<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 JUNE 30, 2000
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 JUNE 30, 2000
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, June 30, 2000 and December 31, 1999 ......................1
Statements of Operations,
Six and Three Months Ended June 30, 2000 and 1999...................2
Statement of Partners' Deficiency,
Six Months Ended June 30, 2000 .....................................3
Statements of Cash Flow,
Six Months Ended June 30, 2000 and 1999.............................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
JUNE 30, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
2000
(Unaudited) 1999
------------ ------------
<S> <C> <C>
ASSETS
INVESTMENTS IN LIMITED PARTNERSHIPS $ -- $ --
(Notes 1 and 2)
CASH AND CASH EQUIVALENTS (Note 1) 916,876 817,796
------------ ------------
TOTAL ASSETS $ 916,876 $ 817,796
============ ============
LIABILITIES AND PARTNERS' DEFICIENCY
LIABILITIES:
Notes payable (Notes 3 and 7) $ 4,600,000 $ 4,600,000
Accrued fees and expenses due general
partners (Note 4) 1,630,164 1,730,608
Accrued interest payable (Notes 3 and 7) 6,233,361 6,014,861
Accounts payable (Note 2) 70,015 63,528
------------ ------------
12,533,540 12,408,997
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 4 and 5)
PARTNERS' DEFICIENCY:
General partners (366,914) (366,659)
Limited partners (11,249,750) (11,224,542)
------------ ------------
(11,616,664) (11,591,201)
------------ ------------
TOTAL LIABILITIES AND PARTNERS'
DEFICIENCY $ 916,876 $ 817,796
============ ============
</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
SIX AND THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 150 $ 50 $ 7,022 $ 150
--------- --------- --------- ---------
OPERATING EXPENSES:
Management fees - general partner (Note 4) 130,556 50,360 208,488 104,244
General and administrative (Note 4) 32,899 23,450 51,693 20,996
Legal and accounting (Note 4) 70,024 17,366 66,869 39,550
Interest (Notes 3 and 4) 218,500 109,250 218,500 109,250
--------- --------- --------- ---------
Total operating expenses 451,979 200,426 545,550 274,040
--------- --------- --------- ---------
LOSS FROM OPERATIONS (451,829) (200,376) (538,528) (273,890)
GAIN ON SALE OF LIMITED
PARTNERSHIP INTEREST (Note 2) 323,759 75,582
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED
AS INCOME 102,607 102,607 560,711 560,711
--------- --------- --------- ---------
NET (LOSS) INCOME $ (25,463) $ (22,187) $ 22,183 $ 286,821
========= ========= ========= =========
NET (LOSS) INCOME PER LIMITED
PARTNERSHIP INTEREST $ (2) $ (2) $ 2 $ 23
========= ========= ========= =========
</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
SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS 12,368
============
DEFICIENCY, January 1, 2000 $ (366,659) $(11,224,542) $(11,591,201)
Net loss for the six months
ended June 30, 2000 (255) (25,208) (25,463)
------------ ------------ ------------
DEFICIENCY, June 30, 2000 $ (366,914) $(11,249,750) $(11,616,664)
============ ============ ============
</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
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (25,463) $ 22,183
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Gain on sale of partnership interests (323,759) --
Increase in other assets -- (64,300)
Increase in accrued interest payable 218,500 218,500
(Decrease) increase in accrued fees and expenses
due general partners (100,444) 272,787
Increase (decrease) in accounts payable 6,487 (221,742)
--------- ---------
Net cash (used in) provided by operating activities (224,679) 227,428
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of partnership interests 323,759 202,714
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners -- (702,714)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 99,080 (272,572)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 817,796 831,751
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 916,876 $ 559,179
========= =========
</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
JUNE 30, 2000
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, 1999. 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 June 30, 2000 and the results of operations and
changes in cash flows for the six and three 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)
JUNE 30, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 12,368 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)
JUNE 30, 2000
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
As of June 30, 2000, the Partnership holds limited partnership interests
in 10 limited partnerships. As of June 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 June 30, 2000.
7
<PAGE> 10
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
The following are unaudited combined estimated statements of operations
for the six and three months ended June 30, 2000 and 1999 for the
limited partnerships in which the Partnership has investments:
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 2000 June 30, 2000 June 30, 1999 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCOME
Rental and Other $ 5,160,000 $ 2,580,000 $ 8,420,000 $ 4,210,000
----------- ----------- ----------- -----------
EXPENSES
Depreciation 1,034,000 517,000 1,682,000 841,000
Interest 876,000 438,000 1,626,000 813,000
Operating 3,756,000 1,878,000 5,418,000 2,709,000
----------- ----------- ----------- -----------
Total expenses 5,666,000 2,833,000 4,726,000 4,363,000
----------- ----------- ----------- -----------
NET LOSS $ (506,000) $ (253,000) $ (306,000) $ (153,000)
=========== =========== =========== ===========
</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
8
<PAGE> 11
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
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 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.
On September 11, 1998, HUD issued interim regulations implementing
MAHRAA and final regulations are expected to be issued in 2000.
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.
During the six months ended June 30, 2000, the Partnership surrendered
its interests in one limited partnership for a net payment of $323,759.
The Partnership recognized a gain of $323,759 from the sale because it
had no investment balance related to this partnership.
On December 30, 1998, the Partnership sold its limited partnership
interests in 7 local limited partnerships to the Operating Partnership.
The sale resulted in cash proceeds to the Partnership of $202,714 which
was 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.
9
<PAGE> 12
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
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. 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. The notes matured in
December 1999, at which time all unpaid interest became due.
Notes payable and related accrued interest payable aggregating
$10,833,361 as of June 30, 2000 matured on December 31, 1999. Due to the
Partnership's lack of cash and partners' deficiency, there is
substantial doubt about its ability to satisfy these obligations, which
would result in the possible foreclosure of the investments in the local
limited partnerships. As a result, there is substantial doubt about the
Partnerships' ability to continue as a going concern.
Management is in process of attempting to negotiate extensions of the
maturity dates on the notes payable.
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 June 30, 2000, 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.
10
<PAGE> 13
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2000
NOTE 5 - CONTINGENCIES
On August 27, 1998, two investors holding an aggregate of eight units of
limited partnership interests in Real Estate Associates Limited III (an
affiliated partnership in which NAPICO is the managing general partner)
and two investors holding an aggregate of five units of limited
partnership interest in Real Estate Associates Limited VI (another
affiliated partnership in which NAPICO is the managing general partner)
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
affiliates of Casden Properties Inc., organized by an affiliate of
NAPICO. The plaintiffs seek equitable relief, as well as compensatory
damages and litigation related costs. On August 4, 1999, one investor
holding one unit of limited partnership interest in the Partnership
commenced a virtually identical action in the United States District
Court for the Central District of California against the Partnership,
NAPICO and certain other affiliated entities. The managing general
partner of such NAPICO managed partnerships and the other defendants
believe that the plaintiffs' claims are without merit and are contesting
the actions vigorously.
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.
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. 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)
JUNE 30, 2000
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 $130,556 and $208,488 for the six
months ended June 30, 2000 and 1999, respectively. The fees have
decreased due to the sale of partnership interests in 1999, which
reduced the invested assets.
12
<PAGE> 15
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATION (CONTINUED)
The Partnership is obligated on non-recourse notes payable of $4,600,000
at June 30, 2000 and December 31, 1999, 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, which were generally consistent
for periods presented. Legal and accounting fees were $66,869 and
$66,869 for the six months ended June 30, 2000 and 1999, respectively.
General and administrative expenses were $32,899 and $51,693 for the six
months ended June 30, 2000 and 1999, 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
13
<PAGE> 16
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATION (CONTINUED)
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
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.
On September 11, 1998, HUD issued interim regulations implementing
MAHRAA and final regulations are expected to be issued in 2000.
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.
During the six months ended June 30, 2000, the Partnership surrendered
its interests in one limited partnership for a net payment of $323,759.
The Partnership recognized a gain of $323,759 from the sale because it
had no investment balance related to this partnership.
On December 30, 1998, the Partnership sold its limited partnership
interests in 7 local limited partnerships to the subsidiaries of Casden
Properties Inc. The sale resulted in cash proceeds to the Partnership of
$202,714 and a net gain of $5,398,973, after deducting selling 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.
Notes payable and related accrued interest payable aggregating
$10,833,361 as of June 30, 2000 matured on December 31, 1999. Due to the
Partnership's lack of cash and partners' deficiency, there is
substantial doubt about its ability to satisfy these obligations, which
would
14
<PAGE> 17
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATION (CONTINUED)
result in the possible foreclosure of the investments in the local
limited partnerships. As a result, there is substantial doubt about the
Partnerships' ability to continue as a going concern.
Management is in process of attempting to negotiate extensions of the
maturity dates on the notes payable.
15
<PAGE> 18
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership interests in Real Estate Associates Limited III (an affiliated
partnership in which NAPICO is the managing general partner) and two investors
holding an aggregate of five units of limited partnership interest in Real
Estate Associates Limited VI (another affiliated partnership in which NAPICO is
the managing general partner) 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 affiliates of Casden
Properties Inc., organized by an affiliate of NAPICO. The plaintiffs seek
equitable relief, as well as compensatory damages and litigation related costs.
On August 4, 1999, one investor holding one unit of limited partnership interest
in the Partnership commenced a virtually identical action in the United States
District Court for the Central District of California against the Partnership,
NAPICO and certain other affiliated entities. The managing general partner of
such NAPICO managed partnerships and the other defendants believe that the
plaintiffs' claims are without merit and are contesting the actions vigorously.
As of June 30, 2000, 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 exhibits are required per the provision of Item 6 of
regulation S-K and no reports on Form 8-K were filed during the
quarter ended June 30, 2000.
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<PAGE> 19
HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2000
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.
General Partner
/s/ BRUCE NELSON
---------------------------------
Bruce Nelson
President
Date: August 21, 2000
-------------------------
/s/ PAUL PATIERNO
---------------------------------
Paul Patierno
Chief Financial Officer
Date: August 21, 2000
-------------------------
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