UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended September 30, 2000
[ ] 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, MA 02494
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 444-5251
Former address, if changed from last report
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
Exhibits Index on Page 16
Page 1 of 17
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
INDEX
Page
----
Part I: Financial Information
Item 1. Financial Statements:
Balance Sheets, September 30, 2000 and December 31, 1999 3-4
Statements of Operations for the Nine Months
Ended September 30, 2000 and 1999 5
Statements of Cash Flows for the Nine Months Ended
September 30, 2000, and 1999 6
Notes to Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-15
Part II: Other Information
Item 3. Defaults Upon Senior Securities 16
Item 6. Exhibits and Reports on Form 8-K 16
2
<PAGE>
<TABLE>
<CAPTION>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
BALANCE SHEETS
(Unaudited) (Audited)
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 311,549 $ 526,940
State tax refund receivable 211,271 --
Deferred legal fees 49,447 40,109
------------ ------------
Total current assets 572,267 567,049
Investments in local limited
partnerships 885,066 1,475,083
------------ ------------
Total assets $ 1,457,333 $ 2,042,132
============ ============
(continued)
3
<PAGE>
<CAPTION>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
BALANCE SHEETS (continued)
(Unaudited) (Audited)
September 30, 2000 December 31, 1999
------------------ -----------------
<S> <C> <C>
Liabilities and Partners' Deficit
Current liabilities:
Purchase Money Notes, current maturities $ 10,586,936 $ 12,436,808
Accounts payable to affiliates 261,771 188,272
Accounts payable -- 1,565
Accrued expenses 51,968 98,597
Accrued interest payable 138,038 141,318
------------ ------------
Total current liabilities 11,038,713 12,866,560
Purchase money notes, net of current maturities -- 648,199
------------ ------------
Total liabilities 11,038,713 13,514,759
------------ ------------
Contingencies -- --
Partners' deficit:
General partners:
Capital contributions 4,202 4,202
Capital distributions (159) (128)
Accumulated losses (191,946) (210,889)
------------ ------------
(187,903) (206,815)
------------ ------------
Limited partners (21,566 Units at
September 30, 2000 and December 31, 1999):
Capital contributions (net of
offering costs of $1,134,440) 9,649,520 9,649,520
Capital distributions (465,762) (462,706)
Accumulated losses (18,577,235) (20,452,626)
------------ ------------
(9,393,477) (11,265,812)
------------ ------------
Total partners' deficit (9,581,380) (11,472,627)
------------ ------------
Total liabilities and partners'
deficit $ 1,457,333 $ 2,042,132
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income $3,733 $6,402 $13,899 $101,042
--------- -------- ---------- ----------
Expenses:
Interest expense 201,690 356,272 560,962 1,491,615
general and
administrative expenses 42,511 32,672 100,501 99,030
--------- -------- ---------- ----------
Total expenses 244,201 388,944 661,463 1,590,645
--------- -------- ---------- ----------
Loss before equity in local
limited partnership investments
and Extraordinary items (240,468) (382,542) (647,564) (1,489,603)
Equity in income of Local
Limited Partnership
investments (12,011) 6,408 109,599 78,777
--------- -------- ---------- ----------
Net Loss before
extraordinary items (252,479) (376,134) (537,965) (1,410,826)
Extraordinary items:
gain on sale of investments
in Local Limited Partnerships (1,800) 344,472 2,432,299 2,998,579
--------- -------- ---------- ----------
Net income (loss) $(254,279) $(31,662) $1,894,334 $1,587,753
========= ======== ========== ==========
Units used in computing
basic net income(loss) per
Limited Partnership Unit 21,566 21,566 21,566 21,566
========= ======== ========== ==========
Basic loss per Limited
Partnership Unit before
extraordinary items $(11.59) $(17.27) $(24.70) $(64.76)
========= ======== ========== ==========
Basic net income (loss) per
Limited Partnership Unit $(11.67) $(1.45) $86.96 $72.89
========= ======== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
September 30,
-----------------------------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash distributions from Local Limited
Partnerships $ 129,618 $ 251,371
Interest payment on purchase money notes (123,760) (245,730)
Uncashed interest payments on purchase
money notes from prior years -- 841
Cash paid for general and administration expenses (47,567) (123,067)
Interest received 13,899 19,287
----------- -----------
Net cash used by operating activities (27,810) (97,298)
----------- -----------
Cash Flows from financing activity:
Principal and accrued interest received upon repayment
of Linden Park Apartments notes receivable -- 241,058
Deemed capital distributions in respect of state taxes
withheld by Local Limited Partnerships (3,087) (5,641)
----------- -----------
Net cash provided by (used in) financing activities (3,087) 235,417
----------- -----------
Cash Flows from investing activities:
Cash proceeds from sale of investments in
Local Limited Partnerships 100,000 879,411
Closing costs (56,352) (77,416)
Cash paid for deferred legal fees (16,871) --
Capital distributions to limited partners -- (449,999)
Estimated state taxes paid from proceeds from sale of
investments in Local Limited Partnerships (211,271) --
----------- -----------
Net cash provided (used) by investing activities (184,494) 351,996
----------- -----------
Net increase (decrease) in cash and cash equivalents (215,391) 490,115
Cash and cash equivalents at:
Beginning of period 526,940 42,284
----------- -----------
End of period $ 311,549 $ 532,399
=========== ===========
Reconciliation of net loss before extraordinary items to net cash used by operating
activities:
Net loss before extraordinary items $ (537,965) $(1,410,826)
Adjustments to reconcile net loss to net
cash used by operating activities:
Share of income of Local Limited
Partnership investments (109,599) (78,777)
Cash distributions from Local Limited
Partnerships 129,618 251,371
Interest expense added to purchase money
notes, net of discount amortization 440,482 1,462,940
Interest income added to long-term
notes receivable, net of discount
amortization, and interest received -- (81,755)
(Decrease) increase in:
Accrued interest payable (3,280) (216,213)
Accounts payable to affiliates 73,499 (9,498)
Accounts payable (1,565) (1,040)
Accrued expenses (19,000) (13,500)
----------- -----------
Net cash provided by operating activities $ (27,810) $ (97,298)
=========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
6
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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").
2. Significant Accounting Policies
In the opinion of the General Partner, the accompanying unaudited
financial statements contain all normal recurring adjustments necessary to
present fairly the financial position of the Partnership as of September 30,
2000. The financial statements, which do not include all of the information and
footnote disclosures required by generally accepted accounting principles,
should be read in conjunction with the Partnership's audited financial
statements for the year ended December 31, 1999.
3. Investments in Local Limited Partnerships
The following is a summary of cumulative activity for investments in
Local Limited Partnerships since their dates of acquisition:
(Unaudited) (Audited)
September 30, December 31,
2000 1999
------------- ------------
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 (3,343,091) (3,450,761)
Cash distributions received from Local
Limited Partnerships (4,199,189) (4,069,602)
Cash distributions received from Local
Limited Partnerships recognized as
investment income 95,060 93,162
Value of Local
Limited Partnership investments sold (1,035,518) (465,520)
----------- -----------
Investments in Local Limited Partnerships $ 885,066 $ 1,475,083
=========== ===========
(Continued)
7
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. Investments in Local Limited Partnerships, continued
Summarized financial information from the combined statements of operations
of Local Limited Partnerships for the periods owned by the Partnership is as
follows:
For the Nine Months Ended
September 30,
-----------------------------
2000 1999
---- ----
Rental and other income $ 2,409,534 $ 3,547,197
Expenses:
Operating expenses 1,521,499 2,304,171
Interest expense 432,016 660,498
Depreciation and amortization 439,605 647,948
----------- -----------
Total expenses 2,393,120 3,612,617
----------- -----------
Net income (loss) $ 16,414 $ (65,420)
=========== ===========
Partnership's share of net income (loss) $ 18,888 $ (63,113)
=========== ===========
Other partners' share of net income (loss) $ (2,474) $ (2,307)
=========== ===========
The differences between the Partnership's share of income in Local
Limited Partnership investments in the Partnership's Statement of Operations for
the nine months ended September 30, 2000 and 1999 and the share of net income
(loss) in the above Summarized Statements of Operations consists of the
following:
For the Nine Months Ended
September 30,
--------------------------
2000 1999
---- ----
Share of income in Local Limited
Partnership Investments in the
Partnership's Statement of Operations $ 109,599 $ 78,777
Partnership's share of income (loss) in the
above summarized Statements of Operations 18,888 (63,113)
--------- ---------
Difference $ 90,711 $ 141,890
========= =========
Partnership's unrecorded share of losses (income):
Linden Park $ -- $ 54,521
Brierwood Ltd. 8,133 17,409
Brierwood II, Ltd. 18,087 10,666
Pine Forest Apartments, Ltd. 32,254 14,354
Surry Manor 17,011 37,331
Glendale Manor 6,092 --
Meadowwood 7,206 --
Prior year loss carry forward applied
against 1999 net income
Meadowwood -- (7,255)
Glendale Manor -- (4,138)
--------- ---------
Subtotal 88,783 122,888
Cash Distributions
recorded as investment income 1,928 19,002
--------- ---------
Total $ 90,711 $ 141,890
========= =========
(Continued)
8
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. Investments in Local Limited Partnerships, continued
The Partnership recorded its share of losses in 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, further losses were suspended and any cash
distributions received from these six partnerships have been or will be
recognized as investment income rather than as a reduction in Investment in
Local Limited Partnerships on the Partnership's Balance Sheet. The Partnership
is not obligated to make additional capital contributions to fund the deficit in
its capital accounts in these Local Limited Partnerships.
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 $3,087 during the first nine
months of 2000 have been treated as distributions from the Local Limited
Partnerships and a distribution to the partners of Liberty Housing Partners
Limited Partnership.
4. Transactions with Affiliates
During the nine months ended September 30, 2000, and 1999 the
Partnership recognized general and administrative expenses owed to the Managing
General Partner, as follows:
2000 1999
---- ----
Reimbursement of Partnership
administration expenses $36,000 $37,023
Partnership management fees 37,500 37,500
As of September 30, 2000, and December 31, 1999, accounts payable to
affiliates totaling $261,771 and $188,272, respectively, represent amounts owed
for reimbursements of Partnership administration expenses of $132,000 and
$96,001, respectively, and partnership management fees of $129,771 and $92,271,
respectively.
(Continued)
9
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. Statement of Distributable Cash from Operations
Distributable Cash From Operations for the nine months ended September
30, 2000, as defined in Section 17 of the Partnership Agreement, is as follows:
Interest income per Statement of Operations $ 13,899
Less: General and administrative expenses per
Statement of Operations (100,501)
---------
Cash from Operations, as defined (86,602)
---------
Distributable Cash from Operations, as defined $ --
=========
10
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Disposition of Investments
On February 1, 2000, the Partnership sold its 98% interest as a limited
partner (the "Partnership Interest") in Osuna Apartments Company ("Osuna") to
the Sovereign Management Corporation, the company retained by Osuna to manage
its apartment complex (the "Purchaser"). In consideration for the sale of the
Partnership Interest, the Partnership received a net cash purchase price of
$100,000. In connection with the sale, the holders of the Purchase Money Notes
(the "Notes") issued by the Partnership in connection with its acquisition of
the Partnership Interest released the Partnership from all liabilities in
connection with the Notes. After transaction expenses, the Partnership
recognized a gain estimated to be $2,432,299 on the sale of the investment.
As of September 30, 2000 eight series of the Purchase Money Notes,
relating to Fuquay-Varina Homes for the Elderly, Ltd., Oxford Homes for the
Elderly, Ltd., Williamston Homes for the Elderly, Ltd., Glendale Manor
Apartments, Austintown Associates, Meadowwood Ltd., Brierwood Ltd., and Pine
Forest Apartments, Ltd. had matured and were in default. The remaining series of
Purchase Money Notes, relating to Surry Manor, Ltd. matures on July 9, 2001.
None of the series of Purchase Money Notes is cross-defaulted to the others, nor
are the series of Purchase Money Notes cross-collateralized in any manner.
The aggregate outstanding principal amount of and accrued and unpaid
interest on the Purchase Money Note obligations of the Partnership, as of
September 30, 2000, was $10,586,936. The outstanding obligations are expected to
increase annually as interest continues to accrue under the Purchase Money
Notes. As of September 30, 2000 there is no unamortized discount balance on the
Purchase Money Notes. The unamortized discount was written off in 1999 and 2000
on those Purchase Money Notes that matured in 1999 and 2000, respectively.
The decrease in Purchase Money Note obligations from December 31, 1999 to
September 30, 2000 reflects $2,938,554 in Purchase Money Note obligations from
which the Partnership was released in connection with the sale of the
Partnership's interest in Osuna, net of interest accrued and discount amortized.
Management does not believe that the principal and accrued interest due
on these notes can be realized or supported by the current value of the
respective properties, through either a sale or refinancing. The Partnership's
interests in these Local Limited Partnerships were pledged as security for the
Partnership's obligations under the respective Purchase Money Notes.
11
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources, continued
The sale or other disposition by the Partnership of its interests in the Local
Limited Partnerships, including in connection with a foreclosure of the pledged
security, 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 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 Partnerships receive rental income pursuant
to Section 8 rental assistance contracts which expire at various times through
March 2005. Under the Multifamily Assisted Housing and Reform and Affordability
Act (MAHRAA) of 1997, as amended, Congress set forth the legislation for a
permanent "mark-to-market" program and provided for permanent authority for the
renewal of Section 8 Contracts. Owners with Section 8 contracts expiring after
September 30, 1998 are subject to the provisions of MAHRAA. On September 11,
1998, HUD issued an interim rule to provide clarification of the implementation
of the mark-to-market program. Since then, revised guidance has been provided
through various HUD housing notices, most recently HUD housing notice 99-36,
which addresses project-based Section 8 contracts expiring in fiscal year 2000.
Under this notice, project owners have several options for Section 8
contract renewals, depending on the type of project and rent level. Options
include marking rents up to market, renewing other contracts with rents at or
below market, referring projects to the Office of Multifamily Housing Assistance
Restructuring (OMHAR) for mark-to-market or "OMHAR lite" renewals, renewing
contracts that are exempted from referral to OMHAR, renewing contracts for
portfolio re-engineering demonstration and preservation projects, and opting out
of the Section 8 program. Owners must submit their option to HUD at least 120
days before expiration of their contract. Each option contains specific rules
and procedures that must be followed to comply with the requirements of housing
notice 99-36.
12
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources, 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 general
partner of Williamston Homes received a five year renewal to March, 2005,
subject to annual Federal appropriation of funds. The remaining properties are
working with HUD to renew their existing contracts for two to five year periods.
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 currently anticipates selling the Partnership's 98% limited
partnership interests in Fuquay-Varina, Oxford Homes and Williamston Homes to
the general partner of these partnerships or his affiliate for approximately
$150,000 plus the assumption of the related Purchase Money Note obligations. The
sale of these interests requires consent from all the related Purchase Money
Note holders. Such consents have been requested and, although certain
documentation remains outstanding, management believes that unanimous consent
has been obtained. Management anticipates closing these transactions in the
fourth quarter of 2000.
Management entered into an agreement with the local general partner of
Austintown Associates to sell the Partnership's 98% limited partnership
interest, subject, among other things, to the consent of the related Purchase
Money Note holders. A meeting with the Purchase Money Note holders to discuss
this transaction was held in November 1999. The Partnership did not receive
unanimous consent of the Purchase Money Note holders and, accordingly, the
agreement expired on April 1, 2000. On September 15, 2000 certain of the
Purchase Money Note holders commenced an action in the Court of Common Pleas
Mahoning County, Ohio seeking, among other things, to foreclose upon the
Partnership's pledge of its 98% limited partnership interest in Austintown
Associates.
Management has also entered into agreements to sell the Partnership's 94%
interests in Brierwood, Brierwood II, Pine Forest and Meadowwood Apartments. The
Partnership would receive only a nominal cash payment in connection with each
sale and, following the sale, the Purchase Money Notes would be exchanged for
pro rata shares of the related 94% partnership interest. The sale of the
Partnership's interests in Brierwood, Pine Forest and Meadowwood Apartments also
requires consent from all the related Purchase Money Note holders. Such consents
have been requested. Management presently anticipates the consummation of these
transactions in the fourth quarter of 2000.
The Partnership has commenced discussions with the local manager for
Surry Manor, Ltd. and Glendale Manor Apartments to purchase the Partnership's
interests in those partnerships. Management presently expects to enter into an
Agreement in the fourth quarter of 2000 to sell the Partnership's 98% limited
Partnership Interests in Surry Manor, Ltd. and Glendale Manor Apartments. The
sale of these interest will require consent from all the related Purchase Money
Note holders.
13
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources, continued
No assurance can be given that the Partnership will be able to
successfully conclude any of the above 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 Unit holders.
Such recapture may cause some or all of the Unit holders to have taxable income
from the Partnership without cash distributions from the Partnership with which
to satisfy the tax liability resulting therefrom.
At September 30, 2000, the Partnership had total cash and cash
equivalents of $311,549, which consisted of funds segregated pursuant to the
terms of the consulting agreement with the General Partner of Linden Park
Associates of $146,158 and cash reserves of $165,391. The reserves include $841
representing uncashed checks issued to certain Purchase Money Note holders for
interest due under their notes. This amount is also included in accrued interest
payable. The increase in cash reserves compared to $120,946 at December 31, 1999
was primarily funded from the proceeds of the sale of the Partnership's interest
in Osuna Apartments.
Estimated state taxes totaling $211,271 were paid from the proceeds of
the sale of the Partnership's investments in Fiddlers Creek Apartments. The
Partnership has subsequently reevaluated this obligation and has applied for a
refund of amounts previously remitted.
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), and
(ii) Partnership reserves.
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.
As discussed above, the Partnership is currently in various stages of
negotiations to sell its interests in the remaining local limited partnerships.
If the Partnership is successful in disposing of its remaining investments,
management presently intends to wind up the Partnership's operations by the end
of the Year 2001.
The Partnership's net loss before extraordinary items decreased to
$537,965 in the first nine months of 2000 from $1,410,826 in the first nine
months of 1999 primarily as a result of the decrease in the Partnership's
interest expense of $930,653.
14
<PAGE>
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Partnership Operations, continued
On February 1, 2000 the Partnership sold its investment in Osuna
Apartments. The Partnership realized a net gain of $2,432,299, determined as
follows:
Cash received $ 100,000
Forgiveness of Purchase Money Notes 2,938,554
Less: Investment in Osuna Apartments (569,998)
Less: Consulting fees paid in connection with
the disposition (26,924)
Less: Professional fees (9,333)
-----------
Gain on sale of investment in Osuna Apartments Company $ 2,432,299
===========
In the first nine months of 2000, the Partnership's interest income
reflects interest earned on reserves of $13,899. In the first nine months of
1999, interest income totaling $101,042 consisted of interest earned on reserves
of $9,102 and interest net of discount amortization on the long-term notes
receivable of $17,416 and the write off of the unamortized discount of $74,524.
The Partnership's interest expense decreased to $560,962 in the first
nine months of 2000 from $1,491,615 in the first nine months of 1999. The
decrease is attributable to the decrease in discount amortization included in
interest expense of $787,028 and the reduction of interest accrued totaling
$143,625 due to the sales of the Fiddlers Creek investment and Osuna Apartments
Company, which included the assumption or release of the related Purchase Money
Notes, on May 28, 1999 and February 1, 2000, respectively.
The Partnership's equity in income from the Local Limited Partnerships
was $109,599 in the first nine months of 2000 and $78,777 in the first nine
months of 1999.
15
<PAGE>
Part II
Other Information
Item 1. Legal Proceedings.
On September 15 2000, James P. Manchi and Robert P. Baker commenced an action
against the Partnership in the Court of Common Pleas, Mahoning County, Ohio.
Messrs. Manchi and Baker are holders of Purchase Money Notes issued by the
Partnership in connection with the acquisition of its partnership interest in
Austintown Associates. The remaining holders of Purchase Money Notes relating to
Austintown Associates were joined as involuntary plaintiffs in the action by
Messrs. Manchi and Baker. The complaint was subsequently amended on October 4,
2000. The plaintiffs seek a declaration of the rights of the parties under the
Purchase Money Notes and related pledge agreements, a judgment in favor of the
holders for the monies due under the Purchase Money Notes (to be satisfied
through sale of the partnership interest in Austintown Associates), a
declaration of an event of default under the related pledge agreements and the
appointment of a receiver to supervise the sale of the partnership interest. The
Partnership does not presently intend to contest this action.
Item 3. Defaults Upon Senior Securities.
On September 29, 1999 the Purchase Money Notes outstanding for
Fuquay-Varina, Oxford Homes and Williamston Homes matured. The amounts due at
maturity under these non-recourse obligations consisted of $2,015,000 in
aggregate principal amount and $530,961 in accrued and unpaid interest. As of
September 30, 2000, the aggregate arrearages under these notes amounted to
$2,616,439.
The Purchase Money Notes outstanding for Austintown Associates,
Meadowwood Ltd, Brierwood Ltd. and Pine Forest matured on October 30, 1999. The
amounts due at maturity under these non-recourse obligations consisted of
$2,830,000 in aggregate principal amount and $3,608,251 in accrued and unpaid
interest. As of September 30, 2000, the aggregate arrearages under these notes
amounted to $6,667,096.
On August 29, 2000 the Purchase Money Notes outstanding for Glendale Manor
Apartments matured. The amounts due at maturity under these non-recourse
obligations consisted of $450,000 in aggregate principal amount and $224,979 in
accrued and unpaid interest. As of September 30, 2000, the aggregate arrearages
under these notes amounted to $678,577.
16
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
By: TNG Properties Inc.
Managing General Partner
By: /s/ Michael A. Stoller
Michael A. Stoller
President and CEO
By: TNG Properties Inc.
Managing General Partner
By: /s/ Wilma R. Brooks
Wilma R. Brooks
Chief Financial Officer
Date: 11/13/00
