FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year-ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-18756
ASSISTED HOUSING FUND L.P. I
(Exact name of registrant as specified in its charter)
Washington 91-1391150
(State of organization) IRS Employer Identification No.)
1191 Second Avenue, Suite 904, Seattle, WA 98101 (Address of
principal executive offices) (Zip code)
Registrant's telephone number, including area code: (206) 461-4782
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of class)
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
The Exhibit Index appears at page 18. There are 18 pages.
<PAGE>
PART I
Item 1. Business
Assisted Housing Fund L.P. I (the Partnership) is a limited partnership formed
on November 2, 1987 and organized under the laws of the State of Washington.
The Partnership raised $3,511,000 from the sale of 703 units of limited
partnership through a public offering completed on April 14, 1989. The
Partnership has invested as a limited partner in eleven other limited
partnerships (Property Partnerships) which develop, own, and operate residential
apartment complexes located in small towns across the country. Each apartment
complex benefits from several forms of federal assistance programs and qualifies
for low-income housing credits (Tax Credits) pursuant to the Internal Revenue
Code by the Tax Reform Act of 1986. There are 332 partners in the Partnership.
The Partnership's general partner is Murphey Favre Properties, Inc., (MFP), a
wholly-owned subsidiary of WM Financial, Inc. which is a wholly-owned subsidiary
of Washington Mutual Bank (WMB), a wholly- owned subsidiary of Washington
Mutual, Inc.
Table A on page 4 lists the Property Partnerships in which the Partnership has
invested. Item 7 of this Report contains other significant information with
respect to such Property Partnerships.
Each Property Partnership has, as its general partner (developer), one or more
individuals or an entity not affiliated with the Partnership or MFP. In
accordance with the Partnership Agreements under which such entities are
organized, the Partnership depends on the developers for the management of each
Property Partnership. As of December 31, 1998, the Property Partnerships and
their developers were:
<PAGE>
PROPERTY PARTNERSHIP DEVELOPER GENERAL PARTNER
1. Fairview Apartments Company Limited Rural Housing Corporation
Partnership (Fairview)
2. Ionia Limited Divided Housing Rural Housing Corporation
Association (LDHA) Limited
Partnership (Ionia)
3. Logan Apartments Company Limited Rural Housing Corporation and
Partnership (Logan) Arthur H. Winer
4. Rolling Brook II LDHA Limited Rural Housing Corporation
Partnership (Rolling Brook)
5. Wexford Manor LDHA Limited Rural Housing Corporation
Partnership (Wexford
6. Blue Heron Apartment Associates Dujardin Development Co.
Limited Partnership (Blue Heron)
7. Glenwood Apartment Associates Limited Dujardin Development Co.
Partnership (Glenwood)
8. Pacific Place Apartment Associates Dujardin Development Co.
Limited Partnership (Pacific Place)
9. Cove LDHA Limited Partnership (Cove) Kenneth & Lowell Werth
10. Washington Street LDHA Limited Kenneth & Lowell Werth
Partnership (Washington)
11. Fayette Hills Limited Partnership LeRoy Eslinger and
(Fayette) Douglas E. Pauley
A wholly-owned subsidiary of MFP, Murphey Favre Housing Managers (MFHM), is a
special limited partner in each Property Partnership and has certain approval
rights over the actions by the developers of the Property Partnerships.
<PAGE>
Table A
SELECTED PROPERTY
PARTNERSHIP DATA
<TABLE>
<CAPTION>
Property Date Interest Number of
Partnerships Location Acquired Apt. Units
<S> <C> <C> <C>
Fairview Plymouth, WI December 1, 1989 40
Ionia Ionia, MI December 1, 1989 24
Logan Logan, OH December 1, 1989 32
Rolling Brook Algonac, MI December 1, 1989 24
Wexford Onsted, MI December 1, 1989 24
Blue Heron Bainbridge Island, WA March 20, 1989 40
Glenwood Lake Stevens, WA June 1, 1988 46
Pacific Place South Bend, WA October 4, 1988 24
Cove Big Rapids, MI July 12, 1989 48
Washington Perry, MI July 12, 1989 24
Fayette Fayetteville, WV December 1, 1989 68
----
394
</TABLE>
<PAGE>
Item 2. Properties
Rental property consists of apartment projects renting to low- and
moderate-income tenants.
As of December 31, 1998, the Property Partnerships had placed rental properties
into operation in the following locations:
Date Placed
Location In Service
Plymouth, WI June 13, 1990
Ionia, MI August 8, 1990
Logan, OH January 11, 1991
Algonac, MI March 8, 1990
Onsted, MI February 21, 1990
Bainbridge Island, WA May 1, 1990
Lake Stevens, WA April 1, 1989
South Bend, WA May 1, 1989
Big Rapids, MI March 1, 1990
Perry, MI January 1, 1990
Fayetteville, WV December 1, 1989
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters
The Registrant's securities consist of 703 units of Limited Partnership
Interest, valued at $5,000 per unit, for which there is no market. Units may
only be sold, assigned, exchanged or otherwise transferred upon compliance with
the terms of the Limited Partnership Agreement.
As of the date of filing of this report, the Partnership has 332 limited
partners and one general partner.
The Partnership has not made any distributions in 1996, 1997 and 1998 and does
not anticipate making any significant distributions in the future.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C>
Rental Revenue $1,505,575 $1,448,422 $1,415,977 $1,381,245 $1,336,598
Interest
Revenue 24,835 24,538 21,800 21,158 18,868
Income (Loss) (500,629) (535,351) (618,708) (615,345) (600,996)
Income (Loss)
per Limited
Partnership
Unit (705) (754) (871) (867) (846)
Total Assets 11,949,410 12,514,876 13,022,213 13,620,436 14,107,470
Mortgage Notes
Payable
12,348,628 $12,375,470 $12,399,750 $12,422,388 $12,442,696
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
During the year, management's emphasis was on the continued operation of eleven
properties. At December 31, 1998, five properties were 100% occupied, three
were between 94% and 96% occupied and three were between 80% and 88% occupied.
The three properties with the lowest occupancy, located in Michigan and West
Virginia, continue to have cash flow problems. As a result, property taxes for
the three properties were delinquent at December 31, 1998 although other
obligations were current. These properties will continue to be closely
monitored by management.
The properties are located in rural towns with populations of 14,000 or less.
Five properties are located in Michigan, three in Washington, and one each in
Ohio, West Virginia and Wisconsin. The properties range in size from 24 to 68
units for a total portfolio of 394 units.
Results of Operations
On a consolidated basis, net income (loss) before depreciation for 1998, 1997
and 1996 was $134,348, $96,827, and $12,240, respectively. Rental revenues for
1998 were up 3.9% from 1997 as compared to increases of 2.3% from 1996 to 1997,
and 3% from 1995 to 1996. Expenses for 1998, including depreciation, were up
0.7% over 1997, while expenses, includin depreciation, for 1997 and 1996 were
up 0.9% and 1.8% over 1996 and 1995, respectively.
The Partnership paid $22,690, $25,726, and $22,226, in accounting expenses for
the Partnership for 1998, 1997 and 1996, respectively.
Interest revenue for 1998 increased 1.4% from 1997 and decreased 0.9% from 1996
to 1997.
<PAGE>
Liquidity and Capital Resources
The Partnership completed its public offering of units of limited partnership on
April 14, 1989, with proceeds totaling $3,511,000 from 339 limited partners. As
of December 31, 1998, the Partnership had invested $2,542,000 of offering
proceeds in eleven Property Partnerships.
Offering proceeds equal to $175,750 were reserved by the Partnership to fund its
operating expenses. As of December 31, 1998, the cash reserves of the
Partnership totaled $13,276. It is expected that the Partnership will draw on
the reserves in future years to fund accounting and other operating expenses of
the Partnership. Nominal cash distributions from the Property Partnerships will
supplement the cash reserves. In 1998, the Partnership received $9,930 in
distributions from the Property Partnerships. The expectation is that all cash
distributions received from the Property Partnerships will be used to defray the
operating expenses of the Partnership and thus it is not likely any distribution
will be made to the limited partners.
The Partnership is not required to fund additional amounts to the Property
Partnerships based on each Property Partnership agreement. Additionally, each
Property Partnership is operated as an individual project, and without any
contractual arrangements of any kind between the Property Partnerships. In 1998,
four properties generated positive cash flow and seven properties generated
deficit cash flow. The deficits were funded from rental operating cash and
from authorized withdrawals from the reserve accounts.
As of December 31, 1998, one developer general partner had advanced $14,209 to a
Property Partnership under the deficit funding agreement in place during the
guarantee period. The guarantee periods ended in 1991 and 1992. The developer
general partners are no longer obligated to fund operating deficits.
The Property Partnerships financed construction with a combination of bank
financing and funds from the Partnership. The permanent loans for the properties
were provided by the Farmers Home Administration, now known as Rural Housing
Service (RHS), under Section 515 of the National Housing Act of 1949, as
amended. RHS provides an interest credit to the Property Partnerships which
reduces the interest rates stated in the mortgage notes to an effective 1
percent rate over the lives of the mortgages. All property loans are current.
Capital expenditures on the properties are expected to increase over the initial
years'capital expenses due to the natural aging process of the newly constructed
(10 properties) or newly rehabilitated (1 property) projects at the time of the
formation of the Partnership. As part of RHS loan requirements,a reserve account
is funded at an annual rate of 1% of the original property loan balance until
the balance equals 10% of the original loan balance. Additions to reserve
accounts are funded from property operations and are established for future
capital expenditures.
<PAGE>
Included in cash deposits on the consolidated balance sheets were $13,276 and
$8,195 held as deposits by the Partnership in WMB accounts as of December 31,
1998 and 1997, respectively. As discussed in Part I, Item 1, WMB is affiliated
with MFP.
There are no additional acquisitions nor any dispositions planned.
Regulatory Restrictions
Because the properties are operated under RHS loans and benefit from the federal
low-income housing tax credit program, the properties are restricted as to their
use and must comply with the requirements of the respective federal programs.
The tenants of all the properties must be tax credit and RHS eligible tenants.
It is management's goal to have all units, except for managers' units, occupied
by tax credit eligible tenants. In order to meet established income
requirements, tenants must not earn more than 60% of the median income for the
areas in which the properties are located. Seven of the eleven properties are
further restricted to renting apartment units only to senior citizens.
Additionally, the properties cannot be sold without prior approval of the RHS,
cannot make more than an 8% cash distribution annually to its owner (as
described in Note 6 to the Partnership's financial statements), and must remain
under the low-income housing tax credit program for 15 years to avoid any
recapture of the low-income housing tax credits. Furthermore, pursuant to RHS
loan agreements, RHS may refuse prepayment of the loans and require the
properties be used for the purpose of providing housing to eligible tenants for
a minimum period of 20 years.
Inflation
Operating expenses and rental revenues of each property are subject to
inflationary factors. Low rates of inflation could result in rental revenues
remaining constant or increasing at slower rates than in periods of high
inflation. High rates of inflation raise the operating expenses of the
properties, and to the extent the increased operating expenses are not passed on
to the tenants by rental increases, the properties' operation could be adversely
affected.
<PAGE>
Tax Credit
As of December 31, 1998, 1997 and 1996, tax credits equal to 15.17%, 15.17% and
15.17%, respectively, of the limited partners' capital contributions have been
generated.
Impact of Year 2000
The Partnership's general partner has reviewed the potential exposure due to
computer problems that may arise subsequent to 1999. We are currently in the
process of taking the necessary precautions to minimize any disruptions to
normal business operations. The Partnership may remain susceptible to
consequences of the Year 2000 issue because of the inherent uncertainty of all
systems from outside vendors, or other companies, relied upon by the Partnership
and/or Property Partnerships.
Item 8. Financial Statements and Supplementary Data
The financial statements of Assisted Housing Fund L.P. I as of December 31,
1998, 1997 and 1996, together with the independent auditors' reports thereon,
are filed herewith in Part IV, Item 14 of this Form 10-K.
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
Murphey Favre Properties, Inc. (MFP) is the managing general partner of the
Partnership. The Registrant has no employees.
Item 11. Executive Compensation
Name of Individual Capacities
or Number of in Which Cash
Persons in Group Served Compensation
Year Ended Year Ended Year Ended
12/31/98 12/31/97 12/31/96
None
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent
Class Owner Owner of Class
General Murphey Favre (1) 100%
Partner's Properties, Inc.
Interest Suite 904
1191 Second Avenue
Seattle, WA 98101
(1) The General Partner's interest is owned of record and beneficially by
Murphey Favre Properties, Inc. Its capital interest as of December 31, 1998 is
($51,370).
Item 13. Certain Relationships and Related Transactions
The Property Partnerships have entered into certain agreements with the
developer or its affiliates under which the developer or its affiliates receive
compensation, perform services, or make loans. Note 2 of the Notes to Financial
Statements, which are filed in Part IV, Item 14 of this Form 10-K, provides
additional information pertaining to the individual Property Partnerships.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
(a) 1. The following financial statements of Assisted Housing Fund L.P.
I and subsidiaries are incorporated by reference in Part II and are
attached as pages 1 to 13 of Exhibit 13.
Page of Annual
Report
Independent Auditor's Report.......................... 1
Balance Sheets as of December 31, 1998 and 1997....... 2
Statements of Operations for each of the years ended
December 31, 1998, 1997 and 1996...................... 3
Statements of Partners' Equity (Deficit) for each of
the years ended December 31, 1998, 1997 and 1996...... 4
Statements of Cash Flows for each of the years ended
December 31, 1998, 1997 and 1996...................... 5
Notes to Financial Statements for each of the years
ended December 31, 1998, 1997 and 1996............... 6-12
2. Financial statement schedules Page of Form 10-K
Independent Auditor's Report on Schedules............. 13
Schedule III - Real Estate and Accumulated
Depreciation.......................................... 14-16
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are omitted because either they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. Exhibits: All exhibits to this report are listed in the
Schedule Index at page 17.
(b) No reports on Form 8K were filed during 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASSISTED HOUSING FUND L.P. I
Registrant
By: Murphey Favre Properties, Inc.
Its Managing General Partner
By: Herbert F. Fox /s/ Date: 3/31/99
Herbert F. Fox, Vice President
and Principal Financial Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
By: Murphey Favre Properties, Inc.
By: Kerry K. Killinger /s/ Date: 3/31/99
Kerry K. Killinger
Its Director
By: David G. Murphy /s/ Date: 3/31/99
David G. Murphy
Its Director
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON SCHEDULES
General Partner and Limited Partners
Assisted Housing Fund L.P. I
Seattle, Washington
We have audited the consolidated financial statements of Assisted Housing Fund
L.P. I and its subsidiaries, as of and for the years ended December 31, 1998,
1997 and 1996 listed under Item 14(a)1 hereof and have issued our report thereon
dated March 23, 1999 (which report is incorporated by reference elsewhere in
this Form 10-K). In the course of our audits of such financial statements, we
have also audited the schedules listed under Item 14(a)2 for the years ended
December 31, 1998, 1997 and 1996. These schedules are the responsibility of the
Partnership's management. Our responsibility is to express an opinion based on
our audits. In our opinion, these schedules present fairly, in all material
respects, when read in conjunction with the related financial statements, the
information therein set forth.
Blume Loveridge & Co., PLLC
Bellevue, Washington
March 23, 1999
<PAGE>
ASSISTED HOUSING FUND LP I
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Year Ended December 31, 1998
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D
- --------------------------------------------------------------------------------------------------------
Costs Capitalized
Subsequent
Description Encumbrances Initial Cost to Partnership to Acquisition
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Buildings & Personal
Land Improvements Property Improvements
-----------------------------------------------------------------
Fairview $ 1,279,581 $ 55,413 $ 1,580,336
Ionia 714,791 24,000 917,910
Logan 999,705 55,129 1,208,945
Rolling Brook 751,449 35,000 927,015
Wexford 729,539 22,000 944,922
Blue Heron 1,477,409 248,569 1,622,709
Glenwood 1,446,793 145,000 1,595,734
Pacific Place 760,929 30,000 888,081
Cove 1,439,385 47,000 1,718,133
Washington 719,033 8,000 875,004
Fayette 2,056,856 53,000 $1,815,992 $40,800 599,691
AHF 444,240
-----------------------------------------------------------------------------------
Total $12,375,470 $723,111 $2,260,232 $40,800 $12,878,480
===================================================================================
Construction in
Progress $0 $0
================== ====================
</TABLE>
<PAGE>
ASSISTED HOUSING FUND LP I
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Continued) Year Ended December 31, 1998
<TABLE>
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
- ---------------------------------------------------------------------------------------------------------------------------------
Description Gross Amount at Which Carried at End of Period Accumulated Date of Date of Life on
Depreciation Construction Acquisition Which
Depreciation
in Latest
Income
Statement
is Computed
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Land Buildings Land Total
Improvements
and Personal
Property
------------------------------------------------------
Fairview $ 55,413 $ 1,418,320 $ 162,016 $ 1,635,749 $ 556,979 13-Jun-90 27.5/15/10
Ionia $ 24,000 805,590 112,320 941,910 321,865 08-Aug-90 27.5/15/10/7
Logan $ 55,129 1,022,974 185,971 1,264,074 418,566 11-Jan-91 27.5/15/10
Rolling Brook $ 35,000 794,263 132,752 962,015 339,915 08-Mar-90 27.5/15/10/7
Wexford $ 22,000 815,821 129,101 966,922 348,758 21-Feb-90 27.5/15/10
Blue Heron $248,569 1,890,967 90,217 2,229,753 663,017 01-May-90 27.5/10
Glenwood $145,000 1,701,975 47,676 1,894,651 645,015 01-Apr-89 27.5/10/7
Pacific Place $ 30,000 943,619 21,532 995,151 351,990 01-May-89 27.5/10/7
Cove $ 47,000 1,635,278 82,855 1,765,133 589,757 01-Mar-90 27.5/10/7
Washington $ 8,000 836,929 38,075 883,004 301,113 01-Jan-90 27.5/10
Fayette $ 53,000 2,341,984 114,499 2,509,483 859,513 01-Dec-89 27.5/15/10/7
AHF $ 0 444,240 444,240 144,207 Various
------------------------------------------------------------------
Total $723,111 $14,651,960 $1,117,014 $16,492,085 $5,540,695
====================================================================
Construction in
Progress 0
==============
</TABLE>
<PAGE>
ASSISTED HOUSING FUND LP I
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Continued) Year Ended December 31, 1998
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
REAL ESTATE December 31, 1996 December 31, 1997 December 31, 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $16,410,747 $16,434,240 $16,450,047
Additions during period:
Property acquisitions $ 0 $ 0 $ 0
Acquisitions through foreclosure 0 0 0
Other acquisitions 0 0 0
Improvements etc. (New Construction) 23,493 15,807 42,038
Other (Acquisition Cost) 0 0 0
---------------------------------------------------------------------------
$16,434,240 $16,450,047 $16,492,085
Deductions during period:
Cost of real estate sold $ 0 $ 0 $ 0
Other (describe) 0 0 0 0 0 0
---------------------------------------------------------------------------
Balance at close of period $16,434,240 $16,450,047 $16,492,085
=========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
ACCUMULATED DEPRECIATION December 31, 1996 December 31, 1997 December 31, 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of period $3,642,593 $4,273,541 $4,905,719
Existing property: 630,948 632,178 634,977
Depreciation on additions:
Property acquisitions $ 0 $0 $0
Acquisitions through foreclosure 0 0 0
Other acquisitions 0 0 0
Improvements etc. (New Construction) 0 0 0
Other (Acquisition Costs) 0 0 0
--------------------------------------------------------------------------
$4,273,541 $4,905,719 $5,540,696
Depreciation on deductions:
Cost of real estate sold $ 0 $0 $0
Other (describe) 0 0 0 0 0 0
--------------------------------------------------------------------------
Balance at close of period $4,273,541 $4,905,719 $5,540,696
========== ========== ==========
</TABLE>
<PAGE>
Exhibit Incorporated by
No. Reference From
3 Certificate of Limited Partnership Exhibit C to Form S-11
Registration Statement
No. 91-1391150
13 Annual Report to Security Holders Attached hereto
<PAGE>
ASSISTED HOUSING FUND L.P. I
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR'S REPORT
FOR THE YEARS ENDED DECEMBER 31,
1998, 1997 AND 1996
<PAGE>
CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT....................................... 1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets........................................ 2
Consolidated Statements of Operations.............................. 3
Consolidated Statements of Partners' Equity (Deficit).............. 4
Consolidated Statements of Cash Flows.............................. 5
Notes to Financial Statements....................................... 6-12
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Partners
Assisted Housing Fund L.P. I
Seattle, Washington
We have audited the accompanying consolidated balance sheets of Assisted Housing
Fund L.P. I and its subsidiaries, as of December 31, 1998 and 1997, and the
related consolidated statements of operations, partners' equity (deficit) and
cash flows for the years ended December 31, 1998, 1997 and 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Assisted Housing
Fund L.P. I and its subsidiaries, as of December 31, 1998 and 1997, and the
results of their operations and cash flows for the years ended December 31,
1998, 1997 and 1996, in conformity with generally accepted accounting
principles.
Blume Loveridge & Co., PLLC
Bellevue, Washington
March 23, 1999
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
1998 1997
ASSETS
<S> <C> <C>
Rental property and equipment, at cost:
Buildings and equipment $15,768,974 $15,726,936
Accumulated depreciation (5,540,696) (4,905,719)
----------- -----------
10,228,278 10,821,217
Land 723,111 723,111
----------- -----------
10,951,389 11,544,328
Cash:
Rental operation 150,756 150,694
Partnership 13,276 8,195
----------- -----------
164,032 158,889
Restricted deposits:
Tenant trust - security deposits 108,063 103,562
Reserve accounts 678,773 644,775
----------- -----------
786,836 748,337
Other assets:
Accounts receivable 33,715 36,968
Accounts receivable - DGP's 5,671 4,854
Prepaid expenses 7,767 21,500
----------- -----------
47,153 63,322
----------- -----------
$11,949,410 $12,514,876
=========== ===========
</TABLE>
Continued on page 2A.
Page 2
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (CONTINUED)
<TABLE>
<CAPTION>
December 31,
1998 1997
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
<S> <C> <C>
Liabilities:
Mortgage notes payable $12,348,628 $12,375,470
Assessment payable 47,998 54,855
Accounts payable 251,672 260,661
Due to affiliates 609,100 577,665
Accrued liabilities 107,926 135,852
Security deposits payable 106,620 106,172
----------- -----------
13,471,944 13,510,675
Minority interests in property
partnerships 493,946 519,852
Contingency
Partners' equity (deficit):
Limited partners (1,964,910) (1,469,287)
General partner (51,370) (46,364)
----------- -----------
(2,016,280) (1,515,651)
----------- -----------
$11,949,410 $12,514,876
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Page 2A
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Revenue:
Rent $1,505,575 $1,448,422 $1,415,977
Miscellaneous 73,344 84,211 88,400
---------- ---------- ----------
1,578,919 1,532,633 1,504,377
Expenses:
Operating and maintenance 235,793 222,944 208,657
Utilities 243,754 257,935 254,135
General and administrative 359,323 344,847 347,471
Taxes and insurance 270,871 264,774 251,468
Interest 319,192 329,756 336,895
Depreciation 634,977 632,178 630,948
---------- ---------- ----------
2,063,910 2,052,434 2,029,574
---------- ---------- ----------
(484,991) (519,801) (525,197)
Other revenues (expenses):
Interest earned on
partnership cash 92 253 280
Minority interest
in operations 26,022 26,384 26,435
Accounting and auditing (22,690) (25,726) (22,226)
General and administrative (13,685) (10,991) (18,081)
Partnership management fees - - (74,517)
Incentive management fees (2,434) (3,329) (3,952)
Miscellaneous (2,943) (2,141) (1,450)
---------- ---------- ----------
(15,638) (15,550) (93,511)
---------- ---------- ----------
Net income (loss) $ (500,629) $ (535,351) $ (618,708)
========== ========== ==========
Net income (loss) per
unit of limited
partnership interest $ (705) $ (754) $ (871)
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
Page 3
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
<S> <C> <C> <C>
Profit/loss percentage 99.0% 1.0% 100.0%
=========== ======== =========
Balance - January 1, 1996 $ (326,769) (34,823) (361,592)
Net income (loss) for 1996 (612,521) (6,187) (618,708)
----------- -------- -----------
Balance - December 31, 1996 (939,290) (41,010) (980,300)
Net income (loss) for 1997 (529,997) (5,354) (535,351)
----------- -------- -----------
Balance - December 31, 1997 (1,469,287) (46,364) (1,515,651)
Net income (loss) for 1998 (495,623) (5,006) (500,629)
----------- -------- -----------
Balance - December 31, 1998 $(1,964,910) $(51,370) $(2,016,280)
=========== ======== ===========
</TABLE>
See accompanying notes to financial statements.
Page 4
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(500,629) $(535,351) $(618,708)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation 634,977 632,178 630,948
Minority interests in
operations (26,022) (26,384) (26,435)
Changes in certain assets
and liabilities:
Accounts receivable 2,436 (12,953) 8,082
Prepaid expenses 13,733 5,580 (16,402)
Accounts payable (8,989) 515 19,375
Accrued liabilities (27,926) 60,365 (2,797)
Due to affiliates 31,435 23,131 62,542
Security deposits (4,053) 4,580 (1,030)
--------- --------- ---------
Net cash provided by
operating activities 114,962 151,661 55,575
Cash flows from investing activities:
Purchase of depreciable
property (42,038) (15,807) (23,493)
Deposits to reserve accounts (158,018) (132,444) (140,217)
Withdrawals from
reserve accounts 124,020 40,415 115,969
-------- -------- ---------
Net cash provided (used) by
investing activities (76,036) (107,836) (47,741)
</TABLE>
Continued on page 5A.
Page 5
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from financing activities:
Minority partners' capital
contributions $ (84) $ (117) $ (156)
Mortgage principal payments (26,842) (24,280) (22,638)
Assessment principal payments (6,857) (6,857) (6,857)
-------- -------- -------
Net cash provided (used) by
financing activities (33,783) (31,254) (29,651)
-------- -------- --------
Net increase (decrease)
in cash 5,143 12,571 (21,817)
Cash - beginning of year 158,889 146,318 168,135
-------- -------- --------
Cash - end of year $164,032 $158,889 $146,318
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest $319,363 $327,080 $340,001
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
Page 5A
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES
General
Assisted Housing Fund L.P. I (the Partnership) is a limited partnership which
was organized November 2, 1987 under the laws of the state of Washington to
acquire limited partnership interests in other partnerships (the Property
Partnerships), each of which has been organized to develop or purchase a low- or
moderate-income apartment project. The Partnership's general partner is Murphey
Favre Properties, Inc. (MFP), a wholly-owned subsidiary of WM Financial, Inc.,
which is a wholly-owned subsidiary of Washington Mutual Bank (WMB), a
wholly-owned subsidiary of Washington Mutual, Inc. As of December 31, 1998, 332
limited partners held the 703 units of limited partnership interests
outstanding.
The Partnership has invested as a limited partner in eleven Property
Partnerships. The developer of each apartment project serves as the general
partner (DGP) of the respective Property Partnership.
The properties owned by the Property Partnerships are located in Michigan,
Wisconsin, Ohio, West Virginia and Washington. The apartment projects were
financed and constructed under Section 515 of the National Housing Act, as
amended (administered by the U.S. Department of Agriculture, Rural Housing
Service (RHS)). Under this program, the Property Partnerships provide housing to
low- and moderate-income tenants. Lower rental charges to tenants are recovered
by the Property Partnerships through an interest reduction program which reduces
the effective interest rate over the lives of the mortgages to 1 percent and a
rental assistance program whereby RHS pays the Property Partnerships for a
portion of qualified tenant rents. Construction of the apartment projects began
between June, 1988 and May, 1990 and rental operations began between April, 1989
and February, 1991.
Additionally, in exchange for an allocation of federal low-income housing tax
credits under Section 42 of the Internal Revenue Code, each Property Partnership
has entered into an agreement with an agency of the state in which the apartment
project is located, whereby the Property Partnership has agreed to maintain all
apartment units as both rent restricted and occupied by low-income tenants for a
minimum period of 15 years.
During the years ended December 31, 1998, 1997 and 1996, rental revenue from RHS
totaled $451,730, $435,076, and $408,796, representing 28.6 percent, 28.4
percent and 27.2 percent of total revenue, respectively.
Page 6
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES -
(CONTINUED)
Principles of Consolidation
The financial statements include the financial statements of the Partnership and
the following eleven Property Partnerships in which it has invested as a limited
partner:
Fairview Apartments Company Limited Partnership (Fairview)
Ionia Limited Dividend Housing Association Limited Partnership (Ionia)
Logan Apartments Company Limited Partnership (Logan)
Rolling Brook II Limited Dividend Housing Association Limited
Partnership (Rolling Brook)
Wexford Manor Limited Dividend Housing Association Limited Partnership
(Wexford)
Blue Heron Apartment Associates Limited Partnership (Blue Heron)
Glenwood Apartment Associates Limited Partnership (Glenwood)
Pacific Place Apartment Associates Limited Partnership (Pacific Place)
Cove Limited Dividend Housing Association Limited Partnership (Cove)
Washington Street Limited Dividend Housing Association Limited
Partnership (Washington)
Fayette Hills Limited Partnership (Fayette)
The financial statements are presented on a consolidated basis because the
Partnership holds approximately 99 percent of the profit and loss interests and
approximately 55 percent of the equity interests in each Property Partnership.
Through an affiliate, who is a special limited partner in each of the 11
Property Partnerships, the Partnership controls certain fundamental decisions
affecting the operation of the Property Partnerships. These fundamental
decisions include significant purchases of assets, material borrowings or
creation of liens on the underlying properties, entering into material
contracts, making tax elections and any act that would cause termination of the
Property Partnership. All material interpartnership transactions and balances
have been eliminated. For the years ended December 31, 1998, 1997 and 1996, net
losses allocable to the minority partners were $26,002, $26,384 and $26,435,
respectively.
Page 7
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND USE OF ESTIMATES -
(CONTINUED)
Method of Accounting
The accrual method of accounting is used for financial statement purposes.
Cost Overruns
The partnership agreements for the Property Partnerships required the DGP's to
fund cost overruns on the development of the apartment projects. Such cost
overruns, totaling $589,462, have been recorded as minority interests in
property partnerships and have been included in the cost basis of the rental
property. All depreciation related thereto has been specially allocated to the
respective DGP's.
Depreciation
Depreciation is computed for financial statement purposes using the
straight-line method over the estimated useful lives of the related assets as
follows:
Building shell and components.............. 27.5 years
Land improvements...... ..................... 15 years
Appliances............................... 7 - 10 years
Carpets and draperies.................... 7 - 10 years
Income Taxes
No income tax provision has been included in the financial statements since
income or loss of a Partnership is required to be reported by the respective
partners on their income tax returns.
Cash Equivalents
For purposes of the statement of cash flows, all investment instruments
purchased with a maturity of three months or less are considered to be cash
equivalents. At December 31, 1998 and 1997, there were no cash equivalents.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures.
Page 8
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - TRANSACTIONS WITH AFFILIATES
In connection with the acquisition and development of rental property and the
management of both the rental property and the Partnership, the Partnership and
Property Partnerships have paid or accrued the following amounts to certain
affiliates:
Years Ended December 31,
1998 1997 1996
Murphey Favre Properties, Inc. -
Partnership services fee $ 7,500 $ 7,500 $ 7,500
Partnership administration - - 44,710
Developer general partners
and affiliates -
Property management fees 124,027 121,887 119,365
As of December 31, 1998 and 1997, related party payables consisted of the
following:
1998 1997
Advances from DGP's $201,784 $201,784
Partnership management fees 326,726 326,726
Partnership services fees 30,000 22,500
Advances from general partner 50,590 26,655
$609,100 $577,665
During 1998 and 1997, the general partner advanced $23,935 and $15,631,
respectively, to the Partnership for administrative expenses.
The Partnership maintains deposits in certain of WMB's interest-bearing accounts
which aggregated $13,276 and $8,195 and at December 31, 1998 and 1997,
respectively. Interest earned on such deposits totaled $92, $253 and $280 during
the years ended December 31, 1998, 1997 and 1996, respectively.
Terms of the RHS Loan Agreements require each DGP to provide interest-free
advances of stipulated amounts as initial operating capital to the Property
Partnerships. Due to affiliates includes $152,107 of such advances at December
31, 1998 and 1997. In addition, these balances include DGP advances of $35,468
for land improvements and $14,209 to fund operating deficits. The remainder of
the balances include property management fees and reimbursements payable to MFP
for partnership services and administration.
Page 9
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - TRANSACTIONS WITH AFFILIATES - (CONTINUED)
Advances from the DGPs may only be repaid from the proceeds of future sales of
the respective properties. Property management fees are paid out of rental
operations. Partnership fees and services are payable from future sales of the
properties, to the extent they are not paid from distributions of rental
operation cash (Note 6).
Under the terms of management services agreements, affiliates of the DGP's
provide management services for the rental properties and receive compensation
for such services in amounts approximating 8.5% of rental receipts.
NOTE 3 - CASH IN RESERVE ACCOUNTS
The Loan Agreements between the Property Partnerships and RHS require the
Property Partnerships to deposit $126, 889 annually into separate reserve
accounts until the reserve accounts reach $1,268,211. Subject to RHS approval,
these funds may be used for various purposes, as further described in the
Loan Agreements. All of the Property Partnerships are in compliance with the
minimum funding requirements as set forth by RHS for the year ended December
31, 1998 and nine of the eleven Property Partnerships for the year ended
December 31, 1997. The reserve account balances for the Property Partnerships
that did not meet the annual funding requirements during 1997 did, however,
exceed the required balances as of December 31, 1997, as a result of excess
deposits made in prior years. All withdrawals were approved by RHS and used for
their intended purposes.
NOTE 4 - MORTGAGE NOTES PAYABLE
The mortgage notes are payable to RHS in monthly installments totaling $26,550.
In accordance with provisions of Interest Credit Agreements, RHS provides
monthly interest credits totaling $69,199 which reduce the interest rates stated
in the mortgage notes to effective rates of 1 percent over the lives of the
mortgages. Amortization of principal is based on the stated rates of 8.75% to
10.75% under RHS's Predetermined Amortization Schedule System (PASS). The
mortgage notes mature May, 2039 through January, 2040. Substantially all of the
rental property and equipment is pledged as collateral on the mortgages. No
partner is personally liable on the mortgage notes.
Page 10
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - MORTGAGE NOTES PAYABLE (CONTINUED)
The mortgage notes are regulated by the U.S. Government and, therefore, have no
market price. Accordingly, management has determined that users of the financial
statements would derive no benefit from any estimate of fair value and
performing such an analysis would not be practicable.
Principal payments on the mortgage notes for the next 5 years are as follows:
Year Amounts
1999 $ 29,360
2000 32,115
2001 35,129
2002 38,422
2003 42,029
2004 and later years 12,171,573
$12,348,628
NOTE 5 - ASSESSMENT PAYABLE
In September, 1995, the city of Bainbridge Island issued an assessment for Blue
Heron's share of street and utility improvements in the amount of $68,569. The
assessment is payable in 10 equal annual installments together with interest at
the rate of 5.6 percent. At December 31, 1998, the fair value of the assessment
approximates the amount recorded in the financial statements.
Principal payments on the assessment for the next 5 years are as follows:
Year Amount
1999 $ 6,857
2000 6,857
2001 6,857
2002 6,857
2003 6,857
2004 and later years 13,713
$47,998
Page 11
<PAGE>
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - RENTAL OPERATION CASH
RHS regulations limit the distribution of rental operation cash to a maximum of
$38,090 annually. Any distribution to the Partnership from rental operation cash
is to be made in accordance with the respective partnership agreements. Whether
or not a Property Partnership makes any limited distribution is based on the
results of its own operations and is at the discretion of the DGP.
NOTE 7 - GUARANTEES
Each of the DGP's has made a guarantee to the respective Property Partnership
that they will compensate the Partnership in the event the actual low-income
housing tax credit is less than 85% to 90% of the available credit. Through
December 31, 1998, no payments have been made under these guarantee agreements.
NOTE 8 - CONTINGENCY
The Partnership has ceased accrual of the annual partnership administration fee,
payable in part to the general partner. Management has determined that the
source of payment, a future sale or refinance of one or more of the Property
Partnerships, may not be sufficient to pay fees accrued in excess of the
$544,540 payable at December 31, 1996. Management has elected to treat fees for
years subsequent to 1996 as a contingent liability. At December 31, 1998
and 1997 the contingent liability for partnership administration fees totaled
$149,034 and $74,517, respectively.
Page 12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 164,032
<SECURITIES> 0
<RECEIVABLES> 39,386
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 211,185
<PP&E> 16,492,085
<DEPRECIATION> 5,540,696
<TOTAL-ASSETS> 11,949,410
<CURRENT-LIABILITIES> 432,730
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,949,410
<SALES> 0
<TOTAL-REVENUES> 1,578,919
<CGS> 0
<TOTAL-COSTS> 2,063,910
<OTHER-EXPENSES> 15,638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 319,192
<INCOME-PRETAX> (500,629)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (500,629)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
