FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 0-15665
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
(Exact name of registrant as specified
in its Pooling and Servicing Agreement)
Nebraska 47-0700551
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Commission File Number: 0-15854
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its Agreement of Limited Partnership)
Delaware 47-0700550
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street,
Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 444-1630
(Registrants' telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Exchangeable Passthrough Certificates representing assigned general
partnership interests in America First Participating/Preferred Equity
Mortgage Fund (the "Certificates")
Exchangeable Units representing assigned limited partnership interests in
America First Participating/Preferred Equity Mortgage Fund Limited
Partnership (the "Units")
<PAGE> -i-
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports) and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S K (229.405 of the chapter) is not contained herein,
and will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The Certificates are not currently being traded in any market.
Therefore, the Certificates had neither a market selling price nor an average
bid and asked price within the 60 days prior to the date of this filing. The
aggregate market value of the Units on March 18, 1996, based on the final
sales price per Unit as reported in The Wall Street Journal on March 19,
1996, was $45,888,703.
<PAGE> -ii-
DOCUMENTS INCORPORATED BY REFERENCE
None
TABLE OF CONTENTS
Page
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . 2
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . 2
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . 4
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 4
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . 10
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 10
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . 10
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 11
Item 12. Security Ownership of Certain Beneficial Owners and Management . . 12
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . 12
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
<PAGE> -iii-
PART I
Item 1. Business. America First Participating/Preferred Equity Mortgage
Fund (the "Fund"), a Nebraska general partnership, was formed pursuant to a
Pooling and Servicing Agreement dated November 20, 1986, to invest principally
in federally-insured first mortgages on multifamily residential properties,
including retirement living centers, and in securities collateralized by first
mortgages on single-family and multifamily residential properties. The Fund
also invested in Preferred Equity Participations ("PEPs") in the form of
limited partnership interests in the limited partnerships which own the
financed properties and in the form of participating mortgages. America First
Participating/Preferred Equity Mortgage Fund Limited Partnership (the
"Partnership") was formed as a limited partnership on November 20, 1986, under
the Delaware Revised Uniform Limited Partnership Act to act as managing
partner of the Fund. The Fund and the Partnership are referred to
collectively herein as the "Registrants." The Registrants' business
objectives are to provide investors (i) safety and preservation of capital,
(ii) regular cash distributions and (iii) a potential for an enhanced yield
from participations in the net cash flow and net capital appreciation from the
financed properties received under the terms of the PEPs.
A total of 5,722,527 Units were sold at $20 per Unit and a total of 100
Certificates were sold at $50,000 per Certificate for total capital
contributions of $111,178,590 after the payment of certain organization and
offering costs.
Through December 31, 1995, the Fund had acquired: (i) ten mortgage-backed
securities guaranteed as to principal and interest by the Government National
Mortgage Association (the "GNMA Certificates") collateralized by first
mortgage loans on multifamily housing properties located in seven states and
five GNMA Certificates backed by pools of single-family mortgages; (ii) a
first mortgage loan insured by the Federal Housing Administration (the "FHA
Loan") on a retirement living center located in California; (iii) limited
partnership interests ("PEPs") in 11 limited partnerships which own the
multifamily housing properties financed by the GNMA Certificates and the FHA
Loan; and, (iv) two participating first mortgage loans (the "Participating
Loans") on multifamily housing properties financed in part by an affiliated
mortgage fund. The FHA Loan and six GNMA Certificates collateralized by
multifamily properties have been repaid by GNMA or the Department of Housing
and Urban Development which left the Fund with only the PEPs on these
properties. The Fund acquired the entire equity interest in the PEPs holding
three multifamily properties. The Fund continues to own all the equity in two
of these properties and the third property was acquired by GNMA through
foreclosure. During 1995, another property in which the Fund held a PEP was
sold at a foreclosure auction in conjunction with bankruptcy proceedings and
the Fund withdrew as a limited partner of another property in which the Fund
held a PEP. Accordingly, the Fund no longer holds a PEP in either of these
properties. Collectively, the four remaining GNMA Certificates, six remaining
PEPs, two real estate properties and two Participating Loans are referred to
as the "Permanent Investments."
The GNMA Certificates and the FHA Loan provide the Registrants with
monthly payments of principal and interest which are either guaranteed by the
Government National Mortgage Association or insured by the Federal Housing
Administration. The Partnership Interests and the Participating Loan
(collectively, the "PEPs") are intended to provide the Registrants with a base
return plus a participation in the net cash flow and net capital appreciation
of the underlying real estate properties. Therefore, the return to the
Registrants depends, in part, on the economic performance of the real estate
financed by the PEPs. A description of the Permanent Investments acquired by
the Fund (and the properties financed thereby) appears in Notes 4, 5, 6 and 7
to the Notes to Combined Financial Statements filed in response to Item 8
hereof. The Partnership has no significant assets other than its general
partner interest in the Fund.
The Registrants are engaged solely in the business of providing financing
for the acquisition and improvement of real estate. Accordingly, the
presentation of information about industry segments is not applicable and
would not be material to an understanding of the Registrants' business taken
as a whole.
The Registrants have no employees. Certain services are provided to the
Registrants by employees of America First Companies L.L.C. which is the
general partner of the general partner of the Partnership, and the Fund
<PAGE> -1-
reimburses America First Companies L.L.C. for such services at cost. The
Registrants are not charged and do not reimburse for the services performed by
managers and officers of America First Companies L.L.C.
Item 2. Properties. Neither Registrant directly owns or leases any
physical properties. However, the Fund initially acquired PEPs in 11 limited
partnerships which were formed to own multifamily housing projects. Under the
terms of the limited partnership agreements, the Fund has removed the general
partners of seven of these partnerships. In three cases, the Fund acquired
the general partners' interest in the limited partnerships in addition to its
PEP. Accordingly, the Fund became the indirect owner of the entire equity
interest in these properties and began accounting for them as investments in
real estate. One of these properties was foreclosed upon by GNMA in 1989 and,
therefore, the Fund no longer holds an interest in this property. In the
remaining four limited partnerships, a substitute limited partner was admitted
and acquired a portion of the removed general partner's interest. The Fund
continued to own PEPs in these properties until 1995 when one of the
properties was sold in foreclosure and the Fund withdrew as the limited
partner from another property. Accordingly the Fund continues to hold PEPs in
six multifamily properties. Descriptions of the multifamily properties in
which the Fund owns indirect equity interests are set forth in Notes 5 and 6
to the Combined Financial Statements filed in response to Item 8 hereof.
The only assets of the Partnership consist of its general partner
interest in the Fund.
Item 3. Legal Proceedings. There are no other material pending legal
proceedings to which the Registrants or any of their property is subject.
Item 4. Submission of Matters to a Vote of Security Holders. No matter
was submitted during the fourth quarter of the fiscal year ending December 31,
1995 to a vote of the Registrants' security holders.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information. There is no established public market for the
Certificates. The Units trade on The NASDAQ Stock Market under the trading
symbol "AFPFZ." The following table sets forth the high and low sale prices
for the Units for each quarterly period from January 1, 1994, through December
31, 1995.
<TABLE>
<CAPTION>
Sale Prices
----------------------
1994 High Low
<S> <C> <C>
1st Quarter $10-1/4 $ 8-5/8
2nd Quarter $ 9-3/4 $ 8-3/4
3rd Quarter $ 9-1/4 $ 8-1/8
4th Quarter $ 8-5/8 $ 7
1995
1st Quarter $ 9-1/8 $ 8-1/8
2nd Quarter $ 8-7/8 $ 7-3/4
3rd Quarter $ 8-7/8 $ 8
4th Quarter $ 8-7/8 $ 8
</TABLE>
(b) Investors. The approximate number of Unit Holders on December 31,
1995, was 4,662, and there was one Certificate Holder as of that date.
(c) Distributions. Cash distributions are being made on a monthly basis.
Total cash distributions paid or accrued to Certificate Holders and Unit
Holders during the fiscal years ended December 31, 1995, and December 31,
1994, equaled $6,196,298 and $6,275,297, respectively. The cash distributions
paid per Certificate and per Unit during the fiscal years ended December 31,
1995, and December 31, 1994, were as follows:
<PAGE> -2-
<TABLE>
<CAPTION>
Per Certificate
Year Ended Year Ended
December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
Income $1,426.95 $1,537.88
Return of Capital 1,222.05 1,111.12
----------------- -----------------
Total $2,649.00 $2,649.00
================= =================
</TABLE>
<TABLE>
<CAPTION>
Per Unit
Year Ended Year Ended
December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
Income $ .5708 $ .6151
Return of Capital .4888 .4445
----------------- -----------------
Total $ 1.0596 $ 1.0596
================= =================
</TABLE>
See Item 7, Management's Discussion and Analysis of Financial Conditions
and Results of Operations, for information regarding the sources of funds used
for cash distributions and for a discussion of factors, if any, which may
adversely affect the Registrants' ability to make cash distributions at the
same levels in 1996 and thereafter.
<PAGE> -3-
Item 6. Selected Financial Data. Set forth below is selected financial
data for the Fund and the Partnership. The information set forth below should
be read in conjunction with the combined financial statements and notes to
combined financial statements filed in response to Item 8 hereof.
<TABLE>
<CAPTION>
For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Mortgage and mortgage-backed securities
income $ 3,398,068 $ 3,488,646 $ 4,035,182 $ 4,464,692 $ 3,819,705
Equity in earnings of property partnerships 148,589 203,318 285,208 246,982 223,849
Rental income 2,334,465 2,268,649 2,189,546 2,166,104 2,076,698
Gain on sale of mortgage-backed securities - - - - 370,284
Interest income on participating loans 251,157 264,904 268,633 266,216 254,685
Interest income on temporary cash investments
and U.S. government securities 408,645 374,521 284,652 243,394 1,321,667
General and administrative expenses (834,594) (647,772) (785,128) (760,903) (802,772)
Real estate operating expenses (1,155,052) (1,044,385) (1,116,833) (973,726) (1,032,424)
Depreciation (337,598) (502,358) (463,046) (569,476) (571,022)
Interest expense (841,815) (721,906) (609,667) (622,902) (473,252)
------------- ------------- ------------- ------------- -------------
Net income $ 3,371,865 $ 3,683,617 $ 4,088,547 $ 4,460,381 $ 5,187,418
============= ============= ============= ============= =============
Net income per exchangeable unit $ .57 $ .62 $ .68 $ .75 $ .87
============= ============= ============= ============= =============
Net income per passthrough certificate $ 1,426.95 $ 1,537.88 $ 1,699.55 $ 1,872.22 $ 2,163.47
============= ============= ============= ============= =============
Cash distributions paid or accrued per
exchangeable unit $ 1.0596 $ 1.0596 $ 1.0596 $ 1.0596 $ 3.1121
============= ============= ============= ============= =============
Cash distributions paid or accrued per
passthrough certificate $ 2,649.00 $ 2,649.00 $ 2,649.00 $ 2,649.00 $ 7,780.25
============= ============= ============= ============= =============
Investment in U.S. government securities $ 5,025,000 $ - $ - $ - $ -
============= ============= ============= ============= =============
Investment in mortgage and
mortgage-backed securities $ 43,103,240 $ 45,810,512 $ 46,851,694 $ 50,413,119 $ 49,070,601
============= ============= ============= ============= =============
Investment in PEPs, net of valuation allowance $ 325,517 $ 449,510 $ 469,176 $ 462,766 $ 537,190
============= ============= ============= ============= =============
Investment in real estate $ 6,668,864 $ 6,970,972 $ 7,473,330 $ 7,936,376 $ 8,386,064
============= ============= ============= ============= =============
Investment in participating loans, net of
valuation allowance $ 2,960,000 $ 2,960,000 $ 2,960,000 $ 2,960,000 $ 2,960,000
============= ============= ============= ============= =============
Total assets $ 64,566,103 $ 67,833,181 $ 69,994,829 $ 72,067,829 $ 74,105,486
============= ============= ============= ============= =============
Mortgage notes payable $ 9,614,760 $ 9,614,760 $ 9,614,760 $ 9,614,760 $ 9,614,760
============= ============= ============= ============= =============
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The Fund originally acquired: (i) ten mortgage-backed securities guaranteed as
to principal and interest by the Government National Mortgage Association
(GNMA) collateralized by first mortgage loans on multifamily housing
properties located in seven states, GNMA Certificates backed by pools of
single-family mortgages (the GNMA Certificates); (ii) a first mortgage loan
insured by the Federal Housing Administration (the FHA Loan) on a retirement
living center located in California; (iii) limited partnership interests
(PEPs) in eleven limited partnerships which own the multifamily properties
financed by the GNMA Certificates and the FHA Loan; and (iv) two participating
first mortgage loans (the Participating Loans) on multifamily housing
properties financed in part by an affiliated mortgage fund. The FHA Loan and
six of the GNMA Certificates secured by multifamily properties have been
repaid which left the Fund with only the PEPs on these properties. Under the
terms of the limited partnership agreements for the PEPs, the Fund has removed
the general partners of seven of the limited partnerships owning multifamily
properties. In three cases, the Fund acquired the general partners' interest
in the limited partnerships in addition to its PEP. Accordingly, the Fund
<PAGE> -4-
became the indirect owner of the entire equity interest in these properties
and began accounting for them as investments in real estate (the "Real Estate
Interests"). One of these properties was foreclosed upon by GNMA in 1989 and,
therefore, the Fund no longer holds an interest in this property. In the
remaining four limited partnerships, a substitute limited partner was admitted
and acquired a portion of the removed general partner's interest. The Fund
continued to own PEPs in these properties until 1995 when Casa Sandoval was
sold in foreclosure and the Fund withdrew as the limited partner from
Moonraker Apartments. As a result of the foregoing, the Fund continues to
hold four GNMA Certificates, six PEPs, two Real Estate Interests and two
Participating Loans.
The following table shows the occupancy levels of the properties financed by
the Fund in which the Fund continues to hold an interest at December 31, 1995:
<TABLE>
<CAPTION>
Number Percentage
Number of Units of Units
Property Name Location of Units Occupied Occupied
- ------------------------------------- ------------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
The Parklane Salt Lake City, UT 94 86 91%
Grand Villa Grand Junction, CO 46 46 100%
Cambridge Court Kearney, NE 41 41 100%
Hickory Villa Omaha, NE 57 48 84%
Harmony Bay Apartments Roswell, GA 300 272 91%
Timber Cove Apartments Decatur, IA 272 237 87%
Meadow Brook Apartments (1) Amelia, OH 168 142 85%
Morrowood Townhouses (1) Morrow, GA 264 259 98%
Avalon Ridge Renton, WA 356 280 79%
Jackson Park Place Fresno, CA 296 272 92%
-------------- -------------- --------------
1,894 1,683 89%
============== ============== ==============
</TABLE>
(1)Property acquired in settlement of PEP.
DISTRIBUTIONS
Cash distributions paid or accrued were as follows:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended For the Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
---------------------- ---------------------- ----------------------
Per Per Per
Per Unit Certificate Per Unit Certificate Per Unit Certificate
-------- ----------- -------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Regular monthly distributions
Income distributed $ .5708 $ 1,426.95 $ .6151 $ 1,537.88 $ .6798 $ 1,699.55
Return of capital .4888 1,222.05 .4445 1,111.12 .3798 949.45
-------- ----------- -------- ----------- -------- -----------
$1.0596 $ 2,649.00 $1.0596 $ 2,649.00 $1.0596 $ 2,649.00
======== =========== ======== =========== ======== ===========
Distributions
Paid out of current and
prior undistributed cash flow $1.0596 $ 2,649.00 $1.0596 $ 2,649.00 $1.0596 $ 2,649.00
======== =========== ======== =========== ======== ===========
</TABLE>
Regular monthly distributions to investors consist primarily of interest and
principal received on mortgage-backed securities. Additional cash for
distributions is received from PEPs and other investments. The Fund may draw
on reserves to pay operating expenses or to supplement cash distributions to
investors. The Fund is permitted to replenish its reserves through the sale
or refinancing of assets. During 1995, a net amount of $777,828 of
undistributed mortgage principal payments was placed in reserves. In
addition, the Fund withdrew $962,741 from reserves to purchase 110,060
Exchangeable Units (Units) during 1995. The total amount held in reserves at
December 31, 1995, was $34,418,105 of which $32,839,361 was invested in GNMA
and FNMA Certificates and U.S. government securities.
<PAGE> -5-
The Fund believes that cash provided by operating and investing activities
and, if necessary, withdrawals from the Fund's reserves will be adequate to
meet its short-term and long-term liquidity requirements, including the
payments of distributions to investors. The Fund has no other internal or
external sources of liquidity. Under the terms of the Pooling and Servicing
agreement, the Fund is not authorized to enter into short-term or long-term
debt financing arrangements or issue additional Units or Certificates to meet
short-term and long-term liquidity requirements.
Asset Quality
The Fund continues to receive the full amount of monthly principal and
interest payments on its GNMA and FNMA Certificates. The GNMA and FNMA
Certificates are fully guaranteed as to principal and interest by GNMA and
FNMA, respectively. The obligations of GNMA are backed by the full faith and
credit of the United States government.
PEPs and Participating Loans, however, are not insured or guaranteed. The
value of these investments is a function of the value of the real estate
underlying the PEPs or collateralizing the Participating Loans. It is the
policy of the management of the Fund to make a periodic review of the real
estate underlying the PEPs or collateralizing the Participating Loans in order
to establish, when necessary, valuation reserves on investments in PEPs and
Participating Loans. The allowance for losses on investments in PEPs is based
on the fair value of the properties underlying the PEPs. A reserve for the
Participating Loans is established for the difference between the recorded
investment in the Participating Loans and the fair value of the underlying
collateral.
The fair value of the properties underlying the PEPs and the collateral for
the Participating Loans is based on management's best estimate of the net
realizable value of such properties; however, the ultimate realized values may
vary from these estimates. The net realizable value of the properties is
determined based on the discounted estimated future cash flows from the
properties, including estimated sales proceeds. The calculation of discounted
estimated future cash flows includes certain variables such as the assumed
inflation rates for rents and expenses, capitalization rates and discount
rates. These variables are supplied to management by an independent real
estate appraisal firm based upon local market conditions for each property.
In certain cases, additional factors such as the replacement value of the
property or comparable sales of similar properties are also taken into
consideration. The allowances are periodically reviewed and adjustments are
made to the allowances when there are significant changes in the estimated net
realizable value of the properties underlying the PEPs or the underlying
collateral for the loans.
Based on the foregoing methodology, valuations and reviews performed during
1995 indicated that the investment in PEPs and Participating Loans recorded on
the balance sheet at December 31, 1995, required no adjustments to their
carrying amounts.
The Parklane
The Parklane, a retirement living center located in Salt Lake City, Utah, had
an average occupancy rate of 96% during 1995, compared to 99% during 1994.
Cash flow from operations of the property has been sufficient to pay debt
service on the first mortgage loan collateralized by the property and the Fund
continues to receive timely payment of principal and interest on its GNMA
Certificate. However, the Fund received no equity distributions in 1995 from
the PEP interest in the limited partnership which owns this property and does
not expect any distributions in 1996.
Grand Villa
Average occupancy at Grand Villa retirement living center, in Grand Junction,
Colorado, was 81% during 1995, compared to 96% during 1994. During 1995, the
net cash provided from the operations of the property was sufficient to pay
total debt service on the mortgage loan. In addition to the GNMA payments, in
1995, the Fund received approximately $79,000 in equity distributions from its
PEP interest in the partnership which owns the property. The Fund anticipates
the property will continue to generate cash flow in excess of debt service in
1996.
<PAGE> -6-
Cambridge Court
Average occupancy at Cambridge Court retirement living center, in Kearney,
Nebraska, was 96% during 1995, compared to 98% during 1994. During 1995, the
net cash provided from the operations of the property was sufficient to pay
total debt service on the mortgage loan. In addition to the GNMA payments, in
1995, the Fund received approximately $11,000 in equity distributions from its
PEP interest in the partnership which owns the property. Cash flow from the
operations of this property is expected to continue to remain sufficient to
pay debt service on the mortgage loan during 1996.
Hickory Villa
Average occupancy at Hickory Villa retirement living center, in Omaha,
Nebraska, was 91% during 1995, compared to 95% during 1994. Cash flow from
the operations of the property was sufficient to make principal and interest
payments on the mortgage loan during 1995. Cash flow from the operations of
this property is expected to continue to remain sufficient to pay debt service
on the mortgage loan during 1996. However, the Fund received no equity
distribution from the PEP interest in the limited partnership which owns this
property in 1995 and does not expect any in 1996.
Harmony Bay Apartments
Harmony Bay Apartments, in Roswell, Georgia, had an average occupancy rate of
93% during 1995, compared to 94% during 1994. The GNMA Certificate has been
repaid in full, but the property partnership in which the Fund holds a PEP
continues to own the property. However, the Fund received no equity
distribution from the PEP interest in the limited partnership which owns this
property in 1995 and does not expect any in 1996. The mortgage loan on the
property went into default in 1990. However, the property partnership entered
into a Provisional Workout Agreement (PWA) with HUD effective February 1,
1995. Under the terms of the PWA, the property is required to make monthly
payments which increase over the term of the PWA. Monthly payments are
currently $57,189 which are sufficient to pay 72% of current interest. The
monthly payments increase annually at February 1 at varying amounts to
$121,123 beginning February 1, 2003, at which point payments will be
sufficient to pay 153% of current interest. Any funds over $85,127 remaining
in the operating account are to be remitted in addition to the scheduled
monthly payments. On February 1, 2004, HUD will recast the mortgage and any
delinquent interest at 9.5% interest amortized over the remaining term of the
mortgage, providing the mortgagor has fully complied with the terms of the PWA
and HUD has determined that it is financially feasible. Under the terms of
the PWA, HUD was given the option to declare the entire indebtedness due and
payable at or after February 1, 2005. Effective May 8, 1995, HUD assigned the
Deed of Trust to a private mortgagee. However, the property will continue to
operate under the PWA. The property was in compliance with the terms of the
PWA as of December 31, 1995 and expects to remain in compliance during 1996.
Timber Cove Apartments
Timber Cove Apartments, in Decatur, Illinois, had an average occupancy rate of
90% during 1995, compared to 88% during 1994. Cash flow from operations of
the property has not been sufficient to make principal and interest payments
and the mortgage loan on the property has been in default since 1990. The
GNMA Certificate has been repaid in full, but the property partnership, in
which the Fund holds a PEP continues to own the property. However, the Fund
received no equity distribution from the PEP interest in the limited
partnership which owns this property in 1995 and does not expect any in 1996.
The property partnership is continuing negotiations with HUD concerning a
potential workout agreement that would help the property reestablish its
financial stability and preserve the Fund's equity position.
Meadow Brook Apartments
Meadow Brook Apartments, in Amelia, Ohio, had an average occupancy rate of 91%
during 1995, compared to 87% during 1994. The GNMA Certificate has been
repaid in full, but the Fund continues to own the property. The mortgage loan
on the property went into default in 1990. However, the property entered into
a Provisional Workout Agreement (PWA) with HUD effective March 1, 1995, in
order to help the property reestablish its financial stability. Under the
terms of the PWA, the Partnership is required to make monthly payments which
increase over the term of the PWA. Monthly payments beginning March 1, 1995,
are $24,374 which are sufficient to pay 70% of the current interest, service
charges and taxes. The monthly payments increase annually at March 1 at
varying amounts to $38,497 beginning March 1, 2001, at which point payments
<PAGE> -7-
will be sufficient to pay 120% of current interest, service charge and taxes.
Any funds over $30,287 remaining in the operating account are to be remitted
in addition to the scheduled monthly payments. On February 28, 2004, HUD will
recast any delinquent interest, principal and other charges at 9.5% interest
amortized over the remaining term of the mortgage, providing the mortgagor has
fully complied with the terms of the PWA and HUD has determined that it is
financially feasible. Terms of the PWA also forgave past delinquencies in the
reserve for replacement and accrued late fees payable of $165,775. The
property was in compliance with the terms of the PWA as of December 31, 1995
and expects to remain in compliance during 1996.
Morrowood Townhouses
Morrowood Townhouses, in Morrow, Georgia, had an average occupancy rate of 96%
during 1995, compared to 94% during 1994. The GNMA Certificate has been paid
in full, but the Fund continues to own the property. The mortgage loan on the
property went into default in 1989. However, the property entered into a
Provisional Workout Agreement (PWA) with HUD effective July 1, 1994. Under
the terms of the PWA, the property is required to make monthly payments which
increase over the term of the PWA. Monthly payments are currently $44,118
which are sufficient to pay 92% of current interest. The monthly payments
increase annually at July 1 at varying amounts to $57,430 beginning July 1,
2002, at which point payments will be sufficient to pay 120% of current
interest. Additional payments are to be made monthly to reduce previous
mortgage delinquencies. The payments adjust annually on July 1 and range
from $1,215 to $2,350, monthly. Any funds over $51,237 remaining in the
operating account are to be remitted in addition to the scheduled monthly
payments. On July 1, 2003, HUD will recast any delinquent interest, principal
and other charges at 9.5% interest amortized over the remaining term of the
mortgage, providing the mortgagor has fully complied with the terms of the PWA
and HUD has determined that it is financially feasible. Under the terms of
the PWA, HUD was given the option to declare the entire indebtedness due and
payable at or after July 1, 2004. Effective May 12, 1995, HUD assigned the
Deed of Trust to a private mortgagee. However, the property will continue to
operate under the PWA. The property was in compliance with the terms of the
PWA as of December 31, 1995 and expects to remain in compliance during 1996.
Avalon Ridge
Avalon Ridge Apartments, in Renton, Washington, had an average occupancy rate
of 84% during 1995 and 1994. Interest is recognized as income on the Fund's
Participating Loan on a cash basis. Interest earned in 1995 was $41,157,
compared to $54,904 in 1994 and was approximately $83,000 less than the amount
needed to pay the base interest in 1995. An affiliate of the Fund's general
partner began managing this property in September of 1994. Since that time,
the property manager has implemented a plan to improve the tenant profile
through more stringent tenant qualifications. In addition, management has
been working to evict some of the current problem tenants. This has resulted
in a higher-than-normal turnover of units. The increase in tenant turnover
caused an increase of approximately $175,000 in repairs and maintenance expense
and property improvements. The majority of the increase was due to expenses
incurred to prepare apartment units for new rentals. In order to attract new
tenants, the property manager has had to decrease rental rates which resulted
in a decrease in rental income of $137,000 from 1994 to 1995. This decrease
in rental income and the $175,000 increase in repairs and maintenance expenses
were partially offset by a decrease of $53,000 in other operating expenses,
primarily property taxes. Thus, net cash flow generated by the property,
excluding interest, decreased approximately $259,000 from 1994 to 1995.
Management believes that its efforts will improve future operating results of
the property.
Jackson Park Place
Jackson Park Place Apartments, in Fresno, California, had an average occupancy
rate of 96% during 1995, compared to 95% during 1994. As a result, net cash
flow, excluding interest, in 1995 increased by approximately $14,000, compared
to 1994. Interest of $210,000 earned on the Fund's Participating Loan in 1995
and 1994 represents the full amount of base interest due for the respective
year. No contingent interest was earned in 1995 or 1994 and none is expected
in 1996.
<PAGE> -8-
Results of Operations
The Fund ended its ninth full year of operations on December 31, 1995. The
table below compares the results of operations for each year shown.
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Mortgage and mortgage-backed securities income $ 3,398,068 $ 3,488,646 $ 4,035,182
Equity in earnings of property partnerships 148,589 203,318 285,208
Rental income 2,334,465 2,268,649 2,189,546
Interest income on participating loans 251,157 264,904 268,633
Interest income on temporary cash investments
and U.S. government securities 408,645 374,521 284,652
-------------- -------------- --------------
6,540,924 6,600,038 7,063,221
-------------- -------------- --------------
General and administrative expenses 834,594 647,772 785,128
Real estate operating expenses 1,155,052 1,044,385 1,116,833
Depreciation 337,598 502,358 463,046
Interest expense 841,815 721,906 609,667
-------------- -------------- --------------
3,169,059 2,916,421 2,974,674
-------------- -------------- --------------
Net income $ 3,371,865 $ 3,683,617 $ 4,088,547
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Increase Increase
(Decrease) (Decrease)
From 1994 From 1993
-------------- --------------
<S> <C> <C>
Mortgage and mortgage-backed securities income $ (90,578) $ (546,536)
Equity in earnings of property partnerships (54,729) (81,890)
Rental income 65,816 79,103
Interest income on participating loans (13,747) (3,729)
Interest income on temporary cash investments
and U.S. government securities 34,124 89,869
-------------- --------------
(59,114) (463,183)
-------------- --------------
General and administrative expenses 186,822 (137,356)
Real estate operating expenses 110,667 (72,448)
Depreciation (164,760) 39,312
Interest expense 119,909 112,239
-------------- --------------
252,638 (58,253)
-------------- --------------
Net income $ (311,752) $ (404,930)
============== ==============
</TABLE>
The decrease in mortgage and mortgage-backed securities income of $90,578 from
1994 to 1995 is a result of the continued amortization of the principal
balances of the GNMA and FNMA Certificates resulting in a decrease in such
income of approximately $322,600 during 1995. The decrease during 1995 was
partially offset by the acquisition of additional GNMA Certificates by the
Fund during June 1994, which added approximately $232,000 of such income
during 1995. The decrease in mortgage and mortgage-backed securities income
of $546,536 from 1993 to 1994 was a result of a $1,390,000 decrease due to the
continued amortization of the principal balances of the GNMA and FNMA
Certificates which was offset by an $843,000 increase in interest attributable
to the purchase of GNMA and FNMA Certificates during July 1993, December 1993
and June 1994.
Equity in earnings of property partnerships is a function of the cash flow
received by the Fund from its PEP interests in the operating partnerships which
own certain of the properties as well as the Fund's allocable share of earnings
generated by these properties. Because of an overall decrease in the cash
<PAGE> -9-
flow received by the Fund from these properties, equity in earnings of
property partnerships decreased by $54,729 from 1994 to 1995, primarily due to
a decrease in the occupancy of Grand Villa. Equity in earnings of property
partnerships decreased by $81,890 from 1993 to 1994 due to a decrease in cash
flow from the property partnerships. See discussion of the properties in
which the Fund holds a PEP in the Asset Quality Section for additional
information.
The decreases in interest income on participating loans from 1994 to 1995 and
1993 to 1994 are attributable to the Fund recording income on the Avalon Ridge
property when it is received. The rate of interest received, which is lower
than the base interest rate, fluctuates with the cash flow generated by this
property. See discussion of this property in the Asset Quality section for
additional information.
The increase in interest income on temporary cash investments of $34,124 from
1994 to 1995 and $89,869 from 1993 to 1994 is attributable to additional cash
available for investment resulting from the receipt of principal payments on
GNMA Certificates backed by pools of single family properties. Principal
payments have exceeded normal amortization because of increased prepayments of
the underlying mortgages.
Rental income, net of real estate operating expenses and depreciation, from
the properties acquired by the Fund in settlement of PEPs increased by
approximately $120,000 in 1995 and $112,000 in 1994. The increase from 1994
to 1995 is due to an increase in rental income resulting from overall higher
average occupancy and rental rate increases which was partially offset by an
increase in real estate operating expenses. The increase in net rental income
from 1993 to 1994 was due to an increase in rental income resulting from
higher average occupancy and rental rate increases and a decrease in operating
expenses, primarily property improvements. The increases in net rental income
in 1995 and 1994 were entirely offset by increases in interest paid by the
Fund on the mortgage loans it has assumed on these properties. Since interest
is paid only to the extent of available cash flow from these properties, the
Fund records additional interest expense as such cash flow increases.
General and administrative expenses increased by $186,822 from 1994 to 1995
due to increases in: (i) salaries and related expenses of approximately
$129,000; (ii) administrative fees of approximately $30,000 paid by the Fund
to the general partner since the PEPs did not generate sufficient cash flow to
pay the full amount; (iii) legal and accounting fees of approximately $28,000;
(iv) insurance expense of approximately $10,000; and (v) other expenses of
approximately $6,000. These increases were partially offset by a decrease of
approximately $16,000 in printing and investor servicing expenses.
General and administrative expenses decreased $137,356 from 1993 to 1994 due
to decreases in: (i) administrative fees of approximately $58,000 paid to the
general partner; (ii) salaries and related expenses of approximately $52,000;
(iii) printing fees of approximately $19,000; (iv) legal and accounting fees
of approximately $11,000; and (v) other expenses or approximately $6,000.
These decreases were partially offset by an increase of approximately $9,000
in insurance expense.
Item 8. Financial Statements and Supplementary Data. The Combined
Financial Statements and supporting schedules of the Registrants are set forth
in Item 14 hereof and are incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure. There were no disagreements with the Registrants'
independent accountants on accounting principles and practices or financial
disclosure during the fiscal years ended December 31, 1995 and 1994.
PART III
Item 10. Directors and Executive Officers of Registrants. The Registrants
have no managers or officers. Management of the Fund consists of the
Partnership which is the managing general partner of the Fund. Management of
the Partnership consists of the general partner of the Partnership, America
First Capital Associates Limited Partnership Three ("AFCA") and its general
partner, America First Companies L.L.C. The following individuals are the
managers and officers of America First Companies L.L.C, and each serves for a
term of one year.
<PAGE> -10-
Name Position Held Position Held Since
- ----------------------- ---------------------------- -------------------
Michael B. Yanney Chairman of the Board, 1987
President, Chief Executive
Officer and Manager
Michael Thesing Vice President, Secretary, 1987
Treasurer and Manager
William S. Carter, M.D. Manager 1994
George Kubat Manager 1994
Martin Massengale Manager 1994
Alan Baer Manager 1994
Gail Walling Yanney Manager 1996
Michael B. Yanney, 62, is the Chairman and President of America First
Companies L.L.C. From 1977 until the organization of the first such fund in
1984, Mr. Yanney was principally engaged in the ownership and management of
commercial banks. Mr. Yanney also has investments in private corporations
engaged in a variety of businesses. From 1961 to 1977, Mr. Yanney was
employed by Omaha National Bank and Omaha National Corporation (subsequently
merged into FirsTier Financial, Inc.), where he held various positions,
including the position of Executive Vice President and Treasurer of the
holding company. Mr. Yanney also serves as a member of the boards of
directors of Burlington Northern Santa Fe Corporation, Forest Oil Corporation,
MFS Communications Company, Inc., Lozier Corporation, Mid-America Apartment
Communities, Inc., and PKS Information Services, Inc.
Michael Thesing, 41, has been Vice President and Chief Financial Officer
of affiliates of America First Companies L.L.C. since July 1984. From January
1984 until July 1984, he was employed by various companies controlled by Mr.
Yanney. He was a certified public accountant with Coopers & Lybrand from 1977
through 1983.
William S. Carter, M.D., 69, is a retired physician. Dr. Carter
practiced medicine for 30 years in Omaha, Nebraska, specializing in
otolaryngology (disorders of the ears, nose and throat).
George Kubat, 50, is the President and Chief Executive Officer of
Phillips Manufacturing Co., an Omaha, Nebraska, based manufacturer of drywall
and construction materials. Prior to assuming that position in November 1992,
Mr. Kubat was a certified public accountant with Coopers & Lybrand in Omaha,
Nebraska, from 1969. He was the tax partner in charge of the Omaha office from
1981 to 1992.
Martin Massengale, 62, is the President Emeritus of the University of
Nebraska. Prior to becoming President in 1991, he served as Interim President
from August 1989, as Chancellor of the University of Nebraska Lincoln from
June 1981 through December 1990 and as Vice Chancellor for Agriculture and
Natural Resources from 1976 to 1981. Prior to that time, he was a professor
and associate dean of the College of Agriculture at the University of
Arizona. Dr. Massengale currently serves on the board of directors of Woodmen
Accident & Life Insurance Company.
Alan Baer, 73, is presently Chairman of Alan Baer & Associates, Inc., a
management company located in Omaha, Nebraska. He is also Chairman of Lancer
Hockey, Inc., Baer Travel Services, Wessan Telemarketing, Total Security
Systems, Inc. and several other businesses. Mr. Baer is the former Chairman
and Chief Executive Officer of the Brandeis Department Store chain which was,
until its acquisition, one of the larger retailers in the Midwest. Mr. Baer
has also owned and served on the board of directors of several banks in
Nebraska and Illinois.
Gail Walling Yanney, 60, is a retired physician. Dr. Walling practiced
anesthesia and was most recently the Executive Director of the Clarkson
Foundation until October of 1995. In addition, she is a former director of
FirsTier Bank, N.A., Omaha. Ms. Yanney is the wife of Michael Yanney.
Item 11. Executive Compensation. Neither the Registrants nor AFCA has
any directors or officers. None of the managers or executive officers of
America First Companies L.L.C. (the general partner of AFCA) receives
compensation from the Registrants and AFCA receives no reimbursement from the
Registrant for any portion of their salaries. Remuneration paid by the Fund
to AFCA pursuant to the terms of its pooling and servicing agreement during
the year ending December 31, 1995, is described in Note 9 of the Notes to
Combined Financial Statements filed in response to Item 8 hereof.
<PAGE> -11-
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) No person is known by Registrants to own beneficially more than 5% of
the Units. One hundred percent of the Certificates are owned by National Bank
of Detroit as trustee for the K Mart Corporation Employee Welfare Benefit
Plan, 611 Woodward Avenue, Detroit, Michigan 48232.
(b) William S. Carter, M.D. owns 3,500 units. No other manager or
officer of America First Companies L.L.C. and no partner of AFCA owns any
Certificates or Units.
(c) LB I Group, Inc. is the special limited partner of AFCA, with the
right to become the managing general partner of AFCA, or to designate another
corporation or other entity as the managing general partner, upon the
happening of any of the following events: (1) the commission of any act which,
in the opinion of LB I Group, Inc., constitutes negligence, misfeasance or
breach of fiduciary duty on the part of the managing general partner, (2) the
dissolution, insolvency or bankruptcy of the managing general partner or the
occurrence of such other events which cause the managing general partner to
cease to be a general partner under Delaware law, or (3) the happening of an
event which results in the change in control of the managing general partner
whether by operation of law or otherwise.
There exists no other arrangement known to the Registrants, the operation
of which may at any subsequent date result in a change in control of the
Registrants.
Item 13. Certain Relationships and Related Transactions. The general
partner of the Registrants is AFCA and the sole general partner of AFCA is
America First Companies L.L.C.
Except as described herein, neither Registrant is a party to any
transaction or proposed transaction with AFCA, America First Companies L.L.C.
or with any person who is (i) a director or executive officer of America First
Companies L.L.C. or any general partner of AFCA, (ii) a nominee for election
as a director of America First Companies L.L.C, (iii) an owner of more than 5%
of the Units or Certificates or (iv) a member of the immediate family of any
of the foregoing persons.
During 1995, the Registrants paid or reimbursed AFCA or America First
Companies L.L.C. $582,010 for certain costs and expenses incurred in
connection with the operation of the Registrants, including legal and
accounting fees and investor communication costs, such as printing and mailing
charges. See Note 9 to Notes to Combined Financial Statements filed in
response to Item 8 hereof for a description of these costs and expenses. AFCA
is entitled to an annual administrative fee equal to .35% of the Fund's
outstanding investments which is paid by the Fund to the extent such amounts
are not paid by property owners. AFCA earned $248,129 in such administrative
fees during 1995, and of such amount, the Fund paid $215,033.
An affiliate of AFCA has been retained to provide property management
services for Morrowood Townhouses, Avalon Ridge and Harmony Bay Apartments.
The fees for services provided represent the lower of: (i) costs incurred in
providing management of the property; or, (ii) customary fees for such
services determined on a competitive basis. Total fees amounted to $155,167
in 1995.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements. The following financial statements are included
in response to Item 8 of this report:
Independent Accountants' Report dated March 26, 1996.
Combined Balance Sheets of Registrants as of December 31, 1995, and
December 31, 1994.
Combined Statements of Income of Registrants for the years ended December
31, 1995, December 31, 1994, and December 31, 1993.
Combined Statements of Partners' Capital of Registrants for the years
ended December 31, 1995, December 31, 1994, and December 31, 1993.
<PAGE> -12-
Combined Statements of Cash Flows of Registrants for the years ended
December 31, 1995, December 31, 1994, and December 31, 1993.
Notes to Combined Financial Statements of Registrants.
2. Financial Statement Schedules. The information required to be set
forth in the financial statement schedules is shown in the Notes to Combined
Financial Statements filed in response to Item 8 hereof.
3. Exhibits. The following exhibits were filed as required by Item 14(c)
of this report. Exhibit numbers refer to the paragraph numbers under Rule 601
of Regulation S-K:
3(a). Articles of Incorporation and Bylaws of America First Fiduciary
Corporation Number Six (incorporated herein by reference to Form 10-K dated
December 31, 1987, filed pursuant to Section 13 of the Securities Exchange Act
of 1934 by America First Participating/Preferred Equity Mortgage Fund Limited
Partnership (Commission File No. 0-15854)).
3(b). Articles of Incorporation and Bylaws of America First Fiduciary
Corporation Number Seven (incorporated herein by reference to Form 10-K, dated
December 31, 1987, filed pursuant to Section 13 of the Securities Exchange Act
of 1934 by America First Participating/Preferred Equity Mortgage Fund
(Commission File No. 0-15665)).
4(a). Agreement of Limited Partnership dated November 20, 1986,
(incorporated herein by reference to Form 10-K dated December 31, 1986, filed
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 by
America First Participating/Preferred Equity Mortgage Fund Limited Partnership
(Commission File No. 0-15854)).
4(b). Form of Certificate of Exchangeable Unit (incorporated by reference
to Form S-11 Registration Statement filed February 24, 1986, with the
Securities and Exchange Commission by America First Participating/Preferred
Equity Mortgage Fund Limited Partnership (Commission File No. 33-3566)).
4(c). Pooling and Servicing Agreement dated November 20, 1986, (including
as an exhibit thereto the Form of Exchangeable Passthrough Certificate)
(incorporated herein by reference to Form 10-K dated December 31, 1986, filed
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 by
America First Participating/Preferred Equity Mortgage Fund (Commission File
No. 0-15665)).
10(a). $18,667,000 Deed of Trust Note, dated December 1, 1987, of Casa
Sandoval Investors, a California Limited Partnership (incorporated by
reference to Form 10-K dated December 31, 1987, filed pursuant to Section 13 of
the Securities Exchange Act of 1934 by America First Participating/Preferred
Equity Mortgage Fund (Commission File No. 0-15665)).
10(b). Deed of Trust, dated December 1, 1987, of Casa Sandoval Investors,
a California Limited Partnership (incorporated by reference to Form 10-K dated
December 31, 1987, filed pursuant to Section 13 of the Securities Exchange Act
of 1934 by America First Participating/Preferred Equity Mortgage Fund
(Commission File No. 0-15665)).
10(c). Assignment of Mortgage Loan and Related Documents, dated December
1, 1987, from America First Mortgage Corp. to FirsTier Bank, National
Association as custodian for the Registrant (incorporated by reference to Form
10-K dated December 31, 1987, filed pursuant to Section 13 of the Securities
Exchange Act of 1934 by America First Participating/Preferred Equity Mortgage
Fund (Commission File No. 0-15665)).
24. Power of Attorney.
(b) The Registrant did not file any reports on Form 8-K during the last
quarter of the period covered by this report.
<PAGE> -13-
INDEPENDENT ACCOUNTANTS' REPORT
To the Partners
America First Participating/Preferred Equity Mortgage Fund
and
America First Participating/Preferred Equity Mortgage Fund Limited Partnership:
We have audited the accompanying combined balance sheets of America First
Participating/Preferred Equity Mortgage Fund and America First
Participating/Preferred Equity Mortgage Fund Limited Partnership as of
December 31, 1995 and 1994, and the related combined statements of income,
partners' capital and cash flows for each of the three years in the period
ended December 31, 1995. These combined financial statements are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the combined
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall combined financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of America First
Participating/Preferred Equity Mortgage Fund and America First
Participating/Preferred Equity Mortgage Fund Limited Partnership as of
December 31, 1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Omaha, Nebraska Coopers & Lybrand L.L.P.
March 26, 1996
<PAGE> -14-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
Dec. 31, 1995 Dec. 31, 1994
-------------- --------------
<S> <C> <C>
Assets
Cash and temporary cash investments, at cost which approximates market value $ 2,573,156 $ 7,806,496
Investment in U.S. government securities (Note 8) 5,025,000 -
Investment in mortgage-backed securities (Note 4) 43,103,240 45,810,512
Investment in preferred equity participations (PEPs), net of valuation allowance (Note 5) 325,517 449,510
Investment in real estate (Note 6) 6,668,864 6,970,972
Investment in participating loans, net of valuation allowance (Note 7) 2,960,000 2,960,000
Interest receivable 374,487 359,225
Investment evaluation fees, net 610,477 633,515
Other assets 2,925,362 2,842,951
-------------- --------------
$ 64,566,103 $ 67,833,181
============== ==============
Liabilities and Partners' Capital
Liabilities
Accounts payable (Note 9) $ 316,778 $ 551,365
Distributions payable (Note 3) 1,029,143 1,048,974
Mortgage notes payable (Note 10) 9,614,760 9,614,760
-------------- --------------
10,960,681 11,215,099
-------------- --------------
Partners' Capital
General Partner 100 100
Passthrough Certificate Holder ($23,060 per certificate in 1995 and $23,901 in 1994) 2,305,965 2,390,147
Exchangeable Unit Holders ($9.22 per unit in 1995 and $9.56 in 1994) 51,299,357 54,227,835
-------------- --------------
53,605,422 56,618,082
-------------- --------------
$ 64,566,103 $ 67,833,181
============== ==============
The accompanying notes are an integral part of the combined financial statements.
</TABLE>
<PAGE> -15-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Income
Mortgage and mortgage-backed securities income (Note 4) $ 3,398,068 $ 3,488,646 $ 4,035,182
Equity in earnings of property partnerships (Note 5) 148,589 203,318 285,208
Rental income 2,334,465 2,268,649 2,189,546
Interest income on participating loans (Note 7) 251,157 264,904 268,633
Interest income on temporary cash investments
and U.S. government securities 408,645 374,521 284,652
-------------- -------------- --------------
6,540,924 6,600,038 7,063,221
-------------- -------------- --------------
Expenses
General and administrative expenses (Note 9) 834,594 647,772 785,128
Real estate operating expenses 1,155,052 1,044,385 1,116,833
Depreciation 337,598 502,358 463,046
Interest expense 841,815 721,906 609,667
-------------- -------------- --------------
3,169,059 2,916,421 2,974,674
-------------- -------------- --------------
Net income $ 3,371,865 $ 3,683,617 $ 4,088,547
============== ============== ==============
Net income allocated to:
General Partner $ 34,064 $ 40,484 $ 62,434
Exchangeable Unit Holders 3,195,130 3,489,345 3,856,158
Passthrough Certificate Holder 142,671 153,788 169,955
-------------- -------------- --------------
$ 3,371,865 $ 3,683,617 $ 4,088,547
============== ============== ==============
Net income per exchangeable unit $ .57 $ .62 $ .68
============== ============== ==============
Net income per passthrough certificate $ 1,426.95 $ 1,537.88 $ 1,699.55
============== ============== ==============
Weighted average number of units outstanding 5,597,771 5,672,327 5,672,327
============== ============== ==============
Weighted average number of certificates outstanding 100 100 100
============== ============== ==============
The accompanying notes are an integral part of the combined financial statements.
</TABLE>
<PAGE> -16-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
COMBINED STATEMENTS OF PARTNERS' CAPITAL
FROM DECEMBER 31, 1992, TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
Passthrough Certificate Exchangeable Unit
Holders Holders
-------------------------- -------------------------
General # of
Partner Certificates Amount # of Units Amount Total
-------- ------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Partners' Capital (excluding net unrealized
holding gains)
Balance at December 31, 1992 $ 100 100 $ 2,596,205 5,672,327 $ 58,903,126 $ 61,499,431
Net income 62,434 - 169,955 - 3,856,158 4,088,547
Cash distributions paid or accrued (Note 3) (62,434) - (264,901) - (6,010,397) (6,337,732)
-------- ------------ ------------ ---------- ------------ ------------
Balance at December 31, 1993 100 100 2,501,259 5,672,327 56,748,887 59,250,246
Net income 40,484 - 153,788 - 3,489,345 3,683,617
Cash distributions paid or accrued (Note 3) (40,484) - (264,900) - (6,010,397) (6,315,781)
-------- ------------ ------------ ---------- ------------ ------------
Balance at December 31, 1994 100 100 2,390,147 5,672,327 54,227,835 56,618,082
Net income 34,064 - 142,671 - 3,195,130 3,371,865
Cash distributions paid or accrued (Note 3) (34,064) - (264,900) - (5,931,398) (6,230,362)
Purchase of 110,060 units (Note 8) - - 3,268 (110,060) (966,009) (962,741)
-------- ------------ ------------ ---------- ------------ ------------
100 100 2,271,186 5,562,267 50,525,558 52,796,844
-------- ------------ ------------ ---------- ------------ ------------
Net unrealized holding gains
Balance at December 31, 1994 - - - - - -
Net change - - 34,779 - 773,799 808,578
-------- ------------ ------------ ---------- ------------ ------------
- - 34,779 - 773,799 808,578
-------- ------------ ------------ ---------- ------------ ------------
Balance at December 31, 1995 $ 100 100 $ 2,305,965 5,562,267 $ 51,299,357 $ 53,605,422
======== ============ ============ ========== ============ ============
The accompanying notes are an integral part of the combined financial statements.
</TABLE>
<PAGE> -17-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 3,371,865 $ 3,683,617 $ 4,088,547
Adjustments to reconcile net income to
net cash from operating activities:
Equity in earnings of property partnerships (148,589) (203,318) (285,208)
Depreciation 337,598 502,358 463,046
Amortization of discount on mortgage-backed and
U.S. government securities (72,975) (39,831) (56,043)
Decrease (increase) in interest receivable (15,262) 26,369 29,060
Amortization of investment evaluation fees 23,038 23,036 23,037
Increase in other assets (82,411) (684,541) (144,890)
Increase (decrease) in accounts payable (234,587) 1,149 119,519
-------------- -------------- --------------
Net cash provided by operating activities 3,178,677 3,308,839 4,237,068
-------------- -------------- --------------
Cash flows from investing activities
Acquisition of U.S. government securities (4,937,891) - -
Mortgage principal payments received 3,512,331 8,980,410 15,621,198
Acquisition of mortgage-backed securities (10,615) (7,899,397) (12,003,730)
Distributions received from PEPs 272,582 222,984 278,798
Investment in real estate (35,490) - -
-------------- -------------- --------------
Net cash provided by (used in) investing activities (1,199,083) 1,303,997 3,896,266
-------------- -------------- --------------
Cash flows from financing activities
Purchase of Units (962,741) - -
Distributions paid (6,250,193) (5,846,414) (6,281,066)
-------------- -------------- --------------
Net cash used in financing activities (7,212,934) (5,846,414) (6,281,066)
-------------- -------------- --------------
Net increase (decrease) in cash and temporary cash investments (5,233,340) (1,233,578) 1,852,268
Cash and temporary cash investments at beginning of year 7,806,496 9,040,074 7,187,806
-------------- -------------- --------------
Cash and temporary cash investments at end of year $ 2,573,156 $ 7,806,496 $ 9,040,074
============== ============== ==============
Supplemental disclosure of cash flow information
Cash paid during the period for interest $ 841,815 $ 721,906 $ 609,667
============== ============== ==============
The accompanying notes are an integral part of the combined financial statements.
</TABLE>
<PAGE> -18-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. Organization
America First Participating/Preferred Equity Mortgage Fund (the Fund) was
formed on November 20, 1986, as a Nebraska general partnership for the purpose
of acquiring a portfolio of federally-insured multifamily mortgages or other
investments including preferred equity participations (PEPs). PEPs consist
of equity interests which are intended to provide the Fund with a
participation in the net cash flow and net sale or refinancing proceeds of the
properties collateralizing the mortgage loans. America First
Participating/Preferred Equity Mortgage Fund Limited Partnership (the
Partnership) was also formed on November 20, 1986, under the Delaware Revised
Uniform Limited Partnership Act to serve as the managing general partner of
the Fund. The Fund and the Partnership will continue in existence until
December 31, 2036, unless terminated earlier under the provisions of the
Pooling and Servicing Agreement forming the Fund and the Partnership Agreement
forming the Partnership. The General Partner of the Partnership is America
First Capital Associates Limited Partnership Three (AFCA 3).
2. Summary of Significant Accounting Policies
A)Method of Accounting
The financial statements include the combined statements of the Fund and
the Partnership. The combined financial statements are prepared on the
accrual basis of accounting in accordance with generally accepted accounting
principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
B)Investments in Mortgage-Backed Securities, U.S. Government Securities and
Participating Loans
On January 1, 1994, the Fund adopted Statement of Financial Accounting
Standard No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" (FAS 115). FAS 115 requires that investment securities be
classified as held-to-maturity, available-for-sale, or trading. Under FAS
115, investments classified as held-to-maturity are carried at amortized
cost. Investments classified as available-for-sale are reported at
fair value with any unrealized gains or losses excluded from earnings
and reflected as a separate component of partners' capital. Subsequent
increases and decreases in the net unrealized gain/loss on the
available-for-sale securities are reflected as adjustments to the carrying
value of the portfolio and adjustments to the component of partners'
capital. The Fund does not have investment securities classified as
trading. FAS 115 had no impact to partners' capital or earnings prior to
June 30, 1995, since all investment securities were classified as
held-to-maturity. As described in Note 4, on June 30, 1995, the Fund
reclassified certain investment securities from the held-to-maturity
category to the available-for-sale category.
The investment in Participating Loans is recorded at cost and reduced by
principal payments received. Participating Loans are not insured or
guaranteed. The value of these investments is a function of the value of
the real estate collateralizing the Participating Loans. Interest income on
Participating Loans is excluded from income when, in the opinion of
management, collection of such interest is doubtful. This interest is
recognized as income when it is received.
C)Investment in Preferred Equity Participations (PEPs)
The investment in PEPs consist of interests in limited partnerships which
own the properties underlying the mortgage-backed securities and are
accounted for using the equity method. PEPs are not insured or guaranteed.
The value of these investments is a function of the value of the real estate
underlying the PEPs.
<PAGE> -19-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
D)Allowance for Losses on Investment in PEPs and Participating Loans
The allowance for losses on investments in PEPs is a valuation reserve which
has been established at a level that management feels is adequate to absorb
potential losses on investments in PEPs. The allowance is based on the fair
value of the properties underlying the PEPs.
The allowance for losses on Participating Loans is a valuation reserve
which has been established at a level that management feels is adequate to
absorb potential losses on outstanding loans. Reserves are established for
loans which management considers impaired. Loans are considered impaired
when it is probable that the Fund will be unable to collect amounts due
according to the contractual terms of the loan agreements. Based on this
analysis, all loans were considered impaired at December 31, 1995. A
reserve is established for the difference between the recorded investment in
the Participating Loans and the fair value of the underlying collateral.
The fair value of the properties underlying the PEPs and the collateral for
the Participating Loans is based on management's best estimate of the net
realizable value of such properties; however, the ultimate realized values
may vary from these estimates. The net realizable value of the properties is
determined based on the discounted estimated future cash flows from the
properties, including estimated sales proceeds. The calculation of discounted
estimated future cash flows includes certain variables such as the assumed
inflation rates for rents and expenses, capitalization rates and discount
rates. These variables are supplied to management by an independent real
estate appraisal firm based upon local market conditions for each property.
In certain cases, additional factors such as the replacement value of the
property or comparable sales of similar properties are also taken into
consideration. The allowances are periodically reviewed and adjustments are
made to the allowances when there are significant changes in the estimated
net realizable value of the properties underlying the PEPs or the underlying
collateral for the loans.
E)Investment in Real Estate
The investment in real estate is recorded at the lower of cost or estimated
net realizable value at the date of acquisition.
F)Depreciation
Depreciation of real estate acquired in settlement of PEPs is based on the
estimated useful life of the properties (ranging from 6 to 27 1/2 years)
using the straight-line method.
G)Income Taxes
No provision has been made for income taxes since each Exchangeable Unit
Holder or Passthrough Certificate Holder is required to report their share
of the Partnership's or Fund's income for federal and state income tax
purposes. The reported amounts of the Fund's assets and liabilities
exceeded the tax basis by $5,956,079 and $10,394,969 at December 31, 1995,
and December 31, 1994, respectively.
H)Temporary Cash Investments
Temporary cash investments are invested in short-term debt securities
purchased with original maturities of three months or less.
I)Investment Evaluation Fees
The investment evaluation fees were incurred in connection with the
acquisition of assets. These fees are being amortized over the life of the
Fund.
J)Net Income Per Exchangeable Unit and Passthrough Certificate
Net income per Exchangeable Unit and Passthrough Certificate is allocated
based on the weighted average number of exchangeable units and passthrough
certificates outstanding during each year presented.
<PAGE> -20-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
K)New Accounting Pronouncement
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of". Among other things,
this Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or circumstances indicate that the carrying value of an
asset may not be recoverable. The Partnership plans to adopt this Statement
in 1996 and anticipates that the adoption of this Statement will not have a
material impact on the combined financial statements.
3. Partnership Income, Expenses and Cash Distributions
The Partnership Agreement and the Pooling and Servicing Agreement contain
provisions for distributing the cash available for distribution and for the
allocation of income and expenses for tax purposes among AFCA 3 and investors.
Income and expenses are allocated to each investor on a monthly basis based on
the number of exchangeable units or passthrough certificates held by each
investor as of the last day of the month for which such allocation is to be
made.
Net income from operations will generally be allocated between investors and
AFCA 3 in accordance with cash distributions from regular monthly payments on
investments. Net income arising from sale or refinancing proceeds will
generally be allocated first to AFCA 3 in an amount equal to the sale or
refinancing proceeds distributed to AFCA 3 and the balance will be allocated
to the investors. Net income arising from both operations and sale or
refinancing proceeds, however, may be specially allocated to AFCA 3 to the
extent that prior allocations of net income from sale or refinancing proceeds
are insufficient to match distributions arising from sale or refinancing
proceeds. Net losses, for tax purposes, will be allocated 99% to investors
and 1% to AFCA 3.
Cash distributions representing return of capital (other than sale or
refinancing proceeds) are allocated 100% to investors. Cash distributions
representing income (other than sale or refinancing proceeds) from investments
during each distribution period are allocated in the following order of
priority: (i) 99% to investors and 1% to AFCA 3 until investors receive from
all sources a cumulative noncompounded return of 9% per annum on their
adjusted capital contributions; (ii) 90% to investors and 10% to AFCA 3 until
investors receive from all sources a cumulative noncompounded return of 11%
per annum on their adjusted capital contributions; and thereafter, (iii) 95%
to investors and 5% to AFCA 3.
Cash distributions representing sale or refinancing proceeds are allocated in
the following order of priority: (i) 100% to investors until investors
receive aggregate cash distributions from all sources equal to a full return
of investment; (ii) 99% to investors and 1% to AFCA 3 until investors have
received from all sources a full return of investment plus a cumulative
noncompounded return of 9% per annum on their adjusted capital contributions;
(iii) 90% to investors and 10% to AFCA 3 until investors have received from
all sources a full return of investment plus a cumulative noncompounded return
of 11% per annum on their adjusted capital contributions; and thereafter, (iv)
95% to investors and 5% to AFCA 3.
Cash distributions are presently made on a monthly basis but may be made
quarterly if AFCA 3 so elects. The cash distributions included in the
combined financial statements represent the actual cash distributions made
during each year and the cash distributions accrued at the end of each year.
4. Investment in Mortgage-Backed Securities
The mortgage-backed securities held by the Partnership represent Government
National Mortgage Association (GNMA) Certificates and Federal National
Mortgage Association (FNMA) Certificates. The GNMA Certificates are backed by
first mortgage loans on multifamily residential properties and pools of single-
family properties. The FNMA Certificates are backed by pools of single-family
properties. The GNMA Certificates are debt securities issued by a private
<PAGE> -21-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
mortgage lender and are guaranteed by GNMA as to the full and timely payment
of principal and interest on the underlying loans. The FNMA Certificates are
debt securities issued by FNMA and are guaranteed by FNMA as to the full and
timely payment of principal and interest on the underlying loans.
On June 30, 1995, the Fund transferred all GNMA and FNMA Certificates held in
the reserve account from the held-to-maturity classification to the
available-for-sale classification (see Note 8).
At December 31, 1995, the total amortized cost, gross unrealized holding gains
and aggregate fair value of held-to-maturity securities were $15,288,879,
$529,439 and $15,818,318, respectively.
At December 31, 1994, the total amortized cost, gross unrealized holding
gains, gross unrealized holding losses and aggregate fair value of
held-to-maturity securities were $45,810,512, $155,875, $1,547,616 and
$44,418,771, respectively.
Descriptions of the Fund's mortgage-backed securities at December 31, 1995,
are as follows:
<TABLE>
<CAPTION>
Income
Number Interest Maturity Carrying Earned
Type of Security and Name Location of Units Rate Date Amount in 1995
- ---------------------------------- ------------------ -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Held-to-Maturity
GNMA Certificates:
The Parklane Salt Lake City, UT 94 9.25% 03/15/2029 $ 6,421,567 $ 595,119
Grand Villa Grand Junction, CO 46 9.25% 03/15/2029 2,000,362 92,691 (3)
Cambridge Court Kearney, NE 41 9.25% 02/15/2029 1,951,783 90,442 (3)
Hickory Villa Omaha, NE 57 9.25% 02/15/2029 2,526,874 234,182
Pools of single-family properties 9.58% (1) 2017 2,337,957 255,032
Pools of single-family properties 9.62% (1) 2016 to 2017 50,336 5,513
------------ ------------
15,288,879 1,272,979
------------ ------------
Available-for-Sale
GNMA Certificates:
Pools of single-family properties 8.56% (1) 2016 to 2020 3,393,641 (2) 305,590
Pools of single-family properties 9.30% (1) 2021 1,953,202 (2) 215,864
Pools of single-family properties 8.76% (1) 2021 1,296,052 (2) 123,039
Pools of single-family properties 8.76% (1) 2021 596,682 (2) 61,118
Pools of single-family properties 8.25% (1) 2021 to 2022 2,811,962 (2) 223,450
Pools of single-family properties 6.50% (1) 2023 4,629,795 (2) 311,895
Pools of single-family properties 6.03% (1) 2008 2,582,943 (2) 162,919
Pools of single-family properties 7.13% (1) 2009 7,216,934 (2) 527,688
FNMA Certificates:
Pools of single-family properties 5.52% (1) 2000 3,333,150 (2) 193,526
------------ ------------
27,814,361 2,125,089
------------ ------------
Balance at December 31, 1995 $ 43,103,240 $ 3,398,068
============ ============
</TABLE>
(1)Represents yield to the Fund.
(2)Reserve account asset - see Note 8.
(3)Mortgage income has been reduced due to the elimination of the Fund's share
of interest received from the PEP partnerships.
<PAGE> -22-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
-------------- -------------- --------------
<C> <C> <C>
Reconciliation of the carrying amount of the mortgage-backed
securities is as follows:
Balance at beginning of year $ 45,810,512 $ 46,851,694 $ 50,413,119
Additions
Acquisition of mortgage-backed securities 10,615 7,899,397 12,003,730
Amortization of discount on mortgage-backed securities 26,726 39,831 56,043
Net unrealized holding gains on available-for-sale securities 767,718 - -
Deduction
Mortgage principal payments received (3,512,331) (8,980,410) (15,621,198)
-------------- -------------- --------------
Balance at end of year $ 43,103,240 $ 45,810,512 $ 46,851,694
============== ============== ==============
</TABLE>
5. Investment in Preferred Equity Participations (PEPs)
The PEPs consist of interests in limited partnerships which own properties
financed by the Fund. The limited partnership agreements provide for a
participation in the net cash flow and net sale or refinancing proceeds of the
properties subject to various priority payments.
Descriptions of the PEPs held at December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Equity in
Earnings
Amount of Property
Name Location Partnership Name of PEPs Partnerships
- ---------------------- ------------------ -------------------------------------- -------------- --------------
<S> <C> <C> <C> <C>
Harmony Bay Apartments Roswell, GA Harmony Bay Associates, Ltd. $ 887,388 $ -
Timber Cove Apartments Decatur, IL Timber Cove Associates 50,019 -
Grand Villa Grand Junction, CO Stazier Associates Grand Junction Ltd. 214,523 57,689
Cambridge Court Kearney, NE Stazier Associates Kearney Ltd. 127,855 90,900
Hickory Villa Omaha, NE Stazier Associates Omaha Ltd. - -
The Parklane Salt Lake City, UT Congregate Care Company - -
-------------- --------------
1,279,785 $ 148,589
Less valuation allowance (954,268) ==============
--------------
Balance at December 31, 1995 $ 325,517
==============
</TABLE>
<PAGE> -23-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
-------------- -------------- --------------
<C> <C> <C>
Reconciliation of the carrying amount of the PEPs is as follows:
Balance at beginning of year $ 4,203,793 $ 4,223,459 $ 4,217,049
Addition
Equity in earnings of property partnerships 148,589 203,318 285,208
Deductions
Distributions received from PEPs (272,582) (222,984) (278,798)
Write-offs (1) (2,800,015) - -
-------------- -------------- --------------
Balance at end of year $ 1,279,785 $ 4,203,793 $ 4,223,459
============== ============== ==============
The following summarizes the activity in the valuation allowance:
Balance at beginning of year $ 3,754,283 $ 3,754,283 $ 3,754,283
Write-offs (1) (2,800,015) - -
-------------- -------------- --------------
Balance at end of year $ 954,268 $ 3,754,283 $ 3,754,283
============== ============== ==============
</TABLE>
(1)The Fund no longer holds a PEP investment in Casa Sandoval or the Villages
at Moonraker. During 1995, Casa Sandoval was sold at a foreclosure
auction and the Fund withdrew as a limited partner of the operating
partnership which owns the Villages at Moonraker. Therefore, the
valuation allowance previously established for the full amount of these
PEP investments was written off.
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Combined condensed financial information for the PEPs is as follows:
Assets
Real estate $ 21,764,899 $ 51,438,474 $ 51,205,777
Restricted deposits and funded reserves 644,429 2,021,659 742,886
Other assets 2,614,643 3,417,931 7,936,506
-------------- -------------- --------------
$ 25,023,971 $ 56,878,064 $ 59,885,169
============== ============== ==============
Liabilities and Partners' Capital
Liabilities
Mortgage and notes payable $ 28,582,989 $ 58,841,803 $ 61,343,441
Other liabilities 3,753,136 12,637,370 5,942,192
Partners' Capital (Deficit)
General Partners (7,134,537) (17,494,365) (10,352,799)
Limited Partners
Other (1,457,402) (1,310,537) (1,271,124)
America First Participating/Preferred Equity Mortgage Fund 1,279,785 4,203,793 4,223,459
-------------- -------------- --------------
$ 25,023,971 $ 56,878,064 $ 59,885,169
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Rental income $ 10,009,582 $ 13,591,876 $ 10,882,195
============== ============== ==============
Combined results of operations $ (1,413,339) $ (3,638,218) $ (5,266,230)
============== ============== ==============
Equity in earnings of property partnerships $ 148,589 $ 203,318 $ 285,208
============== ============== ==============
</TABLE>
<PAGE> -24-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
6. Real Estate Acquired in Settlement of PEPs
The rental income and real estate operating, interest and depreciation
expenses of the properties owned by the Fund have been consolidated with the
Fund's operations and are reflected in the combined financial statements.
Real estate acquired in settlement of PEPs is comprised of the following
multifamily housing properties:
<TABLE>
<CAPTION>
Carrying Carrying
Number Value at Value at
Name Location of Units Dec. 31, 1995 Dec. 31, 1994
- -------------------------- ------------------ -------- -------------- --------------
<S> <C> <C> <C> <C>
Meadow Brook Apartments Amelia, OH 168 $ 3,470,774 $ 3,470,774
Morrowood Townhouses Morrow, GA 264 6,001,956 5,966,466
-------------- --------------
$ 9,472,730 $ 9,437,240
Less accumulated depreciation (2,803,866) (2,466,268)
-------------- --------------
$ 6,668,864 $ 6,970,972
============== ==============
</TABLE>
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
-------------- -------------- --------------
<C> <C> <C>
Reconciliation of the carrying value of the
real estate held is as follows:
Balance at beginning of year $ 6,970,972 $ 7,473,330 $ 7,936,376
Investment in real estate 35,490 - -
Depreciation (337,598) (502,358) (463,046)
-------------- -------------- --------------
Balance at end of year $ 6,668,864 $ 6,970,972 $ 7,473,330
============== ============== ==============
</TABLE>
7. Investment in Participating Loans
The Participating Loans are collateralized by first mortgages on properties
jointly financed with America First Tax Exempt Mortgage Fund 2 Limited
Partnership, whose general partner is an affiliate of AFCA 3. The
Participating Loan agreements call for payment of base interest and additional
interest out of a portion of the net cash flow or net sale or refinancing
proceeds of the properties.
Descriptions of the Participating Loans held as of December 31, 1995, are as
follows:
<TABLE>
<CAPTION>
Interest
Carrying Income on
Number Interest Maturity Amount Participating
Name Location of Units Rate (1) Date of Loans Loans
- ---------------------- ---------------- -------- -------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Avalon Ridge Renton, WA 356 10% (2) 09/01/99 $ 1,245,000 $ 41,157
Jackson Park Place Fresno, CA 296 10% 09/01/99 2,100,000 210,000
-------------- --------------
3,345,000 $ 251,157
Valuation allowance to net realizable value (385,000) ==============
--------------
Balance at end of year $ 2,960,000
==============
</TABLE>
<PAGE> -25-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1)In addition to the base interest rate, the notes bear additional contingent
interest which, when combined with the base interest, is limited to a
cumulative, non-compounded amount not greater than 13% per annum. The
Fund did not receive any additional contingent interest in 1995, 1994 or
1993.
(2)Interest is recognized as income on the cash basis which is at a rate lower
than the base interest rate. The amount of foregone interest was $83,343
for 1995, $69,596 for 1994 and $65,867 for 1993.
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
-------------- -------------- --------------
<C> <C> <C>
The following summarizes the activity in the valuation allowance:
Balance at beginning and end of year $ 385,000 $ 385,000 $ 385,000
============== ============== ==============
</TABLE>
8. Fund Reserve Account
The Fund maintains a reserve account which consisted of the following:
<TABLE>
<CAPTION>
Dec. 31, 1995
-------------
<S> <C>
Cash and temporary cash investments $ 1,578,744
U.S. government securities 5,025,000
GNMA Certificates 24,481,211
FNMA Certificates 3,333,150
-------------
Balance at end of year $ 34,418,105
=============
</TABLE>
The reserve account was established to maintain working capital for the Fund
and is available to supplement distributions to investors and for any
contingencies related to the ownership of the investments and the operation of
the Fund. The U.S. government securities mature in 1996, the GNMA
Certificates mature between 2008 and 2023 and the FNMA Certificates mature in
2000.
During the quarter ended June 30, 1995, the Partnership reassessed the
appropriateness of the classification of securities held in the reserve
account. The Partnership concluded, given the nature of the reserve account,
it would be more appropriate to classify securities held in the reserve
account as available-for-sale rather than as held-to-maturity. Accordingly,
on June 30, 1995, the Partnership transferred all securities held in the
reserve account from the held-to-maturity classification to the
available-for-sale classification. The total amortized cost, gross unrealized
holding gains, gross unrealized holding losses and the aggregate fair value of
the securities transferred were $33,950,530, $617,701, $241,388 and
$34,326,843, respectively.
At December 31, 1995, the total amortized cost, gross unrealized holding
gains, gross unrealized holding losses and the aggregate fair value of
available-for-sale securities were $32,030,783, $851,198, $42,620 and
$32,839,361 respectively.
On September 12, 1990, June 7, 1995 and July 25, 1995, management announced
its intent to utilize a portion of the reserve account to acquire a maximum of
200,000 Exchangeable Units (Units) in the over-the-counter market. As of
December 31, 1995, 160,260 Units (110,060 during 1995) had been acquired at a
total cost of $1,529,382 ($962,741 during 1995).
<PAGE> -26-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
9. Transactions with Related Parties
Substantially all of the Fund's general and administrative expenses are paid
by AFCA 3 or an affiliate and reimbursed by the Fund. The amounts of such
expenses reimbursed to AFCA 3 or an affiliate are shown below. The amounts
are presented on a cash basis and do not reflect accruals made at the end of
each year.
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Reimbursable salaries and benefits $ 380,301 $ 264,544 $ 270,761
Investor services and custodial fees 54,967 67,470 69,806
Professional fees and expenses 52,846 32,776 28,661
Insurance 21,333 15,917 4,189
Report preparation and distribution 20,973 23,812 39,049
Registration fees 16,666 15,031 11,411
Consulting and travel expenses 5,235 6,990 17,439
Telephone 8,729 7,538 10,009
Other expenses 20,960 15,314 7,323
Stock certificates - 592 1,403
-------------- -------------- --------------
$ 582,010 $ 449,984 $ 460,051
============== ============== ==============
</TABLE>
AFCA 3 is entitled to an administrative fee of .35% per annum of the
outstanding amount of investments of the Fund to be paid by the Fund to the
extent such amount is not paid by property owners. AFCA 3 earned
administrative fees of $248,129 in 1995, $255,687 in 1994 and $262,361 in
1993. Of such amounts, $215,033, $184,373 and $241,721 were paid by the Fund
during 1995, 1994, and 1993, respectively, and the remainder was paid by
property owners.
An affiliate of AFCA 3 provided property management services for Morrowood
Townhouses beginning in November 1992, Avalon Ridge beginning in September
1994, and Harmony Bay Apartments beginning in June 1995. The fees for
services provided represent the lower of: (i) costs incurred in providing
management of the property; or, (ii) customary fees for such services
determined on a competitive basis. Total fees amounted to $155,167 in 1995,
$56,486 in 1994 and $54,524 in 1993.
10. Mortgage Notes Payable
The Fund assumed the following mortgage notes as a result of the acquisition
of real estate in settlement of PEPs.
<TABLE>
<CAPTION>
Interest Maturity Monthly Balance at Balance at
Collateral Rate Date Payment Dec. 31, 1995 Dec. 31, 1994
- ------------------------------ -------- ---------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Meadow Brook Apartments 9.50% 11/25/2022 $ 24,374 $ 3,569,236 $ 3,569,236
Morrowood Townhouses 9.50% 11/19/2022 44,118 6,045,524 6,045,524
-------------- --------------
$ 9,614,760 $ 9,614,760
============== ==============
</TABLE>
These notes are payable to an unaffiliated party and are collateralized solely
by the foregoing properties. The notes are in default; however, the Fund
effectively has no risk with respect to the mortgage notes payable since the
Fund's net equity in the properties has previously been reduced to zero.
Therefore, for accounting purposes, the Fund records interest expense on these
notes only when it is paid.
<PAGE> -27-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
11. Fair Value of Financial Instruments
The following methods and assumptions were used by the Fund in estimating the
fair value of its financial instruments:
Cash and temporary cash investments: Fair value approximates the carrying
value of such assets.
Investment in U.S. government securities and mortgage-backed securities:
Fair values are based on amounts obtained from an independent pricing source.
Investment in participating loans: Fair value is based on management's best
estimate of the net realizable value of the underlying collateral of the
loans. See Footnote 2D.
Mortgage notes payable: Fair values are not readily determinable as certain
terms of the mortgage loans have recently been revised under provisional
workout agreements.
<TABLE>
<CAPTION>
At December 31, 1995
----------------------------------
Carrying Estimated
Amount Fair Value
-------------- --------------
<S> <C> <C>
Cash and temporary cash investments $ 2,573,156 $ 2,573,156
U.S. government securities 5,025,000 5,025,000
Investment in mortgage-backed securities 43,103,240 43,632,679
Investment in participating loans 2,960,000 2,960,000
</TABLE>
12. Summary of Unaudited Quarterly Results of Operations
<TABLE>
<CAPTION>
First Second Third Fourth
From January 1, 1995, to December 31, 1995 Quarter Quarter Quarter Quarter
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Total income $ 1,644,154 $ 1,627,344 $ 1,590,634 $ 1,678,792
Total expenses (751,884) (774,208) (786,091) (856,876)
-------------- -------------- -------------- --------------
Net income $ 892,270 $ 853,136 $ 804,543 $ 821,916
============== ============== ============== ==============
Net income per exchangeable unit $ .15 $ .14 $ .14 $ .14
============== ============== ============== ==============
Net income per passthrough certificate $ 375.03 $ 359.68 $ 342.13 $ 350.11
============== ============== ============== ==============
Market Price per BUC
High sale 9-1/8 8-7/8 8-7/8 8-7/8
Low sale 8-1/8 7-3/4 8 8
============== ============== ============== ==============
</TABLE>
<PAGE> -28-
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND
AND
AMERICA FIRST PARTICIPATING/PREFERRED EQUITY MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
First Second Third Fourth
From January 1, 1994, to December 31, 1994 Quarter Quarter Quarter Quarter
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Total income $ 1,601,908 $ 1,589,033 $ 1,640,505 $ 1,768,592
Total expenses (664,044) (716,375) (694,853) (841,149)
-------------- -------------- -------------- --------------
Net income $ 937,864 $ 872,658 $ 945,652 $ 927,443
============== ============== ============== ==============
Net income per exchangeable unit $ .16 $ .14 $ .16 $ .16
============== ============== ============== ==============
Net income per passthrough certificate $ 390.34 $ 364.73 $ 395.20 $ 387.61
============== ============== ============== ==============
Market Price per BUC
High sale 10-1/4 9-3/4 9-1/4 8-5/8
Low sale 8-5/8 8-3/4 8-1/8 7
============== ============== ============== ==============
</TABLE>
The exchangeable units are quoted on the NASDAQ National Market System under
the symbol AFPFZ. The high and low quarterly prices of the exchangeable units
shown were compiled from the Monthly Statistical Reports provided to the Fund
by the National Association of Securities Dealers, Inc. and represent final
sale prices.
<PAGE> -29-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrants have duly caused this report to be
signed on their behalf by the undersigned, thereunto duly authorized.
AMERICA FIRST PARTICIPATING/
PREFERRED EQUITY MORTGAGE FUND
By America First Participating/
Preferred Equity Mortgage
Fund Limited Partnership,
managing general partner
By America First Capital
Associates Limited Partnership
Three, general partner of America First
Participating/Preferred Equity Mortgage
Fund Limited Partnership
By America First Companies L.L.C, general
partner of America First Capital
Associates Limited Partnership
Three
By /s/ Michael Thesing
Michael Thesing,
Vice President
Date: March 27, 1996
AMERICA FIRST PARTICIPATING/
PREFERRED EQUITY MORTGAGE
FUND LIMITED PARTNERSHIP
By America First Capital
Associates Limited Partnership
Three, general partner of America First
Participating/Preferred Equity Mortgage
Fund Limited Partnership
By America First Companies L.L.C, general
partner of America First Capital
Associates Limited Partnership
Three
By /s/ Michael Thesing
Michael Thesing,
Vice President
Date: March 27, 1996
<PAGE> -30-
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 27, 1996 By /s/ Michael B. Yanney*
Michael B. Yanney
Chairman of the Board, President, Chief
Executive Officer and Manager
(Principal Executive Officer)
Date: March 27, 1996 By /s/ Michael Thesing
Michael Thesing
Vice President, Secretary, Treasurer and
Manager (Principal Financial Officer)
Date: March 27, 1996 By
George Kubat
Manager
Date: March 27, 1996 By /s/ William S. Carter, M.D.*
William S. Carter, M.D.
Manager
Date: March 27, 1996 By /s/ Martin Massengale*
Martin Massengale
Manager
Date: March 27, 1996 By /s/ Alan Baer*
Alan Baer
Manager
Date: March 27, 1996 By /s/ Gail Walling Yanney*
Gail Walling Yanney
Manager
*By Michael Thesing Attorney in Fact
/s/ Michael Thesing
Michael Thesing
<PAGE> -31-
EXHIBIT 24
POWER OF ATTORNEY
<PAGE> -32-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1995, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Tax-Exempt Mortgage Fund 2 Limited Partnership
America First Participating/Preferred Equity Mortgage Fund
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
Capital Source L.P.
Capital Source II L.P.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 10th day of March, 1996.
/s/ Michael B. Yanney
Michael B. Yanney
<PAGE> -33-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1995, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Tax-Exempt Mortgage Fund 2 Limited Partnership
America First Participating/Preferred Equity Mortgage Fund
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 2nd day of March, 1996.
/s/ William S. Carter
William S. Carter, M.D.
<PAGE> -34-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1995, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Tax-Exempt Mortgage Fund 2 Limited Partnership
America First Participating/Preferred Equity Mortgage Fund
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 25th day of March, 1996.
/s/ Gail Walling Yanney
Gail Walling Yanney
<PAGE> -35-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1995, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Tax-Exempt Mortgage Fund 2 Limited Partnership
America First Participating/Preferred Equity Mortgage Fund
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 2nd day of March, 1996.
/s/ Martin Massingale
Martin Massingale
<PAGE> -36-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1995, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Tax-Exempt Mortgage Fund 2 Limited Partnership
America First Participating/Preferred Equity Mortgage Fund
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 3rd day of March, 1996.
/s/ Alan Baer
Alan Baer
<PAGE> -37-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1993 DEC-31-1992 DEC-31-1991
<PERIOD-END> DEC-31-1995 DEC-31-1994 DEC-31-1993 DEC-31-1992 DEC-31-1991
<CASH> 2,573,156 7,806,496 9,040,074 7,187,806 10,327,167
<SECURITIES> 48,128,240 45,810,512 46,851,694 50,413,119 49,070,601
<RECEIVABLES> 374,487 359,225 385,594 414,654 432,456
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 0 0 0 0 0
<CURRENT-ASSETS> 7,972,643 8,165,721 9,425,668 7,602,460 10,759,623
<PP&E> 9,472,730 9,437,240 9,437,240 9,437,240 9,317,452
<DEPRECIATION> (2,803,866) (2,466,268) (1,963,910) (1,500,864) (931,388)
<TOTAL-ASSETS> 64,566,103 67,833,181 69,994,829 72,067,829 74,105,486
<CURRENT-LIABILITIES> 1,345,921 1,600,339 1,129,823 953,638 1,151,159
<BONDS> 0 0 0 0 0
<COMMON> 0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<OTHER-SE> 53,605,422 56,618,082 59,250,246 61,499,431 63,339,567
<TOTAL-LIABILITY-AND-EQUITY> 64,566,103 67,833,181 69,994,829 72,067,829 74,105,486
<SALES> 0 0 0 0 0
<TOTAL-REVENUES> 6,540,924 6,600,038 7,063,221 7,387,388 8,066,888
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 0 0 0 0 0
<OTHER-EXPENSES> 2,327,244 2,194,515 2,365,007 2,304,105 2,406,218
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 841,815 721,906 609,667 622,902 473,252
<INCOME-PRETAX> 3,371,865 3,683,617 4,088,547 4,460,381 5,187,418
<INCOME-TAX> 0 0 0 0 0
<INCOME-CONTINUING> 0 0 0 0 0
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 3,371,865 3,683,617 4,088,547 4,460,381 5,187,418
<EPS-PRIMARY> 0 0 0 0 0
<EPS-DILUTED> 0 0 0 0 0
</TABLE>
