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, 1998
[ ] 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.)
100 Second Avenue, Needham, Massachusetts 02494
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 444-5251
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: 128-141
Page 1 of 143
<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 general 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"). 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 units of Limited Partnership Interest ("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 and sale of 21,616 units was
completed on July 12, 1985. During 1995, the Partnership recorded as cancelled
and no longer outstanding 40 units which were formally abandoned by the holders.
During 1998 an additional 10 units were abandoned.
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 non-recourse 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 original terms of 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 a 19.8% limited partnership
interest in Liberty LGP. Liberty Housing Corporation held an 80.2% interest as a
general partner in Liberty LGP. 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 does not expect to 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.
3
<PAGE>
Item 1. Business, continued
(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 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.
(10) The risk that properties owned by Local Limited Partnerships will be unable
to replace the revenue received under federal housing assistance contracts or
extend the current contract at the same terms upon their termination.
The Partnership has engaged the General Partner of Linden Park Associates
Limited Partnership to assist with the workout or liquidation of the
Partnership's Purchase Money Note ("PMN") debt and the Local Limited Partnership
interest which serves as collateral for the PMN. The terms of the engagement
provide for the payment of certain fees and expenses. It is contemplated that
these fees and expenses will be paid from the principal and interest from the
Linden Park Associates Limited Partnership notes held by the Partnership. If the
workout or liquidation of the entire portfolio is successfully completed the
Partnership's entire interest in these notes will have been exhausted. Through
February 28, 1999 expenses aggregating $7,560 have been paid out of the interest
earnings on these notes.
Management presently expects that the indebtedness of the Fiddlers Creek
and Linden Park Partnerships will be refinanced. In connection with these
refinancings, it is anticipated that the management of the Fiddlers Creek
project will use $494,950 of the proceeds and the management of the Linden Park
project will use $396,000 of the proceeds, respectively, to acquire the
Partnership's interest in those projects. The acquisitions would include
assumption of the Partnership's obligations for the related Purchase Money Notes
("PMN"). Management presently expects these transactions to close in the second
quarter of 1999, although no assurance may be given that the transactions will
ultimately be consummated.
4
<PAGE>
Item 1. Business, continued
Management is currently in negotiation with the general partner of the
Glendale Manor, Surry Manor, Oxford Homes, Williamston Homes and Fuquay Varina
partnerships regarding the extension of the PMN's relating to the Partnership's
investments in these five projects. Management has proposed a five year
extension of the PMN's relating to the Osuna Apartments project to the holders
of these notes. No assurance may be given that the Partnership will be able to
secure extensions of the terms of any of these PMN's.
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,
1998, 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 and included in Item 8. 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.
5
<PAGE>
<TABLE>
<CAPTION>
Item 2. Properties
Purchase Money Notes
----------------------------------
Unpaid
Principal At Acquisition
Total and -----------------------
Name/Percentage Interest Acquisi- Original Interest LHPLP Total
Ownership of Local Acquisiton tion Principal as of Maturity Share of Invested
Limited Partnership Date Cost Amount(A) 12/31/98 Date Local Debt Assets (C)
- ----------------------- ---------- -------- --------- --------- -------- ---------- ----------
98% interests are owned
in the following Local
Limited Partnerships(B):
<S> <C> <C> <C> <C> <C> <C> <C>
1 Glendale Manor 8/31/84 $810,000 $450,000 $609,482 8/29/2000 $929,000 $1,739,000
Apartments
2 Surry Manor, Ltd. 8/31/84 740,000 360,000 698,512 7/9/2001 1,006,000 1,746,000
3 Oxford Homes 9/28/84 1,004,000 644,000 883,452 9/28/1999 653,000 1,657,000
for the Elderly, Ltd.
4 Williamston 9/28/84 1,064,000 664,000 783,167 9/28/1999 649,000 1,713,000
Homes for the
Elderly, Ltd.
5 Fuquay-Varina 9/28/84 1,118,000 707,000 737,549 9/28/1999 822,000 1,940,000
Homes for the
Elderly, Ltd.
6 Fiddlers Creek 9/28/84 2,876,000 1,750,000 3,072,656 9/28/1999 2,396,000 5,272,000
Apartments
7 Austintown 10/30/84 3,081,000 1,600,000 3,479,213 10/30/1999 3,635,000 6,716,000
Associates
8 Osuna Apartments 11/30/84 2,042,000 1,300,000 2,819,435 11/27/1999 1,527,000 3,569,000
Company
9 Linden Park 12/06/84 2,997,000 1,800,000 2,419,434 12/11/1999 3,359,000 6,356,000
Associates
Limited Partnership
<CAPTION>
Description of Apartment Complex
Name/Percentage -----------------------------------------------
Ownership of Local Geographic Government
Limited Partnership Size Location Assistance (D)
- ----------------------- ----- ---------- --------------
98% interests are owned
in the following Local
Limited Partnerships(B):
<S> <C> <C> <C>
1 Glendale Manor 50 Units Clinton, SC 221(d)(4)
Apartments 30,310 SF 100% Section 8 (E)
5.5 Acres
2 Surry Manor, Ltd. 44 Units Dobson, NC 221(d)(4)
27,253 SF 100% Section 8 (E)
5.0 Acres
3 Oxford Homes 50 Units Oxford, NC 221(d)(4)
for the Elderly, Ltd. 26,672 SF 100% Section 8 (E)
4.5 Acres
4 Williamston 50 Units Williamstown, 221(d)(4)
Homes for the 26,496 SF NC 100% Section 8 (E)
Elderly, Ltd. 7 Acres
5 Fuquay-Varina 60 Units Fuqyay-Varina, 221(d)(4)
Homes for the 35,056 SF NC 100% Section 8 (E)
Elderly, Ltd. 6 Acres
6 Fiddlers Creek 160 Units Winston-Salem, 221(d)(4)
Apartments 126,900 SF NC
15 Acres
7 Austintown 200 Units Austintown, 236 HUD
Associates 189,200 SF OH 100% Section 8 (E)
20 Acres
8 Osuna Apartments 110 Units Albuquerque, 236 HUD
Company 97,400 SF NM Section 8, (E)
7.3 Acres 22 Units
9 Linden Park 198 Units Triangle, 221(d)(4)
Associates 164,327 SF VA VA Housing
Limited Partnership 10 Acres Development
Authority Interest
Subsidy
(Continued)
6
<PAGE>
<CAPTION>
Item 2. Properties, continued
Purchase Money Notes
----------------------------------
Unpaid
Principal At Acquisition
Total and -----------------------
Name/Percentage Interest Acquisi- Original Interest LHPLP Total
Ownership of Local Acquisiton tion Principal as of Maturity Share of Invested
Limited Partnership Date Cost Amount(A) 12/31/98 Date Local Debt Assets (C)
- ----------------------- ---------- -------- --------- --------- -------- ---------- ----------
94% interests are owned
in the following Local
Limited Partnerships(B):
<S> <C> <C> <C> <C> <C> <C> <C>
10 Pine Forest 10/29/84 736,000 350,000 765,340 10/30/1999 1,190,000 1,926,000
Apartments, Ltd.
11 Brierwood, Ltd. 10/29/84 563,000 270,000 598,962 10/30/1999 838,000 1,401,000
12 Meadowwood, Ltd. 10/29/84 1,001,000 610,000 1,370,985 10/30/1999 1,004,000 2,005,000
13 Brierwood II, Ltd. 01/25/85 101,000 351,000 452,000
----------- ----------- ----------- ----------- -----------
Total Acquisitions $18,133,000 $10,505,000 $18,238,187 $18,359,000 $36,492,000
=========== =========== =========== =========== ===========
<CAPTION>
Description of Apartment Complex
Name/Percentage -----------------------------------------------
Ownership of Local Geographic Government
Limited Partnership Size Location Assistance (D)
- ----------------------- ----- ---------- --------------
94% interests are owned
in the following Local
Limited Partnerships(B):
<S> <C> <C> <C>
10 Pine Forest 64 Units Cairo, GA 515 RHS
Apartments, Ltd. 53,344 SF 521 RHS
6 Acres 29 Units
11 Brierwood, Ltd. 56 Units Bainbridge, 515 RHS
42,840 SF GA 521 RHS
6 Acres 33 Units
12 Meadowwood, Ltd. 80 Units Tifton,GA 515 RHS
67,416 SF
6.8 Acres
13 Brierwood II, Ltd. 18 Units Bainbridge, 515 RHS
12,402 SF GA
1.4 Acres
Total Acquisitions 1,140 units
(Continued)
7
<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, 1998 on the Purchase Money Notes is as
follows:
Principal Interest Total
----------- ----------- -----------
Obligation of:
The Partnership $ 8,705,000 $ 7,113,753 $15,818,753
Linden Park 1,800,000 619,434 2,419,434
----------- ----------- -----------
$10,505,000 $ 7,733,187 $18,238,187
=========== =========== ===========
(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 income 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 Section 521 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. 06/1999
Williamston Homes for the Elderly, Ltd. 09/1999
Fuquay-Varina Homes for the Elderly, Ltd. 05/1999
Austintown Associates 05/1999, 10/1999
Osuna Apartments Company 08/1999
</FN>
</TABLE>
8
<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.
Osuna Apartment Company ("Osuna"), one of the Local Limited
Partnerships, is party to a wrongful death action brought by the estate of a
former tenant in the Second Judicial District of the State of New Mexico. The
suit arises out of the murder of the tenant by the son of a maintenance
contractor periodically engaged by Osuna. No specific amount has been claimed.
Osuna is vigorously contesting the allegations of its liability. The Partnership
presently expects that if Osuna were found to have some liability in this
action, substantially all of the amount would be covered by Osuna's liability
insurance.
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 4, 1999, there were 997 holders of record of the 21,566
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 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).
9
<PAGE>
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.
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest income $ 36 $ 46 $ 61 $ 32 $ 36
Net loss (2,556) (2,218) (1,962) (1,564) (1,527)
Net loss per Unit (117.31) (101.75) (90.02) (71.77) (69.92)
Total assets at
December 31 2,254 2,229 2,587 2,964 3,174
Long-term debt
(including
current portion,
net of discount)
at December 31 14,137 11,544 9,684 8,152 6,864
Distributable Cash
From Operations
per Unit(a) -- -- -- -- --
Units used in computing
per unit calculations
above (b) 21,568 21,576 21,576 21,576 21,616
<FN>
(a) Distributable cash is calculated pursuant to the terms of the
Partnership Agreement. See Note 11 to the Financial Statements.
(b) During 1995, the Partnership recorded as cancelled and no longer
outstanding 40 units which were formally abandoned by the holders.
During 1998 an additional 10 units were abandoned.
</FN>
</TABLE>
10
<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. Recourse on each
Purchase Money Note is limited to the pledged partnership interest. 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, 1998, as
set forth in the table included in Item 2 above, was $15,818,753. 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 ($14,136,743 at December 31, 1998), 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.
11
<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, 1998 the
unpaid principal amount of and accrued and unpaid interest on the LPLP Notes
equaled $2,419,434. 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. As discussed
below, LPLP is in the process of refinancing the property.
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 Partnership continues to explore options for resolving the Purchase
Money Notes. In connection with these efforts the Partnership engaged the
General Partner of Linden Park Associates Limited Partnership to assist with the
workout or liquidation of the Partnership's PMN portfolio and the Local Limited
Partnership interest which serves as collateral for the PMN. The terms of the
engagement provide for the payment of certain fees and expenses. It is
contemplated that these fees and expenses will be paid from the principal and
interest from the Linden Park Associates Limited Partnership notes held by the
Partnership. If the workout or liquidation of the entire portfolio is
successfully completed the Partnership's entire interest in these notes will
have been exhausted.
In addition, the Partnership has granted the Linden Park General Partner
an option to acquire the Partnership's interest in Linden Park Associates
Limited Partnership, over the next three and one-half years at a purchase price
of $400,000 for the next eighteen months and increasing by $100,000 each year
thereafter.
Management presently expects that the indebtedness of the Fiddlers Creek
and Linden Park Partnerships will be refinanced. In connection with these
refinancings, it is anticipated that the management of the Fiddlers Creek
project will use $494,950 of the proceeds and the management of the Linden Park
project will use $396,000 of the proceeds, respectively, to acquire the
Partnership's interest in those projects.
12
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources, continued
The acquisitions would include assumption of the Partnership's obligations for
the related Purchase Money Notes ("PMN"). Management presently expects these
transactions to close in the second quarter of 1999, although no assurance may
be given that the transactions will ultimately be consummated.
Management is currently in negotiation with the general partner of the
Glendale Manor, Surry Manor, Oxford Homes, Williamston Homes and Fuquay Varina
partnerships regarding the extension of the PMN's relating to the Partnership's
investments in these five projects. Management has proposed a five year
extension of the PMN's relating to the Osuna Apartments project to the holders
of these notes.
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.
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. As described above, it is
contemplated that the principal and interest of the note identified in clause
(ii) will be utilized to fund the payment of certain fees and expenses incurred
in connection with the workout or liquidation of the partnership's portfolio. At
December 31, 1998, the Partnership's had reserves of $42,284 (in cash and cash
equivalents), compared with $65,685 at December 31, 1997. Such reserves have
partially funded the Partnership administrative expenses, including expense
reimbursement to the Managing General Partner. The Partnership incurs certain
administrative costs, including the partnership Management Fee, which are earned
by or reimbursed to the Managing General Partner. As discussed more fully in
Note 6 to the financial statements, such administrative costs were $98,136,
$107,007 and $98,240 in 1998, 1997 and 1996, respectively. The Partnership's
cash balances have decreased each year from December 31, 1996 through December
31, 1998. If the trend continues, the Partnership may not have sufficient cash
available for operating expenses during 1999.
During 1998, 1997 and 1996, 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: 1998: Seven LLP's -
$186,617; 1997: Seven LLP's - $369,947; and 1996: Seven LLP's - $288,577. By
April 30, 1998, 1997, and 1996, 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).
13
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources, continued
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 1998, the Partnership received $18,634 of
interest payments on such notes leaving accrued unpaid interest of $70,297. As
of December 31, 1998, the outstanding balance of principal and accrued and
unpaid interest receivable on these notes amounted to $244,100, prior to the
unamortized discount of $84,797.
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 1999 and continuing through 2000. Under the Multifamily Assisted Housing and
Reform and Affordability Act (MAHRAA) of 1997, Congress set forth the
legislation for a permanent "mark-to-market" program and provided for permanent
authority for the renewal of Section 8 Contracts. On September 11, 1998, HUD
issued an interim rule to provide clarification of the implementation of the
mark-to-market program. Owners with Section 8 contracts expiring after September
30, 1998 are subject to the provisions of MAHRAA. As such, each Local Limited
Partnership may choose to either opt out of the Section 8 program, request
mortgage restructuring and renewal of the Section 8 contract, or request renewal
of the Section 8 contract without mortgage restructuring. Each option contains a
specific set of rules and procedures that must be followed in order to comply
with the requirements of MAHRAA. Management is reviewing the status of each
Local Limited Partnership with the local General Partner to determine which
option under the MAHRAA should be exercised by the Local Limited Partnership.
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 decreased to $36,347 in 1998 from $45,607 in 1997.
14
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Partnership Operations, continued
This decrease was attributable to the lower reserve balance maintained during
the year and a decrease in interest payments received on the long-term note
receivable ($18,634 in 1998 versus $23,803 in 1997). Interest income was $61,407
in 1996. In 1996, interest payments received on the long-term note receivable
were $35,410.
The Partnership's interest expense increased to $2,672,560 in 1998 from
$2,214,122 in 1997 and $1,904,536 in 1996. 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 $143,677 in
1998, $145,864 in 1997 and $143,556 in 1996.
Average occupancy levels at the projects owned by the Local Limited
Partnerships ranged from 89% to 100% in 1998, and 88% to 100% in 1997, and 94%
to 100% in 1996.
The Partnership's equity in income from the Local Limited Partnerships was
$224,229 in 1998, $96,766 in 1997, and $24,678 in 1996. The $107,503 increase in
income recognized in 1998 compared to 1997, is attributable to: an increase of
$127,463 in net income from the combined statements of operations of all Local
Limited Partnerships, and an increase in cash distributions recognized as
investment income of $28,000. The Partnership did not record losses totaling
approximately $163,658 from Six Local Limited Partnerships because its related
investment accounts had already been reduced to zero. The recognition of income
in 1997 is primarily attributable to the fact that the partnership did not
record losses totaling approximately $172,000 for five Local Limited
Partnerships and recognized investment income of $23,065 of cash distributions
received from Glendale Manor as it would have reduced its investment balance
below zero. In 1996, the Partnership did not record approximately $125,000 of
net losses for four Local Limited Partnerships but was able to apply $55,714 of
loss carry-forward against the current year net income of one Local Limited
Partnership. 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 $2,555,661
in 1998 from $2,217,613 and $1,962,007 in 1997 and 1996, respectively.
The operations of the Partnership and of each of the Local Limited
Partnerships are subject to numerous risks, including material tax risks. The
rents of the Properties, many of which receive rental subsidy payments,
including payments under Section 8 of Title II of the Housing and Community
Development Act of 1974 ("Section 8"), are subject to specific laws, regulations
and agreements with federal and state agencies. The subsidy agreements expire at
various times from May 1999 through July 2000. The United States Department of
Housing and Urban Development ("HUD") has issued notices, which relate to
project based Section 8 contracts. HUD's current program provides in general for
restructuring rents and/or mortgages where rents may be adjusted to market
levels and mortgage terms may be adjusted based on the reduction in rents,
although there may be instances in which only rents, but not mortgages, are
restructured.
The Partnership cannot reasonably predict legislative initiatives and
governmental budget negotiations, the outcome of which could result in a
reduction in funds available for the various federal and state administered
housing programs including the Section 8 program.
15
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Partnership Operations, continued
Such changes could adversely affect the future net operating income and debt
structure of certain Local Partnerships currently receiving such subsidy or
similar subsidies. See Item 1 above.
Recent Accounting Pronouncements
The Partnership has adopted SFAS No. 128, "Earnings per Share" and SFAS
No. 129, "Disclosure of Information about Capital Structure." SFAS No. 128
provides accounting and reporting standards for the amount of earnings per
share. SFAS No. 129 requires the disclosure, in summary form within the
financial statements, of the pertinent rights and privileges of the various
securities outstanding. The implementation of these standards has not materially
affected the Registrant's financial statements.
In June 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." In February 1998, the
FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." In June 1998, The FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Registrant
does not have any items of other comprehensive income, does not have other
segments of its business on which to report, does not have any pensions or other
postretirement benefits, and does not have any derivatives or hedging
activities. Consequently, these pronouncements are expected to have no effect on
the financial statements.
Impact of the Year 2000 Issue
The Year 2000 issue may affect the Partnership's operations as a result
of issues arising from systems and services utilized by the Managing General
Partner or by various Local Limited Partnerships. The Managing General Partner
has inventoried its systems and equipment that may require correction for Year
2000 issues. Management has received certifications from their principal
software provider that all of the core components of the primary software system
critical to the Partnership's operation are Year 2000 compliant. In addition,
the primary network system, it's operating system and certain personal computers
attached to that system have been upgraded and are deemed to be Year 2000
compliant.
The auditors for each Local Limited Partnership have reviewed the Year
2000 status of such partnerships. Based on the information reported to the
Partnership by such auditors, management expects that the critical systems
utilized by the Local Limited Partnerships will be timely rendered Year 2000
compliant at little cost to the Local Limited Partnerships.
The Partnership does not expect that any failure of the Managing General
Partnership's systems on which it depends to be Year 2000 compliant would have a
material adverse effect on the Partnership. However, the failure of systems on
which a Local Limited Partnership depends could result in adverse effects,
including the failure to properly account for and process income and expenses
and the failure to properly operate the property. The Partnership cannot
presently predict whether such effects would have a material and adverse effect
on the Local Limited Partnerships, and as a result, the Partnership.
Item 7A. Qualitative and Quantitative Disclosure About Market Risk:
This item is not applicable as this registrant is a small business
issuer within the meaning of Rule 12b-2.
16
<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, 1998 and 1997 18-19
Statements of Operations for the Years
Ended December 31, 1998, 1997 and 1996 20
Statements of Changes in Partners' Deficit
for the Years Ended December 31, 1998, 1997 and 1996 21
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996 22
Notes to Financial Statements 23-35
Independent Auditors' Report 36
Separate Financial Statements, including
Reports of Independent Accountants, for
Significant Subsidiaries:
Fiddlers Creek Apartments 37-62
Osuna Apartments Company 63-89
Linden Park Assoicates 90-120
Financial Statement Schedules:
Independent Auditors' Report 121
Schedule III - Real Estate and Accumulated Depreciation 122
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.
17
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
----------------------------
1998 1997
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 42,284 $ 65,685
Notes and accrued interest receivable, current maturities 159,303 --
------------ ------------
Total current assets 201,587 65,685
Long-term notes and accrued interest
Receivable, net of current maturities -- 143,485
Investments in local limited
partnerships 2,052,426 2,019,775
------------ ------------
Total Assets $ 2,254,013 $ 2,228,945
============ ============
<CAPTION>
(continued)
18
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
BALANCE SHEETS (continued)
December 31,
----------------------------
1998 1997
---- ----
<S> <C> <C>
Liabilities and Partners' Deficit
Current liabilities:
Purchase Money Notes, current maturities $ 13,151,250 $ --
Accounts payable to affiliates 173,271 75,271
Accounts payable 2,659 1,410
Accrued expense 16,500 16,000
Accrued interest payable 263,558 370,165
------------ ------------
Total current liabilities 13,607,238 462,846
Purchase money notes, net of current maturities 985,493 11,544,195
------------ ------------
Total liabilities 14,592,731 12,007,041
------------ ------------
Contingencies -- --
Partners' deficit:
General partners:
Capital contributions 4,202 4,202
Capital distributions (72) (22)
Accumulated losses (224,106) (198,550)
------------ ------------
(219,976) (194,370)
------------ ------------
Limited partners (21,566 Units in 1998
and 21,576 units in 1997):
Capital contributions (net of
offering costs of $1,134,440) 9,649,520 9,649,520
Capital distributions (7,122) (2,211)
Accumulated losses (21,761,140) (19,231,035)
------------ ------------
(12,118,742) (9,583,726)
------------ ------------
Total partners' deficit (12,338,718) (9,778,096)
------------ ------------
Total liabilities and partners' deficit $ 2,254,013 $ 2,228,945
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
19
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
-----------------------------------------
1998 1997 1996
---- ---- ----
Interest income $ 36,347 $ 45,607 $ 61,407
Expenses:
Interest expense 2,672,560 2,214,122 1,904,536
General and administrative
expense 143,677 145,864 143,556
----------- ----------- -----------
Total expenses 2,816,237 2,359,986 2,048,092
----------- ----------- -----------
Loss before equity in income
of local limited partnership
investments (2,779,890) (2,314,379) (1,986,685)
Equity in income of local
limited partnership
investments 224,229 96,766 24,678
----------- ----------- -----------
Net loss $(2,555,661) $(2,217,613) $(1,962,007)
=========== =========== ===========
Basic Net Loss per Limited
Partnership Unit $ (117.31) $ (101.75) $ (90.02)
=========== =========== ===========
Units used in computing Basic
Net Loss per Limited
Partnership Unit 21,568 21,576 21,576
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the years ended December 31, 1998, 1997 and 1996
General Limited
Partner Partners Total
------- -------- -----
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)
Net loss (22,177) (2,195,436) (2,217,613)
Capital Distributions (22) (2,211) (2,233)
------------ ------------ ------------
Partners' deficit
at December 31, 1997 $ (194,370) $ (9,583,726) $ (9,778,096)
Net loss (25,556) (2,530,105) (2,555,661)
Capital Distributions (50) (4,911) (4,961)
------------ ------------ ------------
Partners' deficit
At December 31, 1998 $ (219,976) $(12,118,742) $(12,338,718)
============ ============ ============
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
<TABLE>
<CAPTION>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Years Ended December 31
-------------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Cash distributions from local limited partnerships $ 191,578 $ 372,180 $ 288,577
Interest payments on purchase money notes (186,617) (369,947) (290,554)
Cash paid for general and administration expenses (43,930) (128,051) (173,106)
Interest received 20,529 29,821 45,667
----------- ----------- -----------
Net cash used in operating activities (18,440) (95,997) (129,416)
----------- ----------- -----------
Cash flows from financing activity:
Capital distributions (4,961) (2,233) --
----------- ----------- -----------
Net cash used in financing activity (4,961) (2,233) --
----------- ----------- -----------
Net decrease in cash and cash equivalents (23,401) (98,230) (129,416)
Cash and cash equivalents at:
Beginning of period 65,685 163,915 293,331
----------- ----------- -----------
End of period $ 42,284 $ 65,685 $ 163,915
=========== =========== ===========
Reconciliation of net loss to net cash used in operating activities:
Net loss $(2,555,661) $(2,217,613) $(1,962,007)
Adjustments to reconcile net loss to net
cash used in operating activities:
Share of income of local limited
partnership investments (224,229) (96,766) (24,678)
Cash distributions from local limited
partnerships 191,578 372,180 288,577
Interest expense added to purchase money
notes, net of discount amortization 2,592,548 1,859,914 1,532,710
Interest income added to
notes receivable, net of discount
amortization, and interest received (15,818) (15,817) (15,818)
Decrease in other current assets -- 31 77
(Decrease) increase in:
Accrued interest payable (106,607) (15,736) 81,273
Accounts payable to affiliates 98,000 17,000 (30,500)
Accounts payable 1,249 410 1,000
Accrued expenses 500 400 (50)
----------- ----------- -----------
Net cash used in operating activities (18,440) $ (95,997) $ (129,416)
=========== =========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
22
<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
and 1998, the Partnership recorded as cancelled and no longer outstanding 40 and
10 units, respectively, 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, 1998 and December 31, 1997, consist of
money market fund investments with no stated maturity, valued at cost, which
approximates market value.
Discounts on purchase money notes are amortized over the terms of the
related notes using the effective interest method. Discounts on notes receivable
are amortized over the term of the notes using the effective interest method.
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss pass through to, and is
reportable by the partners individually.
23
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
2. Significant Accounting Policies, continued
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Net loss per Limited Partnership 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.
The Partnership has adopted SFAS No. 128, "Earnings per Share" and SFAS
No. 129, "Disclosure of Information about Capital Structure." SFAS No. 128
provides accounting and reporting standards for the amount of earnings per
share. SFAS No. 129 requires the disclosure, in summary form within the
financial statements, of the pertinent rights and privileges of the various
securities outstanding. The implementation of these standards has not materially
affected the Registrant's financial statements.
In June 1997, the Financial Accounting Standards Board (FASB) issued
SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information." In February 1998, the
FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits." In June 1998, The FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." The Registrant
does not have any items of other comprehensive income, does not have other
segments of its business on which to report, does not have any pensions or other
postretirement benefits, and does not have any derivatives or hedging
activities. Consequently, these pronouncements are expected to have no effect on
the financial statements.
3. Contingencies
The Partnership's cash balances have decreased each year from December
31, 1996 through December 31, 1998. If the trend continues, the Partnership may
not have sufficient cash available for operating expenses during 1999.
In addition, the Purchase Money Notes (PMN) have maturity dates ranging
from September 1999 through July 2001. 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
24
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
3. Contingencies, continued
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 Partnership continues to explore options for resolving the Purchase
Money Notes. In connection with these efforts the Partnership engaged the
General Partner of Linden Park Associates Limited Partnership to assist with the
workout or liquidation of the Partnership's PMN portfolio and the Local Limited
Partnership interest which serves as collateral for the PMN. The terms of the
engagement provide for the payment of certain fees and expenses. It is
contemplated that these fees and expenses will be paid from the principal and
interest from the Linden Park Associates Limited Partnership notes held by the
Partnership. If the workout or liquidation of the entire portfolio is
successfully completed the Partnership's entire interest in these notes will
have been exhausted.
In addition, the Partnership has granted the Linden Park General Partner
an option to acquire the Partnership's interest in Linden Park Associates
Limited Partnership, over the next three and one-half years at a purchase price
of $400,000 for the next eighteen months and increasing by $100,000 each year
thereafter.
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.
The rents of the Properties, many of which receive rental subsidy
payments, including payments under Section 8 of Title II of the Housing and
Community Development Act of 1974 ("Section 8"), are subject to specific laws,
regulations and agreements with federal and state agencies. The subsidy
agreements expire at various times from May 1999 through July 2000. Under the
Multifamily Assisted Housing and Reform and Affordability Act (MAHRAA) of 1997,
Congress set forth the legislation for a permanent "mark-to-market" program and
provided for permanent authority for the renewal of Section 8 Contracts. On
September 11, 1998 HUD issued an interim rule to provide clarification of the
implementation of the mark-to-market program. Owners with Section 8 contracts
expiring after September 30, 1998 are subject to the provisions of MAHRAA.
25
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
3. Contingencies, continued
As such, each Local Limited Partnership may choose to either opt out of the
Section 8 program, request mortgage restructuring and renewal of the Section 8
contract, or request renewal of the Section 8 contract without mortgage
restructuring. Each option contains a specific set of rules and procedures that
must be followed in order to comply with the requirements of MAHRAA.
The Partnership cannot reasonably predict legislative initiatives and
governmental budget negotiations, the outcome of which could result in a
reduction in funds available for the various federal and state administered
housing programs including the Section 8 program. Such changes could adversely
affect the future net operating income and debt structure of certain Local
Limited Partnerships currently receiving such subsidy or similar subsidies.
Management of the Partnership is presently implementing plans to address
these matters. Management has decided that the Partnership may defer payment of
the management fee, and defer payment of the reimbursements for general and
administrative costs. Management is reviewing the status of each Local Limited
Partnership with the local General Partner to determine which option under the
MAHRAA should be exercised by the Local Limited Partnership.
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 bear 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.
26
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
4. Investments in Local Limited Partnerships, continued
The following is a summary of cumulative activity for investments in
Local Limited Partnerships since their dates of acquisition:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1998 1997
---- ----
<S> <C> <C>
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 (3,571,307) (3,744,473)
Cash distributions received from Local Limited Partnerships (3,818,231) (3,626,621)
Cash distributions received from Local Limited
Partnerships recognized as Investment Income $ 74,160 $ 23,065
----------- -----------
Investments in Local Limited Partnerships $ 2,052,426 $ 2,019,775
=========== ===========
</TABLE>
Summarized financial information from the combined financial statements
of all Local Limited Partnerships is as follows:
Summarized Balance Sheets
-------------------------
December 31,
------------
1998 1997
---- ----
Assets:
Investment property, net
of accumulated depreciation $ 16,092,927 $ 16,526,177
Current assets 2,253,903 2,376,801
Other assets 281,271 294,284
------------ ------------
Total assets $ 18,628,101 $ 19,197,262
============ ============
Liabilities and Partners' Equity (Deficit):
Current liabilities $ 1,665,916 $ 1,671,568
Long-term debt, net of discounts 16,441,103 16,839,912
------------ ------------
Total liabilities 18,107,019 18,511,480
Partnership's equity(deficit) 717,476 878,863
Other partners' equity(deficit) (196,394) (193,081)
------------ ------------
Total liabilities and
partners' equity(deficit) $ 18,628,101 $ 19,197,262
============ ============
27
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
4. Investments in Local Limited Partnerships, continued
<TABLE>
<CAPTION>
Summarized Statements of Operations
-----------------------------------
For the Years Ended December 31,
--------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Rental and other income $ 5,482,888 $ 5,358,709 $ 5,199,572
Expenses:
Operating expenses 3,442,496 3,424,047 3,298,651
Interest expense 1,019,581 1,041,432 954,170
Depreciation and amortization 1,011,101 993,415 991,323
----------- ----------- -----------
Total expenses 5,473,178 5,458,894 5,244,144
----------- ----------- -----------
Net income (loss) $ 9,710 $ (100,185) $ (44,572)
=========== =========== ===========
Partnership's share of net income (loss) $ 9,506 $ (97,997) $ (45,752)
=========== =========== ===========
Other partners' share
of net income (loss) $ 204 $ (2,188) $ 1,180
=========== =========== ===========
</TABLE>
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, 1998 through 1996 and the share of loss in the
above Summarized Statements of Operations consists of the Partnership's
unrecorded share of losses and cash distributions recorded as investment income
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Share of income in Local Limited Partnership Investments
in the Partnership's Statement of Operations $ 224,229 $ 96,766 $ 24,678
Partnership's share of income in the
above summarized Statements of Operations 9,506 (97,997) (44,572)
--------- --------- ---------
Difference $ 214,723 $ 194,763 $ 69,250
========= ========= =========
Unrecorded Losses:
Linden Park (Prior year loss
carry forward applied against 1996 net income) $ 19,199 $ 46,355 $ (55,714)
Brierwood, Ltd. 46,313 35,037 36,982
Brierwood II, Ltd. 18,802 11,530 20,189
Pine Forest Apartments, Ltd. 41,658 66,954 39,870
Surry Manor -- 11,822 28,145
Glendale Manor 7,778 -- --
Meadowwood, Ltd. 29,908 -- --
Other -- -- (222)
--------- --------- ---------
Subtotal Unrecorded Losses 163,658 171,698 69,250
Cash distributions recorded as investment income:
Glendale Manor 37,497 23,065 --
Surry Manor 13,568 -- --
--------- --------- ---------
Total $ 214,723 $ 194,763 $ 69,250
========= ========= =========
</TABLE>
28
<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 Sheets at December 31, 1998 and 1997 are $1,334,950 and $1,140,912,
respectively, greater than the Partnership's equity reported in the Summarized
Balance Sheets above. This is related to the share of unrecorded losses of the
seven Local Limited Partnerships and cash distributions received from Glendale
Manor and Surry Manor which were recorded as investment income. The investment
of these seven Local Limited Partnerships has been reduced to zero.
The Partnership recorded its share of losses in Linden Park, Brierwood
Ltd., Brierwood II, Ltd., Pine Forest Apartments, Ltd., Surry Manor, Glendale
Manor and Meadowwood, Ltd. until its related investment was reduced to zero.
Subsequent to that point, any cash distributions received from these seven
partnerships will be recognized as investment income rather than as a reduction
in Investment in Local Limited Partnerships on the Partnership's Balance Sheet.
In 1998, $37,497 of cash distributions from Glendale Manor and $13,568 from
Surry Manor were recognized as investment income as it would have reduced its
investment balance below zero. The Partnership is not obligated to make
additional capital contributions to fund the deficit in its capital accounts in
these Local Limited Partnerships.
Certain Local Limited Partnerships have made payments on behalf of the
Partnership for non-resident state withholding taxes in accordance with state
income tax regulations. These amounts totaling $4,961 in 1998 and $2,233 in 1997
have been treated as distributions from the Local Limited Partnerships and a
distribution to the partners of Liberty Housing Partners Limited Partnership.
5. Notes and Accrued 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, 1998 the
Partnership received $18,634 of interest on such notes. Any interest that is
unpaid prior to maturity is due at maturity. As of December 31, 1998 and 1997,
the outstanding balance of principal and accrued interest net of unamortized
discount is $159,303 and $143,485, respectively.
29
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
NOTES TO THE FINANCIAL STATEMENTS
6. Transactions with Affiliates
During the years ended December 31, 1998, 1997 and 1996 the Partnership
recognized general and administrative expenses owed to the Managing General
Partner, as follows:
1998 1997 1996
---- ---- ----
Reimbursement of Partnership
administration expenses $48,136 $57,707 $48,240
Partnership management fees 50,000 50,000 50,000
As of December 31, 1998 and 1997, accounts payable to affiliates
totaling $173,271 and $75,271 respectively, represent amounts owed for
reimbursements of Partnership administration expenses of $68,000 and $20,000,
respectively, and partnership management fees of $105,271 and $55,271,
respectively. Management has determined to defer further payment of the amounts
accruing for Partnership management fees and reimbursement of Partnership
administrative expenses in order to conserve cash and cash equivalents available
to fund the Partnership's operations. See note 3.
30
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
NOTES TO THE FINANCIAL STATEMENTS
7. Purchase Money Notes
Purchase money notes consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
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 338,512 306,106
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 159,482 137,984
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 239,852 215,485
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 119,067 81,486
<CAPTION>
31
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
NOTES TO THE FINANCIAL STATEMENTS
7. Purchase Money Notes (Continued)
1998 1997
---- ----
<S> <C> <C>
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 30,249 50,080
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 1,322,656 1,066,909
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 760,985 706,085
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 328,962 304,662
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 415,340 383,840
<CAPTION>
32
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
NOTES TO THE FINANCIAL STATEMENTS
7. Purchase Money Notes (Continued)
1998 1997
---- ----
<S> <C> <C>
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 1,879,213 1,746,140
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 1,519,435 1,411,536
----------- -----------
Total principal and accrued and unpaid
interest at 9% at December 31 15,818,753 15,115,313
Aggregate discount on the above purchase
money notes plus accrued interest (based
upon average imputed interest rates of 21%) (1,682,010) (3,571,118)
----------- -----------
Purchase money note liability 14,136,743 11,544,195
Less: Current maturities, net of aggregate discount (13,151,250) (--)
----------- -----------
Long-term purchase money note liability $ 985,493 $ 11,544,195
=========== ============
</TABLE>
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, 1998 is approximately 21%.
33
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
7 Purchase Money Notes (Continued)
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.
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.
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, 1998, 1997 and 1996, to the loss reported for
Federal income tax purposes is as follows:
1998 1997 1996
---- ---- ----
Net loss per Statements of
Operations $(2,555,661) $(2,217,613) $(1,962,007)
Less: Excess of tax equity over
book equity in loss of
Local Limited
Partnership (700,821) (669,980) (746,209)
Add: Additional book basis
interest 1,707,207 1,292,826 1,033,449
Expenses not deducted
pursuant to I.R.C
Section 267 98,000 17,000 (30,500)
----------- ----------- -----------
Loss for Federal income
tax purposes $(1,451,275) $(1,577,767) $(1,705,267)
=========== =========== ===========
34
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
9. Disclosure About Fair Value of Financial Instruments
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 Notes 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.
11. Statement of Distributable Cash from Operations (Unaudited)
Distributable Cash From Operations for the year ended December 31, 1998,
as defined in Section 17 of the Partnership Agreement, is as follows:
Interest income per Statement of Operations $ 36,347
Less: Interest income added to long-term notes
receivable, net of discount amortization (15,818)
Plus: 1998 cash distributions to be received from
Local Limited Partnerships, net of non-resident
state withholding taxes 255,290
Less: 1998 interest payments on purchase money
notes to be paid out of 1998 cash
distributions from Local Limited Partnerships (255,290)
General and administrative expenses per
Statement of Operations (143,677)
---------
Cash from Operations, as defined (123,148)
---------
Distributable Cash from Operations, as defined $ 0
=========
35
<PAGE>
Reznick Fedder & Silverman
Certified Public Accountants - A Professional Corporation
745 Atlantic Avenue - Suite 800 - Boston, Massachusetts 02111-2735
Phone (617) 423-5855 - Fax (617) 423-6651
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, 1998 and 1997, and the related statements of operations, changes in
partners' deficit, and cash flows for each of the three years in the period
ended December 31, 1998. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits. We did not audit the financial
statements of certain operating partnerships in which Liberty Housing Partners
Limited Partnership owns a limited partnership interest. Investments in such
partnerships comprise 47% and 43% of the assets as of December 31, 1998 and
1997, respectively, and losses from such partnerships comprise 0%, 1.5%, and
6.6% of the partnership loss for each of the three years in the period ended
December 31, 1998, of Liberty Housing Partners Limited Partnership. The
financial statements of these partnerships were audited by other auditors, whose
reports have been furnished to us, and our opinion, insofar as it relates to
information relating to these partnerships, is based solely on the reports of
the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors
referred to above, the financial statements referred to above present fairly, in
all material respects, the financial position of Liberty Housing Partners
Limited Partners as of December 31, 1998 and 1997 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
/s/ REZNICK FEDDER & SILVERMAN
Boston, Massachusetts REZNICK FEDDER & SILVERMAN
March 10, 1999
36
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
INDEPENDENT AUDITORS' REPORTS
FINANCIAL STATEMENTS
AND
SUPPLEMENTAL INFORMATION
DECEMBER 31, 1998
1
37
<PAGE>
<TABLE>
<CAPTION>
C O N T E N T S
Page
<S> <C>
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 17-19
Independent Auditors' Report on Internal Control (Combined Report Applicable to
the Financial Statements and HUD-Assisted Programs) 20-21
Independent Auditors' Report on Compliance Based on an Audit of
Financial Statements Performed in Accordance with Government Auditing Standards 22
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs 23
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Fair Housing and Non-Discrimination 24
Schedule of Findings and Questioned Costs 25
Auditors' Comments on Audit Resolution Matters Relating to
the HUD Programs 26
</TABLE>
2
38
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
December 31, 1998
CERTIFICATE OF PARTNERS
We hereby certify that we have examined the accompanying
financial statements of Fiddlers Creek Apartments, Ltd. and, to the best of our
knowledge and belief, the same are complete and accurate.
GENERAL PARTNERS
/s/ Billy P. Shadrick 2/9/99
---------------------------------------------------
Billy P. Shadrick Date
Liberty LGP Limited Partnership
---------------------------------------------------
Michael Stoller Date
Partnership Employer
Identification Number: 56-1449286
3
39
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
December 31, 1998
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 are complete and
accurate.
/s/ Billy P. Shadrick
------------------------------------------
Billy P. Shadrick
President, Housing Management, Inc.
2/9/99
------------------------------------------
Date
4
40
<PAGE>
Sharrard, McGee & Co., P.A.
Certified Public Accountants - Consultants
1321 Long Street - Post Office Box 5869 - High Point, North Carolina 27262
Independent Auditors' Report
January 18, 1999
To the Partners
Fiddlers Creek Apartments, Ltd.
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, 1998, 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. as of December 31, 1998, and the results of its
operations, changes in partners' capital, 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 18, 1999 on our consideration of Fiddlers Creek Apartments, Ltd.'s
internal control and reports dated January 18, 1999, on its compliance with laws
and regulations, specific requirements applicable to major HUD programs and
specific requirements applicable to Fair Housing and Non-Discrimination.
Our audit was conducted for the purpose of forming an opinion
on the basic financial statements taken as a whole. The accompanying
supplementary information shown on pages 17 - 19 is presented for purposes of
additional analysis and is not a required part of the basic financial statements
of the Partnership. 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.
/s/ Sharrard, McGee & Co., P.A.
5
41
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
December 31, 1998
AUDITOR INFORMATION
January 18, 1999
The Audit Partner on this engagement was Carroll L. Royster,
1321 Long Street, P.O. Box 5869, High Point, North Carolina 27262,
(336)884-0410.
Sharrard, McGee & Co., P.A.'s federal employer identification
number is 56-1146197.
/s/ Sharrard, McGee & Co., P.A.
6
42
<PAGE>
<TABLE>
<CAPTION>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
BALANCE SHEET
December 31, 1998
===============================
ASSETS
<S> <C> <C>
CURRENT ASSETS:
1120 Cash - operations $ 121 815
1130 Tenant accounts receivable 943
1200 Miscellaneous prepaid expenses 21 352 $ 144 110
--------------------
DEPOSITS HELD IN TRUST - FUNDED:
1191 Tenant deposits held in trust 40 692
FUNDED RESERVES:
1310 Escrow deposits 9 377
1320 Replacement reserves 70 152 79 529
--------------------
FIXED ASSETS - AT COST (Note 3):
1410 Land 389 973
1420 Buildings 3 282 391
1440 Building equipment - portable 117 278
1460 Furnishings 50 953
1465 Office furniture and equipment 2 321
1470 Maintenance equipment 7 066
1490 Miscellaneous fixed assets 8 463
--------------------
3 858 445
1495 Less accumulated depreciation 1 602 562 2 255 883
--------------------
OTHER ASSETS:
1520 Intangible assets 90 188
-------------------
$ 2 610 402
===================
<CAPTION>
LIABILITIES AND PARTNERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
2109 Accounts payable - 30 days $ 10 240
2113 Accounts payable - entity (Note 4) 15 000
2121 Accrued payroll taxes payable 701
2123 Accrued management fee payable (Note 4) 5 034
2131 Accrued interest payable - first mortgage 13 716
2170 Mortgage payable - first mortgage (short-term)
(Note 3) 47 311 $ 92 002
--------------------
DEPOSIT AND PREPAID REVENUE:
2191 Tenant deposits held in trust (contra) 37 061
2210 Prepaid revenue 10 104 47 165
--------------------
LONG-TERM LIABILITIES:
2320 Mortgage payable - first mortgage (Note 3) 2 057 342
Less current maturities 47 311 2 010 031
--------------------
PARTNERS' EQUITY 461 204
-------------------
$ 2 610 402
===================
<FN>
See accompanying summary of accounting
policies and notes to financial statements.
</FN>
</TABLE>
7
43
<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, 1998
====================================
Associate
Investor Limited General Local General
Total (100%) Partner (98%) Partner (1%) Partner (1%)
-------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Balance at beginning
of year $ 330 810 $ 351 894 $ (10 542) $ (10 542)
Net income for the year 134 879 132 181 1 349 1 349
Withdrawals by partners (4 485) (2 658) (102) (1 725)
------------------- ------------------- ------------------- -------------------
Balance at end of year $ 461 204 $ 481 417 $ (9 295) $ (10 918)
=================== =================== =================== ===================
<FN>
See accompanying summary of accounting
policies and notes to financial statements.
</FN>
</TABLE>
8
44
<PAGE>
<TABLE>
<CAPTION>
Statement of Profit and Loss U.S. Department of Housing and Urban Development
Office of Housing
Federal Housing Commissioner
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, Paperwork Reduction Project (2602-0062). Office
of Information Technology, U.S. Department of Housing and Urban Development, Washington, D.C. 20410-3600. This agency may not
collect this information, and you are not required to complete this form, unless it displays a currently valid OMB control number.
Do not send this form to the above address.
For Month/Period Project Project Name:
Beginning: Ending: Number:
January 1, 1998 December 31, 1998 053-35163-PM FIDDLERS CREEK APARTMENTS, LTD.
Part I Description of Account Acct. No. Amount*
<S> <C> <C> <C> <C>
Rental Income 5100 Rent Revenue - Gross Potential 5120 $ 748,202
Tenant Assistant Payments 5121 $
Stores and Commercial 5140 $
Garage and Parking Spaces 5170 $
Flexible Subsidy Income 5180 $
Miscellaneous (specify) 5190 $
Total Rent Revenues Potential at 100% Occupancy $748,202
Vacancies 5200 Apartments 5220 $ (14,089)
Stores and Commercial 5240
Concessions 5250
Garage and Parking Spaces 5270
Miscellaneous (specify) 5290
Total Vacancies (14,089)
Net Rental Revenue Rent Revenue Less Vacancies $743,113
Elderly and Congregate Service Income - 5300
Total Service Income (Schedule Attached) 5300 $
Financial Revenue 5400 Financial Revenue - Project Operations 5410 $ 4,922
Revenue from Investments - Residual Receipts 5430 $
Revenue from Investments - Replacement Reserve 5440 $ 2,237
Revenue from Investments - Miscellaneous 5490 $
Total Financial Revenue $ 7,159
Other Revenue 5900 Laundry and Vending Revenue 5910 $ 4,062
Tenant Charges 5920 $ 12,931
Expiration of Gift Donor Restrictions 5960 $
Gifts 5970 $
Miscellaneous Revenue (specify) 5990 $
Total Other Revenue $ 16,993
Total Revenue $758,265
Administrative Expenses Conventions and Meetings 6203 $
6200/6300 Management Consultants 6204 $
Advertising and Marketing 6210 $ 6,718
Apartment Resale Expense (Coops) 6235 $
Other Renting Expense 6250 $ 1,976
Office Salaries 6310 $ 8,608
Office Expenses 6311 $ 6,898
Office or Model Apartment Rent 6312 $
Management Fee 6320 $ 42,260
Manager or Superintendent Salaries 6330 $ 25,001
Administrative Rent Free Unit 6331 $ 1,963
Legal Expenses - (Project) 6340 $ 44
Auditing Expenses 6350 $ 4,700
Bookkeeping Fees/Accounting Services 6351 $ 5,760
Bad Debts 6370 $ 380
Miscellaneous Administrative Expenses (specify) 6390 $
Total Administrative Expenses $104,308
Utilities Expense 6400 Fuel Oil/Coal 6420 $
Electricity 6450 $ 12,789
Water 6451 $ 5,262
Gas 6452 $
Sewer 6453 $
Total Operating and Maintenance Expense $ 18,051
<CAPTION>
*All amounts must be rounded to the nearest Page 1 of 2 unofficial form HUD-92410 (7/91)
dollar: $.50 and over, round up--$.49 and ref Handbook 4370.2
below, round down.
See accompanying summary of accounting policies and notes to financial statements.
9
45
<PAGE>
053-35163-PM FIDDLERS CREEK APARTMENTS, LTD.
<S> <C> <C> <C> <C>
Operating and Payroll 6510 $ 30,328
Maintenance Expenses Supplies 6515 $ 23,357
6500 Contracts 6520 $ 45,997
Operating and Maintenance Rent Free Unit 6521 $ 6,780
Garbage and Trash Removal 6525 $ 2,995
Security Payroll/Contract 6530 $
Security Rent Free Unit 6531 $
Heating/Cooling Repairs and Maintenance 6546 $ 3,266
Snow Removal 6548 $ 190
Vehicle and Maintenance Equipment Operation
and Repairs 6570 $ 331
Miscellaneous Operating and Maintenance Expenses 6590 $
Total Operating and Maintenance Expenses $113,244
Taxes and Insurance 6700 Real Estate Taxes 6710 $ 48,372
Payroll Taxes (Project's Share) 6711 $ 4,823
Property and Liability Insurance (Hazard) 6720 $ 19,627
Fidelity Bond Insurance 6721 $ 268
Workmen's Compensation 6722 $ 1,697
Health Insurance and Other Employee Benefits 6723 $ 2,034
Miscellaneous Taxes, Licenses, Permits and Insurance 6790 $
Total Taxes and Insurance $ 76,821
Financial Expenses 6800 Interest on Mortgage Payable 6820 $ 166,212
Interest on Notes Payable (Long-Term) 6830 $
Interest on Notes Payable (Short-Term) 6840 $
Mortgage Insurance Premium/Service Charge 6850 $ 10,387
Miscellaneous Financial Expenses 6890 $
Total Financial Expenses $176,559
Elderly & Congregate Total Service Expenses-Schedule Attached 6900 $
Service Expenses 6900 Total Cost of Operations Before Depreciation $489,023
Profit (Loss) before Depreciation $269,242
Depreciation (Total) - 6600 (specify) 6600 $119,363
Operating Profit or (Loss) $149,879
Corporate or Mortgagor Officer's Salaries 7110 $
Entity Expenses 7100 Legal Expense 7120 $
Federal, State and Other Income Taxes 7130 $
Interest Income 7140 $
Interest on Notes Payable 7141 $
Interest on Mortgage Payable 7142 $
Other Expenses PARTNERSHIP ADMIN FEE 7190 $ 15,000
Total Corporate Expenses $ 15,000
Profit or Loss (Net Income or Loss) $134,879
<CAPTION>
Warning: HUD will prosecute false claims and statements. Conviction may result in 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 subaccounts (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 expenses.
Part II
<S> <C>
1. Total mortgage principal payments required during the audit year (12 monthly payments).
This applies to all direct loans and HUD-held and fully insured mortgages. Any HUD
approved second mortgages should be included in these figures. $ 43,685
2. Total of 12 monthly deposits into the Replacement Reserve account, as required by the
Regulatory Agreement even if payments may be temporarily suspended or reduced. $ 27,216
3. Replacement Reserves, or Residual Receipts and Releases which are included as expense
items on this Profit and Loss statement $ 0
4. Project Improvement Reserve releases under the Flexible Subsidy Program that
are included as expense items on this Profit and Loss Statement. $ 0
<CAPTION>
Page 2 of 2 unofficial form HUD-92410 (7/91)
<FN>
See accompanying summary of accounting policies and notes to financial statements.
</FN>
</TABLE>
10
46
<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, 1998
====================================
Cash flows from operating activities:
<S> <C> <C>
Rental receipts $ 742 020
Interest receipts 7 159
Other receipts 16 993
-------------------
766 172
Administrative $ (23 092)
Management fees (56 569)
Accounting fees (5 760)
Operating and maintenance (74 060)
Real estate taxes (47 671)
Tenant security deposits 2 411
Salaries and wages (63 523)
Miscellaneous taxes (4 823)
Insurance (43 228)
Utilities (18 052)
Interest on mortgage note (166 504)
Mortgage insurance (10 352) (511 223)
------------------- -------------------
Net cash provided by operating activities 254 949
Cash flows from investing activities:
Purchase of property and equipment (390 554)
Replacement reserves - deposits (29 353)
Replacement reserves - withdrawals 108 296
Escrow deposits 5 844
-------------------
Net cash used in investing activities (305 767)
Cash flows from financing activities:
Partnership administrative fee (15 000)
Mortgage principal payments (43 685)
Withdrawals by partners (4 485)
-------------------
Net cash used in financing activities (63 170)
-------------------
Net increase in cash (113 988)
Cash at beginning of year 235 803
-------------------
Cash at end of year $ 121 815
===================
<CAPTION>
See accompanying summary of accounting
policies and notes to financial statements.
11
47
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1998
(Continued)
====================================
Reconciliation of net income to net cash provided by operating activities:
<S> <C> <C>
Net income $ 134 879
-------------------
Nonoperating expense included in determining
net income 15 000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation $ 114 260
Amortization 5 103 119 363
-------------------
Decrease (increase) in assets:
Accounts receivable (2 197)
Tenant security deposits 2 677
Prepaid expenses (19 567) (19 087)
-------------------
Increase (decrease) in liabilities:
Accounts payable (5 454)
Accrued interest (291)
Accrued taxes 700
Tenant security deposits (265)
Prepaid rents 10 104 4 794
------------------- -------------------
Total adjustments 120 070
-------------------
Net cash provided by operating activities $ 254 949
===================
<FN>
See accompanying summary of accounting
policies and notes to financial statements.
</FN>
</TABLE>
12
48
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(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 fixed assets) 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.
13
49
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
=============================
NOTE 1 - 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.
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. At times during the year, the Partnership's cash balances
exceeded $100,000. Management believes this policy will not cause any adverse
effect on the Partnership. At December 31, 1998, the amount exceeding the FDIC
limit was $60,943.
NOTE 3 - MORTGAGE PAYABLE
The mortgage, originally in the amount of $2,519,100, is
payable in monthly installments of $17,516, including interest at 8% per annum.
The final payment is due in February 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.
<TABLE>
<CAPTION>
The maturities of this debt are as follows:
<S> <C>
1999 $ 47 311
2000 51 238
2001 55 491
2002 60 096
2003 65 084
2004 and after 1 778 122
--------------------
$ 2 057 342
====================
</TABLE>
14
50
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Continued)
=============================
NOTE 4 - RELATED PARTY TRANSACTIONS
A - 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 calls for a management fee of 7.5% of gross revenue collections plus
accounting fees of $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,
1998 1998 1998
------------ ------------ --------------
<S> <C> <C> <C>
Management fees $ 17 860 $ 42 260 $ 4 554
Accounting fees 1 680 5 760 480
------------ ---------- -----------
$ 19 540 $ 48 020 $ 5 034
============ ========== ===========
</TABLE>
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 $15,000 per annum. The Partnership administrative fee is payable from
"surplus cash" as defined by HUD regulations.
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, $19,485, including a
Partnership administrative fee of $15,000, was distributed in the first quarter
of 1998, and $153,037 of available surplus cash was not distributed, but
retained for capital improvements, and it is anticipated that $90,685 will be
distributed in the first quarter of 1999.
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.
15
51
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(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 Fiddlers
Creek Apartments, Ltd.'s financial instruments as of December 31, 1998 are as
follows:
Carrying Fair Value
------------- -------------
Financial assets:
Cash and cash equivalents $ 162 507 $ 162 507
============= =============
Financial liabilities:
Long-term debt $ 2 057 342 $ 2 057 342
============= =============
16
52
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
SUPPLEMENTAL INFORMATION
For the Year Ended December 31, 1998
====================================
REPLACEMENT RESERVES
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:
<TABLE>
<CAPTION>
<S> <C> <C>
Balance at beginning of year $ 149 095
Monthly deposits:
12 @ $2,268.00 27 216
Interest 2 237
Withdrawals:
Approval Purpose of
Authorized By Date Withdrawal
HUD 04/16/98 Repave parking lot $ (81 222)
HUD 04/16/98 Repave parking lot (27 074)
WMF/Huntooh
Daise Associates Various Investment service charge (100) (108 396)
------------------- -------------------
Balance at end of year confirmed by mortgagee $ 70 152
===================
<FN>
The mortgagee charged a fee of $100 for investing the
replacement reserves fund.
</FN>
</TABLE>
17
53
<PAGE>
<TABLE>
<CAPTION>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
(A Limited Partnership)
SUPPLEMENTAL INFORMATION
For the Year Ended December 31, 1998
(Continued)
====================================
CHANGES IN FIXED ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
- ------------------------------------
Cost Accumulated Depreciation
----------------------------------------------------- ------------------------------------------------------
Balance Balance Balance Balance
January 1, December January 1, Current December
1998 Additions Deletions 31, 1998 1998 Provisions Deletions 31, 1998
---------- --------- --------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Land $ 275 147 $ 275 147
Land improvements 6 530 $ 108 296 114 826 $ 1 599 $ 2 624 $ 4 223
Buildings 3 017 603 264 788 3 282 391 1 332 254 106 627 1 438 881
Building equipment -
portable 108 774 15 168 $ 6 664 117 278 95 725 3 941 $ 6 664 93 002
Office furniture
and equipment 2 321 2 321 1 922 185 2 107
Computer equipment 786 2 302 3 088 235 720 955
Furnishings 50 953 50 953 50 953 50 953
Maintenance
equipment 7 066 7 066 7 031 35 7 066
Miscellaneous
fixed assets 5 375 5 375 5 247 128 5 375
---------- --------- --------- ---------- ---------- ---------- --------- ----------
$3 474 555 $ 390 554 $ 6 664 $3 858 445 $1 494 966 $ 114 260 $ 6 664 $1 602 562
========== ========= ========= ========== ========== ========== ========= ==========
<FN>
NOTE:
Additions to fixed assets were: Dispositions of fixed assets were:
Item Cost Item Cost
----------------- ---------- --------------- ----------
1 Computer $ 1 154 2 Ranges $ 504
1 Software 1 148 23 Refrigerators 6 160
23 Refrigerators 10 974 --------
2 Ranges 654 $ 6 664
14 Dishwashers 3 540 ========
Parking Lot Pavement 108 296
Vinyl Siding 264 788
---------
$ 390 554
=========
</FN>
</TABLE>
18
54
<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, 1998 053-35163-PM
Part A - Compute Surplus Cash
<S> <C> <C>
Cash
1. Cash (Accounts 1110, 1120, 1191, 1192) $162,507
2. Tenant subsidiary vouchers due for period covered
by financial statement $
3. Other (describe) $
(a) Total Cash (Add Lines 1, 2, and 3) $162,507
Current Obligations
4. Accrued mortgage interest payable $ 13,716
5. Delinquent mortgage principal payments $
6. Delinquent deposits to reserve for replacements $
7. Accounts payable (due within 30 days) $ 10,240
8. Loans and notes payable (due within 30 days) $
9. Deficient Tax Insurance or MIP Escrow Deposits $
10. Accrued expenses (not escrowed) $ 701
11. Prepaid Rents (Account 2210) $ 10,104
12. Tenant security deposits liability (Account 2191) $ 37,061
13. Other (Describe) $
(b) Less Total Current Obligations (Add Lines 4 through 13) $ 71,822
(c) Surplus Cash (Deficiency)(Line (a) minus Line (b)) $ 90,685
<CAPTION>
PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS
<S> <C> <C>
1. Surplus Cash $ 90,685
Limited Dividend Projects
2a. Annual 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. Amount to be Carried on Balance Sheet as Distribution Earned
but Unpaid (Line 2a plus 2b minus 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
Loan Technician Date
Reviewed By
Loan Servicer Date
Page 1 of 2 form HUD-93486 (8/95)
</TABLE>
19
55
<PAGE>
Sharrard, McGee & Co., P.A.
Certified Public Accountants - Consultants
1321 Long Street - Post Office Box 5869 - High Point, North Carolina 27262
Independent Auditors' Report on Internal Control
(Combined Report Applicable to the
Financial Statements and HUD-Assisted Programs)
January 18, 1999
To the Partners
Fiddlers Creek Apartments, Ltd.
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, 1998, and have issued
our report thereon dated January 18, 1999. 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 18, 1999.
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 the Inspector General. 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 internal control. In fulfilling
this responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of controls. The objectives of
internal control 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, errors,
irregularities or instances of noncompliance may nevertheless occur and not be
detected. Also, projection of any evaluation of internal control 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
controls may deteriorate.
In planning and performing our audit, we obtained an
understanding of the design of relevant controls 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 Fiddlers Creek
Apartments, Ltd.'s financial statements and on its compliance with specific
requirements applicable to its major HUD-assisted programs and to report on
internal control in accordance with the provisions of the Guide and not to
provide any assurance on internal control.
20
56
<PAGE>
(Continued)
We performed tests of controls, as required by the Guide, to
evaluate the effectiveness of the design and operation of controls 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 internal control. Accordingly, we do not express such an
opinion.
Our consideration of internal control would not necessarily
disclose all matters in internal control 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 components 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 internal
control and its operation that we consider to be material weaknesses as defined
above.
This report is intended for the information and use of the
partners, management, and the Department of Housing and Urban Development and is
not intended to be and should not be used by anyone other than these specified
parties.
/s/ Sharrard, McGee & Co., P.A.
21
57
<PAGE>
Sharrard, McGee & Co., P.A.
Certified Public Accountants - Consultants
1321 Long Street - Post Office Box 5869 - High Point, North Carolina 27262
Independent Auditors' Report on Compliance Based on an Audit of Financial
Statements Performed in Accordance with Government Auditing Standards
January 18, 1999
To the Partners
Fiddlers Creek Apartments, Ltd.
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, 1998, and have issued
our report thereon dated January 18, 1999.
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 Fiddlers Creek Apartments, Ltd. is the responsibility of Fiddlers
Creek Apartments, Ltd.'s management. As part of obtaining reasonable assurance
about whether the financial statements are free of material misstatement, we
performed tests of Fiddlers Creek Apartments, 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 and use of the
partners, management, and the Department of Housing and Urban Development and is
not intended to be and should not be used by anyone other than these specified
parties.
/s/ Sharrard, McGee & Co., P.A.
22
58
<PAGE>
Sharrard, McGee & Co., P.A.
Certified Public Accountants - Consultants
1321 Long Street - Post Office Box 5869 - High Point, North Carolina 27262
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs
January 18, 1999
To the Partners
Fiddlers Creek Apartments, Ltd.
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, 1998, and have issued
our report thereon dated January 18, 1999.
We have also audited Fiddlers Creek Apartments, 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, 1998. 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.
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.
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, 1998.
This report is intended for the information and use of the
partners, management, and the Department of Housing and Urban Development and is
not intended to be and should not be used by anyone other than these specified
parties.
/s/ Sharrard, McGee & Co., P.A.
23
59
<PAGE>
Sharrard, McGee & Co., P.A.
Certified Public Accountants - Consultants
1321 Long Street - Post Office Box 5869 - High Point, North Carolina 27262
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Fair Housing and Non-Discrimination
January 18, 1999
To the Partners
Fiddlers Creek Apartments, Ltd.
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, 1998, and have issued
our report thereon dated January 18, 1999.
We have applied procedures to test Fiddlers Creek Apartments,
Ltd.'s compliance with the Fair Housing and Non-Discrimination requirements
applicable to its HUD-assisted programs, for the year ended December 31, 1998.
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. Our procedures were substantially less
in scope than an audit, the objective of which would be the expression of an
opinion on Fiddlers Creek Apartments, Ltd.'s compliance with the Fair Housing
and Non-Discrimination 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 and use of the
partners, management, and the Department of Housing and Urban Development and is
not intended to be and should not be used by anyone other than these specified
parties.
/s/ Sharrard, McGee & Co., P.A.
24
60
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
For the Year Ended December 31, 1998
=========================================
NONE
25
61
<PAGE>
FIDDLERS CREEK APARTMENTS, LTD.
HUD PROJECT NO. 053-35163-PM
AUDITORS' COMMENTS ON AUDIT RESOLUTION MATTERS
RELATING TO THE HUD PROGRAMS
For the Year Ended December 31, 1998
==============================================
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.
26
62
<PAGE>
OSUNA APARTMENTS COMPANY
HUD Project No. 116-44052-LDP
(A Limited Partnership)
Financial Statements
and
Supplementary Information
For the Year Ended December 31, 1998
63
<PAGE>
<TABLE>
<CAPTION>
OSUNA APARTMENTS COMPANY
HUD Project No. 116-44052-LDP
(A Limited Partnership)
Table of Contents
<S> <C>
Independent Auditors' 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
Supplementary Information:
Supplemental Data Required by HUD Schedule 1
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs Schedule 2
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Nonmajor HUD Program Transactions Schedule 3
Independent Auditors' Report on Internal Control Schedule 4
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Fair Housing and Non-Discrimination Schedule 5
Schedule of Findings and Questioned Costs Schedule 6
Auditors' Comments on Audit Resolution Matters Relating to
HUD Programs Schedule 7
Corrective Action Plan Schedule 8
Partners' Certification Schedule 9
Management Agent's Certification Schedule 10
</TABLE>
64
<PAGE>
Kirkpatrick, Klein & Mathis, P.L.L.C.
CERTIFIED PUBLIC ACCOUNTANTS
Mike G. Kirkpatrick
James M. Klein
John C. Mathis
INDEPENDENT AUDITORS' REPORT
To the Partners of
Osuna Apartments Company
We have audited the accompanying balance sheet of Osuna Apartments Company (a
limited partnership), HUD Project No. 116-44052-LDP, as of December 31, 1998,
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. 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 Osuna Apartments Company (a
limited partnership), HUD Project No. 116-44052-LDP as of December 31, 1998, 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, we have also issued a report dated February 5, 1999, on our
consideration of Osuna Apartments Company's internal control, and reports dated
February 5, 1999, 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.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information required by HUD included in Schedule 1 provides additional analysis
which is not a required part of the basic financial statements of the
Partnership. The information in such schedule 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.
/s/ Kirkpatrick, Klein & Mathis, P.L.L.C.
February 5, 1999
4901 LBJ Freeway-Suite 120-Dallas, Texas 75244-(972) 386-0800-Fax (972) 404-9308
65
<PAGE>
<TABLE>
<CAPTION>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Exhibit A
Balance Sheet
December 31, 1998
Assets
<S> <C> <C>
Current assets:
1120 Cash - operations (Note 1) $ 33,415
1130 Accounts receivable - tenants 404
1135 Accounts receivable - HUD 279
1200 Prepaid expenses 7,621
-----------
Total current assets 41,719
Deposits held in trust - funded:
1191 Tenant security deposits (contra) (Schedules 1 and 2) 10,800
Restricted deposits and funded reserves:
1310 Mortgage escrow deposits $ 29,052
1320 Reserve for replacements
(Note 2 and Schedule 1) 162,441
1330 Reserve for exterior painting (Schedule 1) 39,960
1340 Reserve for residual receipts
(Note 2 and Schedule 1) 284,328 515,781
-----------
Fixed assets (at cost) (Notes 1 and 3) (Schedule 1):
1410 Land 255,230
1420 Buildings 1,854,035
1440 Building equipment - portable 7,487
1460 Furnishings 149,273
1465 Office furniture 10,064
-----------
2,276,089
1495 Less accumulated depreciation 1,029,692 1,246,397
-----------
Other asset:
1520 Unamortized deferred expenses (Note 1) 17,560
-----------
$1,832,257
===========
<CAPTION>
Liabilities and Partners' Equity
<S> <C> <C>
Current liabilities:
2110 Accounts payable - trade $ 15,620
2113 Accounts payable - other (Note 4) 2,500
2115 Accounts payable - HUD 2,992
2121 Accrued payroll taxes 943
2131 Accrued interest payable 478
2150 Accrued property taxes 8,450
2210 Prepaid rent 474
2170 Current maturities of long-term debt (Note 3) 39,966
-----------
Total current liabilities 71,423
Deposit liabilities:
2191 Tenant security deposits (contra) 10,800
Long-term debt (Note 3):
2320 Mortgage payable, 7 percent, less
current maturities of $39,966 1,171,648
Contingency (Note 8)
3130 Partners' equity (Notes 1 and 5) 578,386
-----------
$1,832,257
===========
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
Statement of Profit and Loss U.S. Department of Housing and Urban Development EXHIBIT B
Office of Housing
Federal Housing Commissioner
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, Paperwork Reduction Project (2502-0062). Office
of Information Technology, U.S. Department of Housing and Urban Development, Washington, D.C. 20410-3600. This agency may not
collect this information, and you are not required to complete this form, unless it displays a currently valid OMG control number.
Do not send this form to the above address.
For Month/Period Ending: Project Project Name:
Beginning: Number:
1/98 12/98 116-44052-LDP Osuna Apartments
Part I Description of Account Acct. No. Amount*
<S> <C> <C> <C> <C>
Rental Income 5,100 Rent Revenue - Gross Potential 5120 391,205
Tenant Assistant Payments 5121 38,683
Stores and Commercial 5140
Garage and Parking Spaces 5170
Flexible Subsidy Revenue 5180
Misc. Rent Revenue 5190
Excess Rent 5191
Rent Revenue - Insurance 5192
Special Claims Revenue 5193
Retained Excess Income 5194
Total Rent Revenue 429,888
Vacancies 5,200 Apartments 5220 3,561
Stores and Commercial 5240
Rental Concessions 5250
Garage and Parking Spaces 5270
Miscellaneous 5290
Total Vacancies 3,561
Net Rental Revenue (Rent Less Vacancies) 426,327
Nursing Home/Assisted Living/Board
Care/Other Elderly Care/Coop/& Other 5300
Financial Revenue 5,400 Financial Revenue - Project Operations 5410 1,874
Revenue from Investments - Residual Receipts 5430 8,435
Revenue from Investments - Replacement Resv. 5440 5,112
Revenue from Investments - Misc. 5490
Total Financial Revenue 15,421
Other Revenue 5,900 Laundry and Vending Revenue 5910 4,973
Tenant Charges 5920 2,436
Miscellaneous Revenue 5990
Total Other Revenue 7,409
Total Revenue 449,157
Administrative Expenses Conventions and Meetings 6203
6200/6300 Management Consultants 6204
Advertising and Marketing 6210 87
Other Renting Expense 6250 18
Office Salaries 6310 6,760
Office Expenses 6311 8,224
Office or Model Apartment Rent 6312
Management Fee 6320 40,042
Manager or Superintendent Salaries 6330 17,880
Administrative Rent Free Unit 6331 3,966
Legal Expenses - Project 6340 66
Audit Expense 6350 5,710
Bookkeeping Fees/Accounting Services 6351 5,280
Bad Debts 6370
Misc. Administrative Expenses 6390
Total Administrative Expenses 88,033
<CAPTION>
The accompanying notes are an integral part of the finanical statements
1 of 2
67
<PAGE>
OSUNA APARTMENTS EXHIBIT B
<S> <C> <C> <C> <C>
Utilities Expense 6,400 Fuel Oil/Coal 6420
Electricity 6450 47,393
Water 6451 18,542
Gas 6452 22,790
Sewer 6453 7,128
Total Utilities Expense 95,853
Operating and Payroll 6510 18,492
Maintenance Expenses Supplies 6515 19,830
6,500 Contracts 6520 55,322
Operating and Maintenance Rent Free Unit 6521 4,656
Garbage and Trash Removal 6525 7,820
Security Payroll/Contract 6530
Security Rent Free Unit 6531
Heating/Cooling Repairs and Maintenance 6546 4,345
Snow Removal 6548
Vehicle and Maintenance Equipment O & R 6570 362
Miscellaneous Operating and Maintenance 6590
Total Operating and Maintenance Expenses 110,827
Taxes and Insurance 6,700 Real Estate Taxes 6710 24,805
Payroll Taxes (Project Share) 6711 4,188
Property & Liability Insurance (Hazard) 6720 10,045
Fidelity Bond Insurance 6721 533
Workmen's Compensation 6722 1,264
Health Insurance and Other Employee Benefits 6723 1,615
Miscellaneous Taxes, Licenses, Permits and Ins. 6790 40
Total Taxes and Insurance 42,490
Financial Expenses 6,800 Interest on Mortgage Payable 6820 6,826
Interest on Notes Payable Long Term 6830
Interest on Notes Payable Short Term 6840
Mortgage Insurance Premium/Service Charge 6850 6,244
Miscellaneous Financial Expenses 6890 1,275
Total Financial Expenses 14,345
Elderly & Congregate Nursing Homes/Assisted Living/Board
Service Expenses 6,900 & Care/Other Elderly Care Expenses 6900 -
Total Cost of Operations before Depreciation 351,548
Profit (Loss) Before Depreciation 97,609
Depreciation Expense 6600 65,344
Amortization Expense 6610 1,054 66,398
Operating Profit or (Loss) 31,211
Mortgagor Entity Officers Salaries 7110
Expenses 7,100 Legal Expense 7120
Federal, State and Other Income Taxes 7130
Interest Income 7140
Interest on Notes Payable 7141
Interest on Mortgage Payable 7142
Other Expens Note 4 7190 2,500
Net Entity Expenses 2,500
Profit or Loss (Net Income or Loss) 3250 28,711
<CAPTION>
Warning: HUD will prosecute false claims and statements. Conviction may result in 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 subaccounts (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 expenses.
Part II
<S> <C>
1. Total principal payments required under the mortgage, even if payments under a
Workout Agreement are less or more than those required under the mortgage. $ 32,272
2. Replacement Reserve deposits required by the Regulatory Agreement or
Amendments thereto, even if payments may be temporarily suspended or waived. $ 6,068
3. Replacement or Painting Reserve releases which are included as expense items on
this Profit and Loss statement None
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that
are included as expense items on this Profit and Loss Statement. NA
<FN>
Form provided by The Sovereign Management Corporation.
The accompanying notes are an integral part of the finanical statements.
</FN>
2 of 2
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Exhibit C
Statement of Changes in Partners' Equity
For the Year Ended December 31, 1998
Associate Local
General General Limited
Total Partner Partner Partner
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance, January 1, 1998 $ 558,987 $ 3,404 $ 3,494 $ 552,089
Distributions to partners (9,312) (93) (118) (9,101)
Net income (loss) for the year 28,711 745 745 27,221
------------- ------------- -------------- --------------
Balance, December 31, 1998 $ 578,386 $ 4,056 $ 4,121 $ 570,209
============= ============= ============== ==============
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
Exhibit D
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Statement of Cash Flows
For the Year Ended December 31, 1998
Cash flows from operating activities:
<S> <C> <C>
Rental receipts $ 418,657
Interest receipts 789
Other receipts 7,409 $ 426,855
---------------
Administrative expenses 23,160
Management fees 40,042
Utilities 88,966
Salaries and wages 43,132
Maintenance expenses 87,679
Real estate taxes and escrow deposits 49,272
Taxes - other 3,789
Insurance 13,271
Mortgage interest 7,026
Mortgage insurance premium 6,016 362,353
--------------- ---------------
Net cash provided by operating activities 64,502
Cash flows from investing activities:
Deposit to residual receipts (22,593)
Deposits to reserve for replacements (6,068)
Deposits to reserve for exterior painting (3,600)
---------------
Net cash used in investing activities (32,261)
Cash flows from financing activities:
Mortgage principal payments (37,272)
Distribution to partners (9,312)
---------------
Net cash used in financing activities (46,584)
---------------
Decrease in cash (14,343)
Cash, beginning of year 47,758
---------------
Cash, end of year $ 33,415
===============
<CAPTION>
The accompanying notes are an integral part of the financial statements.
70
<PAGE>
Exhibit D
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Statement of Cash Flows (Continued)
For the Year Ended December 31, 1998
<S> <C> <C>
Cash flows from operating activities:
Net income $ 28,711
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization $ 66,398
Decrease in accounts receivable - tenants 829
Increase in accounts receivable - HUD (158)
Decrease in prepaid expenses 414
Increase in mortgage escrow account (11,543)
Increase in accounts payable - trade 6,887
Decrease in accounts payable - HUD (155)
Decrease in accrued interest payable (200)
Increase in prepaid rent 436
Decrease in accrued property taxes (12,924)
Increase in accrued payroll taxes 439
Interest earned on reserve accounts (14,632) 35,791
-------------- --------------
Net cash provided by operating activities $ 64,502
==============
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 7,026
==============
Interest earned on reserve accounts and
maintained in the respective reserve accounts $ 14,632
==============
<FN>
The accompanying notes are an integral part of the financial statements.
</FN>
</TABLE>
71
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Notes to Financial Statements
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. Lower rental charges to tenants are recovered by
the Partnership through rent subsidies provided by HUD. 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.
During the year ended December 31, 1998, rental revenue from HUD totaled $38,683
representing nine percent of total revenue. The rent subsidy contract with HUD
expires August 31, 1999.
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, 1998 was $11,812 and "surplus cash"
amounted to $13,187. 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, 1998
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. For purposes of the statement of cash flows, cash does not include
tenant security deposits or restricted deposits.
72
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Notes to Financial Statements
Note 1 - Organization and Summary of Significant Accounting Policies (Continued)
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.
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. Actual results could differ
from those estimates.
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. 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.
73
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Notes to Financial Statements
Note 2 - Replacement Reserves and Residual Receipts
Replacement reserve funds are held in cash ($11,697) and U.S. Treasury bills
($150,744) due April 1999. Residual receipts are held in cash ($12,416) and U.S.
Treasury bills ($271,911) due April 1999. The Treasury bills bear interest at
approximately 5.26% per annum. The amounts reported approximate fair value and
are based on quoted market prices.
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:
1999 $39,966
2000 $42,856
2001 $45,954
2002 $49,275
2003 $52,838
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 1998, the general partners earned $2,500 in local partnership
administrative fees. This amount is reflected as an accrued expense at December
31, 1998. 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.
74
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Notes to Financial Statements
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 $446,000 at
December 31, 1998, 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.
Note 7 - Management Fees
Management fees of $40,042 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 stemming from the alleged wrongful
death of a tenant. The Partnership's insurance carrier has retained counsel to
represent the Partnership in this action. The allegations are denied and are
being vigorously contested. However, 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.
Note 9 - Current Vulnerability Due to Certain Concentrations
The Partnership's sole asset is Osuna Apartments. The Partnership's operations
are concentrated in the mutifamily real estate market. In addition, the
Partnership receives rental subsidies from HUD and operates in a heavily
regulated environment. The operations of the Partnership are subject to the
administrative directives, rules and regulations of federal, state and local
regulatory agencies, including, but not limited to, HUD. Such administrative
directives, rules and regulations are subject to change by an act of congress or
an administrative change mandated by HUD. Such changes may occur with little
notice or inadequate funding to pay for the related cost, including the
additional administrative burden, to comply with a change.
75
<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, 1998 to be
used for replacement of property with the approval of HUD as follows:
Balance, January 1, 1998 $151,260
Monthly deposits ($506 x 12) 6,068
Interest earned 5,113
--------
Balance, December 31, 1998 $162,441
========
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
1998 transactions.
Balance, January 1, 1998 $253,300
Interest earned 8,435
1997 residual receipts transferred 22,593
--------
Balance, December 31, 1998 $284,328
========
Reserve for Exterior Painting
Restricted cash is held by a bank to be used for exterior painting as follows:
Balance, January 1, 1998 $35,276
Deposits for 1998 ($300 x 12) 3,600
Interest earned 1,084
-------
Balance, December 31, 1998 $39,960
=======
This supporting data is presented for purposes of additional analysis and is not
a required part of the basic financial statements.
76
<PAGE>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Schedule 1
Supporting Data Required by HUD (Continued)
Miscellaneous Information
The lead auditor of the engagement was James M. Klein, a member in the firm of
Kirkpatrick, Klein & Mathis, P.L.L.C. (EIN: 75-2785999), 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.
77
<PAGE>
<TABLE>
<CAPTION>
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Schedule 1
Supporting Data Required By HUD (Continued)
December 31, 1998
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,
1998 Additions Deductions 1998 1998 Provision Deduction 1998 1998
---------- --------- ---------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Land $ 255,230 $ - $ - $ 255,230 $ - $ - $ - $ - $ 255,230
Buildings 1,854,035 - - 1,854,035 804,897 61,849 - 866,746 987,289
Building equipment
portable 7,487 - - 7,487 4,735 1,070 - 5,805 1,682
Furnishings 149,273 - - 149,273 149,273 - - 149,273 -
Office furniture 10,064 - - 10,064 5,443 2,425 - 7,868 2,196
---------- -------- -------- ---------- --------- -------- -------- ---------- ----------
Totals $2,276,089 $ - $ - $2,276,089 $ 964,348 $ 65,344 $ - $1,029,692 $1,246,397
========== ======== ======== ========== ========= ======== ======== ========== ==========
<FN>
This supporting data is presented for purposes of additional analysis and is not
a required part of the financial statements.
</FN>
</TABLE>
78
<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 12/31/98 116-44052-LDP
PART A - COMPUTE SURPLUS CASH
<S> <C> <C>
1. Cash (Accounts 1110, 1120, 1191, 1192) $44,215
2. Tenant subsidiary vouchers due for period covered
by financial statement $ 279
3. Other (describe) $
(a) Total Cash (Add Lines 1, 2, and 3) $44,494
4. Accrued mortgage interest payable $ 478
5. Delinquent mortgage principal payments $
6. Delinquent deposits to reserve for replacements $
7. Accounts payable (due within 30 days) $15,620
8. Loans and notes payable
(due within 30 days) $
9. Deficient Tax Insurance or MIP Escrow Deposits $
10. Accrued expenses (not escrowed) Payroll Taxes $ 943
11. Prepaid Rents (Account 2210) $ 474
12. Tenant security deposits liability (Account 2191) $10,800
13. Other (Describe) Excess Income $ 2,992
(b) Less Total Current Obligations (Add Lines 4 through 13) $31,307
(c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $13,187
<CAPTION>
PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS
<S> <C> <C>
1. Surplus Cash $13,187
Limited Dividend Projects
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) $ 1,375
PREPARED BY REVIEWED BY
LOAN TECHNICIAN LOAN SERVICER
DATE DATE
See Reverse for instructions) HUD-93486
<FN>
This supporting data is presented for additional analysis and is not a required part of the basic financial statements.
</FN>
</TABLE>
79
<PAGE>
Schedule 2
INDEPENDENT AUDITORS' REPORT ON
COMPLIANCE WITH SPECIFIC
REQUIREMENTS APPLICABLE TO MAJOR HUD PROGRAMS
To the Partners of
Osuna Apartments Company
We 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, 1998, and have issued our report thereon dated February 5, 1999.
We 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,
1998. The management of the Partnership 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. 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
Partnership's compliance with those requirements. We believe that our audit
provides a reasonable basis for our opinion.
In our 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, 1998.
This report is intended solely for the information and use of management and the
Department of Housing and Urban Development and is not intended to be and should
not be used by anyone other than these specified parties.
/s/ Kirkpatrick, Klein & Mathis, P.L.L.C.
Dallas, Texas
February 5, 1999
80
<PAGE>
Schedule 3
INDEPENDENT AUDITORS' REPORT
ON COMPLIANCE WITH SPECIFIC
REQUIREMENTS APPLICABLE TO
NONMAJOR HUD PROGRAM TRANSACTIONS
To the Partners of
Osuna Apartments Company
We 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, 1998, and have issued our report thereon dated February 5, 1999.
In connection with our audit of the 1998 financial statements of Osuna
Apartments Company and with our consideration of the Partnership's internal
control 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, we selected certain
transactions applicable to certain nonmajor HUD-assisted programs for the year
ended December 31, 1998. As required by the Guide, we performed auditing
procedures to test compliance with the requirements governing fair housing and
non-discrimination, management, maintenance, the replacement reserve, federal
financial reports, tenant application, tenant eligibility, tenant
recertification, and tenant 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 the Partnership's
compliance with those 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 solely for the information and use of management and the
Department of Housing and Urban Development and is not intended to be used by
anyone other than these specified parties.
/s Kirkpatrick, Klein & Mathis, P.L.L.C.
Dallas, Texas
February 5, 1999
81
<PAGE>
Schedule 4
INDEPENDENT AUDITORS' REPORT
ON INTERNAL CONTROL
To the Partners of
Osuna Apartments Company
We 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, 1998, and have issued our report thereon dated February 5, 1999. We
have also audited the Partnership's compliance with requirements applicable to
its major HUD-assisted program and have issued our report thereon dated February
5, 1999.
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. 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 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 internal control. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benefits and related
costs of controls. The objectives of internal control 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 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, errors, irregularities or instances of noncompliance may
nevertheless occur and not be detected. Also, projection of any evaluation of
internal control 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 controls may deteriorate.
In planning and performing our audits, we obtained an understanding of the
design of relevant controls 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 Osuna Apartments
Company's financial statements and on its compliance with specific requirements
applicable to its major HUD-assisted program and to report on internal control
in accordance with the provisions of the Guide and not to provide any assurance
on internal control.
82
<PAGE>
We performed tests of controls, as required by the Guide, to evaluate the
effectiveness of the design and operation of controls that we considered
relevant to preventing or detecting material noncompliance with specific
requirements applicable to the Partnership's major HUD-assisted program. Our
procedures were less in scope than would be necessary to render an opinion on
internal control. Accordingly, we do not express such an opinion.
Our consideration of internal control would not necessarily disclose all matters
in internal control 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 components 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 internal
control and its operation that we consider to be material weaknesses as defined
above.
This report is intended solely for the information and use of management and the
Department of Housing and Urban Development and is not intended to be and should
not be used by anyone other than these specified parties.
/s/ Kirkpatrick, Klein & Mathis, P.L.L.C.
Dallas, Texas
February 5, 1999
83
<PAGE>
Schedule 5
INDEPENDENT AUDITORS' REPORT
ON COMPLIANCE WITH SPECIFIC REQUIREMENTS
APPLICABLE TO FAIR HOUSING AND NON-DISCRIMINATION
To the Partners of
Osuna Apartments Company
We have audited the financial statements of Osuna Apartments Company as of and
for the year ended December 31, 1998, and have issued our report thereon dated
February 5, 1999.
We have also applied procedures to test Osuna Apartments Company's compliance
with the Fair Housing and Non-Discrimination requirements applicable to its
HUD-assisted programs for the year ended December 31, 1998.
Our procedures were limited to the applicable compliance requirement 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. Our 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 Fair Housing and Non-Discrimination 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 solely for the information and use of management and the
Department of Housing and Urban Development and is not intended to be and should
not be used by anyone other than these specified parties.
/s/ Kirkpatrick, Klein & Mathis, P.L.L.C.
Dallas, Texas
February 5, 1999
84
<PAGE>
Schedule 6
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Schedule of Findings and Questioned Costs
December 31, 1998
There were no findings, including material questioned costs, noted during the
audit.
85
<PAGE>
Schedule 7
AUDITORS' COMMENTS ON
AUDIT RESOLUTION MATTERS
RELATING TO HUD PROGRAMS
To the Partners of
Osuna Apartments Company
We have audited the financial statements of Osuna Apartments Company (a limited
partnership) as of and for the year ended December 31, 1998, and have issued our
report thereon dated February 5, 1999.
During the 1997 audit, no material matters involving internal control and its
operation or compliance with specific requirements applicable to its major HUD
program were noted. Accordingly corrective action was not required during 1998.
Further, based on the auditor's discussions with management, there were no HUD
OIG audits, physical inspections, program reviews or management reviews during
1998. In February 1998 the mortgagee conducted a physical inspection of the
property and indicated the overall condition of the property was satisfactory.
/s/ Kirkpatrick, Klein & Mathis, P.L.L.C.
Dallas, Texas
February 5, 1999
86
<PAGE>
Schedule 8
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Corrective Action Plan
December 31, 1998
Section I - Internal Control Review
There were no findings or recommendations which require comment.
Section II - Compliance Review
There were no instances of noncompliance with laws and regulations which require
comment. Further, as noted in Schedule 7, the physical inspection was deemed
satisfactory and required no response.
NOTE: As a result of the above, there is no need for a separate mortgagor
letter proposing a corrective action plan.
87
<PAGE>
Schedule 9
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, 1998, and, to the best of our knowledge and belief, the same are complete
and accurate.
By: /s/ Michael A. Stoller
TNG Properties Inc.
DATE GENERAL PARTNER (Printed Name)
By: /s/ Samuel R. Campbell
3/10/99 Personal Economics Development Corp.
DATE GENERAL PARTNER (Printed Name)
Employer Identification
No. 74-2347236
88
<PAGE>
Schedule 10
OSUNA APARTMENTS COMPANY
(A Limited Partnership)
Management 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,
1998, and, to the best of my knowledge and belief, the same are complete and
accurate.
The Sovereign Management Corporation
3/10/99
DATE MANAGING AGENT
BY: /s/ Joyce Brow
Joyce Brow
(Printed Name)
TITLE: Director of Management
EMPLOYER IDENTIFICATION NO.
74-1705931
89
<PAGE>
LINDEN PARK ASSOCIATES
LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
DECEMBER 31, 1998
90
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
CERTIFICATE OF PARTNERS
FHA PROJECT NO.: 000-35090-PM
DECEMBER 31, 1998
CERTIFICATE OF PARTNERS
We hereby certify that we have examined the accompanying financial
statements and supplemental data of Linden Park Associates Limited Partnership
and, to the best of our knowledge and belief, the same is complete and accurate.
GENERAL PARTNERS
---------------------------------------------
Signature Date
---------------------------------------------
Print Name
---------------------------------------------
Signature Date
---------------------------------------------
Print Name
Partnership Employer
Identification Number
52-1377632
91
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
MANAGING AGENT'S CERTIFICATION
DECEMBER 31, 1998
CERTIFICATE OF MANAGING AGENT
We hereby certify that we have examined the accompanying financial
statements and supplemental data of Linden Park Associates Limited Partnership,
and, to the best of our knowledge and belief, the same is complete and accurate.
Beltway Management, Inc.
CORPORATE OFFICER
---------------------------------------------
Signature Date
---------------------------------------------
Print Name
Corporate Employer
Identification Number
52-1006619
92
<PAGE>
Grubman & Associates
of Maryland, P.C. - Certified Public Accountants
101 Chestnut Street, Suite 120
Gaithersburg, MD 20877
(301) 948-3464
Facsimile (301) 762-7350
REPORT ON AUDITED FINANCIAL STATEMENTS AND
SUPPLEMENTARY INFORMATION
Independent Auditor's Report
To the Partners
Linden Park Associates Limited Partnership
Triangle, Virginia
We have audited the accompanying balance sheet of Linden Park Associates Limited
Partnership as of December 31, 1998, and the related statements of income, cash
flows and analysis of partners' equity 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 Linden Park Associates Limited
Partnership as of December 31, 1998, 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 21, 1999 on our consideration of Linden Park Associates Limited
Partnership's internal control structure and a report dated January 21, 1999 on
its compliance with laws and regulations.
93
<PAGE>
The accompanying supplementary information is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the financial statements
taken as a whole.
/s/ Grubman & Associates of Maryland, P.C.
Grubman & Associates of Maryland, P.C.
Gaithersburg, Maryland
January 21, 1999
Employer Identification No.: 52-1885118
Engagement Principal: Stewart A. Grubman
94
<PAGE>
<TABLE>
<CAPTION>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
<S> <C> <C>
Current Assets
1120 Cash in Bank $97,763
1121 Cash in Bank - Owners 890
1130 Tenant Accounts Receivable 12,695
1140 Accounts Receivable - Other 2,890
1153 Due from General Partners 15 $114,253
-----------
Deposits Held in Trust - Funded
1191 Tenants Security Deposits (Contra) 68,762
Prepaid Expenses
1240 Property Insurance 2,203
1250 Mortgage Insurance Premium 955
1251 Insurance - Other 241 3,399
-----------
Restricted Deposits and Funded Reserves
1310 Mortgage Escrow Deposits 27,601
1320 Replacement Reserve 88,886 116,487
-----------
Fixed Assets
1410 Land 456,828
1420 Buildings 5,657,969
1450 Building Equipment - Portable 359,506
1451 Furniture & Fixtures 23,264
1452 Improvements 108,483
-----------
Total Fixed Assets 6,606,050
Less: Accumulated Depreciation (2,615,129) 3,990,921
----------- ------------
TOTAL ASSETS $4,293,822
============
<CAPTION>
See Accompanying Notes to Financial Statements.
-2-
95
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
BALANCE SHEET
DECEMBER 31, 1998
LIABILITIES AND PARTNERS' EQUITY
<S> <C> <C>
Current Liabilities
2110 Accounts Payable $20,083
2120 Accrued Wages Payable 6,924
2130 Accrued Interest Payable 3,579
2135 Accrued Interest - Sellers Note 619,434
2150 Payroll Taxes Payable 737
2155 Management Fee Payable 9,498
2320 Mortgage Payable - Current Portion 105,914 $766,169
------------
Deposits and Prepayment Liabilities
2191 Tenants Security Deposits (Contra) 38,830
2210 Rent Deferred Credits 725 39,555
------------
Long Term Liabilities
2310 Notes Payable - Sellers 1,800,000
2320 Mortgage Payable 2,147,248
------------
3,947,248
Less: Current Portion (105,914) 3,841,334
------------
Partners' Equity
3130 Partners' Equity (Deficit) (353,236)
-----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $4,293,822
===========
<FN>
See Accompanying Notes to Financial Statements.
</FN>
</TABLE>
-3-
96
<PAGE>
<TABLE>
<CAPTION>
Statement of U.S. Department of Housing
Profit and Loss 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 Project Number Project Name
Beginning 1/1/98 Ending 12/31/98 000-35090-PM Linden Park
Part I Description of Account Acct.No. Amount*
<S> <C> <C> <C> <C>
Apartments or Member Carrying Charges (Coops) 5120 $ 1,313,529
Tenant Assistance Payments 5121 $ 29,089
Rental Furniture and Equipment 5130 $
Income Stores and Commercial 5140 $
5100 Garage and Parking Spaces 5170 $
Flexible Subsidy Income 5180 $
Miscellaneous (specify) 5190 $
Total Rent Revenue Potential at 100% Occupancy $ 1,342,618
Apartments 5220 ( 76,617)
Furniture and Equipment 5230 ( )
Vacancies Stores and Commercial 5240 ( )
5200 Garage and Parking Spaces 5270 ( )
Miscellaneous (specify) 5290 ( )
Total Vacancies ( 76,617)
Net Rental Revenue Rent Revenue Less Vacancies $ 1,266,001
Elderly and Congregate Services Income -- 5300
Total Service Income (Schedule Attached) 5300 $ $ 0
Interest Income-Project Operations 5410 $ 3,373
Financial Income from Investments-Residual Receipts 5430 $
Revenue Income from Investments-Replacement Reserve 5440 $ 2,929
5400 Income from Investments-Miscellaneous 5490 $
Total Financial Revenue $ 6,302
Laundry and Vending 5910 $ 35,893
NSF and Late Charges 5920 $ 7,368
Other Damages and Cleaning Fees 5930 $
Revenue Forfeited Tenant Security Deposits 5940 $ 99
5900 Other Revenue (specify) 5990 $ 673
Total Other Revenue $ 44,033
Total Revenue $ 1,316,336
Advertising 6210 $ 48,894
Other Renting Expense 6250 $ 5,734
Office Salaries 6310 $ 30,996
Office Supplies 6311 $ 13,025
Office or Model Apartment Rent 6312 $
Administrative Management Fee 6320 $ 108,967
Expenses Manager or Superintendent Salaries 6330 $ 34,060
6200/6300 Manager or Superintendent Rent Free Unit 6331 $ 15,112
Legal Expenses (Project) 6340 $ 5,761
Auditing Expenses (Project) 6350 $ 7,500
Bookkeeping Fees/Accounting Services 6351 $ 9,504
Telephone and Answering Service 6360 $ 10,105
Bad Debts 6370 $ 22,609
Miscellaneous Administrative Expenses (specify) 6390 $ 2,104
Total Administrative Expenses $ 314,371
Fuel Oil/Coal 6420 $
Utilities Electricity 6450 $ 20,106
Expenses Water 6451 $ 29,153
6400 Gas 6452 $ 68,447
Sewer 6453 $ 38,440
Total Utilities Expense $ 156,146
<CAPTION>
* All amounts must be rounded to the nearest dollar; $.50 and Page 1 of 2 Form HUD-92410 ( )
over, round up - $.49 and below, round down. Ref. HB 4370.2
See Accompanying Notes to Financial Statements.
-4-
97
<PAGE>
<S> <C> <C> <C> <C>
Janitor and Cleaning Payroll 6510 $ 23,991
Janitor and Cleaning Supplies 6515 $ 1,589
Janitor and Cleaning Contract 6517 $ 17,549
Exterminating Payroll/Contract 6519 $ 4,578
Exterminating Supplies 6520 $ 300
Garbage & Trash Removal 6525 $ 54,404
Security Payroll/Contract 6530 $ 1,470
Grounds Payroll 6535 $ 21,093
Operating and Grounds Supplies 6536 $ 4,552
Maintenance Grounds Contract 6537 $ 26,784
Expenses Repairs Payroll 6540 $ 62,180
6500 Repairs Material 6541 $
Repairs Contract 6542 $ 20,689
Elevator Maintenance/Contract 6545 $ 3,560
Heating/Cooling Repairs and Maintenance 6546 $ 348
Swimming Pool Maintenance/Contract 6547 $ 19,292
Snow Removal 6548 $
Decorating Payroll/Contract 6560 $ 22,373
Decorating Supplies 6561 $
Other 6570 $
Miscellaneous Operating and Maintenance Expenses 6590 $ 3,802
Total Operating and Maintenance Expenses $ 288,554
Real Estate Taxes 6710 $ 53,173
Payroll Taxes (FICA) 6711 $ 16,422
Miscellaneous Taxes, Licenses and Permits 6719 $ 140
Taxes Property and Liability Insurance (Hazard) 6720 $ 13,239
and Fidelity Bond Insurance 6721 $ 715
Insurance Workmen's Compensation 6722 $ 4,188
6700 Health Insurance and Other Employee Benefits 6723 $ 18,068
Other Insurance (specify) 6729 $
Total Taxes and Insurance $ 105,945
Interest on Bonds Payable 6810 $
Interest on Mortgage Payable 6820 $ 43,900
Financial Interest on Notes Payable (Long-Term) 6830 $
Expenses Interest on Notes Payable (Short-Term) 6840 $
6800 Mortgage Insurance Premium/Service Charge 6850 $ 11,501
Miscellaneous Financial Expenses 6890 $ 1,404
Total Financial Expenses $ 56,805
Elderly & Total Service Expenses--Schedule Attached 6900 $ 0
Congregate Total Cost of Operations Before Depreciation $ 921,821
Service Profit (Loss) Before Depreciation $ 394,515
Expenses Depreciation (Total)--6600 (specify) 6600 $ 242,126
6900 Operating Profit or (Loss) $ 152,389
Officer Salaries 7110 $
Corporate or Legal Expenses (Entity) 7120 $
Mortgagor Taxes (Federal-State-Entity) 7130-32 $
Entity Other Expenses (Entity) 7190 $ 171,980
Expenses Total Corporate Expenses $ 171,980
7100 Net Profit or (Loss) $ (19,591)
<CAPTION>
Warning: HUD will prosecute false claims and statements. Conviction may result
in 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>
1. Total principal payments required under the mortgage, even if payments under a Workout
Agreement are less or more than those required under the mortgage. $ 103,811
2. Replacement Reserve deposits required by the Regulatory Agreement or Amendments thereto,
even if payments may be temporarily suspended or waived. $ 62,400
3. Replacement or Painting Reserve releases which are included as expense items on this
Profit and Loss statement. $ 0
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that are included
as expense items on this Profit and Loss Statement. $ 0
<FN>
Page 2 of 2 Form HUD-92410
See Accompanying Notes to Financial Statements.
</FN>
</TABLE>
-5-
98
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
STATEMENT OF PARTNERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
General Limited Total
Partners Partners
------------------------------------------
Partners' (Deficit) -
January 1, 1998 ($ 30,578) ($303,067) ($333,645)
Add: Net Income for the
Year (392) (19,199) (19,591)
------------------------------------------
Partners' (Deficit) -
December 31, 1998 ($ 30,970) ($322,266) ($353,236)
==========================================
See Accompanying Notes to Financial Statements.
-6-
99
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
STATEMENT OF CASH FLOWS - OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
OPERATING ACTIVITIES:
Revenues
Rent Income $ 1,248,492
Financial Income 6,302
Laundry Income 35,893
Other Tenant Charges 8,140 $ 1,298,827
-----------
Expenses
Administrative Expenses 127,474
Utilities Expenses 156,929
Management Fees 109,596
Operating & Maintenance Expenses 173,141
Payrolls 188,189
Taxes - Real Estate 53,173
Taxes - Other 16,487
Interest on Mortgages 44,073
Interest - Other 1,204
Insurance 36,202
Mortgage Insurance Premiums 11,460
Miscellaneous 200 918,128
----------- ----------
TOTAL PROVIDED BY OPERATIONS $ 380,699
----------
INVESTING ACTIVITIES:
Net Change in Tax and Insurance Escrow 4,595
Net Change in Replacement Reserve 7,755
Increase in Funded Security Deposits (2,284)
Decrease in Tenants Security Deposits (5,688)
Purchase of Assets (64,587)
----------
TOTAL USED BY INVESTING ACTIVITIES (60,209)
----------
FINANCIAL ACTIVITIES:
Surplus Cash Distributions (198,598)
Amortization of Mortgage (103,811)
----------
TOTAL USED FOR FINANCIAL ACTIVITIES (302,409)
----------
INCREASE (DECREASE) IN CASH BALANCE 18,081
Cash at Beginning of Year 79,682
----------
Cash at End of Year $ 97,763
==========
See Accompanying Notes to Financial Statements.
-7-
100
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
RECONCILIATION OF CASH FLOWS - OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
Reconciliation of Net Income (Loss) to Net Cash Provided by
Operating Activities:
Net Income (Loss) $152,389
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by
Operating Activities:
Depreciation 242,126
Decrease (Increase) in:
Accounts Receivable - Tenants (2,979)
Accounts Receivable - Section 8 (40)
Prepaid Property Insurance 8
Prepaid Mortgage Insurance 41
Increase (Decrease) in:
Accounts Payable - Trade (11,428)
Accounts Payable - Management Agent (629)
Accrued Interest Payable (173)
Accrued Wages 687
Rents Received in Advance 622
Accrued Payroll Taxes 75
--------
Net Cash Provided (Used) by
Operating Activities $380,699
========
See Accompanying Notes to Financial Statements.
-8-
101
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
STATEMENT OF CASH FLOWS - PARTNERSHIP
FOR THE YEAR ENDED DECEMBER 31, 1998
OPERATING ACTIVITIES:
Revenues
Financial Income $ 20
Expenses
Partnership Administration Fee $ 10,000
Interest on Sellers Notes 188,598 198,598
--------- --------
TOTAL USED BY OPERATIONS (198,578)
--------
FINANCIAL ACTIVITIES:
Surplus Cash Distributions 198,598
--------
INCREASE (DECREASE) IN CASH BALANCE 20
Cash at Beginning of Year 870
--------
Cash at End of Year $ 890
========
See Accompanying Notes to Financial Statements.
-9-
102
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
STATEMENT OF CASH FLOWS - PARTNERSHIP
FOR THE YEAR ENDED DECEMBER 31, 1998
Reconciliation of Net Income (Loss) to Net Cash Provided by Operating
Activities:
Net Income (Loss) ($171,980)
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided (Used) by
Operating Activities:
Increase (Decrease) in:
Accrued Interest - Sellers Notes (26,598)
---------
Net Cash Provided (Used) by
Operating Activities ($198,578)
=========
See Accompanying Notes to Financial Statements.
-10-
103
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Summary of Significant Accounting Policies:
a) Organization:
The Virginia limited partnership was organized on December 6,
1984 to own, maintain and operate a 198 unit apartment complex
(the project) located in Dumfries, Virginia. The operation of
the project is governed under Section 221 (d) (4) of the
National Housing Act by a regulatory agreement with the
Federal Housing Administration. Such projects are regulated by
HUD as to operating methods. By amendment to the regulatory
agreement project rent charges were decontrolled by HUD. The
Virginia Housing Development Authority (VHDA) controls the
rent charges pursuant to their regulatory agreement.
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. However, 1)
the allocation of deductions in respect of depreciation on
property contributed to the partnership is to be allocated
according to the basis contributed by respective partners, and
2) deductions in respect of the operating deficit guarantee
fee are to be allocated 1% to the Associate General Partner
and 99% to the Investor Limited Partner. 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.
b) Depreciation:
Depreciation is provided for in amounts sufficient to relate
the cost of depreciable assets to operations over their
estimated service lives, principally using the straight line
method over 30 years for buildings, 5 years for portable
building equipment and 7 years for office equipment.
c) Income Taxes:
No provision for income taxes has been made in the financial
statements since these taxes are the personal responsibilities
of the partners.
d) 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.
-11-
104
<PAGE>
Notes to Financial Statements Page 2
2. Mortgage Payable:
The 2% FHA insured mortgage, collateralized by property and building of
the partnership, to the Virginia Housing Development Authority and the
Loyola Federal Savings & Loan requiring monthly payments as follows:
Principal Tax and Insurance Replacement
and Interest Escrow Reserve Total
------------ ------ ------- -----
$12,324 $6,687 $5,200 $24,211
======= ====== ====== =======
The balance as of December 31, 1998 is:
Virginia Housing Development
Authority $2,014,134
Loyola Federal Savings & Loan 133,114
----------
$2,147,248
Amortization for the next five years is as follows:
1999 $105,914
2000 $108,044
2001 $110,216
2002 $112,450
2003 $114,719
2004 and Thereafter $1,595,905
The fair value of the mortgage payable is estimated based on the
current rates offered for debt of the same remaining maturities. At
December 31, 1998, the fair value of the mortgage payable approximates
the amounts recorded in the financial statements.
3. Related Party Transactions:
The project is managed by Beltway Management, Inc., an affiliate of a
general partner, pursuant to the management agreement approved by HUD.
The partnership pays a 8.6% management fee based on the gross
collections of the project. The management fee for the year ended
December 31, 1998 charged to operations was $108,967.
-12-
105
<PAGE>
Notes to Financial Statements Page 3
4. Allowable Distribution:
Although this project is "profit motivated" as defined by HUD, the
Virginia Housing Development Authority had previously limited the
dividends. During the calendar year, the Virginia Housing Development
Authority lifted this limitation.
The partnership agreement requires that cash flow from operations be
distributed: 1) first $10,000 to partnership administrative fee, 2)
balance to the accrued interest payable on the sellers purchase money
promissory notes.
5. Notes Payable - Sellers:
The purchase money promissory notes of $1,800,000 due December 11, 1999
bearing interest at 9% per annum collateralized by the pledge of
limited and general partnership interests.
All of the purchase money notes and accrued interest thereon may be
paid 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.
-13-
106
<PAGE>
SUPPLEMENTAL INFORMATION
-14-
107
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
FORM 92410 - SUPPORT SCHEDULE
FOR THE YEAR ENDED DECEMBER 31, 1998
Mortgage Entity Expense
Interest Income - Partnership ($20)
Partnership Administration Fee 10,000
Interest on Sellers Note 162,000
---------
$ 171,980
=========
-15-
108
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
SUPPLEMENTAL INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1998
Delinquent Tenants Accounts Receivable:
Number of Amount Past
Tenants Due
Delinquent 30 Days 24 $ 8,007
Delinquent 30-60 Days 11 1,966
Delinquent over 90 Days 16 2,722
-------
$12,695
=======
Accounts Receivable (Other than from Regular Tenants):
Name of Original Date Terms Original Balance
Borrower Amount Due
- --------------------------------------------------------------------------------
Coinmach December 1998 $2,850 $2,850
Laundry Income ======== =========
HUD - Section 8 $40 $40
======== =========
Mortgage Escrow Deposits:
Estimated amount required for
future payment of:
City, State and County Taxes $4,431
Property Insurance 11,020
Mortgage Insurance 10,505 $25,956
---------
Total Confirmed by Mortgagee 27,601
---------
Amount Funded in Excess $1,645
=========
Tenant Security Deposits:
Tenant Security deposits are held in a separate bank account in the name of the
project.
Compensation of Partners from Operations:
None
-16-
109
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
SUPPLEMENTAL INFORMATION - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1998
Reserve for Replacements:
In accordance with the provisions of the regulatory agreement, restricted cash
is held by Source One Mortgage Services to be used for replacement of property
with approval of HUD as follows:
Balance, January 1, 1998 $ 96,641
Monthly Deposits - $5,200 x 12 months 62,400
Interest Earned 2,928
Disbursements - Approved Releases (71,861)
Disbursement - Interest (monthly) (1,222)
--------
Balance, December 31, 1998,
confirmed by mortgagee $ 88,886
========
Accrued Taxes:
Federal Unemployment Accrued Wages $ 54
FICA - Employers' Share Accrued Wages 515
Virginia Unemployment Accrued Wages 168
-----------
$737
===========
Identity of Interest Firms:
The project is managed by Beltway Management, Inc., an affiliate of a general
partner, pursuant to a management agreement submitted to the Department of
Housing and Urban Development.
Accounts Payable (Other than Trade Creditors):
None
-17-
110
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
SUPPLEMENTAL INFORMATION - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1998
Listing of Identity of Interest Companies and Activities doing Business with
Owner/Agent:
Company Name Type of Service Amount
Received
Beltway Management, Inc. Management of Property $108,967
Beltway Management, Inc. Computer Fee $9,504
Unauthorized Distributions from Operations:
None
-18-
111
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
SUPPLEMENTAL INFORMATION - CONTINUED
FOR THE YEAR ENDED DECEMBER 31, 1998
Schedule of Funds in Financial Institution as of December 31, 1998:
A. Funds held by Mortgagor, Regular Operating Accounts:
1) NationsBank (checking) $ 2,834
2) NationsBank (checking) 60,837
3) Allegiance Bank (savings) 29,547
4) Susquehanna Bank (savings) 4,545
---------
Operating Accounts, Total $ 97,763
---------
B. Funds held by Mortgagor in Trust, Tenant Security Deposits:
1) Allegiance Bank (checking) 68,762
---------
68,762
---------
C. Funds held by Mortgagee, in Trust
1) Tax & Insurance Escrow 27,601
2) Replacement Reserve 88,886
---------
Funds held by Mortgagee, Total 116,487
---------
TOTAL FUNDS IN FINANCIAL INSTITUTION $283,012
=========
-19-
112
<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
Linden Park 12/31/98 000-35090-PM
<S> <C> <C>
Part A - Compute Surplus Cash
Cash
1. Cash (Accounts 1110, 1120, 1191, 1192) $ 166,525
2. Tenant subsidy vouchers due for period covered by financial statement $
3. Replacement Reserve Release $
(a) Total Cash (Add Lines 1, 2, and 3) $ 166,525
Current Obligations
4. Accrued mortgage interest payable $ 3,579
5. Delinquent mortgage principal payments $
6. Delinquent deposits to reserve for replacements $
7. Accounts payable (due within 30 days) $ 20,083
8. Loans and notes payable (due within 30 days) $
9. Deficient Tax Insurance or MIP Escrow Deposits $
10. Accrued expenses (not escrowed) $ 17,159
11. Prepaid Rents (Account 2210) $ 725
12. Tenant security deposits liability (Account 2191) $ 38,830
13. Other (Describe) $
(b) Less Total Current Obligations (Add lines 4 through 13) $ 80,376
(c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $ 86,149
Part B - Compute Distributions to Owners and Required Deposit to Residual Receipts
1. Surplus Cash $ 86,149
Limited Dividend Projects
2a. Annual Distribution Earned During Fiscal Period Covered by 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. Amount to be Carried on Balance Sheet as Distribution Earned but Unpaid
(Line 2a plus 2b minus 2c) $ 0
4. Amount Available for Distribution During Next Fiscal Period $ 86,149
5. Deposit Due Residual Receipts (Must be deposited with Mortgagee within 60 days after
Fiscal Period ends) $ 0
<FN>
Prepared By Reviewed By
Loan Technician Date Loan Servicer Date
Page 1 of 1 form HUD-93486 (8/95)
</FN>
</TABLE>
-20-
113
<PAGE>
<TABLE>
<CAPTION>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
CHANGES IN FIXED ASSET ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1998
ASSETS ACCUMULATED DEPRECIATION
---------------------------------------------- -----------------------------------------------------------------
Balance Balance Balance Current Balance Net Book
01/01/98 Additions 12/31/98 01/01/98 Provision 12/31/98 Value
---------------------------------------------- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land $ 456,828 $ -- $ 456,828 $ -- $ -- $ -- $ 456,828
Buildings 5,657,969 -- 5,657,969 2,054,276 216,406 2,270,682 3,387,287
Building
Equipment 359,506 -- 359,506 294,987 23,009 317,996 41,510
Furniture &
Equipment 23,264 -- 23,264 23,008 171 23,179 85
Improvements 43,896 64,587 108,483 732 2,540 3,272 105,211
---------------------------------------------- -----------------------------------------------------------------
$6,541,463 $ 64,587 $6,606,050 $2,373,003 $ 242,126 $2,615,129 $3,990,921
============================================== =================================================================
</TABLE>
-21-
114
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON THE INTERNAL CONTROL
STRUCTURE (COMBINED REPORT APPLICABLE TO THE
FINANCIAL STATEMENTS AND HUD-ASSISTED PROGRAMS)
Independent Auditor's Report
To the Partners
Linden Park Associates Limited Partnership
Triangle, Virginia
We have audited the financial statements of Linden Park Associates Limited
Partnership as of and for the year ended December 31, 1998, and have issued our
report thereon dated January 21, 1999. We have also audited Linden Park
Associates Limited Partnership's compliance with requirements applicable to
major HUD-assisted programs and have issued our report thereon dated January 21,
1999.
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 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 Linden
Park Associates Limited Partnership complied with laws and regulations,
noncompliance with which would be material to a major HUD-assisted program.
The management of Linden Park Associates Limited Partnership is responsible for
establishing and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgements by management are required to assess
the expected benefits and related costs of the 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 financial statements of Linden Park Associates Limited
Partnership 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.
-22-
115
<PAGE>
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 Linden Park Associates
Limited Partnership'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.
This report is intended for the information of the audit committee, 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/ Grubman & Associates of Maryland, P.C.
Grubman & Associates of Maryland, P.C.
Gaithersburg, Maryland
January 21, 1999
-23-
116
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH SPECIFIC
REQUIREMENTS APPLICABLE TO MAJOR HUD PROGRAMS
Independent Auditor's Report
To the Partners
Linden Park Associates Limited Partnership
Triangle, Virginia
We have audited the financial statements of Linden Park Associates Limited
Partnership as of and for the year ended December 31, 1998 and have issued our
report thereon dated January 21, 1999.
We have also audited Linden Park Associates Limited Partnership's compliance
with the specific 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 each of its major HUD-assisted programs for
the year ended December 31, 1998.
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 Linden Park Associates
Limited Partnership's compliance with those requirements. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, Linden Park Associates Limited Partnership 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, 1998.
This report is intended for the information of the audit committee, 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/ Grubman & Associates of Maryland, P.C.
Grubman & Associates of Maryland, P.C.
Gaithersburg, Maryland
January 21, 1999
-24-
117
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH SPECIFIC
REQUIREMENTS APPLICABLE TO AFFIRMATIVE FAIR HOUSING
Independent Auditor's Report
To the Partners
Linden Park Associates Limited Partnership
Triangle, Virginia
We have audited the financial statements of Linden and for the year ended
December 31, 1998, and have issued our report thereon dated January 21, 1999.
We have also applied procedures to test Linden Park Associates Limited
Partnership's compliance with the Affirmative Fair Housing requirements
applicable to its HUD assisted programs, for the year ended December 31, 1998.
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 procedure was substantially less in scope than an
audit, the objective of which is the expression of an opinion on Linden Park
Associates Limited Partnership'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 audit committee, 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/ Grubman & Associates of Maryland, P.C.
Grubman & Associates of Maryland, P.C.
Gaithersburg, Maryland
January 21, 1999
-25-
118
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE
WITH LAWS AND REGULATIONS APPLICABLE
TO THE FINANCIAL STATEMENTS
To the Partners
Linden Park Associates Limited Partnership
Triangle, Virginia
We have audited the financial statements of Linden Park Associates Limited
Partnership as of and for the year ended December 31, 1998, and have issued our
report thereon dated January 21, 1999.
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 Linden
Park Associates Limited Partnership is the responsibility of Linden Park
Associates Limited Partnership's management. As part of obtaining reasonable
assurance about whether the financial statements are free of material
misstatement, we performed tests of Linden Park Associates Limited Partnership's
compliance with certain provisions of laws, regulations, contracts, and grants.
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 audit committee, 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/ Grubman & Associates of Maryland, P.C.
Grubman & Associates of Maryland, P.C.
Gaithersburg, Maryland
January 21, 1999
-26-
119
<PAGE>
LINDEN PARK ASSOCIATES LIMITED PARTNERSHIP
FHA PROJECT NO.: 000-35090-PM
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
COMPLIANCE AND INTERNAL CONTROL
FOR THE YEAR ENDED DECEMBER 31, 1998
Findings/Noncompliance Questioned Cost
None N/A
-27-
120
<PAGE>
Reznick Fedder & Silverman
Certified Public Accountants - A Professional Corporation
745 Atlantic Avenue - Suite 800 - Boston, Massachusetts 02111-2735
Phone (617) 423-5855 - Fax (617) 423-6651
INDEPENDENT AUDITORS' REPORT
To the Partners
Liberty Housing Partners Limited Partnership
Our report on the 1998 and 1997 financial statements of Liberty Housing
Partners Limited Partnership is included on page 34 of this Form 10-K. In
connection with our audits 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 10, 1998
121
<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 31,1998
Cost at Interest Net Gross Amount At Which Carried
Acquisition Date Improvements At December 31, 1998
------------------------- Capitalized ----------------------------------
Number Total Buildings Subsequent Buildings
Of Encum- And to And
Property Units brances Land Improvements Acquisition Land Improvements Total
- ------------------------------ ----- ---------- ---------- ------------ ------------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Garden Apartment Complexes - Elderly Housing:
- ---------------------------------------------
Surry Manor Apartments, 44 $934,598 $50,239 $1,259,177 60,485 $54,839 $1,315,062 $1,369,901
Dobson, NC
Glendale Manor Apartments, 50 855,216 53,652 1,187,181 12,640 53,652 1,199,821 1,253,473
Clinton, SC
Fuquay-Varina Homes, 60 743,122 72,396 1,401,073 24,283 79,276 1,418,476 1,497,752
Fuquay, NC
Williamston Homes, 50 586,767 60,967 1,096,520 37,586 81,067 1,114,006 1,195,073
Williamston, NC
Oxford Homes, Oxford, NC 50 590,460 64,360 1,085,939 27,143 67,950 1,109,492 1,177,442
Garden Apartment Complexes - Low and Moderate Income Housing:
- -------------------------------------------------------------
Compass West Apartments, 200 3,110,997 397,105 4,822,593 325,778 469,020 5,076,456 5,545,476
Austintown, OH
Meadowwood Apartments, 80 788,895 90,146 1,337,358 39,379 90,146 1,376,737 1,466,883
Tifton, GA
Brierwood Apartments, 56 856,358 76,325 1,024,970 (26,931) 76,325 998,039 1,074,364
Bainbridge, GA
Pine Forest Apartments, 64 1,229,691 44,588 1,491,921 1,380 44,588 1,493,301 1,537,889
Cairo, GA
Osuna Apartments, 110 1,316,060 255,230 1,987,767 33,092 255,230 2,020,859 2,276,089
Albuquerque, NM
Linden Park Apartments 198 4,261,517 357,236 4,544,514 1,704,300 456,828 6,149,222 6,606,050
Triangle, VA
Brierwood II Apartments 18 369,139 27,288 423,387 -- 27,288 423,387 450,675
Bainbridge, GA
Garden Apartment Complexes - Other Assisted Housing:
- ----------------------------------------------------
Fiddlers Creek Apartments, 160 2,178,611 275,147 3,156,533 426,765 389,973 3,468,472 3,858,445
Winston Salem, NC ----- ----------- ---------- ----------- ---------- ---------- ----------- -----------
Total Local Limited
Partnership Real Estate 1,140 $17,821,431 $1,824,679 $24,818,933 $2,665,900 $2,146,182 $27,163,330 $29,309,512
===== =========== ========== =========== ========== ========== =========== ===========
<CAPTION>
Life on Which
Depreciation
Accumulated Date is Computed
Property Depreciation Built (Years)
- --------------------------------- ---------------- --------- -------------
<S> <C> <C> <C>
Garden Apartment Complexes - Elderly Housing:
- ---------------------------------------------
Surry Manor Apartments, $639,645 1981 3-30
Dobson, NC
Glendale Manor Apartments, 594,259 1980 3-30
Clinton, SC
Fuquay-Varina Homes, 701,170 1977 3-30
Fuquay, NC
Williamston Homes, 551,962 1978 3-30
Williamston, NC
Oxford Homes, Oxford, NC 547,390 1978 3-30
Garden Apartment Complexes - Low and Moderate Income Housing:
- -------------------------------------------------------------
Compass West Apartments, 2,467,773 1974 7-30
Austintown, OH
Meadowwood Apartments, 799,404 1977 10-25
Tifton, GA
Brierwood Apartments, 554,634 1979 10-25
Bainbridge, GA
Pine Forest Apartments, 864,586 1980 10-25
Cairo, GA
Osuna Apartments, 1,029,692 1975 5-30
Albuquerque, NM
Linden Park Apartments 2,615,129 1975 5-30
Triangle, VA
Brierwood II Apartments 248,379 1984 10-25
Bainbridge, GA
Garden Apartment Complexes - Other Assisted Housing:
- ----------------------------------------------------
Fiddlers Creek Apartments, 1,602,562 1977 5-30
Winston Salem, NC -----------
Total Local Limited
Partnership Real Estate $13,216,585
===========
<CAPTION>
The aggregate cost of the above properties for Federal income tax purposes at December 31, 1998 is $36,305,945.
A reconciliation of summarized carrying value of the above properties for the years ended December 31, 1998, 1997 and 1996 is a
follows:
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $28,802,902 $28,708,988 $27,292,762
Additions during the period - Improvements subse-
equent to acquisition, net of dispositions 506,610 93,914 1,416,226
----------- ----------- -----------
Balance at end of year $29,309,512 $28,802,902 $28,708,988
=========== =========== ===========
<CAPTION>
A reconciliation of summarized accumulated depreciation on the above properties for the years ended December 31, 1998, 1997 and 1996
is as follows:
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year ($12,276,725) ($11,329,357) ($10,381,105)
Current provision for depreciation (939,860) (947,368) (948,252)
----------- ----------- -----------
Balance at end of year ($13,216,585) ($12,276,725) ($11,329,357)
============ ============ ============
</TABLE>
122
<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, 1999:
Name Title Age
- ---- ----- ---
Michael A. Stoller President, Chief Executive Officer and Director 42
Wilma R. Brooks Vice President, Treasurer and Director 41
Barbara A. Gilman Vice President and Director of Management 49
Stephen D. Puliafico Director 43
James C. Coughlin Director 34
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.
123
<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.
James C. Coughlin is a Director of the Managing General Partner. Since
September 1997 Mr. Coughlin has been Vice President of Acquisitions of The
Newton Group, LLC. Mr. Coughlin is responsible for corporate finance, project
finance, project acquisitions, site selection and strategic planning. From 1995
to 1997, Mr. Coughlin was a principal of Peacock Associates, a real estate
consulting and financial advisory firm. From 1992 to 1995, Mr. Coughlin was a
real estate finance specialist for The Berkshire Group. Mr. Coughlin received
his B.A. from Stonehill College and his M.B.A. from Suffolk University. Mr.
Coughlin is a licensed Massachusetts real estate broker and a candidate at
Boston University's Real Estate Finance Certificate Program.
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.
124
<PAGE>
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 Form 4 or 5 with
the Securities and Exchange Commission.
Item 10. Directors and Executive Officers of the Partnership, continued
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, 1998, 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.
125
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management, continued
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 21,566 Units outstanding as of
December 31, 1998.
(b) Security ownership of management.
By virtue of its organization as a limited partnership, the Partnership
has no officers or directors. The Former Associate General Partner owned 10
Units, which have been assigned, as of January 1, 1997, 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 1998, 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, 1998 an
aggregate of $121,679 in accrued and unpaid administrative fees were due to
Liberty LGP from the Local Limited Partnerships. During 1998, Liberty LGP
accrued $68,500 in administrative fees due from the Local Limited Partnership
and received payment aggregating $65,762. At December 31, 1998 accrued and
unpaid administrative fees aggregated $124,417. Liberty LGP is not entitled to
interest on the accrued and unpaid amount.
126
<PAGE>
PART IV
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
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.
127
<PAGE>
<TABLE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
4. Instruments defining the rights of security holders:
4.1 The Amended and Restated Certificate of Limited Exhibit 4.1 to the registrants Annual
Partnership Report on Form 10-K, for the period
ended December 31, 1995.
4.2 First Amendment to Second Amended and Restated Exhibit 4.2 to the registrants Annual
Certificate of Limited Partnership 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 Limited Exhibit 4.4 to the registrants Annual
Partnership (withdrawal of Liberty Real Estate Report on Form 10-K, for the period
Corporation and Admission of TNG Properties Inc. ended December 31, 1995.
4.5 Amendment to the Amended Agreement of Limited Exhibit 4.5 to the registrants Annual
Partnership (withdrawal of LHP Associates Limited Report on Form
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 Billy P. Exhibit 10.4 (a) Effective to
Shadrick, Bobby Ray Badgett, Housing Projects, Inc. and Post-Amendment No. 1 to Form S-11
Liberty Housing Partners Limited Partnership. Registration Statement (File 2-90617)
*10.4 (b) Amended and Restated Certificate and Agreement of Exhibit 10.4 (b) to Post- Effective
Limited Partnership of Surry Manor, Ltd. Amendment No. 1 to Form S-11
Registration Statement (File 2-90617)
128
<PAGE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
*10.4 (c) Promissory Notes dated August 31, 1984 from Liberty Exhibit 10.4 (c) to Post-Effective Amendment No.
Housing Partners Limited Partnership to Billy P. 1 to Form S-11 Registration Statement (File
Shadrick and from Liberty Housing Partners Limited 2-90617)
Partnership to Bobby Joe Davis.
*10.4 (d) Purchase Money Notes dated August 31, 1984 from Liberty Exhibit 10.4 (d) to Post-Effective Amendment No.
Housing Partners to Billy P. Shadrick and from Liberty 1 to Form S-11 Registration Statement (File
Housing Partners Limited Partnership to Bobby Joe Davis. 2-90617)
*10.4 (e) Pledge Agreements dated August 31, 1984 between Billy P. Exhibit 10.4 (e) to Post-Effective Amendment No.
Shadrick and Liberty Housing Partners Limited 1 to Form S-11 Registration Statement (File
Partnership and between Bobby Joe Davis and Liberty 2-90617)
Housing Partners Limited Partnership.
*10.4 (f) Deed of Trust Note dated July 11, 1980 from Surry Manor, Exhibit 10.4 (f) to Post-Effective Amendment No.
Ltd. to Highland Mortgage Company and related Deed of 1 to Form S-11 Registration Statement (File
Trust dated July 11, 1980 among Surry Manor, Ltd., James
2-90617) M. Tanner, and Highland Mortgage Company.
*10.4 (g) Regulatory Agreement dated July 11, 1980 between Surry Exhibit 10.4 (g) to Post-Effective Amendment No.
Manor, Ltd. and the Secretary of Housing and Urban 1 to Form S-11 Registration Statement (File
Development. 2-90617)
*10.4 (h) Housing Assistance Payments Contract dated April 9, 1981 Exhibit 10.4 (h) to Post-Effective Amendment No.
between Surry Manor, Ltd. and the Secretary of Housing 1 to Form S-11 Registration Statement (File
and Urban Development. 2-90617)
10.5 Documents Relating to Partnership Interest in Glendale
Manor Apartments
*10.5 (a) Escrow Agreement dated August 31, 1984 between Billy P. Exhibit 10.5 (a) to Post-Effective Amendment No.
Shadrick, Bobby Ray Badgett, Housing Projects, Inc. and 1 to Form S-11 Registration Statement (File
Liberty Housing Partners Limited Partnership. 2-90617)
*10.5 (b) Amended and Restated Certificate and Agreement of Exhibit 10.5 (b) to Post-Effective Amendment No.
Limited Partnership of Glendale Manor Apartments. 1 to Form S-11 Registration Statement (File
2-90617)
129
<PAGE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
*10.5 (c) Promissory Notes dated August 31, 1984 from Liberty Exhibit 10.5 (c) to Post-Effective Amendment No.
Housing Partners Limited Partnership to Billy P. 1 to Form S-11 Regis-tration Statement (File
Shadrick, from Liberty Housing Partners Limited 2-90617)
Partnership to Bobby Joe Davis and from Liberty Housing
Partners Limited Partnership to Bobby R. Badgett.
*10.5 (d) Purchase Money Notes dated August 31, 1984 from Liberty Exhibit 10.5 (d) to Post-Effective Amendment No.
Housing Partners Limited Partnership to Billy P. 1 to Form S-11 Registration Statement (File
Shadrick and from Liberty Housing Partners Limited 2-90617)
Partnership to Bobby Joe Davis.
*10.5 (e) Pledge Agreements dated August 31, 1984 between Billy P. Exhibit 10.5 (e) to Post-Effective Amendment No.
Shadrick and Liberty Housing Partners Limited 1 to Form S-11 Regis-triton Statement (File
Partnership, between Bobby Joe Davis and Liberty Housing 2-90617)
Partners Limited Partnership and 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-Effective Amendment No.
Manor Apartments to Cincinnati Mortgage Corporation and 1 to Form S-11 Registration Statement (File
related Mortgage dated April 11, 1979 between Glendale 2-90617)
Manor Apartments and Cincinnati Mortgage Corporation.
*10.5 (g) Regulatory Agreement dated April 11, 1979 between Exhibit 10.5 (g) to Post-Effective Amendment No.
Glendale Manor Apartments and the Secretary of Housing 1 to Form S-11 Registration Statement (File
and Urban Development. 2-90617)
*10.5 (h) Housing Assistance Payments Contract dated May 30, 1980 Exhibit 10.5 (h) to Post-Effective Amendment No.
between Glendale Manor Apartments and the Secretary of 1 to Form S-11 Registration Statement (File
Housing and Urban Development 2-90617)
10.6 Documents Relating to Partnership Interest in Fiddlers
Creek Apartments
*10.6 (a) Escrow Agreement dated September 28, 1984 between Billy Exhibit 10.6 (a) To Post-Effective Amendment No.
P. Shadrick, Bobby Ray Badgett, J. Thomas Dotson and 1 to Form S-11 Registration Statement (File
Liberty Housing Partners Limited Partnership. 2-90617)
130
<PAGE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
*10.6 (b) Amended and Restated Certificate and Agreement of Exhibit 10.6 (b) to Post-Effective Amendment No.
Limited Partnership of Fiddlers Creek Apartments. 1 to Form S-11 Registration Statement (File
2-90617)
*10.6 (c) Promissory Note form dated September 28, 1984, Purchase Exhibit 10.6 (c) to Post Effective Amendment No.
Money Note form dated September 28, 1984, Pledge 1 to Form S-11 Registration Statement (File
Agreement form dated September 28, 1984 and Schedule of 2-90617)
Promissory Notes, Purchase 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 Fiddlers Exhibit 10.6 (d) to Post-Effective Amendment No.
Creek Apartments to Guaranty Mortgage Company of 1 to Form S-11 Registration Statement (File
Nashville and related Deed of Trust dated September 1, 2-90617)
1975 between Fiddlers Creek Apartments and
Guaranty Mortgage Company of Nashville.
*10.6 (e) Regulatory Agreement dated September 1, 1975 between Exhibit 10.6 (e) to Post-Effective Amendment No.
Fiddlers Creek Apartments and the Secretary of Housing 1 to Form S-11 Registration Statement (File
and Urban Development. 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 between Billy Exhibit 10.7 (a) to Post-Effective Amendment No.
P. Shadrick, Bobby Ray Badgett and Liberty Housing 1 to Form S-11 Registration Statement (File
Partners Limited Partnership. 2-90617)
<PAGE>
131
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
*10.7 (b) Amended and Restated Certificate and Agreement of Exhibit 10.7 (b) to Post-Effective Amendment No.
Limited Partnership of Fuquay-Varina Homes for the 1 to Form S-11 Registration Statement (File
Elderly, Ltd. 2-90617)
*10.7 (c) Promissory Note form dated September 28, 1984, Purchase Exhibit 10.7 (c) to Post-Effective Amendment No.
Money Note form dated September 28, 1984, Pledge 1 to Form S-11 Registration Statement (File
Agreement form dated September 28, 1984 and Schedule of 2-90617)
Promissory Notes, Purchase 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 Fuquay-Varina Exhibit 10.7 (d) to Post-Effective Amendment No.
Homes for Elderly, Ltd. to Cincinnati Mortgage 1 to Form S-11 Registration Statement (File
Corporation and related Deed of Trust dated May 23, 1977 2-90617)
between Fuquay-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-Effective Amendment No.
Fuquay-Varina Homes for the Elderly, Ltd. and the 1 to Form S-11 Registration Statement (File
Secretary of Housing and Urban Development. 2-90617)
*10.7 (f) Housing Assistance Payments Contract dated May 3, 1978 Exhibit 10.7 to
between Fuquay-Varina Homes for the Elderly, Ltd. and Post-Effective
the Secretary of Housing and Urban Development. Amendment No. 1 to
Form S-11 Registration (File 2-90617)
10.8 Documents Relating to Partnership Interest in Oxford
Homes for the Elderly, Ltd.
132
<PAGE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
*10.8 (a) Escrow Agreement dated September 28, 1984 between Billy Exhibit 10.8 (a) to Post-Effective Amendment No.
P. Shadrick, Bobby Ray Badgett and Liberty Housing 1 to Form S-11 Registration Statement (File
Partners Limited Partnership. 2-90617)
*10.8 (b) Amended and Restated Certificate and Agreement of Exhibit 10.8 (b) to Post-Effective Amendment No.
Limited Partnership of Oxford Homes for the Elderly, Ltd. 1 to Form S-11 Registration Statement (File
2-90617)
*10.8 (c) Promissory Note form dated September 28, 1984, Purchase Exhibit 10.8 (c) to Post-Effective Amendment No.
Money Note form dated September 28, 1984, Pledge 1 to Form S-11 Registration Statement (File
Agreement form dated September 28, 1984 and Schedule of 2-90617)
Promissory Notes, Purchase 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 Homes for Exhibit 10.8 (d) to Post-Effective Amendment No.
the Elderly, Ltd. to Cincinnati Mortgage Corporation and 1 to Form S-11 Registration Statement (File
related Mortgage dated May 23, 1977 between Oxford Homes 2-90617)
for the Elderly, Ltd. and Cincinnati Mortgage
Corporation.
*10.8 (e) Regulatory Agreement dated May 23, 1977 between Oxford Exhibit 10.8 (e) to Post-Effective Amendment No.
Homes for the Elderly, Ltd. and the Secretary of Housing 1 to Form S-11 Registration Statement (File
and Urban Development. 2-90617)
*10.8 (f) Housing Assistance Payments Contract dated July 3, 1978 Exhibit 10.8 (f) to Post-Effective Amendment No.
between Oxford Homes for the Elderly, Ltd. and the 1 to Form S-11 Registration Statement (File
Secretary of Housing and Urban Development. 2-90617)
133
<PAGE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
10.9 Documents Relating to Partnership Interest in
Williamston Homes for the Elderly, Ltd.
*10.9 (a) Escrow Agreement dated September 28, 1984 between Billy Exhibit 10.9 (a) to Post-Effective Amendment No.
P. Shadrick, Bobby Ray Badgett and Liberty Housing 1 to Form S-11 Registration Statement (File
Partners Limited Partnership. 2-90617)
*10.9 (b) Amended and Restated Certificate and Agreement of Exhibit 10.9 (b) to Post-Effective Amendment No.
Limited Partnership of Williamston Homes for the 1 to Form S-11 Registration Statement (File
Elderly, Ltd. 2-90617)
*10.9 (c) Promissory Note form dated September 28, 1984, Purchase Exhibit 10.9 (c) to Post-Effective Amendment No.
Money Note form dated September 28, 1984, Pledge 1 to Form S-11 Registration Statement (File
Agreement form dated September 28, 1984 and Schedule of 2-90617)
Promissory Notes, Purchase 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 Williamston Exhibit 10.9 (d) to Post-Effective Amendment No.
Homes for the Elderly, Ltd. and Cincinnati Mortgage 1 to Form S-11 Registration Statement (File
Corporation and related Deed of Trust between 2-90617)
Williamston Homes for the Elderly, Ltd. and Cincinnati
Mortgage Corporation.
*10.9 (e) Regulatory Agreement dated May 24, 1977 between Exhibit 10.9 (e) to Post-Effective Amendment No.
Williamston Homes for the Elderly, Ltd. and the 1 to Form S-11 Registration Statement (File
Secretary of Housing and Urban Development. 2-90617)
*10.9 (f) Housing Assistance Payments Contract dated September 19, Exhibit 10.9 (f) to Post-Effective Amendment No.
1978 between Williamston Homes for the Elderly, Ltd. and 1 to Form S-11 Registration Statement (File
the Secretary of Housing and Urban Development. 2-90617)
134
<PAGE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ---------------------------------------------------- -------------------------------
<S> <C> <C>
10.10 Documents Relating to Partnership Interest in
Austintown Associates
*10.10 (a) Escrow Agreement dated October 30, 1984 between James Exhibit 10.10 (a) to Post-Effective Amendment No.
P. Manchi, Robert P. Baker, First March Realty 1 to Form S-11 Registration Statement (File
Corporation and Liberty Housing Partners Limited 2-90617)
Partnership.
*10.10 (b) Amended and Restated Certificate of Formation and Exhibit 10.10 (b) to Post-Effective Amendment No.
Agreement of Limited Partnership of Austintown 1 to Form S-11 Registration Statement (File
Associates. 2-90617)
*10.10 (c) Promissory Note form dated October 30, 1984, Purchase Exhibit 10.10 (c) to Post-Effective Amendment No.
Money Note form dated October 30, 1984, Pledge 1 to Form S-11 Registration Statement (File
Agreement form dated October 30, 1984 and Schedule of 2-90617)
Promissory Notes, Purchase 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 Austintown Exhibit 10.10 (d) to Post-Effective Amendment No.
Associates to Metropolitan Mortgage Corporation of 1 to Form S-11 Registration Statement (File
Ohio, Supplementary Mortgage Note dated November, 1975 2-90617)
from Austintown 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.
135
<PAGE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
*10.10 (e) Regulatory Agreement dated February 22, 1973 between Exhibit 10.10 (e) to Post-Effective Amendment No.
Austintown Associates and the Secretary of Housing and 1 to Form S-11 Registration Statement (File
Urban Development. 2-90617)
*10.10 (f) Housing Assistance Payments Contracts dated December Exhibit 10.10 (f) to Post-Effective Amendment No.
1, 1983 and June 1, 1984 between Austintown Associates 1 to Form S-11 Registration Statement (File
and the Secretary of Housing and Urban Development. 2-90617)
10.11 Documents Relating to Partnership Interest in
Meadowwood, Ltd.
*10.11 (a) Second Amended and Restated Certificate and Agreement Exhibit 10.11 (a) to Post-Effective Amendment No.
of Limited Partnership of Meadowwood, Ltd. 1 to Form S-11 Registration Statement (File
2-90617)
*10.11 (b) Promissory Note form dated October 30, 1984, Purchase Exhibit 10.11 (b) to Post-Effective Amendment No.
Money Note form dated October 30, 1984, Pledge 1 to Form S-11 Registration Statement (File
Agreement form dated October 30, 1984 and Schedule of 2-90617)
Promissory Notes, Purchase 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 October 25, Exhibit 10.11 (c) to Post-Effective Amendment No.
1978 from Meadowwood, Ltd. to Farmers Home 1 to Form S-11 Registration Statement (File
Administration and related Deed to Secure Debt dated 2-90617)
October 25, 1978 between Meadowwood, Ltd. and Farmers
Home Administration.
*10.11 (d) Farmers Home Administration Loan Agreement between Exhibit 10.11 (d) to Post-Effective Amendment No.
Meadowwood, Ltd. and Farmers Home Administration. 1 to Form S-11 Registration Statement (File
2-90617)
136
<PAGE>
Exhibit Page Number or Filing From Which Incorporated by
Numbers Description Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
*10.11 (e) Interest Credit and Rental Assistance Agreement dated Exhibit 10.11 (e) to Post-Effective Amendment No.
October 1, 1983 between Meadowwood, Ltd. and the 1 to Form S-11 Registration Statement (File
Farmers Home Administration. 2-90617)
*10.12 Documents Relating to Partnership Interest in
Brierwood, Ltd.
*10.12 (a) Second Amended and Restated Certificate and Agreement Exhibit 10.12 (a) to Post-Effective Amendment No.
of Limited Partnership of Brierwood, Ltd. 1 to Form S-11 Registration Statement (File
2-90617)
*10.12 (b) Promissory Note form dated October 30, 1984, Purchase Exhibit 10.12 (b) to Post-Effective Amendment No.
Money Note form dated October 30, 1984, Pledge 1 to Form S-11 Registration Statement (File
Agreement form dated October 30, 1984 and Schedule of 2-90617)
Promissory Notes, Purchase 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 Brierwood, Ltd. Exhibit 10.12 (c) to Post-Effective Amendment No.
to Farmers Home Administration and related Deed to 1 to Form S-11 Registration Statement (File
Secure Debt dated May 4, 1979 between Brierwood, Ltd. 2-90617)
and Farmers Home Administration.
*10.12 (d) Farmers Home Administration Loan Agreement dated June Exhibit 10.12 (d) to Post-Effective Amendment No.
15, 1978 between Brierwood, Ltd. and Farmers Home 1 to Form S-11 Registration Statement (File
Administration. 2-90617)
*10.12 (e) Interest Credit and Rental Assistance Agreement dated Exhibit 10.12 (e) to Post-Effective Amendment No.
October 1, 1980 between Brierwood, Ltd. and the 1 to Form S-11 Registration Statement (File
Farmers Home Administration. 2-90617)
137
<PAGE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
10.13 Documents Relating to Partnership Interest in Pine
Forest Apartments, Ltd.
*10.13 (a) Second Amended and Restated Certificate and Agreement Exhibit 10.13 (a) to Post-Effective Amendment No.
of Limited Partnership of Pine Forest Apartments, Ltd. 1 to Form S-11 Registration Statement
(File 2-90617)
*10.13 (b) Promissory Note form dated October 30, 1984, Purchase Exhibit 10.13 (b) to Post-Effective Amendment No.
Money Note form dated October 30, 1984, Pledge 1 to Form S-11 Registration Statement (File
Agreement form dated October 30, 1984 and Schedule of 2-90617)
Promissory Notes, Purchase 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 Forest Exhibit 10.13 (c) to Post-Effective Amendment No.
Apartments, Ltd. to Farmers Home Administration and 1 to Form S-11 Registration Statement (File
related Deed to Secure Debt dated August 6, 1980 2-90617)
between Pine Forest Apartments, Ltd. and Farmers Home
Administration.
*10.13 (d) Farmers Home Administration Loan Agreement dated May Exhibit 10.13 (d) to Post-Effective Amendment No.
10, 1979 between Pine Forest Apartments, Ltd. and 1 to Form S-11 Registration Statement (File
Farmers Home Administration. 2-90617)
*10.13 (e) Interest Credit and Rental Assistance Agreement dated Exhibit 10.13 (e) to Post-Effective Amendment No.
June 1, 1982 between Pine Forest Apartments, Ltd. and 1 to Form S-11 Registration Statement (File
the Secretary of Housing and Urban Development. 2-90617)
10.14 Documents Relating to Partnership Interest in Osuna
Apartments Company
138
<PAGE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
*10.14 (a) Amended and Restated Certificate of Formation and Exhibit 10.14 (a) to Post-Effective Amendment No.
Agreement of Limited Partnership of Osuna Apartments 2 To Form S-11 Registration Statement (File
Company. 2-90617)
*10.14 (b) Promissory Note form dated November 27, 1984, Purchase Exhibit 10.14 (b) to Post-Effective Amendment No.
Money Note form dated November 27, 1984, Pledge 2 to Form S-11 Registration Statement (File
Agreement dated November 27, 1984 between Liberty 2-90617)
Housing Partners Limited 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-Effective Amendment No.
Apartments Company to Housing America Mortgage Co., 2 to Form S-11 Registration Statement (File
Inc. and related Mortgage dated March 5, 1974 from 2-90617)
Osuna Apartments Company to Housing Mortgage Co., Inc.
*10.14 (d) Regulatory Agreement dated March 5, 1974 between Osuna Exhibit 10.14 (d) to Post Effective Amendment No.
Apartments Company and the Secretary of Housing and 2 to Form S-11 Registration Statement (File
Urban Development. 2-90617)
*10.14 (e) Housing Assistance Payments Contracts dated August 7, Exhibit 10.14 (e) to Post-Effective Amendment No.
1984 between Osuna Apartments Company and the 2 to Form S-11 Registration Statement (File
Secretary of Housing and Urban Development. 2-90617)
10.15 Documents Relating to Partnership Interest in Linden
Park Associates Limited Partnership
139
<PAGE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
*10.15 (a) Certificate and Agreement of Limited Partnership of Exhibit 10.15 (a) to Post-Effective Amendment No.
Linden Park Associates Limited Partnership. 2 to Form S-11 Registration Statement (File
2-90617)
*10.15 (b) Promissory Note form dated December 11, 1984, Purchase Exhibit 10.15 (b) to Post-Effective Amendment No.
Money Note form dated December 11, 1984, Pledge 2 to Form S-11 Registration Statement (File
Agreement dated December 11, 1984 by and between 2-90617)
Liberty LGP Limited Partnership, 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 both Exhibit 10.15 (c) to Post-Effective Amendment No.
dated December 5, 1972 and Allonge of January 29, 2 to Form S-11 Registration Statement (File
1976, Supplemental Deed of Trust both dated December 2-90617)
17, 1974 and Allonge of 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, 1976 between Exhibit 10.15 (d) to Post-Effective Amendment No.
Pennamco, Inc. and Virginia Housing Development 2 to Form S-11 Registration Statement (File
Authority. 2-90617)
*10.15 (e) Regulatory Agreement dated December 12, 1984 between Exhibit 10.15 (e) to Post-Effective Amendment No.
Linden Park Associates Limited Partnership and the 2 to Form S-11 Registration Statement (File
Secretary of Housing and Urban Development. 2-90617)
140
<PAGE>
<CAPTION>
Exhibit Description Page Number or Filing from
Numbers which Incorporated by Reference
- -------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
*10.15 (f) Regulatory Agreement dated January 31, 1976 between Exhibit 10.15 (f) to Post-Effective Amendment No.
Graham Park Venture and Virginia Housing Development 2 to Form S-11 Registration Statement (File
Authority. 2-90617)
10.16 Documents Relating to Partnership Interest Brierwood
II, Ltd.
*10.16 (a) Amended and Restated Certificate and Agreement of Exhibit 10.16 (a) to Post-Effective Amendment No.
Limited Partnership of Brierwood II, Ltd. 2 to Form S-11 Registration Statement (File
2-90617)
*10.16 (b) Promissory Note form dated January 4, 1985, Pledge Exhibit 10.16 (b) to Post-Effective Amendment No.
Agreement form dated January 4, 1985 and Schedule of 2 to Form S-11 Registration Statement (File
Promissory Notes and Pledge Agreements between Liberty 2-90617)
Housing Partners Limited Partnership and the partners
of Brierwood II, Ltd.
*10.16 (c) Promissory Note dated January 4, 1985 from Brierwood Exhibit 10.16 (c) to Post-Effective Amendment No.
II, Ltd. to Farmers Home Administration and related 2 to Form S-11 Registration Statement (File
Deed to Secure Debt dated January 4, 1985 between 2-90617)
Brierwood II, Ltd. and Farmers Home Administration.
*10.16 (d) Farmers Home Administration Loan Agreement dated June Exhibit 10.16 (d) to Post-Effective Amendment No.
30, 1983 between Brierwood II, Ltd. and Farmers Home 2 to Form S-11 Registration Statement (File
Administration. 2-90617)
*10.16 (e) Interest Credit and Rental Assistance Agreement dated Exhibit 10.16 (e) to Post-Effective Amendment No.
January 4, 1985 between Brierwood II, Ltd. and the 2 to Form S-11 Registration Statement (File
Farmers Home Administration. 2-90617)
*10.17 Letter agreement with John Wagner regarding consulting Exhibit 10.17 to Form 10-Q for the period ended
services in connection with the liquidation or September 30, 1998
workout of the Partnership's portfolio
<FN>
*Incorporated by Reference as noted
</FN>
</TABLE>
141
<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: 3-29-99 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 3-29-99
Wilma R. Brooks
142
<PAGE>
Signatures, continued
Signature Title Date
- --------- ----- ----
President, CEO and Director of
TNG Properties, Inc. Managing
General Partner
/s/ Michael A. Stoller 3-29-99
Michael A. Stoller
Director of TNG Properties, Inc.
Managing General Partner
/s/ Stephen D. Puliafico 3-29-99
Stephen D. Puliafico
Director of TNG Properties, Inc.
Managing General Partner
_____________________________ _______
James C. Coughlin
143
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements of Liberty Housing Partners Limited Partnership
at and for the period ended December 31, 1998 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 42,284
<SECURITIES> 0
<RECEIVABLES> 159,303
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 201,587
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,254,013
<CURRENT-LIABILITIES> 13,607,238
<BONDS> 985,493
0
0
<COMMON> 0
<OTHER-SE> (12,338,718)
<TOTAL-LIABILITY-AND-EQUITY> 2,254,013
<SALES> 0
<TOTAL-REVENUES> 260,576
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 143,677
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,672,560
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,555,661)
<EPS-PRIMARY> (117.31)
<EPS-DILUTED> 0
</TABLE>
