- ---------
Net cash provided by operating activities 121,100 140,604
--------- ---------
INVESTING ACTIVITIES:
Decrease (increase) in Reserve for Replacements 60,479 (21,869)
(Increase) decrease in mortgage escrow deposits (14,398) 987
Fixed asset purchases (27,247) (29,708)
Security deposits funded (2,221) (3,417)
Proceeds from sale of fixed asset -- 100
--------- ---------
Net cash provided (used) by investing
activities 16,613 (53,907)
--------- ---------
FINANCING ACTIVITIES:
Mortgage principal payments (77,052) (71,801)
Net security deposits collected 471 2,133
Partnership distributions (200) (30,526)
Return of partnership distribution 7,700 --
--------- ---------
Net cash (used) by financing activities (69,081) (100,194)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 68,632 (13,497)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 18,899 32,396
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 87,531 $ 18,899
========= =========
The accompanying notes are an integral part of these financial statements.
102
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
1996 1995
--------- -------
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net loss $ (72,077) $ (93,746)
--------- ---------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 192,884 191,406
Gain on fixed asset sold - (16)
Decrease (increase) in accounts receivable 6,721 (1,671)
(Increase) decrease in inventory supplies (1,414) 1,200
(Decrease) increase in accounts payable (14,380) 45,121
Increase in deferred rent 117 -
Increase in payable to federal programs - (2,913)
Increase in accrued real estate taxes 9,669 1,615
Decrease in accrued interest payable (420) (392)
--------- ---------
Total adjustments 193,177 234,350
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 121,100 $ 140,604
========= =========
The accompanying notes are an integral part of these financial statements.
103
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
1. ORGANIZATION, BASIS OF PREPARATION, AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ORGANIZATION
Austintown Associates, a partnership, was formed as a limited
partnership on February 15, 1973 pursuant to the provisions of the laws
of the State of Ohio. The Partnership operates a 200 unit apartment
project, Compass West, (the Project) located in Youngstown, Ohio. The
Project is operated under the terms of a Federal Housing Administration
(FHA) Regulatory Agreement for Limited Distribution Mortgages under
Section 236 of the National Housing Act dated February 22, 1973.
Distributions to partners are allowable only from surplus cash and are
limited in any one fiscal year to six percent of the initial equity
investment, on a cumulative basis. The FHA, under commitment to the
Partnership, makes interest subsidiary payments to the mortgage lender.
On October 30, 1984, ownership interests for the partners amounting to
99% of the interests of the existing partners were transferred by the
original partners to new partners. As a result of the transfer, the
Partnership retained one of the original General Partners as a Local
General Partner, admitted a new General Partner as Associate General
Partner, and admitted a Sole Investor Limited Partner. During 1995,
there was a substitution of the Associate General Partner.
The Partnership accounted for this transfer of ownership interests by
the goodwill method whereby assets and liabilities are adjusted to
reflect the value of Partnership assets based on the cost to the new
partners of their interests in the Partnership.
Profit of loss and cash distributions:
Pursuant to Article X of the Amended and Restated Certificate of
Formation and Agreement of Limited Partnership, profits and losses are
allocated 1% to the Local General Partner, 1% to the Associate General
Partner and 98% to the Investor Limited Partner, provided all partners
individually have only positive balances or only negative balances. The
agreement requires that all losses be allocated to the Investor Limited
Partner if any General Partner has a negative balance at a time when any
Limited Partner has a positive capital balance.
The agreement also specifies the order of allocations in such instances
as gain from a sale or refinancing and loss from a sale. These
allocations may differ from those for operating profits and losses.
BASIS OF PREPARATION
The financial statements of the Project have been prepared in accordance
with accounting principles applicable to a U.S. Department of Housing
and Urban Development (HUD) project, in conformity with generally
accepted accounting principles and the disclosure requirements as
outlined in HUD Handbook 4370.2 REV 1.
104
<PAGE>
BASIS OF PREPARATION, CONTINUED
PART I - Funds of the Project:
Under the conditions of the Regulatory Agreement, the "borrower" is
obligated to create a Revenue Fund account into which all operating
income of the Project is deposited and a Reserve Fund for Replacements
for application toward the cost of unusual or extraordinary maintenance
or repairs, renewals or replacements with the prior permission of HUD.
PART II - Investment restrictions:
The Regulatory Agreement and Section 236 place certain restrictions on
the investment of funds set aside in the required Reserve. In essence,
investment is restricted to direct obligations of, or obligations the
principal of and the interest on which are guaranteed to include both
securities issued by the United States Government and its agencies, and
those insured by the United States Government and its agencies, and
those insured under the Federal Deposit Insurance Corporation. In
addition, any interest earned on the investment of such funds must be
retained in the required Reserve.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies have been followed in the
preparation of the financial statements:
Cash equivalents
For purposes of the statement of cash flows, the Partnership considers
all highly-liquid, debt instruments purchased with a maturity of three
months or less, not invested in a Reserve required under the terms of
its Regulatory Agreement, to be "cash equivalents."
Fair values of financial instruments
The following methods and assumptions were used by the Partnership in
estimating its fair values for financial instruments:
Cash and cash equivalents: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates their
fair value.
Restricted and Trust deposits and Funded Reserves: The fair value
of these investments, principally U.S. Treasury securities, is
based on the quoted market prices. The carrying amount of money
market funds approximates fair value.
Management believes it is not practicable to estimate the fair value of
the mortgage insured by the U.S. Department of Housing and Urban
Development (HUD) because programs with similar characteristics are not
currently available to the Partnership. Under the Section 236 program of
the National Housing Act, which program no longer exists, insured
mortgages have a below market rate of interest over the 40 year original
term.
The Partnership is a party to an off-balance sheet financial instrument
with the FHA to reduce its mortgage interest note. The Interest
Reduction Contract provides for monthly payments to the mortgagee on
behalf of the Partnership in the amount of $14,291.14 plus an additional
amount representing the monthly mortgage insurance premium. Such
payments commenced with the amortization of the insured mortgage and
continue to its maturity in December 2015.
105
<PAGE>
Fair values of financial instruments, continued
The carrying value of the operating loss loan payable approximates its
fair value.
The Partnership does not hold or issue financial instruments for trading
purposes.
Property and equipment
Property and equipment is recorded on the basis of cost. Depreciation is
computed using the straight-line method over the estimated useful lives
of the assets. The estimated useful lives of the assets range from 3 to
30 years. Management continually reviews property and equipment to
determine that the carrying values have not been impaired.
Maintenance
Routine maintenance is charged to maintenance expense. Expenditures
which materially increase the value or extend the useful lives of the
assets are capitalized.
Unamortized loan costs
Loan costs are being amortized over the appropriate loan period on a
straight-line basis.
Inventory, supplies
Supplies consist of various maintenance and cleaning products carried at
cost.
Income taxes
For income tax purposes, each partner is required to take into account
his share of the Partnership's income or loss and, accordingly, no
provision or benefit for income taxes is included in the financial
statements.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
2. MORTGAGE PAYABLE
The mortgage is insured by the FHA and secured by the property and
equipment of the Project. The mortgagee's recourse on the debt is
limited to such security.
The mortgage, which bears interest at 7% per annum, requires monthly
principal and interest payments of $24,095 less monthly interest subsidy
($15,538 for 1996 and $15,570 for 1995) thru December, 2015. Annual
principal payments for the next five years are as follows: 1997 --
$79,280; 1998 -- $85,011; 1999 -- $91,157; 2000 -- $97,746; 2001 -
$104,812 and thereafter -- $2,575,939.
106
<PAGE>
2. MORTGAGE PAYABLE, CONTINUED
Under Section 236 of the National Housing Act, developers are given an
interest reduction, in that the interest rate to develop and build the
Project is subsidized to an effective rate of 1%.
1996 1995
-------- --------
Expense $214,778 $219,792
Subsidy 186,417 186,803
-------- --------
Net interest $ 28,361 $ 32,989
======== ========
Under agreements with the mortgage lender and the FHA, the Project is
required to make escrow deposits for taxes, insurance and replacement
of Project assets. The Project is also subject to restrictions as to
operating policies, rental charges, operating expenditures and
distributions to partners.
3. OPERATING LOSS LOAN
The operating loss loan is an FHA-secured note with interest payable at
9%, due in monthly installments of $444, including principal and
interest through January, 2002. Annual principal payments for the next
five years, are as follows: 1997 - $3,410; 1998 -- $3,729; 1999 --
$4,079; 2000 -- $4,461; 2001 -- $4,880; and thereafter - $2,358.
4. TRANSACTIONS WITH RELATED PARTIES
Distribution payable consists of administrative fees to the Associate
General Partner for services in overseeing the operations of the
Partnership. The $7,500 per annum fee is payable only out of surplus
cash reserves. The fee owed at December 31, 1996 and 1995 was $7,500.
Pursuant to a management agreement dated July 1, 1994, management fees
of 9.9% of gross rental collections are payable to Federal Management
Company, an affiliate of the Local General Partner. On October 12,
1990, HUD approved a monthly management fee of $32 per unit. Management
fees were $76,800 per annum for the years ended December 31, 1996 and
1995.
Included in operating expenses are reimbursements to Federal Management
Company for payroll, payroll taxes, medical insurance, accounting fees,
and office supplies. Payments for such reimbursements were $169,630 and
$161,000 for the years 1996 and 1995, respectively.
Miscellaneous revenue includes commissions for the collection of
monthly fees for equipment provided by B & M Professional Services, an
affiliate of the Local General Partner. Receipts for the fiscal years
ending December 31, 1996 and 1995 were $2,105 and $2,163, respectively.
Included in operating expenses are payments of $27,260 and $103,197 for
1996 and 1995, respectively, to B & M Professional Services for window
replacement, painting and drywall repairs.
Payables to related parties as of December 31 are as follows:
1996 1995
-------- --------
Federal Management Company $ 16,656 $ 20,445
B & M Professional Services $ 9,809 $ 31,266
107
<PAGE>
5. HOUSING ASSISTANCE PAYMENTS
The Federal Housing Authority (FHA) has contracted with the Partnership
pursuant to Section 8 of the Housing and Community Development Act of
1974 to make housing assistance payments to the Partnership on behalf
of qualified tenants. The Partnership has extended the original
five-year agreements of November, 1983 and May, 1984 to additional
five-year terms ending November, 1998 and May, 1999, respectively. As
of December 31, 1996, the housing assistance payments are contractually
limited to annual amounts totalling $559,980. This contract limit does
not include increases in the contract authority for HUD-approved rent
increases and prior years' unused contract authority, as provided in
the Project's HAP contracts.
108
<PAGE>
SUPPLEMENTARY INFORMATION
109
<PAGE>
[Bick Fredman & Co Letterhead]
Independent Auditor's Report on Supplementary Information
Austintown Associates HUD Field Office Director
Youngstown, Ohio Cleveland, Ohio
Our report on our audit of the basic financial statements of Austintown
Associates, HUD Project No. 042-44213, for December 31, 1996 appears on page 1.
That audit was made for the purpose of forming an opinion on the financial
statements taken as a whole. The supplementary information on pages 13 to 20 is
presented for the purpose of additional analysis and is not a required part of
the basic financial statements of Austintown Associates, HUD Project No.
042-44213. Such information has been subjected to the auditing procedures
applied in the audit of the financial statements and, in our opinion, is fairly
stated in all material respects in relation to the financial statements taken as
a whole.
/s/Bick Fredman & Co
Cleveland, Ohio
January 9, 1997
110
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Statement of Profit and Loss U.S. Department of Housing and Urban Development
Office of Housing
Federal Housing Commissioner
OMB Approval No. 2502-0052 (Exp. 1/31/95)
Public Reporting Burden for this collection of information is estimated to average 1.0 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the
collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Reports Management Officer, Office of Information Policies and Systems, U.S.
Department of Housing and Urban Development, Washington, D.C. 20410-3600 and to the Office of Management and Budget, Paperwork
Reduction Project (2502-0052), Washington, D.C. 20503. Do not send this completed form to either of these addresses.
For Month/Period Ending: Project Project Name:
Beginning Number:
January 1, 1996 December 31, 1996 042-44213 Austintown Associates
Part 1 Description of Account Acct. No. Amount*
<S> <C> <C> <C> <C>
Rental Income 5100 Apartments or Member Carrying Charges (Coops) 5120 $ 155,877
Tenant Assistant Payments 5121 $ 661,203
Furniture and Equipment 5130 $
Stores and Commercial 5140 $
Garage and Parking Spaces 5170 $
Flexible Subsidy Income 5180 $
Miscellaneous (specify) 5190 $
Total Rent Revenues Potential at 100% Occupancy $817,080
Vacancies 5200 Apartments 5220 $ (10,856)
Furniture and Equipment 5230
Stores and Commercial 5240
Garage and Parking Spaces 5270
Miscellaneous (specify) 5290
Total Vacancies (10,856)
Net Rental Revenue Rent Revenue Less Vacancies $806,224
Elderly and Congregate Service Income --5300
Total Service Income (Schedule Attached) 5300 $
Financial Revenue 5400 Interest Income--Project Operations 5410 $ 4,165
Income from Investments--Residual Receipts 5430 $
Income from Investments--Reserve for Replacement 5440 $ 9,225
Income from Investments--Miscellaneous 5490
Total Financial Revenue $ 13,390
Other Revenue 5900 Laundry and Vending 5910 $ 1,523
NSF and Late Charges 5920 $ 1,333
Damages and Cleaning Fees 5930 $ 4,348
Forfeited Tenant Security Deposits 5940 $ 366
Other Revenue (specify) 5990 $ 8,929
Total Other Revenue $ 16,499
Total Revenue $836,113
Administrative Expenses Advertising 6210 $ 1,162
6200/6300 Other Administrative Expense 6250 $ 414
Office Salaries 6310 $ 33,923
Office Supplies 6311 $ 12,131
Office or Model Apartment Rent 6312 $
Management 6320 $ 76,800
Manager or Superintendent Salaries 6330 $ 17,186
Manager or Superintendent Rent Free Unit 6331 $
Legal Expenses (Project) 6340 $ 1,068
Auditing Expenses (Project) 6350 $ 7,000
Bookkeeping Fees/Accounting Services 6351 $
Telephone and Answering Service 6360 $ 4,955
Bad Debts 6370 $ 7,517
Miscellaneous Administrative Expenses (specify) 6390 $ 1,731
Total Administrative Expenses $163,887
Utilities Expense 6400 Fuel Oil/Coal 6420 $
Electricity (Light and Misc. Power) 6450 $ 56,219
Water 6451 $ 64,399
Gas 6452 $
Sewer 6453 $
Total Utilities Expense $120,618
*All amounts must be rounded to the nearest dollar; $.50 and over, round up--$.49 and below, round down.
111
<PAGE>
AUSTINTOWN ASSOCIATES 042-44213
Operating and Janitor and Cleaning Payroll 6510 $ 25,836
Maintenance Expenses Janitor and Cleaning Supplies 6515 $ 4,987
6500 Janitor and Cleaning Contract 6517 $ 2,408
Exterminating Payroll/Contract 6519 $ 675
Exterminating Supplies 6520 $ 262
Garbage and Trash Removal 6525 $ 18,469
Security Payroll/Contract 6530 $ 1,349
Grounds Payroll 6535 $ 9,262
Grounds Supplies 6536 $ 3,433
Grounds Contract 6537 $ 1,397
Repairs Payroll 6540 $ 46,828
Repairs Material 6541 $ 84,519
Repairs Contract 6542 $ 5,400
Elevator Maintenance/Contract 6545 $
Heating/Cooling Repairs and Maintenance 6546 $ 1,575
Swimming Pool Maintenance/Contract 6547 $ 3,836
Snow Removal 6548 $ 1,500
Decorating Payroll/Contract 6560 $ 19,980
Decorating supplies 6561 $ 6,238
Other 6570 $ 4,487
Miscellaneous Operating and Maintenance Expenses 6590 $ 1,044
Total Operating and Maintenance Expenses $243,485
Taxes and Insurance 6700 Real Estate Taxes 6710 $ 87,213
Payroll Taxes (FICA) 6711 $ 21,046
Miscellaneous Taxes, Licenses and Permits 6719 $ 456
Property and Liability Insurance (Hazard) 6720 $ 11,859
Fidelity Bond Insurance 6721 $ 371
Workmen's Compensation 6722 $ 1,008
Health Insurance and Other Employee Benefits 6723 $ 11,972
Other Insurance (specify) 6729 $ 139
Total Taxes and Insurance $134,064
Financial Expenses 6800 Interest on Bonds Payable 6810 $
Interest on Mortgage Payable 6820 $ 28,361
Interest on Notes Payable (Long-Term) 6830 $ 2,193
Interest on Notes Payable (Short-Term) 6840 $
Mortgage Insurance Premium/Service Charge 6850 $ 15,198
Miscellaneous Financial Expenses 6890 $
Total Financial Expenses $ 45,752
Elderly & Congregate Total Service Expenses--Schedule Attached 6900 $
Service Expenses 6900 Total Cost of Operations Before Depreciation $707,806
Profit (Loss) Before Depreciation $128,307
Depreciation (Total)--6600 (specify) 6600 $192,884
Operating Profit or (Loss) $(64,577)
Corporate or Mortgagor Office Salaries 7110 $
Entity Expenses 7100 Legal Expenses (Entity) 7120 $
Taxes (Federal-State-Entity) 7130-32 $
Other Expenses (Entity) 7190 $ 7,500
Total Corporate Expenses $ 7,500
Net Profit or (Loss) $(72,077)
<CAPTION>
Warning: HUD will prosecute false claims and statements. Conviction may result lin criminal and/or civil penalties. (18 U.S.C. 1001,
1010, 1012; 31 U.S.C. 3729, 3802)
Miscellaneous or other income and expense Sub-account Groups. If miscellaneous or other income and/or expense sub- accounts (5190,
5290, 5490, 5990, 6390, 6590, 6729, 6890, and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule
describing or explaining the miscellaneous income or expense.
Part II
<S> <C> <C>
1. Total principal payments required under the mortgage, even if payments under a
Workout Agreement are less or more than those required under t he mortgage. $ 73,935
2. Replacement Reserve deposits required by the Regulatory Agreement or
Amendments thereto, even if payments may be temporarily suspended or waived. $ 54,000
3. Replacement or Painting Reserve releases which are included as expense items on
this Profit and Loss statement $ 34,203
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that
are included as expense items on this Profit and Loss Statement. $ 0
</TABLE>
112
<PAGE>
<TABLE>
<CAPTION>
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
HOUSING - FEDERAL HOUSING COMMISSIONER
OFFICE OF MULTIFAMILY HOUSING MANAGEMENT AND OCCUPANCY
COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND
RESIDUAL RECEIPTS
PROJECT NAME FISCAL PERIOD ENDED: PROJECT NUMBER
Austintown Associates December 31, 1996 042-44213
PART A - COMPUTE SURPLUS CASH
<S> <C> <C> <C>
1. Cash (Accounts 1110,1120,1191,1192) $123,104
2. Tenant subsidiary vouchers due for period covered
by financial statement $ 155
3. Other (describe) RESERVE REPLACEMENT
$
(a) Total Cash (Add Lines 1, 2, and 3) $123,259
4. Accrued mortgage interest payable $ 2,367
5. Delinquent mortgage principal payments $
6. Delinquent deposits to reserve for replacements $
7. Accounts payable (due within 30 days) $ 51,646
8. Loans and notes payable
(due within 30 days) $
9. Deficient Tax Insurance or MIP Escrow Deposits $ 1,830
10. Accrued expenses (not escrowed) $
11. Prepaid Rents (Account 2210) $ 117
12. Tenant security deposits liability (Account 2191) $ 26,491
13. Other (Describe) Excess Income $
(b) Less Total Current Obligations (Add Lines 4 through 13) $ 82,451
(c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $ 40,808
<CAPTION>
PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS
<S> <C> <C>
1. Surplus Cash $ 40,808
2a. Distribution Earned During Fiscal Period
Covered by the Statement $ 25,850
Ltd.
2b. Distribution Accrued and Unpaid as of the
End of the Prior Fiscal Period $127,946
Div.
2c. Distributions Paid During Fiscal Period Covered by Statement $
Proj.
3. Distributions Earned but Unpaid as of the End of
the Fiscal Period Under Review (Line 2a + 2b - 2c) $153,796
4. Amount Available for Distribution During Next Fiscal Period $ 40,808
5. Deposit Due Residual Receipts
(Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $ 0
PREPARED BY REVIEWED BY
LOAN TECHNICIAN LOAN SERVICERIAN
DATE DATE
</TABLE>
113
<PAGE>
<TABLE>
<CAPTION>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
CHANGES IN FIXED ASSET ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1996
ASSETS ACCUMULATED DEPRECIATION Net
-------------------------------------------- -------------------------------------------- Carrying
Balance Balance Balance Balance Amount
Fixed Assets 12/31/95 Additions Disposals 12/31/96 12/31/95 Additions Disposals 12/31/96 12/31/96
- ----------------- ---------- --------- --------- ---------- ---------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Land $ 397,105 $ - $ - $ 397,105 $ - $ - $ - $ - $ 397,105
Building 4,987,520 27,247 15,071 4,999,696 1,832,247 187,666 15,071 2,004,842 2,994,854
Equipment:
Furniture & fixtures 120,618 - - 120,618 109,861 3,283 - 113,144 7,474
Maintenance equipment 29,867 - - 29,867 26,491 1,277 - 27,768 2,099
---------- ------- -------- ---------- ---------- -------- -------- ---------- ----------
TOTAL $5,535,110 $27,247 $ 15,071 $5,547,286 $1,968,599 192,226 $ 15,071 $2,145,754 $3,401,532
========== ======= ======== ========== ========== ======== ========== ==========
Amortization 658
-------
Total $192,884
========
Fixed asset additions/disposals:
Roof $12,705 $ -
Refrigerators 5,639 4,211
Carpeting 8,903 10,860
------- --------
$27,247 $ 15,071
======= ========
</TABLE>
114
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
OTHER SUPPORTING DATA REQUIRED BY HUD
DECEMBER 31, 1996
1. ACCOUNTS OR NOTES RECEIVABLE OTHER THAN REGULAR TENANT ACCOUNTS
None.
2. DELINQUENT TENANT ACCOUNTS
Amount Past Due
0 to 30 days $ 686
31 to 60 days 84
61 to 90 days 52
Over 90 days 1,336
--------
$ 2,158
========
3. ACCOUNTS PAYABLE OTHER THAN TRADE CREDITORS
Federal Management Co. $ 16,656
B & M Professional Services 9,809
--------
$ 26,465
========
4. LOANS OR NOTES PAYABLE OTHER THAN THE INSURED MORTGAGE
9% operating loss loan dated March 24, 1978 in the original amount of
$57,300. Balance at December 31, 1996:
Current $ 3,410
Long-term 19,507
--------
$ 22,917
========
5. COMPENSATION OF PARTNERS
None.
6. CHANGES IN CAPITAL INTERESTS, PROFIT AND LOSS INTERESTS, AND CASH
FLOW INTERESTS
None.
7. TRANSACTIONS WITH PARTIES-AT-INTEREST
Amount
Company Description Paid
--------------------------- -------------------- --------
Liberty LGP Administrative fee $ 7,500
B & M Professional Services Painting and drywall
services $ 16,917
B & M Professional Services Window replacement $ 31,860
Federal Management Co. Management fee $ 76,800
8. UNAUTHORIZED DISTRIBUTIONS
Distributions of $7,700 made in 1996 were returned by one of the
General Partners on December 6, 1996.
115
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
OTHER SUPPORTING DATA REQUIRED BY HUD (CONTINUED)
DECEMBER 31, 1996
9. MORTGAGE ESCROW DEPOSITS
Estimated amount required as of December 31, 1996 for future payment
of:
Mortgage insurance premium $ 14,957
Property insurance 6,918
Real estate taxes 29,071
--------
50,946
Amount on deposit deficient
of estimated requirements 1,830
--------
Total confirmed $ 49,116
========
10. ACCRUED TAXES
Description Basis for Period Date Amount
of tax Accrual Covered Due Accrued
Real Estate 1996 effective 01/01/96 to Semi-Annual
tax rate 12/31/96 1997 $ 87,213
========
11. RESERVE FOR REPLACEMENTS
In accordance with the provisions of the Regulatory Agreement,
restricted cash is held by the mortgage servicing agent, Manufacturers
and Traders Trust, and is used for replacement of property with the
approval of HUD.
Balance at January 1, 1996 $ 242,293
Monthly deposits 54,000
Authorized releases:
December 18, 1995 $(40,000)
Various 1996 (83,704) (123,704)
-------- ---------
Interest income 9,225
---------
Balance at December 31, 1996, confirmed by mortgagee $ 181,814
=========
Invested in:
Money Market $ 54,890
Treasury Bill, due March 6, 1997 126,924
---------
Balance at December 31, 1996 $ 181,814
=========
The following information pertains to Reserve for Replacement
Reimbursement requests approved during December 31, 1996:
Amount Purpose Account Fiscal Year Affected
of Request of Request Charged 1995 1996
---------- -------------------------- ---------- -------- -------
$ 3,148 Refrigerators Building $ 3,148 $ -
2,518 Hot water tanks 6541 2,518 -
680 Garbage disposals 6541 680 -
1,835 Tiles 6541 1,835 -
2,329 Kitchen cabinets 6541 2,329 -
116
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
OTHER SUPPORTING DATA REQUIRED BY HUD (CONTINUED)
DECEMBER 31, 1996
11. RESERVE FOR REPLACEMENTS, CONTINUED
Amount Purpose Account Fiscal Year Affected
of Request of Request Charged 1995 1996
---------- -------------------------- ---------- -------- -------
$ 12,852 Carpeting Building $ 12,852 $ -
332 Freight - carpeting 6541 332 -
345 Dumpster 6542 345 -
-------- -------- -------
$ 24,039 Form HUD 9250 approved January 8, 1996 $ 24,039 $ -
======== ======== =======
$ 4,370 Parking Lot 6541 $ - $ 4,370
2,308 Kitchen cupboards 6541, 6542 - 2,308
3,759 Refrigerators Building - 3,759
807 Exterior paint 6561 - 807
8,161 Drainage for building 1031 6541 ,6542 - 8,161
578 Door 6541 - 578
10,957 Floors 6541, 6542 980 9,977
7,687 Carpeting Building 630 7,057
5,400 Windows 6542 - 5,400
13,665 Roofs Building - 12,705
6541, 6542 - 960
567 Exterior panels 6542 - 567
579 Disposals 6541 - 579
827 Hot water tanks 6541 331 496
-------- ------- --------
$ 59,665 Form HUD 9250 approved October 31, 1996 $ 1,941 $ 57,724
======== ======= ========
12. SCHEDULE OF FUNDS IN FINANCIAL INSTITUTIONS AS OF DECEMBER 31, 1996
Funds held by mortgagor:
Mahoning National Bank (confirmed 1/6/97):
Operating - investment account, 4.40% $ 87,256
Security deposit - savings, 2.5% 4,637
--------
$ 91,893
Metropolitan Savings (confirmed 1/3/97):
Security deposit - CD, due 12/30/97, 5.20% 30,936
--------
Total funds held by mortgagor 122,829
--------
Funds held by mortgagee (confirmed 1/21/97):
Reserve for Replacements:
Money Market 54,890
U.S. Treasury Bill, due 3/6/97 126,924 181,814
--------
Mortgage escrow 49,116
--------
Total funds held by mortgagee 230,930
--------
Total funds in financial institutions $353,759
========
117
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
OTHER SUPPORTING DATA REQUIRED BY HUD (CONTINUED)
DECEMBER 31, 1996
13. TENANT SECURITY DEPOSITS
Tenant security deposits in the total amount of $35,573, which is
sufficient to fund the related liability, are held in the following
bank accounts at December 31, 1996:
Metropolitan Savings Certificate of Deposit
(5.20% due 12/30/97) $ 30,936
Mahoning National Bank Savings 4,637
--------
$ 35,573
========
14. DETAIL OF STATEMENT OF PROFIT AND LOSS SELECTED ACCOUNTS
Account 5990 Other Revenue
Community room/office rentals $ 1,092
Air conditioning fee 2,105
Cable 4,733
Pool 692
Miscellaneous 307
--------
$ 8,929
========
Account 6390 Miscellaneous Administration Expenses
Computer services $ 1,117
Seminars 157
Travel 357
Miscellaneous 100
--------
$ 1,731
========
15. NON-REVENUE PRODUCING UNITS
None.
118
<PAGE>
[Bick Fredman & Co Letterhead]
Independent Auditor's Report on Compliance with Specific
Requirements Applicable to Major HUD-Assisted Programs
Austintown Associates HUD Field Office Director
Youngstown, Ohio Cleveland, Ohio
We have audited the financial statements of Austintown Associates, HUD
Project No. 042-44213, as of and for the year ended December 31, 1996, and have
issued our report thereon dated January 9, 1997. In addition, we have audited
Austintown Associates' compliance with the following specific program
requirements:
Specific Compliance Requirements
o Federal Financial Reports
o Mortgage Status
o Replacement Reserve
o Residual Receipts
o Security Deposits
o Cash Receipts and Disbursements
o Distributions to Owners
o Tenant Application, Eligibility and Recertification
o Management Functions
that are applicable to each of its major HUD-assisted programs, for the year
ended December 31, 1996. The management of the Project is responsible for
compliance with those requirements. Our responsibility is to express an opinion
on compliance with those requirements based on our audit.
We conducted our audit of compliance with those requirements in
accordance with generally accepted auditing standards, and Government Auditing
Standards, issued by the Comptroller General of the United States, and the
Consolidated Audit Guide for Audits of HUD Programs (the "Guide"), issued by the
U.S. Department of Housing and Urban Development, Office of Inspector General,
in July 1993. Those standards and The Guide require that we plan and perform the
audit to obtain reasonable assurance about whether material noncompliance with
the requirements referred to above occurred. An audit includes examining, on a
test basis, evidence about the Project's compliance with those requirements. We
believe that our audit provides a reasonable basis for our opinion.
The results of our audit procedures disclosed immaterial instances of
noncompliance with the requirements referred to above, which are described in
the accompanying Schedule of Findings and Questioned Costs. We considered these
instances of noncompliance in forming our opinion on compliance, which is
expressed in the following paragraph.
119
<PAGE>
In our opinion, Austintown Associates complied, in all material
respects, with the specific compliance requirements described above, that are
applicable to each of its major HUD-assisted programs, for the year ended
December 31, 1996.
This report is intended for the information of management and the U.S.
Department of Housing and Urban Development. This restriction is not intended to
limit the distribution of this report, which is a matter of public record.
/s/Bick Fredman & Co
Cleveland, Ohio
January 9, 1997
120
<PAGE>
[Bick Fredman & Co Letterhead]
Independent Auditor's Report on Compliance with Specific
Requirements Applicable to Affirmative Fair Housing
Austintown Associates HUD Field Office Director
Youngstown, Ohio Cleveland, Ohio
We have audited the financial statements of Austintown Associates, HUD
Project No. 042-44213, as of and for the year ended December 31, 1996, and have
issued our report thereon dated January 9, 1997. We have applied procedures to
test the Project's compliance with the Affirmative Fair Housing requirements
applicable to its HUD-assisted programs, for the year ended December 31, 1996.
Our procedures were limited to the applicable compliance requirement
described in the Consolidated Audit Guide for Audits of HUD Programs (the
"Guide") issued by the U.S. Department of Housing and Urban Development, Office
of Inspector General, in July 1993. Our procedures were substantially less in
scope than an audit, the objective of which is the expression of an opinion on
the Project's compliance with the Affirmative Fair Housing requirements.
Accordingly, we do not express such an opinion.
The results of those procedures disclosed no instances of
noncompliance with the Affirmative Fair Housing requirements that are required
to be reported herein under Government Auditing Standards.
This report is intended for the information of management and the
U.S. Department of Housing and Urban Development. However, this report is
a matter of public record and its distribution is not limited.
/s/Bick Fredman & Co
Cleveland, Ohio
January 9, 1997
121
<PAGE>
[Bick Fredman & Co Letterhead]
Independent Auditor's Report on The Internal Control Structure
Austintown Associates HUD Field Office Director
Youngstown, Ohio Cleveland, Ohio
We have audited the financial statements of Austintown Associates, HUD
Project No. 042-44213, as of and for the year ended December 31, 1996, and have
issued our report thereon dated January 9, 1997. We have also audited the
Project's compliance with requirements applicable to major HUD- assisted
programs and have issued our reports thereon dated January 9, 1997.
We conducted our audits in accordance with generally accepted auditing
standards, Government Auditing Standards, issued by the Comptroller General of
the United States, and the Consolidated Audit Guide
for Audits of HUD Programs (the "Guide"), issued by the U.S. Department of
Housing and Urban Development, Office of the Inspector General, in July 1993.
Those standards, and the Guide, require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement and about whether the Project complied with laws and
regulations, noncompliance with which would be material to a major HUD-assisted
program.
The management of Austintown Associates is responsible for
establishing and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of internal control structure policies and
procedures. The objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit the preparation of financial statements in
accordance with generally accepted accounting principles, and that HUD-assisted
programs are managed in compliance with applicable laws and regulations. Because
of inherent limitations in any internal control structure, errors,
irregularities, or instances of noncompliance may nevertheless occur and not be
detected. Also, projection of any evaluation of the structure to future periods
is subject to the risk that procedures may become inadequate because of changes
in conditions or that the effectiveness of the design and operation of policies
and procedures may deteriorate.
122
<PAGE>
In planning and performing our audits for the year ended December 31,
1996, we obtained an understanding of the internal control structure. With
respect to the internal control structure, we obtained an understanding of the
design of relevant policies and procedures and whether they have been placed in
operation, and we assessed control risk in order to determine our auditing
procedures for the purpose of expressing our opinion on the Project's financial
statements and its compliance with specific requirements applicable to its major
HUD-assisted programs and not to provide an opinion on the internal control
structure. Accordingly, we do not express such an opinion.
We performed tests of controls, as required by the Guide, to evaluate
the effectiveness of the design and operation of internal control structure
policies and procedures that we considered relevant to preventing or detecting
material noncompliance with specific requirements applicable to the Project's
HUD-assisted programs. Our procedures were less in scope than would be necessary
to render an opinion on internal control structure policy and procedures.
Accordingly, we do not express such an opinion.
Our consideration of the internal control structure would not
necessarily disclose all matters in the internal control structure that might be
material weaknesses under standards established by the American Institute of
Certified Public Accountants. A material weakness is a reportable condition in
which the design or operation of one or more of the specific internal control
structure elements does not reduce to a relatively low level the risk that
errors or irregularities in amounts that would be material in relation to the
financial statements being audited or that noncompliance with laws and
regulations that would be material to a HUD-assisted program may occur and not
be detected within a timely period by employees in the normal course of
performing their assigned functions. We noted no matters involving the internal
control structure and its operation that we consider to be material weaknesses
as defined above.
This report is intended for the information of management and the
U.S. Department of Housing and Urban Development. However, this report is
a matter of public record and its distribution is not limited.
/s/Bick Fredman & Co
Cleveland, Ohio
January 9, 1997
123
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
DECEMBER 31, 1996
1. RESERVE FOR TAXES AND INSURANCE
At December 31, 1996, the Reserve for Taxes and Insurance was
deficient by $1,830.
2. SURPLUS CASH CALCULATION/CURRENT YEAR DISTRIBUTIONS
On November 22, 1996, HUD informed the Project owner that the surplus
cash calculation as of December 31, 1995 was in error in that Line 3
included a pending release from the Reserve for Replacements which was
not authorized until 1996. As a consequence of eliminating this item,
the Project had no surplus cash at December 31, 1995. In 1996, the
Project distributed $7,700 to the partners based on the original
surplus cash calculation. In order to comply with HUD's instructions,
on December 6, 1996, one of the general partners returned the entire
distribution of $7,700. This amount is repayable to him out of surplus
cash that exists as of December 31, 1996.
No additional action is needed.
124
<PAGE>
AUSTINTOWN ASSOCIATES
PROJECT NO. 042-44213
AUDIT RESOLUTION MATTERS
DECEMBER 31, 1996
The findings noted on the prior year's audit report and their depositions are
reported below:
1. TENANT CERTIFICATIONS
HUD Handbook 4350.3 requires that the average six month checking
account balance be used when computing net family assets. Three
exceptions were noted in our 1995 testing (exception rate - 13%).
Action taken
No exceptions were noted during the current year audit.
2. TENANT LEASES
Three instances were noted where the tenant file did not contain a
copy of the signed lease (exception rate - 13%).
Action taken
A copy of the signed lease has been inserted in the tenant's file.
125
<PAGE>
MORTGAGOR'S CERTIFICATION
We hereby certify that we have examined the accompanying financial
statements and supplemental data of Austintown Associates and, to the best of
our knowledge and belief, the same is complete and accurate.
/s/ James P. Manchi
Feb 24 , 1997
-------------------------------
Date
EIN: 74-2343727
126
<PAGE>
MANAGING AGENT'S CERTIFICATION
We hereby certify that we have examined the accompanying 1996 financial
statements and supplemental data of Austintown Associates and, to the best of
our knowledge and belief, the same is complete and accurate.
Federal Management Company, Inc.
By /s/ James P. Manchi
James Manchi
Feb 24, 1997
Date
Federal I.D. #34-1527725
127
<PAGE>
OSUNA APARTMENTS COMPANY
HUD Project No. 116-44052-LDP
(A Limited Partnership)
Financial Statements
and
Supplemental Data
For the Year Ended December 31, 1996
128
<PAGE>
<TABLE>
<CAPTION>
OSUNA APARTMENTS COMPANY
HUD Project No. 116-44052-LDP
(A Limited Partnership)
Table of Contents
<S> <C>
Independent Auditor's Report
Financial Statements:
Balance Sheet Exhibit A
Statement of Profit and Loss Exhibit B
Statement of Changes in Partners' Equity Exhibit C
Statement of Cash Flows Exhibit D
Notes to Financial Statements
Supplemental Data:
Supporting Data Required by HUD Schedule 1
Schedule of Funds in Financial Institutions Schedule 2
Independent Auditor's Report on Compliance with Specific
Requirements Applicable to Major HUD Programs Schedule 3
Independent Auditor's Report on Compliance with Specific
Requirements Applicable to Nonmajor HUD Transactions Schedule 4
Independent Auditor's Report on the Internal Control Structure Schedule 5
Independent Auditor's Report on Compliance with Specific
Requirements Applicable to Affirmative Fair Housing Schedule 6
Schedule of Findings and Questioned Costs Schedule 7
Auditor's Comments on Audit Resolution Matters Schedule 8
Auditee's Corrective Action Plan Schedule 9
Partners' Certification Schedule 10
Managing Agent's Certification Schedule 11
</TABLE>
129
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Partners of
Osuna Apartments Company
I have audited the accompanying balance sheet of Osuna Apartments Company (a
limited partnership), HUD Project No. 116-44052-LDP, as of December 31, 1996,
and the related statements of profit and loss, changes in partners' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. My responsibility is to express
an opinion on these financial statements based on my audit.
I conducted my 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 I 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. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Osuna Apartments Company (a limited
partnership), HUD Project No. 116-44052-LDP as of December 31, 1996, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, I have also issued a report dated February 8, 1997, on my
consideration of Osuna Apartments Company's internal control structure and
reports dated February 8, 1997, on its compliance with specific requirements
applicable to major HUD programs, specific requirements applicable to
Affirmative Fair Housing, and specific requirements applicable to nonmajor HUD
program transactions.
My audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental data required by HUD
included in Schedules 1 and 2 provides additional analysis which is not a
required part of the basic financial statements of the Partnership. The
information in such schedules has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in my opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/s/ James M. Klein, P.C.
February 8, 1997
130
<PAGE>
<TABLE>
<CAPTION>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Exhibit A
Balance Sheet
December 31, 1996
Assets
<S> <C> <C>
Current assets:
1110 Petty cash $ 100
1120 Cash in bank - operations (Note 1) (Schedules 1 and 2) 59,914
1130 Accounts receivable - tenants (Schedule 1) 957
1143 - Accounts receivable - HUD (Schedule 1) 111
Prepaid expenses:
1240 Property insurance 4,631
1250 Mortgage insurance 3,654 8,285
---------- -----------
Total current assets 69,367
Deposits held in trust - funded:
1191 Tenant security deposits (contra) (Schedules 1 and 2) 11,105
Restricted deposits and funded reserves:
1310 Mortgage escrow deposits (Schedules 1 and 2) 10,974
1320 Reserve for replacements
(Note 2 and Schedules 1 and 2) 140,540
1330 Reserve for exterior painting (Schedules 1 and 2) 31,676
1340 Reserve for residual receipts
(Note 2 and Schedules 1 and 2) 220,898 404,088
----------
Fixed assets (at cost) (Notes 1 and 3) (Schedule 1):
1410 Land 255,230
1420 Buildings 1,854,035
1430 Building equipment 7,487
1460 Furnishings 157,276
----------
2,274,028
Less accumulated depreciation 899,829 1,374,199
----------
Other asset:
1900 Unamortized deferred expenses (Note 1) 19,667
-----------
$ 1,878,426
===========
Liabilities and Partners' Equity
Current liabilities:
2110 Accounts payable - trade (Schedule 1) $ 18,964
2115 Accounts payable - HUD (Schedule 1) 3,107
2120 Payroll taxes payable 277
2130 Accrued interest payable 865
2140 Other accrued expenses (Note 4 and Schedule 1) 2,500
2210 Prepaid rent 375
2320 Current maturities of long-term debt (Note 3) 34,759
-----------
Total current liabilities 60,847
Deposit liabilities:
2191 Tenant security deposits (contra) (Schedules 1 11,105
and 2)
Long-term debt (Note 3):
2320 Mortgage payable, 7 percent, less
current maturities of $34,759 1,248,886
3130 Partners' equity (Notes 1 and 5) 557,588
-----------
$ 1,878,426
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
131
<PAGE>
<TABLE>
<CAPTION>
Statement of Profit and Loss U.S. Department of Housing and Urban Development
Office of Housing
Federal Housing Commissioner
OMB Approval No. 2502-0052(Exp. 8/31/92)
Public Reporting Burden for this collection of information is estimated to average 1.0 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the
collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Reports Management Officer, Office of Information Policies and Systems, U.S.
Department of Housing and Urban Development, Washington, D.C. 20410-3600 and to the Office of Management and Budget, Paperwork
Reduction Project (2502-0052), Washington, D.C. 20503. Do not send this completed form to either of these addresses.
For Month/Period Ending: Project Project Name:
Beginning Number:
1/96 12/96 116-44052-LDP Osuna Apartments
Part I Description of Account Acct. No. Amount*
<S> <C> <C> <C> <C>
Rental Income 5100 Apartments or Member Carrying Charges (Coops) 5120 $ 380,701
Tenant Assistant Payments 5121 $ 32,747
Furniture and Equipment 5130 $
Stores and Commercial 5140 $
Garage and Parking Spaces 5170 $
Flexible Subsidy Income 5180 $
Miscellaneous (specify) 5190 $
Total Rent Revenues Potential at 100% Occupancy $413,448
Vacancies 5200 Apartments 5220 $ (4,469)
Furniture and Equipment 5230
Stores and Commercial 5240
Garage and Parking Spaces 5270
Miscellaneous (specify) 5290
Total Vacancies (4,469)
Net Rental Revenue Rent Revenue Less Vacancies $408,979
Elderly and Congregate Service Income --5300
Total Service Income (Schedule Attached) 5300 $
Financial Revenue 5400 Interest Income--Project Operations 5410 $ 3,075
Income from Investments--Residual Receipts 5430 $ 9,648
Income from Investments--Reserve for Replacement 5440 $ 6,164
Income from Investments--Miscellaneous 5490
Total Financial Revenue $ 18,887
Other Revenue 5900 Laundry and Vending 5910 $ 5,309
NSF and Late Charges 5920 $ 1,634
Damages and Cleaning Fees 5930 $ 221
Forfeited Tenant Security Deposits 5940 $
Other Revenue (specify) 5990 $ 430
Total Other Revenue $ 7,594
Total Revenue $435,460
Administrative Expenses Advertising 6210 $
6200/6300 Other Administrative Expense 6250 $ 176
Office Salaries 6310 $ 5,533
Office Supplies 6311 $ 6,085
Office or Model Apartment Rent 6312 $
Management 6320 $ 38,683
Manager or Superintendent Salaries 6330 $ 15,180
Manager or Superintendent Rent Free Unit 6331 $ 3,336
Legal Expenses (Project) 6340 $ 1,074
Auditing Expenses (Project) 6350 $ 5,565
Bookkeeping Fees/Accounting Services 6351 $ 5,280
Telephone and Answering Service 6360 $ 1,417
Bad Debts 6370
Miscellaneous Administrative Expenses (specify) 6390 $ 3,916
Total Administrative Expenses $ 86,245
Utilities Expense 6400 Fuel Oil/Coal 6420 $
Electricity (Light and Misc. Power) 6450 $ 50,048
Water 6451 $ 15,936
Gas 6452 $ 23,953
Sewer 6453 $ 6,905
Total Utilities Expense $ 96,842
*All amounts must be rounded to the nearest dollar; $.50 and over, round up--$.49 and below, round down.
The accompanying notes are an integral part of the financial statements.
132
<PAGE>
OSUNA APARTMENTS 116-44052-LDP
Operating and Janitor and Cleaning Payroll 6510 $
Maintenance Expenses Janitor and Cleaning Supplies 6515 $ 169
6500 Janitor and Cleaning Contract 6517 $ 2,378
Exterminating Payroll/Contract 6519 $ 2,544
Exterminating Supplies 6520 $
Garbage and Trash Removal 6525 $ 7,726
Security Payroll/Contract 6530 $
Grounds Payroll 6535 $
Grounds Supplies 6536 $
Grounds Contract 6537 $ 13,948
Repairs Payroll 6540 $ 20,639
Repairs Material 6541 $ 12,443
Repairs Contract 6542 $ 70,030
Elevator Maintenance/Contract 6545 $
Heating/Cooling Repairs and Maintenance 6546 $ 710
Swimming Pool Maintenance/Contract 6547 $
Snow Removal 6548 $
Decorating Payroll/Contract 6560 $ 45,916
Decorating supplies 6561 $ 6,053
Other 6570 $ 576
Miscellaneous Operating and Maintenance Expenses 6590 $
Total Operating and Maintenance Expenses $183,132
Taxes and Insurance 6700 Real Estate Taxes 6710 $ 26,410
Payroll Taxes (FICA) 6711 $ 3,876
Miscellaneous Taxes, Licenses and Permits 6719 $ 5
Property and Liability Insurance (Hazard) 6720 $ 10,777
Fidelity Bond Insurance 6721 $ 533
Workmen's Compensation 6722 $ 1,552
Health Insurance and Other Employee Benefits 6723 $ 132
Other Insurance (specify) 6729 $
Total Taxes and Insurance $ 43,285
Financial Expenses 6800 Interest on Bonds Payable 6810 $
Interest on Mortgage Payable 6820 $ 11,334
Interest on Notes Payable (Long-Term) 6830 $
Interest on Notes Payable (Short-Term) 6840 $
Mortgage Insurance Premium/Service Charge 6850 $ 6,580
Miscellaneous Financial Expenses Amort Fin Costs 6890 $ 1,054
Total Financial Expenses $ 18,968
Elderly & Congregate Total Service Expenses--Schedule Attached 6900 $
Service Expenses 6900 Total Cost of Operations Before Depreciation $428,472
Profit (Loss) Before Depreciation $ 6,988
Depreciation (Total)--6600 (specify) 6600 64,518 $ 64,518
Operating Profit or (Loss) $(57,530)
Corporate or Mortgagor Office Salaries 7110 $
Entity Expenses 7100 Legal Expenses (Entity) 7120 $
Taxes (Federal-State-Entity) 7130-32 $
Other Expenses (Entity) Admin. Fee - Note 4 7190 $ 2,500
Total Corporate Expenses $ 2,500
Net Profit or (Loss) $(60,030)
<CAPTION>
Warning: HUD will prosecute false claims and statements. Conviction may result lin criminal and/or civil penalties. (18 U.S.C. 1001,
1010, 1012; 31 U.S.C. 3729, 3802) Miscellaneous or other income and expense Sub-account Groups. If miscellaneous or other income
and/or expense sub- accounts (5190, 5290, 5490, 5990, 6390, 6590, 6729, 6890, and 7190) exceed the Account Groupings by 10% or more,
attach a separate schedule describing or explaining the miscellaneous income or expense.
Part II
<S> <C> <C>
1. Total principal payments required under the mortgage, even if payments under a
Workout Agreement are less or more than those required under t he mortgage. $ 32,416
2. Replacement Reserve deposits required by the Regulatory Agreement or
Amendments thereto, even if payments may be temporarily suspended or waived. $ 6,072
3. Replacement or Painting Reserve releases which are included as expense items on
this Profit and Loss statement $ 30,000
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that
are included as expense items on this Profit and Loss Statement. $ -
The accompanying notes are an integral part of the financial statements.
</TABLE>
133
<PAGE>
<TABLE>
<CAPTION>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Exhibit C
Statement of Changes in Partners' Equity
For the Year Ended December 31, 1996
Associate Local
General General Limited
Total Partner Partner Partner
---------------- ---------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996 $ 626,930 $ 3,183 $ 3,323 $ 620,424
Distributions to partners (9,312) (93) (118) (9,101)
Net income (loss) for the year (60,030) (150) (150) (59,730)
--------- --------- --------- ---------
Balance, December 31, 1996 $ 557,588 $ 2,940 $ 3,055 $ 551,593
========= ========= ========= =========
</TABLE>
The accompanyingnotes are an integral part of the financial statements.
134
<PAGE>
Exhibit D
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Statement of Cash Flows
For the Year Ended December 31, 1996
Cash flows from operating activities:
Rental receipts $ 401,868
Interest receipts 533
Other receipts 7,594 $ 409,995
---------
Administrative expenses 26,013
Management fees 38,683
Utilities 91,188
Salaries and wages 37,700
Maintenance expenses 156,713
Real estate taxes and escrow deposits 33,472
Taxes - other 4,034
Insurance 13,110
Mortgage interest 11,509
Mortgage insurance premium 6,382 418,804
--------- ---------
Net cash used in operating activities (8,809)
Cash flows from investing activities:
Deposit to residual receipts (19,030)
Deposits to reserve for replacements (6,068)
Deposits to reserve for exterior painting (3,600)
Transferred to operations 31,332
Purchase of fixed assets (2,826)
---------
Net cash used in investing activities (192)
Cash flows from financing activities:
Mortgage principal payments (32,415)
Distribution to partners (9,312)
---------
Net cash used in financing activities (41,727)
---------
Decrease in cash (50,728)
Cash, beginning of year 110,742
---------
Cash, end of year $ 60,014
=========
The accompanying notes are an integral part of the financial statements.
135
<PAGE>
Exhibit D
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Statement of Cash Flows (Continued)
For the Year Ended December 31, 1996
Cash flows from operating activities:
Net loss $(60,030)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization $ 65,572
Increase in accounts receivable - tenants (892)
Increase in accounts receivable - HUD (111)
Decrease in prepaid expenses 82
Increase in mortgage escrow account (7,062)
Increase in accounts payable - trade 11,434
Increase in accounts payable - HUD 515
Decrease in accrued interest payable (175)
Increase in prepaid rent 365
Decrease in accrued payroll taxes (153)
Interest earned on reserve accounts (18,354) 51,221
------- -------
Net cash used in by operating activities $ (8,809)
========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 11,509
========
Interest earned on restricted reserve accounts and
maintained in the respective reserve accounts $ 18,354
========
The accompanying notes are an integral part of the financial statements
136
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Notes to Financial Statements
December 31, 1996
Note 1 - Organization and Summary of Significant Accounting Policies
The Partnership was organized as a limited partnership on February 25, 1974, to
acquire an interest in real property located in Albuquerque, New Mexico and to
construct and operate thereon an apartment complex of 110 units, under Section
236 of the National Housing Act. Such projects are regulated by HUD as to rent
charges and operating methods. The project's major program is its insured loan
under Section 236. The project's nonmajor program results from its participation
in the Section 8 housing assistance program.
The Certificate of Limited Partnership provides that profits and losses from
operations be allocated 1% to the local general partner, 1% to the associate
general partner and 98% to the investor limited partner. However, the allocation
of deductions in respect to depreciation on property contributed to the
Partnership is to be allocated according to the basis contributed by respective
partners. In the case of certain other events which are specified in the
Partnership Agreement (for example, a sale or refinancing of the property) the
allocation may be different than as described above for profits and losses from
operations.
The partnership does business under the assumed name of "Osuna Apartments ".
The regulatory agreement limits annual distributions of net operating receipts
to "surplus cash" available at the end of the year. The maximum distributable
amount for the year ended December 31, 1996 was $11,812 and "surplus cash"
amounted to $36,537. Undistributed amounts are cumulative and may
be distributed in subsequent years if future operations provide "surplus cash"
in excess of current requirements. The cumulative amount distributable at
December 31, 1996 was $11,812.
The following significant accounting policies have been followed in the
preparation of the financial statements:
Basis of accounting
The Partnership's policy is to prepare its financial statements on the basis of
accounting practices prescribed by the Department of Housing and Urban
Development. Assets and liabilities are classified as current based on the
instructions provided in the Consolidated Audit Guide for Audits of HUD
Programs, (July 1993) (Handbook IG 2000.04 REV-1). For purposes of the statement
of cash flows, cash does not include tenant security deposits or restricted
deposits.
Depreciation
Depreciation is provided using the accelerated and straight-line methods over
the estimated useful lives of the assets which range from five to 40 years.
137
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Notes to Financial Statements
December 31, 1996
Note 1 - Organization and Summary of Significant Accounting Policies (Continued)
Deferred expenses
Unamortized deferred expenses consist of fees for obtaining the HUD insured
mortgage loan which are being amortized on the straight-line method over the
life of the mortgage loan.
Income taxes
No income tax provision has been included in the financial statements since
income or loss of the partnership is required to be reported by the respective
partners on their income tax returns.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures.
Rental revenue
Gross rental revenue earned (accounts 5120 and 5121) was based on the approved
rental rate structure (revenue and non-revenue units) of the project. Two
non-revenue apartments (a 1BR and a 2BR) were occupied by the resident manager
and maintenance person during the year.
Concentration of credit risk
The Partnership maintains its cash in various insured bank accounts which, at
times, may exceed Federally insured limits. At December 31, 1996 the uninsured
cash balances approximated $3,000. The partnership has not experienced any
losses in such accounts and believes it is not exposed to any significant risk
on cash. Management is aware of the limitation and attempts to minimize any
risk.
Note 2 - Replacement Reserves and Residual Receipts
Replacement reserve funds are held in cash ($45,192) and U.S. Treasury bills
($95,348) due April 1997. Residual receipts are held in cash ($63,575) and U.S.
Treasury bills ($157,323) due April 1997. The Treasury bills bear interest at
approximately 5.22% per annum. The amounts reported approximate fair value and
are based on quoted market prices.
138
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Notes to Financial Statements
December 31, 1996
Note 3 - Long-term Debt
The seven percent mortgage note payable is insured by HUD and is payable in
monthly installments of $10,293 (before any interest supplement) through August,
2015. A portion of the interest is paid by HUD under its 236 Program. The
apartment project is pledged as collateral for the note.
Current maturities of long-term debt over the next five years ending December
31, are as follows:
1997 $34,759
1998 $37,272
1999 $39,966
2000 $42,856
2001 $45,954
It is impractical to estimate, with any precision, the fair value of the
outstanding debt without incurring excessive cost.
Note 4- Related Party Transactions
During 1996, the general partners earned $2,500 in local partnership
administrative fees. This amount is reflected as an accrued expense at December
31, 1996. These fees are treated as a portion of the limited dividend payable
and can only be paid as part of the allowable distribution from surplus cash.
Note 5 - Restricted Equity
Under the terms of the Regulatory Agreement, the Partnership is required to set
aside specified amounts for the replacement of property and other project
expenditures as approved by HUD. Restricted funds, which approximate $361,000 at
December 31, 1996, are held in separate accounts and generally are not available
for operating purposes without HUD's prior written approval.
Note 6 - Rent Increases
Under the regulatory agreement, the partnership may not increase rents charged
to tenants without HUD approval.
139
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Notes to Financial Statements
December 31, 1996
Note 7 - Management Fees
Management fees of $38,683 were earned under a HUD approved 9.4% management
contract. Management fees are based on collections of rentals, commercial
(laundry and vending), late and NSF fees and forfeited security deposits. In
addition, accounting fees of four dollars per unit per month ($5,280) were paid
to the management company.
Note 8: Contingency
The Partnership has been named in a lawsuit which is being handled by the
Partnership's insurance carrier. The ultimate outcome of this litigation is
unknown at the present time. Accordingly, no provision for any liability (if
any) that might result has been made in the accompanying financial statements.
140
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Schedule 1
Supporting Data Required by HUD
Accounts and Notes Receivable (Other Than Tenants)
Accounts receivable - HUD represent an adjustment of Section 8 funds received in
January 1997.
Accounts Receivable - Tenants
Tenant accounts receivable at December 31, 1996 were comprised primarily of
unpaid rents.
Number of
Tenants Aging Amount Due
--------- ------------ ----------
3 0 - 30 Days $957
====
Mortgage Escrow Deposits
Estimated amount required for future payment of:
City, state and county taxes $ 2,201
Property insurance 5,219
Mortgage insurance 2,127
----------
9,547
Amount in excess of estimated requirements 1,427
----------
Total held by mortgagee $ 10,974
==========
This supporting data is presented for purposes of additional analysis and is not
a required part of the basic financial statements.
141
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Schedule 1
Supporting Data Required by HUD (Continued)
Reserve for Replacements
In accordance with the provisions of the regulatory agreement, restricted cash
and securities are held by GMAC Commercial Mortgage at December 31, 1996 to be
used for replacement of property with the approval of HUD as follows:
Balance, January 1, 1996 $ 127,778
Monthly deposits ($506 x 12) 6,068
Interest earned 6,694
---------
Balance, December 31, 1996 $ 140,540
=========
Reserve for Residual Receipts
In accordance with the provisions of the regulatory agreement, residual receipts
cash and securities are held by GMAC Commercial Mortgage. Use of these funds is
contingent upon HUD's prior written approval. The following is an analysis of
1996 transactions.
Balance, January 1, 1996 $ 178,305
Interest earned 9,774
1994 residual receipts transferred 19,030
Transfer from another property to correct prior
year mortgagee error 13,789
---------
Balance, December 31, 1996 $ 220,898
=========
Reserve for Exterior Painting
Restricted cash is held by a bank to be used for exterior painting as follows:
Balance, January 1, 1996 $ 58,076
Deposits for 1996 ($300 x 12) 3,600
Interest earned 1,332
Interest transferred to operating (1,332)
Transfer to operating (30,000)
---------
Balance, December 31, 1996 $ 31,676
=========
This supporting data is presented for purposes of additional analysis and is not
a required part of the basic financial statements.
142
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Schedule 1
Supporting Data Required by HUD (Continued)
Accounts Payable (Other Than Trade Creditors)
None
Accounts Payable - Trade
Accounts payable trade represent current obligations of the Partnership due in
30 days.
Accounts Payable - HUD
Accounts payable HUD represents excess income collected and remitted in January
1997.
Accrued Taxes
Basis Amount
Description of Tax of Accrual Period Covered Date Due Accrued
- ------------------ ---------- -------------- -------- -------
Payroll Monthly December 1996 January
1997 $227
====
Tenant Security Deposits
Tenant security deposits are fully funded and are held in a separate interest
bearing account in the name of the project in an account insured by the Federal
government at Norwest Bank Texas, Waco, N.A. Interest earned on the account does
not inure to the tenants and is transferred into the operating account. At
December 31, 1996 and 1995 the account consisted of $11,105 and $10,805,
respectively, in cash.
Partnership Changes
There were no changes in the partners' ownership during 1996.
Distributions to Partners
In March 1996, $11,812 in limited dividends, earned in 1995, were paid to the
partners. At December 31, 1996 an equal amount ($11,812) was earned and is
expected to be paid in 1997.
This supporting data is presented for purposes of additional analysis and is not
a required part of the basic financial statements.
143
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Schedule 1
Supporting Data Required by HUD (Continued)
Unauthorized Distributions to Partners
There were no unauthorized distributions to partners during 1996.
Compensation of Partners
There was no compensation paid to partners.
Identity of Interest Companies
During 1996, the general partners earned $2,500 in local partnership
administrative fees. These fees are treated as part of the limited dividend and
are only paid out of surplus cash.
Loans (Other Than Insured Mortgages) and Notes Payable
None
Comments on Other Balance Sheet Items
None
Miscellaneous Information
The lead auditor of the engagement was James M. Klein, the shareholder in the
firm of James M. Klein, P.C. (EIN: 75-2465724), located at 4901 LBJ Freeway,
Suite 120, Dallas, Texas 75244.
This supporting data is presented for purposes of additional analysis and is not
a required part of the basic financial statements.
144
<PAGE>
<TABLE>
<CAPTION>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Supporting Data Required By HUD (Continued)
December 31, 1996
Changes in the Apartment Project
Assets Accumulated Depreciation Net
-------------------------------------------------- ---------------------------------------------- Carrying
Balance Balance, Balance, Balance, Amount
Jan. 1, Dec. 31, Jan. 1, Dec. 31, Dec. 31,
1996 Additions Deductions 1996 1996 Provision Deductions 1996 1996
------------ --------- ---------- --------- --------- ----------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Land $ 255,230 $ - $ - $ 255,230 $ - $ - $ - $ - $ 255,230
Buildings 1,854,035 - - 1,854,035 681,201 61,848 - 743,049 1,110,986
Building equipment
fixed 4,974 2,513 - 7,487 2,596 1,069 - 3,665 3,822
Furnishings 156,963 313 - 157,276 151,514 1,601 - 153,115 4,161
---------- -------- --------- ---------- --------- -------- ---------- -------- ----------
Totals $2,271,202 $ 2,826 $ - $2,274,028 $ 835,311 $ 64,518 $ - $899,829 $1,374,199
========== ======== ========= ========== ========= ======== ========== ======== ==========
</TABLE>
This supporting data is presented for purposes of additional analysis and is not
a required part of the financial statements.
145
<PAGE>
<TABLE>
<CAPTION>
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
HOUSING - FEDERAL HOUSING COMMISSIONER
OFFICE OF MULTIFAMILY HOUSING MANAGEMENT AND OCCUPANCY
COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND SCHEDULE 1
RESIDUAL RECEIPTS
PROJECT NAME FISCAL PERIOD ENDED: PROJECT NUMBER
OSUNA APARTMENTS 12/31/96 116-44052-LDP
PART A - COMPUTE SURPLUS CASH
<S> <C> <C> <C>
1. Cash $71,119
2. Tenant subsidiary vouchers due for period covered
by financial statement $ 111
3. Other (describe)
$ -
(a) Total Cash (Add Lines 1, 2, and 3) $71,230
4. Accrued mortgage interest payable $ 865
5. Delinquent mortgage principal payments $ -
6. Delinquent deposits to reserve for replacements $ -
7. Accounts payable (due within 30 days) $18,964
8. Loans and notes payable
(due within 30 days) $
9. Deficient Tax Insurance or MIP Escrow Deposits $
10. Accrued expenses (not escrowed) $ 277
11. Prepaid Rents (Account 2210) $ 375
12. Tenant security deposits liability (Account 2191) $11,105
13. Other (Describe) Excess Income $ 3,107
(b) Less Total Current Obligations (Add Lines 4 through 13) $34,693
(c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $36,537
<CAPTION>
PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS
<S> <C> <C>
1. Surplus Cash $36,537
2a. Distribution Earned During Fiscal Period
Covered by the Statement $11,812
2b. Distribution Accrued and Unpaid as of the
End of the Prior Fiscal Period $11,812
2c. Distributions Paid During Fiscal Period Covered by Statement $11,812
3. Distributions Earned but Unpaid as of the End of
the Fiscal Period Under Review (Line 2a + 2b - 2c) $11,812
4. Amount Available for Distribution During Next Fiscal Period $11,812
5. Deposit Due Residual Receipts
(Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $24,725
PREPARED BY REVIEWED BY
LOAN TECHNICIAN LOAN SERVICERIAN
DATE DATE
</TABLE>
See Reverse for Instructions) HUD-93486
This supporting data is presented for additional analysis and is not a required
part of the basic financial statements.
146
<PAGE>
Schedule 2
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Schedule of Funds In Financial Institutions
December 31, 1996
A. Funds held by mortgagor, regular operating account:
1. Norwest Bank Texas (checking) $ 26,259
2. Norwest Bank Texas (money market, 2.5%) 33,138
3. First Security Bank New Mexico (checking) 517
--------
Total operating funds 59,914
B. Funds held by mortgagor in trust, tenant security deposit:
1. Norwest Bank Texas (money market, 2.5%) 11,105
C. Funds held by mortgagor, exterior painting reserve:
1. Norwest Bank Texas (money market, 2.5%) 31,676
--------
Total funds held by mortgagor $102,695
========
D. Funds held by mortgagee (in trust):
1. Tax and insurance escrow $ 10,974
--------
2. Reserve fund for replacements
a. 1-year Treasury Bill, 5.22%, maturing April 1997 95,348
b. GMAC Commercial Mortgage (Corestates Bank, N.A.) 45,192
--------
140,540
--------
3. Reserve for residual receipts
a. 1-year Treasury Bill, 5.22%, maturing April 1997 157,323
b. GMAC Commercial Mortgage (Corestates Bank, N.A.) 63,575
--------
220,898
--------
Total funds held by mortgagee $372,412
========
Total funds in financial institutions $475,107
========
NOTE: All funds held by mortgagor were verified as of December 31, 1996.
All funds held by mortgagee servicing agent (GMAC) were confirmed
as of December 31, 1996.
This supporting data is presented for purposes of additional analysis and is not
a required part of the basic financial statements.
147
<PAGE>
Schedule 3
INDEPENDENT AUDITOR'S REPORT ON
COMPLIANCE WITH SPECIFIC
REQUIREMENTS APPLICABLE TO MAJOR HUD PROGRAMS
To the Partners of
Osuna Apartments Company
I have audited the financial statements of Osuna Apartments Company (a limited
partnership), Project No. 116-44052-LDP, as of and for the year ended December
31, 1996, and have issued my report thereon dated February 8, 1997.
I have also audited Osuna Apartments Company's compliance with the specific
program requirements governing federal financial reports, mortgage status, the
replacement reserve, the residual receipts, tenant security deposits, cash
receipts and disbursements, distributions to owners, tenant application, tenant
eligibility, tenant recertification, and management functions, that are
applicable to its major HUD-assisted program for the year ended December 31,
1996. The management of the Partnership is responsible for compliance with those
requirements. My responsibility is to express an opinion on compliance with
those requirements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards,
Government Auditing Standards, issued by the Comptroller General of the United
States and the Consolidated Audit Guide for Audits of HUD Programs (the "Guide")
issued by the U.S. Department of Housing and Urban
Development, Office of Inspector General, in July 1993. Those standards and the
Guide require that I plan and perform the audit to obtain reasonable assurance
about whether material noncompliance with the requirements referred to above
occurred. An audit includes examining, on a test basis, evidence about the
Partnership's compliance with those requirements. I believe that my audit
provides a reasonable basis for my opinion.
In my opinion, Osuna Apartments Company complied, in all material respects, with
the requirements described above that are applicable to its major HUD-assisted
program for the year ended December 31, 1996.
This report is intended for the information of management and the Department of
Housing and Urban Development. However, this report is a matter of public record
and its distribution is not limited.
/s/ James M. Klein, P.C.
Dallas, Texas
February 8, 1997
148
<PAGE>
Schedule 4
INDEPENDENT AUDITOR'S REPORT
ON COMPLIANCE WITH SPECIFIC
REQUIREMENTS APPLICABLE TO
NONMAJOR HUD TRANSACTIONS
To the Partners of
Osuna Apartments Company
I have audited the financial statements of Osuna Apartments Company (a limited
partnership), HUD Project No. 116-44052-LDP as of and for the year ended
December 31, 1996, and have issued my report thereon dated February 8, 1997.
In connection with my audit of the 1996 financial statements of Osuna Apartments
Company and with my consideration of the Partnership's internal control
structure used to administer HUD programs, as required by the Consolidated Audit
Guide for Audits of HUD Programs (the "Guide"), issued by the U.S. Department of
Housing and Urban Development, Office of Inspector General, in July 1993, I
selected certain transactions applicable to certain nonmajor HUD-assisted
programs for the year ended December 31, 1996. As required by the Guide, I
performed auditing procedures to test compliance with the requirements governing
affirmative fair housing, management, maintenance, the replacement reserve,
federal financial reports, tenant application, tenant eligibility, tenant
recertification, and tenant security deposits that are applicable to those
transactions. My procedures were substantially less in scope than an audit, the
objective of which is the expression of an opinion of the Partnership's
compliance with those requirements. Accordingly, I do not express such an
opinion.
The results of my tests disclosed no instances of noncompliance that are
required to be reported herein under the Guide.
This report is intended for the information of management and the Department of
Housing and Urban Development. However, this report is a matter of public record
and its distribution is not limited.
/s/ James M. Klein, P.C.
Dallas, Texas
February 8, 1997
149
<PAGE>
Schedule 5
INDEPENDENT AUDITOR'S REPORT
ON THE INTERNAL CONTROL STRUCTURE
To the Partners of
Osuna Apartments Company
I have audited the financial statements of Osuna Apartments Company (a limited
partnership), HUD Project No. 116-44052-LDP as of and for the year ended
December 31, 1996, and have issued my report thereon dated February 8, 1997. I
have also audited the Partnership's compliance with requirements applicable to
its major HUD-assisted program and have issued my report thereon dated February
8, 1997.
I conducted my audits in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States, and the Consolidated Audit Guide for Audits of HUD Programs (the
"Guide"), issued by the U.S. Department of Housing and Urban Development, Office
of the Inspector General, in July 1993. Those standards and the Guide require
that I plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement and about whether the
Partnership complied with laws and regulations, noncompliance with which would
be material to a major HUD-assisted program.
The management of Osuna Apartments Company is responsible for establishing and
maintaining an internal control structure. In fulfilling this responsibility,
estimates and judgments by management are required to assess the expected
benefits and related costs of internal control structure policies and
procedures. The objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition, that transactions
are executed in accordance with management's authorization and recorded properly
to permit the preparation of financial statements in accordance with generally
accepted accounting principles, and that HUD-assisted programs are managed in
compliance with applicable laws and regulations. Because of inherent limitations
in any internal control structure, errors, irregularities or instances of
noncompliance may nevertheless occur and not be detected. Also, projection of
any evaluation of the structure to future periods is subject to the risk that
procedures may become inadequate because of changes in conditions or that the
effectiveness of the design and operation of policies and procedures may
deteriorate.
In planning and performing my audits, I obtained an understanding of the design
of relevant internal control structure policies and procedures and determined
whether they had been placed in operation, and I assessed control risk, in order
to determine my auditing procedures for the purpose of expressing my opinions on
Osuna Apartments Company's financial statements and on its compliance with
specific requirements applicable to its major HUD-assisted program and the
report on the internal control structure in accordance with the provisions of
the Guide and not to provide any assurance on the internal control structure.
150
<PAGE>
I performed tests of controls, as required by the Guide, to evaluate the
effectiveness of the design and operation of internal control structure policies
and procedures that I considered relevant to preventing or detecting material
noncompliance with specific requirements applicable to the Partnership's major
HUD-assisted program. My procedures were less in scope than would be necessary
to render an opinion on such internal control structure policies and procedures.
Accordingly, I do not express such an opinion.
My consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of one or more of the internal control structure elements does not
reduce to a relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial statements or that
noncompliance with laws and regulations that would be material to a HUD-assisted
program may occur and not be detected within a timely period by employees in the
normal course of performing their assigned functions. I noted no matters
involving the internal control structure and its operations that I consider to
be material weaknesses as defined above.
This report is intended for the information of management and the Department of
Housing and Urban Development. However, this report is a matter of public record
and its distribution is not limited.
/s/ James M. Klein, P.C.
Dallas, Texas
February 8, 1997
151
<PAGE>
Schedule 6
INDEPENDENT AUDITOR'S REPORT
ON COMPLIANCE WITH SPECIFIC REQUIREMENTS
APPLICABLE TO AFFIRMATIVE FAIR HOUSING
To the Partners of
Osuna Apartments Company
I have audited the financial statements of Osuna Apartments Company as of and
for the year ended December 31, 1996, and have issued my report thereon dated
February 8, 1997.
I have also applied procedures to test Osuna Apartments Company's compliance
with the Affirmative Fair Housing requirements applicable to its HUD-assisted
program for the year ended December 31, 1996.
My procedures were limited to the applicable compliance requirements described
by the Consolidated Audit Guide for Audits of HUD Programs (the "Guide") issued
by the U.S. Department of Housing and Urban Development, Office of Inspector
General, in July 1993. My procedures were substantially less in scope than an
audit, the objective of which is the expression of an opinion on Osuna
Apartments Company's compliance with the Affirmative Fair Housing requirements.
Accordingly, I do not express such an opinion.
The results of my tests disclosed no instances of noncompliance that are
required to be reported herein under the Guide.
This report is intended for the information of management and the Department of
Housing and Urban Development. However, this report is a matter of public record
and its distribution is not limited.
/s/ James M. Klein, P.C.
Dallas, Texas
February 8, 1997
152
<PAGE>
Schedule 7
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Schedule of Findings and Questioned Costs
December 31, 1996
There were no findings, including material questioned costs, noted during the
audit.
153
<PAGE>
Schedule 8
AUDITOR'S COMMENTS ON
AUDIT RESOLUTION MATTERS
RELATING TO HUD PROGRAMS
To the Partners of
Osuna Apartments Company
I have audited the financial statements of Osuna Apartments Company (a limited
partnership) as of and for the year ended December 31, 1996, and have issued my
report thereon dated February 8, 1997.
During the 1995 audit, no material matters involving the internal control
structure and its operation or compliance with specific requirements applicable
to its major HUD program were noted. Accordingly corrective action was not
required during 1996. Further, based on the auditor's discussions with
management, there were no HUD OIG audits or program reviews during 1996.
In March and August, 1996, the mortgagee conducted physical inspections of the
project with the overall physical condition and maintenance policies and
practices ultimately receiving a "superior" rating. Based on discussions with
management and review of correspondence, items noted in the physical inspection
reports have been corrected or are being addressed.
/s/ James M. Klein, P.C.
Dallas, Texas
February 8, 1997
154
<PAGE>
Schedule 9
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Auditee's Corrective Action Plan
December 31, 1996
Section I - Internal Control Structure Review
There were no findings or recommendations listed in the 1995 report.
Section II - Compliance Review
There were no instances of noncompliance with laws and regulations listed in the
1995 report.
NOTE: As a result of the above, there is no need for a separate mortgagor
letter proposing a corrective action plan.
155
<PAGE>
Schedule 10
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Partners' Certification
We hereby certify that we have examined the accompanying financial statements
and supplemental data of Osuna Apartments Company for the year ended December
31, 1996, and, to the best of our knowledge and belief, the same is complete and
accurate.
Personal Economics Development Corporation
By: /s/ Samuel R. Cambell
2-25-97 Samuel R. Cambell, President
DATE GENERAL PARTNER (Printed Name)
By: ____________________________
DATE GENERAL PARTNER (Printed Name)
Employer Identification
No. 74-2347236
156
<PAGE>
Schedule 11
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Managing Agent's Certification
I hereby certify that I have examined the accompanying financial statements and
supplemental data of Osuna Apartments Company for the year ended December 31,
1996, and, to the best of my knowledge and belief, the same is complete and
accurate.
2-25-97 The Sovereign Management Corporation
DATE MANAGING AGENT
BY: /s/ Joyce Brow
Joyce Brow
(Printed Name)
TITLE: Director of Management
157
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Liberty Housing Partners Limited Partnership
Our report on the 1996 and 1995 financial statements of Liberty Housing
Partners Limited Partnership is included on page 31 of this Form 10-K. In
connection with our audit of such financial statements, we have also audited the
related financial statement schedule listed in the index on page 15 of this Form
10-K. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ REZNICK FEDDER & SILVERMAN
Boston, Massachusetts REZNICK FEDDER & SILVERMAN
March 18, 1997
158
<PAGE>
<TABLE>
<CAPTION>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY OWNED
BY LOCAL LIMITED PARTNERSHIPS IN WHICH REGISTRANT HAS INVESTED
at December 31, 1996
Cost At Interest Net Gross Amount At Which Carried Life on
Acquisition Date Improvements At December 31, 1996 Which
---------------------- Capitalized ------------------------------ Accumu- Depreci-
Number Total Buildings Subsequent Buildings lated ation is
Of Encum- And to And Depre- Date Computed
Property Units brances Land Improvements Acquisition Land Improvements Total ciation Built (Years)
- --------------------------- ------- ------- ------------ ------------ ---- ------------ -------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Garden Apartment Complexes - Elderly Housing:
Surry Manor
Apartments, 44 $934,598 $50,239 $1,259,177 $22,387 $50,239 $1,281,564 $1,331,803 $550,592 1981 3-30
Dobson, NC
Glendale Manor 50 855,216 53,652 1,187,181 9,681 53,652 1,196,862 1,250,514 519,611 1980 3-30
Apartments,
Clinton, SC
Fuquay-Varina
Homes, 60 743,122 72,396 1,401,073 17,697 72,396 1,418,770 1,491,166 603,240 1977 3-30
Fuquay, NC
Williamston Homes, 50 586,767 60,967 1,096,520 9,019 60,967 1,105,539 1,166,506 476,684 1978 3-30
Williamston, NC
Oxford Homes,
Oxford, NC 50 590,460 64,360 1,085,939 22,682 64,360 1,108,621 1,172,981 473,514 1978 3-30
Garden Apartment Complexes - Low and Moderate Income Housing
Compass West 200 3,110,997 397,105 4,822,593 327,588 397,105 5,150,181 5,547,286 2,145,754 1974 7-30
Apartments,
Austintown, OH
Meadowwood 80 788,895 90,146 1,337,358 39,379 90,146 1,376,737 1,466,883 691,943 1977 10-25
Apartments,
Tifton, GA
Brierwood
Apartments, 56 856,358 76,325 1,024,970 (26,931) 76,325 998,039 1,074,364 478,129 1979 10-25
Bainbridge, GA
Pine Forest
Apartments, 64 1,229,691 44,588 1,491,921 1,380 44,588 1,493,301 1,537,889 748,624 1980 10-25
Cairo, GA
Osuna Apartments, 110 1,316,060 255,230 1,987,767 31,031 255,230 2,018,798 2,274,028 899,829 1975 5-30
Albuquerque, NM
Linden Park
Apartments 198 4,261,517 357,236 4,544,514 1,570,235 456,828 6,015,157 6,471,985 2,132,647 1975 5-30
Triangle, VA
Brierwood II
Apartments 18 369,139 27,288 423,387 - 27,288 423,387 450,675 216,579 1984 10-25
Bainbridge, GA
Garden Apartment Complexes - Other Assisted Housing:
Fiddlers Creek 160 2,178,611 275,147 3,156,533 41,228 275,147 3,197,761 3,472,908 1,392,211 1977 5-30
Apartments, ----- ----------- ---------- ----------- ---------- --------- ----------- ----------- -----------
Winston Salem, NC
Total Local
Limited Partnership
Real Estate 1,140 $17,821,431 $1,824,679 $24,818,933 $2,065,376 $1,924,27 $26,784,717 $28,708,988 $11,329,357
===== =========== ========== =========== ========== ========= =========== =========== ===========
</TABLE>
The aggregate cost of the above properties for Federal income tax purposes at
December 31, 1996 is $35,758,051.
A reconciliation of summarized carrying value of the above properties for the
years ended December 31, 1996, 1995 and 1994 is a follows :
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $27,292,762 $27,237,957 $27,230,829
Additions during the period - Improvements subse-
equent to acquisition, net of dispositions 1,416,226 54,805 7,128
----------- ----------- -----------
Balance at end of year $28,708,988 $27,292,762 $27,237,957
=========== =========== ===========
<CAPTION>
A reconciliation of summarized accumulated depreciation on the above properties for the years ended December 31, 1996, 1995 and 1994
is as follows :
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $10,381,105) ($9,492,160) ($8,636,168)
Current provision for depreciation (948,252) (888,945) (855,992)
------------ ------------ -----------
Balance at end of year ($11,329,357) ($10,381,105) ($9,492,160)
============ ============ ===========
</TABLE>
159
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Partnership
(a-b) Identification of Directors and Executive Officers
The Partnership has no directors or officers. As indicated in Item 1 of
this report, the Managing General Partner of the Partnership, as of December 27,
1995, is TNG Properties Inc., a Massachusetts corporation. Under the Partnership
Agreement, the Managing General Partner is solely responsible for the operation
of the Partnership's properties, and the Limited Partners have no right to
participate in the control of such operations. The names and ages of the
directors and executive officers of the Managing General Partner, TNG Properties
Inc., are as follows as of March 18, 1997:
<TABLE>
<CAPTION>
Name Title Age
- ---- ----- ---
<S> <C> <C>
Michael A. Stoller President, Chief Executive Officer and Director 40
Wilma R. Brooks Vice President, Treasurer and Director 39
Barbara A. Gilman Vice President and Director of Management 47
Stephen D. Puliafico Director 41
Clyde W. Sylvia Director 41
</TABLE>
The directors of the Managing General Partner generally are elected at
the annual meeting of stockholders of the Managing General Partner, to serve
until the next such annual meeting, and until their successors are duly elected
and qualified, or until their earlier death, resignation or removal. The
executive officers the Managing General Partner generally are elected at the
annual meeting of directors of the Managing General Partner, to serve until the
next such annual meeting, and until their successors are duly elected and
qualified, or until their earlier death, resignation or removal.
(c) Identification of certain significant persons.
None.
(d) Family relationship
Mr. Stoller and Ms. Brooks are husband and wife.
160
<PAGE>
Item 10. Directors and Executive Officers of the Partnership, continued
(e) Business experience
Michael A. Stoller is President, CEO, and a Director of the Managing
General Partner and The Newton Group, LLC. From 1992 to 1994, Mr. Stoller was
President and Director of MBMC, Inc. of Boston, and the Managing General Partner
of MB Management Company Limited Partnership, of Boston, a property management
company. From 1983 to 1992, Mr. Stoller was employed by REMAS, Inc. and was a
Partner and Chief Operating Officer of MB Associates, which companies engaged in
the development and management of government assisted housing properties. Mr.
Stoller holds a B.S. from Babson College and is a Certified Public Accountant.
Stephen D. Puliafico is Director of the Managing General Partner. Since
August 1995 Mr. Puliafico has been Executive Vice President of The Newton Group,
LLC. From 1994 to 1995 Mr. Puliafico was a Regional Sales Manager for Staples, a
seller of office supplies. From 1982 to 1994, Mr. Puliafico was a General
Manager for Lechmere, a discount department store chain. Mr. Puliafico holds a
B.S. from Southeastern Massachusetts University.
Clyde W. Sylvia is Director of the Managing General Partner. Since
1994, Mr. Sylvia has been the Chief Financial Officer of Imaging Technology, of
Bedford, Massachusetts, a manufacturer of electronic imaging products. From 1989
to 1993 Mr. Sylvia was a Director at NADCO, of Lowell, Massachusetts, a
manufacturer of reference directories. Mr. Sylvia holds a B.S. from the
University of Massachusetts at Amherst., an M.B.A. from Suffolk University and
is a Certified Public Accountant.
Wilma R. Brooks is Vice President, Treasurer and a Director of the
Managing General Partner and Vice President and Treasurer of The Newton Group,
LLC. From 1987 to 1993, Ms. Brooks was Chief Financial Officer and Treasurer of
Congress Group Ventures, Inc., of Cambridge, Massachusetts, a commercial real
estate developer. Ms. Brooks holds a B.S. from the University of Vermont and is
a Certified Public Accountant.
Barbara A. Gilman is Vice President and Director of Management of the
Managing General Partner. For the seven years prior to joining the Managing
General Partner in 1994, Ms. Gilman was Director of Management of Beacon
Management Company, of Boston, Massachusetts, a property management company. Ms.
Gilman holds a B.S. from Stonehill College.
(f-g) Involvement in certain legal proceedings
The Partnership is not aware of any legal proceedings during the past
five years which may be material to the evaluation of the ability and integrity
of any director or executive officer of the Managing General
Partner.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Partnership's officers and directors, and persons who own more than
ten percent of a registered class of the Partnership's equity securities, to
file reports of ownership on Form 3 and changes in ownership on
161
<PAGE>
Item 10. Directors and Executive Officers of the Partnership, continued
Form 4 or 5 with the Securities and Exchange Commission. Such officers,
directors and ten-percent security holders are also required by applicable rules
to furnish the Partnership with copies of all Section 16(a) reports they file.
Although the Partnership has no directors or officers, the rules promulgated
under ss. 16(a) provide that, for purposes of ss. 16, officers of the Managing
General Partner are considered to be officers of the Partnership. Based solely
on its review of the copies of such forms received by it, or written
representation from certain reporting persons that no Forms 3, 4 or 5 were
required for such persons. The Partnership believes that, during the fiscal year
ended December 31, 1996, its officers and ten percent security holders complied
with all Section 16(a) filing requirements applicable to such individuals.
Item 11. Executive Compensation
(a), (b), (c), (d), and (e): The officers and directors of the Managing
General Partner are compensated as employees of the Managing General Partner,
but receive no compensation from the Partnership. The Managing General Partner
and its affiliates receive compensation and expense reimbursement from the
Partnership, as more fully described in Note 6 of the Notes to Financial
Statements of the Partnership included in Item 8 of this report.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) Security ownership of certain beneficial owners and management.
Because it is organized as a limited partnership, the Partnership has
issued no securities possessing traditional voting rights. However, the
Partnership Agreement provides that certain matters require the approval of a
majority in interest of the Limited Partners. Such matters include:
(1) Amendment of the Limited Partnership Agreement;
(2) Termination of the Partnership;
(3) Removal of any General Partner; and
(4) Sale of substantially all the assets of the Partnership.
Under the Partnership Agreement, the Managing General Partner is solely
responsible for the operation of the Partnership's properties, and the Limited
Partners have no right to participate in the control of such operations. On
December 27, 1995, the Former Managing General Partner and Former Associate
General Partner withdrew from the Partnership and TNG Properties Inc. was
admitted in their place as Successor General Partner and became Managing General
Partner of the Partnership.
No person or group is known by the Managing General Partner to own
beneficially more than 5% of the Partnership's 21,576 Units outstanding as of
December 31, 1996.
(b) Security ownership of management.
162
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Item 12. Security Ownership of Certain Beneficial Owners and
Management, continued
By virtue of its organization as a limited partnership, the Partnership has no
officers or directors. The Former Associate General Partner owns 10 Units which
are to be assigned to the current Managing General Partner.
(c) Changes in Control.
None.
Item 13. Certain Relationships and Related Transactions
(a), (b), and (c): The managing general partner of the Partnership is TNG
Properties, Inc., a Massachusetts corporation. See Note 6 to the Financial
Statements of the Partnership contained in Item 8 of this report for a
description of the fees and expense reimbursement paid by the Partnership to the
current or former Managing General Partner and its affiliates. Directors and
executive officers of TNG Properties, Inc. are identified in Item 10 of this
report. During 1996, the Partnership was not involved in any transaction
involving any of these directors or officers of the Corporation or any member of
the immediate family of these individuals, nor did any of these persons provide
services to the Partnership for which they received direct or indirect
remuneration. Similarly, there exists no business relationship between the
Partnership and any of the directors or officers of the Managing General
Partner, nor were any of the individuals indebted to the Partnership. Liberty
LGP, formerly an affiliate of the predecessor general partners and now an
affiliate of the Managing General Partner is entitled to receive certain
administrative fees from the Local Limited Partnerships. At January 1, 1996 an
aggregate of $104,917 in accrued and unpaid administrative fees were due to
Liberty LGP from the Local Limited Partnerships. During 1996, Liberty LGP
accrued $68,500 in administrative fees due from the Local Limited Partnership
and received payment aggregating $67,000. At December 31, 1996 accrued and
unpaid administrative fees aggregated $106,417. Liberty LGP is not entitled to
interest on the accrued and unpaid amount.
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) 1. Financial Statements
See Index included in Item 8, on page 15 of this Report.
2. Financial Statement Schedules
See Index included in Item 8 on page 15 of this Report for
schedules applicable to registrant.
3. Exhibits
163
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Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K (continued)
See (c) below
(b) Reports on Form 8-K
None
(c) Index to Exhibits
Except as set forth below, all Exhibits to Form 10-K, as set forth in
Item 601 of Regulation S-K, are not applicable.
164
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4. Instruments defining the rights of security holders:
4.1 The Amended and Restated Certificate of Limited Exhibit 4.1 to the registrants
Partnership Annual Report on Form
10-K, for the period ended
December 31, 1995.
4.2 First Amendment to Second Amended and Exhibit 4.2 to the registrants
Restated Certificate of Limited Partnership Annual Report on Form
10-K, for the period ended
December 31, 1995.
*4.39 Amended Agreement of Limited Partnership Exhibit A to the prospectus
contained in Form S-11
Registration Statement (File
2-90617)
4.4 Amendment to the Amended Agreement of Exhibit 4.4 to the registrants
Limited Partnership (withdrawal of Liberty Real Annual Report on Form
Estate Corporation and Admission of TNG 10-K, for the period ended
Properties Inc. December 31, 1995.
4.5 Amendment to the Amended Agreement of Exhibit 4.5 to the registrants
Limited Partnership (withdrawal of LHP Associates Annual Report on Form
Limited Partnership) 10-K, for the period ended
December 31, 1995.
10. Material Contracts and Other Documents
10.4 Documents Relating to Partnership Interest in
Surry Manor, Ltd.
*10.4 (a) Escrow Agreement dated August 31, 1984 between Exhibit 10.4 (a) Effective to
Billy P. Shadrick, Bobby Ray Badgett, Housing Post-Amendment No. 1 to
Projects, Inc. and Liberty Housing Partners Limited Form S-11 Registration
Partnership. Statement (File 2-90617)
*10.4 (b) Amended and Restated Certificate and Agreement Exhibit 10.4 (b) to Post-
of Limited Partnership of Surry Manor, Ltd. Effective Amendment No. 1
to Form S-11 Registration
Statement (File 2-90617)
*10.4 (c) Promissory Notes dated August 31, 1984 from Exhibit 10.4 (c) to Post-
Liberty Housing Partners Limited Partnership to Effective Amendment No. 1
Billy P. Shadrick and from Liberty Housing to Form S-11 Registration
Partners Limited Partnership to Bobby Joe Davis. Statement (File 2-90617)
165
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*10.4 (d) Purchase Money Notes dated August 31, 1984 from Exhibit 10.4 (d) to Post-
Liberty Housing Partners to Billy P. Shadrick and Effective Amendment No. 1
from Liberty Housing Partners Limited Partnership to Form S-11 Registration
to Bobby Joe Davis. Statement (File 2-90617)
*10.4 (e) Pledge Agreements dated August 31, 1984 between Exhibit 10.4 (e) to Post-
Billy P. Shadrick and Liberty Housing Partners Effective Amendment No. 1
Limited Partnership and between Bobby Joe Davis to Form S-11 Registration
and Liberty Housing Partners Limited Partnership. Statement (File 2-90617)
*10.4 (f) Deed of Trust Note dated July 11, 1980 from Surry Exhibit 10.4 (f) to Post-
Manor, Ltd. to Highland Mortgage Company and Effective Amendment No. 1
related Deed of Trust dated July 11, 1980 among to Form S-11 Registration
Surry Manor, Ltd., James M. Tanner, and Highland Statement (File 2-90617)
Mortgage Company.
*10.4 (g) Regulatory Agreement dated July 11, 1980 between Exhibit 10.4 (g) to Post-
Surry Manor, Ltd. and the Secretary of Housing Effective Amendment No. 1
and Urban Development. to Form S-11 Registration
Statement (File 2-90617)
*10.4 (h) Housing Assistance Payments Contract dated April Exhibit 10.4 (h) to Post-
9, 1981 between Surry Manor, Ltd. and the Effective Amendment No. 1
Secretary of Housing and Urban Development. to Form S-11 Registration
Statement (File 2-90617)
10.5 Documents Relating to Partnership Interest in
Glendale Manor Apartments
*10.5 (a) Escrow Agreement dated August 31, 1984 between Exhibit 10.5 (a) to Post-
Billy P. Shadrick, Bobby Ray Badgett, Housing Effective Amendment No. 1
Projects, Inc. and Liberty Housing Partners Limited to Form S-11 Registration
Partnership. Statement (File 2-90617)
*10.5 (b) Amended and Restated Certificate and Agreement Exhibit 10.5 (b) to Post-
of Limited Partnership of Glendale Manor Effective Amendment No. 1
Apartments. to Form S-11 Registration
Statement (File 2-90617)
166
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Numbers ----------- which Incorporated by
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<S> <C> <C>
*10.5 (c) Promissory Notes dated August 31, 1984 from Exhibit 10.5 (c) to Post-
Liberty Housing Partners Limited Partnership to Effective Amendment No. 1
Billy P. Shadrick, from Liberty Housing Partners to Form S-11 Regis-tration
Limited Partnership to Bobby Joe Davis and from Statement (File 2-90617)
Liberty Housing Partners Limited Partnership to
Bobby R. Badgett.
*10.5 (d) Purchase Money Notes dated August 31, 1984 from Exhibit 10.5 (d) to Post-
Liberty Housing Partners Limited Partnership to Effective Amendment No. 1
Billy P. Shadrick and from Liberty Housing to Form S-11 Regis-tration
Partners Limited Partnership to Bobby Joe Davis. Statement (File 2-90617)
*10.5 (e) Pledge Agreements dated August 31, 1984 between Exhibit 10.5 (e) to Post-
Billy P. Shadrick and Liberty Housing Partners Effective Amendment No. 1
Limited Partnership, between Bobby Joe Davis and to Form S-11 Regis-tration
Liberty Housing Partners Limited Partnership and Statement (File 2-90617)
between Bobby R. Badgett and Liberty Housing
Partners Limited Partnership.
*10.5 (f) Mortgage Note dated April 11, 1979 from Glendale Exhibit 10.5 (f) to Post-
Manor Apartments to Cincinnati Mortgage Effective Amendment No. 1
Corporation and related Mortgage dated April 11, to Form S-11 Regis-tration
1979 between Glendale Manor Apartments and Statement (File 2-90617)
Cincinnati Mortgage Corporation.
*10.5 (g) Regulatory Agreement dated April 11, 1979 Exhibit 10.5 (g) to Post-
between Glendale Manor Apartments and the Effective Amendment No. 1
Secretary of Housing and Urban Development. to Form S-11 Regis-tration
Statement (File 2-90617)
*10.5 (h) Housing Assistance Payments Contract dated May Exhibit 10.5 (h) to Post-
30, 1980 between Glendale Manor Apartments and Effective Amendment No. 1
the Secretary of Housing and Urban Development to Form S-11 Regis-tration
Statement (File 2-90617)
10.6 Documents Relating to Partnership Interest in
Fiddlers Creek Apartments
*10.6 (a) Escrow Agreement dated September 28, 1984 Exhibit 10.6 (a) To Post-
between Billy P. Shadrick, Bobby Ray Badgett, J. Effective Amendment No. 1
Thomas Dotson and Liberty Housing Partners to Form S-11 Regis-tration
Limited Partnership. Statement (File 2-90617)
167
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*10.6 (b) Amended and Restated Certificate and Agreement Exhibit 10.6 (b) to Post-
of Limited Partnership of Fiddlers Creek Effective Amendment No. 1
Apartments. to Form S-11 Regstration
Statement (File 2-90617)
*10.6 (c) Promissory Note form dated September 28, 1984, Exhibit 10.6 (c) to Post
Purchase Money Note form dated September 28, Effective Amendment No. 1
1984, Pledge Agreement form dated September 28, to Form S-11 Registration
1984 and Schedule of Promissory Notes, Purchase Statement (File 2-90617)
Money Notes and Pledge Agreements between
Liberty Housing Partners Limited Partnership and
the partners of Fiddlers Creek Apartments.
*10.6 (d) Deed of Trust Note dated September 1, 1975 from Exhibit 10.6 (d) to Post-
Fiddlers Creek Apartments to Guaranty Mortgage Effective Amendment No. 1
Company of Nashville and related Deed of Trust to Form S-11 Regis-tration
dated September 1, 1975 between Fiddlers Creek Statement (File 2-90617)
Apartments and Guaranty Mortgage Company of
Nashville.
*10.6 (e) Regulatory Agreement dated September 1, 1975 Exhibit 10.6 (e) to Post-
between Fiddlers Creek Apartments and the Effective Amendment No. 1
Secretary of Housing and Urban Development. to Form S-11 Registration
Statement (File 2-90617)
10.7 Documents Relating to Partnership Interest
Fuquay-Varina Homes for the Elderly, Ltd.
*10.7 (a) Escrow Agreement dated September 28, 1984 Exhibit 10.7 (a) to Post-
between Billy P. Shadrick, Bobby Ray Badgett and Effective Amendment No. 1
Liberty Housing Partners Limited Partnership. to Form S-11 Registration
Statement (File 2-90617)
168
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*10.7 (b) Amended and Restated Certificate and Agreement Exhibit 10.7 (b) to Post-
of Limited Partnership of Fuquay-Varina Homes Effective Amendment No. 1
for the Elderly, Ltd. to Form S-11 Registration
Statement (File 2-90617)
*10.7 (c) Promissory Note form dated September 28, 1984, Exhibit 10.7 (c) to Post-
Purchase Money Note form dated September 28, Effective Amendment No. 1
1984, Pledge Agreement form dated September 28, to Form S-11 Registration
1984 and Schedule of Promissory Notes, Purchase Statement (File 2-90617)
Money Notes and Pledge Agreements between
Liberty Housing Partners Limited Partnership and
the partners of Fuquay-Varina Apartments.
*10.7 (d) Deed of Trust Note dated May 23, 1977 from Exhibit 10.7 (d) to Post-
Fuquay-Varina Homes for Elderly, Ltd. to Effective Amendment No. 1
Cincinnati Mortgage Corporation and related Deed to Form S-11 Registration
of Trust dated May 23, 1977 between Fuquay- Statement (File 2-90617)
Varina Homes for the Elderly, Ltd. and Cincinnati
Mortgage Corporation.
*10.7 (e) Regulatory Agreement dated May 23, 1977 between Exhibit 10.7 (e) to Post-
Fuquay-Varina Homes for the Elderly, Ltd. and the Effective Amendment No. 1
Secretary of Housing and Urban Development. to Form S-11 Registration
Statement (File 2-90617)
*10.7 (f) Housing Assistance Payments Contract dated May Exhibit 10.7 to
3, 1978 between Fuquay-Varina Homes for the Post-Effective
Elderly, Ltd. and the Secretary of Housing and Amendment No. 1 to
Urban Development. Form S-11 Registration (File
2-90617)
10.8 Documents Relating to Partnership Interest in
Oxford Homes for the Elderly, Ltd.
169
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*10.8 (a) Escrow Agreement dated September 28, 1984 Exhibit 10.8 (a) to Post-
between Billy P. Shadrick, Bobby Ray Badgett and Effective Amendment No. 1
Liberty Housing Partners Limited Partnership. to Form S-11 Registration
Statement (File 2-90617)
*10.8 (b) Amended and Restated Certificate and Agreement Exhibit 10.8 (b) to Post-
of Limited Partnership of Oxford Homes for the Effective Amendment No. 1
Elderly, Ltd. to Form S-11 Registration
Statement (File 2-90617)
*10.8 (c) Promissory Note form dated September 28, 1984, Exhibit 10.8 (c) to Post-
Purchase Money Note form dated September 28, Effective Amendment No. 1
1984, Pledge Agreement form dated September 28, to Form S-11 Registration
1984 and Schedule of Promissory Notes, Purchase Statement (File 2-90617)
Money Notes and Pledge Agreements between
Liberty Housing Partners Limited Partnership and
the partners of Oxford Homes for the Elderly, Ltd.
*10.8 (d) Mortgage Note dated May 23, 1977 from Oxford Exhibit 10.8 (d) to Post-
Homes for the Elderly, Ltd. to Cincinnati Mortgage Effective Amendment No. 1
Corporation and related Mortgage dated May 23, to Form S-11 Registration
1977 between Oxford Homes for the Elderly, Ltd. Statement (File 2-90617)
and Cincinnati Mortgage Corporation.
*10.8 (e) Regulatory Agreement dated May 23, 1977 between Exhibit 10.8 (e) to Post-
Oxford Homes for the Elderly, Ltd. and the Effective Amendment No. 1
Secretary of Housing and Urban Development. to Form S-11 Registration
Statement (File 2-90617)
*10.8 (f) Housing Assistance Payments Contract dated July Exhibit 10.8 (f) to Post-
3, 1978 between Oxford Homes for the Elderly, Effective Amendment No. 1
Ltd. and the Secretary of Housing and Urban to Form S-11 Registration
Development. Statement (File 2-90617)
170
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10.9 Documents Relating to Partnership Interest in
Williamston Homes for the Elderly, Ltd.
*10.9 (a) Escrow Agreement dated September 28, 1984 Exhibit 10.9 (a) to Post-
between Billy P. Shadrick, Bobby Ray Badgett and Effective Amendment No. 1
Liberty Housing Partners Limited Partnership. to Form S-11 Registration
Statement (File 2-90617)
*10.9 (b) Amended and Restated Certificate and Agreement Exhibit 10.9 (b) to Post-
of Limited Partnership of Williamston Homes for Effective Amendment No. 1
the Elderly, Ltd. to Form S-11 Registration
Statement (File 2-90617)
*10.9 (c) Promissory Note form dated September 28, 1984, Exhibit 10.9 (c) to Post-
Purchase Money Note form dated September 28, Effective Amendment No. 1
1984, Pledge Agreement form dated September 28, to Form S-11 Registration
1984 and Schedule of Promissory Notes, Purchase Statement (File 2-90617)
Money Notes and Pledge Agreements between
Liberty Housing Partners Limited Partnership and
the partners of Williamston Homes for the Elderly,
Ltd.
*10.9 (d) Deed of Trust Note dated May 24, 1977 from Exhibit 10.9 (d) to Post-
Williamston Homes for the Elderly, Ltd. and Effective Amendment No. 1
Cincinnati Mortgage Corporation and related Deed to Form S-11 Registration
of Trust between Williamston Homes for the Statement (File 2-90617)
Elderly, Ltd. and Cincinnati Mortgage Corporation.
*10.9 (e) Regulatory Agreement dated May 24, 1977 between Exhibit 10.9 (e) to Post-
Williamston Homes for the Elderly, Ltd. and the Effective Amendment No. 1
Secretary of Housing and Urban Development. to Form S-11 Registration
Statement (File 2-90617)
*10.9 (f) Housing Assistance Payments Contract dated Exhibit 10.9 (f) to Post-
September 19, 1978 between Williamston Homes Effective Amendment No. 1
for the Elderly, Ltd. and the Secretary of Housing to Form S-11 Registration
and Urban Development. Statement (File 2-90617)
171
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10.10 Documents Relating to Partnership Interest in
Austintown Associates
*10.10 (a) Escrow Agreement dated October 30, 1984 Exhibit 10.10 (a) to Post-
between James P. Manchi, Robert P. Baker, First Effective Amendment No. 1
March Realty Corporation and Liberty Housing to Form S-11 Registration
Partners Limited Partnership. Statement (File 2-90617)
*10.10 (b) Amended and Restated Certificate of Formation Exhibit 10.10 (b) to Post-
and Agreement of Limited Partnership of Effective Amendment No. 1
Austintown Associates. to Form S-11 Registration
Statement (File 2-90617)
*10.10 (c) Promissory Note form dated October 30, 1984, Exhibit 10.10 (c) to Post-
Purchase Money Note form dated October 30, Effective Amendment No. 1
1984, Pledge Agreement form dated October 30, to Form S-11 Registration
1984 and Schedule of Promissory Notes, Purchase Statement (File 2-90617)
Money Notes and Pledge Agreements between
Liberty Housing Partners Limited Partnership and
the partners of Austintown Associates.
*10.10 (d) Mortgage Note dated February 22, 1973 from Exhibit 10.10 (d) to Post-
Austintown Associates to Metropolitan Mortgage Effective Amendment No. 1
Corporation of Ohio, Supplementary Mortgage to Form S-11 Registration
Note dated November, 1975 from Austintown Statement (File 2-90617)
Associates to The Cleveland Trust Company, Supplementary
Mortgage Note dated March 24, 1978 from Austintown
Associates to Diversified Financial & Mortgage Services,
Inc. and the related Mortgage dated February 22, 1973
between Austintown Associates and Metropolitan Mortgage
Corporation of Ohio.
172
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*10.10 (e) Regulatory Agreement dated February 22, 1973 Exhibit 10.10 (e) to Post-
between Austintown Associates and the Secretary Effective Amendment No. 1
of Housing and Urban Development. to Form S-11 Registration
Statement (File 2-90617)
*10.10 (f) Housing Assistance Payments Contracts dated Exhibit 10.10 (f) to Post-
December 1, 1983 and June 1, 1984 between Effective Amendment No. 1
Austintown Associates and the Secretary of to Form S-11 Registration
Housing and Urban Development. Statement (File 2-90617)
10.11 Documents Relating to Partnership Interest in
Meadowwood, Ltd.
*10.11 (a) Second Amended and Restated Certificate and Exhibit 10.11 (a) to Post-
Agreement of Limited Partnership of Effective Amendment No. 1
Meadowwood, Ltd. to Form S-11 Registration
Statement (File 2-90617)
*10.11 (b) Promissory Note form dated October 30, 1984, Exhibit 10.11 (b) to Post-
Purchase Money Note form dated October 30, Effective Amendment No. 1
1984, Pledge Agreement form dated October 30, to Form S-11 Registration
1984 and Schedule of Promissory Notes, Purchase Statement (File 2-90617)
Money Notes and Pledge Agreements between
Liberty Housing Partners Limited Partnership and
the partners of Meadowwood, Ltd.
*10.11 (c) Promissory Notes dated October 3, 1977 and Exhibit 10.11 (c) to Post-
October 25, 1978 from Meadowwood, Ltd. to Effective Amendment No. 1
Farmers Home Administration and related Deed to Form S-11 Registration
to Secure Debt dated October 25, 1978 between Statement (File 2-90617)
Meadowwood, Ltd. and Farmers Home
Administration.
*10.11 (d) Farmers Home Administration Loan Agreement Exhibit 10.11 (d) to Post-
between Meadowwood, Ltd. and Farmers Home Effective Amendment No. 1
Administration. to Form S-11 Registration
Statement (File 2-90617)
173
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*10.11 (e) Interest Credit and Rental Assistance Agreement Exhibit 10.11 (e) to Post-
dated October 1, 1983 between Meadowwood, Effective Amendment No. 1
Ltd. and the Farmers Home Administration. to Form S-11 Registration
Statement (File 2-90617)
*10.12 Documents Relating to Partnership Interest in
Brierwood, Ltd.
*10.12 (a) Second Amended and Restated Certificate and Exhibit 10.12 (a) to Post-
Agreement of Limited Partnership of Brierwood, Effective Amendment No. 1
Ltd. to Form S-11 Registration
Statement (File 2-90617)
*10.12 (b) Promissory Note form dated October 30, 1984, Exhibit 10.12 (b) to Post-
Purchase Money Note form dated October 30, Effective Amendment No. 1
1984, Pledge Agreement form dated October 30, to Form S-11 Registration
1984 and Schedule of Promissory Notes, Purchase Statement (File 2-90617)
Money Notes and Pledge Agreements between
Liberty Housing Partners Limited Partnership and
the partners of Brierwood, Ltd.
*10.12 (c) Promissory Note dated May 4, 1979 from Exhibit 10.12 (c) to Post-
Brierwood, Ltd. to Farmers Home Administration Effective Amendment No. 1
and related Deed to Secure Debt dated May 4, to Form S-11 Registration
1979 between Brierwood, Ltd. and Farmers Home Statement (File 2-90617)
Administration.
*10.12 (d) Farmers Home Administration Loan Agreement Exhibit 10.12 (d) to Post-
dated June 15, 1978 between Brierwood, Ltd. and Effective Amendment No. 1
Farmers Home Administration. to Form S-11 Registration
Statement (File 2-90617)
*10.12 (e) Interest Credit and Rental Assistance Agreement Exhibit 10.12 (e) to Post-
dated October 1, 1980 between Brierwood, Ltd. Effective Amendment No. 1
and the Farmers Home Administration. to Form S-11 Registration
Statement (File 2-90617)
174
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10.13 Documents Relating to Partnership Interest in
Pine Forest Apartments, Ltd.
*10.13 (a) Second Amended and Restated Certificate and Exhibit 10.13 (a) to Post-
Agreement of Limited Partnership of Pine Forest Effective Amendment No. 1
Apartments, Ltd. to Form S-11 Registration
Statement (File 2-90617)
*10.13 (b) Promissory Note form dated October 30, 1984, Exhibit 10.13 (b) to Post-
Purchase Money Note form dated October 30, Effective Amendment No. 1
1984, Pledge Agreement form dated October 30, to Form S-11 Registration
1984 and Schedule of Promissory Notes, Purchase Statement (File 2-90617)
Money Notes and Pledge Agreements between
Liberty Housing Partners Limited Partnership and
the partners of Pine Forest Apartments, Ltd.
*10.13 (c) Promissory Note dated August 6, 1980 from Pine Exhibit 10.13 (c) to Post-
Forest Apartments, Ltd. to Farmers Home Effective Amendment No. 1
Administration and related Deed to Secure Debt to Form S-11 Registration
dated August 6, 1980 between Pine Forest Statement (File 2-90617)
Apartments, Ltd. and Farmers Home
Administration.
*10.13 (d) Farmers Home Administration Loan Agreement Exhibit 10.13 (d) to Post-
dated May 10, 1979 between Pine Forest Effective Amendment No. 1
Apartments, Ltd. and Farmers Home to Form S-11 Registration
Administration. Statement (File 2-90617)
*10.13 (e) Interest Credit and Rental Assistance Agreement Exhibit 10.13 (e) to Post-
dated June 1, 1982 between Pine Forest Effective Amendment No. 1
Apartments, Ltd. and the Secretary of Housing to Form S-11 Registration
and Urban Development. Statement (File 2-90617)
10.14 Documents Relating to Partnership Interest in
Osuna Apartments Company
175
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*10.14 (a) Amended and Restated Certificate of Formation Exhibit 10.14 (a) to Post-
and Agreement of Limited Partnership of Osuna Effective Amendment No. 2
Apartments Company. To Form S-11 Registration
Statement (File 2-90617)
*10.14 (b) Promissory Note form dated November 27, 1984, Exhibit 10.14 (b) to Post-
Purchase Money Note form dated November 27, Effective Amendment No. 2
1984, Pledge Agreement dated November 27, 1984 to Form S-11 Registration
between Liberty Housing Partners Limited Statement (File 2-90617)
Partnership, Liberty LGP Limited Partnership and
the Sovereign Corporation, and Schedule of
Promissory Notes and Purchase Money Notes
between Liberty Housing Partners Limited
Partnership and the partners of Osuna
Apartments Company.
*10.14 (c) Mortgage Note dated March 5, 1974 from Osuna Exhibit 10.14 (c) to Post-
Apartments Company to Housing America Effective Amendment No. 2
Mortgage Co., Inc. and related Mortgage dated to Form S-11 Registration
March 5, 1974 from Osuna Apartments Company Statement (File 2-90617)
to Housing Mortgage Co., Inc.
*10.14 (d) Regulatory Agreement dated March 5, 1974 Exhibit 10.14 (d) to Post
between Osuna Apartments Company and the Effective Amendment No. 2
Secretary of Housing and Urban Development. to Form S-11 Registration
Statement (File 2-90617)
*10.14 (e) Housing Assistance Payments Contracts dated Exhibit 10.14 (e) to Post-
August 7, 1984 between Osuna Apartments Effective Amendment No. 2
Company and the Secretary of Housing and to Form S-11 Registration
Urban Development. Statement (File 2-90617)
10.15 Documents Relating to Partnership Interest in
Linden Park Associates Limited Partnership
176
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*10.15 (a) Certificate and Agreement of Limited Partnership Exhibit 10.15 (a) to Post-
of Linden Park Associates Limited Partnership. Effective Amendment No. 2
to Form S-11 Registration
Statement (File 2-90617)
*10.15 (b) Promissory Note form dated December 11, 1984, Exhibit 10.15 (b) to Post-
Purchase Money Note form dated December 11, Effective Amendment No. 2
1984, Pledge Agreement dated December 11, 1984 to Form S-11 Registration
by and between Liberty LGP Limited Partnership, Statement (File 2-90617)
John L. Wagner, Liberty Housing Partners
Limited Partnership and Graham Park Venture, and
Schedule of Promissory Notes and Purchase Money Notes
between Linden Park Associates Limited Partnership and
Graham Park Venture.
*10.15 (c) Deed of Trust Note and related Deed of Trust Exhibit 10.15 (c) to Post-
both dated December 5, 1972 and Allonge of Effective Amendment No. 2
January 29, 1976, Supplemental Deed of Trust to Form S-11 Regis- tration
both dated December 17, 1974 and Allonge of Statement (File 2-90617)
January 29, 1976, and Second Supplemental Deed
of Trust Note and related Second Supplemental
Deed of Trust both dated January 29, 1976 all
documents between Graham Park Venture and
Loyola Federal Savings and Loan Association.
*10.15 (d) Loan Assumption Agreement dated March 23, Exhibit 10.15 (d) to Post-
1976 between Pennamco, Inc. and Virginia Effective Amendment No. 2
Housing Development Authority. to Form S-11 Registration
Statement (File 2-90617)
*10.15 (e) Regulatory Agreement dated December 12, 1984 Exhibit 10.15 (e) to Post-
between Linden Park Associates Limited Effective Amendment No. 2
Partnership and the Secretary of Housing and to Form S-11 Registration
Urban Development. Statement (File 2-90617)
177
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*10.15 (f) Regulatory Agreement dated January 31, 1976 Exhibit 10.15 (f) to Post-
between Graham Park Venture and Virginia Effective Amendment No. 2
Housing Development Authority. to Form S-11 Registration
Statement (File 2-90617)
10.16 Documents Relating to Partnership Interest
Brierwood II, Ltd.
*10.16 (a) Amended and Restated Certificate and Exhibit 10.16 (a) to Post-
Agreement of Limited Partnership of Brierwood Effective Amendment No. 2
II, Ltd. to Form S-11 Registration
Statement (File 2-90617)
*10.16 (b) Promissory Note form dated January 4, 1985, Exhibit 10.16 (b) to Post-
Pledge Agreement form dated January 4, 1985 Effective Amendment No. 2
and Schedule of Promissory Notes and Pledge to Form S-11 Registration
Agreements between Liberty Housing Partners Statement (File 2-90617)
Limited Partnership and the partners of
Brierwood II, Ltd.
*10.16 (c) Promissory Note dated January 4, 1985 from Exhibit 10.16 (c) to Post-
Brierwood II, Ltd. to Farmers Home Effective Amendment No. 2
Administration and related Deed to Secure Debt to Form S-11 Registration
dated January 4, 1985 between Brierwood II, Ltd. Statement (File 2-90617)
and Farmers Home Administration.
*10.16 (d) Farmers Home Administration Loan Agreement Exhibit 10.16 (d) to Post-
dated June 30, 1983 between Brierwood II, Ltd. Effective Amendment No. 2
and Farmers Home Administration. to Form S-11 Registration
Statement (File 2-90617)
*10.16 (e) Interest Credit and Rental Assistance Agreement Exhibit 10.16 (e) to Post-
dated January 4, 1985 between Brierwood II, Ltd. Effective Amendment No. 2
and the Farmers Home Administration. to Form S-11 Registration
Statement (File 2-90617)
*Incorporated by Reference as noted
178
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
By: LIBERTY HOUSING PARTNERS LIMITED
PARTNERSHIP
(Registrant)
By: TNG Properties, Inc.,
Managing General Partner
Date: 3-31-97 By: /s/ Michael A. Stoller
Michael A. Stoller
President, CEO, and Director of
TNG Properties, Inc.
Managing General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature Title Date
Vice President, Treasurer
and Director (principal
financial and accounting officer)
of TNG Properties, Inc. Managing
General Partner
/s/ Wilma R. Brooks 3-31-97
Wilma R. Brooks
179
<PAGE>
Signatures, continued
SSignature Title Date
President, CEO and Director of
TNG Properties, Inc. Managing
General Partner
/s/ Michael A. Stoller 3-31-97
Michael A. Stoller
Director of TNG Properties, Inc.
Managing General Partner
/s/ Stephen D. Puliafico 3-31-97
Stephen D. Puliafico
Director of TNG Properties, Inc.
Managing General Partner
______________
Clyde W. Sylvia
180
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