<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended SEPTEMBER 30, 1999
Commission File Number 0-13808
HOUSING PROGRAMS LIMITED
(A California Limited Partnership)
I.R.S. Employer Identification No. 95-3906167
9090 WILSHIRE BLVD., SUITE 201
BEVERLY HILLS, CALIF. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
<PAGE> 2
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, September 30, 1999 and December 31, 1998 .................1
Statements of Operations,
Nine and Three Months Ended September 30, 1999 and 1998.............2
Statement of Partners' Deficiency,
Nine Months Ended September 30, 1999 ...............................3
Statements of Cash Flow,
Nine Months Ended September 30, 1999 and 1998.......................4
Notes to Financial Statements ............................................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation ................................12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.....................................................16
Item 6. Exhibits and Reports on Form 8-K......................................16
Signatures.....................................................................17
</TABLE>
<PAGE> 3
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
<TABLE>
<CAPTION>
ASSETS
1999
(Unaudited) 1998
------------ ------------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS $ -- $ --
CASH AND CASH EQUIVALENTS (Note 1) 591,411 831,751
CASH DUE FROM ESCROW -- 202,714
OTHER ASSETS 64,300 --
------------ ------------
TOTAL ASSETS $ 655,711 $ 1,034,465
============ ============
LIABILITIES AND PARTNERS' DEFICIENCY
LIABILITIES:
Notes payable (Notes 3 and 6) $ 4,600,000 $ 4,600,000
Accrued fees and expenses due general
partners (Note 4) 1,732,550 1,355,519
Accrued interest payable (Notes 3 and 6) 5,905,611 5,577,861
Accounts payable (Note 2) 76,529 300,309
------------ ------------
12,314,690 11,833,689
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 4 and 5)
PARTNERS' DEFICIENCY:
General partners (367,336) (358,739)
Limited partners (11,291,643) (10,440,485)
------------ ------------
(11,658,979) (10,799,224)
------------ ------------
TOTAL LIABILITIES AND PARTNERS'
DEFICIENCY $ 655,711 $ 1,034,465
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Nine months Three months Nine months Three months
ended ended ended ended
Sept 30, 1999 Sept 30, 1999 Sept 30, 1998 Sept 30, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 7,244 $ 105 $ 44,066 $ 14,401
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Management fees - general partner (Note 4) 312,732 104,244 369,720 123,240
General and administrative (Note 4) 70,314 16,122 102,463 63,461
Legal and accounting (Note 4) 81,020 14,151 113,935 36,630
Interest (Notes 3 and 4) 327,750 109,250 617,718 205,906
----------- ----------- ----------- -----------
Total operating expenses 791,816 243,767 1,203,836 429,237
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (784,572) (243,662) (1,159,770) (414,836)
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED
AS INCOME 627,531 66,820 395,207 16,322
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS (Note 2) -- -- 276,000 92,000
----------- ----------- ----------- -----------
NET LOSS $ (157,041) $ (176,842) $ (488,563) $ (306,514)
=========== =========== =========== ===========
NET LOSS PER LIMITED PARTNERSHIP $ (13) $ (14) $ (40) $ (25)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' DEFICIENCY
NINE MONTHS ENDED SEPTEMBER 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS 12,368
============
DEFICIENCY, January 1, 1999 $ (358,739) $(10,440,485) $(10,799,224)
Distribution (7,027) (695,687) (702,714)
Net loss for the nine months
ended September 30, 1999 (1,570) (155,471) (157,041)
------------ ------------ ------------
DEFICIENCY, September 30, 1999 $ (367,336) $(11,291,643) $(11,658,979)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (157,041) $ (488,563)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Equity in income of limited partnerships
and amortization of acquisition costs -- (276,000)
Increase in other assets (64,300) (67,499)
Increase in accrued interest payable 327,750 553,605
Increase in accrued fees and expenses due general partners 377,031 317,356
(Decrease) increase in accounts payable (223,780) 48,947
----------- -----------
Net cash provided by operating activities 259,660 87,846
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales proceeds 202,714 --
Distributions from limited partnerships
recognized as a return of capital -- 129,638
----------- -----------
Net cash provided by financing activities 202,714 129,638
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (702,714) --
----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (240,340) 217,484
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 831,751 1,162,398
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 591,411 $ 1,379,882
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the financial statements is
condensed from that which would appear in the annual audited financial
statements; accordingly, the financial statements included herein should be
reviewed in conjunction with the financial statements and related notes thereto
contained in the Housing Programs Limited (the "Partnership") annual report for
the year ended December 31, 1998. National Partnership Investments Corp.
("NAPICO") is a general partner for the Partnership. Accounting measurements at
interim dates inherently involve greater reliance on estimates than at year end.
The results of operations for the interim period presented are not necessarily
indicative of the results for the entire year.
In the opinion of NAPICO, the accompanying unaudited financial statements
contain all adjustments (consisting primarily of normal recurring accruals)
necessary to present fairly the financial position of the Partnership at
September 30, 1999 and the results of operations for the nine and three months
then ended and changes in cash flows for the nine months then ended.
ORGANIZATION
Housing Programs Limited (the "Partnership"), formed under the California
Uniform Limited Partnership Act, was organized on May 15, 1984. The Partnership
was formed to invest primarily in other limited partnerships which own or lease
and operate federal, state or local government-assisted housing projects. The
general partners of the Partnership are National Partnership Investments Corp.
(NAPICO), and Coast Housing Investment Associates (CHIA), a limited partnership
and Housing Programs Corporation II.
The general partners have a 1 percent interest in profits and losses of the
Partnership. The limited partners have the remaining 99 percent interest which
is allocated in proportion to their respective individual investments. National
Partnership Investments Corp. (NAPICO) is the corporate general partner of the
Partnership. Casden Properties Inc. owns a 95.25% economic interest in NAPICO,
with the balance owned by Casden Investment Corporation ("CIC"). CIC, which is
wholly owned by Alan I. Casden, owns 95% of the voting common stock of NAPICO.
On December 30, 1998, the Partnership sold its limited partnership interests in
7 local limited partnerships for net proceeds of $202,714 to subsidiaries of
Casden Properties Inc.
5
<PAGE> 8
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
METHOD OF ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS
The investments in local limited partnerships are accounted for on the equity
method. Acquisition, selection fees and other costs related to the acquisition
of the projects have been capitalized to the investment account and amortized on
a straight line basis over the estimated lives of the underlying assets, which
is generally 30 years.
NET LOSS PER LIMITED PARTNERSHIP INTEREST
Net loss per limited partnership interest was computed by dividing the limited
partners' share of net loss by the number of limited partnership interests
outstanding during the year. The number of limited partnership interests was
12,350 for all years presented.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and bank certificates of deposit with
an original maturity of three months or less. The Partnership has its cash and
cash equivalents on deposit primarily with one money market mutual fund. Such
cash and cash equivalents are uninsured.
INCOME TAXES
No provision has been made for income taxes in the accompanying financial
statements since such taxes, if any, are the liability of the individual
partners.
6
<PAGE> 9
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership reviews long-lived assets to determine if there has been any
permanent impairment whenever events or changes in circumstances indicate that
the carrying amount of the asset may not be recoverable. If the sum of the
expected future cash flows is less than the carrying amount of the assets, the
Partnership recognizes an impairment loss.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership holds limited partnership interests in 10 limited partnerships
as of September 30, 1999, after selling its interests in 7 limited partnerships
in 1998. As of September 30, 1999, the limited partnerships own residential low
income rental projects consisting of 1,685 apartment units. The mortgage loans
of these projects are payable to or insured by various governmental agencies.
The Partnership, as a limited partner, is entitled to 99 percent of the profits
and losses of the limited partnerships.
Distributions from the limited partnerships are recognized as a reduction of
capital until the investment balance has been reduced to zero or to a negative
amount equal to further capital contributions required. Subsequent distributions
are recognized as income.
The Partnership has no carrying value in investments in limited partnerships as
of September 30, 1999.
7
<PAGE> 10
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
The following are unaudited combined estimated statements of operations for the
nine and three months ended September 30, 1999 and 1998 for the limited
partnerships in which the Partnership has investments:
<TABLE>
<CAPTION>
Nine months Three months Nine months Three months
ended ended ended ended
Sept. 30, 1999 Sept. 30, 1999 Sept. 30, 1998 Sept. 30, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INCOME
Rental and Other $12,630,000 $ 4,210,000 $ 13,224,000 $ 4,408,000
------------ ------------ ------------ ------------
EXPENSES
Depreciation 2,523,000 841,000 2,580,000 860,000
Interest 2,439,000 813,000 2,586,000 862,000
Operating 8,127,000 2,709,000 8,427,000 2,809,000
------------ ------------ ------------ ------------
Total expenses 13,089,000 4,363,000 13,593,000 4,531,000
------------ ------------ ------------ ------------
Net Loss $ $ (459,000) $ (153,000) $ (369,000) $ (123,000)
============ ============ ============ ============
</TABLE>
NAPICO, or one of its affiliates, is the general partner and property management
agent for certain of the limited partnerships included above.
Under recent adopted law and policy, the United States Department of Housing and
Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which was generally the case
under existing HAP Contracts. The payments under the renewed HAP Contracts are
not expected to be in an amount that would provide sufficient cash flow to
permit owners of properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing Administration of
HUD ("FHA") unless such mortgage loans are restructured. In order to address the
reduction in payments under HAP Contracts as a result of this new policy, the
Multi-family Assisted Housing Reform and Affordability Act of 1997 ( "MAHRAA"),
which was adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the Section 8
program.
8
<PAGE> 11
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
Under MAHRAA, an FHA-insured mortgage loan can be restructured into a first
mortgage loan which will be amortized on a current basis and a low interest
second mortgage loan payable to FHA which will only be payable on maturity of
the first mortgage loan. This restructuring results in a reduction in annual
debt service payable by the owner of the FHA-insured mortgage loan and is
expected to result in an insurance payment from FHA to the holder of the FHA-
insured loan due to the reduction in the principal amount. MAHRAA also phases
out project- based subsidies on selected properties serving families not located
in rental markets with limited supply, converting such subsidies to a
tenant-based subsidy.
MAHRAA provides that properties begin the restructuring process in federal
fiscal year 1999 (beginning October 1, 1998). On September 11, 1998, HUD issued
interim regulations implementing MAHRAA and final regulations are expected to be
issued in 1999. With respect to the local limited partnerships' expiring HAP
Contracts, it is expected that the HAP payments will be reduced or terminated
pursuant to the terms of MAHRAA.
When the HAP Contracts are subject to renewal, there can be no assurance that
the local limited partnerships in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the economic impact on the Partnership of the combination of the reduced
payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.
As a result of the foregoing, the Partnership in 1997 undertook an extensive
review of disposition, refinancing or re-engineering alternatives for the
properties in which the limited partnerships have invested and are subject to
HUD mortgage and rental subsidy programs. The Partnership has incurred expenses
in connection with this review by various third party professionals, including
accounting, legal, valuation, structural and engineering costs, which amounted
to approximately $43,000 through December 31, 1998, including approximately
$37,000 for the nine months ended September 30, 1998. Additional costs amounting
to $17,962 were incurred during the first quarter of 1999.
On December 30, 1998, the Partnership sold its limited partnership interests in
7 local limited partnerships to Affiliates of Casden Properties Inc. ("CPI
Affiliates"). The sale resulted in cash proceeds to the Partnership of $202,714
and a net gain of $5,398,973, after deducting selling
9
<PAGE> 12
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
costs. The cash proceeds were held in escrow at December 31, 1998 and were
collected in 1999. In March 1999, the Partnership made cash distributions of
$695,687 to the limited partners and $7,027 to the general partners, primarily
using proceeds from the sale of the partnership interests collected in 1999. In
March 1999, the Partnership made cash distributions of $695,687 to the limited
partners and $7,027 to the general partners, which included using proceeds from
the sale of the partnership interests.
CPI Affiliates purchased such limited partner interests for cash, which it
raised in connection with a private placement of its equity securities. The
purchase was subject to, among other things, (i) the purchase of the general
partner interests in the local limited partnerships by the Operating
Partnership; (ii) the approval of HUD and certain state housing finance
agencies; and (iii) the consent of the limited partners to the sale of the local
limited partnership interests held for investment by the Partnership.
In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.
NOTE 3 - NOTES PAYABLE
Certain of the Partnership's investments involved purchases of partnership
interests from partners who subsequently withdrew from the operating
partnership. The Partnership is obligated for non-recourse notes payable of
$4,600,000 to the sellers of the partnership interests, bearing interest at 9.5
percent per annum to the various sellers of the partnership interests. The
Partnership was relieved of notes payable in the amount of $4,069,743 in
connection with the sale of the Partnership interests to Casden Properties Inc.
The notes have principal maturity dates ranging from December 31, 1999 to
December 2001 or upon sale or refinancing of the underlying partnership
properties. These obligations and the related interest are collateralized by the
Partnership's investment in the investee limited partnerships and are payable
only out of cash distributions from the investee partnerships, as defined in the
notes. Unpaid interest is due at maturity of the notes.
10
<PAGE> 13
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
NOTE 4 - FEES AND EXPENSES DUE TO GENERAL PARTNERS
Under the terms of the Restated Certificate and Agreement of the Limited
Partnership, the Partnership is obligated to the general partners for an annual
management fee equal to 0.5 percent of the original invested assets of the
limited partnerships. Invested assets is defined as the costs of acquiring
project interests including the proportionate amount of the mortgage loans
related to the Partnership's interests in the capital accounts of the respective
limited partnerships.
As of September 30, 1999, the fees and expenses due the general partners
exceeded the Partnership's cash. The general partners, during the forthcoming
year, will not demand payment of amounts due in excess of such cash or such that
the Partnership would not have sufficient operating cash; however, the
Partnership will remain liable for all such amounts.
NOTE 5 - CONTINGENCIES
On August 4, 1999, one investor holding one unit of limited partnership interest
in Housing Programs Limited commenced an action in the United States District
Court for the Central District of California against the Partnership, NAPICO and
certain other affiliated entities. The complaint alleges that the defendants
breached their fiduciary duty to the limited partners of certain NAPICO managed
partnerships and made materially false and misleading statements in the consent
solicitation statements sent to the limited partners of such partnerships
relating to approval of the transfer of partnership interests in limited
partnerships, owning certain of the properties, to CPI Affiliates. The
plaintiffs seek equitable relief, as well as compensatory damages and litigation
related costs.
NAPICO is a plaintiff in various lawsuits and has also been named as defendant
in other lawsuits arising from transactions in the ordinary course of business.
In the opinion of NAPICO, the claims will not result in any material liability
to the Partnership.
The Partnership has assessed the potential impact of the Year 2000 computer
systems issue on its operations. The Partnership believes that no significant
actions are required to be taken by the Partnership to address the issue and
that the impact of the Year 2000 computer systems issue will not materially
affect the Partnership's future operating results or financial condition.
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about Fair
Value of Financial Instruments," requires disclosure of fair value information
about financial instruments, when it is practicable to estimate that value. The
notes payable are collateralized by the Partnership's investments in investee
limited partnerships and are payable only out of cash distributions from the
investee partnerships. The cash flow generated by operations of the investee
limited partnerships, which account for the Partnership's primary source of
revenues, are subject to various government rules, regulations and restrictions
which make it impracticable to estimate the fair value of the notes payable and
related accrued interest. The carrying amount of other assets and liabilities
reported on the balance sheets that require such disclosure approximates fair
value due to their short-term maturity.
11
<PAGE> 14
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary sources of funds include interest income on money
market accounts and certificates of deposit and distributions from limited
partnerships in which the Partnership has invested. It is not expected that any
of the local limited partnerships in which the Partnership has invested will
generate cash flow sufficient to provide for distributions to the Partnership's
limited partners in any material amount. The Partnership made a distribution to
the investors in March 1999, which included using proceeds from disposition of
its investments in certain limited partnerships.
RESULTS OF OPERATIONS
Partnership revenues consist primarily of interest income earned on certificates
of deposit and other temporary investment of funds. The Partnership also
receives distributions from the lower- tier limited partnerships in which it has
invested.
Distributions received from limited partnerships are recognized as return of
capital until the investment balance has been reduced to zero or to a negative
amount equal to future capital contributions required. Subsequent distributions
received are recognized as income.
Except for certificates of deposit and money market funds, the Partnership's
investments consist entirely of interests in other limited partnerships owning
government assisted housing projects. Available cash is invested to provide
interest income as reflected in the statements of operations. These funds can be
converted to cash to meet obligations as they arise. The Partnership intends to
continue investing available funds in this manner.
A recurring partnership expense is the annual management fee. The fee is payable
to the General Partners of the Partnership and is calculated at .5 percent of
the Partnership's invested assets. The management fee is paid to the General
Partners for their continuing management of partnership affairs. The fee is
payable beginning with the month following the Partnership's initial investment
in a local limited partnership. Management fees were $312,732 and $369,720 for
the nine months ended September 30, 1999 and 1998, respectively. The fees have
decreased due to the sale of partnership interests in 1998, which reduced the
invested assets.
12
<PAGE> 15
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
The Partnership is obligated on non-recourse notes payable of $4,600,000 at
September 30, 1999 and December 31, 1998, which bear interest at 9.5 percent per
annum and mature on December 31, 1999. The Partnership was relieved of notes
payable in the amount of $4,069,743 in connection with the sale of the
partnership interests to Casden Properties Inc. The notes and related interest
are payable from cash flow generated from operations of the related rental
properties as defined in the notes. These obligations are collateralized by the
Partnership's investments in the limited partnerships. Unpaid interest is due at
maturity of the notes.
Operating expenses, other than management fees and interest expense, consist of
legal and accounting fees for services rendered to the Partnership and
administrative expenses. Legal and accounting fees were $81,020 and $113,935 for
the nine months ended September 30, 1999 and 1998, respectively. General and
administrative expenses were $70,314 and $102,463 for the nine months ended
September 30, 1999 and 1998, respectively.
The Partnership accounts for its investments in the local limited partnerships
on the equity method, thereby adjusting its investment balance by its
proportionate share of the income or loss of the local limited partnerships.
Losses incurred after the limited partnership investment account is reduced to
zero are not recognized.
Under recent adopted law and policy, the United States Department of Housing and
Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which was generally the case
under existing HAP Contracts. The payments under the renewed HAP Contracts are
not expected to be in an amount that would provide sufficient cash flow to
permit owners of properties subject to HAP Contracts to meet the debt service
requirements of existing loans insured by the Federal Housing Administration of
HUD ("FHA") unless such mortgage loans are restructured. In order to address the
reduction in payments under HAP Contracts as a result of this new policy, the
Multi-family Assisted Housing Reform and Affordability Act of 1997 ( "MAHRAA"),
which was adopted in October 1997, provides for the restructuring of mortgage
loans insured by the FHA with respect to properties subject to the Section 8
program. Under MAHRAA, an FHA-insured mortgage loan can be restructured into a
first mortgage loan
13
<PAGE> 16
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
which will be amortized on a current basis and a low interest second mortgage
loan payable to FHA which will only be payable on maturity of the first mortgage
loan. This restructuring results in a reduction in annual debt service payable
by the owner of the FHA-insured mortgage loan and is expected to result in an
insurance payment from FHA to the holder of the FHA- insured loan due to the
reduction in the principal amount. MAHRAA also phases out project- based
subsidies on selected properties serving families not located in rental markets
with limited supply, converting such subsidies to a tenant-based subsidy.
MAHRAA provides that properties begin the restructuring process in federal
fiscal year 1999 (beginning October 1, 1998). On September 11, 1998, HUD issued
interim regulations implementing MAHRAA and final regulations are expected to be
issued in 1999. With respect to the local limited partnerships' expiring HAP
Contracts, it is expected that the HAP payments will be reduced or terminated
pursuant to the terms of MAHRAA.
When the HAP Contracts are subject to renewal, there can be no assurance that
the local limited partnerships in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the economic impact on the Partnership of the combination of the reduced
payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.
As a result of the foregoing, the Partnership in 1997 undertook an extensive
review of disposition, refinancing or re-engineering alternatives for the
properties in which the limited partnerships have invested and are subject to
HUD mortgage and rental subsidy programs. The Partnership has incurred expenses
in connection with this review by various third party professionals, including
accounting, legal, valuation, structural and engineering costs, which amounted
to $43,096 through December 31, 1998, including approximately $37,000 for the
nine months ended September 30, 1998. Additional costs amounting to $17,962 were
incurred during the first quarter of 1999.
On December 30, 1998, the Partnership sold its limited partnership interests in
7 local limited partnerships to Affiliates of Casden Properties Inc. ("CPI
Affiliates"). The sale resulted in cash proceeds to the Partnership of $202,714
and a net gain of $5,398,973, after deducting selling
14
<PAGE> 17
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATION (CONTINUED)
costs. The cash proceeds were held in escrow at December 31, 1998 and were
collected in 1999. In March 1999, the Partnership made cash distributions of
$695,687 to the limited partners and $7,027 to the general partners, primarily
using proceeds from the sale of the partnership interests.
CPI Affiliates purchased such limited partner interests for cash, which it
raised in connection with a private placement of its equity securities. The
purchase was subject to, among other things, (i) the purchase of the general
partner interests in the local limited partnerships by Casden Properties Inc.;
(ii) the approval of HUD and certain state housing finance agencies; and (iii)
the consent of the limited partners to the sale of the local limited partnership
interests held for investment by the Partnership.
In August 1998, a consent solicitation statement was sent to the limited
partners setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together with
certain amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction. Prior to the
sale of the partnership interests, the consents of the limited partners to the
sale and amendments to the Partnership Agreement were obtained.
15
<PAGE> 18
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1999
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 4, 1999, one investor holding one unit of limited partnership interest
in Housing Programs Limited commenced an action in the United States District
Court for the Central District of California against the Partnership, NAPICO and
certain other affiliated entities. The complaint alleges that the defendants
breached their fiduciary duty to the limited partners of certain NAPICO managed
partnerships and made materially false and misleading statements in the consent
solicitation statements sent to the limited partners of such partnerships
relating to approval of the transfer of partnership interests in limited
partnerships, owning certain of the properties, to CPI Affiliates. The
plaintiffs seek equitable relief, as well as compensatory damages and litigation
related costs.
As of September 30, 1999, NAPICO was a plaintiff or defendant in several
lawsuits. None of these suits are related to the Partnership. In the opinion of
NAPICO, the claims will not result in any material liability to the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No reports on Form 8-K were filed during the quarter ended September
30, 1999.
16
<PAGE> 19
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1999
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.
HOUSING PROGRAMS LIMITED
(a California limited partnership)
By: National Partnership Investments Corp.
its General Partner
By: /s/ BRUCE NELSON
----------------------------------
Bruce Nelson
President
Date: November 17, 1999
--------------------------------
By: /s/ CHARLES H. BOXENBAUM
----------------------------------
Charles H. Boxenbaum
Chief Executive Officer
Date: November 17, 1999
--------------------------------
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 591,411
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 591,411
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 655,711
<CURRENT-LIABILITIES> 76,529
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (11,658,979)
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 634,775
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 791,816
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (157,041)
<INCOME-TAX> 0
<INCOME-CONTINUING> (157,041)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (157,041)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
