UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-2
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
- - - --- OF 1934
For the fiscal year ended December 31, 1996
OR
- - - --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 Commission File Number 0-16860
EAGLE INSURED L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3442945
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 421-5333
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Beneficial Unit Certificates
Indicate by check mark whether the Registrant: (1) has 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
registrant was required to file such reports), and (2) has 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 is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K/A-2 or any
amendment to this Form 10-K/A-2. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Agreement of Limited Partnership dated as of September 3, 1987, as
amended and restated December 11, 1987, included as part of the Registration
Statement filed with the Securities and Exchange Commission pursuant to Rule
424(b) under the Securities Act of 1933, and amended February 10, 1988 and
October 31, 1995, is incorporated by reference into Part IV of this Annual
Report on Form 10-K/A-2.
Index to exhibits may be found on page 172
Page 1 of 178
<PAGE>
PART I
Item 1. Business.
General
Eagle Insured L.P., a Delaware limited partnership (the "Registrant"),
was formed on August 13, 1987 and will terminate on December 31, 2040 unless
terminated sooner under the provisions of the Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement"). The Registrant was formed to
invest in insured, co-insured or guaranteed mortgage investments and equity
loans ("Mortgages") which finance multifamily residential rental properties
("Developments") from proceeds raised from the initial sale of 2,641,100
Beneficial Unit Certificates ("BUC$") at $20 per BUC. The Registrant's fiscal
year for book and tax purposes ends on December 31.
The Registrant originally invested in four Mortgages financing
Developments. One of the Mortgages was prepaid on January 31, 1994. One of the
three remaining Developments was originally developed by an entity affiliated
with the Registrant. For more information regarding the Registrant's operations,
see Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Registrant is engaged solely in the business of investing in
Mortgages; therefore, presentation of industry segment information is not
applicable.
General Partners
The general partners of the Registrant are Related Federal Insured L.P.
("Related General Partner") and Prudential-Bache Properties, Inc. ("PBP")
(collectively, the "General Partners"). Related FI BUC$ Associates, Inc. (the
"Assignor Limited Partner"), which acquired and holds limited partnership
interests on behalf of those persons who purchased BUC$, has assigned to those
persons substantially all of its rights and interests in and under such limited
partnership interests. The Related General Partner and the Assignor Limited
Partner are under common ownership.
Structure of mortgage loans and equity loans
All base interest and initially at least 90% in the aggregate of the
principal of the mortgages made by the Registrant are coinsured by the FHA (80%
of the 90%) and an affiliate of the Related General Partner (20% of the 90%),
with the remaining 10% of the Registrant's original portfolio consisted of
uninsured non-interest-bearing equity loans made directly to the same developers
as are the Mortgages. With respect to a default on FHA co-insured loans, the
Registrant would bear the risk of loss with respect to uninsured portions of the
loans (10% of Mortgage Loan and additional interest), however these are secured
by the partnership interests which own the underlying properties. The equity
loans to developers are recorded at zero as of December 31, 1996 as a result of
being accounted for under the equity method of accounting without elimination of
the amount due and owing to the Registrant.
In addition to the stated interest rates, the Registrant is entitled to
receive additional interest on the Mortgages from a percentage of the annual net
cash flow of the Development and from a percentage of the residual proceeds upon
sale or refinancing. The Registrant accepted lower base interest rates than were
otherwise available in the market with respect to the Mortgages in exchange for
the potential to receive additional interest payments. The notes evidencing the
Mortgages for Cross Creek and Woodgate Manor, two of the Developments, bear
interest at 8.95% with the potential to receive an additional 0.84% to 1.68% on
the Mortgages plus 30% of any remaining cash flow from the Developments and 35%
of capital proceeds. The Mortgage for Weatherly Walk is structured in the same
manner except the participation in remaining cash flow and capital proceeds is
up to 50%. Additional interest is due no later than upon the prepayment or other
satisfaction of the Mortgages or the sale of the
-2-
<PAGE>
Developments. The receipt of additional interest is dependent upon the economic
performance of the underlying Developments. Additional interest is not insured
by the FHA or any private mortgage lender.
As of December 31, 1996, the Registrant holds three Mortgages. The
following table lists the original amounts of the outstanding Mortgages in which
the Registrant has invested:
<TABLE>
<CAPTION>
Original Original Interest
Funding Mortgage Equity Total Rate on
Closing Completion Loan Loan Loan Mortgage Maturity
Project Date Date Amount Amount Amount Loan (2) Date (3)
- - - ------- ---- ---- ------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Cross Creek
Apartments
Charlotte, NC (1) 06/10/88 2/01/91 $17,494,100 $1,783,900 $19,278,000 8.95% 1/1/2030
Weatherly Walk
Apartments
Fayetteville, GA 08/18/88 12/05/89 7,772,500 895,200 8,667,700 8.95% 11/1/2029
Woodgate Manor
Gainesville, FL (1) 12/12/88 12/13/88 3,110,300 339,700 3,450,000 8.95% 1/1/2024
</TABLE>
(1) The general partnership interest of this Development is held by an
affiliate of the Related General Partner.
(2) Includes a servicing fee of 0.07% paid by the developer to Related
Mortgage Corporation (an affiliate of the Related General Partner); however,
does not include additional interest which may be payable.
(3) The Registrant may call for prepayment of the total loan at any time
after the tenth anniversary of the date the mortgage loan funding was completed.
The Registrant, in order to call for prepayment, would be required to terminate
the mortgage insurance contract with FHA (and/or the coinsurer) not later than
the accelerated payment date. Since the exercise of such option would be at the
Registrant's discretion, it is intended to be exercised only where the
Registrant determines that the value of the Development has increased by an
amount which would justify accelerating payment in full and assuming the risks
of foreclosure if the mortgagor failed to make the accelerated payment. The
Registrant presently expects to dispose of such loans within 10 to 15 years
after acquisition.
As of December 31, 1996, the aggregate balance of the Mortgages recorded
on the financial statements is $27,623,254. For individual year-end balances,
see Note 3 to the financial statements in Item 8.
Following is the interest income from mortgage loans as a percentage of
total revenues, excluding equity gains (losses).
1996 1995 1994
---- ---- ----
Cross Creek 53% 53% 49%
Weatherly Walk 23 23 22
Woodgate Manor 12 11 13
Tivoli Lakes 5
Tivoli Lakes Apartments was sold on January 31, 1994 and the related
Mortgage was paid in full. See Note 3 to the financial statements in Item 8 for
further information relating to the repayment of the Tivoli Lakes Mortgage.
-3-
<PAGE>
The Registrant's loan payable relating to its unsecured credit facility
was fully repaid on February 7, 1994 with a portion of the proceeds of the
Tivoli Lakes Mortgage repayment. Originally, $3,060,000 of this credit facility
was used to make a loan (the "Cross Creek Loan") to the present owner of the
Cross Creek property, Walsh/Cross Creek Limited Partnership ("Cross Creek")
which acquired title to the property upon the default of the original developer.
Such funds were used to pay for costs incurred to complete construction and to
fund operating deficits. Significant interests in Cross Creek are held by
affiliates of the Related General Partner. Cross Creek continues to be liable to
the Registrant for the outstanding balance and interest pursuant to the Cross
Creek Loan. Stephen M. Ross holds a majority interest in the Related General
Partner and has guaranteed to the Registrant that the Cross Creek Loan,
including all interest thereunder, will be repaid when due. See Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 4 to the financial statements in Item 8.
Competition
The General Partners and/or their affiliates have formed, and may
continue to form, various entities to engage in businesses which may be
competitive with the Registrant. The Registrant's business is affected by
competition to the extent that the underlying properties from which it derives
interest and principal payments may be subject to competition from neighboring
properties. In particular, additional interest payments which are not insured
are dependent upon the economic performance of the underlying properties and may
be affected by competitive conditions.
Employees
The Registrant has no employees. Management and administrative services
for the Registrant are performed by the General Partners and their affiliates
pursuant to the Partnership Agreement. The General Partners receive special
distributions and reimbursement of expenses in connection with such activities
as described in Articles 9 and 11 of the Partnership Agreement. See Note 4 to
the financial statements in Item 8.
Other Events.
On December 31, 1996, the United States District Court for the Southern
District of New York (the "Court") issued a preliminary approval order (the
"Order") with respect to settlement (the "Related Settlement") of the class
action litigation (the "Class Action") relating to the Registrant (In re
Prudential Securities Inc. Limited Partnership Litigation, MDL No. 1005) against
the Related General Partner and certain of its affiliates. See Note 7 to the
financial statements in Item 8. Pursuant to the stipulation of settlement
entered into with counsel for the class on December 24, 1996, the proposed
Related Settlement contemplates, among other matters, the reorganization (the
"Reorganization") of the Registrant and three other partnerships co-sponsored by
affiliates of the Related General Partner and PBP.
The proposed Related settlement and Reorganization are subject to
objections by the BUC$holders and limited partners of the Registrant as well as
each of the other concerned partnerships and final approval of the Court after
review of the proposals at a fairness hearing.
Under the proposed Reorganization plan, the BUC$holders of the
Registrant and Summit Insured Equity L.P., Summit Preferred Equity L.P. and
Eagle Insured L.P. will receive shares in a newly formed real estate investment
trust. It is anticipated that the shares will be allocated proportionately among
the partnerships and their respective investors based upon appraisals and other
factors and as supported by a third-party fairness opinion. Detailed information
about the proposed Related Settlement and Reorganization will be sent to
BUC$holders in the near future. The terms of the Reorganization include, among
other matters, the acquisition by affiliates of the Related Capital Company
("RCC") of PBP's general partner interest (the "PBP Interest"), transfer to the
BUC$holders one-half of the PBP Interest, the reduction of fees currently
payable to the General Partners by 25%, filing an application to list the new
company's shares on an exchange and the creation of an infinite, as opposed to
finite, life-operating business.
-4-
<PAGE>
In connection with the proposed Related Settlement and Reorganization, on
December 19, 1996, PBP and RCC entered into an agreement for the purchase by RCC
or its affiliates of the PBP Interest. The agreement is subject to numerous
conditions, including the effectiveness of the Related Settlement of the Class
Action and the approval of the sale and withdrawal of PBP as a general partner
of the Registrant by the Court.
Pending final approval of the Related Settlement, the Court's Order
prohibits class members (including the BUC$holders) from, among other matters,
(i) transferring their BUC$ unless the transferee agrees to be bound by the
Related Settlement; (ii) granting a proxy to object to the Reorganization; or
(iii) commencing a tender offer for the BUC$. In addition, the General Partners
are enjoined from (i) recording any transfers made in violation of the Order and
(ii) providing the list of investors in any of the partnerships which are the
subject of the Reorganization to any person conducting a tender offer.
There can be no assurance that the conditions to the closing of the
proposed Related Settlement and Reorganization will be satisfied nor that a
closing may occur in the projected time frame in which a closing may occur.
Item 2. Properties.
The Registrant does not own or lease any property.
Item 3. Legal Proceedings.
This information is incorporated by reference from Item 1. Business -
Other Events and Note 6 to the financial statements in Item 8.
Item 4. Submission of Matters to a Vote of BUC$holders.
None.
-5-
<PAGE>
PART II
Item 5. Market for the Registrant's BUC$ and Related BUC$holder Matters.
As of March 3, 1997 there were 3,934 holders of record owning 2,641,100
BUC$. A significant secondary market for the BUC$ has not developed and it is
not expected that one will develop in the future. There are also certain
restrictions set forth in Section 13 of the Partnership Agreement limiting the
ability of a BUC$holder to transfer their BUC$. Furthermore, the Court's Order
in connection with the proposed Related Settlement of the Class Action imposes
certain restrictions on the transfer of the BUC$. See Item 1. Business - Other
Events. Consequently, BUC$holders may not be able to liquidate their investments
in the event of emergency or for any other reason.
The following per BUC cash distributions were paid from cash flow from
operations during the following calendar quarters:
Quarter Ended 1996 1995
------------- ----- -----
March 31 $0.2375 $0.2375
June 30 0.2375 0.2375
September 30 0.2375 0.2375
December 31 0.2375 0.2375
There are no material legal restrictions upon the Registrant's present
or future ability to make distributions in accordance with the provisions of the
Partnership Agreement. The Registrant currently expects that cash distributions
will continue to be paid in the foreseeable future from current cash flow from
operations. Approximately $65,000 and $127,000 of the distributions paid to BUC$
holders during 1996 and 1995, respectively, represent a return of capital on a
generally accepted accounting principles (GAAP) basis. The return of capital on
a GAAP basis is calculated as BUC$holder distributions less net income allocated
to BUC$holders. For a discussion of other factors that may affect the amounts of
future distributions, see Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
-6-
<PAGE>
Item 6. Selected Financial Data.
The information set forth below presents selected financial data of the
Registrant. Additional financial information is set forth in the financial
statements and notes thereto contained in Item 8 hereof.
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Interest income from
mortgage loans $ 2,534,475 $ 2,536,426 $ 2,774,540 $ 3,630,936 $ 3,715,204
============ ============ ============ ============ ============
Equity gain (loss) $ (6,162) $ (66,265) $ 1,256,027(1) $ (168,980) $ (620,377)
============ ============ ============ ============ ============
Net income $ 2,650,938 $ 2,587,848 $ 4,031,885 $ 3,266,144 $ 2,741,550
============ ============ ============ ============ ============
Net income per BUC $ .93 $ .90 $ 1.44 $ 1.13 $ .93
============ ============ ============ ============ ============
Loan receivable from
affiliate $ 3,060,000 $ 3,060,000 $ 3,060,000 $ 3,060,000 $ 3,060,000
============ ============ ============ ============ ============
Total assets $ 33,055,428 $ 33,149,277 $ 33,251,564 $ 47,641,443 $ 48,082,937
============ ============ ============ ============ ============
Loan payable $ 0 $ 0 $ 0 $ 2,837,553 $ 3,060,000
============ ============ ============ ============ ============
Total Partnerships
Capital $ 32,949,421 $ 33,015,626 $ 33,144,921 $ 44,665,108 $ 44,865,987
============ ============ ============ ============ ============
Total BUC$holder
distributions $ 2,509,081 $ 2,509,081 $ 15,087,311(2) $ 3,169,320 $ 3,175,659
============ ============ ============ ============ ============
BUC$holder distributions
per BUC $ .95 $ .95 $ 5.71 $ 1.20 $ 1.20
============ ============ ============ ============ ============
</TABLE>
(1) Includes an equity gain of approximately $1,523,000 relating to the
collection of the equity loan made to the developer of the Tivoli Lakes
Apartments. The carrying value of this loan had been reduced to zero in previous
years.
(2) Includes a special distribution in March 1994 of approximtately $12,413,000
from the proceeds of a prepayment of the Tivoli Lakes Mortgage.
-7-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
The Registrant originally invested in four Mortgages which financed
multifamily residential rental properties. As further discussed in Note 3 to the
financial statements, Tivoli Lakes Apartments was sold on January 31, 1994 and
the related Mortgage was paid in full.
All base interest and initially at least 90% in the aggregate of the
principal of the Mortgages made by the Registrant are coinsured by the FHA (80%
of the 90%) and an affiliate of the Related General Partner (20% of the 90%),
with the remaining 10% of the Registrant's original portfolio comprised of
uninsured non-interest-bearing equity loans made directly to the same developers
as are the mortgage investments. With respect to a default on FHA co-insured
loans, the Partnership would bear the risk of loss with respect to uninsured
portions of the loans (10% of Mortgage Loan and additional interest), however
these are secured by the interests in the partnerships owning the underlying
properties. The equity loans to developers are recorded at zero as of December
31, 1996 as a result of being accounted for under the equity method of
accounting without elimination of the amount due and owing to the Partnership.
The Registrant is entitled to receive additional interest on each
Mortgage from the annual net cash flow of the development and from a percentage
of the residual value upon sale or refinancing. The receipt of additional
interest is dependent upon the economic performance of the underlying
properties. During 1996, the Registrant received additional interest payments of
approximately $77,000 from Woodgate Manor.
In prior years, the Registrant utilized $3,060,000 of an unsecured
credit facility to advance funds in the form of a loan to Walsh/Cross Creek L.P.
("Cross Creek Loan") to enable it to complete construction and to fund operating
deficits. See Note 4 to the financial statements. On February 7, 1994, the
Registrant used a portion of the proceeds from the Tivoli Lakes repayment to
fully repay its outstanding debt under the credit facility of $2,837,553;
however, the Cross Creek Loan remains outstanding. Stephen M. Ross, who holds a
majority interest in the Related General Partner, has guaranteed repayment of
the principal and interest on the Cross Creek Loan (as amended, the "Guarantee
Agreement"). See Note 4 to the financial statements for further information. Mr.
Ross remains in compliance with his obligations under the Guarantee Agreement
and Amendment to the Guarantee. However, significant portions of his assets are
in the form of partnership interests and corporate stock which are pledged or
are otherwise illiquid. Furthermore, a significant portion of the cash flow
which Mr. Ross would otherwise be expected to receive from his business
operations is presently pledged to meet other obligations. Mr. Ross also has
contingent liabilities that, if simultaneously called upon, could result in Mr.
Ross having insufficient liquid assets to meet all of his current liabilities.
There can be no assurance that Mr. Ross will have the liquidity necessary to
continue to comply with his obligations under the Guarantee Agreement and
Amendment to the Guarantee. In addition, Mr. Ross has capitalized the Related
General Partner with a demand promissory note and, if called upon to pay all or
a portion of this note, there is no assurance that he will have the liquidity
necessary to meet such demand.
FAI, Ltd. Weatherly Walk Apartments ("Weatherly Walk") and Walsh/Cross
Creek Limited Partnership ("Cross Creek") have in the past experienced recurring
operating losses, working capital deficiencies and negative cash flows which
raised concerns of a potential default on the related Mortgages and equity
loans. With respect to Weatherly Walk, the Fayetteville, Georgia market has
improved, and the partnership which owns the property is no longer experiencing
operating deficits, working capital deficiencies on negative cash flows and it
is currently meeting its operating obligations including required Mortgage
payments. With respect to Cross Creek, which continues to experience recurring
operating losses, as indicated above and in Note 4, Stephen M. Ross has
guaranteed the performance of all obligations for the payment of interest (at
8.95%) and principal of the first Mortgage together with the equity loan and has
contributed $255,000 during 1996 ($3,182,732 cumulatively) to cover operating
losses and working capital deficiencies, allowing this property to meet all
required Mortgage payments.
-8-
<PAGE>
The quarterly distribution to BUC$holders was decreased to $.2375 per
BUC in the second quarter of 1994 as a result of the Tivoli Lakes loan repayment
which reduced the Partnership's interest income. The fourth quarter 1996
distribution of approximately $627,000 was paid to BUC$holders in February 1997
from adjusted cash flow from operations and the Registrant anticipates
continuing to fund cash distributions in the future from the same source.
Principal and interest payments from Mortgages are anticipated to provide
sufficient liquidity to meet the operating expenditures of the Registrant in
future years.
At the beginning of the year, the Registrant had cash and cash
equivalents of approximately $1,146,000. After the receipt of net cash flow from
operations of approximately $2,658,000, principal payments received on mortgage
loans of approximately $141,000 and the payment of distributions of
approximately $2,717,000, the Registrant had approximately $1,228,000 in cash
and cash equivalents at December 31, 1996.
For a discussion of the proposed settlement of the Class Action relating
to the Registrant see Other Events in Item 1. Business above.
Management is not aware of any trends or events, commitments or
uncertainties which have not otherwise been disclosed, that will or are likely
to impact liquidity in a material way. All base interest and at least 90% of the
principal of the Registrant's investments in Mortgages are insured or co-insured
by the FHA and a private mortgage lender (which is an affiliate of the Related
General Partner). The Registrant's investment in unsecured non-interest bearing
equity loans (which represent approximately 10% of the Registrant's original
portfolio) are secured by the interest in the partnerships owning the underlying
properties which are diversified by location so that if one state is
experiencing downturns in the economy, the remaining properties may be
experiencing upswings. However, the geographic diversifications of the portfolio
may not protect against a general downturn in the national economy.
The Registrant anticipates that cash generated currently from the
operations of the properties underlying the Registrant mortgage loans (taking
into account certain guarantees and the current performance of the properties
and the markets) will be sufficient to meet the required debt service payments
to the Registrant.
Results of Operations
1996 vs. 1995
The Registrant's net income for the year ended December 31, 1996
increased by approximately $63,000 as compared to 1995 for the reasons described
below.
During the years ended December 31, 1996 and 1995, the Partnership
recorded equity losses of approximately $6,000 and $66,000, respectively,
relating to net equity losses from the Woodgate Manor property. The decrease in
1996 was due to the carrying value of the Woodgate Manor equity loan being
reduced to zero by the current year loss.
General and administrative expenses decreased approximately $26,000 for
the year ended December 31, 1996 as compared to 1995 primarily due to the cost
of obtaining appraisals of the properties securing the Partnership's three
mortgage loans in 1995 as well as an overaccrual of audit fees at December 31,
1995.
1995 vs. 1994
The Registrant's net income for the year ended December 31, 1995
decreased by approximately $1,444,000 as compared to 1994 for the reasons
described below.
Interest income from mortgage loans decreased approximately $238,000 in
1995 as compared to 1994 primarily due to the reduced interest received by the
Registrant as a result of the repayment of the Tivoli Lakes mortgage in January
1994 and reduced amounts of additional interest received from Woodgate Manor in
1995 relative to 1994. With regard to Woodgate, certain capital repairs and
improvements were made to the property in 1995 which reduced net cash flow and
therefore, the amount of additional interest which was due and payable to the
Registrant.
-9-
<PAGE>
Interest income from loan receivable increased approximately $52,000 for
the year ended December 31, 1995 as compared to the corresponding period in 1994
due to increases of approximately 2% in the prime rate in 1995.
Interest income from temporary investments decreased approximately
$33,000 for the year ended December 31, 1995 as compared to the corresponding
period in 1994 primarily from nonrecurring interest earned on the undistributed
proceeds from the Tivoli Lakes Mortgage repayment during the first quarter of
1994.
During 1995 and 1994, the Registrant recorded an equity loss of
approximately $66,000 and equity gain of approximately $1,256,000, respectively.
The carrying value of the Tivoli Lakes equity loan of $1,523,000 had been
reduced to zero in previous years. The equity loan was fully repaid on January
31, 1994 resulting in an equity gain of $1,523,000 in 1994. The 1994 gain was
offset, in part, by an equity loss of approximately $267,000 relating to the
Woodgate Manor property. The equity loss recorded in 1995 was attributable to
the Woodgate Manor property.
Other income decreased approximately $403,000 for the year ended
December 31, 1995 as compared to the corresponding period in 1994 primarily due
to prepayment penalties and other fees associated with the Tivoli Lakes Mortgage
loan payment in 1994.
Interest expense on loan payable decreased approximately $20,000 in 1995
as compared to 1994 as a result of the repayment of the outstanding debt under
the credit facility with a portion of the proceeds from the Tivoli Lakes
repayment in February 1994.
The Registrant wrote off approximately $495,000 in loan origination fees
relating to the Tivoli Lakes Mortgage in the first quarter of 1994.
Additional Information
The following table lists the respective occupancy rates at each of the
properties securing Mortgages as of March 9, 1997.
Property Location Occupancy %
-------- -------- -----------
Cross Creek Apartments Charlotte, NC 91.0%
Weatherly Walk Apartments Fayetteville, GA 84.4%
Woodgate Manor Gainesville, FL 96.0%
10
<PAGE>
Item 8. Financial Statements and Supplementary Data.
(a) 1. Financial Statements Page
----
Independent Auditors' Report 12
Statements of Financial Condition as of December 31, 1996
and 1995 13
Statements of Income for the years ended December 31, 1996,
1995 and 1994 14
Statements of Changes in Partners' Capital (Deficit) for the
years ended December 31, 1996, 1995 and 1994 15
Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994 16
Notes to Financial Statements 17
11
<PAGE>
[Letterhead of Deloitte & Touche LLP]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Eagle Insured L.P.
New York, New York
We have audited the accompanying statements of financial condition of
Eagle Insured L.P. (a Delaware Limited Partnership) as of December 31, 1996 and
1995, and the related statements of income, changes in partners' capital
(deficit) and cash flows for each of the three years in the period ended
December 31, 1996. Our audits also included the financial statement schedule
listed in the Index at Item 14. These financial statements and financial
statement schedule are the responsibility of the General Partners. Our
responsibility is to express an opinion on the financial statements and
financial statement schedule 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of Eagle Insured L.P. as of December
31, 1996 and 1995 and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
/s/DELOITTE & TOUCHE LLP
New York, New York
March 20, 1997
12
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
ASSETS
December 31,
----------------------------
1996 1995
------------ ------------
Investments in mortgage loans $ 27,623,254 $ 27,764,817
Loan receivable from affiliate 3,060,000 3,060,000
Deferred loan origination fees, net 932,303 962,387
Cash and cash equivalents 1,228,487 1,145,895
Interest receivable 204,387 206,763
Equity loan to developer 0 6,162
Other assets 6,997 3,253
------------ ------------
Total assets $ 33,055,428 $ 33,149,277
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Due to affiliates $ 47,974 $ 76,429
Accrued expenses 58,033 57,222
------------ ------------
Total liabilities 106,007 133,651
------------ ------------
Contingencies
Partners' capital (deficit):
BUC$holders (2,641,100 BUC$
issued and outstanding) 33,286,865 33,351,747
General partners (337,444) (336,121)
------------ ------------
Total partners' capital 32,949,421 33,015,626
------------ ------------
Total liabilities and partners' capital $ 33,055,428 $ 33,149,277
============ ============
See accompanying notes to financial statements
13
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Revenues:
Interest income:
Mortgage loans $ 2,534,475 $ 2,536,426 $2,774,540
Equity gain (loss) (6,162) (66,265) 1,256,027
Loan receivable from affiliate 288,426 305,022 252,684
Temporary investments 47,412 51,627 84,349
Other income 0 0 403,000
----------- ----------- ----------
Total revenues 2,864,151 2,826,810 4,770,600
----------- ----------- ----------
Expenses:
Interest expense on loan payable 0 0 20,415
General and administrative 183,129 208,878 192,098
Amortization of deferred loan origination fees 30,084 30,084 31,277
Write-off of deferred loan origination fees 0 0 494,925
----------- ----------- ----------
Total expenses 213,213 238,962 738,715
----------- ----------- ----------
Net income $ 2,650,938 $ 2,587,848 $4,031,885
=========== =========== ==========
Allocation of Net Income:
BUC$holders $ 2,444,199 $ 2,382,371 $3,797,527
=========== =========== ==========
General partners:
Special distribution $ 156,857 $ 156,857 $ 156,857
Other 49,882 48,620 77,501
----------- ----------- ----------
$ 206,739 $ 205,477 $ 234,358
=========== =========== ==========
Net income per BUC $ .93 $ .90 $ 1.44
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements
14
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
Total BUC$holders General Partner
----- ----------- ---------------
<S> <C> <C> <C>
Partners' capital (deficit) - January 1, 1994 $ 44,665,108 $ 44,768,241 $(103,133)
Net income 4,031,885 3,797,527 234,358
Distributions (15,552,072) (15,087,311) (464,761)
------------ ------------ ---------
Partners' capital (deficit) - December 31, 1994 33,144,921 33,478,457 (333,536)
Net income 2,587,848 2,382,371 205,477
Distributions (2,717,143) (2,509,081) (208,062)
------------ ------------ ---------
Partners' capital (deficit) - December 31, 1995 33,015,626 33,351,747 (336,121)
Net income 2,650,938 2,444,199 206,739
Distributions (2,717,143) (2,509,081) (208,062)
------------ ------------ ---------
Partners' capital (deficit) - December 31, 1996 $ 32,949,421 $ 33,286,865 $(337,444)
============ ============ =========
</TABLE>
See accompanying notes to financial statements
15
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------------
1996 1995 1994
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $ 2,872,689 $ 2,940,221 $ 3,223,547
Other income received 0 0 403,000
General and administrative expenses paid (214,517) (180,564) (223,676)
Interest paid 0 0 (20,415)
----------- ----------- ------------
Net cash provided by operating activities 2,658,172 2,759,657 3,382,456
----------- ----------- ------------
Cash flows from investing activities:
Principal payments received on mortgage loans 141,563 127,699 13,632,206
Repayment of equity loan receivable 0 0 1,523,300
----------- ----------- ------------
Net cash provided by investing activities 141,563 127,699 15,155,506
----------- ----------- ------------
Cash flows from financing activities:
Distributions paid (2,717,143) (2,717,143) (15,552,072)
Repayment of loan payable 0 0 (2,837,553)
----------- ----------- ------------
Net cash used in financing activities (2,717,143) (2,717,143) (18,389,625)
----------- ----------- ------------
Net increase in cash and cash equivalents 82,592 170,213 148,337
Cash and cash equivalents at beginning of year 1,145,895 975,682 827,345
----------- ----------- ------------
Cash and cash equivalents at end of year $ 1,228,487 $ 1,145,895 $ 975,682
=========== =========== ============
Reconciliation of net income to net cash
provided by operating activities:
Net income $ 2,650,938 $ 2,587,848 $ 4,031,885
----------- ----------- ------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity (gain) loss 6,162 66,265 (1,256,027)
Amortization of deferred loan origination fees 30,084 30,084 31,277
Write-off of deferred loan origination fees 0 0 494,925
Changes in:
Interest receivable 2,376 36,854 104,726
Other assets (3,744) 11,598 7,809
Due to affiliates (28,455) 13,753 (15,190)
Accrued expenses 811 13,255 (16,949)
----------- ----------- ------------
Total adjustments 7,234 171,809 (649,429)
----------- ----------- ------------
Net cash provided by operating activities $ 2,658,172 $ 2,759,657 $ 3,382,456
=========== =========== ============
</TABLE>
See accompanying notes to financial statements
16
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1 - General
Eagle Insured L.P., a Delaware limited partnership (the "Partnership"),
was formed on August 13, 1987 and will terminate on December 31, 2040 unless
terminated sooner under the provisions of the Amended and Restated Agreement of
Limited Partnership (the "Partnership Agreement"). The Partnership was formed to
invest in insured, coinsured or guaranteed mortgage investments. The general
partners of the Partnership are Prudential-Bache Properties, Inc. ("PBP") and
Related Federal Insured L.P. (the "Related General Partner") (collectively, the
"General Partners"). Related FI BUC$ Associates, Inc. (the "Assignor Limited
Partner"), which acquired and holds limited partnership interests on behalf of
those persons who purchased Beneficial Unit Certificates ("BUC$"), has assigned
to those persons substantially all of its rights and interests in and under such
limited partnership interests. The Related General Partner and the Assignor
Limited Partner are under common ownership.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Accounting
The books and records of the Partnership are maintained 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 the General Partners to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
b) Cash and Cash equivalents
Cash and cash equivalents include cash in banks and investments in
short-term instruments with an original maturity of three months or less, for
which cost approximates market value.
c) Investment in Mortgage Loans
The insured mortgage investments are recorded as loans. Amounts
received or receivable from the properties for interest payments on these loans
are reflected as interest income in the Statements of Income. Equity loans to
developers are accounted for under the equity method of accounting without
elimination of the amount due and owing to the Partnership. Equity gains
(losses) recorded on these loans are included in the Statements of Income.
At least annually, and more frequently if circumstances warrant, the
Partnership evaluates the collectibility of both interest and principal of each
of its loans to determine whether it is impaired. A loan is considered to be
impaired when, based on current information and events, it is probable the
Partnership will be unable to collect all amounts due according to the existing
contractual terms. When a loan is considered to be impaired, the amount of the
loss accrual is determined by discounting the expected future cash flows at the
loan's effective interest rate or, for practical purposes, from the estimated
fair value of the collateral.
17
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
Note: 2-Summary of Significant Accounting Policies (continued)
d) Loan Origination Fees
The General Partners were paid loan origination fees equal to 3% of
gross proceeds from the initial offering. Loan origination fees were capitalized
and are amortized over the lives of the mortgages. The accumulated amortization
relating to mortgages outstanding at December 31, 1996 and 1995 was $250,798 and
$220,714, respectively.
e) Income Taxes
The Partnership is not required to provide for, or pay, any Federal
income taxes. Income tax attributes that arise from its operations are passed
directly to the individual BUC$holders. The Partnership may be subject to state
and local taxes in jurisdictions in which it operates.
f) Profit and Loss Allocations/Distributions
The General Partners receive a special distribution of adjusted cash
from operations for managing the affairs of the Partnership (equal to .5% per
annum of total invested assets) which is payable quarterly, subject to certain
limitations. After payment of the special distribution, quarterly distributions
of cash are made from adjusted cash from operations and are allocated 98% to the
BUC$holders and 2% to the General Partners. For financial reporting purposes,
net profits or losses after the special distribution are allocated 98% to the
BUC$holders and 2% to the General Partners.
NOTE 3 - Investment in Mortgage Loans and Equity Loans to Developers
All base interest and initially at least 90% in the aggregate of the
principal of the loans made by the Partnership are coinsured by the Federal
Housing Administration (the "FHA") (80% of the 90%) and Related Mortgage
Corporation, and affiliate of the Related General Partner (20% of the 90%), with
the remaining 10% of the Partnership's original portfolio comprised of uninsured
noninterest-bearing equity loans made directly to the same developers as are the
mortgages. With respect to a default on FHA co-insured loans, the Partnership
would bear the risk of loss with respect to uninsured portions of the loans (10%
of Mortgage Loan and additional interest), however these are secured by the
interests in the partnerships owning the underlying properties. The loans
require monthly payment of principal and interest over the life of the mortgage
loan.
Equity loans to developers, in the original amount of $3,018,800 on the
remaining three projects represented noninterest-bearing advances made to the
developers for such items as initial operating deficit escrow requirements and
Housing and Urban Development ("HUD") related contingencies such as working
capital escrow and cash requirements. Such amounts are due on demand after six
months notice any time after the tenth anniversary of the initial endorsement of
the loan by HUD. Equity operating losses have reduced the carrying value of
these loans to zero as of Decemer 31, 1996 without elimination of the amount due
and owing to the Partnership.
18
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
Note: 3- Investments in Mortgage Loans and Equity Loans To Developers
(continued)
Information relating to investments in FHA co-insured mortgage loans
and equity loans to developers as of December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Interest Mortgage Mortgage Equity Equity
Funding Final Rate on Loan Loan Loan Loan
Closing Completion Maturity Mortgage Balance at Balance at Balance at Balance at
Project Date Date Date (1) Loan (2) 12/31/96 12/31/95 12/31/96 12/31/95
- - - ------- --------- ---------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cross Creek
Apartments
Charlotte,
NC (3) 06/10/88 2/1/91 1/1/30 8.95% $17,106,744 $17,187,347 $0 $ 0
Weatherly Walk
Apartments
Fayetteville,
GA 08/18/88 12/5/89 11/1/29 8.95% 7,553,454 7,589,607 0 0
Woodgate Manor
Gainesville,
FL (3) 12/12/88 12/13/88 1/1/24 8.95% 2,963,056 2,987,863 0 6,162
----------- ----------- -- ------
$27,623,254 $27,764,817 $0 $6,162
=========== =========== == ======
</TABLE>
(1) The Partnership may call for prepayment of the total loan at any
time after the tenth anniversary of the date the mortgage loan funding was
completed. The Partnership, in order to call for prepayment, would be required
to terminate the mortgage insurance contract with FHA (and/or the coinsurer) not
later than the accelerated payment date. Since the exercise of such option would
be at the Partnership's discretion, it is intended to be exercised only where
the Partnership determines that the value of the Development has increased by an
amount which would justify accelerating payment in full and assuming the risks
of foreclosure if the mortgagor failed to make the accelerated payment. The
Partnership presently expects to dispose of such loans within 10 to 15 years
after acquisition.
For a period of five years from the loan closing date, the owners of
the properties did not have the right to prepay the mortgage loans without the
consent of the General Partners. Beginning in the sixth year and thereafter, any
prepayment during one calendar year in an amount in excess of 15% of the
original principal amount of the mortgage loan will be subject to a prepayment
penalty. The prepayment penalty is 5% in the sixth year and decreases 1% per
year thereafter.
(2) Includes a servicing fee of 0.07% paid by the developer to Related
Mortgage Corporation (an affiliate of the Related General Partner); however,
does not include additional interest which may be payable.
(3) The general partnership interest of the project is held by an
affiliate of the Related General Partner.
19
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 3 - Investment in Mortgage Loans and Equity Loans to Developers (continued)
On January 31, 1994, Tivoli Lakes Associates, Ltd., the owner of
Tivoli Lakes Apartments, a property securing a first mortgage note held by the
Partnership, sold the property to a real estate investment trust which is not
affiliated with the Partnership, its General Partners or Tivoli Lakes
Associates, Ltd. With the consent of the General Partners, the proceeds from the
sale were used to fully repay the Partnership's first mortgage note of
$13,513,611 as well as to repay the original equity loan made to the property's
developer of $1,523,300, the carrying value of which had been reduced to zero in
previous years. In addition, prepayment penalties and other fees of
approximately $403,000 were paid to the Partnership in connection with this
transaction. Tivoli Lakes Associates, Ltd. also used a portion of the proceeds
from the sale to pay the Partnership approximately $63,000 of interest pursuant
to their additional interest guaranty. Deferred loan origination fees of
approximately $495,000 were written off in 1994 as a result of the loan
repayments.
On February 7, 1994, the Partnership used a portion of the proceeds
received from the transaction described above to fully repay its outstanding
debt of $2,837,553. See Note 4 for further information. In March 1994,
distributions of $12,413,170 ($4.70 per BUC) and $253,330 were paid to the
BUC$holders and General Partners, respectively, as a result of the prepayment by
Tivoli Lakes Associates, Ltd.
Following is the interest income from mortgage loans as a percentage of
total revenues, excluding equity gains (losses).
1996 1995 1994
Cross Creek 53% 53% 49%
Weatherly Walk 23 23 22
Woodgate Manor 12 11 13
Tivoli Lakes - - 5
Tivoli Lakes Apartments was sold on January 31, 1994 and the related
Mortgage was paid in full.
At December 31, 1996 and 1995, the estimated fair value of the
Partnership's portfolio of mortgage loans, equity loans and the Cross Creek Loan
(see Note 4) was approximately $32,639,000 and $32,814,000, respectively. The
estimated fair values for the years ended December 31, 1996 and 1995 were based
on internal valuations, of the three properties collateralizing these loans and
independently appraised values, as of October 1, 1995, respectively. Fair value
estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. This estimate is
subjective in nature and involves uncertainties and matters of significant
judgment. Changes in assumptions could significantly affect estimates. Due to
the property-specific nature of the loans and the lack of a ready market for
such investments, this fair value estimate does not necessarily represent the
amount which the Partnership could realize upon a current sale of its
investments.
20
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 4 - Related Parties
The General Partners and their affiliates perform services for the
Partnership which include, but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; asset management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with these services, the amount of which is limited by the provisions
of the Partnership Agreement. The costs and expenses were:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
PBP and affiliates $ 36,045 $ 63,422 $ 79,645
Related General Partners and affiliates 41,931 13,000 12,375
---------- ---------- ----------
$ 77,976 $ 76,422 $ 92,020
========== ========== ==========
</TABLE>
The present owner of the Cross Creek property ("Walsh/Cross Creek
L.P.") acquired title to the property upon the default of the original
developer. Significant interests in Walsh/Cross Creek L.P. are held by
affiliates of the Related General Partner. The Partnership made a loan of
$3,060,000 to Walsh/Cross Creek L.P. (the "Cross Creek Loan") to pay for costs
incurred to complete construction and to fund operating deficits. The Cross
Creek Loan bears interest at the prime rate plus 1% and is due on January 1,
2030 or on the occurrence of other events as more fully described in the loan
agreement. The amount loaned to Walsh/Cross Creek L.P. is classified as a loan
reveivable from affiliate and is anticipated to be repaid from cash flows from
the property. Stephen M. Ross holds a majority interest in the Related General
Partner and has guaranteed to the Partnership, subject to certain conditions
contained in the Guarantee Agreement and Amendment to the Guarantee as follows:
(i) the performance of all obligations for the payment of interest on the Cross
Creek Loan when due in accordance with documentation evidencing the Cross Creek
Loan; (ii) the payment of principal on the Cross Creek Loan on or before
December 31, 2000; (iii) the repayment on or before December 31, 2000 of the
$1,783,900 equity loan (currently recorded at zero) previously made to the
original developer of Cross Creek; and (iv) the payment when due of interest and
principal at an interest of 8.95% of the $17,494,100 first mortgage loan
previously made to the original developer.
In accordance with the Guarantee Agreement and Amendment to the
Guarantee and except as otherwise required by HUD, available cash flow or
capital proceeds from the Cross Creek property will be applied first to all
expenses of operating and maintaining the property, debt service and/or
satisfaction of the mortgage loan, equity loan and Cross Creek Loan, then to
reimburse Stephen M. Ross for operating deficit payments which he has made
(amounting to $255,000 for the year ended December 31, 1996 and $3,182,732,
cumulatively), then to additional interest, default rate and guaranteed rate
payments as set forth in the Subordinated Note and the Additional Interest
Guarantee.
The Partnership maintained an account with the Prudential Institutional
Liquidity Portfolio Fund, an affiliate of PBP, for investment of its available
cash in short-term instruments in 1995 in accordance with the guidelines
established by the Partnership Agreement.
Prudential Securities Incorporated ("PSI"), an affiliate of PBP, owns
6,655 BUC$ at December 31, 1996.
21
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 5 - Income Taxes
The following is a reconciliation of net income for financial reporting
purposes with net income for tax reporting purposes for the years ended December
31, 1996, 1995, and 1994, respectively.
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- -----------
<S> <C> <C> <C>
Net income per financial statements $2,650,938 $2,587,848 $ 4,031,885
Elimination of equity (gain) loss 6,162 66,265 (1,256,027)
Other 0 35,509 (35,509)
---------- ---------- -----------
Tax basis net income $2,657,100 $2,689,622 $ 2,740,349
========== ========== ===========
</TABLE>
The differences between the tax and book bases of partners' capital are
primarily attributable to the cumulative effect of the book to tax income
adjustments and the recording of the fourth quarter distribution.
Effective October 1, 1995, the Related General Partner has assumed from
PBP, the responsibilities and duties of the Tax Matters Partner as defined in
the Partnership Agreement.
NOTE 6 - Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes
et al. v. Prudential Securities Group, Inc. et al. (CV-93-654), was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of investors in the Partnership, against the Partnership, PBP, PSI and a number
of other defendants.
By order of the Judicial Panel on Multidistrict Litigation dated April
14, 1994, the Kinnes case, together with a number of other actions not involving
the Partnership, were transferred to a single judge of the United States
District Court for the Southern District of New York (the "Court") and
consolidated for pretrial proceedings under the caption In re Prudential
Securities Incorporated Limited Partnerships Litigation (MDL Docket 1005) (the
"Class Action"). On June 8, 1994, plaintiffs in the transferred cases filed a
complaint that consolidated the previously filed complaints and named as
defendants, among others, PSI, certain of its present and former employees and
the General Partners. The Partnership was not named a defendant in the
consolidated complaint, but the name of the Partnership was listed as being
among the limited partnerships at issue in the case.
On August 9, 1995, PBP, PSI and other Prudential defendants entered
into a Stipulation and Agreement of Partial Compromise and Settlement with legal
counsel representing plaintiffs in the consolidated actions. The Court
preliminarily approved the settlement agreement by order dated August 29, 1995
and, following a hearing held November 17, 1995, found that the agreement was
fair, reasonable, adequate and in the best interests of the plaintiff class. The
Court gave final approval to the settlement, certified a class of purchasers of
specific limited partnerships, including the Partnership, released all settled
claims by members of the class against the PSI settling defendants and
permanently barred and enjoined class members from instituting, commencing or
prosecuting any settled claim against the released parties. The full amount due
under the settlement agreement has been paid by PSI. The consolidated action
remains pending against the Related General Partner and certain of its
affiliates.
22
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 6 - Contingencies (continued)
On December 31, 1996, the Court issued a preliminary approval order (the
"Order") with respect to settlement (the "Related Settlement") of the Class
Action against the Related General Partner and certain of its affiliates.
Pursuant to the stipulation of settlement entered into with counsel for the
class on December 24, 1996, the proposed Related Settlement contemplates, among
other matters, the reorganization (the "Reorganization") of the Partnership and
three other partnerships co-sponsored by affiliates of the Related General
Partner and PBP.
The proposed Related Settlement and Reorganization are subject to
objections by the BUC$holders and limited partners of the Partnership as well as
each of the other concerned partnerships and final approval of the Court after
review of the proposals at a fairness hearing.
Under the proposed Reorganization plan, the BUC$holders of the
Partnership and Summit Insured Equity L.P., Summit Insured Equity L.P. II and
Summit Preferred Equity L.P. will receive shares in a newly formed real estate
investment trust. It is anticipated that the shares will be allocated
proportionately among the partnerships and their respective investors based upon
appraisals and other factors as supported by a third-party fairness opinion.
Detailed information about the proposed Related Settlement and Reorganization
will be sent to BUC$holders in the near future. The terms of the Reorganization
include, among other matters, the acquisition by affiliates of the Related
Capital Company ("RCC") of PBP's general partner interest (the "PBP Interest"),
transfer to the BUC$holders of one-half of the PBP Interest, reduction of fees
currently payable to the General Partners by 25%, filing an application to list
the new company's shares on an exchange and the creation of an infinite, as
opposed to finite, life-operating business.
In connection with the proposed Related Settlement and Reorganization,
on December 19, 1996, PBP and RCC entered into an agreement for the purchase by
RCC or its affiliates of the PBP Interest. The agreement is subject to numerous
conditions, including the effectiveness of the Related Settlement of the Class
Action and the approval of the sale and withdrawal of PBP as a general partner
of the Partnership by the Court.
Pending final approval of the Related Settlement, the Court's Order
prohibits class members (including the BUC$holders) from, among other matters,
(i) transferring their BUC$ unless the transferee agrees to be bound by the
Related Settlement; (ii) granting a proxy to object to the Reorganization; or
(iii) commencing a tender offer for the BUC$. In addition, the General Partners
are enjoined from (i) recording any transfers made in violation of the Order and
(ii) providing the list of investors in any of the partnerships which are the
subject of the Reorganization to any person conducting a tender offer.
There can be no assurance that the conditions to the closing of the
proposed Related Settlement and Reorganization will be satisfied nor that a
closing may occur in the projected time frame. In the event a settlement cannot
be reached, the Related General Partner believes it has meritorious defenses to
the consolidated complaint and intends to vigorously defend this action.
NOTE 7 - Subsequent Event
In February 1997, distributions of approximately $627,000 and $13,000
were paid to the BUC$holders and General Partners, respectively, for the quarter
ended December 31, 1996.
23
<PAGE>
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITOR'S REPORT
FAI, LTD.
WEATHERLY WALK APARTMENTS
HUD PROJECT NO.: 061-36634
DECEMBER 31, 1996
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
TABLE OF CONTENTS
PAGE
MORTGAGOR'S CERTIFICATION 4
MANAGING AGENT'S Certification 5
INDEPENDENT AUDITOR'S REPORT 6
FINANCIAL STATEMENTS
BALANCE SHEET 8
STATEMENT OF PROFIT AND LOSS 10
STATEMENT OF PARTNERS' DEFICIT 12
STATEMENT OF CASH FLOWS 13
NOTES TO FINANCIAL STATEMENTS 15
SUPPLEMENTAL INFORMATION
ACCOUNTS AND NOTES RECEIVABLE 20
DELINQUENT TENANT ACCOUNTS RECEIVABLE 20
MORTGAGE ESCROW DEPOSITS 20
TENANT SECURITY DEPOSITS 20
RESERVE FOR REPLACEMENTS 21
ACCOUNTS PAYABLE 21
ACCRUED TAXES 22
LOANS AND NOTES PAYABLE 22
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
TABLE OF CONTENTS (continued)
Page
COMPENSATION OF PARTNERS 22
UNAUTHORIZED DISTRIBUTIONS OF
PROJECT INCOME TO PARTNERS 22
IDENTITY OF INTEREST COMPANIES AND ACTIVITIES 23
NON-REVENUE PRODUCING UNITS 23
COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND
RESIDUAL RECEIPTS 24
SCHEDULE OF FUNDS IN FINANCIAL INSTITUTIONS 25
CHANGES IN FIXED ASSET ACCOUNTS 26
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL
STRUCTURE 27
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE
WITH SPECIFIC REQUIREMENTS APPLICABLE TO
MAJOR HUD PROGRAMS 29
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH
SPECIFIC REQUIREMENTS APPLICABLE TO AFFIRMATIVE
FAIR HOUSING 31
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH
LAWS AND REGULATIONS APPLICABLE TO THE FINANCIAL
STATEMENTS 32
AUDITOR'S COMMENTS ON AUDIT RESOLUTION MATTERS
RELATED TO THE HUD PROGRAMS 33
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
December 31, 1996
MORTGAGOR'S CERTIFICATION
We hereby certify that we have examine the accompanying financial statements
and supplemental data of FAI, Ltd., and, to the best of our knowledge and
belief, the same is complete and accurate.
GENERAL PARTNER
FAI, Ltd.
Nalco, Inc.
A Georgia Corporation
Corporate General Partner
/s/ Elliot A. Lewis 2-5-97
-----------------------------------
Signature Date
Partnership Employer
Identification Number: 58- 1805795
-4-
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
December 31, 1996
MANAGING AGENT'S CERTIFICATION
We hereby certify that we have examined the accompanying financial
statements and supplemental data of FAI, Ltd., and, to the best of our knowledge
and belief, the same is complete and accurate.
MANAGING AGENT
DOMINION MANAGEMENT, INC.
3190 NE Expressway, Suite 410
Atlanta, Georgia 30341
/s/ Elliot A. Lewis 2-25-97
-----------------------------------
Elliott A. Lewis Date
Owner
Laura Clark
Property Manager
Managing Agent Employer
Identification Number: 58-1803075
- 5 -
<PAGE>
[LETTERHEAD of Timothy F. Kercheval]
INDEPENDENT AUDITOR'S REPORT
To the Partners
FAI, Ltd.
I have audited the accompanying balance sheet of FAI, Ltd., Weatherly
Walk Apartments as of December 31, 1996, and the related statements of profit
and loss (on HUD Form No. 92410), partners' deficit and cash flows for the year
then ended. These financial statements are the responsibility of the
Partnership's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that I plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects the financial position of FAI, Ltd., Weatherly
Walk Apartments, as of December 31, 1996, and the results of its operations, the
changes in partners' deficit and cash flows for the year then ended, in
conformity with generally accepted accounting principles.
My audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 20
through 26 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in my opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
- 6 -
<PAGE>
In accordance with Government Auditing Standards, and the "Consolidated
Audit Guide for Audits of HIJD Programs," I have also issued reports dated
February 19, 1997 on my consideration of FAI, Ltd.'s internal control structure
and on its compliance with specific requirements applicable to major HUD
Programs, affirmative fair housing, and laws and regulations applicable to the
financial statements.
Atlanta, Georgia
February 19,1997
/S/Timothy F. Kercheval, C.P.A.
Audit Principal: Timothy F. Kercheval
Certified Public Accountant
-7-
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
BALANCE SHEET
December 31, 1996
ASSETS
CURRENT ASSETS
1110 Petty cash $ 200
1120 Cash and cash equivalents 28,833
1240 Prepaid property insurance 11,126
1250 Prepaid mortgage insurance 51,807
1290 Miscellaneous prepaid expenses 676
--------
Total current assets 92,642
DEPOSITS HELD IN TRUST - FUNDED
1191 Tenant security deposits 43,680
RESTRICTED DEPOSITS AND FUNDED RESERVES
1310 Mortgage escrow deposits $ 23,174
1320 Reserve for replacements 44,093 67,267
-------
RENTAL PROPERTY
1410 Land 810,000
1420 Buildings and improvements 6,985,217
1460 Furnishings 362,839
---------
8,158,056
Less accumulated depreciation 1,590,276 6,567,780
---------
OTHER ASSETS
1902 Organizational costs, less accumulated
amortization of $37,586 173,228
-------
$ 6,944,597
===========
-8-
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
BALANCE SHEET- CONTINUED
December 31,1996
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES
2110 Accounts payable $ 13,914
2111 Accounts payable - other 5,264
2120 Accrued wages payable 1,732
2130 Accrued interest payable - mortgage 56,336
2191 Miscellaneous current liabilities 6,343
2210 Rent deferred credits 2,269
2230 Payable to other projects 101,271
2320 Mortgage payable - current maturities 39,525
-------
Total current liabilities 226,654
DEPOSITS LlABILITY
2191 Tenant security deposits (contra) 41,445
LONG-TERM LIABILITIES
2320 Mortgage payable, net of current maturities 7,513,929
2321 Second mortgage payable, net of current maturities 895,200 8,409,129
---------
3130 PARTNERS' DEFICIT (1,732,631)
-----------
$ 6,944,597
===========
- 9 - See notes to financial statements
<PAGE>
US. Department a/ Housing
Statement of and Urban Development
Profit and Loss Office of Housing
Federal Housing Commissioner
<TABLE>
<CAPTION>
OMB Approval No. 2502-00520(exp. 1/31/95)
- - - ------------------------------------------------------------------------------------------------------------------------------------
Public Reporting Burden for this collection of information is estimated to average 1.0 hours per response, including the time for
reviewing instructions, searching existing data source, gathering and maintaining the data needed, and completing and reviewing the
collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Report Management Officer, Officer of Information Policies and System, U.S.
Department of Housing and Urban Development, Washington, D.C. 20410-3600, and to the Officer of Management and Budget Paperwork
Reduction Project (2502-0052), Washington, D.C. 20503. Do not send this completed form to either of these addresses.
- - - ------------------------------------------------------------------------------------------------------------------------------------
For Month/Period Project Number Project Name:
Beginning: Ending: HUD Project No.: 061-16634 FAI, Ltd.
1/1/96 12/31/96
- - - ------------------------------------------------------------------------------------------------------------------------------------
Part I Description of Account Account No. Amount*
- - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartments or Member Carrying Charges (Coops) 5120 $ 1,567,875
Tenant Assistance Payments 5121 $
Rental Furniture and Equipment 5130 $
Income Stores and Commercial 5140 $
5100 Garage and Parking Spaces 5170 $
Flexible Subsidy Income 5180 $
Miscellaneous (Specify) 5190 $
Total Rent Revenue Potential at 100% Occupancy $ 1,567,875
Apartments 5220 $ (103,276)
Vacancies Furniture and Equipment 5230 $
5200 Stores and Commercial 5240 $
Garage and Parking Spaces 5270 $
Miscellaneous (Specify) 5190 $
Total Vacancies $ (103,276)
Net Rental Revenue Rent Revenue Less Vacancies $ 1,464,599
Elderly and Congregate Services Income-5300
Total Service Income (Schedule Attached) 5300 $
Interest Income-Project Operations 5410 $
Financial Income from Investments-Residual Receipts 5430 $
Revenue Income from Investments-Reserve for Replacement 5440 $
5400 Income from Investments-Miscellaneous 5490 $ 1,939
1939
Total Financial Revenue $ 1,939
Laundry and Vending 5910 $ 3,910
Financial NSF and Late Charges 5920 $ 3,977
Revenue Damages and Cleaning Fees 5940 $ 50
5400 Forfeited Tenant Security Deposits 5490 $ 14,828
Other Revenue (Specify) 5990 $ 42,614
52614
Total Other Revenue $ 65,379
Total Other Revenue $ 1,531,917
Advertising 6210 $ 32,264
Administrative Other Renting Expenses 6250 $ 7,398
Expenses Office Salaries 6310 $ 16,279
6200/6300 Office Supplies 6311 $ 4,491
Office or Model Apartment Rent 6312 $
Management Fee 6230 $ 76,187
Management or Superintendent Salaries 6330 $ 81,914
Manager or Superintendent Rent Free Unit 6331 $
Legal Expenses (Project) 6340 $ 255
Auditing Expenses (Project) 6350
Bookkeeping Fees/Accounting Services 6351 $ 4,656
Telephone and Answering Services 6360 $ 9,108
Bad Debts 6370 $ 805
Miscellaneous Administrative Expenses (Specify) 6390 $ 37,985
37985
Total Administrative Expenses $ 271,342
Fuel Oil/Coal 6420 $
Utilities Electricity 6450 $ 23,797
Expenses Water 6451 $ 7,972
6400 Gas 6452 $ 4,225
Sewer 6452 $
Total Utilities Expense $ 35,994
* All amounts must be rounded to the nearest dollar. $.50 form HUD-92410 (7/91)
and over, round up-$.49 and below round down. ref Handbook 4370.2
Page 1 of 2
<PAGE>
<CAPTION>
<S> <C> <C> <C> <C>
Janitor and Cleaning Payroll 6510 $
Janitor and Cleaning Supplies 6515 $ 521
Janitor and Cleaning Contract 6517 $
Exterminating Payroll/Contract 6519 $
Exterminating Supplies 6520 $ 2,934
Garbage and Trash Removall 6525 $ 7,038
Security Payroll/Contract 6530 $
Grounds Payroll 6535 $ 29,094
Ground Supplies 6536 $
Operating and Grounds Contract 6537 $
Maintenance Repairs Payroll 6540 $
Expenses Repairs Material 6541 $ 136,020
6500 Repairs Contract 6542 $ 24
Elevator Maintenance/Contract 6545 $
Heating/Cooling Repairs and Maintenance 6546 $ 4,461
Swimming Pool Maintenance/Contract 6547 $ 7,406
Snow Removal 6548 $
Decorating Payroll/Contract 6560 $ 893
Decorating Supplies 6561 $ 35,944
Other 6570 $ 9,406
Miscellaneous Administrative Expenses 6590 $ 16,025
16025
Total Operating and Maintenance Expenses $ 249,766
Real Estate Taxes 6710 $ 99,845
Payroll Taxes (FICA) 6711 $
Financial Miscellaneous Taxes, Licenses and Permits 6719 $ 11,010
Expenses Property and Liability Insurance (Hazard) 6720 $ 11,126
6700 Fidelity Bond Insurance 6721 $
Workmen's Compensation 6722 $
Health Insurance & Other Employee Benefits 6723 $ 25,101
Other Insurance (Specify) 6729
Total Taxes and Insurance $ 147,082
Interest on Bonds Payable 6810 $
Interest on Mortgage Payable 6820 $ 677,541
Financial Interest on Notes Payable (Long-Term) 6830 $
Expenses Interest on Notes Payable (Short-Term) 6840 $
6800 Mortgage Insurance Premium/Service Charge 6850 $ 56,776
Miscellaneous Administrative Expenses 6890 $
Total Financial Expenses $ 734,317
Elderly & Total Service Expenses-Schedule Attached 6900
Congregate Total Cost of Operations Before Depreciation $ $1,438,501
Service Profit (Loss) Before Depreciation $ $ 93,416
Expenses Depreciation (Total)-6600 & Amortization 6600 $ $ 216,288
6900 Operating Profit or (Loss) $ (122,872)
Officer Salaries 7110 $
Corporate or Legal Expenses (Entity) 7120 $
Mortgagor Taxes (Federal-State-Entity) 7130-32 $
Entity Other Expenses (Entity) 7190 $
Expenses Total Corporate Expenses $
71000 Net Profit or (Loss) $ (122,872)
- - - ------------------------------------------------------------------------------------------------------------------------------------
Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties (18 U.S.C. 1001,
1010, 1012; 31 U.S.C. 3729, 3802) Miscellaneous or other Income and Expenses Sub-account Groups. If miscellaneous or other Income
and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6729, 6890, and 7190) exceed the Account Groupings by 10% or more, attach
a separate schedule describing or explaining the miscellaneous income or expense.
- - - ------------------------------------------------------------------------------------------------------------------------------------
Part 11
1. Total principal payments required under the mortgage, even if payments under a Workout Agreement are less
or more than those required under the mortgage. $ 56,800
2. Replacement Reserve deposits required by the Regulatory Agreement or Amendments thereto, even
if payments may be temporarily suspended or waived. $ 25,553
3. Replacement or Painting Reserve releases which are included as expense items on the Profit and Loss
statement. $ NONE
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense
items on this Profit and Loss statement. $ N/A
Form HUD-92410
</TABLE>
Page 2 of 2
See notes to financial statements
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
STATEMENT OF PARTNERS' DEFICIT
Year ended December 31, 1996
Partners' deficit, beginning $ (1,609,759)
Net loss (122 872)
---------
Partners' deficit, end $ (1,732,631)
- 12 - See notes to financial statements
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
STATEMENT OF CASH FLOWS
Year ended December 31, 1996
Cash flows from operating activities
Rental income received $ 1,465,862
Interest received 1,939
Other income received 65,379
Administrative expenses paid (100,140)
Management fees paid (76,088)
Utilities paid (35,994)
Salaries and wages paid (129,756)
Operating and maintenance paid (230,089)
Real estate taxes paid (201,923)
Property insurance paid (22,252)
Other taxes and insurance paid (36,787)
Interest paid on mortgage (677,811)
Mortgage insurance premium paid (56,520)
Decrease in mortgage escrow deposits 95,462
Net tenant security deposits paid (442)
---------
Net cash provided by operating activities 60,840
---------
Cash flows from investing activities
Deposits to reserve for replacements (27,472)
Withdrawals from reserve for replacements 59,463
---------
Net cash provided by investing activities 31,991
---------
Cash flows from financing activities
Mortgage principal payments (36,153)
--------
Net cash used in financing activities (36,153)
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 56,678
Cash and cash equivalents, beginning (27,645)
---------
Cash and cash equivalents, ending $ 29,033
=========
-13- (continued)
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
STATEMENT OF CASH FLOWS - CONTINUED
Year ended December 31, 1996
Reconciliation of net loss to net cash provided by operating activities
Net loss $ (122,872)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation 210,968
Amortization 5,320
Changes in asset and liability accounts
(Increase) decrease in assets
Prepaid expenses (11,546)
Tenant security deposits - net (442)
Mortgage escrow deposits 95,462
Increase (decrease) in liabilities
Accounts payable (10,310)
Accounts payable - other (3,983)
Accrued wages payable (1,576)
Accrued interest payable (270)
Accrued real estate taxes (102,078)
Management fees payable 99
Rent deferred credits 2,068
--------
Net cash provided by operating activities $ 60,840
========
- 14 - See notes to financial statements
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
The partnership was organized as a limited partnership under the laws of
the State of Georgia during July of 1988 for the purpose of constructing
and operating a rental housing project under Section 8 of the National
Housing Act. The project consists of 194 units located in Fayetteville,
Georgia, and is currently operating under the name of Weatherly Walk
Apartments. The project is regulated by the United States Department of
Housing and Urban Development ("HUD") as to rent charges and operating
methods. The project is managed by a related party under an agreement
approved by HUD which provides for a management fee of 5% of monthly rental
collections.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenue and expenses during
the reporting period. Actual results may differ from those estimates.
Rental Property
Rental property is canted at cost. Depreciation is provided for in amounts
sufficient to relate the cost of depreciable assets to operations over
their estimated service lives using the straight-line method as follows:
Buildings and improvements 7 - 40 years
Furnishings 10 - 12 years
- 15 -
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES (Continued)
The partnership reviews its property investment for possible impairment at
least annually, and more frequently if circumstances warrant. If this
review indicates that the carrying amount of the property may not be
recoverable, the partnership estimates the future cash flow expected to
result from the operations of the property and its eventual sale. If the
sum of this expected future cash flow (undiscounted and without interest
charges) is less than the carrying amount of the property, it is written
down to its estimated fair value.
The expected future cash flow used in this process relies upon estimates
and assumptions, including expense growth, occupancy, rental rates, and
market capitalization rates. The general partner believes that the
estimates and assumptions used are appropriate. However, changes in market
conditions and circumstances may occur which would cause these estimates
and assumptions to change, resulting in revised cash flow projections.
This, in turn, could lead to future write-downs, which could be material.
No write-down for impairment has been recorded as of December 31, 1996.
Amortization
Permanent loan costs consist of fees for obtaining the HUD-insured mortgage
loan and are being amortized over the forty-year life of the mortgage loan
using the straight-line method.
Income Taxes
Profit or loss of the partnership is allocated 1% to the general partner(s)
and 99% to the limited partners. No income tax provision has been included
in the financial statements since profit or loss of the partnership is
required to be reported by the respective partners on their income tax
returns.
Rental Income
Rental income is recognized from apartment rentals as they accrue. Rental
payments received in advance are deferred until earned. All leases between
the partnership and the tenants of the property are operating leases.
- 16 -
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE B - MORTGAGE PAYABLE
The mortgage payable, in the original amount of $7,751,900 is insured by
the Department of Housing and Urban Development and collateralized by a
deed of trust on the rental property. The note is payable to Related
Mortgage Company, and bears interest at the rate of 8.95% per annum.
Principal and interest are payable by the partnership in monthly
installments of $59,497 for a term of 480 months ending November of 2029.
Under agreements with the mortgage lender and HUD, the partnership is
required to make monthly escrow deposits for property taxes and insurance,
mortgage insurance and replacement of project assets, and is subject to
restrictions as to operating policies, rental charges, operating
expenditures and distributions to partners.
The liability of the partnership under the mortgage note is limited to the
underlying value of the real estate collateral plus other amounts deposited
with the lender.
Aggregate annual maturities of the mortgage payable over each of the next
five years are as follows:
December 31, 1997 $ 39,525
1998 43,211
1999 47,241
2000 51,647
2001 56,464
2002 and thereafter 7,315,366
----------
$ 7,553,454
==========
Management believes it is not practicable to estimate the fair value of the
mortgage payable because programs with similar characteristics are not
currently available to the partnership.
- 17 -
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1996
NOTE C - RELATED PARTY TRANSACTIONS
The project is managed by Dominion Capital, Inc. Stockholders of Dominion
Capital, Inc. are the general partners of the partnership. The management
contract and the management fees of 5 percent of gross collections are
approved by HUD. Total management fees of $76,187 were incurred in 1996.
The managing agent also received a fee for monthly accounting, record
keeping and data processing of $2 per apartment unit per month. The total
such fee incurred in 1996 is $4,656.
Related Party Transactions
The partnership owed $78,888 to HRA, Ltd., $2,200 to Dominion Holdings,
Inc., $5,400 to BRA, Ltd., $2,000 to Dominion Capital, Inc., and $12,783 to
Arc Way, Ltd. at year end. The aforementioned partnerships and corporations
share common owners.
NOTE D - OTHER REVENUE (ACCOUNT NO. 5990)
Utility Income $ 752
Pet fees 3,875
Lease cancellation fees 15,609
Refund of fees (319)
Application fee 8,820
Bad debt income . 2,337
M-T-M surcharge 11,540
--------
$ 42,614
========
- 18 -
<PAGE>
SUPPLEMENTAL INFORMATION
SUPPORTING DATA REQUIRED BY HUD
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION
SUPPORTING DATA REQUIRED BY HUD
December 31, 1996
ACCOUNTS AND NOTES RECEIVABLE (OTHER THAN FROM REGULAR TENANTS)
NONE
DELINQUENT TENANT ACCOUNTS RECEIVABLE
NONE
MORTGAGE ESCROW DEPOSITS
Estimated amounts required as of December 31, 1996,
for future payment of:
City, state and county taxes $ 8,308
Mortgage insurance 9,420
--------
Total estimated requirements 17,728
--------
Total confirmed by mortgagee $ 23,174
========
Estimated requirements in excess of amount on deposit $ 5,446
========
TENANT SECURITY DEPOSITS
Tenant security deposits are held in a separate bank account in the name of
the project.
- 20 -
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION (Continued)
SUPPORTING DATA REQUIRED BY HUD
December 31, 1996
RESERVE FOR REPLACEMENTS
In accordance with the provisions of the regulatory agreement, restricted
cash is held by Related Mortgage Company to be used for replacement of
property with the approval of HUD as follows:
Balance at December 31, 1995 $ 76,084
Monthly deposits 25,533
Interest earned 1,939
Withdrawals
Expensed (59,463)
---------
Balance at December 31, 1996 confirmed by mortgagee $ 44,093
=========
ACCOUNTS PAYABLE (OTHER THAN TRADE CREDITORS)
Details of payables due in more than 60 days:
Date Original Amount
Creditor Purpose incurred Terms amount due
- - - -------- ------- -------- ----- ---------- --------
Dominion Capital, Management 12/96 Surplus $6,343 $6,343
Inc. Fee cash as
defined
- 21 -
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION (Continued)
SUPPORTING DATA REQUIRED BY HUD
December 31, 1996
ACCRUED TAXES
NONE
LOANS AND NOTES PAYABLE (OTHER THAN THE INSURED MORTGAGE)
Interest Date Original Balance
Creditor rate Collateral incurred Terms amount due
- - - -------- -------- ---------- -------- ----- -------- ---------
Eagle Non- Partners' 06/18/88 Undefined $ 895,200 $ 895,200
Insured,L.P. interest interest
bearing
COMPENSATION OF PARTNERS
NONE
UNAUTHORIZED DISTRIBUTIONS OF PROJECT INCOME TO PARTNERS
NONE
- 22 -
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION (Continued)
SUPPORTING DATA REQUIRED BY HUD
December 31, 1996
IDENTITY OF INTEREST COMPANIES AND ACTIVITIES
Amount Amount
Company Name Type of Service Paid Payable
- - - ------------- ------------------ ----------- -----------
Dominion Capital, Inc. Management Company $ 76,088 $ 6,343
=========== ===========
Payables to related parties
ArcWay, Ltd. Similar ownership 12,783
HRA, Ltd. Similar ownership 78,888
BRA, Ltd. Similar ownership 5,400
Dominion Holdings, Inc. Major stockholder 2,200
Dominion Capital, Inc. Major stockholder 2,000
------------
$ 101,271
============
NON-REVENUE PRODUCING UNITS
Name of occupant Connection with project
Keith McQuilkin Courtesy Officer
(Total rent is $630 with a rent concession of $400)
- 23 -
<PAGE>
<TABLE>
<CAPTION>
Computation of Surplus Cash, U.S. Department of Housing
Distributions and Residual and Urban Development
Receipts Office of Housing
Federal Housing Commissioner
- - - -----------------------------------------------------------------------------------------------------------------------------------
Project Name Fiscal Period Ended: Project Number
FAI, Ltd. 12/31/96 HUD Project No: 061 -36634
- - - -----------------------------------------------------------------------------------------------------------------------------------
Part A - Compute Surplus Cas
- - - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash
- - - ------------------------------------------------------------------------------------------------------------------------------------
1. Cash (Accounts 1110,1120,1191,1192) $ 72,713
2. Tenant subsidy vouchers due for period covered by financial statement $
3. Other (describe) $
(a) Total Cash (Add lines 1,2, and 3) $ 72,713
- - - -----------------------------------------------------------------------------------------------------------------------------------
Current Obligations
4. Accrued mortgage interest payable $ 56,336
5. Delinquent mortgage principal payments $
6. Delinquent deposits to reserve for replacements $
7. Accounts payable (due within 30 days) $ 25,521
8. Loans and notes payable (due within 30 days) $
9. Deficient Tax Insurance or MIP Escrow Deposits $
10. Accrued expenses (not escrowed) $ 1,732
1l. Prepaid Rent (Account 2210) $ 2,269
12. Tenant security deposits liability (Account 2191) $ 41,445
13. Other (Describe) $
(b) Less Total Current Obligations (Add lines 4 through 13) $ 127,303
(c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $ (54,590)
- - - -----------------------------------------------------------------------------------------------------------------------------------
PART B - Compute Distributions to Owners and Required Deposit to Residual Receipts
- - - -----------------------------------------------------------------------------------------------------------------------------------
1. Surplus Cash $ NONE
Limited Dividend Projects
2a Annual Distribution Earned During Fiscal Period Covered by the Statement $
2b. Distribution Accrued and Unpaid as of the End of the Prior Fiscal Period $
2c. Distributions Paid During Fiscal Period Covered by Statement $
3. Amount to be Carried on Balance Sheet as Distribution Earned but Unpaid
(Line 2a plus 2b minus 2c) $
4. Amount Available for Distribution During Next Fiscal Period $ NONE
5. Deposit Due Residual Receipts (Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $ NONE
Prepared By Reviewed By
- - - -----------------------------------------------------------------------------------------------------------------------------------
Loan Technician Date Loan Servicer Date
- - - -----------------------------------------------------------------------------------------------------------------------------------
form HUD-93486 (8/95)
</TABLE>
-24-
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION (Continued)
SUPPORTING DATA REQUIRED BY HUD
December 31, 1996
SCHEDULE OF FUNDS IN FINANCIAL INSTITUTIONS
Funds held by mortgagor, operating accounts
1. Wachovia, Operating Account, 28, 833
(Account No. 17-537-029)
Funds held by mortgagor, in trust -
1. Wachovia, Tenant Security Deposit Trust
(Account No. 12-403-428) 43,680
Funds held by mortgagee (in trust)
1 Chemical Bank, Tax and Insurance Escrow 23,174
2 Chemical Bank, Reserve for Replacement (2.9 percent) 44,093
---------
Total funds held by mortgagee $ 139,780
=========
Balances confirmed by bank and by mortgagee $ 139,780
=========
- 25 -
<PAGE>
<TABLE>
<CAPTION>
FAI, Ltd.
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION - CONTINUED
SUPPORTING DATA REQUIRED BY HUD
CHANGES IN FIXED ASSET ACCOUNTS
Year ended December 31, 1996
Assets Accumulated Depreciation
------------------------------------------------------------------------------------------
Balance Balance Balance Current
12/31/95 Additions Deletions 12/31/96 12/31/95 Provision
--------- --------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Land $ 810,000 $ - $ - $ 810,000 $ - $ -
Buildings and improvement 6,985,217 - - 6,985,217 1,147,192 174,930
Furnishings 362,839 - - 362,839 232,116 36,038
------------- ------------- ----------- ------------- ------------- ---------------
$ 8,158,056 $ - $ - $ 8,158,056 $ 1,379,308 $ 210,968
============= ============= =========== ============= ============= ===============
Balance Net book
Deletions 12/31/96 value
--------- -------- ----------
<S> <C> <C> <C>
Land $ - $ - $ 810,000
Buildings and improvement - 1,322,122 5,663,095
Furnishings - 268,154 94,685
------------- -------------
$ - $ 1,590,276 $ 6,567,780
============= =============
- 26 -
<PAGE>
[LETTERHEAD of Timothy F. Kercheval]
</TABLE>
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL STRUCTURE
To the Partners
FAI, Ltd.
I have audited the financial statements of FAI, Ltd., as of and for the
year ended December 31, 1996, and have issued my report thereon dated February
19, 1997, I have also audited FAI, Ltd.'s compliance with requirements
applicable to major HUD-assisted programs and have issued my report thereon
dated February 19, 1997.
I conducted my audit in accordance with generally accepted auditing
standards, Government Auditing Standards, issued by the Comptroller General of
the United States, and the "Consolidated Audit Guide for Audits of HUD Programs"
(the Guide), issued by the U.S. Department of Housing and Urban Development,
Office of Inspector General in July 1993. Those standards and the Guide require
that I plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement and about whether
FAI, Ltd. complied with laws and regulations, noncompliance with which would be
material to a major HUD-assisted program.
The management of the partnership is responsible for establishing and
maintaining an internal control structure. In fulfilling this responsibility,
estimates and judgments by management are required to assess the expected
benefits and related costs of internal control structure policies and
procedures. The objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition, that transactions
are executed in accordance with management's authorization and recorded properly
to permit the preparation of financial statements in accordance with generally
accepted accounting principles, and that HUD-assisted programs are managed in
compliance with applicable laws and regulations. Because of inherent limitations
in any internal control structure, errors, irregularities or instances of
noncompliance may nevertheless occur and not be detected. Also, projection of
any evaluation of the structure to future periods is subject to the risk that
procedures may become inadequate because of changes in conditions or that the
effectiveness of the design and operation of policies and procedures may
deteriorate.
- 27 -
<PAGE>
In planning and performing my audit of the partnership for the year
ended December 31, 1996, I obtained an understanding of the design of the
relevant internal control structure policies and procedures and determined
whether they had been placed in operation, and I assessed control risk in order
to determine my auditing procedures for the purpose of expressing my opinions on
the partnership's financial statements and on its compliance with specific
requirements applicable to major HUD-assisted programs and to report on the
internal control structure in accordance with the provisions of the Guide and
not to provide an opinion on the internal control structure.
I performed tests of controls, as required by the Guide, to evaluate
the effectiveness of the design and operation of internal control structure
policies and procedures that I considered relevant to preventing or detecting
material noncompliance with specific requirements that are applicable to the
partnership's HUD-assisted programs. My procedures were less in scope than would
be necessary to render an opinion on these internal control structure policies
and procedures. Accordingly, I do not express such an opinion.
My consideration of the internal control structure would not
necessarily disclose all matters in the internal control structure that might be
material weaknesses under standards established by the American Institute of
Certified Public Accountants. A material weakness is a condition in which the
design or operation of one or more of the internal control structure elements
does not reduce to a relatively low level the risk that errors, irregularities
or instances of noncompliance with laws and regulations in amounts that would be
material in relation to the financial statements being audited or a HUD-
assisted program may occur and not be detected within a timely period by
employees in the normal course of performing their assigned functions. I noted
no matters involving the internal control structure and its operations that I
consider to be material weaknesses as defined above.
This report is intended for the information of the audit committee,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
/s/Timothy F. Kercheval, CPA
Atlanta, Georgia
February 19, 1997
- 28 -
<PAGE>
[LETTERHEAD of Timothy F. Kercheval]
INDEPENDENT AUDITOR'S REPORT ON
COMPLIANCE WITH SPECIFIC REQUIREMENTS
APPLICABLE TO MAJOR HUD PROGRAMS
To the Partners
FAI, Ltd.
I have audited the financial statements of FAI, Ltd., as of and for the
year ended December 31, 1996, and have issued my report thereon dated February
19, 1997.
I have also audited FAI, Ltd.'s compliance with the specific program
requirements governing federal financial reports; mortgage status; replacement
reserve; residual receipts; security deposits; cash receipts and disbursements;
distributions to owners; tenant application, eligibility, and recertification;
and management functions that are applicable to its major HUD-assisted programs
for the year ended December 31, 1996. The management of FAI, Ltd. is responsible
for compliance with those requirements. My responsibility is to express an
opinion on compliance with those requirements based on my audit.
I conducted my audit of compliance with specific program requirements
in accordance with generally accepted auditing standards, Government Auditing
Standards, issued by the Comptroller General of the United States, and the
"Consolidated Audit Guide for Audits of HUD Programs" (the Guide), issued by the
U.S. Department of Housing and Urban Development, Office of Inspector General
in July 1993. Those standards and the Guide require that I plan and perform the
audit to obtain reasonable assurance about whether material noncompliance with
the requirements referred to above occurred. An audit includes examining, on a
test basis, evidence about FAI, Ltd.'s compliance with those requirements. I
believe that my audit provides a reasonable basis for my opinion.
The results of my audit procedures disclosed immaterial instances of
noncompliance with the requirements referred to above, which are described in
the accompanying Schedule of Findings and Questioned Costs. I considered these
instances of noncompliance in forming my opinion on compliance, which is
expressed in the following paragraph.
In my opinion, FAI, Ltd. complied, in all material respects, with the
specific program requirements that are applicable to its major HUD-assisted
programs for the year ended December 31, 1996.
- 29 -
<PAGE>
This report is intended for the information of the audit committee,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
/s/Timothy F. Kercheval, CPA
Atlanta, Georgia
February 19,1997
- 30 -
<PAGE>
[LETTERHEAD of Timothy F. Kercheval]
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE
WITH SPECIFIC REQUIREMENTS APPLICABLE TO
AFFIRMATIVE FAIR HOUSING
To the Partners
FAI, Ltd.
I have audited the financial statements of FAI, Ltd., as of and for the
year ended December 31, 1996, and have issued my report thereon dated February
19, 1997. I have also audited FAI, Ltd.'s compliance with requirements
applicable to major HUD-assisted programs and have issued my report thereon
dated February 19, 1997.
I have applied procedures to test FAI, Ltd.'s compliance with the
Affirmative Fair Housing requirements applicable to its HUD-assisted programs
for the year ended December 31, 1996.
My procedures were limited to the applicable procedures described in
the "Consolidated Audit Guide for Audits of HUD Programs" (the Guide), issued by
the U.S. Department of Housing and Urban Development, Office of Inspector
General in July 1993. My procedures were substantially less in scope than an
audit, the objective of which is the expression of an opinion on FAI, Ltd.'s
compliance with the Affirmative Fair Housing requirements. Accordingly, I do not
express such an opinion.
The results of my tests disclosed no instances of noncompliance that
are required to be reported herein under the Guide.
This report is intended for the information of the audit committee,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
/s/Timothy F. Kercheval, CPA
Atlanta, Georgia
February 19, 1997
- 31 -
<PAGE>
[LETTERHEAD of Timothy F. Kercheval]
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE
WITH LAWS AND REGULATIONS APPLICABLE
TO THE FINANCIAL STATEMENTS
To the Partners
FAI, Ltd.
I have audited the financial statements of FAI, Ltd. as of and for the
year ended December 31 , 1996, and have issued my report thereon dated February
19, 1997.
I conducted my audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that I plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement.
Compliance with laws, regulations, contracts, and grants applicable to
FAI, Ltd. is the responsibility of FAI, Ltd.'s management. As part of obtaining
reasonable assurance about whether the financial statements are free of material
misstatement, I performed tests of FAI, Ltd.'s compliance with certain
provisions of laws, regulations, contracts, and grants. However, the objective
of my audit of the financial statements was not to provide an opinion on overall
compliance with such provisions. Accordingly, I do not express such an opinion.
The results of my tests disclosed no instances of noncompliance that
are required to be reported herein under Government Auditing Standards.
However, the results of my tests disclosed certain immaterial instances of
noncompliance that are described in the accompanying Schedule of Findings and
Questioned Costs.
This report is intended for the information of the audit committee,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
/s/ Timothy F. Kercheval, CPA
Atlanta, Georgia
February 19, 1997
- 32 -
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
AUDITORS' COMMENTS ON AUDIT RESOLUTION MA l-l FIRS
RELATED TO THE HUD PROGRAMS
December 31, 1996
Finding No. 1
The project operating account experienced overdrB throughout 1995.
Status
As of December 31, 1996, the project maintained adequate cash funds to
cover all outstanding checks.
- 33 -
<PAGE>
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
FAI, LTD.
WEATHERLY WALK APARTMENTS
HUD PROJECT NO.:061-36634
DECEMBER 31, 1995
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
TABLE OF CONTENTS
PAGE
MORTGAGOR'S CERTIFICATION 4
MANAGING AGENTS CERTIFICATION 5
INDEPENDENT AUDITORS' REPORT 6
FINANCIAL STATEMENTS
BALANCE SHEET 8
STATEMENT OF PROFIT AND LOSS 10
STATEMENT OF PARTNERS' DEFICIT 12
STATEMENT OF CASH FLOWS 13
NOTES TO FINANCIAL STATEMENTS 15
SUPPLEMENTAL INFORMATION
ACCOUNTS AND NOTES RECEIVABLE 21
DELINQUENT TENANT ACCOUNTS RECEIVABLE 21
MORTGAGE ESCROW DEPOSITS 21
TENANT SECURITY DEPOSITS 21
RESERVE FOR REPLACEMENTS 22
ACCOUNTS PAYABLE 22
ACCRUED TAXES 23
LOANS AND NOTES PAYABLE 23
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
Page
COMPENSATION OF PARTNERS 23
UNAUTHORIZED DISTRIBUTIONS OF
PROJECT INCOME TO PARTNERS 23
IDENTITY OF INTEREST COMPANIES AND ACTIVITIES 24
NON-REVENUE PRODUCING UNITS 24
COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND
RESIDUAL RECEIPTS (December 31, 1995) 25
SCHEDULE OF FUNDS IN FINANCIAL INSTITUTIONS 26
CHANGES IN FIXED ASSET ACCOUNTS 27
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL
STRUCTURE 28
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE
WITH SPECIFIC REQUIREMENTS APPLICABLE TO
MAJOR HUD PROGRAMS 30
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH
SPECIFIC REQUIREMENTS APPLICABLE TO AFFIRMATIVE
FAIR HOUSING 32
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH
LAWS AND REGULATIONS APPLICABLE TO THE FINANCIAL
STATEMENTS 33
SCHEDULE OF FINDINGS AND QUESTIONED COSTS 34
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
December 31, 1995
MORTGAGOR'S CERTIFICATION
We hereby certify that we have examined the accompanying financial
statements and supplemental data of FAI, Ltd., and, to the best of our knowledge
and belief, the same is complete and accurate.
GENERAL PARTNER
FAI, Ltd.
Ealco, Inc.
A Georgia Corporation
Corporate General Partner
/s/ Elliot A. Lewis 2-25-96
-------------------------------
Signature Date
Partnership Employer
Identification Number: 58-1805795
4
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
December 31,1995
MANAGING AGENT'S CERTIFICATION
We hereby certify that we have examined the accompanying financial
statements and supplemental data of FAI, Ltd., and, to the best of our knowledge
and belief, the same is complete and accurate.
MANAGING AGENT
DOMINION MANAGEMENT, INC.
3190 NE Expressway, Suite 410
Atlanta, Georgia 30341
/s/ Elliot A. Lewis
-------------------------------
Elliott A. Lewis 2/25/96
Owner
Property Manager
Managing Agent Employer
Identification Number: 58-1803075
5
<PAGE>
Timothy F. Kercheval
Certified Public Accountant
Suite 388 (770) 457-6125
5446 Peachtree Industrial Blvd. FAX (770) 457-6401
Chamblee, GA 30341
INDEPENDENT AUDITORS' REPORT
To the Partners
FAI, Ltd.
We have audited the accompanying balance sheet of FAI, Ltd.,
Weatherly Walk Apartments as of December 31, 1995, and the related statements of
profit and loss (on HUD Form No. 92410), partners' deficit and cash flows for
the year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects the financial position of FAI, Ltd., Weatherly
Walk Apartments, as of December 31, 1995, and the results of its operations, the
changes in partners' deficit and cash flows for the year then ended, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note F to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note F. The financial statements to not include any
adjustments that might result from the outcome of this uncertainty.
6
<PAGE>
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 21
through 27 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued
reports dated February 21, 1996 on our consideration of FAI, Ltd.'s internal
control structure and on its compliance with specific requirements applicable to
major HUD Programs, affirmative fair housing, and laws and regulations
applicable to the financial statements.
Atlanta, Georgia
February 21, 1996
/s/ T.F. Kercheval
Audit Principal: Timothy F. Kercheval
Certified Public Accountant
7
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
BALANCE SHEET
December 31, 1995
ASSETS
CURRENT ASSETS
1240 Prepaid property insurance $ 52,063
----------
Total current assets 52,063
DEPOSITS HELD IN TRUST- FUNDED
1191 Tenant security deposits 42,498
----------
RESTRICTED DEPOSITS AND FUNDED RESERVES
1310 Mortgage escrow deposits 118,130
1320 Reserve for replacements 76,084
1350 Operating deficit escrow 506 194,720
--------- ----------
RENTAL PROPERTY
1410 Land 810,000
1420 Buildings and improvements 6,985,217
1440 Building equipment - portable 362,839
---------
8,158,056
Less accumulated depreciation 1,379,308 6,778,748
--------- ----------
OTHER ASSETS
1902 Organizational costs. less accumulated
amortization of $32,264 178,548
----------
$7,246,577
==========
8
<PAGE>
<TABLE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
BALANCE SHEET - CONTINUED
December 31, 1995
LIABILITIES AND PARTNERS' DEFICIT
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES
2110 Accounts payable $ 33,471
2111 Property taxes payable 102,078
2113 Bank overdraft 27,645
2120 Accrued salaries 3,308
2130 Accrued mortgage interest 56,606
2230 Payable to affiliates 101,271
2210 Prepaid rent 201
2190 Accrued incentive management fee 6,244
2320 Current portion of mortgage payable 36,153
------------
Total current liabilities 366,977
DEPOSITS LIABILITIES
2191 Tenant security deposits (contra) 40,705
LONG-TERM LIABILITIES
2320 Mortgage payable, net of current maturities 7,553,454
2321 Second mortgage payable, net of current maturities 895,200 8,448,654
---------
3130 PARTNERS' DEFICIT (1,609,759)
------------
$ 7,246,577
============
See notes to financial statements
</TABLE>
9
<PAGE>
Statement of U.S. Department of Housing [GRAPHIC OMITTED]
Profit and Loss and Urban Development
Office of Housing
Federal Housing Commissioner
Public Reporting Burden for this collection of information is estimated to
average 1.0 hours per response, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments regarding
this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Reports Management
Officer, Office of Information Policies and Systems, U.S. Department of Housing
and Urban Development, Washington, D.C. 20410-3600, and to the Office of
Management and Budget Paperwork Reduction Project (2502-0052), Washington, D.C.
20503. Do not send this completed form to either of these addresses.
<TABLE>
<CAPTION>
For Month/Period Project Number: Project Name:
Beginning: 1/1/95 Ending: 12/31/95 HUD Project No.: 061-36634 FAI. Ltd.
Weatherly Walk Apartments
- - - -------------------------------------------------------------------------------------------------------------------------------
Part I Description of Account Account No. Amount*
- - - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartments or Member Carrying Charges (Coops) 5120 $ 1,421,510
Tenant Assistance Payments 5121 $
Rental Furniture and Equipment 5130 $
Income Stores and Commercial 5140 $
5100 Garage and Parking Spaces 5170 $
Flexible Subsidy Income 5180 $
Miscellaneous (Specify) 5190 $ 23,991
Total Rent Revenue Potential at 100% Occupancy $ 1,445,501
Apartments 5220 $ (48,695)
Furniture and Equipment 5230 $
Vacancies Stores and Commercial 5240 $
5200 Garage and Parking Spaces 5270 $
Miscellaneous (Specify) 5290 $
Total Vacancies $ (48,695)
Net Rental Revenue Rent Revenue Less Vacancies $ 1,396,806
Elderly and Congregate Services Income- 5300
Total Service Income (Schedule Attached) 5300 $
Interest Income-Project Operations 5410 $
Financial Income from Investments-Residential Receipts 5430 $
Revenue Income from Investments-Reserve for Replacement 5440 $ 1,886
5400 Income from Investments-Miscellaneous 5490 $ 15
Total Financial Revenue $ 1,901
Laundry and Vending 5910 $ 4,071
NSF and Late Charges 5920 $ 5,050
Other Damages and Cleaning Fees 5930 $ 933
Revenue Forfeited Tenant Security Deposits 5940 $ 9,299
5900 Other Revenue (Specify) 5990 $ 18,984
Total Other Revenue $ 38,337
Total Revenue $ 1,437,044
Advertising 6210 $ 25,180
Other Renting Expenses 6250 $ 9,208
Office Salaries 6310 $
Office Supplies 6311 $ 13,670
Office or Model Apartment Rent 6312 $ 8,863
Administrative Management Fee 6320 $ 71,227
Expenses Manager or Superintendent Salaries 6330 $ 70,422
6200/6300 Manager or Superintendent Rent Free Unit 6331 $
Legal Expenses (Project) 6340 $ 560
Auditing Expenses (Project) 6350 $
Bookkeeping Fees/Accounting Services 6351 $ 4,656
Telephone and Answering Services 6360 $ 8,110
Bad Debts 6370 $ 2,581
Miscellaneous Administrative Expenses (Specify) 6390 $ 16,397
Total Administrative Expenses $ 230,874
Fuel Oil/Coal 6420 $
Utilities Electricity 6450 $ 59,562
Expense Water 6451 $ 7,934
6400 Gas 6452 $ 5,255
Sewer 6453 $
Total Utilities Expense $ 72,751
* All amounts must be rounded to the nearest dollar, $.50 form HUD-92410 (7/91)
and over, round up - $.49 and below round down. ref Handbook 4370.2
</TABLE>
Page 1 of 2
10
<PAGE>
<TABLE>
<CAPTION>
- - - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janitor and Cleaning Payroll 6510 $
Janitor and Cleaning Supplies 6515 $ 365
Janitor and Cleaning Contract 6517 $
Exterminating Payroll/Contract 6519 $
Exterminating Supplies 6520 $ 3,937
Garbage and Trash Removal 6525 $ 5,866
Security Payroll/Contract 6530 $
Grounds Payroll 6535 $ 95,464
Grounds Supplies 6536 $ 16,088
Operating and Grounds Contract 6537 $
Maintenance Repairs Payroll 6540 $
Expenses Repairs Material 6541 $ 11,200
6500 Repairs Contract 6542 $ 32
Elevator Maintenance/Contract 6545 $
Heating/Cooling Repairs and Maintenance 6546 $ 1,476
Swimming Pool Maintenance/Contract 6547 $ 2,428
Snow Removal 6548 $
Decorating Payroll/Contract 6560 $ 17,541
Decorating Supplies 6561 $ 27,109
Other 6570 $
Miscellaneous Operating and Maintenance Expenses 6590 $ 10,396
Total Operating and Maintenance Expenses $ 191,902
Real Estate Taxes 6710 $ 102,230
Payroll Taxes (FICA) 6711 $ 9,251
Miscellaneous Taxes, Licenses and Permits 6719 $
Taxes and Property and Liability Insurance (Hazard) 6720 $ 10,371
Insurance Fidelity Bond Insurance 6721 $
6700 Workmen's Compensation 6722 $
Health Insurance & Other Employee Benefits 6723 $ 11,653
Other Insurance (Specify) 6729 $
Total Taxes and Insurance $ 133,505
Interest on Bonds Payable 6810 $
Interest on Mortgage Payable 6820 $ 680,298
Financial Interest on Notes Payable (Long-Term) 6830 $
Expenses Interest on Notes Payable (Short-Term) 6840 $
6800 Mortgage Insurance Premium/Service Charge 6850 $ 57,037
Miscellaneous Financial Expenses 6890 $
Total Financial Expenses $ 737,335
Elderly & Total Service Expenses-Schedule Attached 6900
Congregate Total Cost of Operations Before Depreciation $ $ 1,366,367
Service Profit (Loss) Before Depreciation $ $ 70,677
Expenses Depreciation (Total)-6600 & Amortization 6600 $ $ 216,291
6900 Operating Profit or (Loss) $ (145,614)
Officer Salaries 7110 $
Corporate or Legal Expenses (Entity) 7120 $
Mortgagor Taxes (Federal-State-Entity) 7130-32 $
Entity Other Expenses (Entity) 7190 $
7100 Total Corporate Expenses
Net Profit or (Loss) $ (145,614)
- - - ----------------------------------------------------------------------------------------------------------------------------------
Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties (18 U.S.C. 1001,
1010, 1012; 31 U.S.C. 3729, 3802) Miscellaneous or other Income and Expenses Sub-account Groups. If miscellaneous or other income
and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6729, 6890, and 7190) exceed the Account Groupings by 10% or
more, attach a separate schedule describing or explaining the miscellaneous income or expense.
</TABLE>
<TABLE>
<CAPTION>
Part II
<S> <C>
1. Total principal payments required under the mortgage, even if payments under a Workout Agreement are less
or more than those required under the mortgage. $ 56,800
2. Replacement Reserve deposits required by the Regulatory Agreement or Amendments thereto, even if payments
may be temporarily suspended or waived. $ 25,533
3. Replacement or Painting Reserve releases which are included as expense items on the Profit and Loss
statement. $ NONE
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items
on this Profit and Loss statement. $ N/A
- - - ----------------------------------------------------------------------------------------------------------------------------------
Form HUD-92410
Page 2 of 2
See notes to financial statements
</TABLE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
STATEMENT OF PARTNERS' DEFICIT
Year ended December 31, 1995
Partners' deficit, beginning $ (1,464,145)
Net loss (145,614)
------------
Partners' deficit, ending $ (1,609,759)
============
See notes to financial statements
11
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
STATEMENT OF CASH FLOWS
Year ended December 31, 1995
Cash flows from operating activities
Rental income received $ 1,398,503
Interest received 1,901
Other income received 36,835
Administrative expenses paid (99,361)
Management fees paid (54,845)
Utilities paid (68,882)
Salaries and wages paid (167,647)
Operating and maintenance paid (112,416)
Property insurance paid (10,134)
Other taxes and insurance paid (20,904)
Interest paid on mortgage (681,635)
Mortgage insurance premium paid (57,037)
Real estate taxes paid (152)
----------
Net cash provided by operating activities 164,226
----------
Cash Flows from investing activities
Deposits to reserve for replacements (27,420)
Withdrawals from reserve for replacements 21,326
Deposits to mortgage reserve (87,776)
Investment in rental property (6,110)
Deposits to operating deficit escrow (15)
----------
Net cash used in investing activities (99,995)
----------
Cash flows from financing activities
Mortgage principal payments (33,031)
----------
Net cash used in financing activities (33,031)
----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 31,200
Cash and cash equivalents, beginning (58,845)
----------
Cash and cash equivalents, ending $ (27,645)
==========
(continued)
12
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
STATEMENT OF CASH FLOWS - CONTINUED
Year ended December 31, 1995
Reconciliation of net loss to net cash provided by operating activities
Net loss $(145,614)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation 210,969
Amortization 5,322
(Increase) decrease in assets
Tenant accounts receivable 1,496
Accounts receivable - other -
Prepaid expenses 237
Tenant security deposits - net (1,502)
Increase (decrease) in liabilities
Accounts payable 3,118
Accounts payable - other (19,096)
Increase in property taxes payable 102,078
Decrease in mortgage interest payable (1,337)
Increase in accrued management fees 6,246
Increase in accrued utilities 3,869
Increase in prepaid rent 201
Increase in accrued salaries (1,761)
---------
Net cash provided by operating activities $ 164,226
=========
See notes to financial statements
13
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The Partnership was organized as a limited partnership under the laws of the
State of Georgia during July of 1988 for the purpose of constructing and
operating a rental housing project under Section 8 of the National Housing Act.
The project consists of 194 units located in Fayetteville, Georgia, and is
currently operating under the name of Weatherly Walk Apartments. The project is
regulated by the United States Department of Housing and Urban Development
("HUD") as to rent charges and operating methods. The project is managed by a
related party under an agreement approved by HUD which provides for a management
fee of 5% of monthly rental collections.
Use of Estimates
- - - ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenue and expenses during the reporting period. Actual
results may differ from those estimates.
Rental Property
- - - ---------------
Rental property is carried at cost. Depreciation is provided for in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives using the straight-line method as follows:
Furnishings 10 years
Office furniture 12 years
Buildings and improvements 40 years
14
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - (Continued)
Amortization
- - - ------------
Permanent loan costs consist of fees for obtaining the HUD-insured mortgage loan
and are being amortized over the forty-year life of the mortgage loan using
the straight-line method.
Income Taxes
- - - ------------
Profit or loss of the Partnership is allocated 1% to the general partner(s) and
99% to the limited partners. No income tax provision has been included in the
financial statements since profit or loss of the Partnership is required to be
reported by the respective partners on their income tax returns.
The Partnership uses the accrual method of accounting for book purposes and the
cash method for tax purposes. The adjustment of book profit to tax basis loss
for the year ended December 31, 1995 is summarized as follows:
Net loss shown by financial statements $146,766
Items increasing loss
Adjustment for conversion from accrual
basis to cash basis for tax purposes
Depreciation difference on real
property Pursuant to Section 754 step-up 75,452
--------
Net loss as shown by the tax return $222,218
========
Rental Income
- - - -------------
Rental income is recognized from apartment rentals as they accrue. Rental
payments received in advance are deferred until earned. All leases between the
Partnership and the tenants of the property are operating leases.
15
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31,1995
NOTE B - MORTGAGE PAYABLE
The mortgage payable, in the original amount of $7,751,900 is insured by the
Department of Housing and Urban Development and collateralized by a deed of
trust on the rental property. The note is payable to Related Mortgage Company,
and bears interest at the rate of 8.95% per annum. Principal and interest are
payable by the Partnership in monthly installments of $59,497 for a term of 480
months ending November of 2029.
Under agreements with the mortgage lender and HUD, the Partnership is required
to make monthly escrow deposits for property taxes and insurance, mortgage
insurance and replacement of project assets, and is subject to restrictions as
to operating policies, rental charges, operating expenditures and distributions
to partners.
The liability of the Partnership under the mortgage note is limited to the
underlying value of the real estate collateral plus other amounts deposited with
the lender.
Aggregate annual maturities of the mortgage payable over each of the next five
years are as follows:
December 31,1996 $36,153
1997 39,525
1998 43,211
1999 47,241
2000 51,647
2001 and thereafter 7.371,830
----------
$7,589,607
==========
Management believes it is not practicable to estimate the fair value of the
mortgage payable because programs with similar characteristics are not currently
available to the Partnership.
16
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31,1995
NOTE C - RELATED PARTY TRANSACTIONS
The project is managed by Dominion Management, Inc. Stockholders of
Dominion Management, Inc. are the general partners of the Partnership. The
management contract and the management fees of 5% of gross collections are
approved by HUD. Total management fees of $71,227 were incurred in 1995.
The managing agent also received a fee for monthly accounting, record
keeping and data processing of $2 per apartment unit per month. The total
such fee incurred in 1995 is $4,656.
Related Party Transactions
--------------------------
The Partnership owed $78,888 to HRA, Ltd., $2,200 to Dominion Holdings,
Inc., $5,400 to Bra, Ltd., $2,000 to Dominion Management, Inc., and $12,783
to Arc Way, Ltd. at year end. The aforementioned partnerships and
corporations share common owners.
NOTE D - OTHER REVENUE (ACCOUNT NO. 5990)
Other revenue consists of the following:
Utility income $ 583
Transfer fee 200
Pet fees 3,125
Lease cancellation fees 15,076
-------
$18,984
=======
17
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995
NOTE E - OTHER ENTITY EXPENSES (Account No. 7190)
Partnership expenses which are not attributable to project operations
consist of the following:
Amortization $5,322
------
Total entity expenses (To HUD Form
92410; Line 7190) $5,322
======
NOTE F - GOING CONCERN
The Company has experienced recurring operation losses, working capital
deficiencies, and negative cash flows which raises significant doubt about
its ability to continue as a going concern. Management plans to obtain
additional capital as needed and to reduce or delay expenditures.
Significant doubt, however, remains about the Partnership's ability to
continue as a going concern for a reasonable period of time.
18
<PAGE>
SUPPLEMENTAL INFORMATION
SUPPORTING DATA REQUIRED BY HUD
19
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION
SUPPORTING DATA REQUIRED BY HUD
December 31, 1995
ACCOUNTS AND NOTES RECEIVABLE (OTHER THAN FROM REGULAR TENANTS)
NONE
DELINQUENT TENANT ACCOUNTS RECEIVABLE
NONE
MORTGAGE ESCROW DEPOSITS
Estimated amounts required as of December 31, 1995,
for future payment of:
City, state and county taxes $102,078
Property insurance 9,869
Mortgage insurance 56,800
--------
Total estimated requirements $168,747
Total confirmed by mortgagee $118,130
========
Estimated requirements in excess of
amount on deposit $(50,616)
========
TENANT SECURITY DEPOSITS
Tenant security deposits are held in a separate bank account in the name
of the project.
20
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION - CONTINUED
SUPPORTING DATA REQUIRED BY HUD
December 31, 1995
RESERVE FOR REPLACEMENTS
In accordance with the provisions of the regulatory agreement, restricted
cash is held by Related Mortgage Company to be used for replacement of
property with the approval of HUD as follows:
Balance at December 31, 1994 $69,990
Monthly deposits 25,553
Interest earned 1,886
Withdrawals
Expensed (21,326)
-------
Balance at December 31, 1995
confirmed by mortgagee $76,084
=======
ACCOUNTS PAYABLE (OTHER THAN TRADE CREDITORS)
Details of payables due in more than 60 days:
Date Original Amount
Creditor Purpose incurred Terms Amount Due
- - - -------- ------- -------- ----- -------- ------
Dominion Incentive 12/95 Surplus $6,244 6,244
Management Management cash as
Fee define
21
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION - CONTINUED
SUPPORTING DATA REQUIRED BY HUD
December 31, 1995
ACCRUED TAXES
Description Basis Period Amount
of tax for accrual covered Date due accrued
----------- ----------- ------- -------- -------
Property tax Actual tax bill 01/01/95 04/17/96 $102,078
12/31/95
LOANS AND NOTES PAYABLE (OTHER THAN THE INSURED MORTGAGE)
Interest Date Original Amount
Creditor rate Collateral incurred Terms amount due
- - - -------- -------- ---------- -------- ------ ------ ------
Eagle Non-interest Partners' 06/18/88 Undefined $895,200 $895,200
Insured, bearing interest
L.P.
COMPENSATION OF PARTNERS
NONE
UNAUTHORIZED DISTRIBUTIONS OF PROJECT INCOME TO PARTNERS
NONE
22
<PAGE>
<TABLE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION - CONTINUED
SUPPORTING DATA REQUIRED BY HUD
December 31, 1995
<CAPTION>
IDENTITY OF INTEREST COMPANIES AND ACTIVITIES
Amount Amount
Company name Type of service paid payable
------------ --------------- ------ -------
<S> <C> <C> <C>
Dominion Management, Inc. Management Company $70,658 $ 569
=====
Payables to Related Parties
ArcWay, Ltd. Similar ownership 12,783
HRA, Ltd. Similar ownership 78,888
BRA, Ltd. Similar ownership 5,400
Dominion Holdings, Inc. Major stockholders 2,200
Dominion Management, Inc. Major stockholders 2,000
--------
$101,271
========
NON-REVENUE PRODUCING UNITS
Name of occupant Connection with project
---------------- -----------------------
Keith McQuilkin Courtesy Officer
(Total rent is $630 with a rent concession of $400)
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Computation of Surplus Cash, U.S. Department of Housing
Distributions and Residual and Urban Development
Receipts Office of Housing
Federal Housing Commission
Product Name Fiscal Period Ended Project Number
FAI, Ltd., Weatherly Walk Apartments 12/31/95 HUD Project No.:061-36634
Part A - Compute Surplus Cash
Cash
<S> <C> <C>
1. Cash (Accounts 1110,1120, 1191,1192) $ 15 ,356
2. Tenant subsidy vouchers due for period covered by financial statement $
3. Other (describe) $
(a) Total Cash (Add lines 1, 2, and 3) $ 15 356
Current Obligations
4. Accrued mortgage interest payable $ 56,606
5. Delinquent mortgage principal payments $
6. Delinquent deposits to reserve for replacements $
7. Accounts payable (due within 30 days) $ 24,224
8. Loans and notes payable (due within 30 days) $
9. Deficient Tax Insurance or MIP Escrow Deposits $ 50,616
10. Accrued expenses (not escrowed) $ 3,308
11. Prepaid Rent (Account 2210) $
12. Tenant security deposits liability (Account 2191) $ 40,705
13. Other(Describe)
(b) Less Total Current Obligation (Add lines 4 through 13) $ 175,459
(c) Surplus Cash (Deficiency) (Line (a) minus line (b)) $ (160,103)
PART B - Compute Distributions to Owners and Required Deposit to Residual Receipts
1. Surplus Cash $ NONE
Limited Dividend Projects
2a. Annual Distribution Earned During Fiscal Period Covered by the Statement $
2b. Distribution Accrued and Unpaid as of the End of the Prior Fiscal Period $
2c. Distribution Paid During Fiscal Period Covered by Statements $
3. Amount to be Earned on Balance Sheet as Distribution Earned but unpaid
(Line 2a plus 2b minus 2c) $
4. Amount Available for Distribution During Next Fiscal Period $ NONE
5. Deposit Due Residual Receipts (Must be deposited with Mortgagee within 60 days after Fiscal Period ends) $ NONE
Prepared by Reviewed by
Loan Technician Date Loan Servicer Date
form HUD-93486 (8/95)
</TABLE>
24
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION - CONTINUED
SUPPORTING DATA REQUIRED BY HUD
December 31, 1995
SCHEDULE OF FUNDS IN FINANCIAL INSTITUTIONS
Funds held by mortgagor, operating accounts
1. Petty Cash $200
2. Wachovia, Operating Account,
(Account No. 17-537-029) (27,847)
Funds held by mortgagor, in trust -
1. Wachovia, Tenant Security Deposit
Trust (Account No. 12-403-428) 42,498
Funds held by mortgagee in escrow
1. Chemical Bank, Tax and Insurance Escrow 118,130
2. Chemical Bank, Reserve for Replacement(2.9%) 76,084
3. Chemical Bank, Operating Deficit Escrow 506
--------
Total funds held by mortgagee $209,571
========
Balances confirmed by bank and by mortgagee
25
<PAGE>
<TABLE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SUPPLEMENTAL INFORMATION - CONTINUED
SUPPORTING DATA REQUIRED BY HUD
CHANGES IN FIXED ASSET ACCOUNTS
Year ended December 31, 1995
<CAPTION>
Assets Accumulated Depreciation
------------------------------------- -------------------------------------------------
Balance Balance Balance Current Balance Net Book
12/31/94 Additions 12/31/95 12/31/94 Provision 12/31/95 Vale
-------- --------- -------- -------- --------- -------- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Land $ 810,000 $ -- $ 810,000 $ -- $ -- $ -- $ 810,000
Buildings and Improvements 6,979,107 6,110 6,985,217 1,168,339 210,969 1,379,308 5,605,909
Building equipment - portable 362,839 -- 362,839 -- -- -- 362,839
---------- -------- ---------- ---------- --------- ---------- ----------
$8,151,946 $ 6,110 $8,158,056 $1,168,339 $ 210,969 $1,379,308 $6,778,748
========== ======== ========== ========== ========= ========== ==========
</TABLE>
26
<PAGE>
Timothy F. Kercheval
Certified Public Accountant
Suite 388
5446 Peachtree Industrial Blvd. (770) 457-6125
Chamblee, GA 30341 Fax (770) 457-6401
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL STRUCTURE
To the Partners
FAI, Ltd.
We have audited the financial statements of FAI, Ltd., as of and for the year
ended December 31, 1995, and have issued our report thereon dated February 21,
1996. We have also audited FAI, Ltd.'s compliance with requirements applicable
to major HUD assisted programs and have issued our report thereon dated February
21, 1996.
We conducted our audit in accordance with generally accepted auditing
standards, Government Auditing Standards, issued by the Comptroller General of
the United States, and the "Consolidated Audit Guide for Audits of HUD Programs"
(the Guide), issued by the U.S. Department of Housing and Urban Development,
Office of Inspector General in July 1993. Those standards and the Guide require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement and about whether
FAI, Ltd. complied with laws and regulations, noncompliance with which would be
material to a major HUD-assisted program.
The management of the partnership is responsible for establishing and
maintaining an internal control structure. In fulfilling this responsibility,
estimates and judgments by management are required to assess the expected
benefits and related costs of internal control structure policies and
procedures. The objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition, that transactions
are executed in accordance with management's authorization and recorded properly
to permit the preparation of financial statements in accordance with generally
accepted accounting principles, and that HUD-assisted programs are managed in
compliance with applicable laws and regulations. Because of inherent limitations
in any internal control structure, errors, irregularities or instances of
noncompliance may nevertheless occur and not be detected. Also, projection of
any evaluation of the structure to future periods is subject to the risk that
procedures may become inadequate because of changes in conditions or that the
effectiveness of the design and operation of policies and procedures may
deteriorate.
27
<PAGE>
In planning and performing our audit of the partnership for the year ended
December 31, 1995, we obtained an understanding of the design of the relevant
internal control structure policies and procedures and determined whether they
had been placed in operation, and we assessed control risk in order to determine
our auditing procedures for the purpose of expressing our opinions on the
partnership's financial statements and on its compliance with specific
requirements applicable to major HUD-assisted programs and to report on the
internal control structure in accordance with the provisions of the Guide and
not to provide an opinion on the internal control structure.
We performed tests of controls, as required by the Guide, to evaluate the
effectiveness of the design and operation of internal control structure policies
and procedures that we considered relevant to preventing or detecting material
noncompliance with specific requirements that are applicable to the
partnership's HUD-assisted programs. Our procedures were less in scope than
would be necessary to render an opinion on these internal control structure
policies and procedures. Accordingly, we do not express such an opinion.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of one or more of the internal control structure elements does not
reduce to a relatively low level the risk that errors, irregularities or
instances of noncompliance with laws and regulations in amounts that would be
material in relation to the financial statements being audited or a HUD-
assisted program may occur and not be detected within a timely period by
employees in the normal course of performing their assigned functions. We noted
no matters involving the internal control structure and its operations that we
consider to be material weaknesses as defined above.
This report is intended for the information of the audit committee,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
/s/Timothy F. Kercheval, CPA
Atlanta, Georgia
February 21, 1996
28
<PAGE>
[LETTERHEAD of Timothy F. Kercheval]
INDEPENDENT AUDITOR'S REPORT ON
COMPLIANCE WITH SPECIFIC REQUIREMENTS
APPLICABLE TO MAJOR HUD PROGRAMS
To the Partners
FAI, Ltd.
We have audited the financial statements of FAI, Ltd., as of and for
the year ended December 31, 1995, and have issued our report thereon dated
February 21, 1996.
We have also audited FAI, Ltd.'s compliance with the specific program
requirements governing federal financial reports; affirmative fair housing;
mortgage status; replacement reserve; residual receipts; security deposits; cash
receipts and disbursements; distributions to owners; tenant application,
eligibility, and recertification; and management functions that are applicable
to its major HUD-assisted programs for the year ended December 31, 1995. The
management of FAI, Ltd. is responsible for compliance with those requirements.
Our responsibility is to express an opinion on compliance with those
requirements based on our audit.
We conducted our audit of compliance with specific program requirements
in accordance with generally accepted auditing standards, Government Auditing
Standards, issued by the Comptroller General of the United States, and the
"Consolidated Audit Guide for Audits of HUD Programs" (the Guide), issued by the
U.S. Department of Housing and Urban Development, Office of Inspector General in
July 1993. Those standards and the Guide require that we plan and perform the
audit to obtain reasonable assurance about whether material noncompliance with
the requirements referred to above occurred. An audit includes examining, on a
test basis, evidence about FAI, Ltd.'s compliance with those requirements. We
believe that our audit provides a reasonable basis for our opinion.
The results of our audit procedures disclosed immaterial instances of
noncompliance with the requirements referred to above, which are described in
the accompanying Schedule of Findings and Questioned Costs. We considered these
instances of noncompliance in forming our opinion on compliance, which is
expressed in the following paragraph.
In our opinion, FAI, Ltd. complied, in all material respects, with the
specific program requirements that are applicable to its major HUD-assisted
programs for the year ended December 31, 1995.
29
<PAGE>
This report is intended for the information of the audit committee,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
/s/ Timothy F. Kercheval CPA
Atlanta, Georgia
February 21, 1996
30
<PAGE>
Timothy F. Kercheval
Certified Public Accountant
Suite 388
5446 Peachtree Industrial Blvd. (770) 457-6125
Chamblee, GA 30341 Fax (770) 457-6401
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE
WITH SPECIFIC REQUIREMENTS APPLICABLE TO
AFFIRMATIVE FAIR HOUSING
To the Partners
FAI, Ltd.
We have audited the financial statements of FAI, Ltd. as of and for the year
ended December 31, 1995, and have issued our report thereon dated February 21,
1996. We have also audited FAI, Ltd.'s compliance with requirements applicable
to major HUD-assisted programs and have issued our report thereon dated February
21, 1996.
We have applied procedures to test FAI, Ltd.'s compliance with the Affirmative
Fair Housing requirements applicable to its HUD-assisted programs for the year
ended December 31, 1995.
Our procedures were limited to the applicable procedures described in the
"Consolidated Audit Guide for Audits of HUD Programs" (the Guide), issued by the
U.S. Department of Housing and Urban Development, Office of Inspector General in
July 1993. Our procedures were substantially less in scope than an audit, the
objective of which is the expression of an opinion on FAI, Ltd.'s compliance
with the Affirmative Fair Housing requirements. Accordingly, we do not express
such an opinion.
The results of our tests disclosed no instances of noncompliance that are
required to be reported herein under the Guide.
However, the results of our tests disclosed certain immaterial instances of
noncompliance that are described in the accompanying Schedule of Findings and
Questioned Costs.
This report is intended for the information of the audit committee,
management, and the Department of Housing and Urban Development. However, this
report is a matter of public record and its distribution is not limited.
/s/ Timothy F. Kercheval CPA
Atlanta, Georgia
February 21, 1996
31
<PAGE>
Timothy F. Kercheval
Certified Public Accountant
Suite 388
5446 Peachtree Industrial Blvd. (770) 457-6125
Chamblee, GA 30341 Fax (770) 457-6401
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE
WITH LAWS AND REGULATIONS APPLICABLE
TO THE FINANCIAL STATEMENTS
To the Partners
FAI, Ltd.
We have audited the financial statements of FAI, Ltd. as of and for the year
ended December 31, 1995, and have issued our report thereon dated February 21,
1996.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Comptroller General
of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement.
Compliance with laws, regulations, contracts, and grants applicable to FAI,
Ltd. is the responsibility of FAI, Ltd.'s management. As part of obtaining
reasonable assurance about whether the financial statements are free of material
misstatement, we performed tests of FAI, Ltd.'s compliance with certain
provisions of laws, regulations, contracts, and grants. However, the objective
of our audit of the financial statements was not to provide an opinion on
overall compliance with such provisions. Accordingly, we do not express such an
opinion.
The results of our tests disclosed no instances of noncompliance that are
required to be reported herein under Government Auditing Standards.
However, the results of our tests disclosed certain immaterial instances of
noncompliance that are described in the accompanying Schedule of Findings and
Questioned Costs.
This report is intended for the information of the audit committee, management,
and the Department of Housing and Urban Development. However, this report is a
matter of public record and its distribution is not limited.
/s/ Timothy F. Kercheval CPA
Atlanta, Georgia
February 21, 1996
32
<PAGE>
FAI, Ltd.
Weatherly Walk Apartments
HUD Project No.: 061-36634
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
December 31, 1995
Finding No. 1
- - - -------------
The project operating account experienced overdrafts throughout the year.
Recommendation
--------------
Management should not draft cash disbursement without sufficient funds in
the bank account.
33
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
FINANCIAL STATEMENTS
DECEMBER 31, 1994
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS0
PROJECT NO. 061-36634
TABLE OF CONTENTS
-----------------
PAGE
----
Independent auditors' report 1
Financial statements:
Balance sheet 2 - 3
Statement of profit and loss 4 - 5
Statement of changes in partners' deficit 6
Statement of cash flows 7 - 8
Notes to financial statements 9 - 11
Supporting information as required by HUD:
Supporting information 12 - 17
Independent auditors' report on internal control structure 18 - 20
Independent auditors' report on compliance with
specific requirements applicable to major HUD programs 21
Schedule of findings and questioned costs 22
Independent auditors' report on compliance with specific
requirements applicable to affirmative fair housing 23
Auditors' comments on audit resolution matters relating to
HUD programs 24
Management agent certification 25
Mortgagor's certification 26
Corrective action plan 27 - 28
<PAGE>
[ Letterhead of HABIF, AROGETI & WYNNE, P.C. ]
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT
To the Partners
FAI, Ltd.
We have audited the accompanying balance aheet of FAI, LTD., WEATHERLY
WALK APARTMENTS, HUD Project No. 061-36634, as of December 31, 1994, and
the related statements of profit and loss, changes in partners' deficit,
and cash flows for the year then ended. These financial statements are
the responsibility of the Project's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards and Government Auditing Standards, issued by the Controller
General of the United States. Those standards require that we plan and
perform the audit to obtain resonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above preaent
fairly, in all material respects, the financial position of FAI, LTD. as
of December 31, 1994, and results of its operations, its changes in
partners' deficit, and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note G to
the financial statements, the Company has suffered recurring losses from
operations and has a net capital deficiency that raises substantial
doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note G. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
Our audit was made for the purpose of forming an opinion on the
financial statements taken as a whole. The supporting information
included in the report [shown on pages 12 through 17] is presented for
the purpose of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the financial statements
and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
Atlanta, Georgia
/s/ HABIF, AROGETI & WYNNE, P.C.
February 24, 1995
MEMBERS
GEORGIA SOCIETY OF AMERICAN INSTITUTE OF AICPA DIVISION FOR CPA FIRMS
1
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
BALANCE SHEET
DECEMBER 31, 1994
ASSETS
Current assets
- - - --------------
1130 Tenant accounts receivable $ 1,496
1250 Prepaid mortgage insurance 52,303
-----------
Total current assets 53,799
-----------
Deposits held in truat - funded
- - - -------------------------------
1191 Tenant security deposits - held in trust 38,881
-----------
Restricted deposits and funded reserves
- - - ---------------------------------------
1310 Mortgage escrow deposits 30,354
1320 Reserve for replacement 69,990
1322 Operating deficit escrow 491
-----------
100,835
-----------
Property and equipment, at cost
- - - ----------------------
1410 Land 810,000
1420 Buildings and improvements 6,979,107
1450 Office furniture 14,750
1460 Fixtures 348,089
-----------
8,151,946
4120 Less accumulated depreciation [1,168,339]
-----------
6,983,607
-----------
Other assets
- - - ------------
1900 Loan costs, net of accumulated
amortization of $26,942 183,870
-----------
$ 7,360,992
===========
See auditors' report and accompanying notes
2
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
BALANCE SHEET [CONTINUED]
DECEMBER 31, 1994
LIABILITIES AND PARTNERS' DEFICIT
---------------------------------
Current liabilities
- - - -------------------
1120 Cash overdraft $ 58,845
2110 Accounts payable 45,581
2120 Accrued salaries 5,069
2130 Accrued mortgage interest 57,943
2230 Payable to affiliates 101,271
2320 Current portion of mortgage payable 33,069
---------
Total current liabilities 301,778
---------
Deposits and prepayment liabilities
- - - -----------------------------------
2191 Tenant security deposits-held in trust [contra] 38,590
---------
Long-term liabilities
- - - ---------------------
2311 Note payable - surplus cash 895,200
2320 Mortgage payable, net of current portion 7,589,569
---------
8,484,769
---------
Partners' deficit
- - - -----------------
3130 Partners' deficit [1,464,145]
---------
$7,360,992
=========
See auditors' report and accompanying notes
3
<PAGE>
Statement Of U.S. Department of Housing
Profit and Loss and Urban Development
Office of Housing
Federal Housing Commissioner
OMB Approval No.2502-0052(Exp.8/31/92)
- - - --------------------------------------------------------------------------------
Public Reporting Burden for this collection of Information is estimated to
average 1.0 hours per response, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments regarding
this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Reports Management
Officer, Office of Information Policies and Systems , U.S. Department of Housing
and Urban Development, Washington D.C. 20410-3600 and to the Office of
Management and Budget, Paperwork Reduction Project (2502-0052), Washington, D.C.
20503. Do not send this completed form to either of these addresses.
- - - -------------------------------------------------------------------------------
For Month/Period Project Number: Project Name:
Beginning: Ending:
January1,1994 December31,1994 061-36634 FAI, Ltd., Weatherly
Walk Apartments
- - - --------------------------------------------------------------------------------
Part I Description of Account Acct. No. Amount*
- - - --------------------------------------------------------------------------------
Rental Income - 5100
Apartments or Member Carrying Charges (Coops) 5120 $ 1,387,040
Tenant Assistance Payments 5121 $ O
Furniture and Equipment 5130 $ O
Stores and Commercial 5140 $ O
Garage and Parking Spaces 5170 $ O
Flexible Subsidy Income 5180 $ O
Miscellaneous (specify) 5190 $ O
- - - --------------------------------------------------------------------------------
Total Rent Revenue Potential at 100% Occupancy $ 1,387,040
- - - --------------------------------------------------------------------------------
Vacancies - 6200
Apartments 5220 ( 71,950)
Furniture and Equipment 5230 ( O)
Stores and Commercial 5240 ( O)
Garage and Parking Spaces 5270 ( O)
Miscellaneous (specify) 5290 ( O)
Total Vacancies ( 71,95O)
- - - --------------------------------------------------------------------------------
Net Rental Revenue Rent Revenue Less Vacancies $ 1,315,090
- - - --------------------------------------------------------------------------------
Elderly and Congregate Service income - 5300
Total Service Income (Schedule attached) 5300 $ O
- - - --------------------------------------------------------------------------------
Financial Revenue - 5400
Interest Income- Project Operations 5410 $ 12
Income from Investments-Residual Receipts 5430 $ O
Income from Investments-Reserve for
Replacement 5440 $ 1,532
Income from Investments -Miscellaneous 5490 $ O
Total Financial Revenue $ 1,544
- - - --------------------------------------------------------------------------------
Other Revenue - 5800
Laundry and Vending 5910 $ 4,890
NSF and Late charges 5920 $ 5,315
Damages and Cleaning Fees 5930 $ 1,493
Forfeited Tenant Security Deposits 5940 $ 6,883
Other Revenue (specify) 5990 $ 24,427
Total Other Revenue $ 43,008
- - - --------------------------------------------------------------------------------
Total Revenue $ 1,359,642
- - - --------------------------------------------------------------------------------
Administrative Expenses - 6200/6300
Advertising 6210 $ 20,121
Other Administrative Expenses 6250 $ 11,538
Office Salaries 6310 $ 40,211
Office Supplies 6311 $ 20,254
Office or Model Apartment Rent 6312 $ 7,210
Management 6320 $ 67,353
Manager or Superintendent Salaries 6330 $ 22,013
Manager or Superintendent Rent Free Unit 6331 $ O
Legal Expenses (Project) 6340 $ 613
Auditing Expenses (Project) 6350 $ 8,340
Bookeeping Fees 6351 $ 4,656
Telephone and Answering Service 6360 $ 7,379
Bad Debts 6370 $ 1,604
Miscellaneous Administrative Expenses(specify) 6390 $ 11,361
- - - --------------------------------------------------------------------------------
Total Administrative Expenses $ 222,653
- - - --------------------------------------------------------------------------------
Utilities Expense - 6400
Fuel Oil/Coa1 6420 $ O
Electricity(Light and Misc. Power) 6450 $ 56,454
Water 6451 $ 10,150
Gas 6452 $ 5,293
Sewer 6453 $ O
- - - --------------------------------------------------------------------------------
Total Utilities Expense $ 71,897
- - - --------------------------------------------------------------------------------
*All amounts must be rounded See auditors' report form HUD-92410(7-91)
to the nearest dollar; and accompanying notes ref handbook 4370.2
$.50 and over, round up-
$.49 and below, round down.
4
<PAGE>
Operating and Maintenance Expenses - 6500
Janitor and Cleaning Payroll 6510 $ 0
Janitor and Cleaning Supplies 6515 $ 582
Janitor and Cleaning Contract 6517 $ O
Exterminating Payroll/Contract 6519 $ 3,901
Exterminating Supplies 6520 $ O
Garbage and Trash Removal 6525 $ 9,588
Security Payroll/Contract 6530 $ O
Grounds Payroll 6535 $ 43,179
Grounds Supplies 6536 $ O
Grounds Contract 6537 $ 35,200
Repairs Payroll 6540 $ O
Repairs Material 6541 $ 34,107
Repair Contract 6542 $ O
Elevator Maintenace Contract 6545 $ O
Heating/Cooling Repairs and Maintenance 6546 $ 1,236
Swimming Pool Maintenance Contract 6547 $ 1,944
Snow Removal 6548 $ O
Decorating Payroll/Contract 656O $ 0
Decorating Supplies 6661 $ 50,336
Other 6570 $ 2,894
Miscellaneous Operating & Maintenance
Expense 6590 $ O
- - - --------------------------------------------------------------------------------
Total Operating & Maintenance Expenses $ 182,967
- - - --------------------------------------------------------------------------------
Taxes and Insurance - 6700
Real Estate Taxes 6710 $ 81,398
Payroll Taxes (FICA) 6711 $ 8,662
Miscellaneous Taxes, Licenses and Permits 6719 $ O
Property and Liability Insurance (Hazard) 6720 $ 9,860
Fidelity Bond Insurance 6721 $ O
Workmen's Compensation 6722 $ 2,820
Health Insurance & Other Employee Benefits 6723 $ 11,384
Other Insurance (specify) 6729 $ O
Total Taxes and Insurance $ 114,124
- - - --------------------------------------------------------------------------------
Financial Expenses - 8800
Interest on Bonds Payable 6810 $ O
Interest on Mortgage Payable 6820 $ 683,449
Interest on Notes Payable(Long Term) 6830 $ O
Interest on Notes Payable(Short-Term) 6840 $ O
Mortgage Insurance Premium/Service Charge 6850 $ 62,050
Miscellaneous Financial Express 6890 $ O
Total Financial Expenses $ 745,499
- - - --------------------------------------------------------------------------------
Elderly and Congregate Service Expenses - 6900
Total Service Expenses Schedule Attached 6900 $ O
Total Cost of Operations Before Depreciation $1,337,140
Profit(Loss) Before Depreciation $ 22,502
Depreciation (Total) - 6600 (specify) 6600 $ 215,841
Operating Profit or (Loss) $ (193 339)
Corporate or Mortgagor Entity Expenses - 7100
Officer Salaries 7110 $ O
Legal Expenses (Entity) 7120 $ O
Taxes (Federal-State-Entity) 7130-32 $ O
Other Expenses (Entity) 7190 $ O
Total Corporate Expenses $ O
Net Profit or (Loss) $ (193,339)
- - - --------------------------------------------------------------------------------
Warning: HUD will prosecute false claims and statements. Conviction may result
in criminal and/or civil penalties.
Miscellaneous or other Income and Expense Sub-account Groups. If mis-
cellaneous or other income and/or expense sub-accounts (5190, 5290, 5490, 5990,
6390, 6590, 6729, 6890 and 7190) exceed the Account Groupings by 10% or more,
attach a separate schedule describing or explaining the miscellaneous income or
expense.
- - - --------------------------------------------------------------------------------
Part I
- - - --------------------------------------------------------------------------------
1. Total principal payments required under the mortgage,
even if payments under a Workout Agreement are less
or more than those required under the mortgage. $ 30,285
2. Replacement Reserve deposits required by the Regulatory
Agreement or Amendments thereto, even if payments may
be temporarily suspended or waived. $ 25,533
3. Replacement or Painting Reserve releases which are
included as expense items on this Profit and Loss
Statement. $ 21,037
4. Project Improvement Reserve Releases under the Flexi-
bility Subsidy Program that are included as expense
items on this Profit and Loss Statement. $ 0
- - - --------------------------------------------------------------------------------
See auditors' report and accompanying notes form HUD-92410
5
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1994
Balance, January 1, 1994 $[1,270,806]
Net 1oss [ 193,339]
---------
Balance, December 31, 1994 $[l,464,145]
=========
See auditors' report and accompanying notes
6
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
Cash flows from operating activities
- - - ------------------------------------
Revenues:
- - - --------
Rental receipts $ 1,304,052
Interest receipts 1,544
Other receipts 43,008
-----------
1,348,604
-----------
Expenses:
- - - --------
Administrative 93,076
Management fees 67,133
Utilities 72,587
Salaries and wages 117,187
Operating and maintenance 139,788
Property taxes, insurance,
and escrow deposits 88,020
Miscellaneous taxes and insurance 16,338
Interest on mortgage 683,679
Insurance on mortgage 57,058
-----------
1,334,866
-----------
Net cash provided by operating activities 13,738
-----------
Cash flows from investing activities
- - - ------------------------------------
Deposits into reserve for replacement [ 27,065]
Releases from reserve for replacement 21,037
Deposit into operating deficit escrow [ 11]
-----------
Net cash used by investing activities [ 6,039]
-----------
Cash flows from financing activities
- - - ------------------------------------
Mortgage principal payable [ 30,285]
Received from affiliates 20,088
-----------
Net cash used by financing activities [ 10,197]
-----------
Net decrease in cash [ 2,498]
Cash, [overdraft], beginning of year [ 56,347]
-----------
Cash [overdraft], end of year $[ 58,845]
===========
See auditors' report and accompanying notes
7
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
STATEMENT OF CASH FLOWS [CONTINUED]
FOR THE YEAR ENDED DECEMBER 31, 1994
Increase [Decrease] In Cash
Cash flows from operating activities
- - - ------------------------------------
Net loss $[193,339]
---------
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 215,841
Increase in tenant accounts receivable [ 183]
Decrease in prepaid mortgage insurance 4,992
Decrease in tenant security deposits -
held in trust 3,244
Increase in mortgage escrow deposits [ 6,754]
Increase in accounts payable 690
Decrease in accrued salaries [ 3,122]
Decrease in accrued mortgage interest [ 230]
Decrease in tenant security deposits -
held in trust [contra] [ 5]
Decrease in deferred rent [ 7,396]
-------
Total adjustments 207,077
-------
Net cash provided by operating activities $ 13,738
=======
See auditors' report and accompanying notes
8
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCCOUNTING POLICIES:
------------------------------------------------------------
FAI, LTD., a Georgia Limited Partnership, was formed in July of 1988. The
general and limited partners have ownership interests of 1% and 99%, respec-
tively. The partnership was formed for the purpose of constructing and
operating a rental housing project under Section 207 of the National Housing
Act. Construction was completed in April of 1989, and the construction costs
were certified through August 29, 1989. The project consists of 194 units
located in Fayetteville, Georgia, and is currently operating under the name
of Weatherly Walk Apartments. The project is regulated by the United States
Department of Housing and Urban Development ["HUD"].
The following significant accounting policies have been followed in the
preparation of the financial statements:
a. Property and Equipment:
----------------------
Property and equipment is carried at cost. Expenditures for maintenance
and repairs are expensed currently, while renewals and betterments that
materially extend the life of an asset are capitalized. The cost of
assets sold, retired, or otherwise disposed of, and the related allowance
for depreciation, are eliminated from the accounts, and any resulting gain
or loss is included in operations.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which are as follows:
Buildings and improvements 40 years
Office furniture 12 years
Fixtures 10 years
b. Income Taxes:
------------
No provision has been made for income taxes because each partner's
proportionate share of the partnership income or loss is passed through to
be included on the separate tax return of the partner.
c. Capitalization:
--------------
Construction period interest and taxes have been capitalized and are being
amortizd over the buildings' useful life of 40 years. The construction
period interest and taxes being amortized are $619,110.
d. Loan Costs:
----------
Loan costs are being amortized on a straight-line basis over 40 years,
the life of the loan.
9
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DBCEMBER 31, 1994
B. OPERATING ESCROW:
-----------------
In accordance with the provisions of the equity loan agreement, restricted
cash is held by Related Mortgage Company to be used to fund operating
deficiencies.
Balance, January 1, 1994 $480
Interest earned ll
Service charge returned -0-
---
Balance, December 31, 1994 $491
===
C. MORTGAGE PAYABLE:
-----------------
The mortgage payable in the original amount of $7,751,900 is insured by the
Department of Housing and Urban Development and collateralized by a deed of
trust on the rental property. The mortgage is payable to Related Mortgage
Company, and bears interest at the rate of 8.95% per annum. Principal and
interest are payable by the Partnership in monthly installments of $59,497
for a term of 480 months ending November of 2029.
Under agreements with HUD, the Partnership is required to make monthly escrow
deposits for insurance and replacement of project assets, and is subject to
restrictions as to operating policies, rental charges, operating expenditures
and distributions.
The liability of the Partnership under the mortgage is limited to the
underlying value of the real estate collateral plus other amounts deposited
with the lender.
The maturity of the mortgage payable is as follows:
December 31,
------------
1995 $ 33,069
1996 36,153
1997 39,525
1998 43,211
1999 47,241
2000 and thereafter 7,423,439
---------
7,622,638
Less current portion 33,069
---------
$7,589,569
==========
10
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
NOTES TO FINANCIAL STATEMENTS [CONTINUED]
DECEMBER 31, 1994
D. NOTE PAYABLE:
-------------
The note payable in the original amount of $895,200 was obtained from Eagle
Insured, L.P. The proceeds are designated for fees associated with financing,
working capital deficiencies, and operating deficiencies. The note is non-
interest bearing, but Eagle Insured, L.P. will receive 50% of future surplus
cash flows from operations. The note is secured by the partners' interest in
the partnership.
E. RELATED PARTY TRANSACTIONS:
---------------------------
Dominion Management, Inc. represents the Partnership as the management agent
for the apartment project. Management fees ca1culated at 5% of gross
receipts have been paid from operations to Dominion Management, Inc. Of
these, $61,678 was paid and $5,675 was accrued. E11iott Lewis and David
Berkman, limited partners in FAI, Ltd., are major stockholders of Dominion
Management, Inc.
The Partnership owed $78,888 to HRA, Ltd., $2,200 to Dominion Holdings, Inc.,
$5,400 to BRA, Ltd., $2,000 to Dominion Management, Inc., and $12,783 to Arc
Way, Ltd. at year end. The aforementioned partnerships and corporations
share common owners.
F. RENTALS UNDER OPERATING LEASES:
-------------------------------
The rental lease periods for Weatherly Walk Apartments range from six months
to one year. At December 31, 1994, monthly rent potential from the 194 units
was approximately $115,510. The units were approximately 99% leased at
December 31, 1994.
G. GOING CONCERN:
--------------
The Company has experienced recurring operating losses, working capital
deficiencies, and negative cash flows which raises significant doubt about
its ability to continue as a going concern. Management plans to obtain
additional capital as needed and to reduce or delay expenditures.
Significant doubt, however, remains about the partnership's ability to
continue as a going concern for a reasonable period of time.
11
<PAGE>
SUPPORTING INFORMATION
12
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT N0. 061-36634
SUPPORTING INFORMATION
DECEMBER 31, 1994
[a] Schedule of Funds in Financial Institutions:
- - - ------------------------------------------------
Funds Held by Mortgagor:
a. Petty cash $ 200
b. Wachovia Bank,
Regular Operating Account:
Account No. 17537029 [ 59,045]
---------
[ 58,845]
Funds Held by Mortgagor in Trust:
a. Wachovia Bank,
Tenant Security Deposit Account:
Account No. 12403428 38,881
---------
Total Funds Held by Mortgagor $[ 19,964]
=========
Funds Held by Mortgagee:
a. Tax and Insurance Bscrow, Chemical Bank $ 30,354
b. Reserve Fund for Replacements, Chemical Bank 69,990
c. Operating Deficit Escrow, Chemical Bank 491
-------
Total Funds Held by Mortgagee $ 100,835
=======
The cash balances were confirmed at December 31, 1994, with the exception of
petty cash.
[b] Accounts Receivable - Current [From Regular Tenants]:
-----------------------------------------------------
Delinquent Number of Past Due
Period Tenants Amount
---------- --------- --------
0 - 30 days 4 $ 686
30 - 60 days 6 810
--------
$ 1,496
========
[c] Mortgage Escrow Deposits:
-------------------------
The estimated amounts required as of December 31, 1994, for future
payment of property taxes, mortgage insurance premiums and hazard insurance
premiums are as follows:
Property taxes $ 6,783
Hazard insurance 9,860
Mortgage insurance 4,755
-------
21,398
Balance, December 31, 1994 Confirmed by Mortgagee 30,354
-------
Amount on Deposit in Excess of Estimated Requirements $ 8,956
=======
13
<PAGE>
FAI, LTD
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
SUPPORTING INFORMATION REQUIRED BY HUD [CONTINUED]
DECEMBER 31, 1994
[d] Reserve for Replacement:
-----------------------
In accordance with the provisions of the regulatory agreement, restricted
cash is held by Related Mortgage Company to be used for future replacement
of project assets:
Balance, January 1, 1994 $ 63,962
Monthly deposits [$2,127.75 x 12] 25,533
Interest earned 1,532
Disbursements [21,037]
--------
Balance, December 31, 1994 Confirmed by mortgagee $ 69,990
========
The following information pertains to Reserve for Replacement reimbursement
requests that were authorised:
Amount of Account Fiscal Year
Puroose of Request Request Charged Affected
------------------ ------- ------- --------
Chimney cap repair $ 2,500 6541 December 31, 1994
Roof repair 2,700 6541 December 31, 1994
Painting 1,000 6541 December 31, 1994
Plumbing 2,000 6541 December 31, 1994
Carpet/vinyl flooring 12,837 6561 December 31, 1994
------
Total reimbursements $21,037
=======
[e] Tenant Security Deposits - Held in Trust:
-----------------------------------------
Tenant security doposits are held in a separate bank account in the name of
the Project.
[f] Accounts Payable [other than trade creditors]:
----------------------------------------------
NONE
[g] Accrued Taxes:
--------------
NONE
[h] Deferred Rent:
--------------
NONE
[i] Compensation of Partners:
-------------------------
No compensation was paid to the partners of FAI, Ltd. for the year ended
December 31, 1994.
14
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
SOPPORTING INFORMATION REQUIRED BY HUD [CONTINUED]
DECEMBER 31, 1994
[j] Licensing Requirements:
-----------------------
HABIF, AROGETI & WYNNE, P.C., Certified Public Accountants and/or individual
stockholders meet all licensing requirements of the Georgia State Board of
Accountancy.
Lead Auditor: Timothy F. Kercheval, Stockholder
Address: Habif, Arogeti & Wynne, P.C.
1073 W. Peachtree Street
Atlanta, Georgia 30309
Phone # (404) 892-9651
FEI # 58-1237286
[k] Activity on Underlying HUD Mortgage:
------------------------------------
Principal balance, January 1, 1994 $7,652,923
Principal paid during the year 30,285
----------
Principal balance, December 31, 1994 $7,622.638
==========
Interest paid during the year $ 683,449
==========
[l] Management Fees:
----------------
Management fees are computed at 5% of the revenues collected each month.
Any portion of the management fees not paid during the year is included in
the accrued management fees as of December 31, 1994. The management fees
are computed as follows:
Revenues per statement of cash flows $ 1,348,604
Changes in other items affecting cash basis revenues:
Interest income [ 1,544]
---------
Income used for calculation of management fee 1,347,060
Management fee percentage 5%
---------
Actual management fees [to HUD Form 92410; Line 6320] 67,353
Increase in accrued management fees
[included in accounts payable] 220
---------
Management fee paid [to statement of cash flows] $ 67,133
=========
The management fee taken by the management company may be reconciled
from the accrual basis fee to the cash actually disbursed for
management fees as follows:
Actual management fee [To HUD Form 92410; Line 6320] $ 67,353
Decresse in accrued management fees
[included in accounts payable] 552
---------
Total management fees paid [to statement
of cash flows] $ 66,801
=========
15
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
SUPPORTING INFORMATION REQUIRED BY HUD [CONTINUED]
DECEMBER 31, 1994
.
[m] Identity-of-Interest Transactions:
----------------------------------
Fees Paid to
Related Party Relationship Related Party
------------- ------------ -------------
Dominion Management, Inc. Major stockholders are
also partners in FAI,
Ltd. $67,353
=======
Payables to
Related Parties
---------------
Arc Way, Ltd. Similar ownership $ 12,783
HRA, Ltd. Similar ownership 78,888
BRA, Ltd. Similar ownership 5,400
Dominion Holdings, Inc. Major atockholders are
also partners in FAI, Ltd. 2,200
Dominion Management, Inc. Major atockholders are
also partners in FAI,Ltd. 2,000
-----
$101,271
========
[n] Unauthorized Distributions to Partners:
---------------------------------------
NONE
[o] Other Revenue and Miscellaneous Administrative Expenses:
--------------------------------------------------------
Other revenue consists of the following:
Rent increase/decrease $[ 5,644]
Refund of fees [ 185]
Application fee 8,713
Less cancellation fee 9,827
Month to month surcharge 8,216
Pet fees 3,500
--------
Total other revenue [To HUD Form 92410; line 5990] $ 24,427
========
Miscellaneous administrative expenses consist of the following:
Background checks $ 37
Uniforms 2,219
Employee welfare 3,638
Education expenses 5,097
Travel and entertainment 370
--------
Total Miscellaneous Administrative Expenses
[To HUD Form 92410; line 6390] $ 11,361
========
16
<PAGE>
<TABLE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
SUPPORTING INFORMATION REQUIRED BY HUD [CONTINUED]
DEPRECIATION SCHEDULE
DECEMBER 31, 1994
<CAPTION>
[p] Changes in Property and Equipment:
----------------------------------
For The Year Ended December 31, 1994:
-------------------------------------
ASSETS ACCUMULATED DEPRECIATION
--------------------------------------------- ------------------------------------------
Net Book
Balance, Balance, Balance, Balance, Value,
January December January Current December December
1, 1994 Additions Deductions 31, 1994 1, 1994 Provisions Deductions 31, 1994 31, 1994
------- --------- ---------- -------- ------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Land $ 810,000 $-0- $-0- $ 810,000 $ -0- $ -0- $ -O- $ -0- $ 810,000
Buildings and
improvements 6,979,107 -0- -0- 6,979,107 797,783 174,481 -0 972,264 6,006,843
Office furniture 14,750 -0- -0- 14,750 6,299 1,229 -0- 7,528 7,222
Fixtures 348,089 -0- -0- 348,089 153,740 34,807 -0- 188,547 159,542
------- ---- ---- ------- ------- ------ - ------- -------
TOTALS $8,151,946 $-0- $-0- $8,151,946 $957,822 $210,517 $ -0- $1,168,339 $6,983,607
========== ==== ==== ========== ======== ======== ===== ========== ==========
Depreciation deduction $210,517
Amortization deduction 5,324
-----
Total to HUD form 92410; Line 6600 $215,841
========
</TABLE>
17
<PAGE>
U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
HOUSING-FEDERAL HOUSING COMMISSIONER
OFFICE OF MULTIFAMILY HOUSING MANAGEMENT AND OCCUPANCY
COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS AND RESIDUAL RECEIPTS
PROJECT NAME FISCAL PERIOD ENDED PROJECT NUMBER
FAI, Ltd., Weatherly Walk December31, 1994 061-36634
PART A-COMPUTE SURPLUS CASH
1. Cash (Accounts 1110,1120, 1191, 1192) $ (19,964)
2. Tenant Subsidy Vouchers due for Fiscal Period $ 0
3. Other (describe) $ 0
(a) Total Cash (Add lines 1,2 and 3) $ (19,964)
4. Accrued Mortgage Interest Payable $ 57.943
5. Delinquent Mortgage Principal Payments $ 0
6. Delinquent Deposits to Reserve for Replacements $ 0
7. Accounts Payable (due within 30 days) $ 21,106
8. Loans and Notes Payable (due within 30 days) $ 0
9. Deficient Tax Insurance or MIP Escrow Deposits $ 0
10. Accrued Expenses (not escrowed) $ 5,069
11. Prepaid Rents (account 2210) $ 0
12. Tenant Security Deposits Liability (Account 2191) $ 38,590
13. Other(describe) $ 0
(b) less Total Current Obigations (add lines 4 through 13) $ 122,708
(c) Surplus Cash (Deficiency) (line (a) minus line (b)) $(142,672)
- - - --------------------------------------------------------------------------------
PART B COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS
- - - --------------------------------------------------------------------------------
1. Surplus Cash $ NONE
2a. Annual Distribution Earned During Fiscal Period Covered
by the Statement. $ 0
2b. Distribution Accrued and Unpaid as of the End of the
Prior Fiscal Period. $ 0
2c. Distributions Paid During Fiscal Period Covered by
Statement $ 0
3. Amount to be Carried on Balance Sheet as Distribution
Earned but Unpaid. $ 0
4. Amount Availabie for Distribution During Next Fiscal Period $ NONE
5. Deposit Due Residual Receipts (Must be deposited with Mortgagee
within 60 days ) $ NONE
PREPARED BY REVIEWED BY
LOAN TECHNICIAN LOAN SERVICER
DATE DATE
HUD-93486(12-80)
18
<PAGE>
[ Letterhead of HABIF, AROGETI & WYNNE, P.C. ]
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL STRUCTURE
----------------------------------------------------------
To the Partners
FAI, Ltd.
We have audited the financial statements of FAI, LTD., WEATHERLY WALK
APARTMENTS, HUD Project No. 061-36634, as of and for the year ended December 31,
1994, and have issued our report thereon dated February 24, 1995. We have also
audited FAI, LTD.'s compliance with requirements applicable to major
HUD-assisted programs and have issued our reports thereon dated February 24,
1995.
We conducted our audits in accordance with generally accepted auditing
atandards, Government Auditing Standards issued by the Comptroller General of
the United States, and the Consolidated Audit Guide for Audits of HUD Programs
(the "Guide") issued by the U.S. Department of Housing and Urban Development,
Office of the Inspector General in July 1993. Those standards and the Guide
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement and about
whether FAI, LTD. complied with laws and regulations, noncompliance with which
would be material to a major HUD-assisted program.
In planning and performing our audits for the year ended December 31, 1994, we
considered FAI, LTD.'s internal control structure in order to determine our
auditing procedures for the purpose of expressing our opinions on FAI, LTD.'s
basic financial statements and on its compliance with specific requirements
applicable to its major HUD-assisted programs and to report on the internal
control structure in accordance with the Guide.
The management of FAI, LTD. is responsible for establishing and maintaining an
internal control structure. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected benifits and related
costs of internal control structure policies and procedures. The objectives of
an internal control structure are to provide management with reasonable, but not
absolute, assurance that assets are safeguarded against loss from unauthorized
use or disposition and that transactions are executed in accordance with manage-
ment authorization and recorded properly to permit the preparation of financial
statements in accordance with generally accepted accounting principles and that
HUD-assisted programs are managed in compliance with applicable laws and regula-
tions. Because of inherent limitations in any internal control structure,
errors, irregularities, or instances of noncompliance may nevertheless occur and
not be detected. Also, projection of any evaluation of the structure to future
periods is subject to the risk that procedures may become inadequate because of
changes in conditions or that the effectiveness of the design and operation of
policies and procedures may deteriorate.
MEMBERS
GEORGIA SOCIETY OF AMERICAN INSTITUTE OF AICPA DIVISION FOR CPA FIRMS
19
<PAGE>
INDEPENDENT AUDITORS' REPORT ON
-------------------------------
INTERNAL CONTROL STRUCTURE (CONTINUED)
--------------------------------------
For the purpose of this report, we have classified the significant internal
control structure policies and procedures in the following categories.
Accounting applications
-----------------------
Cash receipts/Revenue
Purchases/Cash disbursements
Payroll
Specific compliance requirements
--------------------------------
Affirmative fair housing
Mortgage status
Replacement reserve
Security deposits
Cash receipts
Cash disbursements
Tenant application, eligibility, and recertification
Management functions
Federal financial reports
For all of the internal control structure categories listed above, we obtained
an understanding of the design of relevant policies and procedures and
determined whether they have been placed in operation, and we assessed control
risk.
We performed tests of controls, as required by the Guide, to evaluate the
effectiveness of the design and operation of interna1 control structure policies
and procedures that we considered relevant to preventing or detecting material
noncompliance with specific and common requirements applicable to FAI, LTD.'s
major HUD-assisted programs. Our procedures were less in scope than would be
necessary to render an opinion on internal control structure policy and
procedures. Accordingly, we do not express such an opinion.
20
<PAGE>
INDEPENDENT AUDITORS' REPORT ON
-------------------------------
INTERNAL CONTROL STRUCTURE (CONTINUED)
--------------------------------------
We noted no matters involving the internal control structure and its operation
that we consider to be reportable conditions under standards established by the
American Institute of Certified Public Accountants. Reportable conditions
involve matters coming to our attention relating to significant deficiencies in
the design or operation of the internal control structure that, in our judgment,
could adversely affect the organization's ability to record, process, summarize,
and report financial data consistent with the aasertions of FAI, LTD. in the
financial statements or to administer HUD-assisted programs in accordance with
applicable laws and regulations.
A material weakness is a reportable condition in which the design or operation
of one or more of the internal control structure elements doea not reduce to a
relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited or that
noncompliance with laws and regulations that would be material to a HUD-assisted
program may occur and not be detected within a timely period by employees in the
normal course of performing their assigned functions.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control atructure that might be reportable
conditions and, accordingly, would not necessarily disclose all reportable
conditions that are also considered to be material weaknesses as defined above.
This report is intended for the information of the audit committee, management,
and the Department of Housing and Urban Development. However, this report is a
matter of public record and its distribution is not limited.
Atlanta, Georgia
/s/ HABIF, AROGETI & WYNNE, P.C.
February 24, 1995
21
<PAGE>
[ Letterhead of HABIF, AROGETI & WYNNE, P.C. ]
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC
--------------------------------------------------------
REQUIREMENTS APPLICABLE SO AFFIRMATIVE FAIR HOUSING
---------------------------------------------------
To the Partners
FAI, Ltd.
We have audited the financial statements of FAI, LTD., WEATHERLY WALK
APARTMENTS, HUD Project No. 061-36634, as of and for the year ended December 31,
1994, and have issued our report thereon dated February 24, 1995. In addition,
we have audited FAI, LTD.'s compliance with the apecific program requirements
governing
Mortgage status
Replacement reserve
Security deposits
Cash receipts
Cash disbursements
Tenant application, eligibility, and recertification
Management functions
Federal financial reports
that are applicable to each of its major HUD-assisted programs, for the year
ended December 31, 1994. The management of FAI, LTD. is responsible for
compliance with those requirements. Our responsibility is to express an opinion
on compliance with those requirements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards,
Government Auditing Standards issued by the Controller General of the United
States, and the July 1993 Consolidated Audit Guide for Audits of HUD Programs
(the "Guide") issued by the U.S. Department of Housing and Urban Development,
Office of Inspector General. Those standards and the Guide require that we plan
and perform the audit to obtain reasonable assurance about whether material
noncompliance with the requirements referred to above occurred. An audit
includes examining, on a teat basis, evidence about FAI, LTD.'s compliance with
those requirements. We believe that our audit provides a reasonable basis for
our opinion.
The results of our audit procedures disclosed instances of noncompliance with
the requirements referred to above, which are described in the acccompanying
schedule of findings and questioned costs. We considered these instances of
noncompliance in forming our opinion on compliance, which is expressed in the
following paragraph.
In our opinion, FAI, LTD. complied, in all material respects, with the
requirements described above that are applicable to each of its major HUD-
assisted programs for the year ended December 31, 1994 with the exception of
those items noted on the accompanying schedule of findings and questioned costs.
This report is intended for the information of the audit committee, management,
and the Department of Housing and Urban Development. However, this report ia a
matter of public record and its distribution is not limited.
Atlanta, Georgia
/s/ HABIF, AROGETI & WYNNE, P.C.
February 24, 1995
MEMBERS
GEORGIA SOCIETY OF AMERICAN INSTITUTE OF AICPA DIVISION FOR CPA FIRMS
22
<PAGE>
FAI, LTD.
WEATHERLY WALK APARIMENTS
PROJECT NO. 061-36634
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
DECEMBER 31, 1994
Finding #1:
- - - -----------
Statement of Condition:
- - - -----------------------
The security deposit liability was fully funded for the last half of the year.
However, transfers were made which caused the liability to be underfunded during
the first of the year. In accordance with HUD 4370.2 Section 2-9, the security
deposit escrow should meet or exceed the liability throughout the year.
Criteria:
- - - ---------
The audited should maintain a security deposit escrow balance at least equal to
the liability.
Effects:
- - - --------
During the first of the year, adequate funds were not maintained in the
partnership's security deposit escrow account to cover the liability required.
Adequate balances were maintained for the last half of the year.
Cause:
- - - ------
Funds were transferred between cash accounts.
Recommendation:
- - - ---------------
Disbursments from the security deposit escrow account shoud be limited to
security deposit refunds and forfeitures.
23
<PAGE>
[ Letterhead of HABIF, AROGETI & WYNNE, P.C. ]
Certified Public Accountants
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC
--------------------------------------------------------
REQUIREMENTS APPLICABLE SO AFFIRMATIVE FAIR HOUSING
---------------------------------------------------
To the Partners
FAI, Ltd.
We have audited the financial statements of FAI, LTD., WEATHERLY WALK
APARTMENTS, HUD Project No. 061-36634, as of and for the year ended December 31,
1994, and have issued our report thereon dated February 24, 1995.
We have applied procedures to test FAI, LTD.'s compliance with the affirmative
fair housing requirements applicable to its HUD-assisted programs, for the year
ended December 31, 1994.
Our procedures were limited to the applicable compliance requirements described
in the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S.
Department of Housing and Urban Development, Office of Inspector General in July
1993. Our procedures were substantially less in scope than an audit, the
objective of which would be the expression of an opinion on FAI, LTD.'s
compliance with the requirements listed in the preceding paragraph. Accordingly,
we do not express such an opinion.
With respect to the items tested, the results of those procedures disclosed no
material instances of noncompliance with the affirmative fair housing
requirements. With respect to items not tested, nothing came to our attention
that caused us to believe that FAI, LTD. had not complied, in all material
respects, with those requirements.
This report is intended for the information of the audit committee, management,
and the Department of Housing and Urban Development. However, this report is a
matter of public record and its distribution is not limited.
Atlanta, Georgia
/s/ HABIF, AROGETI & WYNNE, P.C.
February 24, 1995
MEMBERS
GEORGIA SOCIETY OF AMERICAN INSTITUTE OF AICPA DIVISION FOR CPA FIRMS
24
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
AUDITORS COMMENTS ON AUDIT RESOLUTION MATTERS
RELATING TO HUD PROGRAMS
DECEMBER 31, 1994
A. DECEMBER 31, 1993 AUDIT FINDINGS:
---------------------------------
The 1993 audit findings resolved are as follows:
Finding #1:
-----------
The security deposit liability was fully funded for the last half of the
year. However, transfers were made which caused the liability to be
underfunded during the first of the year.
Finding #2:
-----------
The partnership has developed the ability to maintain their records on the
HUD chart of accounts concurrently with their own.
Finding #3:
-----------
The partnership added a controller and moved their accounting functions in-
house to facilitate accurate and timely reporting.
B. HUD MANAGEMENT REVIEW AND PHYSICAL INSPECTION PERFORMED ON APRIL 22, 1994:
--------------------------------------------------------------------------
All findings noted on prior management review and physica1 inspections
have been addressed by the project prior to December 31, 1994.
25
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
DECEMBER 31, 1994
MANAGEMENT AGENT CERTIFICATION
------------------------------
We have reviewed the accompanying financial statements and supporting
information of FAI, LTD. and, to the best of our knowledge and belief, the
same are complete and accurate.
DOMINION MANAGEMENT CORP.
3190 NE Expressway
Atlanta, Georgia 30341
(404) 455-6233
FEI #58-1803075
/s/ Tammy Glaser 2-28-85
-------------------- -------
Signature Date
President
--------------------
Title
26
<PAGE>
FAI, LTD.
WEATHERLY WALK APARTMENTS
PROJECT NO. 061-36634
DECEMBER 31, 1994
MORTGAGOR'S CERTIFICATION
-------------------------
We hereby certify that we have examined the accompanying financial statements
and supporting information of FAI, LTD., and, to the best of our knowledge and
belief, the same are complete and accurate.
FAI, LTD.
Ealco, Inc.
A Georgia Corporation
Corporate General Partner
By: /s/ Elliott Lewis 2-28-95
------------------ ---------
Elliott Lewis Date
President
Owning Partnership Employer
Identification Number 58-1805795
27
<PAGE>
Logo
DOMINION
FAI, Ltd.
Weatherly Walk Apartments
Project No. 061-36634
Corrective Action Plan
To the Schedule of Findings and Questioned Costs
December 31, 1994
Finding 1:
----------
The security deposit liability was fully funded throughout the
last half of the year. The liability will continue to be funded.
28
<PAGE>
Logo
DOMINION
FAI, Ltd.
Weatherly Walk Apartments
Project No. 061-36634
Status of Corrective Action Plan
On Prior Year Findings
December 31, 1994
Finding 1:
- - - ----------
The security deposit liability was fully funded at the end of
the year.
Finding 2:
- - - ----------
The HUD Chart of Accounts was implemented for use
effective January 1, 1994.
Finding 3:
- - - ----------
Accurate financial statement information was reported timely on
a monthly basis. This has been achieved by the hiring of a
Controller and bringing the financial statement reporting
inhouse.
29
<PAGE>
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
WALSH/CROSS CREEK LIMITED PARTNERSHIP
(A MAJORITY-OWNED SUBSIDIARY
OF CROSS CREEK OF COLUMBIA, INC.)
DECEMBER 31, 1996
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS
BALANCE SHEET 4
STATEMENT OF PROFIT AND LOSS 6
STATEMENT OF PARTNERS' DEFICIT 8
STATEMENT OF CASH FLOWS 9
NOTES TO FINANCIAL STATEMENTS 11
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Walsh/Cross Creek Limited Partnership
We have audited the accompanying balance sheet of Walsh/Cross Creek
Limited Partnership as of December 31, 1996, and the related statements of
profit and loss (on HUD Form No. 92410), partners' deficit and cash flows for
the year then ended. These financial statements are the responsibility of the
partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Walsh/Cross Creek
Limited Partnership as of December 31, 1996, and the results of its operations,
the changes in partners' deficit and its cash flows for the year then ended. in
conformity with generally accepted accounting principles.
/s/Reznick Fedder & Silverman
Boston, Massachusetts
February 21, 1997
- 3 -
<PAGE>
Walsh/Cross Creek Limited Partnership (A Majority-Owned Subsidiary of Cross
Creek of Columbia Inc.)
HUD Project No.: 053-36603
BALANCE SHEET
December 31. 1996
ASSETS
CURRENT ASSETS
1110 Petty cash $ 1,250
1120 Cash in bank 28,616
1130 Tenant accounts receivable 11,987
1240 Prepaid property insurance 36,927
---------
Total current assets 78,780
DEPOSITS HELD IN TRUST - FUNDED
1191 Tenant security deposits 79,840
RESTRICTED DEPOSITS AND FUNDED RESERVES
1310 Mortgage escrow deposits $ 121,937
1320 Reserve for replacements 33,345 155,282
--------
RENTAL PROPERTY
1410 Land 3,204,814
1420 Buildings and improvements 14,896,314
1430 Building equipment - fixed 20,643
1450 Personal property 694,940
----------
18,816,711
Less accumulated depreciation 3,926,973 14,889,738
----------
OTHER ASSETS
1901 Mortgage costs, less accumulated
amortization of $177,638 947,076
----------
$ 16,150,716
===========
- 4 - (continued)
<PAGE>
Walsh/Cross Creek Limited Partnership
(A Majority-Owned Subsidiary of Cross Creek of Columbia. Inc.)
HUD Project No.: 053-36603
BALANCE SHEET- CONTINUED
December 31, 1996
LIABILITIES AND PARTNERS' DEFICIT
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C>
2110 Accounts payable $ 48,049
2130 Accrued interest payable - mortgage 127,588
2190 Management fees payable 235,019
2191 Miscellaneous current liabilities 3,066
2210 Rent deferred credits 22,274
2320 Mortgage payable - current maturities 88,120
-------
Total current liabilities 524,116
DEPOSITS LIABILITIES
2191 Tenant security deposits (contra) 73,942
LONG-TERM LIABILITIES
2165 Advances from general partner 3,182,732
2310 Notes payable 1,783,900
2320 Mortgage payable, net of current maturities 17,018,624
2321 Second mortgage payable. net of current maturities 3,060,000 25,045,256
----------
3130 PARTNERS' DEFICIT (9,492,598)
---------
$16,150,716
==========
</TABLE>
- 5 - See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
US. Department a/ Housing
Statement of and Urban Development
Profit and Loss Office of Housing _
Federal Housing Commissioner
- - - ------------------------------------------------------------------------------------------------------------------------------------
Public Reporting Burden for this collection of information is estimated to average 1.0 hours per response, including the time for
reviewing instructions, searching existing data source, gathering and maintaining the data needed, and completing and reviewing the
collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Report Management Officer, Officer of Information Policies and System, U.S.
Department of Housing and Urban Development, Washington, D.C. 20410-3600, and to the Officer of Management and Budget Paperwork
Reduction Project (2502-0052), Washington, D.C. 20503. Do not send this completed form to either of these addresses.
- - - ------------------------------------------------------------------------------------------------------------------------------------
For Month/Period Project Number Project Name:
Beginning: Ending: HUD Project No.: 053-36603 Walsh/Cross Creek Limited {Partnership (A majority Owned
1/1/96 12/31/96
- - - ------------------------------------------------------------------------------------------------------------------------------------
|Part I Description of Account Account No. Amount*
- - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartments or Member Carrying Charges (Coops) 5120 $ 3,119,800
Tenant Assistance Payments 5121 $
Rental Furniture and Equipment 5130 $
Income Stores and Commercial 5140 $
5100 Garage and Parking Spaces 5170 $
Flexible Subsidy Income 5180 $
Miscellaneous (Specify) 5190 $
Total Rent Revenue Potential at 100% Occupancy $ 3,119,800
- - - ------------------------------------------------------------------------------------------------------------------------------------
Apartments 5220 $ (80,700)
Vacancies Furniture and Equipment 5230 $
5200 Stores and Commercial 5240 $
Garage and Parking Spaces 5270 $
Miscellaneous (Specify) 5190 $
Total Vacancies $ (80,700)
Net Rental Revenue Rent Revenue Less Vacancies $ 3,039,100
- - - ------------------------------------------------------------------------------------------------------------------------------------
Elderly and Congregate Services Income-5300
Total Service Income (Schedule Attached) 5300 $
- - - ------------------------------------------------------------------------------------------------------------------------------------
Interest Income-Project Operations 5410 $ 2,622
Financial Income from Investments-Residual Receipts 5430 $
Revenue Income from Investments-Reserve for Replacement 5440 $
5400 Income from Investments-Miscellaneous 5490 $
Total Financial Revenue $ 2,622
- - - ------------------------------------------------------------------------------------------------------------------------------------
Laundry and Vending 5910 $ 6,635
Financial NSF and Late Charges 5920 $ -
Revenue Damages and Cleaning Fees 5940 $ -
5400 Forfeited Tenant Security Deposits 5490 $ 1,892
Other Revenue (Specify) 5990 $ 10,383
Total Other Revenue $ 18,910
Total Other Revenue $ 3,060,632
- - - ------------------------------------------------------------------------------------------------------------------------------------
Advertising 6210 $ 11,889
Administrative Other Renting Expenses 6250 $ 20,660
Expenses Office Salaries 6310 $ 93,516
6200/6300 Office Supplies 6311 $ 10,917
Office or Model Apartment Rent 6312 $ -
Management Fee 6230 $ 152,845
Management or Superintendent Salaries 6330 $ 65,387
Manager or Superintendent Rent Free Unit 6331 $ -
Legal Expenses (Project) 6340 $ 1,594
Auditing Expenses (Project) 6350 8,600
Bookkeeping Fees/Accounting Services 6351 $ 12,600
Telephone and Answering Services 6360 $ 9,264
Bad Debts 6370 $ 32,734
Miscellaneous Administrative Expenses (Specify) 6390 $ 19,474
Total Administrative Expenses $ 442,480
- - - ------------------------------------------------------------------------------------------------------------------------------------
Fuel Oil/Coal 6420 $ -
Utilities Electricity 6450 $ 44,563
Expenses Water 6451 $ 38,376
6400 Gas 6452 $ -
Sewer 6452 $ 44,051
Total Utilities Expense $ 126,990
- - - ------------------------------------------------------------------------------------------------------------------------------------
* All amounts must be rounded to the nearest dollar. $.50 From HUED-92410 (7/91)
and over, round up-$.49 and below round down. ref Handbook 4370.2
</TABLE>
Page 1 of 2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Janitor and Cleaning Payroll 6510 $ -
Janitor and Cleaning Supplies 6515 $ 949
Janitor and Cleaning Contract 6517 $ -
Exterminating Payroll/Contract 6519 $ -
Exterminating Supplies 6520 $ 7,031
Garbage and Trash Removall 6525 $ 4,350
Security Payroll/Contract 6530 $ 943
Grounds Payroll 6535 $ 18,489
Ground Supplies 6536 $ 6,091
Operating and Grounds Contract 6537 $ 68,833
Maintenance Repairs Payroll 6540 $ 19,817
Expenses Repairs Material 6541 $ 5,234
6500 Repairs Contract 6542 $ 212,595
Elevator Maintenance/Contract 6545 $ -
Heating/Cooling Repairs and Maintenance 6546 $ 3,366
Swimming Pool Maintenance/Contract 6547 $ -
Snow Removal 6548 $ 943
Decorating Payroll/Contract 6560 $ -
Decorating Supplies 6561 $ 105,147
Other 6570 $ 387
Miscellaneous Administrative Expenses (Specify) 6590 $ -
Total Operating and Maintenance Expenses $ 454,175
- - - ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Taxes 6710 $ 182,374
Payroll Taxes (FICA) 6711 $ 15,887
Financial Miscellaneous Taxes, Licenses and Permits 6719 $ 99
Expenses Property and Liability Insurance (Hazard) 6720 $ 39,647
6800 Fidelity Bond Insurance 6721 $ -
Workmen's Compensation 6722 $ 6,181
Health Insurance & Other Employee Benefits 6723 $ 33,026
Other Insurance (Specify) 6729 $ -
Total Financial Expenses $ 277,214
- - - ------------------------------------------------------------------------------------------------------------------------------------
Interest on Bonds Payable 6810 $ -
Interest on Mortgage Payable 6820 $ 1,534,413
Financial Interest on Notes Payable (Long-Term) 6830 $ -
Expenses Interest on Notes Payable (Short-Term) 6840 $ -
6800 Mortgage Insurance Premium/Service Charge 6850 $ 128,531
Miscellaneous Administrative Expenses (Specify) 6890 $ -
Total Financial Expenses $ 1,662,944
- - - ------------------------------------------------------------------------------------------------------------------------------------
Elderly & Total Service Expenses-Schedule Attached 6900 $
Congregate Total Cost of Operations Before Depreciation $ $ 2,963,803
Service Profit (Loss) Before Depreciation $ 96,829
Expenses Depreciation (Total)-6600 & Amortization 6600 $ 637,881
6900 Operating Profit or (Loss) $ $ (541,052)
- - - ------------------------------------------------------------------------------------------------------------------------------------
Officer Salaries
Corporate or Legal Expenses (Entity) 7110 $
Mortgagor Taxes (Federal-State-Entity) 7120 $
Entity Other Expenses (Entity) 7130-32 $
Expenses Total Corporate Expenses 7190 $ 288,232 $ $288,232
71000 Net Profit or (Loss) $ $(829,284)
- - - ------------------------------------------------------------------------------------------------------------------------------------
Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties (18 U.S.C. 1001,
1010, 1012; 31 U.S.C. 3729, 3802) Miscellaneous or other Income and Expenses Sub-account Groups. If miscellaneous or other Income
and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6729, 6890, and 7190) exceed the Account Groupings by 10% or more, attach
a separate schedule describing or explaining the miscellaneous income or expense.
- - - ------------------------------------------------------------------------------------------------------------------------------------
Part 11
- - - ------------------------------------------------------------------------------------------------------------------------------------
1. Total principal payments required under the mortgage, even if payments under a Workout Agreement are less
or more than those required under the mortgage $ 80,603
- - - ------------------------------------------------------------------------------------------------------------------------------------
2. Replacement Reserve deposits required by the Regulatory Agreement or Amendments thereto, even if payments may he temporarily
suspended or waived. $ 52,260
- - - ------------------------------------------------------------------------------------------------------------------------------------
3. Replacement or Painting Reserve releases which are included as expense items on the Profit and Loss
statement $ 36,999
- - - ------------------------------------------------------------------------------------------------------------------------------------
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense
items on this Profit and Loss statement. $ N/A
- - - ------------------------------------------------------------------------------------------------------------------------------------
Page 2 of 26
</TABLE>
<PAGE>
Walsh/Cross Creek Limited Partnership (A Majority-Owned Subsidiary of Cross
Creek of Columbia
HUD Project No.: 053-36603
STATEMENT OF PARTNERS' DEFICIT
Year ended December 31. 1996
Partners' deficit, beginning $ (8,663,314)
Net loss (829,284)
----------
Partners' deficit, ending $ (9,492,598)
=============
- 8 - See notes to financial statements
<PAGE>
Walsh/Cross Creek Limited Partnership (A Majority-Owned Subsidiary of Cross
Creek of Columbia Inc.)
HUD Project No.: 053-36603
STATEMENT OF CASH FLOWS
Year ended December 31. 1996
Cash flows from operating activities
Rental income received $ 3,012,265
Interest received 2,622
Other Income received 18,910
Administrative expenses paid 98,653
Management fees paid (323,142)
Utilities paid (130,056)
Salaries and wages paid (201,152)
Operating and maintenance paid (414,926)
Real estate taxes paid (182,374)
Payroll taxes paid (15,887)
Property insurance paid (36,927)
Other taxes and insurance paid (39,306)
Interest paid on mortgage (1,535,014)
Mortgage insurance premium paid (128,531)
Decrease in mortgage escrow deposits 10,934
Mortgagor entity expenses paid (288,232)
Net tenant security deposits paid (2,612)
---------
Net cash used in operating activities (154,775)
---------
Cash flows from investing activities
Deposits to reserve for replacements (52,260)
Withdrawals from reserve for replacements 36,999
---------
Net cash used in investing activities (15,261)
---------
Cash flows from financing activities
Mortgage principal payments (80,603)
Advances from general partners 253,220
---------
Net cash provided by financing activities 172,617
---------
NET INCREASE IN CASH 2,581
Cash, beginning 27,285
---------
Cash, ending 29,866
=========
- 9 - (continued)
<PAGE>
Walsh/Cross Creek Limited Partnership
(A Majority-Owned Subsidiary of Cross Creek of Columbia. Inc.)
HUD Project No.: 053-36603
STATEMENT OF CASH FLOWS - CONTINUED
Year ended December 31, 1996
Reconciliation of net loss to net cash used in operating activities
Net loss $ (829,284)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 609,696
Amortization 28,185
Mortgagor entity expense 288,232
Mortgagor entity expenses paid (288.232)
(Increase) decrease in assets
Tenant accounts receivable (10,459)
Prepaid expenses 2,720
Tenant security deposits - ne (2,612)
Mortgage escrow deposits 10,934
Increase (decrease) in liabilities
Accounts payable (2,544)
Accrued interest payable (601)
Management fees payable 19,766
Miscellaneous current liabilities 3,066
Rent deferred credits 16,358
-------
Net cash used in operating activities $ (154,775)
=========
- 10 - See notes to financial statements
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICES
The Partnership was formed as a limited partnership under the laws of the
State of North Carolina on June 10, 1988, for the purpose of constructing
and operating a multi-family rental apartment project under Section 221(d)4
of the National Housing Act. The project consists of 420 units located in
Charlotte, North Carolina and is currently operating under the name of
Cross Creek Apartments. The project is managed by an affiliate of the
general partner under a management agreement which provides for a
management fee of 5% of gross collections, plus $2.50 per unit per month
for bookkeeping services.
Cash distributions are limited by agreements between the Partnership and
HUD to the extent of surplus cash, as defined by HUD.
Cross Creek of Columbia, Inc. is the general partner for the Partnership
and has a 75% ownership interest. Cross Creek of Columbia, Inc. and Allan
Tandy are the limited partners with a 24% and 1% ownership interest.
respectively.
All leases between the Partnership and tenants of the property are
operating leases.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual could differ from those estimates.
Rental Property
Rental property is carried at cost. Depreciation is provided for in amounts
sufficient to relate the cost of depreciable assets to operations over
their estimated service lives using the straight-line method.
- 11 -
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued
The estimated lives used in determining depreciation are:
Land improvements 15 years
Buildings 30 years
Building equipment - fixed 7 years
Maintenance equipment 7 years
The Partnership reviews its rental property for possible impairment at
least annually, and more frequently if circumstances warrant. If this
review indicates that the carrying amount of the property may not be
recoverable, the Partnership estimates the future cash flows expected to
result from the operations of the property and its eventual sale. If the
sum of these expected future cash flows (undiscounted and without interest
charges) is less than the carrying amount of the property, it is written
down to its estimated fair value.
The expected future cash flows used in this process rely upon estimates and
assumptions, including expense growth, occupancy, rental rates, and market
capitalization rates. The general partner believes that the estimates and
assumptions used are appropriate. However, changes in market conditions and
circumstances may occur which would cause these estimates and assumptions
to change, resulting in revised cash flow projections. This, in turn, could
lead to future write-downs, which could be material. No write-downs for
impairment have been recorded as of December 31, 1996.
Mortgage Costs
Mortgage costs are amortized over the term of the related mortgage using
the straight-line method.
Rental Income
Rental income is recognized as rents become due. Rental payments received
in advance are deferred until earned.
Income Taxes
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and is
reportable by, the partners individually.
NOTE B - REALIZATION OF ASSETS
The Partnership has incurred recurring losses from operations, and has a
net capital deficiency at December 31, 1996. In addition, the Partnership's
current liabilities exceed its current assets at December 31, 1996. The
Partnership's ability to meet its obligations is dependent upon its ability
to generate operating income. Due to previously soft market conditions
which suppressed rent income, rental income continues to be insufficient to
cover all of the project's debt service requirements after the payment of
operating costs. The general partner has funded the Partnership's operating
deficits by borrowing funds from affiliates of the general partner. The
general partner intends to continue to borrow funds from its affiliates to
maintain its operations.
- 12 -
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia. Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE C - MANAGEMENT AGENT
The property is managed by an affiliate of the general partner. The current
management agreement provides for a management fee of 5% of gross
collections, as defined in the management agreement, plus $2.50 per unit
per month for bookkeeping services. The management and bookkeeping fees
charged to operations were $152,845 and $12,600, respectively in 1996. At
December 31, 1996, unpaid fees aggregated to $235,019.
NOTE D - RELATED PARTY TRANSACTIONS
Second Mortgage Payable
Eagle Insured L.P. (Eagle), an affiliate of the general partner, has agreed
to loan up to $4,000,000 to the Partnership for construction costs, closing
costs and accrued interest payments on the mortgage payable. The note is
subordinated to the mortgage payable and is collateralized by a deed of
trust on the real property. The note bears interest at prime plus 1% (9.25%
at December 31, 1996). As of December 31, 1996, the Partnership owed
$3,060,000 under the note. In 1996, interest charged to mortgagor entity
expense amounted to $288,232, which was paid from affiliate advances.
Equity Loan
Eagle loaned the Partnership $1,783,900 for the HUD required escrows, cash
requirement and loan fees pertaining to the equity loan. This note is
non-interest bearing unless certain events as defined in the loan agreement
occur and is subordinated to the mortgage payable and the note payable and
is unsecured unless coinsurance is terminated by HUD. If an event of
default occurs, the note shall bear interest at the lesser of 4% above the
prime rate or the highest rate permitted by law. The note matures on
January 1, 2030, when all principal is due and payable.
- 13 -
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE D - RELATED PARTY TRANSACTIONS - Continued
Mortgage Payable
The mortgage, in the original amount of $17,494,100, is payable to Related
Mortgage Corporation, an affiliate of the general partner. The mortgage is
payable in monthly principal and interest installments of $134,635 through
January 2030. The mortgage, which is coinsured by HUD, is collateralized by
a deed of trust on the rental property and bears interest at the rate of
8.95%, plus mortgage insurance premium at .75% per annum.
Under agreements with the mortgage lender and FHA, the Partnership is
required to make monthly escrow deposits for taxes, insurance and
replacement of project assets, and is subject to restrictions as to
operating policies. rental charges, operating expenditures and
distributions to partners.
Mortgage escrow deposits at December 31, 1996 consist of the following:
Hazard insurance $ 4,701
Mortgage insurance 117,236
-------
$ 121,937
=========
The liability of the Partnership under the mortgage is limited to the
underlying value of the real estate collateral plus other amounts deposited
with the lender.
Aggregate annual maturities of the mortgage payable over each of the next
five years- are as follows:
December 31, 1997 $ 88,120
1998 96,339
1999 105,324
2000 115,147
2001 125,886
- 14 -
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE D - RELATED PARTY TRANSACTIONS (Continued)
Due to Affiliates
During 1996, an affiliate of the general partner advanced $253,220 to the
Partnership, which was used to pay a portion of the interest on the second
mortgage payable. These advances are noninterest bearing and payable on
demand subject to HUD regulations. At December 31, 1996, the aggregate
balance of advances due to the affiliate was $3,182,732.
NOTE E - OTHER REVENUE (ACCOUNT NO. 5990)
Other revenue consists of the following:
Processing fees $ 9,255
Miscellaneous 1,128
--------
$ 10,383
========
NOTE F - MISCELLANEOUS ADMINISTRATIVE EXPENSES (ACCOUNT NO. 6390)
Miscellaneous administrative expenses consist of the following:
Uniforms $ 784
Training 1,164
Personnel expense reimbursement 1,110
Tenant relations 7,666
Travel and entertainment 855
Computer expense 3,594
Professional fees 1,470
Miscellaneous 521
Dues and subscriptions 2,310
--------
$ 19,474
========
- 15 -
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia. Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1996
NOTE G - OTHER EXPENSES (ENTITY) (ACCOUNT NO. 7190)
Other expenses consist of the following:
Interest expense on second mortgage payable $ 288,232
=========
- 16 -
<PAGE>
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
WALSH/CROSS CREEK LIMITED PARTNERSHIP
(A MAJORITY-OWNED SUBSIDIARY
OF CROSS CREEK OF COLUMBIA, INC.)
DECEMBER 31, 1995
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS
BALANCE SHEET 4
STATEMENT OF PROFIT AND LOSS 6
STATEMENT OF PARTNERS' DEFICIT 8
STATEMENT OF CASH FLOWS 9
NOTES TO FINANCIAL STATEMENTS 11
<PAGE>
[ LETTERHEAD OF REZNICK FEDDER & SILVERMAN ]
INDEPENDENT AUDITORS' REPORT
To the Partners
Walsh/Cross Creek Limited Partnership
We have audited the accompanying balance sheet of Walsh/Cross Creek
Limited Partnership as of December 31, 1995, and the related statements of
profit and loss (on HUD Form No. 92410), partners' deficit and cash flows for
the year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Walsh/Cross Creek
Limited Partnership as of December 31, 1995, and the results of its operations,
the changes in partners' deficit and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
/s/ REZNICK FEDDER & SILVERMAN
Boston, Massachusetts
February 15, 1996
-3-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary of Cross Creek of Columbia, Inc.)
BALANCE SHEET
December 31, 1995
ASSETS
CURRENT ASSETS
1110 Petty cash $ 1,250
1120 Cash in bank 26,035
1130 Tenant accounts receivable 1,528
1240 Prepaid property insurance 39,647
----------
Total current assets 68,460
DEPOSITS HELD IN TRUST - FUNDED
1191 Tenant security deposits 78,842
RESTRICTED DEPOSITS AND FUNDED RESERVES
1310 Mortgage escrow deposits $ 132,871
1320 Reserve for replacements 18,084 150,955
----------
RENTAL PROPERTY
1410 Land 3,020,604
1420 Buildings and improvements 15,080,524
1430 Building equipment-fixed 20,643
1450 Personal property 694,940
----------
18,816,711
Less accumulated depreciation 3,317,277 15,499,434
----------
OTHER ASSETS
1901 Mortgage costs, less accumulated
amortization of $149,453 975,261
----------
$16,772,952
==========
(continued)
-4-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary of Cross Creek of Columbia, Inc.)
BALANCE SHEET-CONTINUED
December 31, 1995
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES
2110 Accounts payable $ 50,593
2130 Accrued interest payable-mortgage 128,189
2165 Advances from general partner 2,929,512
2190 Management fees payable 215,253
2210 Rent deferred credits 5,916
2320 Mortgage payable- current maturities 80,603
---------
Total current liabilities 3,410,066
DEPOSITS LIABILITIES
2191 Tenant security deposits (contra) 75,556
LONG-TERM LIABILITIES
2310 Equity loan $ 1,783,900
2320 Mortgage payable, net of
current maturities 17,106,744
2321 Note payable 3,060,000 21,950,644
----------
CONTINGENCY -
3130 PARTNERS' DEFICIT (8,663,314)
-----------
$16,772,952
===========
See notes to financial statements
-5-
<PAGE>
<TABLE>
<CAPTION>
Statement of U.S. Department of Housing
Profit and Loss and Urban Development
Office of Housing
Federal Housing Commissioner
OMB Approval No. 2502-0052(exp.8/31/92)
Public Reporting Burden for this collection of information is estimated to average 1.0 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the
collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Reports Management Officer, Office of Information Policies and Systems, U.S.
Department of Housing and Urban Development, Washington, D.C. 20410-3600, and to the Office of Management and Budget Paperwork
Reduction Project (2502-0052), Washington, D.C. 20503. Do not send this completed form to either of these addresses.
For Month/Period Project Number: Project Name:
Beginning: 1/1/95 Ending: 12/31/95 Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary of
Cross Creek of Columbia, Inc.
- - - -------------------------------------------------------------------------------------------------------------------------------
Part I Description of Account Account No. Amount*
- - - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartments or Member Carrying Charges (Coops) 5120 $ 2,917,690
Tenant Assistance Payments 5121 $ -
Rental Furniture and Equipment 5130 $ -
Income Stores and Commercial 5140 $ -
5100 Garage and Parking Spaces 5170 $ -
Flexible Subsidy Income 5180 $ -
Miscellaneous (Specify) 5190 $ -
Total Rent Revenue Potential at 100% Occupancy $ 2,917,690
Apartments 5220 $ (80,858)
Furniture and Equipment 5230 $ -
Vacancies Stores and Commercial 5240 $ -
5200 Garage and Parking Spaces 5270 $ -
Miscellaneous (Specify) 5290 $ -
Total Vacancies $ (80,858)
Net Rental Revenue Rent Revenue Less Vacancies $ 2,836,832
Elderly and Congregate Services Income-5300
Total Service Income (Schedule Attached) 5300 $ $ -
Interest Income-Project Operations 5410 $ 3,591
Financial Income from Investments-Residential Receipts 5430 $ -
Revenue Income from Investments-Reserve for Replacement 5440 $ 392
5400 Income from Investments-Miscellaneous 5490 $ -
Total Financial Revenue $ 3,983
Laundry and Vending 5910 $ 6,839
NSF and Late Charges 5920 $ -
Other Damages and Cleaning Fees 5930 $ -
Revenue Forfeited Tenant Security Deposits 5940 $ 2,642
5900 Other Revenue (Specify) 5990 $ 12,429
Processing fee, Miscellaneous
Total Other Revenue $ 21,910
Total Revenue $ 2,862,725
Advertising 6210 $ 12,141
Other Renting Expenses 6250 $ 20,522
Office Salaries 6310 $ 87,469
Office Supplies 6311 $ 7,423
Office or Model Apartment Rent 6312 $ -
Administrative Management Fee 6320 $ 155,260
Expenses Manager or Superintendent Salaries 6330 $ 66,441
6200/6300 Manager or Superintendent Rent Free Unit 6331 $ -
Legal Expenses (Project) 6340 $ 988
Auditing Expenses (Project) 6350 $ 8,600
Bookkeeping Fees/Accounting Services 6351 $ -
Telephone and Answering Services 6360 $ 8,704
Bad Debts 6370 $ 30,731
Miscellaneous Administrative Expenses (Specify) 6390 $ 20,280
Total Administrative Expenses $ 418,559
Fuel Oil/Coal 6420 $ -
Utilities Electricity 6450 $ 48,116
Expense Water 6451 $ 33,762
6400 Gas 6452 $ -
Sewer 6453 $ 50,905
Total Utilities Expense $ 132,783
Janitor and Cleaning Payroll 6510 $ -
Janitor and Cleaning Supplies 6515 $ 1,181
Janitor and Cleaning Contract 6517 $ -
Exterminating Payroll/Contract 6519 $ -
Exterminating Supplies 6520 $ 4,513
Garbage and Trash Removal 6525 $ 3,947
Security Payroll/Contract 6530 $ 1,922
Grounds Payroll 6535 $ 18,089
Grounds Supplies 6536 $ 5,400
Operating and Grounds Contract 6537 $ 76,525
Maintenance Repairs Payroll 6540 $ 19,317
Expenses Repairs Material 6541 $ 6,952
6500 Repairs Contract 6542 $ 125,879
Elevator Maintenance/Contract 6545 $ -
Heating/Cooling Repairs and Maintenance 6546 $ 4,007
Swimming Pool Maintenance/Contract 6547 $ -
Snow Removal 6548 $ 167
Decorating Payroll/Contract 6560 $ -
Decorating Supplies 6561 $ 79,387
Other 6570 $ 58
Miscellaneous Operating and Maintenance Expenses 6590 $ -
Total Operating and Maintenance Expenses $ 347,344
Real Estate Taxes 6710 $ 175,211
Payroll Taxes (FICA) 6711 $ 16,586
Miscellaneous Taxes, Licenses and Permits 6719 $ (528)
Taxes and Property and Liability Insurance (Hazard) 6720 $ 35,262
Insurance Fidelity Bond Insurance 6721 $ -
6700 Workmen's Compensation 6722 $ -
Health Insurance & Other Employee Benefits 6723 $ 34,981
Other Insurance (Specify) 6729 $ -
Total Taxes and Insurance $ 261,512
Interest on Bonds Payable 6810 $ -
Interest on Mortgage Payable 6820 $ 1,534,921
Financial Interest on Notes Payable (Long-Term) 6830 $
Expenses Interest on Notes Payable (Short-Term) 6840 $ -
6800 Mortgage Insurance Premium/Service Charge 6850 $ 129,116
Miscellaneous Financial Expenses 6890 $ -
Total Financial Expenses $ 1,664,037
Elderly & Total Service Expenses-Schedule Attached 6900 $ -
Congregate Total Cost of Operations Before Depreciation $ $ 2,824,235
Service Profit (Loss) Before Depreciation $ $ 38,490
Expenses Depreciation (Total)-6600 & Amortization 6600 $ $ 641,882
6900 Operating Profit or (Loss) $ (603,392)
Officer Salaries 7110 $ -
Corporate or Legal Expenses (Entity) 7120 $ -
Mortgagor Taxes (Federal-State-Entity) 7130-32 $ -
Entity Other Expenses (Entity) 7190 $ 305,388
7100 Total Corporate Expenses $ 305,388
Net Profit or (Loss) $ (908,780)
Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties (18 U.S.C. 1001,
1010, 1012; 31 U.S.C. 3729, 3802) Miscellaneous or other Income and Expenses Sub-account Groups. If miscellaneous or other Income
and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6729, 6890, and 7190) exceed the Account Groupings by 10% or
more, attach a separate schedule describing or explaining the miscellaneous income or expense.
</TABLE>
<TABLE>
<CAPTION>
Part II
<S> <C>
1. Total principal payments required under the mortgage, even if payments under a Workout Agreement are less
or more than those required under the mortgage. $ 73,906
2. Replacement Reserve deposits required by the Regulatory Agreement or Amendments thereto, even if payments
may be temporarily suspended or waived. $ 52,260
3. Replacement or Painting Reserve releases which are included as expense items on the Profit and Loss
statement. $ 47,275
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items
on this Profit and Loss tatement. $ N/A
- - - ----------------------------------------------------------------------------------------------------------------------------------
Form HUD-92410
Page 2 of 2
See notes to financial statements
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Walsh/Cross Creek Limited Partnership
STATEMENT OF PARTNERS' DEFICIT
Year ended December 31, 1995
Special
General partners Limited partners limited partners Total
---------------- ---------------- ---------------- -----
<S> <C> <C> <C> <C>
Partners' deficit, beginning $ (5,815,901) $ (1,938,633) $ - $(7,754,534)
Contributions - - - -
Distributions - - - -
Net loss (227,195) (681,584) - (908,779)
----------- ----------- ------------- ------------
Partners' deficit, end $ (6,043,096) $ (2,620,217) $ - $(8,663,313)
=========== =========== ============= ===========
See notes to financial statements
</TABLE>
-7-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary of Cross Creek of Columbia, Inc.)
STATEMENT OF CASH FLOWS
Year ended December 31, 1995
Cash flows from operating activities
Rental income received $ 2,808,687
Interest received 3,591
Other income received 21,910
Administrative expenses paid (96,536)
Management fees paid (154,138)
Utilites paid (129,467)
Salaries and wages paid (191,315)
Operating and maintenance paid (308,230)
Real estate taxes paid (175,211)
Payroll taxes paid (16,586)
Property insurance paid (38,170)
Other taxes and insurance paid (34,453)
Interest paid on mortgage payable (1,541,890)
Interest paid on note payable (340,897)
Mortgage insurance premium paid (129,116)
Decrease in mortgage escrow deposits 8,570
Net tenant security deposits paid (941)
----------
Net cash used in operating activities (314,192)
----------
Cash flows from investing activities
Deposits to reserve for replacements (52,260)
Withdrawals from reserve for replacements 47,275
Investment in rental property (23,210)
----------
Net cash used in investing activities (28,195)
----------
Cash flows from financing activities
Mortgage principal payments (73,906)
Advances from general partners 416,744
----------
Net cash provided by financing activities 342,838
----------
NET INCREASE IN CASH 451
Cash, beginning 26,834
----------
Cash, ending $ 27,285
==========
(continued)
-8-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary of Cross Creek of Columbia, Inc.)
STATEMENT OF CASH FLOWS-CONTINUED
Year ended December 31, 1995
Reconciliation of net loss to net cash
used in operating activities
Net loss $(908,780)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 609,697
Amortization 32,185
Interest received on reserve for replacements (392)
(Increase) decrease in assets
Tenant accounts receivable (234)
Due from related party (1,780)
Prepaid expenses (2,908)
Tenant security deposits-net (941)
Mortgage escrow deposits 8,570
Increase (decrease) in liabilities
Accounts payable (13,560)
Accounts payable - other 706
Accrued interest payable (42,478)
Management fees payable 2,902
Rent deferred credits 2,821
--------
Net cash used in operating activities $(314,192)
=========
See notes to financial statements
-9-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The Partnership was formed as a limited partnership under the laws of the
State of North Carolina on June 10, 1988, for the purpose of constructing
and operating a multi-family rental apartment project under Section 221(d)4
of the National Housing Act. The project consists of 420 units located in
Charlotte, North Carolina and is currently operating under the name of
Cross Creek Apartments. The project is managed by an affiliate of the
general partner under a management agreement which provides for a
management fee of 5% of gross collections, plus $2.50 per unit per month.
Cash distributions are limited by agreements between the Partnership and
HUD to the extent of surplus cash, as defined by HUD.
Cross Creek of Columbia, Inc. is the general partner for the
Partnership and has a 75% ownership interest. Cross Creek of
Columbia, Inc. and Allan Tandy are the limited partners with a
24% and 1% ownership interest, respectively.
All leases between the Partnership and tenants of the property are
operating leases.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual could differ from those estimates.
Rental Property
---------------
Rental property is carried at cost. Depreciation is provided for in amounts
sufficient to relate the cost of depreciable assets to operations over
their estimated service lives using the straight-line method.
The estimated lives used in determining depreciation are:
Land improvements 15 years
Buildings 30 years
Building equipment - fixed 7 years
Maintenance equipment 7 years
-10-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued
Mortgage Costs
--------------
Mortgage costs are amortized over the term of the related mortgage using the
straight-line method.
Rental Income
-------------
Rental income is recognized as rents become due. Rental payments received in
advance are deferred until earned.
Income Taxes
------------
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and is
reportable by, the partners individually.
NOTE B - REALIZATION OF ASSETS
The Partnership has incurred recurring losses from operations, and has a net
capital deficiency at December 31, 1995. In addition, the Partnership's
current liabilities exceed its current assets at December 31, 1995. The
Partnership's ability to meet its obligations is dependent upon its ability
to generate operating income. Due to previously soft market conditions which
suppressed rent income, rental income continues to be insufficient to cover
all of the project's debt service requirements after the payment of
operating costs. The general partner has funded the Partnership's operating
deficits by borrowing funds from affiliates of the general partner. The
general partner intends to continue to borrow funds from its affiliates to
maintain its operations.
-11-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995
NOTE C - MANAGEMENT AGENT
The property is managed by an affiliate of the general partner. The current
management agreement provides for a management fee of 5% of gross
collections, as defined in the management agreement, plus $2.50 per unit per
month. The management fee charged to operations was $155,260 in 1995. At
December 31, 1995, unpaid management fees aggregated to $215,253.
NOTE D - RELATED PARTY TRANSACTIONS
Note Payable
------------
Eagle Insured L.P. (Eagle), an affiliate of the general partner, has agreed
to loan up to $4,000,000 to the Partnership for construction costs, closing
costs and accrued interest payments on the mortgage payable. The note is
subordinated to the mortgage payable and is collateralized by a deed of
trust on the real property. The note bears interest at prime plus 1% (9.5%
at December 31, 1995). As of December 31, 1995, the Partnership owed
$3,060,000 under the note. In 1995, interest charged to mortgagor entity
expense amounted to $305,388, which was paid from affiliate advances.
Equity Loan
-----------
Eagle loaned the Partnership $1,783,900 for the HUD required escrows, cash
requirement and loan fees pertaining to the equity loan. This note is
non-interest bearing unless certain events as defined in the loan agreement
occur and is subordinated to the mortgage payable and the note payable and
is unsecured unless coinsurance is terminated by HUD. If an event of default
occurs, the note shall bear interest at the lesser of 4% above the prime
rate or the highest rate permitted by law. The note matures on January 1,
2030, when all principal is due and payable.
-12-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995
NOTE D - RELATED PARTY TRANSACTIONS - Continued
Mortgage Payable
----------------
The mortgage, in the original amount of $17,494,100, is payable to Related
Mortgage Corporation, an affiliate of the general partner. The loan is
payable in monthly principal and interest installments of $134,635 through
January 2030. The loan, which is coinsured by HUD, is collateralized by a
deed of trust on the rental property and bears interest at the rate of
8.95%, plus mortgage insurance premium at .75% per annum.
Under agreements with the mortgage lender and FHA, the Partnership is
required to make monthly escrow deposits for taxes, insurance and
replacement of project assets, and is subject to restrictions as to
operating policies, rental charges, operating expenditures and distributions
to partners.
Mortgage escrow deposits at December 31, 1995 consist of the following:
Property taxes $ 10,136
Hazard insurance 4,917
Mortgage insurance 117,818
--------
$132,871
========
The liability of the Partnership under the mortgage is limited to the
underlying value of the real estate collateral plus other amounts deposited
with the lender.
Aggregate annual maturities of the mortgage for the next five years
following December 31, 1995 are as follows:
1996 $ 80,603
1997 88,120
1998 96,339
1999 105,324
2000 115,147
-13-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995
NOTE D - RELATED PARTY TRANSACTIONS - Continued
Due to Affiliates
-----------------
During 1995, an affiliate of the general partner advanced $416,744 to the
Partnership, of which approximately $28,500 was used to fund capital
improvements, $341,500 was used to pay interest on the note payable and
$46,500 was used to fund operations. These advances are noninterest bearing
and payable on demand subject to HUD Regulations. At December 31, 1995, the
aggregate balance of advances due to the affiliate was $2,929,512. Accounts
payable at December 31, 1995 includes $25 to an affiliate for payroll
related costs.
Management believes it is not practical to estimate the fair value of the
mortgage, notes, and advances because loans with similar characteristics are
not currently available to the Partnership.
NOTE E - OTHER REVENUE (ACCOUNT NO. 5990)
Other revenue consists of the following:
Processing fees $10,260
Miscellaneous 2,169
-------
$12,429
=======
NOTE F - MISCELLANEOUS ADMINISTRATIVE EXPENSES (ACCOUNT
NO. 6390)
Miscellaneous administrative expenses consist of the following:
Uniforms $ 563
Training 636
Personnel expense reimbursement 2,943
Tenant relations 6,818
Lockbox expense 42
Computer expense 4,412
Professional fees 1,393
Miscellaneous 1,174
Dues and subscriptions 2,299
------
$20,280
=======
-14-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1995
NOTE G - OTHER EXPENSES (ENTITY) (ACCOUNT NO. 7190)
Other expenses consist of the following:
Interest expense on note payable $305,388
========
-15-
<PAGE>
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
WALSH/CROSS CREEK LIMITED PARTNERSHIP
(A MAJORITY-OWNED SUBSIDIARY
OF CROSS CREEK OF COLUMBIA, INC.)
DECEMBER 31, 1994
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 3
FINANCIAL STATEMENTS
BALANCE SHEET 5
STATEMENT OF PROFIT AND LOSS 6
STATEMENT OF PARTNERS' DEFICIT 8
STATEMENT OF CASH FLOWS 9
NOTES TO FINANCIAL STATEMENTS 11
<PAGE>
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners
Walsh/Cross Creek Limited Partnership
We have audited the accompanying balance sheet of Walsh/Cross Creek
Limited Partnership as of December 31, 1994, and the related statements of
profit and loss (on HUD Form No. 92410), partners' deficit and cash flows for
the year then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Walsh/Cross Creek
Limited Partnership as of December 31, 1994, and the results of its operations,
the changes in partners' deficit and its cash flows for the year then ended, in
conformity with generally accepted accounting principles.
-3-
<PAGE>
The accompanying financial statements have been prepared assuming that
the Partnership will continue as a going concern. As discussed in Note B to the
financial statements, the Partnership has suffered recurring losses from
operations and has a net capital deficiency. These matters raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note B. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Reznick Fedder & Silverman
- - - ------------------------------
Boston, Massachusetts
March 23, 1995
-4-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary of Cross Creek of Columbia, Inc.)
BALANCE SHEET
December 31, 1994
ASSETS
CURRENT ASSETS
1110 Petty cash $ 1,250
1120 Cash in bank 25,584
1130 Accounts receivable - tenants 1,293
1250 Prepaid insurance 36,739
---------
Total current assets 64,866
DEPOSITS HELD IN TRUST - FUNDED
1191 Tenant security deposits 72,936
RESTRICTED DEPOSITS AND FUNDED RESERVES
1310 Mortgage escrow deposits $ 141 441
1320 Reserve for replacements 12,707 154,148
----------
RENTAL PROPERTY
1410 Land and land improvements 3,181,604
1420 Buildings 14,896,314
1430 Building equipment - fixed 694,940
1470 Maintenance equipment 20,643
----------
18,793,501
Less accumulated depreciation 2,707,580 16,085,921
---------- ----------
OTHER ASSETS
1900 Mortgage costs, net of
accumulated amortization
of $121,268 1,003,446
1920 Organization costs, net of
accumulated amortization
of $36,000 4,000 1,007,446
---------- -----------
$17,385,317
===========
LIABILITIES
CURRENT LIABILITIES
2110 Accounts payable $ 65,261
2130 Accrued interest payable -
mortgage 135,158
2131 Accrued interest payable -
equity loan 35,509
2160 Accrued management fee 212,351
2161 Due to affiliate 2,512,733
2210 Deferred rent credit 3,095
2320 Mortgage payable - current
maturities 73,727
-----------
Total current liabilities 3,037,834
DEPOSITS LIABILITY
2191 Tenant security deposits
(contra) 70,591
LONG-TERM LIABILITIES
2310 Note payable $ 3,060,000
2320 Mortgage payable, net of current
maturities 17,187,526
2390 Equity loan 1,783,900 22,031,426
----------
3130 PARTNERS' DEFICIT (7,754,534)
----------
$17,385,317
===========
See notes to financial statements
-5-
<PAGE>
Statement of U.S. Department of Housing [GRAPHIC OMITTED]
Profit and Loss and Urban Development
Office of Housing
Federal Housing Commissioner
OMB Approval no. 2502-005 (exp. 8/31/92)
Public Reporting Burden for this collection of information is estimated to
average 1.0 hours per response, including the time for reviewing instructions,
searching existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments regarding
this burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Reports Management
Officer, Office of Information Policies and Systems, U.S. Department of Housing
and Urban Development, Washington, D.C. 20410-3600, and to the Office of
Management and Budget Paperwork Reduction Project (2502-0052), Washington, D.C.
20503. Do not send this completed form to either of these addresses.
<TABLE>
<CAPTION>
For Month/Period Project Number: Project Name:
Beginning: 1/1/94 Ending: 12/31/94 Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary of
Cross Creek of Columbia, Inc.
- - - -------------------------------------------------------------------------------------------------------------------------------
Part I Description of Account Account No. Amount*
- - - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Apartments or Member Carrying Charges (Coops) 5120 $ 2,728,260
Tenant Assistance Payments 5121 $
Rental Furniture and Equipment 5130 $
Income Stores and Commercial 5140 $
5100 Garage and Parking Spaces 5170 $
Flexible Subsidy Income 5180 $
Miscellaneous (Specify) 5190 $
Total Rent Revenue Potential at 100% Occupancy 2,728,260
Apartments 5220 $( 103,234)
Furniture and Equipment 5230 $( )
Vacancies Stores and Commercial 5240 $( )
5200 Garage and Parking Spaces 5270 $( )
Miscellaneous (Specify) 5290 $( )
Total Vacancies (103,234)
Net Rental Revenue Rent Revenue Less Vacancies 2,625,026
Elderly and Congregate Services Income-5300
Total Service Income (Schedule Attached) 5300 $ 0
Interest Income-Project Operations 5410 $ 1,394
Financial Income from Investments-Residential Receipts 5430 $
Revenue Income from Investments-Reserve for Replacement 5440 $ 551
5400 Income from Investments-Miscellaneous 5490 $
Total Financial Revenue 1,945
Laundry and Vending 5910 $ 6,654
NSF and Late Charges 5920 $
Other Damages and Cleaning Fees 5930 $
Revenue Forfeited Tenant Security Deposits 5940 $ 8,302
5900 Other Revenue (Specify) 5990 $ 9,156
Total Other Revenue 24,112
Total Revenue 2,651,083
Advertising 6210 $ 19,428
Other Renting Expenses 6250 $ 26,221
Office Salaries 6310 $ 79,627
Office Supplies 6311 $ 7,746
Office or Model Apartment Rent 6312 $
Administrative Management Fee 6320 $ 145,939
Expenses Manager or Superintendent Salaries 6330 $ 38,162
6200/6300 Manager or Superintendent Rent Free Unit 6331 $
Legal Expenses (Project) 6340 $ 1,049
Auditing Expenses (Project) 6350 $ 8,916
Bookkeeping Fees/Accounting Services 6351 $
Telephone and Answering Services 6360 $ 9,322
Bad Debts 6370 $ 34,150
Miscellaneous Administrative Expenses (Specify) 6390 $ 18,037
Total Administrative Expenses 388,597
Fuel Oil/Coal 6420 $
Utilities Electricity 6450 $ 54,253
Expense Water 6451 $ 27,217
6400 Gas 6452 $
Sewer 6453 $ 38,553
Total Utilities Expense 120,023
* All amounts must be rounded to the nearest dollar, $.50Page 1 of 2 form HUD-92410 (7/91)
and over, round up - $.49 and below round down. ref Handbook 4370.2
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------- ----------------------
<S> <C> <C> <C> <C>
Janitor and Cleaning Payroll 6510 $ 25,064
Janitor and Cleaning Supplies 6515 $ 1,105
Janitor and Cleaning Contract 6517 $ 6,735
Exterminating Payroll/Contract 6519 $
Exterminating Supplies 6520 $ 4,380
Garbage and Trash Removal 6525 $ 4,795
Security Payroll/Contract 6530 $ 956
Grounds Payroll 6535 $ 18,044
Grounds Supplies 6536 $ 2,762
Operating and Grounds Contract 6537 $ 70,702
Maintenance Repairs Payroll 6540 $ 18,964
Expenses Repairs Material 6541 $ 36,346
6500 Repairs Contract 6542 $
Elevator Maintenance/Contract 6545 $
Heating/Cooling Repairs and Maintenance 6546 $ 3,587
Swimming Pool Maintenance/Contract 6547 $ 2,730
Snow Removal 6548 $
Decorating Payroll/Contract 6560 $
Decorating Supplies 6561 $ 106,440
Other 6570 $
Miscellaneous Operating and Maintenance Expenses 6590 $ 2,631
Total Operating and Maintenance Expenses 305,241
Real Estate Taxes 6710 $ 169,166
Payroll Taxes (FICA) 6711 $ 15,320
Miscellaneous Taxes, Licenses and Permits 6719 $
Taxes and Property and Liability Insurance (Hazard) 6720 $ 36,721
Insurance Fidelity Bond Insurance 6721 $
6700 Workmen's Compensation 6722 $ 5,792
Health Insurance & Other Employee Benefits 6723 $ 31,475
Other Insurance (Specify) 6729 $
Total Taxes and Insurance 258,474
Interest on Bonds Payable 6810 $
Interest on Mortgage Payable 6820 $ 1,553,730
Financial Interest on Notes Payable (Long-Term) 6830 $
Expenses Interest on Notes Payable (Short-Term) 6840 $
6800 Mortgage Insurance Premium/Service Charge 6850 $ 129,651
Miscellaneous Financial Expenses 6890 $
Total Financial Expenses 1,683,381
Elderly & Total Service Expenses-Schedule Attached 6900 $
Congregate Total Cost of Operations Before Depreciation 2,755,716
Service Profit (Loss) Before Depreciation (104,633)
Expenses Depreciation (Total)-6600 (Specify) 6600 645,628
6900 Operating Profit or (Loss) (750,261)
Officer Salaries 7110 $
Corporate or Legal Expenses (Entity) 7120 $
Mortgagor Taxes (Federal-State-Entity) 7130-32 $
Entity Other Expenses (Entity) 7190 $ 252,684
7100 Total Corporate Expenses 252,684
Net Profit or (Loss) (1,002,945)
- - - ----------------------------------------------------------------------------------------------------------------------------------
Warning: HUD will prosecute false claims and statements. Conviction may result in criminal and/or civil penalties (18 U.S.C. 1001,
1010, 1012; 31 U.S.C. 3729, 3802) Miscellaneous or other Income and Expenses Sub-account Groups. If miscellaneous or other Income
and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6729, 6890, and 7190) exceed the Account Groupings by 10% or
more, attach a separate schedule describing or explaining the miscellaneous income or expense.
</TABLE>
<TABLE>
<CAPTION>
Part II
<S> <C>
1. Total principal payments required under the mortgage, even if payments under a Workout Agreement are less
or more than those required under the mortgage. $ 67,438
2. Replacement Reserve deposits required by the Regulatory Agreement or Amendments thereto, even if payments
may be temporarily suspended or waived. $ 52,260
3. Replacement or Painting Reserve releases which are included as expense items on the Profit and Loss
statement. $ 74,581
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items
on this Profit and Loss statement. $ N/A
- - - ----------------------------------------------------------------------------------------------------------------------------------
Page 2 of 2 Form HUD-92410
* Depreciation 609,443 See notes to financial statements
Amortization 36,185
-------
$645,628
=======
</TABLE>
-7-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
STATEMENT OF PARTNERS' DEFICIT
Year ended December 31, 1994
General Limited
Partner Partners Total
------- -------- -----
Partners' deficit,
beginning $(5,063,692) $(1,687,897) $(6,751,589)
Net loss (752,209) (250,736) (1,002,945)
----------- ----------- -----------
Partners' deficit, ending $(5,815,901) $(1,938,633) $(7,754,534)
=========== =========== ===========
See notes to financial statements
-8-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
STATEMENT OF CASH FLOWS
Year ended December 31, 1994
Cash flows from operating activities
Rental income received $ 2,628,891
Interest received 1,394
Other income received 24,112
Administrative expenses paid (106,000)
Management fees paid (124,833)
Utilities paid (120,609)
Salaries and wages paid (179,861)
Operating and maintenance expenses paid (257,199)
Real estate taxes paid (169,166)
Payroll taxes paid (15,320)
Other taxes and insurance paid (111,753)
Interest paid on mortgage (1,548,198)
Mortgage insurance premium paid (129,651)
Net tenant security deposits paid (1,845)
Decrease in mortgage escrow deposits 20,041
Mortgagor entity expenses paid - interest (217,175)
Decrease in bank overdraft (394)
----------
Net cash used in operating activities (307,566)
Cash flows from investing activities
Decrease in reserve for replacements 22,321
Acquisition of rental property (215,147)
----------
Net cash used in investing activities (192,826)
----------
Cash flows from financing activities
Mortgage principal payments (67,438)
Advances from affiliate 593,414
----------
Net cash provided by financing activities 525,976
----------
NET INCREASE IN CASH 25,584
Cash, beginning 1,250
----------
Cash, ending $ 26,834
==========
(continued)
-9-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
STATEMENT OF CASH FLOWS - CONTINUED
Year ended December 31, 1994
Reconciliation of net loss to net cash used in
operating activities
Net loss $(1,002,945)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation 609,443
Amortization 36,185
Interest on reserve for replacements (551)
Decrease in tenants accounts receivable 12,721
Decrease in mortgage escrow deposits 20,041
Increase in prepaid property insurance (36,739)
Increase in accounts payable 3,227
Increase in accrued interest payable - mortgage 5,532
Increase in accrued interest payable - equity loan 35,509
Decrease in deferred rent credit (8,856)
Increase in accrued management fee 21,106
Tenant security deposits, net (1,845)
Decrease in bank overdraft (394)
----------
Net cash used in operating activities $ (307,566)
==========
See notes to financial statements
-10-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The Partnership was formed as a limited partnership under the laws of the
State of North Carolina on June 10, 1988, for the purpose of constructing
and operating a multi-family rental apartment project under Section 221(d)4
of the National Housing Act. The project consists of 420 units located in
Charlotte, North Carolina and is currently operating under the name of Cross
Creek Apartments. Cash distributions are limited by agreements between the
Partnership and HUD to the extent of surplus cash, as defined by HUD.
Cross Creek of Columbia, Inc. is the general partner for the
Partnership with a 75% ownership interest. Cross Creek of
Columbia, Inc. and Allan Tandy are the limited partners with a
24% and 1% ownership interest, respectively.
Rental Property
---------------
Rental property is carried at cost. Depreciation is provided for in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives using the straight-line method.
The estimated lives used in determining depreciation are:
Land improvements 15 years
Buildings 30 years
Building equipment - fixed 7 years
Maintenance equipment 7 years
Amortization
------------
Mortgage costs are amortized over the term of the related mortgage using the
straight-line method.
Organization costs are amortized over 60 months using the straight-line
method.
Rental Income
-------------
Rental income is recognized for apartment rentals as they accrue. Advance
receipts of rental income are deferred and classified as liabilities until
earned.
Income Taxes
------------
No provision or benefit for income taxes has been included in these
financial statements since taxable income or loss passes through to, and is
reportable by, the partners individually.
-11-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994
NOTE B - GOING CONCERN CONSIDERATIONS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate the continuation
of the Partnership as a going concern. However, the Partnership has incurred
recurring losses from operations, and has a net capital deficiency at
December 31, 1994. In addition, the Partnership's current liabilities exceed
its current assets at December 31, 1994. The Partnership's ability to meet
its obligations is dependent upon its ability to generate operating income.
Due to previously soft market conditions which suppressed rent income,
rental income continues to be insufficient to cover all of the project's
debt service requirements after the payment of operating costs. The general
partner has funded the Partnership's operating deficits by borrowing funds
from affiliates of the general partner. The general partner expects to
continue to borrow funds from its affiliates to cover future operating
deficits until rental income is sufficient to enable the Partnership to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
NOTE C - MANAGEMENT AGENT
The property is managed by an affiliate of the general partner. The current
management agreement provides for a management fee of 5% of gross
collections, as defined in the management agreement, plus $2.50 per unit per
month. The management fee charged to operations was $145,939 in 1994. At
December 31, 1994, unpaid management fees aggregated to $212,351.
NOTE D - RELATED PARTY TRANSACTIONS
Note Payable
------------
Eagle Insured L.P. (Eagle), an affiliate of the general partner, has agreed
to loan up to $4,000,000 to the Partnership for construction costs, closing
costs and accrued interest payments on the mortgage payable. The note is
subordinated to the mortgage payable and is collateralized by a deed of
trust on the real property. The note bears interest at prime plus 1% (9.5%
at December 31, 1994). As of December 31, 1994, the Partnership owed
$3,060,000 under the note. In 1994, interest charged to mortgagor entity
expense amounted to $252,684, which was paid from affiliate advances.
-12-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994
NOTE D - RELATED PARTY TRANSACTIONS - Continued
Equity Loan
-----------
Eagle loaned the Partnership $1,783,900 for the HUD required escrows, cash
requirement and loan fees pertaining to the equity loan. This note is
non-interest bearing unless certain events as defined in the loan agreement
occur and is subordinated to the mortgage payable and the note payable and
is unsecured unless coinsurance is terminated by HUD. If an event of default
occurs, the note shall bear interest at the lesser of 4% above the prime
rate or the highest rate permitted by law. The note matures on January 1,
2030, when all principal is due and payable.
Mortgage Payable
----------------
The mortgage, in the original amount of $17,494,100, is payable to Related
Mortgage Corporation, an affiliate of the general partner. The loan is
payable in monthly principal and interest installments of $134,635 through
January 2030. The loan, which is coinsured by HUD, is collateralized by a
deed of trust on the rental property and bears interest at the rate of
8.95%, plus mortgage insurance premium at .75% per annum.
Under agreements with the mortgage lender and FHA, the Partnership is
required to make monthly escrow deposits for taxes, insurance and
replacement of project assets, and is subject to restrictions as to
operating policies, rental charges, operating expenditures and distributions
to partners.
Mortgage escrow deposits at December 31, 1994 consist of the following:
Property taxes $ 16,267
Hazard insurance 6,819
Mortgage insurance 118,355
--------
$141,441
========
The liability of the Partnership under the mortgage is limited to the
underlying value of the real estate collateral plus other amounts deposited
with the lender.
-13-
<PAGE>
Walsh/Cross Creek Limited Partnership
(a majority-owned subsidiary
of Cross Creek of Columbia, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1994
NOTE C - RELATED PARTY TRANSACTIONS - Continued
Aggregate annual maturities of the mortgage for the next five years
following December 31, 1994 are as follows:
1995 $73,727
1996 80,603
1997 88,120
1998 96,339
1999 105,324
Due to Affiliates
- - - -----------------
During 1994, an affiliate of the general partner advanced $593,413 to the
Partnership of which approximately $215,000 was used to fund capital
improvements, $217,000 was used to pay interest on the note payable and $161,000
was used to fund operations. These advances are noninterest bearing and payable
on demand subject to HUD Regulations. At December 31, 1994, the aggregate
balance of advances due to the affiliate was $2,512,733. Accounts payable at
December 31, 1994 includes $1,815 to an affiliate for payroll related costs.
NOTE E - CONCENTRATION OF CREDIT RISK
The mortgagee maintains cash balances on behalf of the Partnership in one bank.
The balances are insured by the Federal Deposit Insurance Corporation up to
$100,000. As of December 31, 1994, the uninsured portion of the cash balances
held was $54,148.
-14-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
There are no directors or executive officers of the Registrant. The
Registrant is managed by the General Partners. The Related General Partner
assumed the responsibilities of the Tax Matters Partner as of October 1, 1995.
The Registrant, the General Partners and their directors and executive
officers, and any BUC$holder holding more than ten percent of the Registrant's
BUC$ are required to report their initial ownership of such BUC$ and any
subsequent changes in that ownership to the Securities and Exchange Commission
on Forms 3, 4 and 5. The Registrant is not aware of any BUC$ holders who own
more than ten percent of the BUC$. Such executive officers, directors are
required by Securities and Exchange Commission regulators to furnish the
Registrant with copies of all Forms 3, 4 or 5 they file. All of these filing
requirements were satisfied by the officers and directors of the General
Partners on a timely basis for the current year. In making these disclosures,
the Registrant has relied solely on written representations of the General
Partners' directors and executive officers or copies of the reports they have
filed with the Securities and Exchange Commission during and with respect to its
most recent fiscal year.
Prudential-Bache Properties, Inc.
The directors and executive officers of PBP and their positions with
regard to managing the Registrant are as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Thomas F. Lynch, III President, Chief Executive Officer, Chairman of the
Board of Directors and Director
Barbara J. Brooks Vice President - Finance
Eugene D. Burak Vice President
Chester A. Piskorowski Senior Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
</TABLE>
THOMAS F. LYNCH, III, age 38, is the President, Chief Executive
Officer, Chairman of the Board of Directors, and a Director of PBP. He is a
Senior Vice President of Prudential Securities Incorporated ("PSI"), an
affiliate of PBP. Mr. Lynch also serves in various capacities for other
affiliated companies. Mr. Lynch joined PSI in November 1989.
BARBARA J. BROOKS, age 48, is the Vice President-Finance and Chief
Financial Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also
serves in various capacities for other affiliated companies. She has held
several positions within PSI since 1983. Ms. Brooks is a certified public
accountant.
24
<PAGE>
EUGENE D. BURAK, age 51, is a Vice President of PBP. He is a First Vice
President of PSI. Prior to joining PSI in September 1995, he was a management
consultant for three years and was with Equitable Capital Management Corporation
from March 1990 to May 1992. Mr. Burak is a certified public accountant.
CHESTER A. PISKOROWSKI, age 53, is a Senior Vice President of PBP. He
is a Senior Vice President of PSI and is the Senior Manager of the Specialty
Finance Asset Management area. Mr. Piskorowski has held several positions within
PSI since April 1972. Mr. Piskorowski is a member of the New York and Federal
Bars.
FRANK W. GIORDANO, age 54, is a Director of PBP. He is a Senior Vice
President of PSI and Executive Vice President and General Counsel of Prudential
Mutual Fund Management, LLC, an affiliate of PSI. Mr. Giordano also serves in
various capacities for other affiliated companies. He has been with PSI since
July 1967.
NATHALIE P. MAIO, age 46, is a Director of PBP. She is a Senior Vice
President and Deputy General Counsel of PSI and supervises non-litigation legal
work for PSI. She joined PSI's Law Department in 1983; presently she also serves
in various capacities for other affiliated companies.
There are no family relationships among any of the foregoing directors
or executive officers. All of the foregoing directors and executive officers
have indefinite terms.
Related Federal Insured L.P.
The Related General Partner consists of RFI Associates Inc. ("RFI"), a
Delaware corporation, as its sole general partner and Related FIDC Associates, a
New York general partnership, as its limited partner.
The directors and executive officers of RFI are as follows:
Name Position
---- --------
J. Michael Fried President and Director
Stuart J. Boesky Vice President
Alan P. Hirmes Vice President
Richard A. Palermo Treasurer
Stephen M. Ross Director
Lynn A. McMahon Secretary
J. MICHAEL FRIED, 52, is President and a Director of the general
partner of the Related General Partner. Mr. Fried is President, a Director and a
principal shareholder of Related Capital Company ("Capital"), a real estate
finance and acquisition affiliate of the Related General Partner. In that
capacity, he is the chief executive officer of Capital, and is responsible for
initiating and directing all of Capital's syndication, finance, acquisition and
investor reporting activities. Mr. Fried practiced corporate law in New York
City with the law firm of Proskauer Rose Goetz & Mendelsohn from 1974 until he
joined Capital in 1979. Mr. Fried graduated from Brooklyn Law School with a
Juris Doctor degree, magna cum laude; from Long Island University Graduate
School with a Master of Science degree in Psychology; and from Michigan State
University with a Bachelor of Arts degree in History.
25
<PAGE>
STUART J. BOESKY, 40, is Vice President of the general partner of the
Related General Partner. Mr. Boesky practiced real estate and tax law in New
York City with the law firm of Shipley & Rothstein from 1984 until February 1986
when he joined Capital where he presently serves as Managing Director. From 1983
to 1984 Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow
Richard & Rothstein (which subsequently merged with Strook and Strook and Lavan)
and from 1978 to 1980 was a consultant specializing in real estate at the
accounting firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan State
University with a Bachelor of Arts degree and from Wayne State University School
of Law with a Juris Doctor degree. He then received a Master of Law degree in
Taxation from Boston University School of Law.
ALAN P. HIRMES, 42, is a Vice President of the general partner of the
Related General Partner. Mr. Hirmes has been a Certified Public Accountant in
New York since 1978. Prior to joining Capital in October 1983, Mr. Hirmes was
employed by Weiner & Co., certified public accountants. Mr. Hirmes is also a
Managing Director of Capital. Mr. Hirmes graduated from Hofstra University with
a Bachelor of Arts degree.
RICHARD A. PALERMO, 36, is Treasurer of the general partner of the
Related General Partner. Mr. Palermo has been a Certified Public Accountant in
New York since 1985. Prior to joining Related in September 1993, Mr. Palermo was
employed by Sterling Grace Capital Management from October 1990 to September
1993, Integrated Resources, Inc., from October 1988 to October 1990 and E.F.
Hutton & Company, Inc. from June 1986 to October 1988. From October 1982 to June
1986, Mr. Palermo was employed by Marks Shron & Company and Mann Judd Landau,
certified public accountants. Mr. Palermo graduated from Adelphi University with
a Bachelor of Business Administration degree.
STEPHEN M. ROSS, 56, is a Director of the general partner of the
Related General Partner. Mr. Ross is President of The Related Companies, L.P. He
graduated from The University of Michigan with a Bachelor of Business
Administration degree and from Wayne State University School of Law. Mr. Ross
then received a Master of Law degree in taxation from New York University School
of Law. He joined the accounting firm of Coopers & Lybrand in Detroit as a tax
specialist and later moved to New York, where he worked for two large Wall
Street investment banking firms in their real estate and corporate finance
departments. Mr. Ross formed The Related Companies, Inc. ("Related") in 1972, to
develop, manage, finance and acquire subsidized and conventional apartment
developments. To date, Related has developed multi-family properties totaling in
excess of 25,000 units, all of which it manages.
LYNN A. McMAHON, 41, is Secretary of the general partner of the Related
General Partner. Since 1983, she has served as Assistant to the President of
Capital. From 1978 to 1983 she was employed at Sony Corporation of America in
the Government Relations Department.
There are no family relationships between the foregoing directors or
executive officers. All of the foregoing directors and executive officers have
indefinite terms.
26
<PAGE>
Item 11. Executive Compensation.
The Registrant does not pay or accrue any fees, salaries or any other
form of compensation to directors and officers of the General Partners for their
services. Certain officers and directors of the General Partners receive
compensation from affiliates of the General Partners, not from the Registrant,
for services performed for various affiliated entities, which may include
services performed for the Registrant; however, the General Partners believe
that any compensation attributable to services performed for the Registrant is
immaterial. See Item 13. Certain Relationships and Related Transactions for
information regarding compensation to the General Partners.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Other than directors and officers of the general partner of the Related
General Partner who as a group directly own a 99.97% interest in the voting
securities of the Assignor Limited Partner and the general partner of The
Related General Partner, as of March 3, 1997, no director or officer of either
General Partners owns directly or beneficially any interest in the voting
securities of PBP or the Related General Partner.
As of March 3, 1997, no director or officer of either of the General
Partners owns directly or beneficially any of the BUC$ issued by the Registrant.
As of March 3, 1997, no BUC$holder beneficially owns more than five
percent (5%) of the BUC$ issued by the Registrant.
Item 13. Certain Relationships and Related Transactions.
The Registrant has, and will continue to have, certain relationships
with the General Partners and their affiliates. Stephen M. Ross, who holds a
majority interest in the Related General Partner, has made certain guarantees to
the Registrant which are discussed in Note 4 to the financial statements in Item
8. Except as noted, there have been no direct financial transactions between the
Registrant and the directors or officers of the General Partners.
Reference is made to Notes 1 and 4 to the financial statements in Item
8, which identify the related parties and discuss the services provided by these
parties and the amounts paid or payable for their services.
27
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
<TABLE>
<CAPTION>
Sequential
Page
----------
<S> <C>
(a) 1. Financial Statements
Independent Auditors' Report 12
Statements of Financial Condition as of December 31, 1996 and 1995 13
Statements of Income for the years ended December 31, 1996, 1995
and 1994 14
Statements of Changes in Partners' Capital (Deficit) for the years
ended December 31, 1996, 1995 and 1994 15
Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 16
Notes to Financial Statements 17
(a) 2. Financial Statement Schedules
Schedule IV-Mortgage Loans on Real Estate at December 31, 1996 177
All other schedules have been omitted because they are not
required or because the required information is contained in the
financial statements or notes hereto.
Separate Financial Statements for FAI, Ltd., Weatherly Walk
Apartments and Walsh/Cross Creek Limited Partnership (a majority
owned subsidiary of Cross Creek of Columbia, Inc.) 24
</TABLE>
[/R]
28
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(continued)
<TABLE>
<CAPTION>
Sequential
Page
----------
<S> <C>
(a) 3. Exhibits
3(a) and 4(a) Agreement of Limited Partnership, as amended
(incorporated by reference to Exhibits 3(a) and 4(a) to the
Prospectus of the Registrant dated December 11, 1987 filed
pursuant to Rule 424(b) under the Securities Act of 1933, File No.
33-17059)
3(b) and 4(b) Certificate of Limited Partnership, as amended (incorporated by reference to
Exhibits 3(a) and 4(a) to the Registration Statement on Form S-11 (No. 33-17059)
dated November 17, 1987 and to Amendment No. 2 to such Registration Statement
dated December 2, 1987)
3(c) Amendment No. 1 to the Partnership Agreement, dated February 10, 1988
(incorporated by reference to Exhibit 3(c) in Registrant's Annual Report on Form
10-K for the period ended December 31, 1987)
3(d) Amendment No. 2 to the Partnership Agreement , dated October 1, 1995 (incorporated
by reference to Exhibit 3(d) in Registrant's Annual Report on Form 10-K for the
period ended December 31, 1995)
10(a) Mortgage Note, dated June 10, 1988, with respect to Cross Creek
Apartments in Charlotte, North Carolina, in the principal amount
of $17,494,100 (incorporated by reference to Exhibit 10(b) in
Registrant's Current Report on Form 8-K dated June 15, 1988)
10(b) Equity Loan Note, dated June 10, 1988, with respect to Cross Creek
Apartments in Charlotte, North Carolina, in the principal amount
of $1,783,900 (incorporated by reference to Exhibit 10(c) in
Registrant's Current Report on Form 8-K dated June 15, 1988)
10(c) Subordinated Loan Note, dated June 10, 1988, with respect to Cross
Creek Apartments in Charlotte, North Carolina (incorporated by
reference to Exhibit 10(d) in Registrant's Current Report on Form
8-K dated June 15, 1988)
10(d) Mortgage Note, dated August 18, 1988, with respect to Weatherly
Walk Apartments in Fayetteville, Georgia, in the principal amount
of $7,772,500 (incorporated by reference to Exhibit 10(e) in
Registrant's Current Report on Form 8-K dated August 19, 1988)
10(e) Equity Loan Note, dated August 18, 1988, with respect to Weatherly
Walk Apartments in Fayetteville, Georgia, in the principal amount
of $895,200 (incorporated by reference to Exhibit 10(f) in
Registrant's Current Report on Form 8-K dated August 19, 1988)
10(f) Subordinated Loan Note, dated August 18, 1988, with respect to
Weatherly Walk Apartments in Fayetteville, Georgia (incorporated
by reference to Exhibit 10(g) in Registrant's Current Report on
Form 8-K dated August 19, 1988)
</TABLE>
29
<PAGE>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(continued)
<TABLE>
<CAPTION>
(a)3. Exhibits (continued)
Sequential
Page
----------
<S> <C>
10(g) Mortgage Note, dated December 12, 1988, with respect to Woodgate
Manor in Gainesville, Florida, in the principal amount of
$3,110,300 (incorporated by reference to Exhibit 10(h) in
Registrant's Current Report on Form 8-K dated December 12, 1988)
10(h) Equity Loan Note, dated December 12, 1988, with respect to
Woodgate Manor in Gainesville, Florida, in the principal amount of
$339,700 (incorporated by reference to Exhibit 10(i) in
Registrant's Current Report on Form 8-K dated December 12, 1988)
10(i) Subordinated Promissory Note, dated December 12, 1988, with
respect to Woodgate Manor in Gainesville, Florida (incorporated by
reference to Exhibit 10(j) in Registrant's Current Report on Form
8-K dated December 12, 1988)
10(j) Loan Agreement with Walsh/Cross Creek Limited Partnership and Cross Creek of
Columbia, Inc. dated August 15, 1990 (incorporated by reference to Exhibit 10(o)
in Registrant's Annual Report on Form 10-K for the period ended December 31, 1990)
10(k) Guarantee of Cross Creek Apartments by Stephen M. Ross (incorporated by reference
to Exhibit 10(p) in Registrant's Annual Report on Form 10-K for the period ended
December 31, 1991)
10(l) Guarantee Agreement, dated November 13, 1992, by and between the
Registrant and Stephen M. Ross (incorporated by reference to
Exhibit 10(q) in the Registrant's Annual Report on Form 10-K for
the period ended December 31, 1993)
10(m) Amendment to the Guarantee Agreement, dated October 20, 1993, by
and between the Registrant and Stephen M. Ross (incorporated by
reference to Exhibit 10(r) in the Registrant's Annual Report on
Form 10-K for the period ended December 31, 1993)
27 Financial Data Schedule (filed herewith) 178
(b) Reports on Form 8-K
Current report on Form 8-K dated December 31, 1996 was filed on
January 10, 1997 relating to a preliminary approval order with
respect to the settlement of class action litigation.
</TABLE>
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
EAGLE INSURED L.P.
By: Related Federal Insured L.P.
A Delaware corporation, General Partner
By: RFI Associates, Inc.
A Delaware corporation, general partner
Date: April 25, 1997
By: /s/ J. Michael Fried
------------------------
J. Michael Fried
President and Director
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
Date: April 25, 1997
By: /s/ Thomas F. Lynch, III
-------------------------
Thomas F. Lynch, III
President, Chief Executive Officer and
Chairman of the Board of Directors
31
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the report has been signed below by the following persons on behalf by the
Registrant and in the capacities (with respect to the General Partners) and on
the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- - - --------- ----- ----
<S> <C> <C>
President and Director of RFI Associates, Inc.,
/s/ J. Michael Fried general partner of Related Federal Insured, L.P.
- - - ------------------------------ (principal executive officer) April 25, 1997
J. Michael Fried
Vice President of RFI Associates, Inc.,
/s/ Alan P. Hirmes general partner of Related Federal Insured, L.P.
- - - ------------------------------ (principal financial officer) April 25, 1997
Alan P. Hirmes
Treasurer of RFI Associates, Inc.,
/s/ Richard A. Palermo general partner of Related Federal Insured, L.P.
- - - ------------------------------ (principal accounting officer) April 25, 1997
Richard A. Palermo
/s/ Stephen M. Ross Director of RFI Associates, Inc.,
- - - ------------------------------ general partner of Related Federal Insured, L.P. April 25, 1997
Stephen M. Ross
President, Chief Executive Officer and
/s/ Thomas F. Lynch, III Chairman of the Board of Directors
- - - ------------------------------ of Prudential-Bache Properties, Inc. April 25, 1997
Thomas F. Lynch, III
/s/ Barbara J. Brooks Vice President and Chief Financial Officer
- - - ------------------------------ of Prudential-Bache Properties, Inc. April 25, 1997
Barbara J. Brooks
/s/ Eugene D. Burak Vice President
- - - ------------------------------ of Prudential-Bache Properties, Inc. April 25, 1997
Eugene D. Burak
/s/ Frank W. Giordano
- - - ------------------------------
Frank W. Giordano Director of Prudential-Bache Properties, Inc. April 25, 1997
/s/ Nathalie P. Maio
- - - ------------------------------
Nathalie P. Maio Director of Prudential-Bache Properties, Inc. April 25, 1997
</TABLE>
32
<PAGE>
EAGLE INSURED L.P.
Schedule IV - Mortgage Loans on Real Estate
December 31, 1996
<TABLE>
<CAPTION>
Periodic Carrying
Final Payment Face Amount Amount
Interest Closing Maturity Terms Prior of Mortgage of Mortgage
Description (1) Rate (2) Date Date (3) (4)(5) Liens Loans Loans(6)(7)(8)
- - - --------------- -------- ---- -------- ------ ----- ----- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
First Mortgage Loans:
Cross Creek
Apartments (9) 8.95% 6/10/88 1/1/30 Monthly None $17,494,100 $17,106,744
Weatherly Walk
Apartments 8.95% 8/18/88 11/1/29 Monthly None 7,772,500 7,553,454
Woodgate Manor (9) 8.95% 12/12/88 1/1/24 Monthly None 3,110,300 2,963,056
----------- -----------
$28,376,900 $27,623,254
=========== ===========
</TABLE>
(1) All properties are multifamily residential apartment complexes.
(2) Includes a servicing fee of 0.07% paid by the developer to Related Mortgage
Corporation (an affiliate of the Related General Partner).
(3) The Registrant may call for prepayment of the total loan at any time after
the tenth anniversary of the date the mortgage loan was funded.
(4) Monthly payments include principal and interest and are made at a level
amount over the life of the mortgage loan until maturity. See discussion
regarding additional interest in Item 1, "Business-Structure of mortgage
loans and equity loans."
(5) For a period of five years from the loan closing date, the owners of the
properties did not have the right to prepay the mortgage loans without the
consent of the General Partners. Beginning in the sixth year and
thereafter, any prepayment during one calendar year in an amount in excess
of 15% of the original principal amount of the mortgage loan will be
subject to a prepayment penalty. The prepayment penalty is 5% in the sixth
year and decreases 1% per year thereafter.
(6) Carrying amount of mortgage loans for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Beginning Balance $ 27,764,817 $ 27,892,516 $ 41,524,722
Collections of principal (141,563) (127,699) (118,595)
Repayment of Tivoli Lakes (10) 0 0 (13,513,611)
------------ ------------- --------------
Ending Balance $ 27,623,254 $ 27,764,817 $ 27,892,516
============ ============= ==============
</TABLE>
(7) The aggregate cost of the mortgage loans for Federal income tax purposes
for the tax year ended December 31, 1996 is $27,623,254.
(8) All mortgage loans are current with respect to principal and interest.
(9) The General Partnership interest of the project is held by an affiliate of
the Related General Partner.
(10) Tivoli Lakes Apartments was sold on January 31, 1994 and the related
Mortgage loan was paid in full. See Note 3 to the financial statements in
the Registrant's Annual Report in Item 8.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the financial
statements for Eagle Insured L.P. and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<CIK> 0000821203
<NAME> Eagle Insured L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,228,487
<SECURITIES> 0
<RECEIVABLES> 30,887,641
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,997
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 33,055,428
<CURRENT-LIABILITIES> 106,007
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 32,949,421
<TOTAL-LIABILITY-AND-EQUITY> 33,055,428
<SALES> 0
<TOTAL-REVENUES> 2,864,151
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 213,213
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,650,938
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,650,938
<EPS-PRIMARY> .93
<EPS-DILUTED> 0
</TABLE>
