June 29, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Boston Financial Qualified Housing Tax Credits L.P. IV
Form 10-K Annual Report for Year Ended March 31, 1999
File Number 0-19765
Dear Sir/Madam:
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, there is filed herewith one copy of the subject report.
Very truly yours,
/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller
QH410K-K
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended Commission file number
March 31, 1999 0-19765
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(Exact name of registrant as specified in its charter)
Massachusetts 04-3044617
(State of organization) (I.R.S. Employer
Identification No.)
101 Arch Street, 16th Floor
Boston, Massachusetts 02110-1106
(Address of Principal executive office) (Zip Code)
Registrant's telephone number, including area code 617/439-3911
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
(Title of Class)
100,000
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 (Subsection 229.405 of this chapter) 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 or any amendment to this Form 10-K. [ X ]
State the aggregate sales price of partnership units held by nonaffiliates of
the registrant.
$67,653,000 as of March 31, 1999
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE DOCUMENT
IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS: (2) ANY PROXY OR
INFORMATION STATEMENT: AND (3) ANY PROSPECTUS FILED PURSUANT TO RULE 424(b)OR
(c) UNDER THE SECURITIES ACT OF 1933.
<TABLE>
<CAPTION>
Part of Report on
Form 10-K into
Which the Document
Documents incorporated by reference is Incorporated
<S> <C>
Post-effective Amendments No. 1 through 3 to the
Registration Statement, File # 33-26394 Part I, Item 1
Acquisition Reports Part I, Item 1
Prospectus - Sections Entitled:
"Estimated Use of Proceeds" Part III, Item 13
"Management Compensation and Fees" Part III, Item 13
"Profits and Losses for Tax Purposes, Tax Credits
and Cash Distributions" Part III, Item 13
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED MARCH 31, 1999
TABLE OF CONTENTS
PART I Page No.
Item 1 Business K-3
Item 2 Properties K-6
Item 3 Legal Proceedings K-13
Item 4 Submission of Matters to a
Vote of Security Holders K-13
PART II
Item 5 Market for the Registrant's Units
and Related Security Holder Matters K-13
Item 6 Selected Financial Data K-14
Item 7 Management's Discussion and Analysis of
Financial Condition and Results
of Operations K-15
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk K-19
Item 8 Financial Statements and Supplementary Data K-19
Item 9 Changes in and Disagreements on Accounting
and Financial Disclosure K-19
PART III
Item 10 Directors and Executive Officers
of the Registrant K-20
Item 11 Management Remuneration K-21
Item 12 Security Ownership of Certain Beneficial
Owners and Management K-21
Item 13 Certain Relationships and Related
Transactions K-22
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K K-25
SIGNATURES K-26
<PAGE>
PART I
Item 1. Business
Boston Financial Qualified Housing Tax Credits L.P. IV (the "Partnership") is a
limited partnership formed on March 30, 1989 under the Revised Uniform Limited
Partnership Act of the Commonwealth of Massachusetts. The Partnership's
partnership agreement ("Partnership Agreement") authorized the sale of up to
100,000 units of Limited Partnership Interest ("Units") at $1,000 per Unit,
adjusted for certain discounts. The Partnership raised $67,653,000 ("Gross
Proceeds"), net of discounts of $390,000, through the sale of 68,043 Units. Such
amounts exclude five unregistered Units previously acquired for $5,000 by the
Initial Limited Partner, which is also one of the General Partners. The offering
of Units terminated on January 31, 1990.
The Partnership is engaged solely in the business of real estate investment.
Affiliates of the Managing General Partners, BF Leawood, Inc. and BF Texas
Limited Partnership, assumed the Local General Partner interests in Leawood
Manor Associates, L.P. ("Leawood") and twelve other Local Limited Partnerships
in which the Partnership invests (the "Texas Partnerships"), respectively. As a
result, the Partnership is deemed to have control over Leawood and the Texas
Partnerships, and the accompanying financial statements are presented in
combined form to conform with the required accounting treatment under generally
accepted accounting principles. However, this change only affects the
presentation of the Partnership's operating results, not the business of the
Partnership. Accordingly, a presentation of information about industry segments
is not applicable and would not be material to an understanding of the
Partnership's business taken as a whole. As described more fully under Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations, the Managing General Partner has transferred all of the assets of
eleven Texas Partnerships subject to their liabilities to unaffiliated entities.
Therefore, as of March 31, 1999, one Texas Partnership is presented in combined
form.
The Partnership has invested as a limited partner in other limited partnerships
("Local Limited Partnerships") which own and operate residential apartment
complexes ("Properties"), most of which benefit from some form of federal, state
or local assistance programs and all of which qualify for the low-income housing
tax credits ("Tax Credits") added to the Internal Revenue Code (the "Code") by
the Tax Reform Act of 1986. The investment objectives of the Partnership include
the following: (i) to provide current tax benefits in the form of Tax Credits
which qualified limited partners may use to offset their federal income tax
liability; (ii) to preserve and protect the Partnership's capital; (iii) to
provide limited cash distributions from property operations which are not
expected to constitute taxable income during the expected duration of the
Partnership's operations; and (iv) to provide cash distributions from sale or
refinancing transactions. There cannot be any assurance that the Partnership
will attain any or all of these investment objectives.
Table A on the following page lists the properties owned by the Local Limited
Partnerships in which the Partnership has invested. Item 7 of this Report
contains other significant information with respect to such Local Limited
Partnerships. As required by applicable rules, the terms of the acquisition of
Local Limited Partnership interests have been described in supplements to the
Prospectus (and collected in three post-effective amendments to the Registration
Statement) listed in Part IV of this Report (collectively, the "Acquisition
Reports"); such descriptions are incorporated herein by this reference.
<PAGE>
<TABLE>
<CAPTION>
TABLE A
SELECTED LOCAL LIMITED
PARTNERSHIP DATA
(Unaudited)
Properties Owned by Local
Limited Partnerships* Date Interest
Location Acquired
--------------------------- --------------------- ---------------
<S> <C> <C>
Brookscrossing Atlanta, GA 06/30/89
Dorsett Philadelphia, PA 10/20/89
Willow Ridge Prescott, AZ 08/28/89
Town House Allentown, PA 12/26/89
Lancaster House North Lancaster, PA 03/13/89
Sencit Towne House Shillington, PA 12/26/89
Pinewood Terrace** Rusk, TX 12/27/89
Justin Place** Justin, TX 12/27/89
Grandview** Grandview, TX 12/27/89
Hampton Lane Buena Vista, GA 12/20/89
Audobon Boston, MA 12/22/89
Bent Tree** Jackson, TX 12/27/89
Royal Crest** Bowie, TX 12/27/89
Nocona Terrace** Nocona, TX 12/27/89
Pine Manor** Jacksboro, TX 12/27/89
Hilltop** Rhome, TX 12/27/89
Valley View** Valley View, TX 12/27/89
Bentley Court Columbia, SC 12/26/89
Orocovix IV Orocovix, PR 12/30/89
Leawood Manor Leawood, KS 12/29/89
Pecan Hill** Bryson, TX 12/28/89
Carolina Woods Greensboro, NC 01/31/90
Mayfair Mansions Washington, DC 03/21/90
Oakview Square Chesterfield, MI 03/22/89
Whitehills II Howell, MI 04/21/90
Orchard View Gobles, MI 04/29/90
Lakeside Square Chicago, IL 05/17/90
Lincoln Green Old Town, ME 03/21/90
Brown Kaplan Boston, MA 07/01/90
Green Tree Village Greenville, GA 07/06/90
Canfield Crossing Milan, MI 08/20/90
Findlay Market*** Cincinnati, OH 08/15/90
Seagraves** Seagraves, TX 11/28/90
West Pine Findlay, PA 12/31/90
BK Apartments Jamestown, ND 12/01/90
46th & Vincennes Chicago, IL 03/29/91
Gateway Village Garden** Azle, TX 06/24/91
</TABLE>
* The Partnership's interest in profits and losses of each Local Limited
Partnership arising from normal operations is 99%, with the exception of
Leawood Manor which is 89%. Profits and losses arising from sale or
refinancing transactions are allocated in accordance with the respective
Local Limited Partnership Agreements.
** As of March 31, 1999, the Managing General Partner has transferred all of
the assets of eleven of the Texas Partnerships, subject to their
liabilities, to unaffiliated entities. Seagraves Housing, Grandview
Housing, Bryson Housing, Rhome Housing, Bent Tree Housing, Justin Housing,
Valley View Housing, Nocona Terrace Housing, Bowie Housing, Pine Manor
Housing and Pinewood Terrace were transferred prior to March 31, 1999.
Negotiations between the Managing General Partner, the Lender and
prospective buyers have continued through the past quarter to transfer
title to the remaining Texas Partnership to unaffiliated buyers. If
negotiations continue as expected, Gateway Village will be transferred in
the second quarter of 1999. In the meantime, operating deficits continue to
be funded from Partnership Reserves.
*** Findlay Market was transferred to an unaffiliated entity during the year
ended March 31, 1999.
<PAGE>
Although the Partnership's investments in Local Limited Partnerships are not
subject to seasonal fluctuations, the Partnership's equity in losses of Local
Limited Partnerships and rental operations revenues and expenses, to the extent
they reflect the operations of individual Properties, may vary from quarter to
quarter based upon changes in occupancy and operating expenses as a result of
seasonal factors.
With the exception of Leawood Manor and the Texas Partnerships, each Local
Limited Partnership has, as its general partners ("Local General Partners"), one
or more individuals or entities not affiliated with the Partnership or its
General Partners. In accordance with the partnership agreements under which such
entities are organized ("Local Limited Partnership Agreements"), the Partnership
depends on the Local General Partners for the management of each Local Limited
Partnership. As of March 31, 1999, the following Local Limited Partnerships have
a common Local General Partner or affiliated group of Local General Partners
accounting for the specified percentage of the capital contributions to Local
Limited Partnerships: Sencit Townhouse L.P., Allentown Townhouse L.P. and Prince
Street Ltd., representing 11.30%, have AIMCO Properties as Local General
Partner; Greentree Village L.P. and Buena Vista Properties L.P., representing
0.60%, have Norsouth Corporation as Local General Partner; and Whitehills
Apartments Co., L.P., Milan Apartments Co., L.P. and Gobles LDHA, L.P.,
representing 1.14%, have First Centrum as Local General Partner. The Local
General Partners of the remaining Local Limited Partnerships are identified in
the Acquisition Reports, which are incorporated herein by reference.
The Properties owned by Local Limited Partnerships in which the Partnership has
invested are and will continue to be subject to competition from existing and
future apartment complexes in the same areas. The continued success of the
Partnership will depend on many outside factors, most of which are beyond the
control of the Partnership and which cannot be predicted at this time. Such
factors include general economic and real estate market conditions, both on a
national basis and in those areas where the Properties are located, the
availability and cost of borrowed funds, real estate tax rates, operating
expenses, energy costs and government regulations. In addition, other risks
inherent in real estate investment may influence the ultimate success of the
Partnership, including: (i) possible reduction in rental income due to an
inability to maintain high occupancy levels or adequate rental levels; (ii)
possible adverse changes in general economic conditions and adverse local
conditions, such as competitive overbuilding, a decrease in employment or
adverse changes in real estate laws, including building codes; and (iii) the
possible future adoption of rent control legislation which would not permit
increased costs to be passed on to the tenants in the form of rent increases or
which would suppress the ability of the Local Limited Partnerships to generate
operating cash flow. Since most of the Properties benefit from some form of
government assistance, the Partnership is subject to the risks inherent in that
area including decreased subsidies, difficulties in finding suitable tenants and
obtaining permission for rent increases. In addition, any Tax Credits allocated
to investors with respect to a Property are subject to recapture to the extent
that the Property or any portion thereof ceases to qualify for the Tax Credits.
Other future changes in federal and state income tax laws affecting real estate
ownership or limited partnerships could have a material and adverse affect on
the business of the Partnership.
The Partnership is managed by Arch Street IV, Inc., the Managing General Partner
of the Partnership. The other General Partner of the Partnership is Arch Street
IV Limited Partnership. The Partnership, which does not have any employees,
reimburses The Boston Financial Group Limited Partnership ("Boston Financial"),
an affiliate of the General Partner, for certain expenses and overhead costs. A
complete discussion of the management of the Partnership is set forth in Item 10
of this Report.
<PAGE>
Item 2. Properties
The Partnership owns limited partnership interests in twenty-five Local Limited
Partnerships which own and operate Properties, some of which benefit from some
form of federal, state or local assistance programs and all of which qualify for
the Tax Credits added to the Code by the Tax Reform Act of 1986. The
Partnership's ownership interest in each Local Limited Partnership is 99% with
the exception of Leawood Manor and BK Associates, which are 89% and 49.5%,
respectively.
Each of the Local Limited Partnerships has received an allocation of Tax Credits
by its relevant state tax credit agency. In general, the Tax Credit runs for ten
years from the date the Property is placed in service. The required holding
period (the "Compliance Period") of the Properties is fifteen years. During
these fifteen years, the Properties must satisfy rent restrictions, tenant
income limitations and other requirements, as promulgated by the Internal
Revenue Service, in order to maintain eligibility for the Tax Credit at all
times during the Compliance Period. Once a Local Limited Partnership has become
eligible for the Tax Credits, it may lose such eligibility and suffer an event
of recapture if its Property fails to remain in compliance with the
requirements.
In addition, some of the Local Limited Partnerships have obtained one or a
combination of different types of loans such as: i) below market rate interest
loans; ii) loans provided by a redevelopment agency of the town or city in which
the property is located at favorable terms; and iii) repayment terms that are
based on a percentage of cash flow.
The schedules on the following pages provide certain key information on the
Local Limited Partnership interests acquired by the Partnership.
<PAGE>
<TABLE>
<CAPTION>
Capital Contributions
Total Total Paid Mtge. Loans
Local Limited Partnership Number of committed at through March payable at Occupancy at
Property Name Apt. Units March 31, 1999 31, 1999 December 31, Type of March 31,
Property Location 1998 Subsidy* 1999
- -------------------------------- ----------- ---------------- --------------- --------------- ----------- --------------
Brookscrossing Apartments, L.P.
A Limited Partnership
Brookscrossing
<S> <C> <C> <C> <C> <C> <C>
Atlanta, GA 224 $3,363,776 $3,363,776 $5,466,174 None 96%
Willow Ridge Development Co.
Limited Partnership
Willow Ridge
Prescott, AZ 134 2,125,000 2,125,000 3,055,082 None 96%
Leawood Associates, L.P.**
A Limited Partnership
Leawood Manor
Leawood, KS 254 7,497,810 7,497,810 7,415,444 None 98%
Dorsett Limited Partnership
Dorsett Apartments
Philadelphia, PA 58 2,482,107 2,482,107 2,141,401 Section 8 97%
Allentown Towne House, L.P.
Towne House Apartments
Allentown, PA 160 1,589,403 1,589,403 6,499,758 Section 8 100%
Prince Street Towers L.P.
A Limited Partnership
Lancaster House North
Lancaster, PA 201 1,996,687 1,996,687 7,846,424 Section 8 100%
Sencit Towne House L.P.
Sencit Towne House
Shillington, PA 201 1,996,687 1,996,687 6,588,586 Section 8 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Contributions
Total Total Paid Mtge. Loans
Local Limited Partnership Number of committed at through March payable at Occupancy at
Property Name Apt. Units March 31, 1999 31, 1999 December 31, Type of March 31,
Property Location 1998 Subsidy*
- -------------------------------------- ------------ --------------- ------------- ----------------- ----------- -------------
East Rusk Housing Associates, LTD (A)**
Pinewood Terrace Apartments
Rusk, TX
Gateway Housing Associates, LTD (A)**
Gateway Village Garden Apts.
<S> <C> <C> <C> <C> <C> <C>
Azle, TX 50 251,326 251,326 1,131,757 FmHA 98%
Justin Housing Associates, LTD(A)
Justin Place
Justin, TX
Grandview Housing Associates, LTD (A)
Grandview
Grandview, TX
Buena Vista Limited Partnership
Hampton Lane (Buena Vista)
Buena Vista, GA 24 153,474 153,474 715,816 None 100%
Audobon Group, L.P.
A Massachusetts Limited Partnership
Audobon
Boston, MA 37 2,640,419 2,640,419 3,088,524 Section 8 97%
Bent Tree Housing Associates (A)
Bent Tree
Jacksboro, TX
Bowie Housing Associates, LTD (A)
Royal Crest (Bowie)
Bowie, TX
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Contributions
Total Total Paid Mtge. Loans
Local Limited Partnership Number of committed at through March payable at Occupancy at
Property Name Apt. Units March 31, 1999 31, 1999 December 31, Type of March 31,
Property Location 1998 Subsidy* 1999
- -------------------------------------- ------------ ----------------------------- ----------------- ----------- --------------
Nocona Terrace Housing
Associates, LTD (A)
Nocona Terrace
Nocona, TX
Pine Manor Housing Associates (A)
Pine Manor
Jacksboro, TX
Rhome Housing Associates, LTD (A)
Hilltop Apartments
Rhome, TX
Valley View Housing Associates, LTD (A)
Valley View
Valley View, TX
Bentley Court II Limited Partnership
Bentley Court
<S> <C> <C> <C> <C> <C> <C>
Columbia, SC 273 5,000,000 5,000,000 6,868,868 None 90%
Bryson Housing Associates, LTD (A)
Pecan Hill Apartments
Bryson, TX
Orocovix Limited Dividend
Partnership, S.E.
Orocovix IV
Orocovix, PR 40 361,444 361,444 1,642,158 FmHA 100%
Carolina Woods Associates, L.P.
Carolina Woods
Greensboro, NC 48 1,000,000 1,000,000 1,098,156 None 96%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Contributions
Total Total Paid Mtge. Loans
Local Limited Partnership Number of committed at through March payable at Occupancy at
Property Name Apt. Units March 31, 1999 31, 1999 December 31, Type of March 31,
Property Location 1998 Subsidy* 1999
- ------------------------------------ ------------ -------------- ------------- -------------- ----------- --------------
Kenilworth Associates LTD
A Limited Partnership
Mayfair Mansions
<S> <C> <C> <C> <C> <C> <C>
Washington, DC 569 4,250,000 4,250,000 20,953,081 Section 8 96%
Oakview Square Limited Partnership
A Michigan Limited Partnership
Oakview Square
Chesterfield, MI 192 5,299,652 5,299,652 6,002,893 None 95%
Whitehills II Apartments Company
Limited Partnership
Whitehills II
Howell, MI 24 169,276 169,276 752,994 FmHA 100%
Gobles Limited Dividend
Housing Associates
Orchard View
Gobles, MI 24 162,022 162,022 737,105 FmHA 100%
Lakeside Square Limited Partnership
An Illinois Limited Partnership
Lakeside Square
Chicago, IL 308 3,978,813 3,978,813 6,005,125 Section 8 100%
Lincoln Green Associates, A Limited
Partnership
Lincoln Green
Old Towne, ME 30 352,575 352,575 1,638,514 Section 8 97%
Brown Kaplan Limited Partnership
Brown Kaplan
Boston, MA 60 3,024,663 3,024,663 7,998,554 Loans 100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Capital Contributions
Total Total Paid Mtge. Loans
Local Limited Partnership Number of committed at through March payable at Occupancy at
Property Name Apt. Units March 31, 1999 31, 1999 December 31, Type of March 31,
Property Location 1998 Subsidy* 1999
- -------------------------------------- ----------- --------------- ------------- ----------------- ----------- ------------
Green Tree Village Limited Partnership
A Limited Partnership
Green Tree Village
<S> <C> <C> <C> <C> <C> <C>
Greenville, GA 24 145,437 145,437 657,073 FmHA 100%
Milan Apartments Company
Limited Partnership
Canfield Crossing
Milan, MI 32 230,500 230,500 1,015,158 FmHA 97%
Findlay Market Limited Partnership (A)
Findlay Market
Cincinnati, OH
Seagraves Housing Associates, LTD. (A)
Seagraves
Seagraves, TX
West Pine Associates
West Pine
Findlay, PA 38 313,445 313,445 1,673,827 FmHA 97%
B-K Apartments Limited Partnership
BK Apartments
Jamestowne, ND 48 290,000 290,000 856,667 Section 8 75%
46th and Vincennes Limited
Partnership
46th and Vincennes
Chicago, IL 28 751,120 751,120 1,308,408 Section 8 89%
------ ------------ ------------ ------------
3,081 49,425,636 49,425,636 103,157,547
======
Less: **Combined Entities 7,749,136 7,749,136 8,547,201
------------ ------------ ------------
$41,676,50 $ 41,676,500 $ 94,610,346
============ ============ ============
</TABLE>
* FmHA This subsidy, which is authorized under Section 515 of the
Housing Act of 1949, can be one or a combination of
many different types. For instance, FmHA may provide: 1)
direct below-market-rate mortgage loans for rural rental
housing; 2) mortgage interest subsidies which effectively
lower the interest rate of the loan to 1%; 3) rental
assistance subsidies to tenants which allow them to pay no
more than 30% of their monthly income as rent with the
balance paid by the federal government; or 4) a combination of
any of the above.
Section 8 This subsidy, which is authorized under Section 8 of Title
II of the Housing and Community Development Act of 1974,
allows qualified low-income tenants to pay 30% of their
monthly income as rent with the balance paid by the federal
government.
(A) As of March 31, 1999, the Managing General Partner has
transferred all of the assets of eleven of the Texas
Partnerships and Findlay Market subject to their liabilities.
The one remaining Texas Partnership will be transferred after
March 31, 1999. The eleven transferred Texas Partnerships had
total capital contributions and mortgage payable amounts of
$2,632,392 and $6,918,840, respectivley, as of the transfer
dates.
<PAGE>
Three Local Limited Partnerships invested in by the Partnership each represent
more than 10% of the total capital contributions made to Local Limited
Partnerships by the Partnership. The first is Leawood Associates, L.P. ("Leawood
Manor"). Leawood Manor, representing 15.17% of the total capital contributions
to Local Limited Partnerships, is a 254-unit apartment complex located in
Leawood, Kansas. Leawood Manor is financed by a first mortgage at 8%, with an
accrual rate of 11.75% and monthly payments of $77,850 plus 95% of the net cash
flows as defined by the mortgage agreement. Subsequent to December 31, 1998,
Leawood Manor refinanced with Northern Financial Company. The new mortgage has
monthly installments of $53,659 of principal and interest, with interest accrued
at an annual rate of 6.66%. The mortgage matures on February 1, 2009.
The second Local Limited Partnership which represents more than 10% of the total
capital contributions to Local Limited Partnerships is Oakview Square Limited
Partnership ("Oakview Square"). Oakview Square, representing 10.72% of the total
capital contributions to Local Limited Partnerships, is a 192-unit apartment
complex located in Chesterfield, Michigan. Oakview Square is financed by a first
mortgage loan at 9.75% interest and a 35 year term with monthly installments of
approximately $52,100. The loan matures in April 2010.
The third Local Limited Partnership which represents more than 10% of the total
capital contributions to Local Limited Partnership is Bentley Court II Limited
Partnership ("Bentley Court"). Bentley Court, representing 10.12% of the total
capital contribution to Local Limited Partnerships, is a 273 unit apartment
complex located in Columbia, South Carolina.
The duration of the leases for occupancy in the Properties described above is
six to twelve months. The Managing General Partner believes the Properties
described herein are adequately covered by insurance.
Item 3. Legal Proceedings
The IRS finalized its report from an audit of the 1993 tax return for the
project. The IRS report includes the questioning of the treatment of certain
items and findings for non-compliance in 1993. Management understands that the
audit now also focuses on 1994 and 1995 tax credits. On behalf of the
Partnership, the Managing General Partner hired attorneys to appeal the findings
in the IRS report in order to minimize the loss of credits. In June 1998, the
Managing General Partner was informed that the Local General Partner for this
property was indicted on various criminal charges. The Local General Partner
pleaded guilty to two of these counts and is now awaiting sentencing. In the
opinion of management, there is a risk that Bentley Court and, consequently, the
Partnership will suffer some tax credit recapture or credit disallowance.
However, management cannot quantify the risk at this time.
The Partnership is not a party to any other pending legal or administrative
proceeding, and to the best of its knowledge, no legal or administrative
proceeding is threatened or contemplated against it.
Item 4. Submission of Matters to a Vote of Security Holders
None.
<PAGE>
PART II
Item 5. Market for the Registrant's Units and Related Security Holder Matters
There is no public market for the Units, and it is not expected that a public
market will develop. If a Limited Partner desires to sell Units, the buyer of
those Units will be required to comply with the minimum purchase and retention
requirements and investor suitability standards imposed by applicable federal or
state securities laws and the minimum purchase and retention requirements
imposed by the Partnership. The price to be paid for the Units, as well as the
commissions to be received by any participating broker-dealers, will be subject
to negotiation by the Limited Partner seeking to sell his Units. Units will not
be redeemed or repurchased by the Partnership.
The Partnership Agreement does not impose on the Partnership or its General
Partners any obligation to obtain periodic appraisals of assets or to provide
Limited Partners with any estimates of the current value of Units.
As of June 15, 1999, there were 3,808 record holders of Units of the
Partnership.
Cash distributions, when made, are paid annually. No cash distributions were
paid for the years ended March 31, 1999, 1998 and 1997.
Item 6. Selected Financial Data
The following table sets forth selected financial information regarding the
Partnership's financial position and operating results. This information should
be read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Combined Financial Statements and
Notes thereto, which are included in Items 7 and 8 of this Report.
<TABLE>
<CAPTION>
March 31, March 31, March 31, March 31, March 31,
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Revenue (C) $ 2,234,267 $ 2,061,588 $ 2,099,229 $ 2,633,694 $ 2,506,970
Equity in income (losses) of Local
Limited Partnerships (C) 33,851 (1,405,591) (2,747,270) (2,957,339) (3,688,171)
Net loss (166,712) (3,950,858) (5,503,780) (5,046,594) (6,661,959)
Per Limited Partnership Unit (2.43) (57.48) (80.08) (73.43) (96.93)
Cash and cash equivalents (C) 361,069 386,059 288,153 414,451 532,287
Marketable securities 703,642 985,849 1,056,590 1,428,765 1,962,559
Investments in Local Limited
Partnerships 15,022,986 15,286,237 18,891,361 22,021,757 25,343,137
Total assets (A) 29,698,965 31,608,124 36,632,053 41,744,078 50,243,398
Long-term debt (C) 8,547,201 9,720,859 11,111,888 11,228,864 14,636,443
Total liabilities (C) 12,118,935 13,857,576 14,948,056 14,550,850 17,903,195
Cash Distribution - - - - -
Per Limited Partnership Unit - - - - -
Other Data:
Passive loss (B) (6,298,010) (5,850,622) (6,118,380) (6,562,619) (6,695,703)
Per Limited Partnership Unit (B) (91.63) (85.12) (89.02) (95.48) (97.42)
Portfolio income (B) 531,853 399,057 511,058 627,741 401,044
Per Limited Partnership Unit (B) 7.74 5.81 7.44 9.13 5.84
Low-Income Housing Tax Credit (B) 9,066,656 9,278,685 9,364,677 9,536,996 9,432,363
Per Limited Partnership Unit (B) 131.49 134.57 135.81 138.31 136.78
Recapture of Low-Income Housing
Tax Credits (B) 725,142 338,222 179,372 - -
Per Limited Partnership Unit (B) 10.55 4.92 2.61 - -
Local Limited Partnership interests
owned at end of period (D) 25 27 32 34 37
</TABLE>
(A) Total assets include the net investment in Local Limited Partnerships.
(B) Income tax information is as of December 31, the year end of the
Partnership for income tax purposes. The Low-Income Housing Tax Credits
per Limited Partnership Unit for 1999, 1998, 1997, 1996 and 1995
represents the amount allocated to individual investors. Corporate
investors were allocated $134.17, $137.27, $138.59, $141.11 and $139.60
per Unit in 1999, 1998, 1997, 1996 and 1995, respectively.
(C) Revenue for the years ended March 31, 1999, 1998, 1997, 1996 and 1995
includes $1,875,069, $1,911,961, $1,941,455, $2,522,643 and $2,354,347,
respectively, of total revenue from Leawood Manor and the Texas
Partnerships. Equity in losses of Local Limited Partnerships for the
years ended March 31, 1999, 1998, 1997, 1996 and 1995 does not include
$8,850, ($26,848), $1,808,207, $1,165,223 and $1,199,409, respectively,
of losses from Leawood Manor and the Texas Partnerships that have been
combined with the Partnership's loss. Cash and cash equivalents at
March 31, 1999, 1998, 1997, 1996 and 1995 includes $117,997, $113,251,
$71,426, $107,545 and $250,751, respectively, of cash and cash
equivalents from Leawood Manor and the Texas Partnerships. The total
amount of long-term debt is related to Leawood Manor and the Texas
Partnerships. Total liabilities for the years ended March 31, 1999,
1998, 1997, 1996 and 1995 includes $11,662,371, $13,200,479, $14,529,452,
$14,368,374 and $17,756,853, respectively, of liabilities from Leawood
Manor and the Texas Partnership (other than the Texas Partnerships
described in (D) below).
(D) As of March 31, 1999, the Managing General Partner has transferred all of
the assets of eleven of the Texas Partnerships, subject to their
liabilities, to unaffiliated entities. The remaining Texas Partnership was
transferred subsequent to March 31, 1999.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The
Partnership intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements and are including this
statement for purposes of complying with these safe harbor provisions. Although
the Partnership believes the forward-looking statements are based on reasonable
assumptions, the Partnership can give no assurance that their expectations will
be attained. Actual results and timing of certain events could differ materially
from those projected in or contemplated by the forward-looking statements due to
a number of factors, including, without limitation, general economic and real
estate conditions, interest rates and unanticipated delays or expenses on the
part of the Partnership and their suppliers in achieving year 2000 compliance.
Liquidity and Capital Resources
The Partnership (including the Combined Entities) had a decrease in cash and
cash equivalents of $24,990 from $386,059 at March 31, 1998 to $361,069 at March
31, 1999. The decrease is mainly attributable to cash used for operating
activities and cash used for purchases of marketable securities. These decreases
are offset by cash provided by proceeds from sales and maturities of marketable
securities and cash distributions received from Local Limited Partnerships.
The Managing General Partner initially designated 4% of the Gross Proceeds as
Reserves. The Reserves were established to be used for working capital of the
Partnership and contingencies related to the ownership of Local Limited
Partnership interests. Funds totaling approximately $1,212,000 have been
withdrawn from the Reserve account to pay legal fees relating to various
property issues. This amount includes approximately $1,101,000 for the Texas
Partnerships. To date, Reserve funds in the amount of $304,000 have been used to
make additional capital contributions to a Local Limited Partnership. To date,
the Partnership has used approximately $640,000 of operating funds to replenish
Reserves. At March 31, 1999, approximately $809,000 of cash, cash equivalents
and marketable securities has been designated as Reserves. Management believes
that the investment income earned on the Reserves, along with cash distributions
received from Local Limited Partnerships, to the extent available, will be
sufficient to fund the Partnership's ongoing operations. Reserves may be used to
fund Partnership operating deficits, if the Managing General Partner deems
funding appropriate. If Reserves are not adequate to cover the Partnership's
operations, the Partnership will seek other financing sources including, but not
limited to, the deferral of Asset Management Fees to an affiliate of the
Managing General Partner or working with Local Limited Partnerships to increase
cash distributions. In the event a Local Limited Partnership encounters
operating difficulties requiring additional funds, the Partnership's management
might deem it in its best interests to voluntarily provide such funds in order
to protect its investment. To date, in addition to the $1,212,000 noted above,
the Partnership has also advanced approximately $712,000 to the Texas
Partnerships to fund operating deficits. Approximately $325,000 has also been
advanced to four other Local Limited Partnerships.
Since the Partnership invests as a limited partner, the Partnership has no
contractual obligation to provide additional funds to Local Limited Partnerships
beyond its specified investment. Thus, at March 31, 1999, the Partnership had no
contractual or other obligation to any Local Limited Partnership which had not
been paid or provided for.
Cash Distributions
No cash distributions were made during the year ended March 31, 1999.
<PAGE>
Results of Operations
1999 versus 1998
The Partnership's results of operations for the fiscal year ended March 31, 1999
resulted in a net loss of $166,712 as compared to a net loss of $3,950,858 for
the same period in 1998. The decrease in net loss is primarily attributable to
the gain on the transfer of assets of one of the Texas Partnerships, a decrease
in equity in losses of Local Limited Partnerships, a decrease in the provision
for valuation of rental property and a decrease in the provision for valuation
of investments in Local Limited Partnerships. The decrease in equity in losses
of Local Limited Partnerships is due to an increase in losses not recognized by
the Partnership for Local Limited Partnerships whose cumulative equity in losses
and cumulative distributions exceeded its total investment in those
partnerships. The decrease in equity in losses of Local Limited Partnerships is
expected to continue.
1998 versus 1997
The Partnership's results of operations for the fiscal year ended March 31, 1998
resulted in a net loss of $3,950,858 as compared to a net loss of $5,503,780 for
the same period in 1997. The decrease in net loss is primarily attributable to
the recognition of gains on asset transfers for three of the Texas Partnerships,
a decrease in equity in losses of Local Limited Partnerships and a decrease in
the provision for valuation of rental property. The decrease in equity in losses
of Local Limited Partnerships is due to an increase in losses not recognized by
the Partnerships for Local Limited Partnerships whose cumulative equity in
losses and cumulative distributions exceeded its total investment in those
partnerships. The decrease in equity in losses of Local Limited Partnerships is
expected to continue. The expected transfers of Pinewood Terrace Apartments and
Gateway Village Apartments in July 1998 and January 1999, respectively, will
result in additional gains on transfers of assets. The gain on assets transfers
and decrease in equity in losses of Local Limited Partnerships were partially
offset by a provision for valuation of two investments in Local Limited
Partnerships recorded in 1998.
Low-Income Housing Tax Credits
The 1999, 1998 and 1997 Tax Credits per Unit were $131.49, $134.57 and $135.81,
respectively, for individual investors. The 1999, 1998 and 1997 Tax Credits
per Unit were $134.17, $137.27 and $138.59, respectively, for corporate
investors.
Tax Credits are not available for a Property until the Property is placed in
service and its apartment units are occupied by qualified tenants. In the first
year the Tax Credits are claimed, the allowable credit amount is determined
using an averaging convention to reflect the number of months that apartment
units comprising the qualified basis were occupied by qualified tenants during
the year. To the extent that the full amount of the annual credit is not
allocated in the first year, an additional credit equal to the difference is
available in the 11th taxable year.
As of March 31, 1999, each of the twenty-five properties has been placed in
service and their apartment units are qualified. The credits, which have
stabilized, are expected to remain the same for the next two years, and then
they are expected to decrease as properties reach the end of the ten year credit
period. However, because the compliance periods extend significantly beyond the
tax credit periods, the Partnership is expected to retain most of its interest
in the Local Limited Partnership for the foreseeable future. The Partnership has
transferred eleven of the Texas Partnerships and is in the process of
transferring the remaining Texas Partnership. There will be a nominal recapture
of tax credits since the Texas Partnerships represent only 3% of the
Partnerships' tax credits.
The Tax Credits per Unit for corporate investors will be slightly higher for the
remaining years of the credit period than that for individual investors because
certain of the properties took advantage of 1990 federal legislation that
allowed the acceleration of future tax credits to individuals in the tax year
ended December 31, 1990. For those properties that elected to accelerate the
individual credit, the accelerated portion is being amortized over the remainder
of the credit period, thereby causing a reduction of this and future year's tax
credits passed through by those properties. In total, both individual and
corporate investors will be allocated equal amounts of Tax Credits.
<PAGE>
On November 10, 1997, the Partnership transferred 50% of its interest in capital
and profits of BK Apartments to the local general partner in order to protect
the Partnership in the event of recapture of these tax credits. The first stage
of this transfer caused approximately one-half of the recapture liability to
flow to the local general partner.
Property Discussions
Prior to the transfer of eleven of the Texas Partnerships and Findlay Market,
Limited Partnership interests had been acquired in thirty-seven Local Limited
Partnerships which are located in thirteen states, Washington, D.C. and Puerto
Rico. Fifteen of the properties with 1,440 apartments were newly constructed,
and twenty-two of the properties with 2,061 apartments were rehabilitated.
Most of the Local Limited Partnerships have stable operations, operating at
break-even or generating operating cash flow. A few properties are experiencing
operating difficulties and cash flow deficits due to a variety of reasons. The
Local General Partners of those properties have funded operating deficits
through project expense loans, subordinated loans or payments from operating
escrows. In instances where the Local General Partners have stopped funding
deficits because their obligation to do so has expired or otherwise, the
Managing General Partner is working with the Local General Partners to increase
operating income, reduce expenses or refinance the debt at lower interest rates
in order to improve cash flow.
As previously reported, Audobon Apartments and Brown Kaplan, both of which are
located in Massachusetts, are operating below break-even. Both properties
receive subsidies through the State Housing Assistance Rental Program (SHARP),
which are an important part of their annual income. As originally conceived, the
SHARP subsidy was scheduled to decline over time to match increases in net
operating income. However, increases in net operating income failed to keep pace
with the decline in the SHARP subsidy. Many of the SHARP properties (including
Audobon Apartments and Brown Kaplan) sought restructuring workouts with the
lender, Massachusetts Housing Finance Agency (MHFA), that included additional
subsidies in the form of Operating Deficit Loans (ODL's). In July 1997, MHFA
refused to close the restructuring for Brown Kaplan. Effective October 1, 1997,
MHFA, which provided the SHARP subsidies, withdrew funding of the ODL's from its
portfolio of 77 subsidized properties. Properties unable to make full debt
service payments were declared in default by MHFA. The Managing General Partner
has joined a group of SHARP property owners called the responsible SHARP Owners,
Inc. (RSO) and is negotiating with MHFA and the Local General Partners of
Audobon and Brown Kaplan to find a solution to the problems that will result
from the withdrawn subsidies. Given the existing operating deficits and the
dependence on these subsidies, Audobon Apartments and Brown Kaplan may default
on their mortgage obligation in the near future. In particular, Audobon
Apartments is experiencing significant operating deficits, which may affect the
ability of the Fund to retain its interest in Audobon through 1999. A
foreclosure would result in recapture of credits, the allocation of taxable
income to the Fund and loss of future benefits associated with this property. As
previously reported, on September 16, 1998, the Partnership joined with the RSO
and about 20 other SHARP property owners and filed suit against the MHFA (Mass.
Sup. Court Civil Action #98-4720). Among other things, the suit seeks to enforce
the MHFA's previous financial commitments to the SHARP properties. The lawsuit
is complex and in its early stages, so no predications can be made at this time
as to the ultimate outcome. In the meantime, the Managing General Partner
intends to continue to participate in the RSO's efforts to negotiate a
resolution of this matter with MHFA.
As previously reported on Bentley Court, located in Columbia, South Carolina, an
agreement was reached with the lender which enabled an affiliate of the Managing
General Partner to become an additional general partner and substitute
management agent, subject to lender approval, with the right to take control of
the property if it becomes necessary. In addition, the agreement stipulates that
if the Local Limited Partnership defaults on the agreement, the lender has the
right to remove the Management Company. The Managing General Partner is now in
the process of having an affiliate admitted as the Managing General Partner of
Bentley Court. The Managing General Partner will continue to monitor property
operations and the Local General Partner closely. Operating deficits are
currently being funded by the Local General Partner. As a result of the
continuing tax issues at this property, management has decided to fully reserve
the Partnership's investment in Bentley Court.
<PAGE>
As previously reported, BK Apartments, located in Jamestown, North Dakota, is
generating operating deficits despite improved occupancy. The lender issued a
default notice and threatened to foreclose. A workout agreement was negotiated
and completed on November 10, 1997. The Managing General Partner is closely
monitoring the workout plan with the Local General Partner. Furthermore, in
November 1997, the Managing General Partner consummated a transfer of 50% of its
interest in capital and profits of BK Apartments Limited Partnership to the
Local General Partner. The Managing General Partner has the right to put the
Partnership's remaining interest to the Local General Partner any time after one
year has elapsed. The Partnership will retain its full share of tax credits
until such time as the remaining interest is put to the Local General Partner.
In addition, the Local General Partner has the right to call the remaining
interest after the tax credit period has expired.
As previously reported, negotiations among the Managing General Partner, Lender
and prospective buyer for the remaining two Texas Partnerships, Pinewood Terrace
and Gateway Village, continued and resulted in the transfer of Pinewood Terrace
Apartments on July 9, 1998. The transfer of Gateway Village Apartments took
place in 1999, subsequent to year end. The transfer event of Pinewood Terrace
resulted in both Section 1231 Gain and cancellation of indebtedness income, in
addition to credit recapture of approximately $2.80 per Unit for the 1998 tax
year. For 1999 tax purposes, the transfer event of Gateway Village will result
in both Section 1231 Gain and cancellation of indebtedness income and an
estimated tax credit recapture of $2.40 per Unit.
As previously reported, 46 & Vincennes, located in Chicago, Illinois, has been
operating below break-even due to occupancy problems. On April 1, 1998, the
management agent was replaced with a new management agent. For the last two
quarters, occupancy has increased slightly and as of December 31, 1998 was 86%.
The Managing General Partner is working closely with the Local General Partner
and will continue to monitor the new management agent, property operations and
marketing efforts.
As previously reported, Findlay Market (located in Cincinnati, Ohio) and its
Managing and Local General Partners were not successful in their negotiations
with the lender. The lender was not amenable to a cure of the mortgage and
exercised its right to foreclose on the mortgage effective in August 1998. The
foreclosure of this property resulted in recapture of tax credits of
approximately $8.00 per unit, plus interest, and the allocation of taxable
income to the Partnership in the 1998 tax year.
In accordance with Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
the Partnership has implemented policies and practices for assessing impairment
of its real estate assets and investments in Local Limited Partnerships. Each
asset is analyzed by real estate experts to determine if an impairment indicator
exists. If so, the carrying value is compared to the undiscounted future cash
flows expected to be derived from the asset and, if there is a significant
impairment in value, a provision to write down the asset to fair value will be
charged against income.
Inflation and Other Economic Factors
Inflation had no material impact on the operations or financial condition of the
Partnership for the years ended March 31, 1999, 1998 and 1997.
Since some of the Properties benefit from some sort of government assistance,
the Partnership is subject to the risks inherent in that area including
decreased subsidies, difficulties in finding suitable tenants and obtaining
permission for rent increases. In addition, any Tax Credits allocated to
investors with respect to a Property are subject to recapture to the extent that
the Property or any portion thereof ceases to qualify for the Tax Credits.
Certain of the Properties listed in this Report are located in areas suffering
from poor economic conditions. Such conditions could have an adverse effect on
the rent or occupancy levels at such Properties. Nevertheless, management
believes that the generally high demand for below-market rate housing will tend
to negate such factors. However, no assurance can be given in this regard.
<PAGE>
Impact of Year 2000
The Managing General Partner's plan to resolve year 2000 issues involves the
following four phases: assessment, remediation, testing and implementation. To
date, the Managing General Partner has fully completed an assessment of all
information systems that may not be operative subsequent to 1999 and has begun
the remediation, testing and implementation phase on both hardware and software
systems. Because the hardware and software systems of both the Partnership and
Local Limited Partnerships are generally the responsibility of obligated third
parties, the plan primarily involves ongoing discussions with and obtaining
written assurances from these third parties that pertinent systems will be 2000
compliant. In addition, neither the Partnership nor the Local Limited
Partnerships are incurring significant additional costs since such expenses are
principally covered under the service contracts with vendors. As of June 1999,
the General Partner is in the final stages of its Year 2000 remediation plan and
believes all major systems are compliant; any systems still being updated are
not considered significant to the Partnership's operations. However, despite the
likelihood that all significant year 2000 issues are expected to be resolved in
a timely manner, the Managing General Partner has no means of ensuring that all
systems of outside vendors or other entities that impact operations will be 2000
compliant. The Managing General Partner does not believe that the inability of
third parties to address their year 2000 issues in a timely manner will have a
material impact on the Partnership. However, the effect of non-compliance by
third parties is not readily determinable.
Management has also evaluated a worst case scenario projection with respect to
the year 2000 and expects any resulting disruption of either the Managing
General Partner's activities or any Local Limited Partnership's operations to be
short-term inconveniences. Such problems, however, are not likely to fully
impede the ability to carry out necessary duties of the Partnership. Moreover,
because expected problems under a worst case scenario are not extensively
detrimental, and because the likelihood that all systems affecting the
Partnership will be compliant before 2000, the Managing General Partner has
determined that a formal contingency plan that responds to material system
failures is not necessary.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The table below provides information about the Partnership's market risk
sensitive instruments.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 2000 2001 2002 2003 Thereafter Face Value
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Debt Obligations
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Long Term Debt:
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Fixed Rate 62,963 70,813 79,552 89,420 100,511 7,012,185 7,415,444
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Average interest rate 6.66% 6.66% 6.66% 6.66% 6.66% 6.66%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Debt extinguished subsequent to year end, not vulnerable to market risk, has
been excluded from this table.
The fair value of this debt obligation in this table approximates its face value
at March 31, 1999.
In addition to the debt obligation included in this table, the Partnership has
invested in marketable securities with aggregate fair values of $703,642 at
March 31, 1999; these securities, with rates ranging from 4.87% to 6.42%, do not
subject the Partnership to significant market risk because of their short term
maturities and high liquidity.
The Partnership has no other exposure to market risk associated with activities
in derivative financial instruments, derivative commodity instruments, or other
financial instruments.
Item 8. Financial Statements and Supplementary Data
Information required under this Item is submitted as a separate section of this
Report. See Index on page F-1 hereof.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The Managing General Partner of the Partnership is Arch Street IV, Inc., a
Massachusetts corporation (the "Managing General Partner"), an affiliate of The
Boston Financial Group Limited Partnership ("Boston Financial"), a Massachusetts
limited partnership. George Fantini, Jr. and Donna C. Gibson, Vice Presidents of
the Managing General Partner, resigned their positions effective June 30, 1995
and September 13, 1996, respectively. Georgia Murray resigned as Managing
Director, Treasurer and Chief Financial Officer of the General Partner on May
25, 1997. Fred N. Pratt, Jr. resigned as Managing Director of the General
Partner on May 28, 1997. William E. Haynsworth resigned as Managing Director and
Chief Operating Officer of the General Partner on March 23, 1998.
Peter G. Fallon resigned as a Vice President of the General Partner on June 1,
1999.
The Managing General Partner was incorporated in December 1988. Randolph G.
Hawthorne is the Chief Operating Officer of the Managing General Partner and had
the primary responsibility for evaluating, selecting and negotiating investments
for the Partnership. The Investment Committee of the Managing General Partner
approved all investments. The names and positions of the principal officers and
the directors of the Managing General Partner are set forth below.
Name Position
Jenny Netzer Managing Director and President
Michael H. Gladstone Managing Director, Vice President and Clerk
Randolph G. Hawthorne Managing Director, Vice President and
Chief Operating Officer
James D. Hart Chief Financial Officer and Treasurer
Paul F. Coughlan Vice President
William E. Haynsworth Vice President
The other General Partner of the Partnership is Arch Street IV Limited
Partnership, a Massachusetts Limited Partnership ("Arch Street IV L.P.") that
was organized in December 1988. Arch Street IV, Inc. is the managing general
partner of Arch Street IV L.P.
The Managing General Partner provides day-to-day management of the Partnership.
Compensation is discussed in Item 11 of this Report. Such day-to-day management
does not include the management of the Properties.
The business experience of each of the persons listed above is described
below. There is no family relationship between any of the persons listed in
this section.
Jenny Netzer, age 43, graduated from Harvard University (B.A., 1976) and
received a Master's in Public Policy from Harvard's Kennedy School of Government
in 1982. Ms. Netzer joined Boston Financial in 1987 and is a Senior Vice
President leading the Institutional Tax Credit Team. She is also a member of the
Senior Leadership Team, the firm's Executive Committee. Previously, Ms. Netzer
led Boston Financial's new business initiatives and managed the firm's Asset
Management division, which is responsible for the performance of 750 properties
and providing service to 35,000 investors. Before joining Boston Financial, she
was Deputy Budget Director for the Commonwealth of Massachusetts, where she was
responsible for the Commonwealth's health care and public pension programs'
budgets. Ms. Netzer was also Assistant Controller at Yale University and has
been a member of the Watertown Zoning Board of Appeals.
Michael H. Gladstone, age 42, graduated from Emory University (B.A., 1978)
and Cornell University (J.D., M.B.A., 1982). Mr. Gladstone joined Boston
Financial in 1985 and serves as Vice President and General Counsel. He is also
a member of the Senior Leadership Team. Prior to joining Boston Financial,
Mr. Gladstone was associated with the Boston law firm of Herrick & Smith. Mr.
Gladstone is on the Advisory Board of the Housing and Development Reporter.
He is also a member of the Investment Program Association, The National Realty
Committee, Cornell Real Estate Council, National Housing Conference and the
Massachusetts Bar.
<PAGE>
Randolph G. Hawthorne, age 49, is a graduate of Massachusetts Institute of
Technology (S.B., 1971) and Harvard Graduate School of Business (M.B.A., 1973).
Mr. Hawthorne joined Boston Financial in 1973 and is currently a Vice President
responsible for structuring and acquiring real estate investments. Previously,
Mr. Hawthorne served as Treasurer of Boston Financial. Mr. Hawthorne is Past
Chairman of the Board of the National Multi Housing Council, having served on
the board since 1989. He is a past president of the National Housing and
Rehabilitation Association, a member of the Residential Development Council of
the Urban Land Institute, as well as a member of the Advisory Board of the
Berkeley Real Estate Center at the University of California. In addition to
speaking at industry conferences, he is on the Editorial Advisory Boards of the
Tax Credit Advisor and Multi-Housing News.
James D. Hart, age 41, graduated from Trinity College (B.A.) and Amos Tuck
School at Dartmouth College (M.B.A.). Mr. Hart joined Boston Financial in 1997
and serves as Chief Financial Officer and is a member of the Senior Leadership
Team. Prior to joining Boston Financial, Mr. Hart was engaged in venture capital
management on behalf of institutional investors, including the negotiation and
structuring of private equity and mezzanine transactions as a Vice President of
Interfid Ltd., and later in the operational management of a venture-backed
software company, as Managing Director and Chief Financial Officer of Bitstream
Inc. Mr. Hart has also served on the Board of Directors of several companies,
including those that went on to complete initial public offerings.
Paul F. Coughlan, age 55, is a graduate of Brown University (A.B., 1965). Mr.
Coughlan joined Boston Financial in 1975 and is currently a Senior Vice
President and a member of the Investment Management Division with responsibility
for marketing institutional investments. Previously, he was national sales
manager for Boston Financial's retail tax credit funds. Prior to joining Boston
Financial, Mr. Coughlan was an investment broker with Bache & Company and
Reynolds Securities, Inc.
William E. Haynsworth, age 59, is a graduate of Dartmouth College (A.B., 1961)
and Harvard Law School (L.L.B., 1964; L.L.M., 1969). Mr. Haynsworth joined
Boston Financial in 1977 and is a Senior Vice President responsible for the
structuring of real estate investments and the acquisition of property
interests. Prior to joining Boston Financial, Mr. Haynsworth was Acting
Executive Director and General Counsel of the Massachusetts Housing Finance
Agency. He was also the Director of Non-Residential Development of the Boston
Redevelopment Authority and an associate of the law firm of Goodwin, Procter
& Hoar. Mr. Haynsworth is a member of the Executive Committee and the Board
of Directors of the Affordable Housing Tax Credit Coalition. He is a member
of the Senior Leadership Team and the Board of Directors of Boston Financial.
Mr. Haynsworth has over 25 years of real estate experience.
Item 11. Management Remuneration
Neither the directors or officers of Arch Street IV, Inc., nor the partners of
Arch Street IV L.P. nor any other individual with significant involvement in the
business of the Partnership receives any current or proposed remuneration from
the Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 31, 1999, the following is the only entity known to the Partnership
to be the beneficial owner of more than 5% of the Units outstanding:
Amount
Title of Name and Address of Beneficially
Class Beneficial Owner Owned Percent of Class
Limited AMP, Incorporated 10,000 Units 14.70%
Partner P.O. Box 3608
Harrisburg, PA
<PAGE>
The equity securities registered by the Partnership under Section 12(g) of the
Act consist of 100,000 Units, of which 68,043 were sold to the public. The
remaining Units were deregistered in Post-Effective Amendment No. 3, dated
February 21, 1990. Holders of Units are permitted to vote on matters affecting
the Partnership only in certain unusual circumstances and do not generally have
the right to vote on the operation or management of the Partnership.
Arch Street IV L.P. owns five (unregistered) Units not included in the 68,043
Units sold to the public.
Except as described in the preceding paragraph, neither Arch Street IV, Inc.,
Arch Street IV L.P., Boston Financial nor any of their executive officers,
directors, partners or affiliates is the beneficial owner of any Units. None of
the foregoing persons possess a right to acquire beneficial ownership of Units.
There is no arrangement in existence, to the Partnership's knowledge, that would
result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions
The Partnership paid certain fees to and reimbursed certain expenses of the
Managing General Partner or its affiliates (including Boston Financial) in
connection with the organization of the Partnership and the offering of Units.
The Partnership was also required to pay certain fees to and reimburse certain
expenses of the Managing General Partner or its affiliates (including Boston
Financial) in connection with the administration of the Partnership and its
acquisition and disposition of investments in Local Limited Partnerships. In
addition, the General Partners are entitled to certain Partnership distributions
under the terms of the Partnership Agreement. Also, an affiliate of the General
Partners will receive up to $10,000 from the sale or refinancing proceeds of
each Local Limited Partnership, if it is still a limited partner at the time of
such transaction. All such fees and distributions are more fully described in
the sections entitled "Estimated Use of Proceeds", "Management Compensation and
Fees" and "Profits and Losses for Tax Purposes, Tax Credits and Cash
Distributions" of the Prospectus. Such sections are incorporated herein by
reference. In addition, Boston Financial Property Management ("BFPM"), an
affiliate of the Managing General Partner, serves as property management agent
for the properties owned by Leawood Associates, L.P., Oakview Square, L.P.,
Whitehills II Apartments Company, L.P., Gobles Limited Dividend Housing
Association and Milan Apartments Company, L.P. BFPM is also the Management agent
for the Texas Partnerships.
The Partnership is permitted to enter into transactions involving affiliates of
the Managing General Partner, subject to certain limitations established in the
Partnership Agreement.
Information regarding the fees paid and expense reimbursements made in the three
years ending March 31, 1999 is presented as follows:
Organizational fees and expenses
In accordance with the Partnership Agreement, Boston Financial is to be
reimbursed by the Partnership for organizational, offering and selling expenses
advanced on behalf of the Partnership by Boston Financial or its affiliates and
for salaries and direct expenses of certain employees of the Managing General
Partner and its affiliates in connection with the registration and organization
of the Partnership. Such expenses include printing expenses and legal,
accounting, escrow agent and depository fees and expenses. Such expenses also
include a non-accountable expense allowance for marketing expenses equal to 1%
of gross offering proceeds. From inception through March 31, 1999, $8,351,601 of
organization fees and expenses incurred on behalf of the Partnership were paid
and reimbursed to an affiliate of the Managing General Partner. Total
organization and offering expenses did not exceed 5.5% of the gross offering
proceeds.
<PAGE>
Acquisition fees and expenses
In accordance with the Partnership Agreement, the Partnership is required to pay
acquisition fees to and reimburse acquisition expenses of the Managing General
Partner or its affiliates for selecting, evaluating, structuring, negotiating
and closing the Partnership's investments in Local Limited Partnerships.
Acquisition fees totaled 7.5% of the gross offering proceeds. Acquisition
expenses, which include such expenses as legal fees and expenses, travel and
communications expenses, costs of appraisals, accounting fees and expenses, did
not exceed 1.75% of the gross offering proceeds. Acquisition fees totaling
$5,080,756 for the closing of the Partnership's Local Limited Partnership
Investments have been paid to an affiliate of the Managing General Partner.
Acquisition expenses totaling $974,240 were incurred and have been reimbursed to
an affiliate of the Managing General Partner. No payments were made or expenses
reimbursed in each of the three years ended March 31, 1999.
Asset Management Fees
In accordance with the Partnership Agreement, an affiliate of the Managing
General Partner is paid an annual fee for services in connection with the
administration of the affairs of the Partnership. The affiliate currently
receives $7,467 (as adjusted by the CPI factor) per Local Limited Partnership
annually as the Asset Management Fee. Fees earned in each of the three years
ended March 31, 1999 are as follows:
1999 1998 1997
------------- ------------- ----------
Asset management fees $ 199,280 $ 222,066 $ 250,509
Salaries and benefits expense reimbursements
An affiliate of the Managing General Partner is reimbursed for the cost of the
Partnership's salaries and benefits expenses. The reimbursements are based upon
the size and complexity of the Partnership's operations. Reimbursements paid or
payable in each of the three years ended March 31, 1999 are as follows:
1999 1998 1997
------------- ------------- -----------
Salaries and benefits expense
reimbursements $ 108,586 $ 147,039 $ 136,075
Property Management Fees
BFPM is the management agent of the Texas Partnerships and Leawood Manor,
properties in which the Partnership has invested. The property management fee
earned is 5% of the properties' gross revenues. Fees earned by BFPM, which have
been included in the Combined Statements of Operations for each of the three
years ended December 31, 1998, are as follows:
1998 1997 1996
------------- ------------- ----------
Property management fees $ 103,724 $ 122,823 $ 129,241
BFPM is the management agent for Oakview Square, Whitehills II Apartments,
Orchard View and Canfield Crossing, properties in which the Partnership
invested. The property management fee charged is 5% of the properties' gross
revenues. Fees earned by BFPM, which have been included in operating expenses in
the summarized income statements in Note 4 to the Combined Financial Statements
in Part II, Item 8 for each of the three years ended December 31, 1998, are as
follows:
1998 1997 1996
------------- ------------- ------------
Property management fees $ 73,989 $ 77,411 $ 65,926
<PAGE>
Cash distributions paid to the General Partners
In accordance with the Partnership Agreement, the General Partners of the
Partnership, Arch Street IV, Inc. and Arch Street IV Limited Partnership,
receive 1% of cash distributions made to partners. No cash distributions were
made to the General Partners in any of the three years ended March 31, 1999.
Additional information concerning cash distributions and other fees paid or
payable to the Managing General Partner and its affiliates and the reimbursement
of expenses paid or payable to Boston Financial and its affiliates during each
of the three years ended March 31, 1999 is presented in Note 5 to the Financial
Statements.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) and (a)(2) Documents filed as a part of this Report.
In response to this portion of Item 14, the financial statements, financial
statement schedules and the auditors' report relating thereto are submitted as a
separate section of this Report. See Index on page F-1 hereof.
The reports of auditors of the Local Limited Partnership relating to the audits
of the financial statements of such Local Limited Partnerships appear in Exhibit
(28)(1) of this Report.
Other schedules have been omitted as they are either not required or the
information required to be presented therein is available elsewhere in the
financial statements and the accompanying notes and schedules.
(a)(3)(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the year ended March 31,
1999.
(a)(3)(c) Exhibits
Number and Description in Accordance with
Item 601 of Regulation S-K
4. Instruments defining the rights of security
holders, including indentures
4.1 Amended and Restated Agreement Exhibit A to Prospectus contained in
and Certificate of Limited Form S-11 Registration Statement,
Partnership dated as of File # 33-26394
April 20, 1989
27. Financial Data Schedule
28. Additional Exhibits
28.1 (a) Reports of Other Independent Auditors
(b) Audited financial statements of
Local Limited Partnerships
Lakeside
Audobon
Mayfair Mansions
(a)(3)(d) None.
<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.
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
By: Arch Street IV, Inc.
its Managing General Partner
By: /s/Randolph G. Hawthorne Date: June 29, 1999
------------------------------- ------------
Randolph G. Hawthorne
Managing Director, Vice President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Managing General
Partner of the Partnership and in the capacities and on the dates indicated:
By: /s/Randolph G. Hawthorne Date: June 29, 1999
------------------------------- -------------
Randolph G. Hawthorne
Managing Director, Vice President and
Chief Operating Officer
By: /s/Michael H. Gladstone Date: June 29, 1999
------------------------------ -------------
Michael H. Gladstone
A Managing Director
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
Annual Report on Form 10-K
For the Year Ended March 31, 1999
Index
Page No.
Report of Independent Accountants F-2
Combined Financial Statements
Combined Balance Sheets - March 31, 1999 and 1998 F-3
Combined Statements of Operations - Years Ended
March 31, 1999, 1998 and 1997 F-4
Statements of Changes in Partners' Equity
- Years Ended March 31, 1999, 1998 and 1997 F-6
Combined Statements of Cash Flows - Years Ended
March 31, 1999, 1998 and 1997 F-7
Notes to the Combined Financial Statements F-9
Financial Statement Schedule
Schedule III - Real Estate and Accumulated
Depreciation F-27
See also Index to Exhibits on Page K-25 for the financial statements of the
Investor Local Limited Partnerships included as a separate exhibit in this
Annual Report of Form 10-K.
Other schedules have been omitted as they are either not required or the
information required to be presented therein is available elsewhere in the
financial statements and the accompanying notes and schedules.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Boston Financial Qualified Housing Tax Credits L.P. IV
(A Limited Partnership)
In our opinion, based on our audits and the reports of other auditors, the
combined financial statements listed in the accompanying index present fairly,
in all material respects, the financial position Boston Financial Qualified
Housing Tax Credits L.P. IV (the "Partnership") at March 31, 1999 and 1998, and
the results of its operations and its cash flows for each of the three years in
the period ended March 31, 1999, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule listed in the accompanying index presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related combined financial statements. These financial statements and financial
statement schedule are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We did not audit the financial
statements of certain local limited partnerships for which total assets of
$27,203,724 and $29,317,845, are included in these financial statements as of
March 31, 1999 and 1998, respectively, and for which net losses of $114,072,
$1,459,984, and $4,647,629 are included in the accompanying financial statements
as of March 31, 1999, 1998, 1997, respectively. Those statements were audited by
other auditors whose reports thereon have been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for the Local
Limited Partnerships, is based solely on the reports of the other auditors. We
conducted our audits of these statements in accordance with generally accepted
auditing standard, which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits and the reports of other auditors provide a reasonable basis for the
opinions expressed above.
/s/PricewaterhouseCoopers LLP
June 18, 1999
Boston, Massachusetts
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED BALANCE SHEETS - MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
Assets
<S> <C> <C>
Cash and cash equivalents $ 361,069 $ 386,059
Marketable securities, at fair value (Note 3) 703,642 985,849
Accounts receivable, net of allowance for bad debt of $(312,788)
and $314,316 in 1999 and 1998, respectively 31,351 12,759
Tenant security deposits 92,851 85,340
Investments in Local Limited Partnerships,
net of reserve for valuation of $2,094,646 and
$2,724,482 in 1999 and 1998, respectively (Note 4) 15,022,986 15,286,237
Rental property at cost, net of
accumulated depreciation (Note 6) 12,916,254 14,519,371
Mortgagee escrow deposits 117,008 114,300
Deferred charges, net of $196,874 and $176,768 of
accumulated amortization in 1999 and 1998,
respectively 168,970 189,076
Other assets 284,834 29,133
------------- -------------
Total Assets $ 29,698,965 $ 31,608,124
============= =============
Liabilities and Partners' Equity
Mortgage notes payable (Note 7) $ 8,547,201 $ 9,720,859
Accounts payable to affiliates (Note 5) 104,275 602,600
Accounts payable and accrued expenses 251,458 340,574
Interest payable (Note 7) 655,016 627,412
Tenant security deposits payable 78,985 84,131
Payable to affiliated Developer (Note 8) 2,482,000 2,482,000
------------- -------------
Total Liabilities 12,118,935 13,857,576
------------- -------------
Minority interest in Local Limited Partnerships 426,367 432,469
------------- -------------
General, Initial and Investor Limited Partners' Equity 17,150,190 17,316,902
Net unrealized gains on marketable securities 3,473 1,177
------------- -------------
Total Partners' Equity 17,153,663 17,318,079
------------- -------------
Total Liabilities and Partners' Equity $ 29,698,965 $ 31,608,124
============= =============
The accompanying notes are an integral part of the combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- ------------
Revenue:
<S> <C> <C> <C>
Rental $ 1,802,684 $ 1,831,495 $ 1,846,570
Investment 93,535 108,299 130,027
Bad debt recoveries 119,331 - -
Other 218,717 121,794 122,632
------------- ------------- -------------
Total Revenue 2,234,267 2,061,588 2,099,229
------------- ------------- -------------
Expenses:
Asset management fees, related party (Note 5) 199,280 222,066 250,509
General and administrative (includes
reimbursements to affiliate in the amounts of
$108,586, $147,039 and $136,075 in 1999,
1998 and 1997, respectively) (Note 5) 268,965 348,400 462,680
Bad debt expense 12,792 176,648 300,835
Rental operations, exclusive of depreciation 871,715 1,025,546 1,170,804
Property management fees, related party (Note 5) 103,724 122,823 129,241
Interest (Note 7) 1,029,682 1,012,385 987,379
Provision for valuation of rental property - 181,098 791,830
Provision for valuation of
investments in Local Limited
Partnerships (Note 4) - 1,880,482 -
Depreciation (Note 6) 587,103 658,377 746,829
Amortization 86,230 110,330 107,784
------------- ------------- -------------
Total Expenses 3,159,491 5,738,155 4,947,891
------------- ------------- -------------
Loss before equity in income (losses) of Local
Limited Partnerships, minority
interest, loss on liquidation of
interests in Local Limited Partnerships
and gain on transfer of assets (925,224) (3,676,567) (2,848,662)
Equity in income (losses) of Local Limited
Partnerships (Note 4) 33,851 (1,405,591) (2,747,270)
Minority interest in losses of
Local Limited Partnerships 139,073 81,241 92,152
Loss on liquidation of interests
in Local Limited Partnerships (Note 10) (3,750) (3,922) -
------------- ------------- -------------
Net loss before gain on transfer of assets (756,050) (5,004,839) (5,503,780)
Gain on transfer of assets 589,338 1,053,981 -
------------- ------------- -------------
Net Loss $ (166,712) $ (3,950,858) $ (5,503,780)
============= ============= =============
Net Loss allocated:
General Partners $ (1,667) $ (39,509) $ (55,038)
Limited Partners (165,045) (3,911,349) (5,448,742)
------------- ------------- -------------
$ (166,712) $ (3,950,858) $ (5,503,780)
============= ============= =============
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF OPERATIONS (continued)
FOR THE YEARS ENDED MARCH 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- --------------
Net loss before gain on transfer of assets per
<S> <C> <C> <C>
Limited Partnership Unit (68,043 Units) $ (11.00) $ (72.82) $ (80.08)
============= ============= =============
Gain on transfer of assets per
Limited Partnership Unit (68,043 Units) $ 8.57 $ 15.34 $ -
============= ============= =============
Net Loss per Limited Partnership
Unit (68,043 Units) $ (2.43) $ (57.48) $ (80.08)
============= ============= =============
The accompanying notes are an integral part of the combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED MARCH 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Net
Initial Investor Unrealized
General Limited Limited Gains
Partners Partners Partners (Losses) Total
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1996 $ (323,370) $ 5,000 $ 27,089,910 $ 268 $ 26,771,808
------------ --------- ------------- ---------- ------------
Comprehensive Loss:
Net change in net unrealized gains
on marketable securities
available for sale - - - (5,520) (5,520)
Net Loss (55,038) - (5,448,742) - (5,503,780)
------------ --------- ------------- ---------- -------------
Comprehensive Loss (55,038) - (5,448,742) (5,520) (5,509,300)
------------ --------- ------------- ---------- -------------
Balance at March 31, 1997 (378,408) 5,000 21,641,168 (5,252) 21,262,508
------------ --------- ------------- ---------- -------------
Comprehensive Income (Loss):
Net change in net unrealized losses
on marketable securities
available for sale - - - 6,429 6,429
Net Loss (39,509) - (3,911,349) - (3,950,858)
------------ --------- ------------- ---------- -------------
Comprehensive Income (Loss): (39,509) - (3,911,349) 6,429 (3,944,429)
------------ --------- ------------- ---------- -------------
Balance at March 31, 1998 (417,917) 5,000 17,729,819 1,177 17,318,079
------------ --------- ------------- ---------- -------------
Comprehensive Income (Loss):
Net change in net unrealized gains
on marketable securities
available for sale - - - 2,296 2,296
Net Loss (1,667) - (165,045) - (166,712)
------------ --------- ------------- ---------- -------------
Comprehensive Income (Loss) (1,667) - (165,045) 2,296 (164,416)
------------ --------- ------------- ---------- -------------
Balance at March 31, 1999 $ (419,584) $ 5,000 $ 17,564,774 $ 3,473 $ 17,153,663
============ ========= ============= ========== =============
The accompanying notes are an integral part of the combined financial statements.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -------------
Cash flows from operating activities
<S> <C> <C> <C>
Net Loss $ (166,712) $ (3,950,858) $ (5,503,780)
Adjustments to reconcile net loss to net cash
used for operating activities:
Equity in income (losses) of
Local Limited Partnerships (33,851) 1,405,591 2,747,270
Gain on transfer of assets (589,338) (1,053,981) -
Loss on liquidation of interests in
Local Limited Partnerships 3,750 3,922 -
Cash distribution income included in
cash distributions from Local Limited
Partnerships (63,929) (64,034) (19,584)
Provision for valuation of
investments in Local Limited Partnerships - 1,880,482 -
Other (1,026) (5,456) -
Bad debt expense (recoveries) (106,539) 176,648 300,835
Provision for valuation of rental property - 181,098 791,830
Depreciation and amortization 673,333 768,707 854,613
(Gain) loss on sales and maturities of
marketable securities (3,651) 1,902 1,310
Minority interest in losses of Local
Limited Partnerships (139,073) (81,241) (92,152)
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Accounts receivable, net 516 10,918 15,868
Tenant security deposits (8,255) 11,385 11,006
Mortgagee escrow deposits (2,854) (7,945) 6,867
Other assets (255,784) 3,983 (2,805)
Accounts payable to affiliates (491,485) 205,805 250,503
Accounts payable and accrued expenses 38,235 81,313 (43,617)
Interest payable 193,961 180,471 289,020
Tenant security deposits payable (4,402) (3,340) 4,004
------------ ------------ ------------
Net cash used for operating activities (957,104) (254,630) (388,812)
------------ ------------ ------------
Cash flows from investing activities:
Return of investment in Local Limited Partnership - - 3,331
Purchases of marketable securities (922,221) (623,364) (487,098)
Proceeds from sales and maturities
of marketable securities 1,210,375 698,632 852,443
Cash distributions received from Local
Limited Partnerships 360,545 318,180 332,439
(Advances to) reimbursements from
Local Limited Partnerships 351,625 42,133 (336,775)
Purchase of rental property and equipment (89,348) (81,449) (127,283)
----------- ------------ ------------
Net cash provided by investing activities 910,976 354,132 237,057
----------- ------------ ------------
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS (Continued)
FOR THE YEARS ENDED MARCH 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -------------
Cash flows from financing activities:
<S> <C> <C> <C>
Capital contributions received 92,221 92,221 92,221
Advances from affiliate 17,701 20,851 50,212
Payment of mortgage principal (88,784) (114,668) (116,976)
----------- ------------ ------------
Net cash provided by (used for) financing activities 21,138 (1,596) 25,457
----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents (24,990) 97,906 (126,298)
Cash and cash equivalents, beginning 386,059 288,153 414,451
------------ ------------ ------------
Cash and cash equivalents, ending $ 361,069 $ 386,059 $ 288,153
============ ============ ============
Supplemental disclosure:
Cash paid for interest $ 835,730 $ 831,914 $ 698,359
============ ============ ============
Non-cash disclosure:
See Note 10 for discussion on the transfers of certain Texas Partnerships.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS
1. Organization
Boston Financial Qualified Housing Tax Credits L.P. IV (the "Partnership") was
formed on March 30, 1989 under the laws of the Commonwealth of Massachusetts for
the primary purpose of investing, as a limited partner, in other limited
partnerships ("Local Limited Partnerships"), each of which own and operate
apartment complexes, most of which benefit from some form of federal, state or
local assistance program and each of which qualify for low-income housing tax
credits. The Partnership's objectives are to: (i) provide current tax benefits
in the form of tax credits which qualified investors may use to offset their
federal income tax liability; (ii) preserve and protect the Partnership's
capital; (iii) provide limited cash distributions which are not expected to
constitute taxable income during Partnership operations; and iv) provide cash
distributions from sale or refinancing transactions. The General Partners of the
Partnership are Arch Street IV, Inc., which serves as the Managing General
Partner, and Arch Street IV L.P., which also serves as the Initial Limited
Partner. Both of the General Partners are affiliates of The Boston Financial
Group Limited Partnership ("Boston Financial"). The fiscal year of the
Partnership ends on March 31.
The Partnership's partnership agreement ("Partnership Agreement") authorized the
sale of up to 100,000 units of Limited Partnership Interest ("Units") at $1,000
per Unit, adjusted for certain discounts. The Partnership raised $67,653,000
("Gross Proceeds"), net of discounts of $390,000, through the sale of 68,043
Units. Such amounts exclude five unregistered Units previously acquired for
$5,000 by the Initial Limited Partner, which is also one of the General
Partners. The offering of Units terminated on January 31, 1990.
Generally, profits, losses, tax credits and cash flows from operations are
allocated 99% to the Limited Partners and 1% to the General Partners. Net
proceeds from a sale or refinancing will be allocated 95% to the Limited
Partners and 5% to the General Partners, after certain priority payments.
Under the terms of the Partnership Agreement, the Partnership initially
designated 4% of the gross proceeds from the sale of Units as a Reserve for
working capital of the Partnership and contingencies related to ownership of
Local Limited Partnership interests. The Managing General Partner may increase
or decrease such amounts from time to time, as it deems appropriate. At March
31, 1999, the Managing General Partner has designated approximately $809,000 of
cash, cash equivalents and marketable securities as such Reserve.
2. Significant Accounting Policies
Basis of Presentation and Combination
The Partnership accounts for its investments in Local Limited Partnerships, with
the exception of the Combined Entities (defined below), using the equity method
of accounting, because the Partnership does not have a majority control over the
major operating and financial policies of the Local Limited Partnerships in
which it invests. Under the equity method, the investment is carried at cost,
adjusted for the Partnership's share of net income or loss of the Local Limited
Partnership, additional investments and cash distributions from the Local
Limited Partnership. Equity in income or loss of the Local Limited Partnerships
is included currently in the Partnership's operations. The Partnership has no
obligation to fund liabilities of the Local Limited Partnerships beyond its
investment; therefore, the Local Limited Partnership's investment will not be
carried below zero. To the extent that equity losses are incurred or
distributions received when the Partnership's respective carrying value of the
Local Limited Partnership has been reduced to a zero balance, the losses will be
suspended and offset against future income, and distributions received will be
recorded as income.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Basis of Presentation and Combination (continued)
Excess investment costs over the underlying net assets acquired have arisen from
acquisition fees paid and expenses reimbursed to an affiliate of the
Partnership. These fees and expenses are included in the Partnership's
Investments in Local Limited Partnerships and are being amortized on a
straight-line basis over 35 years.
The Managing General Partner has elected to report results of the Local Limited
Partnerships on a 90 day lag basis, because the Local Limited Partnerships
report their results on a calendar year basis. Accordingly, the financial
information about the Local Limited Partnerships that is included in the
accompanying combined financial statements is as of December 31, 1998, 1997 and
1996.
On September 13, 1991, an affiliate of the Partnership's Managing General
Partner, BF Leawood, Inc., became the General Partner of Leawood Associates,
L.P. ("Leawood Manor"), a Local Limited Partnership in which the Partnership has
invested. BF Leawood, Inc. replaced the previous management agent with Boston
Financial Property Management, an affiliate of the Managing General Partner.
Since the Local General Partner of Leawood Manor is now an affiliate of the
Partnership and has a controlling financial interest, these combined financial
statements include all financial activity of Leawood Manor for the years ended
December 31, 1998, 1997 and 1996. All significant intercompany balances and
transactions have been eliminated.
On October 6, 1993, an affiliate of the Partnership's Managing General Partners,
BF Texas Limited Partnership, became an additional Local General Partner with
responsibility for all management decisions in twelve Local Limited Partnerships
(the "Texas Partnerships") in which the Partnership has invested. Since the
Local General Partner of the Texas Partnerships was an affiliate of the
Partnership, and had a controlling financial interest in these Local Limited
Partnerships, these combined financial statements included the financial
activity of the twelve Texas Partnerships beginning in the year ended December
31, 1994. Prior to March 31, 1996, control of seven of these Texas Partnerships
was transferred to unrelated parties, and as such, as of that date, these
partnerships were accounted for on the equity method (see Note 10). During the
years ended March 31, 1998 and 1997, the Partnership relinquished its interest
in these seven Texas Partnerships. During the year ended March 31, 1998, the
Partnership also relinquished its interest in three of the five remaining Texas
Partnerships. During the year ended March 31, 1999, the Partnership relinquished
its interest in one of the two remaining Texas Partnerships. As of March 31,
1999, the financial statements of the remaining Texas Partnership are combined
with the Partnership's financial statements. All significant intercompany
balances and transactions have been eliminated.
The Partnership has elected to report the results of Leawood Manor and the Texas
Partnerships on a 90 day lag basis, consistent with the presentation of the
financial information of all Local Limited Partnerships. As used herein the
"Combined Entities" refers to Leawood Manor and the Texas Partnerships, prior to
the transfer of control referenced above.
Loans and operating advances to Local Limited Partnerships ($36,233 and $19,947
during the years ended March 31, 1999 and 1998, respectively) are reflected as
receivables. A bad debt allowance is provided for such loans and advances deemed
uncollectible.
The Partnership recognizes a decline in the carrying value of its investments in
Local Limited Partnerships when there is evidence of a non-temporary decline in
the recoverable amount of the investment. There is a possibility that the
estimates relating to reserves for non-temporary declines in carrying value of
investments in Local Limited Partnerships may be subject to material near term
adjustments.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Basis of Presentation and Combination (continued)
The Partnership, as a limited partner in the Local Limited Partnerships, is
subject to risks inherent in the ownership of property which are beyond its
control, such as fluctuations in occupancy rates and operating expenses,
variations in rental schedules, proper maintenance and continued eligibility for
tax credits. If the cost of operating a property exceeds the rental income
earned thereon, the Partnership may deem it in its best interest to voluntarily
provide funds in order to protect its investment.
Cash Equivalents
Cash equivalents consist of short-term money market instruments with maturities
of ninety days or less at acquisition and approximate fair value.
Marketable Securities
Marketable securities consist primarily of U.S. Treasury instruments and various
asset-backed investment vehicles. The Partnership's marketable securities are
classified as "Available for Sale" securities and reported at fair value as
reported by the brokerage firm at which the securities are held. All marketable
securities have fixed maturities. Realized gains and losses from the sales of
securities are based on the specific identification method. Unrealized gains and
losses are excluded from earnings and reported as a separate component of
partners' equity.
Effect of Recently Issued Accounting Standard
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income. The standard
requires that changes in comprehensive income be shown in a financial statement
that is displayed with the same prominence as other financial statements. The
standard is effective for fiscal years beginning after December 15, 1997. The
Partnership adopted the new standard effective April 1, 1998 and its adoption
did not have a significant effect on the Partnership's financial position or
results of operations. The only component of the Partnership's other accumulated
comprehensive income is net unrealized gains and losses on marketable
securities.
Deferred Fees
Costs incurred in connection with the organization of the Partnership
amounting to $50,000 were deferred and amortized on a straight-line basis over
60 months.
Leawood Manor's deferred charges consist of financing fees, which are being
amortized using the straight-line method over the term of the related debt.
Rental Property
Real estate and personal property of the Combined Entities are recorded at cost.
The Combined Entities provide for depreciation using various methods over their
estimated useful lives.
In accordance with Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
the Partnership has implemented policies and practices for assessing impairment
of its real estate assets and investments in Local Limited Partnerships. Each
asset is analyzed by real estate experts to determine if an impairment indicator
exists. If so, the carrying value is compared to the undiscounted future cash
flows expected to be derived from the asset and, if there is a significant
impairment in value, a provision to write down the asset to fair value will be
charged against income.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
2. Significant Accounting Policies (continued)
Rental Income
Rental income, principally from short-term leases on the Combined Entities'
apartment units, is recognized as income under the accrual method as the rentals
become due.
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 disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
Statements of Financial Accounting Standards No. 107 ("SFAS No. 107"),
Disclosures About Fair Value of Financial Instruments, requires disclosure for
the fair value of most on- and off-balance sheet financial instruments for which
it is practicable to estimate that value. The scope of SFAS No. 107 excludes
certain financial instruments, such as trade receivables and payables when the
carrying value approximates the fair value and investments accounted for under
the equity method, and all nonfinancial assets, such as real property. Except as
discussed in Note 7, the fair values of the Partnership's assets and
liabilities, which qualify as financial instruments under SFAS No. 107,
approximate their carrying amounts in the accompanying balance sheets.
Income Taxes
No provision for income taxes has been made, as the liability for such taxes is
the obligation of the partners of the Partnership.
Reclassifications
Certain amounts in prior years' financial statements have been reclassified
herein to conform to the current year presentation.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
3. Marketable Securities
A summary of marketable securities is as follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
Debt securities issued by the
US Treasury and other US
government corporations
<S> <C> <C> <C> <C>
and agencies $ 596,872 $ 1,526 $ (352) $ 598,046
Mortgage backed securities 103,297 2,299 - 105,596
----------- ---------- -------- -----------
Marketable securities
at March 31, 1999 $ 700,169 $ 3,825 $ (352) $ 703,642
=========== ========== ======== ===========
Debt securities issued by the
US Treasury and other US
government corporations
and agencies $ 836,320 $ 1,298 $ (2,249) $ 835,369
Mortgage backed securities 148,352 2,128 - 150,480
----------- ---------- -------- -----------
Marketable securities
at March 31, 1998 $ 984,672 $ 3,426 $ (2,249) $ 985,849
=========== ========== ======== ===========
</TABLE>
The contractual maturities at March 31, 1999 are as follows:
<TABLE>
<CAPTION>
Fair
Cost Value
<S> <C> <C>
Due in less than one year $ 347,165 $ 347,202
Due in one to five years 249,707 250,844
Mortgage backed securities 103,297 105,596
----------- -----------
$ 700,169 $ 703,642
=========== ===========
</TABLE>
Actual maturities may differ from contractual maturities because some borrowers
have the right to call or prepay obligations. Proceeds from sales of marketable
securities were approximately $679,000, $382,000 and $560,000 during the fiscal
years ended March 31, 1999, 1998 and 1997, respectively. Proceeds from the
maturities of marketable securities were approximately $531,000, $317,000 and
$292,000 during the fiscal years ended March 31, 1999, 1998 and 1997,
respectively. Included in investment income are gross gains of $4,891, $1,041
and $4,471 and gross losses of $1,239, $2,943 and $5,781 that were realized on
the sales during the fiscal years ended March 31, 1999, 1998 and 1997,
respectively.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
4. Investments in Local Limited Partnerships
The Partnership uses the equity method to account for its limited partnership
interests in twenty-five Local Limited Partnerships (excluding the Combined
Entities) which own and operate multi-family housing complexes, most of which
are government-assisted. The Partnership, as Investor Limited Partner pursuant
to the various Local Limited Partnership Agreements which contain certain
operating and distribution restrictions, has acquired a 99% interest in the
profits, losses, tax credits and cash flows from operations of each of the Local
Limited Partnerships. Upon dissolution, proceeds will be distributed according
to each respective partnership agreement.
The following is a summary of investments in Local Limited Partnerships,
excluding the Combined Entities, at March 31:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
Capital contributions paid to Local Limited
Partnerships and purchase price paid
to withdrawing partners of Local
<S> <C> <C> <C>
Limited Partnerships $ 41,688,356 $ 43,001,951 $ 43,318,237
Cumulative equity in losses of Local Limited
Partnerships (excluding cumulative
unrecognized losses of $8,811,999, $2,445,394
and $895,873 for the years ended 1999, 1998
and 1997, respectively) (24,770,928) (25,573,556) (24,452,001)
Cash distributions received from Local
Limited Partnerships (2,128,254) (1,808,459) (1,490,279)
------------- ------------- -------------
Investments in Local Limited Partnerships
before adjustment 14,789,174 15,619,936 17,375,957
Excess of investment cost over the underlying net assets acquired:
Acquisition fees and expenses 2,999,362 3,025,727 3,031,645
Accumulated amortization of acquisition
fees and expenses (670,904) (634,944) (570,964)
------------- ------------- -------------
Investments in Local Limited Partnerships 17,117,632 18,010,719 19,836,638
Reserve for valuation of investments
in Local Limited Partnerships (2,094,646) (2,724,482) (945,277)
------------- ------------- -------------
$ 15,022,986 $ 15,286,237 $ 18,891,361
============= ============= =============
</TABLE>
At March 31, 1999, the Partnership has provided for a reserve for valuation for
its investment in two Local Limited Partnerships, Bentley Court and Sencit
Townhouse, because there is evidence of non-temporary declines in the
recoverable amount of these investments.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
4. Investments in Local Limited Partnerships (continued)
Summarized financial information as of December 31, 1998, 1997 and 1996 (due to
the Partnership's policy of reporting the financial information of its Local
Limited Partnership interests on a 90 day lag basis) of all the Local Limited
Partnerships in which the Partnership has invested as of that date (excluding
the Combined Entities) is as follows:
<TABLE>
<CAPTION>
Summarized Balance Sheets - as of December 31,
1998 1997 1996
---------------- --------------- ---------------
Assets:
<S> <C> <C> <C>
Rental property, net $ 103,820,897 $ 114,216,561 $ 119,968,771
Current assets 4,473,619 4,386,715 4,512,930
Other assets, net 10,293,049 11,196,370 11,160,325
Total Assets ---------------- --------------- ---------------
$ 129,799,646 $ 135,642,026 $ 118,587,565
================ =============== ===============
Liabilities and Partners' Equity:
Mortgages payable, net of current portion $ 92,036,400 $ 95,338,576 $ 98,043,569
Other liabilities 9,448,555 8,068,167 9,238,211
Current liabilities (includes current
portion of mortgage payable) 7,118,446 8,647,970 7,371,825
---------------- --------------- ---------------
Total Liabilities 108,603,401 112,054,713 114,653,605
---------------- --------------- ---------------
Partners' Equity:
Partnership's equity 5,812,380 13,407,318 16,613,767
Other partners' equity 4,171,784 4,337,615 4,374,654
---------------- --------------- ---------------
Total Partners' Equity 9,984,164 17,744,933 20,988,421
---------------- --------------- ---------------
Total Liabilities and Partners' Equity $ 118,587,565 $ 129,799,646 $ 135,642,026
================ =============== ===============
Summarized Income Statements -
for the years ended December 31,
Rental and other revenue $ 19,849,782 $ 20,094,050 $ 19,632,293
---------------- --------------- ---------------
Expenses:
Operating expenses 11,511,920 10,525,127 10,458,548
Interest expense 6,969,702 7,356,242 7,621,226
Depreciation and amortization 4,675,417 4,807,406 4,847,371
Provisions for valuation of real estate 3,078,687 - -
---------------- --------------- ---------------
Total Expenses 26,235,726 22,688,775 22,927,145
---------------- --------------- ---------------
Net Loss $ (6,385,944) $ (2,594,725) $ (3,294,852)
================ =============== ===============
Partnership's share of Net Loss $ (6,322,085) $ (2,891,078) $ (3,606,691)
================ =============== ===============
Other partners' share of Net Loss $ (63,859) $ 296,353 $ 311,839
================ =============== ===============
</TABLE>
The summarized financial information of the Local Limited Partnerships above
does not include Leawood Manor and the Texas Partnerships for the years ended
December 31, 1998, 1997 and 1996. The balance sheets and statements of
operations of these Local Limited Partnerships are combined with the
Partnership's financial statements through the date that these partnerships were
transferred (see Note 10).
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
4. Investments in Local Limited Partnerships (continued)
For the fiscal years ended March 31, 1999, 1998 and 1997, the Partnership has
not recognized $6,375,605, $1,549,521 and $879,005, respectively, of equity in
losses relating to twelve Local Limited Partnerships where cumulative equity in
losses and cumulative distributions exceeded its total investments in these
Local Limited Partnerships.
The Partnership's equity as reflected by the Local Limited Partnerships of
$5,812,380 differs from the Partnerships Investment in Local Limited
Partnerships before adjustment of $14,789,174 primarily because of unrecognized
losses as described above.
5. Transactions with Affiliates
In accordance with the Partnership Agreement, the Partnership was required to
pay certain fees to and reimburse expenses of the Managing General Partner and
others in connection with the organization of the Partnership and the offering
of Limited Partnership Units. Selling commissions and other issuance expenses
aggregating $8,351,601 have been charged directly to Limited Partners' Equity.
Total organizational and offering expenses exclusive of selling commissions did
not exceed 5.5% of the gross offering proceeds, and organizational and offering
expenses inclusive of selling commissions did not exceed 15% of the gross
offering proceeds.
In accordance with the Partnership Agreement, the Partnership was required to
pay acquisition fees to and reimburse acquisition expenses of the Managing
General Partner or its affiliates for selecting, evaluating, structuring,
negotiating and closing the Partnership's investments in Local Limited
Partnerships. Acquisition fees totaled 7.5% of the gross offering proceeds, and
acquisition expenses did not exceed 1.75% of the gross offering proceeds.
Acquisition fees totaling $5,080,756 have been paid to an affiliate of the
Managing General Partner for the closing of the Partnership's Local Limited
Partnership Investments. Approximately $2,125,000 of these fees are classified
as capital contributions to Local Limited Partnerships in the summary of
Investments in Local Limited Partnerships in Note 4 to the Combined Financial
Statements. Acquisition expenses totaling $974,240 were incurred and have been
reimbursed to an affiliate of the Managing General Partner.
An affiliate of the Managing General Partner currently receives $7,467 (as
adjusted by the CPI factor) per Local Limited Partnership annually as the Asset
Management Fee for administering the affairs of the Partnership. Included in the
Combined Statements of Operations are Asset Management Fees of $199,280,
$222,066 and $250,509 for the years ended March 31, 1999, 1998 and 1997,
respectively. Payables to an affiliate of the Managing General Partner relating
to the aforementioned fees and expenses aggregate $50,402 and $536,918 at March
31, 1999 and 1998, respectively.
An affiliate of the Managing General Partner is reimbursed for the actual cost
of the Partnership's operating expenses. Included in general and administrative
expenses for the years ended March 31, 1999, 1998 and 1997 is $108,586, $147,039
and $136,075, respectively, that has been paid or is payable by the Partnership
as reimbursement for salaries and benefits. At March 31, 1999 and 1998, $21,138
and $18,442, respectively, is payable to an affiliate of the Managing General
Partner.
Boston Financial Property Management ("BFPM"), an affiliate of the Managing
General Partner, is the management agent for Oakview Square, Whitehills II
Apartments, Orchard View and Canfield Crossing, properties in which the
Partnership invested. The property management fee charged is 5% of properties'
gross revenues. Included in operating expenses in the summarized income
statements in Note 4 to the Combined Financial Statements is $73,989, $77,411
and $65,926 of fees earned by BFPM for the years ended December 31, 1998, 1997
and 1996.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
5. Transactions with Affiliates (continued)
Additionally, BFPM is the management agent of the Texas Partnerships and Leawood
Manor, properties in which the Partnership has invested. The property management
fee charged is 5% of the properties' gross revenues. Included in the Combined
Statements of Operations for the years ended March 31, 1999, 1998 and 1997 is
$103,724, $122,823 and $129,241, respectively, of fees earned by BFPM during the
years ended December 31, 1998, 1997 and 1996, respectively. Included in accounts
payable to affiliates at March 31, 1999 and 1998 is $7,061 and $16,014,
respectively, of property management fees due to an affiliate of the Managing
General Partner.
6. Rental Property
Real estate and personal property belonging to the Combined Entity are recorded
at cost, the components of which, excluding certain acquisition costs of
$644,180 and $672,818 as of December 31, 1998 and 1997, respectively, paid by
the Partnership and included in basis, are as follows at December 31:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Land $ 1,268,099 $ 1,097,749
Building and improvements, net of impairment write-down 15,731,509 17,041,167
Equipment 774,723 925,330
------------ ------------
17,774,331 19,064,246
Less: accumulated depreciation 5,502,257 5,217,693
------------ ------------
Total $ 12,272,074 $ 13,846,553
============ ============
</TABLE>
During the year ended December 31, 1997, an impairment loss of $181,098 was
recognized on the real estate in the Texas Partnerships, which reduced the
carrying values of the Texas Partnerships to approximately $2,249,000. For the
year ended December 31, 1997, the net operating results of the Texas
Partnerships increased the loss of the Partnership (prior to impairment losses)
by $253,291. See Note 10 for further details on the liquidation of the interests
in the Texas Partnerships.
7. Mortgage Notes Payable
Leawood Manor
The amended and restated mortgage note as of December 31, 1998 and 1997 is
payable in the outstanding amount of $7,415,445 and $7,471,460, respectively, by
Leawood Manor in monthly installments of $77,850 for principal and interest in
arrears, with interest accrued at an annual rate of 11.75%. Interest is payable
monthly at the rate of 8% per annum plus 95% of the net cash flows as defined by
the mortgage agreement. Under the terms of the agreement, the difference in the
interest payments at the contract rate of 11.75% and the reduced payment rates
will accrue interest at the rate of 8%, which will be payable from 95% of net
cash flows, if available, or upon maturity of the note. On July 10, 1999 the
reduced payment rate is scheduled to increase to 10%. The note matures in July
2006 and is collateralized by the property. The terms of the mortgage note and
other contract documents require the establishment of restricted deposits and
funded reserves to be held and invested by the mortgagee. These financial
instruments potentially subject Leawood Manor to a concentration of credit risk.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
7. Mortgage Notes Payable (continued)
Subequent to December 31, 1998, Leawood Manor entered into a mortgage agreement
with Northern Financial Company to pay off the first mortgage.
The new mortgage, having a principal sum of $8,350,000, will be payable in
monthly installments of $53,659 of principal and interest in arrears, with
interest accrued at an annual rate of 6.66%. The first mortgage payment is due
March 1, 1999 and the mortgage matures on February 1, 2009 with any remaining
principal and interest due at the time.
A prepayment premium shall be payable in connection with any prepayment made
under the mortgage as described in the agreement.
The liability of Leawood Manor under the mortgage will be limited to the
underlying value of the real estate collateral plus other amounts deposited with
the lender.
Aggregate annual maturities of the new mortgage payable over each of the next
five years are as follows:
December 31, 1999 $ 62,963
2000 70,813
2001 79,552
2002 89,420
2003 100,511
As the terms of the mortgage were modified under current market conditions,
management believes carrying value of the note approximates fair value as of
March 31, 1999.
Texas Partnerships
The Texas Partnerships and RECD have entered into Interest Credit and Rental
Assistance Agreements that have stated interest rates ranging from 9.5% to 7.25%
and provide for an effective interest rate on the notes payable to FmHA of 1
percent, plus all rental income over basic rents as determined by the government
(overages) with maturities ranging from 2016 to 2030. All notes are
collateralized by the respective properties.
The principal balances of the Texas Partnerships' mortgage notes at December 31,
1998 and 1997 are $1,131,757 and $2,249,399, respectively. The remaining
mortgage is currently in default and, as a result, the entire balance is
classified as current. During May 1999, this mortgage was transferred to an
unaffiliated entity (see Note 11).
The Partnership believes it is not practical to estimate the fair value of these
mortgage notes payable because loans with similar characteristics are not
currently available to the Partnership.
8. Payable to Developer
Under the terms of Leawood Manor's development agreement, the Developer had
agreed to advance to the property such funds as may be required to pay certain
operating expenses. Any funds so advanced were to be repaid by Leawood Manor
only in certain circumstances. The amount payable to the Developer at December
31, 1997 represented the net amount advanced to Leawood Manor under this
agreement, the rights to which had been assigned to the general partner of
Leawood Manor. During 1998, this debt was forgiven by the general partner.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
9. Litigation
The IRS finalized its report from an audit of the 1993 tax return for the
project. The IRS report includes the questioning of the treatment of certain
items and findings for non-compliance in 1993. Management understands that the
audit now also focuses on 1994 and 1995 tax credits. On behalf of the
Partnership, the Managing General Partner hired attorneys to appeal the findings
in the IRS report in order to minimize the loss of credits. In June 1999, the
Managing General Partner was informed that the Local General Partner for this
property was indicted on various criminal charges. The Local General Partner
pleaded guilty to two of these counts and is now awaiting sentencing. In the
opinion of management, there is a risk that Bentley Court and, consequently, the
Partnership will suffer some tax credit recapture or credit disallowance.
However, management cannot quantify the risk at this time.
The Partnership is not a party to any other pending legal or administrative
proceeding, and to the best of its knowledge, no legal or administrative
proceeding is threatened or contemplated against it.
10. Transfer and Liquidation of Interests in Local Limited Partnerships
The Managing General Partner has transferred all of the assets of eleven of the
Texas Partnerships, subject to their liabilities, to unaffiliated entities. The
transfers of Grandview Terrace Apartments, Pecan Hills Apartment, Seagraves
Garden Apartments, Hilltop Apartments and Bent Tree Housing were effective
February 21, 1996, February 29, 1996, March 8, 1996, June 6, 1996 and November
20, 1996, respectively. Justin Place Apartments and Valley View Apartments were
transferred July 9, 1997, Nacona Terrace Apartments and Royal Creste Apartments
were transferred August 6, 1997 and Pine Manor Apartments was transferred on
October 28, 1997. Pinewood Terrace Apartments was transferred on July 7, 1998.
For financial reporting purposes, a loss on liquidation of interests in Local
Limited Partnerships of $3,750 and a gain on transfer of assets of $589,338 were
recognized in the year ended March 31, 1999 as a result of the transfer of
Pinewood Terrace Apartments.
For financial reporting purposes, a loss on liquidation of interests in Local
Limited Partnerships of $3,922 and a gain on transfers of assets of $1,053,981
were recognized in the year ended March 31, 1998 as a result of the transfer of
Justin Place Apartments, Valley View Apartments and Pine Manor Apartments. The
loss on the transfers of Nacona Terrace Apartments and Royal Creste Apartments
were previously reserved for in the provision for valuation of investments in
Local Limited Partnerships.
On November 10, 1997, the Managing General Partner transferred 50% of its
interest in capital and profits of BK Apartments to an affiliate of the local
general partner. Included in this transfer is a put option. The put option
grants the Managing General Partner the right to put the Partnership's remaining
interest to the local general partner anytime after one year has elapsed. For
financial reporting purposes, the Partnership has written-down the carrying
value of this investment in Local Limited Partnership to zero because it is
unknown as to whether the Partnership will be able to recover its remaining
invested balance. The Partnership will retain its full share of tax credits
until such time as the remaining interest is put to the local general partner.
For tax purposes, these events will result in both Section 1231 Gain and
cancellation of indebtedness income. In addition, the transfer of ownership will
result in a nominal amount of recapture of tax credits, since the Texas
Partnerships represent only 3% of the Partnership's tax credits.
11. Subsequent Event
In May 1999, the Partnership transferred all of the assets of the remaining
Texas Partnership, Gateway Village, to an unaffiliated entity. The assets were
transferred subject to the related liabilities and the Partnership no longer
retains any ownership in the property. This event will result in both section
1231 Gain and cancellation of indebtedness income. In addition, the transfer of
ownership will result in a nominal amount of tax credit recapture.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
12. Federal Income Taxes
A reconciliation of the net loss reported in the Combined Statements of
Operations for the fiscal years ended March 31, 1999, 1998 and 1997 to the net
loss reported for federal income tax purposes for the years ended December 31,
1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Net Loss per Statement of Operations $ (166,712) $ (3,950,858) $ (5,503,780)
Amortization of acquisition fees and
expenses not deductible for tax
purposes 66,124 90,224 92,053
Adjustment for equity in losses of Local
Limited Partnerships for financial reporting
purposes over (under) equity in losses for
tax purposes 1,924,525 (784,701) 499,384
Equity in losses of Local Limited Partnerships not
recognized for financial reporting purposes (6,056,827) (1,549,521) (879,005)
Provision (recovery) for valuation of investment in Local
Limited Partnership not deductible/taxable for tax
purposes (309,778) 1,880,482 -
Operating expenses not deductible in
current year for tax purposes 157,966 253,468 507,615
Operating expenses paid in current year but
expensed for financial reporting purposes in prior year (685,796) - (62,752)
Adjustment to reflect March 31 fiscal year
end to December 31 tax year end (635,480) (236,277) 40,206
Other (60,179) (79,696) (145,350)
------------- ------------ ------------
Net Loss for federal income tax purposes $ (5,766,157) $ (4,376,879) $(5,451,629)
============= ============ ===========
</TABLE>
The differences in the assets and liabilities of the Partnership for financial
reporting purposes and tax reporting purposes for the year ended March 31, 1999
are as follows:
<TABLE>
<CAPTION>
Financial Tax
Reporting Reporting
Purposes Purposes Differences
<S> <C> <C> <C>
Investments in Local Limited Partnerships $ 15,022,986 $ 12,770,183 $ 2,252,803
============== ============= =============
Other assets $ 14,675,979 $ 9,149,622 $ 5,526,357
============== ============= =============
Liabilities $ 12,118,935 $ 115,520 $ 12,003,415
============== ============= =============
</TABLE>
The differences in the assets and liabilities of the Partnership for financial
reporting purposes are primarily attributable to: (i) for financial reporting
purposes, the Partnership combines the financial statements of two Local Limited
Partnerships with its financial statements; for tax reporting purposes, these
entities are carried on the equity method; (ii) the Partnership has not
recognized approximately $8,502,000 of equity in losses relating to twelve Local
Limited Partnerships whose cumulative equity in losses exceeded their total
investments; (iii) the Partnership has provided a reserve for valuation of
approximately $1,785,000 against two of its investments in Local Limited
Partnerships for financial reporting purposes; (iv) approximately $895,000 of
amortization has been deducted for financial reporting purposes only; (v)
$110,000 of cash distributions received from Local Limited Partnerships during
the quarter ended March 31, 1999 are not included in the Partnership's
Investments in Local Limited Partnerships for tax reporting purposes at December
31, 1998; and (vi) organizational and offering costs of approximately $8,352,000
have been capitalized for tax reporting purposes but are charged to Limited
Partners' equity for financial reporting purposes.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
12. Federal Income Taxes (continued)
The differences in the assets and liabilities of the Partnership for financial
reporting purposes and tax reporting purposes for the year ended March 31, 1998
are as follows:
<TABLE>
<CAPTION>
Financial Tax
Reporting Reporting
Purposes Purposes Differences
<S> <C> <C> <C>
Investments in Local Limited Partnerships $ 15,286,237 $ 17,507,057 $ (2,220,820)
============== ============ =============
Other assets $ 16,321,887 $ 10,150,731 $ 6,171,156
============== ============ =============
Liabilities $ 13,857,576 $ 87,346 $ 13,770,230
============== ============ =============
</TABLE>
The differences in the assets and liabilities of the Partnership for financial
reporting purposes are primarily attributable to: (i) for financial reporting
purposes, the Partnership combines the financial statements of three Local
Limited Partnerships with its financial statements; for tax reporting purposes,
these entities are carried on the equity method; (ii) the Partnership has not
recognized approximately $2,445,000 of equity in losses relating to ten Local
Limited Partnerships whose cumulative equity in losses exceeded their total
investments; (iii) the Partnership has provided a reserve for valuation of
approximately $2,724,000 against two of its investments in Local Limited
Partnerships for financial reporting purposes; (iv) approximately $836,000 of
amortization has been deducted for financial reporting purposes only; (v)
$110,000 of cash distributions received from Local Limited Partnerships during
the quarter ended March 31, 1998 are not included in the Partnership's
Investments in Local Limited Partnerships for tax reporting purposes at December
31, 1997; and (vi) organizational and offering costs of approximately $8,352,000
have been capitalized for tax reporting purposes but are charged to Limited
Partners' equity for financial reporting purposes.
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
13. Supplemental Combining Schedules
<TABLE>
<CAPTION>
Balance Sheets
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. IV (A) Entities (B) Eliminations (A)
Assets
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 243,072 $ 117,997 $ - $ 361,069
Marketable securities, at fair value 703,642 - - 703,642
Accounts receivable, net 392,056 11,284 (371,989) 31,351
Tenant security deposits - 92,851 - 92,851
Investments in Local
Limited Partnerships, net 15,996,670 - (973,684) 15,022,986
Rental property at cost, net of
accumulated depreciation - 12,272,074 644,180 12,916,254
Mortgagee escrow deposits - 117,008 - 117,008
Deferred charges, net - 168,970 - 168,970
Other assets 6,287 278,547 - 284,834
--------------- --------------- ------------- --------------
Total Assets $ 17,341,727 $ 13,058,731 $ (701,493) $ 29,698,965
=============== =============== ============= ==============
Liabilities and Partners' Equity
Mortgage notes payable $ - $ 8,547,201 $ - $ 8,547,201
Accounts payable to affiliates 71,540 404,724 (371,989) 104,275
Accounts payable and accrued expenses 116,524 134,934 - 251,458
Interest payable - 655,016 - 655,016
Tenant security deposits payable - 78,985 - 78,985
Payable to affiliated developer - 2,482,000 - 2,482,000
--------------- --------------- ------------- --------------
Total Liabilities 188,064 12,302,860 (371,989) 12,118,935
--------------- --------------- ------------- --------------
Minority interest in Local Limited
Partnerships - - 426,367 426,367
--------------- --------------- ------------- --------------
General, Initial, and Investor
Limited Partners' Equity 17,150,190 755,871 (755,871) 17,150,190
Net unrealized gains on
marketable securities 3,473 - - 3,473
--------------- --------------- ------------- --------------
Total Partners' Equity 17,153,663 755,871 (755,871) 17,153,663
--------------- --------------- ------------- --------------
Total Liabilities and Partners' Equity $ 17,341,727 $ 13,058,731 $ (701,493) $ 29,698,965
=============== =============== ============= ==============
(A) As of March 31, 1999. (
B) As of December 31, 1998 - See Note 2.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
13. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Operations
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. IV (A) Entities (B) Eliminations (A)
Revenue:
<S> <C> <C> <C> <C>
Rental $ - $ 1,802,684 $ - $ 1,802,684
Investment 65,213 28,322 - 93,535
Bad debt recoveries 119,331 - - 119,331
Other 174,654 44,063 - 218,717
--------------- --------------- ------------- ------------
Total Revenue 359,198 1,875,069 - 2,234,267
--------------- --------------- ------------- ------------
Expenses:
Asset management fees, related party 199,280 - - 199,280
General and administrative 268,965 - - 268,965
Bad debt expense 12,792 - - 12,792
Rental operations, exclusive of depreciation - 871,715 - 871,715
Property management fees, related party - 103,724 - 103,724
Interest - 1,029,682 - 1,029,682
Depreciation - 587,103 - 587,103
Amortization 66,124 20,106 - 86,230
--------------- --------------- ------------- ------------
Total Expenses 547,161 2,612,330 - 3,159,491
--------------- --------------- ------------- ------------
Loss before equity in income of Local
Limited Partnerships, minority interest,
loss on liquidation of interests in Local
Limited Partnerships and
extraordinary item (187,963) (737,261) - (925,224)
Equity in income of Local Limited
Partnerships 25,001 - 8,850 33,851
Minority interest in losses of
Local Limited Partnerships - - 139,073 139,073
Loss on liquidation of interests
in Local Limited Partnerships (3,750) - - (3,750)
--------------- --------------- ------------- ------------
Net Loss before gain on transfer (166,712) (737,261) 147,923 (756,050)
Gain on transfer of assets - 589,338 - 589,338
--------------- --------------- ------------- ------------
Net Loss $ (166,712) $ (147,923) $ 147,923 $ (166,712)
=============== =============== ============= ============
(A) For the year ended March 31, 1999.
(B) For the year ended December 31, 1998- See Note 2.
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
13. Supplemental Combining Schedules (continued)
<TABLE>
<CAPTION>
Statements of Cash Flows
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. IV (A) Entities (B) Eliminations (A)
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net Loss $ (166,712) $ (147,923) $ 147,923 $ (166,712)
Adjustments to reconcile net loss to
net cash used for operating activities:
Equity in losses of Local
Limited Partnerships (25,001) - (8,850) (33,851)
Gain on transfer of assets - (589,338) - (589,338)
Loss on liquidation of
interests in Local Limited
Partnerships 3,750 - - 3,750
Cash distribution income included
in cash distributions from
Local Limited Partnerships (63,929) - - (63,929)
Other - (1,026) - (1,026)
Bad debt expense (recoveries) (106,539) - - (106,539)
Depreciation and amortization 66,124 607,209 - 673,333
Gain on sale of marketable securities (3,651) - - (3,651)
Minority interest in losses of
Local Limited Partnerships - - (139,073) (139,073)
Increase (decrease) in cash arising from
changes in operating assets and liabilities
Accounts receivable, net - 516 - 516
Tenant security deposits - (8,255) - (8,255)
Mortgagee escrow deposits - (2,854) - (2,854)
Other assets 13,398 (269,182) - (255,784)
Accounts payable to affiliates (483,820) (7,665) - (491,485)
Accounts payable and accrued expenses 14,787 23,448 - 38,235
Interest payable - 193,961 - 193,961
Tenant security deposits payable - (4,402) - (4,402)
--------------- --------------- ------------- ------------
Net cash used for operating activities (751,593) (205,511) - (957,104)
--------------- --------------- ------------- ------------
Cash flows from investing activities:
Purchases of marketable securities (922,221) - - (922,221)
Proceeds from sales and maturities
of marketable securities 1,210,375 - - 1,210,375
Cash distributions received from
Local Limited Partnerships 360,545 - - 360,545
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV
(A Limited Partnership)
NOTES TO THE COMBINED FINANCIAL STATEMENTS (continued)
13. Supplemental Combining Schedules (continued)
Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Boston Financial
Qualified Housing
Tax Credits Combined Combined
L.P. IV (A) Entities (B) Eliminations (A)
Reimbursements from
<S> <C> <C> <C> <C>
Local Limited Partnerships 73,158 - 278,467 351,625
Purchase of rental property
and equipment - (89,348) - (89,348)
--------------- --------------- ------------- ------------
Net cash provided by (used for)
investing activities 721,857 (89,348) 278,467 910,976
--------------- --------------- ------------- ------------
Cash flows from financing activities:
Capital contributions received - 92,221 - 92,221
Advances from affiliate - 296,168 (278,467) 17,701
Payment of mortgage principal - (88,784) - (88,784)
--------------- --------------- ------------- ------------
Net cash provided by
financing activities - 299,605 (278,467) 21,138
--------------- --------------- ------------- ------------
Net increase (decrease) in cash
and cash equivalents (29,736) 4,746 - (24,990)
Cash and cash equivalents, beginning 272,808 113,251 - 386,059
--------------- --------------- ------------- ------------
Cash and cash equivalents, ending $ 243,072 $ 117,997 $ - $ 361,069
=============== =============== ============= ============
(A) For the year ended March 31, 1999.
(B) For the year ended December 31, 1998- See Note 2.
</TABLE>
<PAGE>
Boston Financial Qualified Housing Tax Credits L. P. IV
Schedule III - Real Estate and Accumulated Depreciation
of Property owned by Local Limited Partnerships in
which Registrant has invested at March 31, 1999
<TABLE>
GROSS AMOUNT
AT WHICH
CARRIED AT
DECEMBER 31,
COST OF INTEREST AT 1998
ACQUISITION DATE
------------------------------- --------------
NET IMPROVEMENTS
NUMBER TOTAL CAPITALIZED
OF ENCUM- BUILDING AND SUBSEQUENT TO
DESCRIPTION UNITS BRANCES * LAND IMPROVEMENTS ACQUISITION LAND
- ----------- ----- --------- ---- ------------ ----------- ----
<S> <C> <C> <C> <C> <C> <C>
Low and Moderate
Income Apartment Complexes
Brooks Crossing Apartments 224 $5,466,174 $878,034 $4,468,624 $3,978,671 $878,034
Atlanta, GA
Willow Ridge 134 3,055,082 345,600 4,722,160 (444,082) 345,600
Prescott, AZ
Dorsett Apartments 58 2,141,401 38,599 2,617,152 3,569,965 42,112
Philadelphia, PA
Hampton Lane Apartments 24 715,816 15,120 25,930 849,554 33,397
Buena Vista, GA
Audubon Apartments 37 3,088,524 0 1,714,176 907,636 0
Boston, MA
Sencit Towne House 201 6,588,586 371,854 9,716,234 825,664 371,854
Shillington, PA
Allentown Towne House 160 6,499,758 236,460 7,917,331 380,740 238,945
Allentown, PA
Prince Street Housing 201 7,846,424 371,734 9,788,527 657,162 371,734
Lancaster, PA
Hilltop Apartments (A) 0 0 8,683 389,661 (398,344) 0
Rhome, TX
Royal Crest Apartments (B) 0 0 13,985 906,750 (920,735) 0
Bowie, TX
Pine Manor Apart. (B) 0 0 19,991 0 (19,991) 0
Jacksonboro, TX
Bryson Place (A) 0 0 1,200 0 (1,200) 0
Bryson, TX
Leawood Manor** 254 7,415,444 971,742 12,044,206 3,383,696 1,127,463
Kansas City, KS
Pinewood Terrace I (C) 0 0 6,897 1,400,102 (1,406,999) 0
Rusk, TX
Valley View Apts (B) 0 0 4,835 466,237 (471,072) 0
Valley View, TX
Grandview Apartments (A) 0 0 8,660 0 (8,660) 0
Grandview, TX
Bent Tree Apts (A) 0 0 14,533 0 (14,533) 0
Jacksonboro, TX
Bentley Court 273 6,868,868 0 0 13,362,725 1,679,225
Columbia, SC
Nocona Terrace (B) 0 0 7,050 741,550 (748,600) 0
Nocona, TX
</TABLE>
<PAGE>
Boston Financial Qualified Housing Tax Credits L. P. IV
Schedule III - Real Estate and Accumulated Depreciation
of Property owned by Local Limited Partnerships in
which Registrant has invested at March 31, 1999
<TABLE>
GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1998
---------------------------------------------------
LIFE ON WHICH
DEPRECIATION
BUILDING AND ACCUMULATED DATE IS COMPUTED DATE
DESCRIPTION IMPROVEMENTS TOTAL DEPRECIATION BUILT (YEARS) ACQUIRED
- ----------- ------------ ----- ------------ ----- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Low and Moderate
Income Apartment Complexes
Brooks Crossing Apartments $8,447,295 $9,325,329 $2,783,624 1990 various 06/30/89
Atlanta, GA
Willow Ridge 4,278,078 4,623,678 1,052,243 1989 various 8/28/89
Prescott, AZ
Dorsett Apartments 6,183,604 6,225,716 1,217,758 1990 various 10/20/89
Philadelphia, PA
Hampton Lane Apartments 857,207 890,604 293,174 1990 various 12/20/89
Buena Vista, GA
Audubon Apartments 2,621,812 2,621,812 1,300,807 1990 various 12/22/89
Boston, MA
Sencit Towne House 10,541,898 10,913,752 2,916,228 1989 various 12/26/89
Shillington, PA
Allentown Towne House 8,295,586 8,534,531 2,072,547 1989 various 12/26/89
Allentown, PA
Prince Street Housing 10,445,689 10,817,423 2,710,781 1989 various 12/26/89
Lancaster, PA
Hilltop Apartments (A) 0 0 0 1989 N/A 12/27/89
Rhome, TX
Royal Crest Apartments (B) 0 0 0 1989 various 12/27/89
Bowie, TX
Pine Manor Apart. (B) 0 0 0 1989 various 12/27/89
Jacksonboro, TX
Bryson Place (A) 0 0 0 1990 N/A 12/28/89
Bryson, TX
Leawood Manor** 15,272,181 16,399,644 5,253,564 1989 various 12/29/89
Kansas City, KS
Pinewood Terrace I (C) 0 0 0 1989 various 12/27/89
Rusk, TX
Valley View Apts (B) 0 0 0 1989 various 12/27/89
Valley View, TX
Grandview Apartments (A) 0 0 0 1990 N/A 12/27/89
Grandview, TX
Bent Tree Apts (A) 0 0 0 1989 N/A 12/27/89
Jacksonboro, TX
Bentley Court 11,683,500 13,362,725 4,212,297 1990 various 12/26/89
Columbia, SC
Nocona Terrace (B) 0 0 0 1989 various 12/27/89
Nocona, TX
</TABLE>
<PAGE>
Boston Financial Qualified Housing Tax Credits L. P. IV
Schedule III - Real Estate and Accumulated Depreciation
of Property owned by Local Limited Partnerships in
which Registrant has invested at March 31, 1999
<TABLE>
GROSS AMOUNT
AT WHICH
CARRIED AT
DECEMBER 31,
COST OF INTEREST AT 1998
ACQUISITION DATE
------------------------------- --------------
NET IMPROVEMENTS
NUMBER TOTAL CAPITALIZED
OF ENCUM- BUILDING AND SUBSEQUENT TO
DESCRIPTION UNITS BRANCES * LAND IMPROVEMENTS ACQUISITION LAND
- ----------- ----- --------- ---- ------------ ----------- ----
<S> <C> <C> <C> <C> <C> <C>
Low and Moderate
Income Apartment Complexes
Justin Place (B) 0 0 5,485 0 (5,485) 0
Justin, TX
Orocovix IV 40 1,642,158 60,000 1,175,705 886,147 61,800
Orocovix, PR
Carolina Woods 48 1,098,156 121,710 2,160,614 6,903 121,710
Greensboro, NC
Mayfair Mansions 569 20,953,081 2,080,022 27,784,358 394,521 2,080,022
Washington, DC
Oakview Square 192 6,002,893 530,411 7,353,548 3,857,255 530,411
Chesterfield, MI
Whitehills 24 752,994 40,200 934,444 8,439 122,878
Howell, MI
Gobles Apts. 24 737,105 12,500 939,518 11,372 56,088
Gobles, MI
Brown Kaplan 60 7,998,554 0 7,096,932 2,018,359 0
Boston, MA
Green Tree 24 657,073 21,120 788,935 3,015 21,120
Greenville, GA
Milan Apartments 32 1,015,158 50,500 1,254,727 50,378 164,803
Milan, MI
Findlay (C) 0 0 19,533 3,165,904 (3,185,437) 0
Cincinnati, OH
Seagraves (A) 0 0 20,000 634,518 (654,518) 0
Seagraves, TX
Lakeside 308 6,005,125 400,000 9,416,579 1,113,039 400,000
Chicago, IL
Lincoln Green 30 1,638,514 156,725 1,924,700 89,571 160,874
Old Town, ME
West Pine 38 1,673,827 74,800 944,818 1,086,747 74,800
Allegheny County, PA
BK Apartments 48 856,667 30,000 983,020 298,978 57,223
Jamestown, ND
46th & Vincennes 28 1,308,408 16,200 1,901,527 75,871 16,200
Chicago, IL
Gateway** 50 1,131,757 119,110 1,355,075 (99,498) 140,636
Azle, TX
--------------------------------------------------------------------------------------------
SUBTOTAL 3,081 103,157,547 7,073,293 126,733,562 29,437,254 9,096,929
LESS: Combined Entities ** 304 8,547,201 1,128,060 15,265,620 1,380,651 1,268,099
--------------------------------------------------------------------------------------------
TOTAL 2,777 $94,610,346 $5,945,233 $111,467,942 $28,056,603 $7,828,830
============================================================================================
</TABLE>
<PAGE>
Boston Financial Qualified Housing Tax Credits L. P. IV
Schedule III - Real Estate and Accumulated Depreciation
of Property owned by Local Limited Partnerships in
which Registrant has invested at March 31, 1999
GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1998
--------------------------------------------------
<TABLE>
LIFE ON WHICH
DEPRECIATION
BUILDING AND ACCUMULATED DATE IS COMPUTED DATE
DESCRIPTION IMPROVEMENTS TOTAL DEPRECIATION BUILT (YEARS) ACQUIRED
- ----------- ------------ ----- ------------ ----- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Low and Moderate
Income Apartment Complexes
Justin Place (B) 0 0 0 1990 various 12/27/89
Justin, TX
Orocovix IV 2,060,052 2,121,852 496,748 1990 various 12/30/89
Orocovix, PR
Carolina Woods 2,167,517 2,289,227 532,341 1990 various 01/31/90
Greensboro, NC
Mayfair Mansions 28,178,879 30,258,901 10,819,279 1990 various 3/21/90
Washington, DC
Oakview Square 11,210,803 11,741,214 2,185,647 1991 various 3/22/89
Chesterfield, MI
Whitehills 860,205 983,083 355,626 1990 various 4/21/90
Howell, MI
Gobles Apts. 907,302 963,390 337,088 1990 various 4/29/90
Gobles, MI
Brown Kaplan 9,115,291 9,115,291 2,275,472 1991 various 7/1/90
Boston, MA
Green Tree 791,950 813,070 261,685 1990 various 7/6/90
Greenville, GA
Milan Apartments 1,190,802 1,355,605 469,290 1990 various 8/20/90
Milan, MI
Findlay (C) 0 0 0 1990 various 8/15/90
Cincinnati, OH
Seagraves (A) 0 0 0 1990 N/A 11/28/90
Seagraves, TX
Lakeside 10,529,618 10,929,618 3,418,612 1991 various 5/17/90
Chicago, IL
Lincoln Green 2,010,122 2,170,996 554,121 1989 various 3/21/90
Old Town, ME
West Pine 2,031,565 2,106,365 485,625 1991 various 12/31/90
Allegheny County, PA
BK Apartments 1,254,775 1,311,998 284,626 1991 various 12/1/90
Jamestown, ND
46th & Vincennes 1,977,398 1,993,598 613,267 1990 various 3/29/91
Chicago, IL
Gateway** 1,234,051 1,374,687 248,693 1991 various 6/24/91
Azle, TX
--------------------------------------------------
SUBTOTAL 154,147,180 163,244,109 47,151,143
LESS: Combined Entities ** 16,506,232 17,774,331 5,502,257
--------------------------------------------------
TOTAL $137,640,948 $145,469,778 $41,648,886
==================================================
</TABLE>
<PAGE>
(1) The aggregate cost for Federal Income Tax purposes is approximately
$ 167,158,000.
(A) During the year ended March 31, 1997, the Partnership transferred all of the
assets of five of the Texas Partnerships subject to their liabilities to
unaffiliated entities.
(B) During the year ended March 31, 1998, the Partnership transferred all of the
assets of five of the Texas Partnerships subject to their liabilities to
unaffiliated entities.
(C) During the year ended March 31, 1999, the Partnership has transferred all of
the assets of Findlay Market and one of the Texas Partnerships subject to their
liabilities to unaffiliated entities.
* Mortgage notes payable generally represent
non-recourse financing of low-income housing
projects payable with terms of up to 40 years with
interest payable at rates ranging from 7.20% to
9.75%. The Partnership has not guaranteed any of
these mortgage notes payable.
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Summary of property owned and accumulated depreciation:
Property Owned December 31, 1998 Accumulated Depreciation December 31, 1998
- ------------------------------------------------------------------- --------------------------------------------------
Balance at beginning of period $151,824,387 Balance at beginning of period
Additions during period: before Combined Entities $37,607,826
Other acquisitions 286,686 Additions during period:
Improvements etc. 280,068 Eliminations - 1997 Combined
Entities 5,217,693
--------------
566,754 Eliminations - Combined
Entities** (5,502,257)
Deductions during period: Properties disposed of (C) (792,962)
Cost of real estate
sold (1,922) Depreciation 5,118,586
==============
Write down of building Balance at close of period $41,648,886
resulting from a non temporary
decline in value (3,078,687) ==============
Eliminations -1997 Combined
Entities 19,064,246
Eliminations - Combined
Entities** (17,774,331)
Disposals from transferred
Properties (C) (5,130,669)
--------------
(6,921,363)
---------------
Balance at close of period $145,469,778
===============
Property Owned December 31, 1997 Accumulated Depreciation December 31, 1997
- ------------------------------------------------------------------- --------------------------------------------------
Balance at beginning of period $153,104,249 Balance at beginning of period
Additions during period: before Combined Entities $33,135,477
Other acquisitions 92,036 Additions during period:
Improvements etc. 390,536 Eliminations - 1996 Combined
Entities 4,878,763
-------------- Eliminations - Combined
482,572 Entities** (5,217,693)
Deductions during period: Properties disposed of (B) (553,079)
Write down of building Depreciation 5,364,358
resulting from a non- ==============
temporary decline in value (181,098) Balance at close of period $37,607,826
==============
Eliminations -1996 Combined
Entities 20,095,959
Eliminations - Combined
Entities** (19,064,246)
Disposals from transferred
Properties (B) (2,613,049)
--------------
(1,762,434)
---------------
Balance at close of period $151,824,387
===============
Property Owned December 31, 1996 Accumulated Depreciation December 31, 1996
- ------------------------------------------------------------------- --------------------------------------------------
Balance at beginning of period $153,974,533 Balance at beginning of period
Additions during period: before Combined Entities $28,735,999
Acquisitions through foreclosure $0 Additions during period:
Other acquisitions 62,414 Eliminations - 1995 Combined
Entities 4,131,931
Improvements etc. 1,770,452 Eliminations - Combined
Entities** (4,878,763)
--------------
1,832,866 Properties disposed of (A) (386,880)
Deductions during period:
Depreciation 5,533,190
Cost of real estate ============
sold (4,622) Balance at close of period $33,135,477
============
Write down of building
resulting from a non-
temporary decline in value (791,830)
Eliminations -1995 Combined
Entities 20,760,503
Eliminations - Combined
Entities** (20,095,959)
Disposals from transferred
Properties (A) (2,571,242)
--------------
(2,703,150)
---------------
Balance at close of period $153,104,249
===============
</TABLE>
<PAGE>
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS IV
(A Limited Partnership)
Annual Report on form 10-K
For The Year Ended March 31, 1999
Reports of Independent Auditors
<PAGE>
46th & VINCENNES
[Letterhead]
[LOGO]
Haran & Associates
INDEPENDENT AUDITORS REPORT
To the Partners HUD Field Office Director
46th & VINCENNES LIMITED PARTNERSHIP Chicago, Illinois
Chicago, Illinois
We have audited the accompanying balance sheet of 46th & VINCENNES LIMITED
PARTNERSHIP, Project No. 071-35594, as of December 31, 1998, and the related
statements of profit and loss, changes in partners' equity and statement of 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. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. 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 46th & VINCENNES LIMITED
PARTNERSHIP, as of December 31, 1998, and its profit or loss, changes in
partners' equity, and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report
dated February 18, 1999 on our consideration of 46th & VINCENNES LIMITED
PARTNERSHIP's internal control structure and reports dated February 18, 1999 on
its compliance with specific requirements applicable to Major HUD Programs,
specific requirements applicable to Affirmative Fair Housing, and specific
requirements applicable to Nonmajor HUD Programs.
The accompanying supplementary information (shown on pages 14 to 18) is
presented for the 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 statement and,
in our opinion, is fairly stated in all material respects in relation to the
financial statements taken as a whole.
/s/Haran & Associates Ltd.
Haran & Associates LTD
Certified Public Accountants
Wilmette, Illinois
Illinois Certificate No. 060-002892
Federal Certification No. 36-3097692
Audit Partner: W. Garrett Heinl (847)853-2576
February 18, 1999
<PAGE>
[Letterhead]
[LOGO]
Haran & Associates
INDEPENDENT AUDITORS REPORT
To the Partners HUD Field Office Director
46th & VINCENNES LIMITED PARTNERSHIP Chicago, Illinois
Chicago, Illinois
We have audited the accompanying balance sheet of 46th & VINCENNES LIMITED
PARTNERSHIP, Project No. 071-35594, as of December 31, 1997, and the related
statements of profit and loss, changes in partners' equity and statement of 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. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. 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 46th & VINCENNES LIMITED
PARTNERSHIP, as of December 31, 1997, and its profit or loss, changes in
partners' equity, and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report
dated January 21, 1998 on our consideration of 46th & VINCENNES LIMITED
PARTNERSHIP's internal control structure and reports dated January 21, 1998 on
its compliance with specific requirements applicable to Major HUD Programs,
specific requirements applicable to Affirmative Fair Housing, and specific
requirements applicable to Nonmajor HUD Programs.
The accompanying supplementary information (shown on pages 15 to 19) is
presented for the 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 statement and,
in our opinion, is fairly stated in all material respects in relation to the
financial statements taken as a whole.
/s/Haran & Associates Ltd.
Haran & Associates LTD
Certified Public Accountants
Wilmette, Illinois
Illinois Certificate No. 060-002892
Federal Certification No. 36-3097692
Audit Partner: James E. Haran
January 21, 1998
<PAGE>
[Letterhead]
[LOGO]
Haran & Associates
INDEPENDENT AUDITORS REPORT
To the Partners HUD Field Office Director
46th & VINCENNES LIMITED PARTNERSHIP Chicago, Illinois
Chicago, Illinois
We have audited the accompanying balance sheet of 46th & VINCENNES LIMITED
PARTNERSHIP, Project No. 071-35594, as of December 31, 1996, and the related
statements of profit and loss, changes in partners' equity and statement of 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. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. 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 46th & VINCENNES LIMITED
PARTNERSHIP, as of December 31, 1996, and its profit or loss, changes in
partners' equity, and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report
dated January 21, 1997 on our consideration of 46th & VINCENNES LIMITED
PARTNERSHIP's internal control structure and reports dated January 21, 1997 on
its compliance with specific requirements applicable to Major HUD Programs,
specific requirements applicable to Affirmative Fair Housing, and specific
requirements applicable to Nonmajor HUD Programs.
The accompanying supplementary information (shown on pages 15 to 19) is
presented for the 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 statement and,
in our opinion, is fairly stated in all material respects in relation to the
financial statements taken as a whole.
/s/Haran & Associates Ltd.
Haran & Associates LTD
Certified Public Accountants
Wilmette, Illinois
Illinois Certificate No. 060-002892
Federal Certification No. 36-3097692
Audit Partner: James E. Haran
January 21, 1997
<PAGE>
Audobon
[Letterhead]
[LOGO]
Ziner, Kennedy & Lehan LLP
INDEPENDENT AUDITORS REPORT
To the Partners of
Audobon Group Limited Partnership
We have audited the accompanying balance sheet (MHFA Forms F.C.-3A & -3B) of
Audobon Group Limited Partnership (a Massachusetts limited partnership) (Project
No. 89-008-R) as of December 31, 1998, and the related statements changes in
partners' equity (deficiency) (MHFA Forms F.C.-3C), operations (MHFA Forms
F.C.-2A), cash flows (MHFA Forms F.C.-4A , -4B & -4C) for the year then ended.
These financial statements are the responsibility of the general partner. 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
misstatements. 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 Audobon Group Limited
Partnership, as of December 31, 1998, and the results of its operations, its
changes in partners' equity 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
Partnership will continue as a going concern. As discussed in Note E to the
financial statements, the Partnership has suffered significant operating losses
and has a net working capital deficiency, which raises substantial doubt about
its ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/Ziner, Kennedy & Lehan LLP
Boston, MA
February 12, 1999
<PAGE>
[Letterhead]
[LOGO]
Ziner & Company, P.C.
INDEPENDENT AUDITORS REPORT
To the Partners of
Audobon Group Limited Partnership
We have audited the accompanying balance sheet (MHFA Forms F.C.-3A & -3B) of
Audobon Group Limited Partnership (a Massachusetts limited partnership) (Project
No. 89-008-R) as of December 31, 1997, and the related statements changes in
partners' equity (deficiency) (MHFA Forms F.C.-3C), operations (MHFA Forms
F.C.-2A), cash flows (MHFA Forms F.C.-4A & -4C) for the year then ended. These
financial statements are the responsibility of the general partner. 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
misstatements. 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 Audobon Group Limited
Partnership, as of December 31, 1997, and the results of its operations, its
changes in partners' equity 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
Partnership will continue as a going concern. As discussed in Note F to the
financial statements, the Partnership's significant operating losses raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/Ziner & Company, P.C.
Boston, MA
February 10, 1998
<PAGE>
[Letterhead]
[LOGO]
Ziner & Company, P.C.
INDEPENDENT AUDITORS REPORT
To the Partners of
Audobon Group Limited Partnership
We have audited the accompanying balance sheet (MHFA Forms F.C.-3A & -3B) of
Audobon Group Limited Partnership (a Massachusetts limited partnership)(Project
No. 89-008-R) as of December 31, 1996, and the related statements changes in
partners' equity (deficiency) (MHFA Forms F.C.-3C), operations (MHFA Forms
F.C.-2A), cash flows (MHFA Forms F.C.-4A & -4C) for the year then ended. These
financial statements are the responsibility of the general partner. 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
misstatements. 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 Audobon Group Limited
Partnership, as of December 31, 1996, and the results of its operations, its
changes in partners' equity 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
Partnership will continue as a going concern. As discussed in Note F to the
financial statements, the Partnership's significant operating losses raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/Ziner & Company, P.C.
Boston, MA
February 22, 1997
<PAGE>
B-K Apartments
[Letterhead]
[LOGO]
EideBailly LLP
INDEPENDENT AUDITORS REPORT
The Partners
B-K Apartments Limited Partnership
Wahpeton, North Dakota
We have audited the accompanying balance sheets of B-K Apartments Limited
Partnership as of December 31, 1998 and 1997, and the related statements of
operations, partners' equity and cash flows for the years 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 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
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 financial statements referred to above present fairly, in
all material respects, the financial position of B-K Apartments Limited
Partnership as of December 31, 1998 and 1997, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 9 to the
financial statements, the Partnership has entered into a forebearance agreement
with its bond holder as a result of recurring vacancies and cash flow
deficiencies which 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 9. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ EideBailly LLP
Fargo, North Dakota
January 19, 1999, except for Note 10 As to which the date is January 25, 1999
<PAGE> [Letterhead]
[LOGO]
Charles Bailly & Company P.L.L.P.
INDEPENDENT AUDITORS REPORT
The Partners
B-K Apartments Limited Partnership
Wahpeton, North Dakota
We have audited the accompanying balance sheets of B-K Apartments Limited
Partnership as of December 31, 1997 and 1996, and the related statements of
operations, partners' equity and cash flows for the years 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 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
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 financial statements referred to above present fairly, in
all material respects, the financial position of B-K Apartments Limited
Partnership as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 9 to the
financial statements, the Partnership has suffered recurring vacancies and cash
deficiencies that 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 9. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Charles Bailly & Company P.L.L.P.
Fargo, North Dakota
February 18, 1998
<PAGE>
Brookscrossing
[Letterhead]
[LOGO]
Mueller, Walla & Albertson, P.C.
INDEPENDENT AUDITORS REPORT
The Partners,
Brookscrossing Apartments, L.P.
St. Louis, Missouri
We have audited the accompanying balance sheet of Brookscrossing Apartments,
L.P. (a limited partnership) as of December 31, 1998, and the related statements
of operations, partners' capital 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 Brookscrossing Apartments, L.P.
as of December 31, 1998, and the results of its operations, changes in partners'
capital and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Mueller, Walla & Albertson, P.C.
Certified Public Accountants
Kirkwood, MS
February 2, 1999
<PAGE>
[Letterhead]
[LOGO]
Mueller, Walla & Albertson, P.C.
INDEPENDENT AUDITORS REPORT
The Partners,
Brookscrossing Apartments, L.P.
St. Louis, Missouri
We have audited the accompanying balance sheets of Brookscrossing Apartments,
L.P. (a limited partnership) as of December 31, 1997, and the related statements
of operations, partners' capital 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 Brookscrossing Apartments, L.P.
as of December 31, 1997, and the results of its operations, changes in partners'
capital and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Mueller, Walla & Albertson, P.C.
Certified Public Accountants
Kirkwood, MS
February 19, 1998
<PAGE>
[Letterhead]
[LOGO]
Mueller, Walla & Albertson, P.C.
INDEPENDENT AUDITORS REPORT
The Partners,
Brookscrossing Apartments, L.P.
St. Louis, Missouri
We have audited the accompanying balance sheets of Brookscrossing Apartments,
L.P. (a limited partnership) as of December 31, 1996, and the related statements
of operations, partners' capital 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 Brookscrossing Apartments, L.P.
as of December 31, 1996, and the results of its operations, changes in partners'
capital and its cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Mueller, Walla & Albertson, P.C.
Certified Public Accountants
Kirkwood, MS
February 11, 1997
<PAGE>
Brown-Kaplan
[Letterhead]
[LOGO]
Reznick Fedder & Silverman
INDEPENDENT AUDITORS REPORT
To the Partners
Brown-Kaplan Limited Partnership
We have audited the accompanying balance sheet of Brown-Kaplan Limited
Partnership as of December 31, 1998, and the related statements of operations,
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 he 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 Brown-Kaplan Limited
Partnership as of December 31, 1998, the results of its operations, changes in
partners' deficit and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
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 20 through 34
is presented for purposed 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, and the Consolidated Audit
Guide for Audits of HUD Programs, we have also issued reports dated January 20,
1999 on or consideration of Brown-Kaplan Limited Partnership's internal control
and on its compliance with specific requirements applicable to major HUD
programs, fair housing and non-discrimination, and laws and regulations
applicable to the financial statements.
/s/Reznick Fedder & Silverman
Boston, Massachusetts Federal Employer
January 20, 1999 Identification Number
52-1088612
Audit Principal: Philip A. Weitzel
<PAGE>
[Letterhead]
[LOGO]
Reznick Fedder & Silverman
INDEPENDENT AUDITORS REPORT
To the Partners of
Brown-Kaplan Limited Partnership
We have audited the accompanying balance sheet (MHFA Forms F.C.-3a and 3b) of
Brown-Kaplan Limited Partnership as of December 31, 1997, and the related
statements of operations (MHFA Form F.C.-2A), partners' equity (deficiency)
(MHFA Form F.C.-3C) and cash flows (MHFA Form F.C.-4A,4B, and 4C) 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 he 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 Brown-Kaplan Limited
Partnership as of December 31, 1997, the results of its operations, changes in
partners' equity (deficiency) and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
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 22 through 29
is presented for purposed 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, and the Consolidated Audit
Guide for Audits of HUD Programs, we have also issued reports dated January 23,
1998 on or consideration of Brown-Kaplan Limited Partnership's internal control
and on its compliance with specific requirements applicable to major HUD
programs, fair housing and non-discrimination, and laws and regulations
applicable to the financial statements.
/s/Reznick Fedder & Silverman
Boston, Massachusetts Federal Employer
January 23, 1998 Identification Number
52-1088612
Audit Principal: Philip A. Weitzel
<PAGE>
[Letterhead]
[LOGO]
Ziner & Company, P.C.
INDEPENDENT AUDITORS REPORT
To the Partners of
Brown-Kaplan Limited Partnership
We have audited the accompanying balance sheet of Brown-Kaplan Limited
Partnership (a Massachusetts limited partnership) (MHFA Project No. 88-002) as
of December 31, 1996, and the related statements changes in partners' equity,
operations 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.
These 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
partnership's 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 Brown-Kaplan Limited
Partnership as of December 31, 1996, and the changes in partners' equity, the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/Ziner & Company, P.C.
Boston, MA
February 7, 1997
<PAGE>
Buena Vista
[Letterhead]
[LOGO]
David G. Pelliccione, C.P.A., P.C.
INDEPENDENT AUDITORS REPORT
To the Partners
Buena Vista Limited Partnership
We have audited the accompanying balance sheets of BUENA VISTA LIMITED, as of
December 31, 1998 and 1997, and the related statement of operations, changes in
partners' equity and cash flows for the years 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.
These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 BUENA VISTA LIMITED PARTNERSHIP
as of December 31, 1998 and 1997, and the results in its operations and cash
flows for the year then ended in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements of BUENA VISTA LIMITED PARTNERSHIP taken as a whole. The supplemental
information on pages 9 and 10 is presented for the 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 audits
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.
/s/ David G. Pelliccione
Savannah, Georgia
February 11, 1999
<PAGE>
[Letterhead]
[LOGO]
David G. Pelliccione, C.P.A., P.C.
INDEPENDENT AUDITORS REPORT
To the Partners
Buena Vista Limited Partnership
We have audited the accompanying balance sheet of BUENA VISTA LIMITED
PARTNERSHIP (A Limited Partnership), as of December 31, 1997 and 1996, and the
related statement of operations, changes in partners' equity and cash flows for
the years 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.
These standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 BUENA VISTA LIMITED PARTNERSHIP
as of December 31, 1997 and 1996, and the results in its operations and cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ David G. Pelliccione
Savannah, Georgia
February 23, 1998
<PAGE>
Carolina Woods
[Letterhead]
[LOGO]
Halbert, Katz & Co., P.C.
INDEPENDENT AUDITORS REPORT
To the Partners
Carolina Woods Associates, Limited Partnership
Wilmington, Delaware
We have audited the accompanying balance sheets of Carolina Woods Associates,
Limited Partnership, as of December 31, 1998 and December 31, 1997, and the
related statements of loss, partners' capital (capital deficiency) and cash
flows for the years 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 audits.
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 audits provide 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 Carolina Woods Associates,
Limited Partnership, as of December 31, 1998 and December 31, 1997, and the
results of its operations, changes in partners' capital (capital deficiency) and
cash flows for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
the report (shown on page 11) is presented for the purpose of additional
analysis and is not a required part of the basic financial statements of
Carolina Woods Associates, Limited Partnership. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the financial statements taken as a whole.
/s/Halbert, Katz & Co., P.C.
Philadelphia, PA
January 29, 1999
<PAGE>
[Letterhead]
[LOGO]
Halbert, Katz & Co., P.C.
INDEPENDENT AUDITORS REPORT
To the Partners
Carolina Woods Associates, Limited Partnership
Wilmington, Delaware
We have audited the accompanying balance sheet of Carolina Woods Associates,
Limited Partnership, as of December 31, 1997 and December 31, 1996, and the
related statements of loss, partners' capital (capital deficiency) and cash
flows for the years 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 audits.
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 audits provide 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 Carolina Woods Associates,
Limited Partnership, as of December 31, 1997 and December 31, 1996, and the
results of its operations, changes in partners' capital and cash flows for the
years then ended, in conformity with generally accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supporting information included in
the report (shown on page 11) is presented for the purpose of additional
analysis and is not a required part of the basic financial statements of
Carolina Woods Associates, Limited Partnership. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the financial statements taken as a whole.
/s/Halbert, Katz & Co., P.C.
Philadelphia, PA
January 30, 1998
<PAGE>
Dorsett
[Letterhead]
[LOGO]
Fishbein & Company, P.C.
INDEPENDENT AUDITORS REPORT
February 2, 1999
Partners
Dorsett Limited Partnership
We have audited the accompanying balance sheets of DORSETT LIMITED PARTNERSHIP
as of December 31, 1998 and 1997, and the related statements of operations,
partners' equity and cash flows for the years 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 audits provide 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 Dorsett Limited Partnership as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information included in
this report (shown on pages 10 and 11) is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership. 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 financial statements
taken as a whole.
/s/Fishbein & Company P.C.
Elkins Park, PA
<PAGE>
[Letterhead]
[LOGO]
Fishbein & Company, P.C.
INDEPENDENT AUDITORS REPORT
February 5, 1998
Partners
Dorsett Limited Partnership
We have audited the accompanying balance sheets of DORSETT LIMITED PARTNERSHIP
as of December 31, 1997 and 1996, and the related statements of operations,
partners' equity 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 provide 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 Dorsett Limited Partnership as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information included in this
report (shown on pages 10 and 11) is presented for purposes of additional
analysis and is not a required part of the basic financial statements of the
Partnership. 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 financial statements
taken as a whole.
/s/Fishbein & Company P.C.
Elkins Park, PA
<PAGE>
Gobles
[Letterhead]
[LOGO]
Kirschner Hutton Perlin, P.C.
INDEPENDENT AUDITORS REPORT
January 18, 1999
Partners
Gobles Limited Dividend Housing Association
Limited Partnership
We have audited the accompanying balance sheet of Gobles Limited Dividend
Housing Association Limited Partnership as of December 31, 1998 and 1997, and
the related statements of operations, partners' deficit and cash flows for the
years 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 audits.
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 audits provide 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 Gobles Limited Dividend Housing
Association Limited Partnership as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Kirschner Hutton Perlin, P.C.
Southfield, MI
<PAGE>
[Letterhead]
[LOGO]
Kirschner Hutton Perlin, P.C.
INDEPENDENT AUDITORS REPORT
January 27, 1998
Gobles Limited Dividend Housing Association
Limited Partnership
We have audited the accompanying balance sheet of Gobles Limited Dividend
Housing Association Limited Partnership as of December 31, 1997 and 1996, and
the related statements of operations, partners' equity (deficit) and cash flows
for the years 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 audits.
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 audits provide 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 Gobles Limited Dividend Housing
Association Limited Partnership as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Kirschner Hutton Perlin, P.C.
Southfield, MI
<PAGE>
Greentree Village
[Letterhead]
[LOGO]
FLOYD & COMPANY, CPA
INDEPENDENT AUDITORS REPORT
To the General Partners of
Greentree Village Limited Partnership
We have audited the accompanying balance sheets of Greentree Village Limited
Partnership (a Georgia Limited Partnership), as of December 31, 1998 and the
related statements of operations, partners' equity (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 audits.
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
misstatements. An audit 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 Greentree Village Limited
Partnership (a Georgia Limited Partnership), as of December 31, 1998 and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
Floyd & Company, C.P.A.
/s/R. Doug Floyd
Savannah, Georgia
February 28, 1999
<PAGE>
[Letterhead]
FLOYD & COMPANY
306 Commercial Drive, Suite 202 Post Office Box 14251
Savannah, Georgia 31406 Savannah, Georgia
Phone: (912) 355-9969
INDEPENDENT AUDITORS REPORT
To the General Partners of
Greentree Village Limited Partnership
We have audited the accompanying balance sheets of Greentree Village Limited
Partnership (a Georgia Limited Partnership), as of December 31, 1997 and the
related statements of operations, partners' equity (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 audits.
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
misstatements. 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 Greentree Village Limited
Partnership (a Georgia Limited Partnership), as of December 31, 1997 and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
Floyd & Company, C.P.A.
/s/R. Doug Floyd
February 28, 1998
<PAGE>
[Letterhead]
FLOYD & COMPANY
306 Commercial Drive, Suite 202 Post Office Box 14251
Savannah, Georgia 31406 Savannah, Georgia
Phone: (912) 355-9969
INDEPENDENT AUDITORS REPORT
To the General Partners of
Greentree Village Limited Partnership
We have audited the accompanying balance sheets of Greentree Village Limited
Partnership (a Georgia Limited Partnership), as of December 31, 1996 and the
related statements of operations, partners' equity (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 audits.
The financial statement information for the year ending December 31, 1995 was
audited by another independent certified public accountant who expressed an
opinion dated March 16, 1996.
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
misstatements. 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 Greentree Village Limited
Partnership (a Georgia Limited Partnership), as of December 31, 1996 and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information listed in the
table of contents is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information, except for
the portion market "unaudited", on which we express no opinion, has been
subjected to the procedures applied in the audits 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.
Floyd & Company, C.P.A.
/s/R. Doug Floyd
February 28, 1997
<PAGE>
Lakeside Square
[Letterhead]
[LOGO]
VACEK, LANGE, & WESTERFIELD, P.C.
INDEPENDENT AUDITORS REPORT
To the Partners of
Lakeside Square Limited Partnership
We have audited the accompanying balance sheet of Lakeside Square Limited
Partnership, a limited partnership, (HUD Project No. IL06-E000-093), as of
December 31, 1998, and the related statements of profit and loss, changes in
partners' capital, and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's managing general partner.
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 the managing general partner, 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 Lakeside Square Limited
Partnership as of December 31, 1998, and the results of its operations, changes
in partners' capital and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole.The supplementary data included in the
report (shown on pages 13 to 19) are presented for the purposes of additional
analysis and are not a required part of the basic financial statements of
Lakeside Square Limited Partnership. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly presented in all material respects, in relation to the
financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued reports
dated January 27, 1999 on our consideration of Lakeside Square Limited
Partnership's (the "Partnership") internal controls and the Partnership's
compliance with specific requirements applicable to major HUD programs and Fair
Housing and Discrimination.
/s/ VACEK, LANGE, & WESTERFIELD, P.C.
Houston, Texas
January 27, 1999
<PAGE>
[Letterhead]
[LOGO]
VACEK, LANGE, & WESTERFIELD, P.C.
INDEPENDENT AUDITORS REPORT
To the Partners of
Lakeside Square Limited Partnership
We have audited the accompanying balance sheets of Lakeside Square Limited
Partnership, a limited partnership, (HUD Project No. IL06-E000-093), as of
December 31, 1997, and the related statements of profit and loss, changes in
partners' capital, and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's Managing general partner.
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 the managing general partner, 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 Lakeside Square Limited
Partnership as of December 31, 1997, and the results of its operations, changes
in partners' capital and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
The supplementary data included in the report (shown on pages 13 to 20) are
presented for the purposes of additional analysis and are not a required part of
the basic financial statements of Lakeside Square Limited Partnership. Such
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly presented in
all material respects, in relation to the financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued reports
dated January 23, 1998 on our consideration of Lakeside Square Limited
Partnership's (the "Partnership") internal control structure and the
Partnership's compliance with laws and regulations.
/s/ VACEK, LANGE, & WESTERFIELD, P.C.
Houston, Texas
January 23, 1998
<PAGE>
[Letterhead]
[LOGO]
VACEK, LANGE, & WESTERFIELD, P.C.
INDEPENDENT AUDITORS REPORT
To the Partners of
Lakeside Square Limited Partnership
We have audited the accompanying balance sheets of Lakeside Square Limited
Partnership, a limited partnership, (HUD Project No. IL06-E000-093), as of
December 31, 1996, and the related statements of profit and loss, changes in
partners' capital, and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's Managing general partner.
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 the managing general partner, 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 Lakeside Square Limited
Partnership as of December 31, 1996, and the results of its operations, changes
in partners' capital and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued reports
dated January 22 and January 24, 1997 on our consideration of Lakeside Square
Limited Partnership's (the "Partnership") internal control structure and the
Partnership's compliance with laws and regulations, respectively.
The supplementary data included in the report (shown on pages 13 to 20) are
presented for the purposes of additional analysis and are not a required part of
the basic financial statements of Lakeside Square Limited Partnership. Such
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly presented in
all material respects, in relation to the financial statements taken as a whole.
/s/ VACEK, LANGE, & WESTERFIELD, P.C.
Houston, Texas
January 22, 1997
<PAGE>
Leawood
[Letterhead]
[LOGO]
Reznick Fedder & Silverman
INDEPENDENT AUDITORS REPORT
To the Partners
Leawood Associates, L.P.
We have audited the accompanying balance sheets of Leawood Associates, L.P., as
of December 31, 1998 and 1997, and the related statements of operations,
partners' equity, and cash flows for the years 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 Leawood Associates, L.P., as of
December 31, 1998 and 1997, and the results of its operations, changes in
partners' capital and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Reznick Fedder & Silverman
Boston, Massachusetts
January 28, 1999
<PAGE>
[Letterhead]
[LOGO]
Reznick Fedder & Silverman
INDEPENDENT AUDITORS REPORT
To the Partners
Leawood Associates, L.P.
We have audited the accompanying balance sheets of Leawood Associates, L.P., as
of December 31, 1997 and 1996, and the related statements of operations,
partners' equity, and cash flows for the years 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 Leawood Associates, L.P., as of
December 31, 1997 and 1996, and the results of its operations, changes in
partners' capital and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Reznick Fedder & Silverman
Boston, Massachusetts
February 2, 1998
<PAGE>
Lincoln Green Associates
[Letterhead]
[LOGO]
OUELLETTE, LABONTE, ROBERGE & ALLEN, P.A.
INDEPENDENT AUDITORS REPORT
The Partners
Lincoln Green Associates
Limited Partnership
We have audited the accompanying balance sheets of Lincoln Green Associates
Limited Partnership, as of December 31, 1998 and 1997, and the related
statements of income (loss), partners' equity (deficit), and cash flows for the
years 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
misstatements. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Lincoln Green Associates
Limited Partnership, as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The additional information included in the
Schedules 1 through 2 is presented for the 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.
/s/ OUELLETTE, LABONTE, ROBERGE & ALLEN
Certified Public Accountants
January 25, 1999
Lewiston, Maine
<PAGE>
[Letterhead]
[LOGO]
OUELLETTE, LABONTE, ROBERGE & ALLEN, P.A.
INDEPENDENT AUDITORS REPORT
The Partners
Lincoln Green Associates
Limited Partnership
We have audited the accompanying balance sheets of Lincoln Green Associates
Limited Partnership, as of December 31, 1997 and 1996, and the related
statements of income (loss), partners' equity, and cash flows for the years 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
misstatements. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Lincoln Green Associates
Limited Partnership, as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the financial
statements taken as a whole. The additional information included in the
Schedules 1 through 2 is presented for the purposes of additional analysis and
are 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.
/s/ OUELLETTE, LABONTE, ROBERGE & ALLEN
February 3, 1998
Lewiston, Maine
<PAGE>
Kenilworth Associates Ltd.
[Letterhead]
[LOGO]
Ernst & Young LLP
INDEPENDENT AUDITORS REPORT
To the Partners
Kenilworth Associates Ltd.
We have audited the accompanying balance sheet of Kenilworth Associates Ltd., a
Limited Partnership, FHA Project No. 000-44160/000-35349 (the "Partnership"), as
of December 31, 1998, and the related statements of profit and, partners' equity
(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 Kenilworth Associates Ltd., a
Limited Partnership, FHA Project No. 000-44160/000-35349, as of December 31,
1998, and the results of its operations and cash flows for the year then ended
in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
the report, as referred to in the Table of Contents, is presented for the
purposed 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, unless
otherwise noted, and in our opinion is fairly stated in all material respect in
relation to the financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued our report
dated February 12, 1999, on our consideration of Keilworth Associates LTD's, a
Limited Partnership, FHA Project No. 000-44160/000-35349, internal control and a
report dated February 12, 1999, on its compliance with applicable laws and
regulations.
/s/ Ernst & Young LLP
February 12, 1999
Washington, DC
<PAGE>
[Letterhead]
[LOGO]
Ernst & Young LLP Suite 500 Phone 202-775-1880
1150 18th Street, N.W. Fax 202-833-2019
Washington D. C. 20036
INDEPENDENT AUDITORS REPORT
To the Partners
Kenilworth Associates Ltd.
We have audited the accompanying balance sheet of Kenilworth Associates Ltd., a
Limited Partnership, FHA Project No. 000-44160/000-35349 (the "Partnership"), as
of December 31, 1997, and the related statements of profit and loss (on HUD Form
No. 92410), partners' equity, 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 Kenilworth Associates Ltd., a
Limited Partnership, as of December 31, 1997, and the results of its operations
and cash flows for the years then ended in conformity with generally accepted
accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
the report, referred to as "Supplementary Information" in the accompanying Table
of Contents, is presented for the purposed 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, unless otherwise noted, and in our opinion is fairly stated in all
material respect in relation to the financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued our report
dated January 30, 1998, on our consideration of Keilworth Associates LTD's, a
Limited Partnerships, internal control over financial reporting and our report
dated January 30, 1998, on its compliance with certain provisions of laws,
regulations and contracts.
/s/ Ernst & Young LLP
January 30, 1998
Washington, DC
<PAGE>
[Letterhead]
[LOGO]
Ernst & Young LLP Suite 500 Phone 202-775-1880
1150 18th Street, N.W. Fax 202-833-2019
Washington D. C. 20036
INDEPENDENT AUDITORS REPORT
To the Partners
Kenilworth Associates Ltd.
We have audited the accompanying balance sheet of Kenilworth Associates Ltd., a
Limited Partnership, (the "Partnership"), as of December 31, 1996, and the
related statements of profit and loss, partners' equity, 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 Kenilworth Associates Ltd., a
Limited Partnership, as of December 31, 1996, and the results of its operations
and cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
January 31, 1997
Washington, DC
<PAGE>
Orocovix Limited Dividend Partnership, S.E.
[Letterhead]
[LOGO]
Horwath Valez Semprit & Co. PSC
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS
Partners
Orocovix Limited Dividend Partnership, S.E.
San Juan, Puerto Rico
We have audited the accompanying balance sheets of Orocovix Limited Dividend
Partnership, S.E. as of December 31, 1998 and 1997, and the related statements
of operations, partners' equity (deficiency) and cash flows for the years 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 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
misstatements. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Orocovix Limited Dividend
Partnership, S.E. as of December 31, 1998 and 1997, and the results of its
operations, its changes in partners' equity (deficiency) and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
/s/HORWATH VELEZ SEMPRIT NIEVES & CO. PSC
San Juan, PR
January 21, 1999
Stamp number 1553568 was affixed
to the original of this report
<PAGE>
Orocovix Limited Dividend Partnership, S.E.
San Juan, Puerto Rico
We have audited the accompanying balance sheets of Orocovix Limited Dividend
Partnership, S.E. as of December 31, 1997 and 1996, and the related statements
of operations, partners' equity (deficiency) and cash flows for the years 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 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
misstatements. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Orocovix Limited Dividend
Partnership, S.E. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/HORWATH VELEZ SEMPRIT NIEVES & CO.
San Juan, PR
February 2, 1998
<PAGE>
Prince Street
[Letterhead]
[LOGO]
Armacost & Osborne, LLP
INDEPENDENT AUDITOR'S REPORT
February 3, 1999
Partners
Prince Street Towers Limited Partnership
Indianapolis, IN
We have audited the accompanying statements of financial position of Prince
Street Towers Limited Partnership, PHFA Project No. R-414-8E, A Limited
Partnership, as of December 31, 1998 and 1997, and the related statements of
profit and loss, partners' equity (deficit) and cash flows for the years 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Prince Street Towers Limited
Partnership at December 31, 1998 and 1997, and the results of its operations,
changes in partners' equity and cash flows for the years then ended in
conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information, as referred
to in the Table of Contents, is presented for purposes of additional analysis
and is not a required part of the basic financial statements of the Partnership.
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.
/s/ Armacost & Osborne, LLP
Certified Public Accountants
Bethesda, Maryland
<PAGE>
[Letterhead]
[LOGO]
J.A. PLUMER & CO., P.A.
INDEPENDENT AUDITOR'S REPORT
February 6, 1998
Partners
Prince Street Towers Limited Partnership
Washington, D.C.
We have audited the accompanying statements of financial position of Prince
Street Towers Limited Partnership, PHFA Project No. R-414-8E, A Limited
Partnership, as of December 31, 1997 and 1996, and the related statements of
profit and loss (on HUD Form No. 92410), partners' equity (deficit) and cash
flows for the years 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 audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Prince Street Towers Limited
Partnership at December 31, 1997 and 1996, and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ J.A. PLUMER & CO., P.A.
Certified Public Accountants
Bethesda, Maryland
<PAGE>
Milan Apartments
[Letterhead]
[LOGO]
KIRSCHNER HUTTON PERLIN, P.C.
INDEPENDENT AUDITORS REPORT
January 15, 1999
Partners
Milan Apartments Company Limited Partnership
We have audited the accompanying balance sheet of Milan Apartments Company
Limited Partnership, RD Project No. 26-58-382867000, as of December 31, 1998 and
1997, and the related statements of operations, partners' deficit, and cash
flows for the years 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 audits.
We conducted our audits 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 audits provide 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 Milan Apartments Company
Limited Partnership as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report
dated January 15, 1999, on our consideration of Milan Apartments Company Limited
Dividend Housing Association Limited Partnership's internal control over
financial reporting and our tests of its compliance with certain provisions of
laws, regulations and contracts.
/s/ Kirschner Hutton Perlin, P.C.
Southfield, MI
<PAGE>
[Letterhead]
[LOGO]
KIRSCHNER HUTTON PERLIN, P.C.
INDEPENDENT AUDITORS REPORT
January 16, 1998
Partners
Milan Apartments Company Limited Partnership
We have audited the accompanying balance sheet of Milan Apartments Company
Limited Partnership, RECD Project No. 26-58-382867000, as of December 31, 1997
and 1996, and the related statements of operations, partners' equity, and cash
flows for the years 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 audits.
We conducted our audits 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 audits provide 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 Milan Apartments Company
Limited Partnership as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report
dated January 16, 1998, on our consideration of Milan Apartments Company Limited
Dividend Housing Association Limited Partnership's internal control structure
and a report dated January 16, 1998, on its compliance with laws and
regulations.
/s/ Kirschner Hutton Perlin, P.C.
Southfield, MI
<PAGE>
Oakview Square
[Letterhead]
[LOGO]
JOHN J. LEHOTAN C.P.A.
To The Partners of Oakview Square
Limited Partnership
Detroit, Michigan 48124
INDEPENDENT AUDITORS REPORT
I have audited the accompanying balance sheet of Oakview Square Limited
Partnership, a Michigan limited partnership, as of December 31, 1998, and the
related statements of profit and loss, partners' equity and cash flow 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.
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 positions of Oakview Square Limited Partnership
as of December 31, 1998 and the results of its operations and its cash flow for
the year then ended in conformity with generally accepted accounting principles.
/s/John J. Lehotan
Certified Public Accountants
Brown City, MI
February 10, 1999
<PAGE>
[Letterhead]
[LOGO]
JOHN J. LEHOTAN C.P.A.
To The Partners of Oakview Square
Limited Partnership
Detroit, Michigan
INDEPENDENT AUDITORS REPORT
I have audited the accompanying balance sheet of Oakview Square Limited
Partnership, a Michigan limited partnership, as of December 31, 1997, and the
related statements of profit and loss, partners' equity and cash flow 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.
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 positions of Oakview Square Limited Partnership
as of December 31, 1997 and the results of its operations and its cash flow for
the year then ended in conformity with generally accepted accounting principles.
/s/John J. Lehotan
Certified Public Accountants
Brown City, MI
February 7, 1998
<PAGE>
[Letterhead]
[LOGO]
JOHN J. LEHOTAN C.P.A.
To The Partners of Oakview Square
Limited Partnership
Detroit, Michigan
INDEPENDENT AUDITORS REPORT
I have audited the accompanying balance sheet of Oakview Square Limited
Partnership, a Michigan limited partnership, as of December 31, 1996, and the
related statements of profit and loss, partners' equity and cash flow 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.
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 positions of Oakview Square Limited Partnership
as of December 31, 1996 and the results of its operations and its cash flow for
the year then ended in conformity with generally accepted accounting principles.
/s/John J. Lehotan
Certified Public Accountants
Brown City, MI
February 6, 1997
<PAGE>
Sencit Towne House
[Letterhead]
[LOGO]
Ernst & Young LLP
REPORT OF INDEPENDENT AUDITORS
To the Partners of
Sencit Towne House Limited Partnership
We have audited the accompanying balance sheet of Sencit Towne House Limited
Partnership, a Limited Partnership - Project No. R389-8E, as of December 31,
1998, and the related statements of profit and loss, partners' equity 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. The financial
statements of Sencit Towne House Limited Partnership for the year ended December
31, 1997, were audited by other auditors whose report dated February 8, 1998,
expressed an unqualified opinion on those statements.
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 1998 financial statements referred to above present fairly,
in all material respects, the financial position of Sencit Towne House Limited
Partnership at December 31, 1998, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
In accordance with Government Auditing Standards, we have also issued a report
entitled "Independent Auditors' Report on Compliance and on Internal Control
Over Financial Reporting Based on an Audit of the Financial Statements in
Accordance with Government Auditing Standards" dated February 22, 1999, on our
consideration of the Partnership's internal control over financial reporting and
our tests of its compliance with certain provisions of laws, regulations and
contracts.
/s/Ernst & Young LLP
Indianapolis, Indiana
February 22, 1999
<PAGE>
[Letterhead]
[LOGO]
Deloitte & Touche LLP
INDEPENDENT AUDITORS' REPORT
To the Partners of
Sencit Towne House Limited Partnership
Washington, D.C.
Pennsylvania Housing Finance Agency
2101 North Front Street
PO Box 8029
Harrisburg, PA
We have audited the accompanying statements of financial position of Sencit
Towne House Limited Partnership A Limited Partnership, PHFA Project No. R389-8E,
as of December 31, 1997 and 1996, and the related statements of profit and loss
(on HUD Form No. 92410), partners' equity (deficit) and cash flows for the years
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 audits.
We conducted our audits 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 misstatements. 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, such financial statements present fairly, in all material
respects, the financial statements of Sencit Towne House Limited Partnership at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Our audit were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The additional information referred to in the Table
of Contents, is presented for the purposed of additional analysis and is not a
required part of the basic financial statements. This additional information is
the responsibility of the Partnership's management. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion , the additional information is fairly stated, in
all material respect, in relation to the financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued our report
dated February 4, 1998, on our consideration of the Partnership's internal
control over financial reporting and our report dated February 4, 1998, on its
compliance with laws and regulations.
/s/Deloitte & Touche LLP
Washington, DC
February 4, 1998
<PAGE>
Allentown Towne
[Letterhead]
[LOGO]
Ernst & Young LLP
REPORT OF INDEPENDENT AUDITORS
To the Partners
Allentown Towne House Limited Partnership
We have audited the accompanying balance sheet of Allentown Towne House Limited
Partnership, a Limited Partnership - Project No. R187-8E, as of December 31,
1998, and the related statements of profit and loss, partners' equity (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. The financial
statements of Allentown Towne House Limited Partnership for the year ended
December 31, 1997, were audited by other auditors whose report dated January 26,
1998, expressed an unqualified opinion on those statements.
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 1998 financial statements referred to above present fairly,
in all material respects, the financial position of Sencit Towne House Limited
Partnership at December 31, 1998, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
In accordance with Government Auditing Standards, we have also issued a report
entitled "Independent Auditors' Report on Compliance and on Internal Control
Over Financial Reporting Based on an Audit of the Financial Statements in
Accordance with Government Auditing Standards" dated February 22, 1999, on our
consideration of the Partnership's internal control over financial reporting and
our tests of its compliance with certain provisions of laws, regulations and
contracts.
/s/Ernst & Young LLP
Indianapolis, Indiana
February 22, 1999
<PAGE>
[Letterhead]
[LOGO]
Deloitte & Touche LLP
INDEPENDENT AUDITORS' REPORT
To the Partners of
Allentown Towne House Limited Partnership
Washington, D.C.
Pennsylvania Housing Finance Agency
2101 North Front Street
PO Box 8029
Harrisburg, PA
We have audited the accompanying statements of financial position of Allentown
Towne House Limited Partnership, A Limited Partnership, PHFA Project No.
R187-8E, as of December 31, 1997 and 1996, and the related statements of profit
and loss (on HUD Form No. 92410), partners' equity (deficit) and cash flows for
the years 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 audits.
We conducted our audits 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 misstatements. 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, such financial statements present fairly, in all material
respects, the financial statements of Allentown Towne House Limited Partnership
at December 31, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
Our audit were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The additional information referred to in the Table
of Contents, is presented for the purposed of additional analysis and is not a
required part of the basic financial statements. This additional information is
the responsibility of the Partnership's management. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion , the additional information is fairly stated, in
all material respect, in relation to the financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued our report
dated January 26, 1998, on our consideration of the Partnership's internal
control over financial reporting and our report dated January 26, 1998, on its
compliance with laws and regulations.
/s/Deloitte & Touche LLP
Washington, DC
January 26, 1998
<PAGE>
West Pine Associates
[Letterhead]
[LOGO]
Paul E. Campbell
INDEPENDENT AUDITORS' REPORT
West Pine Associates
Imperial, PA 15126
I have audited the accompanying balance sheet of West Pine Associates (a limited
partnership), as of December 31, 1998 and 1997, and the related income
statement, changes in partners' equity (deficit), and cash flows for the year
then ended. These financial statements are the responsibility of the project's
management. My responsibility is to express an opinion on these financial
statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Government Auditing Standards, issued by the Comptroller General of the United
States, and the U.S. Department of Agriculture, Farmers Home Administration
"Audit Program" issued in December, 1989. 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 West Pine Associates at December
31, 1998, and the results of its operations and changes in partners' equity
(deficit) and cash flows for the year then ended in conformity with generally
accepted accounting principles.
In accordance with Government Auditing Standards, I have also issued a report
dated January 19, 1999 on my consideration of West Pine Associates internal
control structure and a report dated January 19, 1999, on its compliance with
specific requirements applicable to Rural Development Services Programs
/s/Paul E. Campbell
Certified Public Accountant
Huntington, WV
January 19, 1999
<PAGE>
[Letterhead]
[LOGO]
Paul E. Campbell
INDEPENDENT AUDITORS' REPORT
To the Partners
of West Pine Associates
Huntington, West Virginia 25704
I have audited the accompanying balance sheets of West Pine Associates, as of
December 31, 1997 and 1996, and the related statements of income, partners'
capital, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. My responsibility is to express
an opinion on these financial statements based on my audits.
I conducted my audits 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 misstatements. 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 audits provide a reasonable basis for my
opinion.
In my opinion, such financial statements present fairly, in all material
respects, the financial statements of West Pine Associates as of December 31,
1997 and 1996, and the results of its operations and its cash flows for the
years 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.
/s/Paul E. Campbell
Huntington, West VA
January 8, 1998
<PAGE>
Whitehills II
[Letterhead]
[LOGO]
Kirschner Hutton Perlin, P.C.
INDEPENDENT AUDITORS' REPORT
January 21, 1999
Partners
Whitehills II Apartments Company Limited Partnership
We have audited the accompanying balance sheet of Whitehills II Apartments
Company Limited Partnership as of December 31, 1998 and 1997, and the related
statements of operations, partners' deficit and cash flows for the years 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 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
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 financial statements referred to above present fairly, in
all material respects, the financial position of Whitehills II Apartments
Company Limited Partnership as of December 31, 1998 and 1997, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Kirschner Hutton Perlin, P.C.
Southfield, MI
<PAGE>
[Letterhead]
[LOGO]
Kirschner Hutton Perlin, P.C.
INDEPENDENT AUDITORS' REPORT
January 21, 1998
Partners
Whitehills II Apartments Company Limited Partnership
We have audited the accompanying balance sheet of Whitehills II Apartments
Company Limited Partnership as of December 31, 1997 and 1996, and the related
statements of operations, partners' equity (deficit) and cash flows for the
years 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 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
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, such financial statements referred to above present fairly, in
all material respects, the financial position of Whitehills II Apartments
Company Limited Partnership as of December 31, 1997 and 1996, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Kirschner Hutton Perlin, P.C.
Southfield, MI
<PAGE>
Willow Ridge
[Letterhead]
[LOGO]
Cleveland & Company, P.C.
INDEPENDENT AUDITORS' REPORT
To the Partners of
Willow Ridge Development Company Limited Partnership
Prescott, Arizona
We have audited the accompanying balance sheet of Willow Ridge Development
Company Limited Partnership (FHA Project No. 123-94010, formerly Project No.
123-36610) as of December 31, 1998, and the related statements of operations,
changes in partners' equity, 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 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
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 Willow Ridge Development
Company Limited Partnership (FHA Project No. 123-94010, formerly Project No.
123-36610), as of December 31, 1998, and the results of its operations, and the
changes in partner's equity and cash flows for the year then ended in conformity
with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information (shown on pages 13-17) are 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.
/s/Cleveland & Company, P.C.
Certified Public Accountants
Phoenix, AZ
Federal Employer I.D. No. 86-0564541
February 16, 1999
<PAGE>
[Letterhead]
[LOGO]
Cleveland & Company, P.C.
INDEPENDENT AUDITORS' REPORT
To the Partners of
Willow Ridge Development Company Limited Partnership
Prescott, Arizona
We have audited the accompanying balance sheet of Willow Ridge Development
Company Limited Partnership (FHA Project No. 123-94010, formerly Project No.
123-36610) as of December 31, 1997, and the related statements of operations,
changes in partners' equity, 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 audits 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 Willow Ridge Development
Company Limited Partnership (FHA Project No. 123-94010 formerly Project No.
123-36610), as of December 31, 1997, and the results of its operations, and the
changes in partner's equity and cash flows for the year then ended in conformity
with generally accepted accounting principles.
The accompanying supplementary information (shown on pages 13-32) are 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, and the Consolidated Audit
Guide for Audits for HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 21, 1998, on our
consideration of Willow Ridge Development Company Limited Partnership's internal
control structure, and reports dated February 21, 1997, on its compliance with
specific requirements applicable to major HUD programs, and specific
requirements applicable to Affirmative Fair Housing.
/s/Cleveland & Company, P.C.
Certified Public Accountants
Phoenix, AZ
Federal Employer I.D. No. 86-0564541
February 21, 1998
<PAGE>
[Letterhead]
[LOGO]
Cleveland & Company, P.C.
INDEPENDENT AUDITORS' REPORT
To the Partners of
Willow Ridge Development Company Limited Partnership
Prescott, Arizona
We have audited the accompanying balance sheet of Willow Ridge Development
Company Limited Partnership (FHA Project No. 123-94010, formerly Project No.
123-36610) as of December 31, 1996, and the related statements of operations,
changes in partners' equity, 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 audits 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 Willow Ridge Development
Company Limited Partnership (FHA Project No. 123-94010 formerly Project No.
123-36610), as of December 31, 1996, and the results of its operations, and the
changes in partner's equity and cash flows for the year then ended in conformity
with generally accepted accounting principles.
In accordance with Government Auditing Standards, and the Consolidated Audit
Guide for Audits for HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 10, 1997, on our
consideration of Willow Ridge Development Company Limited Partnership's internal
control structure, and reports dated February 10, 1997, on its compliance with
specific requirements applicable to major HUD programs, and specific
requirements applicable to Affirmative Fair Housing.
The accompanying supplementary information (shown on pages 11-24) are 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.
/s/Cleveland & Company, P.C.
Certified Public Accountants
Phoenix, AZ
Federal Employer I.D. No. 86-0564541
February 10, 1997
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
FINANCIAL STATEMENTS
AND
SUPPLEMENTARY INFORMATION
PROJECT NO. 89-008-R
For the Year Ended December 31, 1998
<PAGE>
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet
(MHFA Forms F.C. -3A & -3B) 2
Statement of Changes in Partners' Equity (Deficiency)
(MHFA Form F.C.-3C) 4
Statement of Operations
(MHFA Form F.C. -2A) 5
Statement of Cash Flows
(MHFA Forms F.C. -4A, -4B, & -4C) 6
Notes to Financial Statements 9
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION 12
MHFA SUPPLEMENTARY INFORMATION 13
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH THE
REGULATORY AND MANAGEMENT AGREEMENTS 20
MORTGAGOR'S AND GENERAL PARTNER'S CERTIFICATE 21
<PAGE>
[Letterhead]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Audubon Group Limited Partnership
We have audited the accompanying balance sheet (MHFA Forms F.C.-3A &
- -3B) of Audubon Group Limited Partnership (a Massachusetts limited partnership)
(Project No. 89-008-R) as of December 31, 1998, and the related statements of
changes in partners' equity (deficiency) (MHFA Form F.C.-3C), operations (MHFA
Form F.C.-2A), and cash flows (MHFA Forms F.C.-4A, -4B & -4C) for the year then
ended. These financial statements are the responsibility of the general partner.
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 the
general partner, 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 Audubon Group
Limited Partnership as of December 31, 1998, and the results of its operations,
its changes in partners' equity 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 Partnership will continue as a going concern. As discussed in Note E to the
financial statements, the Partnership has suffered significant operating losses
and has a net working capital deficiency, which raises substantial doubt about
its ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Ziner, Kennedy & Lehan
February 12, 1999
-1-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
BALANCE SHEET
December 31, 1998
ASSETS
<TABLE>
<S> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents:
201. Partnership 0
-------------
202. Development 2,593
-------------
203. Subtotal 2,593
---------------
Cash Reserved or Escrowed:
205. Tenant Security Deposits 10,862
--------------
206. Insurance & R.E. Tax Escrow 9,425
--------------
209. Special & Other Escrow * 173,144
--------------
210. Subtotal 193,431
---------------
Accounts Receivable:
215. Tenant 14,525
--------------
216. HUD 1,019
--------------
218. Other 19
--------------
220. Subtotal 15,563
---------------
222. Residual Receipts Receivable 0
---------------
223. Short-Term Investments 0
---------------
225. Due from General Partners & Affiliates 0
---------------
227. Prepaid Expenses 9,997
---------------
228. All Other Current Assets 0
---------------
230. Total Current Assets 221,584
---------------
Property & Equipment
- --------------------
231. Land 0
--------------
232. Building & Equipment 2,621,817
--------------
234. Subtotal 2,621,817
---------------
235. Accumulated Depreciation 1,300,807
---------------
236. Net 1,321,010
---------------
Other Assets:
240. Capital Contributions Receivable 0
---------------
241. Reserve for Replacement Escrow * 8,865
---------------
242. Excess Rental Income Escrow Account 0
---------------
243. Long-Term Investments 0
---------------
243.A Market Value 0
--------------
244. Gross Organizational and Financing Costs 179,790
--------------
244.A Accumulated Amortization 47,944
--------------
245. Net 131,846
---------------
246. Deferred Syndication Costs 0
---------------
248. Deposits & Other 0
---------------
250. Total Assets 1,683,305
---------------
250.A *Unreimbursed R/R & Special Escrow
Withdrawals Included in Above 0
</TABLE>
FORM F.C. -3A
The accompanying notes are an integral part of the
financial statements.
-2-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
BALANCE SHEET
December 31, 1998
<TABLE>
<S> <C> <C> <C>
LIABILITIES & PARTNERS' EQUITY (DEFICIENCY)
Current Liabilities:
251. Current Portion of Mortgage Payable 42,380
252. Notes & Advances - due within 1 year 0
Accounts Payable:
255. Trade - due within 30 days 105,860
257. Other 0
260. Subtotal 105,860
262. Residual Receipts Payable 0
Accrued Expenses:
265. Interest 25,665
266. R.E. Taxes & Insurance 0
267. Other 22,539
------
270. Subtotal 48,204
272. Tenant Security Deposits 9,502
274. Prepaid Rent 354
278. All Other Current Liabilities 0
280. Total Current Liabilities 206,300
=======
Long-Term Liabilities:
- -
281. Mortgage Payable, net of current portion 3,046,144
Notes & Advances:
282. Energy Notes 0
283. Arrearage & Flexible Subsidy Notes 0
284. Other Notes & Advances 1,742,757
---------
285. Subtotal 1,742,757
=========
286. Accrued Interest on Long-Term Liabilities 459,494
287. Due to General Partners & Affiliates 24,800
288. Development Fees Payable 0
289. All Other Long-Term Liabilities 0
290. Total Long-Term Liabilities 5,273,195
291. Total Liabilities 5,479,495
=========
Partners' Equity (Deficiency):
- -
292. Total Partners' Equity (3,796,190)
(Deficiency)
294. Total Liabilities & Partners' 1,683,305
Equity (De
</TABLE>
FORM F.C.-3B
The accompanying notes are an integral part of the financial statements.
- -3-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEAR ENDED December 31, 1998
295. Balance, Beginning of Year $ (303,282)
----------------
295.A Add/(Substract) Prior Period Adjustments 0
----------------
296 Add: Capital Contributions 0
----------------
297. Add: Income or (Loss) (3,492,908)
----------------
298. Deduct: Distributions - Regulatory 0
----------------
299. Deduct Distriubtions - Refinancing & Other 0
----------------
300. Balance, End of Year $ (3,796,190)
----------------
FORM F.C. - 3c
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP STATEMENT OF OPERATIONS For the Year Ended
December 31, 1998
DEVELOPMENT
REVENUES:
100. Gross Potential Rental Income 374,889
103. Less Vacancies, Bad Debts & Section 236 Excess (37,881)
Rental Income Remitted
105. Effective Rental Income 337,008
106. Interest Subsidy 0
107. Other Income - Total 10,143
108. Residual Receipts (Remitted) or Reimbursed 0
110. Total Income 347,151
OPERATING EXPENSES:
- -
111. Administration 46,755
112. Maint., Res. Svcs. & Security 73,156
113. Utilities 58,393
114. Taxes (R.E. & Other) 23,674
115. Insurance 15,373
116. Interest (Financing & Other) 394,342
120. Subtotal 611,693
125. Operating Income (264,542)
130. Depreciation & Amortization 149,679
135. Net Income or (Loss) for the Development before Non- (414,221)
Operating Items
140. Non-Operating Items [Gains or (Losses)] 0
145. Net Income or (Loss) for the Development (414,221)
PARTNERSHIP
ADD: REVENUES OF PARTNERSHIP NOT APPLICABLE TO THE DEVELOPMEN
146.A "Cliff" Type Investments 0
146.B Other Partnership Investments 0
146.C Other Revenues 0
146.D Subtotal 0
SUBTRACT: EXPENSES OF PARTNERSHIP NOT APPLICABLE TO THE DEVEL
147.A Paid in Lieu of Distributions 0
147.B Paid from Syndication Proceeds 0
147.C Accrued but not Paid 0
147.D Management Fees - Incentive 0
147.E Other Expenses 3,078,687
147.F Subtotal 3,078,687
148. Net Income or (Loss) for the Partnership (3,492,908)
FORM F.C.-2A
The accompanying notes are an integral part of the financial
statements.
-5-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED December 31, 1998
<TABLE>
LINE CASH LINE CASH LINE NET
NUMBER PROVIDED NUMBER USED NUMBER CASH
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
NET INCOME OR (LOSS) 301 341 $ 3,492,908
------------- -------------
ADJUSTMENT TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION & AMORTIZATION
302 149,679
-------------
NON-OPERATING ITEMS [(GAINS OR LOSSES)]
303 3,078,687 343 0
------------- -------------
CHANGES IN OPERATING ASSETS & LIABILITIES:
DECR/INCR IN ACCOUNTS RECEIVABLE
304 0 344 6,165
------------- -------------
DECR/INCR IN RESIDUAL RECEIPTS RECEIVABLE
304A 0 344A 0
------------- -------------
DECR/INCR IN PREPAID EXPENSES
305 1,358 345 0
------------- -------------
DECR/INCR IN ALL OTHER CURRENT ASSETS
306 0 346 0
------------- -------------
DECR/INCR IN DEPOSITS & OTHER
307 0 347 0
------------- -------------
DECR/INCR IN TENANT SECURITY DEPOSIT ESCROW
308 0 348 2,328
------------- -------------
DECR/INCR IN INSURANCE R/E/ TAX ESCROWS
309 0 349 1,501
------------- -------------
DECR/INCR IN ACCOUNTS PAYABLE
310 0 350 8,264
------------- -------------
DECR/INCR IN RESIDUAL RECEIPTS PAYABLE
310A 0 350A 0
------------- -------------
DECR/INCR IN ACCRUED EXPENSES
311 588 351 0
------------- -------------
DECR/INCR IN TENANT SECURITY DEPOSIT LIAB.
312 981 352 0
------------- -------------
DECR/INCR IN PREPAID RENT
313 2 353 0
------------- -------------
DECR/INCR IN ALL OTHER CURRENT LIABILITIES
314 0 354 0
------------- -------------
DECR/INCR IN ACCRUED INTEREST ON L-T LIABS.
315 117,307 355 0
------------- -------------
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES
320 $ 3,348,602 360 $ 3,511,166 381 $ (162,564)
------------ ------------ ------------
</TABLE>
FORM F.C.-4A
The accompanying notes are an integral part of the
financial statements.
-6-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED December 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
LINE CASH LINE CASH LINE NET
NUMBER PROVIDED NUMBER USED NUMBER CASH
INVESTING ACTIVITIES
DISPOSAL/ACQUISITION OF LAND, BUILDING & EQUIP.
321 $ 0 361 $ 16,775
------------ -------------
DISPOSAL/ACQUISITION OF SHORT-TERM INVESTMENTS
322 0 361 0
------------- -------------
DECR/INCR IN DUE FROM G.P.'S & AFFILIATES
323 0 363 0
------------- -------------
DECR/INCR IN RESERVE FOR REPLACEMENT
324 23,597 364 13,325
------------- -------------
DECR/INCR IN EXCESS RENT ACCOUNT
325 0 365 0
------------- -------------
DECR/INCR IN SPECIAL & OTHER ESCROWS
326 85,604 366 40,860
------------- -------------
ADDITIONAL FINANCING & ORGANIZATION COSTS 367 0
---------
DISPOSAL/ACQUISITION OF LONG-TERM INVESTMENTS
328 0 368 0
------------- -------------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES
330 109,201 370 70,960 382 38,241
------------- ------------- ------------
FINANCING ACTIVITIES
INCR/DECR IN CURRENT PORTION OF MORG PAYABLE
331 3,884 371 0
------------- -------------
INCR/DECR IN L-T PORTION OF MORT PAYABLE
332 0 372 42,380
------------- -------------
INCR/DECR IN NOTES & ADVANCES DUE WITHIN 1 YR
333 0 373 0
------------- -------------
INCR/DECR IN L-T PORTION OF NOTES & AFFILIATES
334 160,718 374 0
------------- -------------
INCR/DECR IN DUE TO G.P.'S & AFFILIATES
335 4,300 375 0
------------- -------------
INCR/DECR IN ALL OTHER LONG-TERM LIABILITIES
336 0 376 0
------------- -------------
CAPITAL CONTRIBUTIONS
337 0
-------------
EQUITY DISTRIBUTIONS 378 0
---------------
INCR/DECR IN DEVELOPMENT FEES PAYABLE
339 0 379 0
------------- -------------
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES
340 $ 168,902 380 $ 42,380 383 $ 126,522
------------ ------------ ---------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 384 2,199
-------------
CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR 385 394
-------
CASH & CASH EQUIVALENTS AT END OF YEAR 386 2,593
-----------------
</TABLE>
FORM F.C.-4B
The accompanying notes are an integral part of the
financial statements.
-7-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
LINE CASH LINE CASH LINE NET
NUMBER PROVIDED NUMBER USED NUMBER CASH
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest - net of RDAL loan proceeds of $160,718 391 $ 149,303
---------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
& FINANCING ACTIVITIES:
Increase Decrease
Increase/Decrease in
Capital Contribs.
Receivable 394 $ 395 $
------------------
Increase/Decrease in
Deferred Syndication
Costs 396 $ 397 $
------------------
</TABLE>
Other (Describe)
The accompanying Statement of Cash Flows has been prepared in the format
prescribed by the Massachusetts Housing Finance Agency (MHFA). Generally
accepted accounting principles (GAAP) require that non-cash investing and
financing activities be disclosed separately. The following schedule reconciles
the prescribed format to a presentation in accordance with generally accepted
accounting principles.
<TABLE>
<S> <C> <C>
Net Cash Provided Net Cash Provided
(Used) in Operating (Used) in Financing
Activities Activities
As reported above $ (162,564) $ 126,522
Proceeds of RDAL paid directly to
MHFA on behalf of Partnership 160,718 (160,718)
----------- --------------
As revised to comply with GAAP $ 1,846 $ (34,196)
============ ==============
</TABLE>
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash or
cash equivalents.
Form F.C.-4C
The accompanying notes are an integral part of the
financial statements.
-8-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Audubon Group Limited Partnership (Partnership) was formed on
November 22, 1988 to acquire, develop and operate 37
rental units in Boston, Massachusetts.
Method of Accounting
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles.
Financial statements are prepared in a format which conforms to the regulatory
requirements of the Massachusetts Housing Finance Agency (MHFA).
Income Taxes
No provision has been made for federal or state income taxes since each
partner includes his pro-rata share of net income or loss and tax credits in his
tax return.
Low-Income Housing Tax Credit
The project is eligible for low-income housing tax credits over a 10
year period which are calculated at approximately 9% of certain costs incurred
in connection with the building rehabilitation. The project has received an
annual allocation of up to $504,000 from the Executive Office of Communities and
Development (EOCD).
Provisions of the enabling legislation regarding the credit restrict
occupancy to qualified low income tenants for a 15 year period. Provisions of
the legislation could result in a recapture of a portion of the credits by the
partners if these provisions are not met.
Depreciation and Amortization
Building and related improvements are being depreciated over 40 years
which approximates their useful life. Site improvements are depreciated on an
accelerated basis over 15 years. Equipment is being depreciated over 7 years.
Finance fees of $179,790 are being amortized over 32 years.
At December 31, 1998, property and equipment (at cost less impairment
adjustment) consist of the following:
Buildings (net of $3,078,687
impairment adjustment) $ 2,436,871
Site improvements 106,775
Equipment 78,171
--------------
$ 2,621,817
Estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
-9-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Year 2000
The Managing Agent has assessed the Partnership's exposure to date
sensitive computer software programs that may not be operative subsequent to
1999 and has implemented a requisite course of action to minimize Year 2000 risk
and ensure that neither significant costs nor disruption of normal business
operations are encountered. However, because there is no guarantee that all
systems of outside vendors or other entities affecting the partnership's
operations rely will be 2000 compliant, the Partnership remains susceptible to
consequences of the Year 2000 issue.
NOTE B - FINANCING
Permanent financing is being provided by MHFA in the form of a 30 year
mortgage which is secured by the property and bears interest at 9.65% per annum.
Installments of $29,043 for principal and interest are due monthly until January
2021. Monthly remittances of $848 are due to fund the reserve for replacements
and $2,923 for the property tax and insurance escrow.
Annual maturities of debt for this mortgage for the ensuing five years
are as follows:
1999 $42,380
2000 46,657
2001 51,362
2002 56,544
2003 62,248
As required by MHFA, an operating deficit escrow was funded at the
permanent loan closing. These funds will remain in the escrow account for
approximately four years. During this period, the project can use these funds
for operating deficits. Additionally, withdrawals can be made with MHFA approval
upon the project achieving certain financial goals as described in the
development fund agreement. The balance in the escrow account at December 31,
1998 was $173,144 and is reported on the balance sheet on line 209. It is
anticipated that the remaining funds will be needed by the operations of the
development.
The Partnership has entered into a contract with the MHFA through its
Rental Housing Development Action Loan Program (RDAL) whereby MHFA will advance
funds to the project. The funds (the RDAL loan) are expected to total
approximately $3,550,000, subject to, and conditioned upon, annual
appropriations of the Commonwealth of Massachusetts, payable in installments
through 2010 and bearing interest at 5% per annum. In the event of a sale or
refinancing of the project, the entire balance of the RDAL loan plus accrued
interest shall become due. Otherwise, principal and accrued interest thereon
will mature in 2010. During 1998, proceeds from this program totaled $ 160,718
and $32,654 of interest was accrued and added capital. At December 31, 1998,
advances totaled $1,500,412 with accrued interest of $304,308.
-10-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE B - FINANCING (continued)
The Boston Redevelopment Authority has provided additional secondary
financing totaling $275,000, secured by the property, which bears simple
interest at the rate of 5% per annum. Interest is payable from cash flow as
defined in the agreement. All unpaid principal and interest is due on or before
2010. Interest of $13,750 accrued during 1998. At December 31, 1998, accrued
interest to date totaled $122,531.
Under the terms of the regulatory agreement with MHFA, distributions
are limited to $50,500 per annum subject to the availability of surplus cash at
year end, as defined in the regulatory agreement.
NOTE C - CAPITAL CONTRIBUTIONS
The general partner has contributed $10 in exchange for a 1% interest
in the profits, losses and distributions. The remaining 99% is allocated to the
special limited and limited partners who contributed $2,640,439. The special
limited partner is entitled to receive a one time distribution of $10,000 which
will be funded by sale or refinancing proceeds.
NOTE D - RENTAL REVENUES
Tenant rents are being subsidized under the Massachusetts Rental
Voucher program which also restricts assistance to those tenants who qualify,
including maximum income limitations.
NOTE E - GOING CONCERN
The project has suffered significant operating losses in recent years.
The general partner has begun negotiations with the limited partners
for additional capital contributions. Additionally, negotiations have commenced
with the MHFA for a modification to the existing financing agreement. Management
continues to streamline expenses while focusing on maintaining occupancy at high
levels. These financial statements do not include any adjustments that may
result from the outcome of this uncertainty.
NOTE F - IMPAIRMENT OF LONG-LIVED ASSETS
During 1998, management became aware of certain indicators that caused
management to reassess the recoverability of the cost of the real estate. Based
on this assessment, the impairment loss of $3,078,687 was recognized to reduce
the carrying amount of the property to its fair value. Fair value was estimated
using the present value of estimated future cash flows discounted at a 9%
interest rate. The impairment loss is reported in line 140 of the Statement of
Operations in these financial statements.
-11-
<PAGE>
[Letterhead]
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
To the Partners of
Audubon Group Limited Partnership
Our report on our audit of the basic financial statements of Audubon
Group Limited Partnership for 1998 appears on page 1. That audit was made for
the purpose of forming an opinion on the basic financial statements taken as a
whole. The accompanying information, which has been presented in accordance with
regulations of the Massachusetts Housing Finance Agency, 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.
/s/ Ziner, Kennedy & Lehan
February 12, 1999
-12-
<PAGE>
MHFA SUPPLEMENTARY INFORMATION
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF FUNDS FLOW AVAILABLE FOR EQUITY
For the Year Ended December 31, 1998
<TABLE>
<S> <C> <C> <C> <C>
FUNDS RECEIVED RESIDENTIAL COMMERCIAL TOTAL
1. Base Rental - Occupancy 374,889 0
2. Gross Excess Rental Income 0
3. Parking Rentals 0 0
5. Gross Potential Rental Income 374,889 0 374,889
6. Less: Vacancies - Occupancy 21,258 0
7. Less: Vacancies - Parking 0 0
8. Less: Bad Debts 16,623 0
9. Less: Excess S13 Rental Income Escrowed 0
10. Less: Excess S236 Rental Income Remitted 0
11. Total Deductions 37,881 0 37,881
13. Effective Rental Income 337,008 0 337,008
14.A Interest Subsidy 0 0
14.B SHARP Subsidy 0 0
14.C RDAL/Other Subsidy 193,373 193,373
15.A Other Income - Interest-Ordinary 9,365 0
15.B - Interest-Annuity 0
15.C - Laundry/Vending 778 0
15.D - Commercial Lease Guarantee 0
15.E - Other (Specify) 0 0
16. Total Other Income 10,143 0 10143
17. Total Effective Income 540,524 0 540,524
18.A Replacement Reserve Reimbursements 23,597 0 23,597
18.B Special Escrow Account Reimbursements 85,604 0 85,604
19. Developer's Contributions 0 0
20. Total Funds Received 649,725 0 649,725
FUNDS DISBURSED
ADMINISTRATIVE EXPENSES
21. Management Fee - Contractual 11,100 0
22.A Payroll 8,216 0
22.B Payroll Taxes & Fringe Benefits 0 0
23. Legal 16,959 0
24. Audit 8,925 0
25. Marketing 481 0
26. Telephone 300 0
27. Office Supplies & Services 774 0
28.A Accounting & Data Proc. Svs. 0 0
28.B Central Office Fee 0 0
29. Miscellaneous 0 0
30. Total Administrative Expenses 46,755 0 46,755
</TABLE>
FORM F.C.-1
-13-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF FUNDS FLOW AVAILABLE FOR EQUITY
For the Year Ended December 31, 1998
<TABLE>
<S> <C> <C> <C> <C>
MAINTENANCE EXPENSES RESIDENTIAL COMMERCIAL TOTAL
31.A Payroll 16,746 0
31.B Payroll Taxes & Fringe Benefits 0 0
32. Janitorial Material & Services 4,197 0
33. Landscaping 3,449 0
34. Decorating (Interior Only) 9,666 0
35. Repairs (Interior & Exterior) 23,636 0
36. Elevator Maintenance 0 0
37. Garbage & Trash Removal 6,949 0
38. Snow Removal 6,542 0
39. Exterminating 896 0
40. Recreation 0 0
41. Miscellaneous 1,075 0
43. Total Maintenance Expenses 73,156 0 73,156
44. Resident Services 0 0
45. Security 0 0
UTILITIES
46. Electricity 11,357 0
47. Gas 26,404 0
48. Oil 0 0
49. Water & Sewer 20,632 0
50. Total Utilities 58,393 0 58,393
53. Replacement Reserve Deposits 12,719 0 12,719
54. Special Escrow Deposits 32,654 0 32,654
TAXES, INSURANCE & INTEREST
55. Taxes - Real Estate 23,674 0
56. Taxes - Other 0 0
57. Insurance 15,373 0
58. Interest 0 0
59. Total Taxes, Insurance & Int. 39,047 0 39,047
61. Totl Disb Prior to Cap Exp & D/S 262,724 0 262,724
62. Totl Funds Flow Prior to CE & DS 387,001 0 387,001
63. Cap. Exp. (Exc. of Mortg. Increases, Flex Sub Funds,
Bank Loans, and Capitalized Leases, ect.) 16,775
65. Funds Flow Prior to D/S 370,226
</TABLE>
FORM F.C.-1
-14-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF FUNDS FLOW AVAILABLE FOR EQUITY
For the Year Ended December 31, 1998
<TABLE>
<S> <C> <C>
GROSS DEBT SERVICE
66. Gross Debt Service - Mortgage (MHFA) $ 348,186
67. Gross Debt Service - Arrearage & Flexible Subsidy No 0
68. Gross Debt Service - Energy Loans 0
69. Gross Debt Service - Secondary Financing 84,652
70. Gross Debt Service - Other Notes Payable 0
71. Total Gross Debt Service 432,838
73. Funds Flow Prior to Non-Operating Items (62,612)
75. Non-Operating Items [Gain or (Loss)] 0
CALCULATIONS OF NET AVAILABLE FOR EQUITY
76. Net Available for Equity - Current Operating Cycle B (62,612)
77. Add: Interest Expense Recorded but not Paid on D/S
(i.e. SHARP and Arrearage Notes, Flex. Sub. Notes 84,652
78. Subtract: Interest Income Earned on R/R and Special (8,812)
80. Net Available for Equity - Distribution Basis 13,228
81.A Add/Subtract: Excess (Deficient) Contributions to R/R 0
81.B Add/Subtract: Excess (Deficient) Contributions to Spec 0
82. Subtract: Tax Abatements Applicable to Prior Report 0
83. Non-Operating Intems [Loss or (Gain)] 0
84.A Management Fee - Incentive 0
84.B Other Timing Differences 0
85. Net Available Equity - Normalized Basis 13,228
</TABLE>
FORM F.C.-1
-15-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP RECONCILIATION TO FORM F.C.-1 For the Year
Ended December 31, 1998
<TABLE>
<S> <C> <C> <C>
150. Net Income or (Loss) for the Development (414,221)
155. Add: Depreciation & Amortization 149,679
156. : Residual Receipts Remitted 0
160. : SHARP Subsidy 0
161. : RDAL/Other Subsidy 193,373
162. : Developer's Contribution 0
164. : Replacement Reserve Reimbursements 23,597
165. : Special Escrow Account Reimbursements 85,604
166. Subtotal 452,253
168. Less: Excess Section 13A Rental Income Escrowed 0
169. : Residual Receipts Reimbursed 0
170. : Debt Service (Principal) 38,496
175. : Replacement Reserve Deposits 12,719
176. : Special Escrow Deposits 32,654
180. : Capital Expenditures (Exclusive of
Flexible Subsidies and Mortgage) 16,775
186. Subtotal 100,644
190. Other Reporting Differences 0
195. Net Available for Equity - Current Operating Cycle B
(See Line #76 of Form F.C.-1) (62,612)
</TABLE>
FORM F.C.-2b
-16-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
SUPPLEMENTAL SCHEDULE OF LONG-TERM LIABILITIES
For the Year Ended December 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Number Balance Number Interest Number Balance
Energy Loans 401$ 0 426 $ 0 451 $ 0
Arrearage Notes 402 0 427 0 452 0
Flexible Subsidy
Notes 403 0 428 0 453 0
SHARP Notes 404 0 429 0 454 0
Secondary Financing
Notes 405 275,000 430 122,531 455 397,531
Residual Proceeds
Notes 406 0 431 0 456 0
Bank Loans (Notes) 407 0 432 0 457 0
Capitalized Lease
Obligation Notes 408 0 433 0 458 0
HODAG 409 0 434 0 459 0
UDAG 410 0 435 0 460 0
RDAL 411 1,500,412 436 304,308 461 1,804,720
Other 412 0 437 0 462 0
Subtotal 415 1,775,412 440 426,839 465 2,202,251
Due to GP & Affiliates 420 24,800 445 0 470 24,800
Development Fees
Payable 421 0 446 0 471 0
All Other Long-Term
Liabilities 422 0 447 0 472 0
Total 425 1,800,212 450 426,839 475 2,227,051
</TABLE>
FORM F.C.-3D
-17-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF FUNDS AVAILABLE FOR DISTRIBUTION
For the Year Ended December 31, 1998
<TABLE>
<S> <C> <C> <C>
(1) Calcualtion of Funds Available for Distribution
Sources of Available Funds:
500 Cash and Cash Equivalents $ 2,593
505 Short-term Investments 0
507 Accounts Receivable & Residual Receipts Receivable 15,563
508 Prepaid Expenses 9,997
509 Unreimbursed R/R and Special Escrow Withdrawals 0
510 Total Sources 28,153
Uses of Available Funds:
515 Accrued interest expenses 25,665
520 Delinquent Mortgage Payments & Interest 0
525 Delinquent Deposits to R/R 0
528 Delinquent Deposits to Insurance R/E. Tax Escrows 0
530 Delinquent Deposits Special & Other Escrows 0
535 Accounts Payable & Residual Receipts Payable 105,860
540 Accrued Expenses (not escrowed) 22,539
545 Notes & Advances - Operating Exepenses
(due within 30 days) 0
550 Unfunded Security Deposits 0
555 Prepaid Rent 354
560 Due to General Partners & Affiliates
(exclusive of developmemt fee) 0
565 Total Uses 154,418
570 Funds Available for Distribution (126,265)
572 Maximum Allowable Distribution if Funds Available 0
</TABLE>
FORM F.C. -5
-18-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF FUNDS AVAILABLE FOR DISTRIBUTION
For the Year Ended December 31, 1998
<TABLE>
<S> <C> <C> <C> <C>
(ii) Calcualtion of Funds Available for Distribution
575 Maximum permissible distribution for current year 13,228
580 Excess net available for distribution from current
Year applied to 3 proceeding years 0
582 Excess net available for distribution from 3
proceeding years applied to current year 0
585 Distributions earned for Prior years but not paid
as of beginning of the year 303,000
586 Less: Distribution paid during current year 0
587 Balance at Year's end 303,000
590 Maximum possible distriubution if Funds available 316,228
(III) Statistics:
595 Accumulated Partnership distributions 0
600 Stated Equity 2,525,023
</TABLE>
Form F.C.-5
-19-
<PAGE>
[Letterhead]
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH THE
REGULATORY AND MANAGEMENT AGREEMENTS
To the Partners of
Audubon Group Limited
Partnership
We have audited, in accordance with generally accepted auditing
standards, the balance sheet of Audubon Group Limited Partnership (a
Massachusetts limited partnership) as of December 31, 1998, and the related
statements of operations, changes in partners' equity (deficiency) and cash
flows for the year then ended, and have issued our report thereon dated February
12, 1999.
In connection with the audit, nothing came to our attention that caused
us to believe that the Partnership failed to comply with the terms, covenants,
provisions or conditions of Section 6, 7, 8a, 8b, 8c, 9, 11a through 11j and 16
of the Regulatory Agreement, dated December 19, 1990, between the Massachusetts
Housing Finance Agency and Audubon Group Limited Partnership, and Sections 5i,
6, 16, 10d, 10e, 10f, and 21 of the Management Agreement, dated November 13,
1997, between Audubon Group Limited Partnership and Peabody Properties, Inc.
insofar as they relate to accounting matters. However, our audit was not
directed primarily toward obtaining knowledge of such noncompliance.
This report is intended solely for the information and use of the
general partner and management company of Audubon Group Limited Partnership, and
the Massachusetts Housing Finance Agency and is not intended to be and should
not be used by anyone other than these specified parties.
/s/ Ziner, Kennedy & Lehan
February 12, 1999
-20-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
December 31, 1998
MORTGAGOR'S AND GENERAL PARTNER'S CERTIFICATE
I hereby certify that I have examined the accompanying financial
statements and supplementary information of Audubon Group Limited Partnership
(Project No. 89-008-R) and, to the best of my knowledge and belief, the same is
complete and accurate.
I hereby certify that for fiscal year ended December 31, 1998, there
has been no change in the general partner of Audubon Group Limited Partnership.
General Partner Date
Partnership Federal
Identification Number 04-3070968
-21-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
FINANCIAL STATEMENTS
For the Year Ended December 31, 1997
<PAGE>
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet
(MHFA Forms F.C. -3A & -3B) 2
Statement of Changes in Partners' Equity (Deficiency)
(MHFA Form F.C.-3C) 4
Statement of Operations
(MHFA Form F.C. -2A) 5
Statement of Cash Flows
(MHFA Forms F.C. -4A, -4B, & -4C) 6
Notes to Financial Statements 9
<PAGE>
[Letterhead]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Audubon Group Limited Partnership
We have audited the accompanying balance sheet (MHFA Forms F.C.-3A &
- -3B) of Audubon Group Limited Partnership (a Massachusetts limited partnership)
(Project No. 89-008-R) as of December 31, 1997, and the related statements of
changes in partners' equity (deficiency) (MHFA Form F.C.-3C), operations (MHFA
Form F.C.-2A), and cash flows (MHFA Forms F.C.-4A, -4B & -4C) for the year then
ended. These financial statements are the responsibility of the general partner.
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 the
general partner, 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 Audubon Group
Limited Partnership as of December 31, 1997, and the results of its operations,
its changes in partners' equity 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 Partnership will continue as a going concern. As discussed in Note E to the
financial statements, the Partnership's significant operating losses raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Ziner & Company, P.C.
February 10, 1998
-1-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
BALANCE SHEET
December 31, 1997
ASSETS
<TABLE>
<S> <C> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents:
201. Partnership 0
-------------
202. Development 394
-------------
203. Subtotal 394
-------------
Cash Reserved or Escrowed:
205. Tenant Security Deposits 8,534
-------------
206. Insurance & R.E. Tax Escrow 7,924
-------------
209. Special & Other Escrow * 217,888
-------------
210. Subtotal 234,346
-------------
Accounts Receivable:
215. Tenant 5,192
-------------
216. HUD 4,187
-------------
218. Other 19
-------------
220. Subtotal 9,398
-------------
222. Residual Receipts Receivable 0
-------------
223. Short-Term Investments 0
-------------
225. Due from General Partners & Affiliates 0
-------------
227. Prepaid Expenses 11,355
-------------
228. All Other Current Assets 0
-------------
230. Total Current Assets 255,493
-------------
Property & Equipment
- --------------------
231. Land 0
-------------
232. Building & Equipment 5,683,729
-------------
234. Subtotal 5,683,729
-------------
235. Accumulated Depreciation 1,157,121
-------------
236. Net 4,526,608
-------------
Other Assets:
240. Capital Contributions Receivable 0
-------------
241. Reserve for Replacement Escrow * 19,137
-------------
242. Excess Rental Income Escrow Account 0
-------------
243. Long-Term Investments 0
-------------
243.A Market Value 0
-------------
244. Gross Organizational and Financing Costs 179,790
-------------
244.A Accumulated Amortization 41,951
-------------
245. Net 137,839
-------------
246. Deferred Syndication Costs 0
-------------
248. Deposits & Other 0
-------------
250. Total Assets 4,939,077
-------------
250.A *Unreimbursed R/R & Special Escrow
Withdrawals Included in Above 0
</TABLE>
FORM F.C. -3A
The accompanying notes are an integral part of the
financial statements.
-2-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
BALANCE SHEET
December 31, 1997
<TABLE>
<S> <C> <C> <C>
LIABILITIES & PARTNERS' EQUITY (DEFICIENCY)
Current Liabilities:
251. Current Portion of Mortgage Payable 38,496
252. Notes & Advances - due within 1 year 0
Accounts Payable:
255. Trade - due within 30 days 114,124
257. Other 0
260. Subtotal 114,124
262. Residual Receipts Payable 0
Accrued Expenses:
265. Interest 26,023
266. R.E. Taxes & Insurance 0
267. Other 21,593
270. Subtotal 47,616
272. Tenant Security Deposits 8,521
274. Prepaid Rent 352
278. All Other Current Liabilities 0
280. Total Current Liabilities 209,109
Long-Term Liabilities:
- -
281. Mortgage Payable, net of current portion 3,088,524
Notes & Advances:
282. Energy Notes 0
283. Arrearage & Flexible Subsidy Notes 0
284. Other Notes & Advances 1,582,039
285. Subtotal 1,582,039
286. Accrued Interest on Long-Term Liabilities 342,187
287. Due to General Partners & Affiliates 20,500
288. Development Fees Payable 0
289. All Other Long-Term Liabilities 0
290. Total Long-Term Liabilities 5,033,250
291. Total Liabilities 5,242,359
Partners' Equity (Deficiency):
292. Total Partners' Equity (303,282)
(Deficiency)
294. Total Liabilities & Partners' 4,939,077
Equity (Deficiency)
</TABLE>
FORM F.C.-3B
The accompanying notes are an integral part of the financial statements.
- -3-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEAR ENDED December 31, 1997
295. Balance, Beginning of Year $ 83,723
-----------------
295.A Add/(Substract) Prior Period Adjustments 0
-----------------
296 Add: Capital Contributions 0
-----------------
297. Add: Income or (Loss) (387,005)
-----------------
298. Deduct: Distributions - Regulatory 0
-----------------
299. Deduct Distriubtions - Refinancing & Other 0
-----------------
300. Balance, End of Year $ (303,282)
-----------------
FORM F.C. - 3c
The accompanying notes are an integral part of the
financial statements.
-4-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP STATEMENT OF OPERATIONS For the Year Ended
December 31, 1997
DEVELOPMENT
REVENUES:
100. Gross Potential Rental Income 366,352
103. Less Vacancies, Bad Debts & Section 236 Excess Renta (26,167)
105. Effective Rental Income 340,185
106. Interest Subsidy 0
107. Other Income - Total 20,055
108. Residual Receipts (Remitted) or Reimbursed 0
110. Total Income 360,240
OPERATING EXPENSES:
- -
111. Administration 41,447
112. Maint., Res. Svcs. & Security 46,938
113. Utilities 84,232
114. Taxes (R.E. & Other) 25,877
115. Insurance 11,338
116. Interest (Financing & Other) 384,728
120. Subtotal 594,560
125. Operating Income (234,320)
130. Depreciation & Amortization 152,685
135. Net Income or (Loss) for the Development before Non- (387,005)
140. Non-Operating Items [Gains or (Losses)] 0
145. Net Income or (Loss) for the Development (387,005)
PARTNERSHIP
ADD: REVENUES OF PARTNERSHIP NOT APPLICABLE TO THE DEVELOPMEN
146.A "Cliff" Type Investments 0
146.B Other Partnership Investments 0
146.C Other Revenues 0
146.D Subtotal 0
SUBTRACT: EXPENSES OF PARTNERSHIP NOT APPLICABLE TO THE DEVEL
147.A Paid in Lieu of Distributions 0
147.B Paid from Syndication Proceeds 0
147.C Accrued but not Paid 0
147.D Management Fees - Incentive 0
147.E Other Expenses
147.F Subtotal
148. Net Income or (Loss) for the Partnership (387,005)
FORM F.C.-2A
The accompanying notes are an integral part of the financial
statements.
-5-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED December 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C>
LINE CASH LINE CASH LINE NET
NUMBER PROVIDED NUMBER USED NUMBER CASH
OPERATING ACTIVITIES
NET INCOME OR (LOSS) 301 341 $ 387,005
------------- -------------
ADJUSTMENT TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION & AMORTIZATION
302 152,685
-------------
NON-OPERATING ITEMS [(GAINS OR LOSSES)]
303 0 343 0
------------- -------------
CHANGES IN OPERATING ASSETS & LIABILITIES:
DECR/INCR IN ACCOUNTS RECEIVABLE
304 9,161 344 0
------------- -------------
DECR/INCR IN RESIDUAL RECEIPTS RECEIVABLE
304A 0 344A 0
------------- -------------
DECR/INCR IN PREPAID EXPENSES
305 0 345 3,721
------------- -------------
DECR/INCR IN ALL OTHER CURRENT ASSETS
306 0 346 0
------------- -------------
DECR/INCR IN DEPOSITS & OTHER
307 0 347 0
------------- -------------
DECR/INCR IN TENANT SECURITY DEPOSIT ESCROW
308 1,058 348 0
------------- -------------
DECR/INCR IN INSURANCE R/E/ TAX ESCROWS
309 5,383 349 0
------------- -------------
DECR/INCR IN ACCOUNTS PAYABLE
310 0 350 15,328
------------- -------------
DECR/INCR IN RESIDUAL RECEIPTS PAYABLE
310A 4,829 350A 0
------------- -------------
DECR/INCR IN ACCRUED EXPENSES
311 0 351 851
------------- -------------
DECR/INCR IN TENANT SECURITY DEPOSIT LIAB.
312 352 352 0
------------- -------------
DECR/INCR IN PREPAID RENT
313 0 353 0
------------- -------------
DECR/INCR IN ALL OTHER CURRENT LIABILITIES
314 0 354 0
------------- -------------
DECR/INCR IN ACCRUED INTEREST ON L-T LIABS.
315 74,399 355 0
------------- -------------
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES
320 $ 247,867 360 $ 406,905 381 $ (159,038)
------------ ------------
</TABLE>
FORM F.C.-4A
The accompanying notes are an integral part of the
financial statements.
-6-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED December 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
LINE CASH LINE CASH LINE NET
NUMBER PROVIDED NUMBER USED NUMBER CASH
INVESTING ACTIVITIES
DISPOSAL/ACQUISITION OF LAND, BUILDING & EQUIP.
321 $ 0 361 $ 0
------------ -------------
DISPOSAL/ACQUISITION OF SHORT-TERM INVESTMENTS
322 0 361 0
------------- -------------
DECR/INCR IN DUE FROM G.P.'S & AFFILIATES
323 0 363 0
------------- -------------
DECR/INCR IN RESERVE FOR REPLACEMENT
324 10,800 364 8,944
------------- -------------
DECR/INCR IN EXCESS RENT ACCOUNT
325 0 365 0
------------- -------------
DECR/INCR IN SPECIAL & OTHER ESCROWS
326 0 366 0
------------- -------------
ADDITIONAL FINANCING & ORGANIZATION COSTS 367 0
---------
DISPOSAL/ACQUISITION OF LONG-TERM INVESTMENTS
328 0 368 0
------------- -------------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES
330 10,800 370 18,215 382 (7,415)
------------- ------------- ------------
FINANCING ACTIVITIES
INCR/DECR IN CURRENT PORTION OF MORG PAYABLE
331 1,381 371 0
------------- -------------
INCR/DECR IN L-T PORTION OF MORT PAYABLE
332 0 372 36,350
------------- -------------
INCR/DECR IN NOTES & ADVANCES DUE WITHIN 1 YR
333 0 373 0
------------- -------------
INCR/DECR IN L-T PORTION OF NOTES & AFFILIATES
334 200,630 374 0
------------- -------------
INCR/DECR IN DUE TO G.P.'S & AFFILIATES
335 0 375 0
------------- -------------
INCR/DECR IN ALL OTHER LONG-TERM LIABILITIES
336 0 376 0
------------- -------------
CAPITAL CONTRIBUTIONS
337 0
-------------
EQUITY DISTRIBUTIONS 378 0
---------------
INCR/DECR IN DEVELOPMENT FEES PAYABLE
339 0 379 0
------------- -------------
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES
340 $ 202,011 380 $ 36,350 383 $ 165,661
------------ ------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 384 (792)
-------------
CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR 385 1,186
---------
CASH & CASH EQUIVALENTS AT END OF YEAR 386 394
</TABLE>
FORM F.C.-4B
The accompanying notes are an integral part of the
financial statements.
-7-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
LINE CASH LINE CASH LINE NET
NUMBER PROVIDED NUMBER USED NUMBER CASH
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest - net of RDAL loan proceeds of $200,630 391 $ 109,713
---------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
& FINANCING ACTIVITIES:
Increase Decrease
Increase/Decrease in
Capital Contribs.
Receivable 394 $ 395 $
------------------
Increase/Decrease in
Deferred Syndication
Costs 396 $ 397 $
------------------
</TABLE>
Other (Describe)
The accompanying Statement of Cash Flows has been prepared in the format
prescribed by the Massachusetts Housing Finance Agency (MHFA). Generally
accepted accounting principles (GAAP) require that non-cash investing and
financing activities be disclosed separately. The following schedule reconciles
the prescribed format to a presentation in accordance with generally accepted
accounting principles.
<TABLE>
<S> <C> <C>
Net Cash Provided Net Cash Provided
(Used) in Operating (Used) in Financing
Activities Activities
As reported above $ (159,038) $ 165,661
Proceeds of RDAL paid directly to
MHFA on behalf of Partnership 200,630 (200,630)
----------- --------------
As revised to comply with GAAP $ 41,592 $ (34,969)
============ ==============
</TABLE>
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash or
cash equivalents.
Form F.C.-4C
The accompanying notes are an integral part of the
financial statements.
-8-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Audubon Group Limited Partnership (Partnership) was formed on November
22, 1988 to acquire, develop and operate 37 rental units in Boston,
Massachusetts.
Method of Accounting
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles.
Financial statements are prepared in a format which conforms to the regulatory
requirements of the Massachusetts Housing Finance Agency (MHFA).
Income Taxes
No provision has been made for federal or state income taxes since each
partner includes his pro-rata share of net income or loss and tax credits in his
tax return.
Low-Income Housing Tax Credit
The project is eligible for low-income housing tax credits over a 10
year period which are calculated at approximately 9% of certain costs incurred
in connection with the building rehabilitation. The project has received an
annual allocation of up to $504,000 from the Executive Office of Communities and
Development (EOCD).
Provisions of the enabling legislation regarding the credit restrict
occupancy to qualified low income tenants for a 15 year period. Provisions of
the legislation could result in a recapture of a portion of the credits by the
partners if these provisions are not met.
Depreciation and Amortization
Building and related improvements are being depreciated over 40 years
which approximates their useful life. Site improvements are depreciated on an
accelerated basis over 15 years. Equipment is being depreciated over 7 years.
Finance fees of $179,790 are being amortized over 32 years.
At December 31, 1997 property and equipment (at cost) consist of the
following:
Buildings $ 5,515,558
Site improvements 90,000
Equipment 78,171
--------------
$ 5,683,729
Estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
-9-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(Massachusetts limited partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE B - FINANCING
Permanent financing is being provided by MHFA in the form of a 30 year
mortgage which is secured by the property and bears interest at 9.65% per annum.
Installments of $29,043 for principal and interest are due monthly until January
2021. Monthly remittances of $848 are due to fund the reserve for replacements
and $2,991 for the property tax and insurance escrow.
Annual maturities of debt for this mortgage for the ensuing five years
are as follows:
1998 $38,496
1999 42,380
2000 46,657
2001 51,362
2002 56,544
As required by MHFA, an operating deficit escrow was funded at the
permanent loan closing. These funds will remain in the escrow account for
approximately four years. During this period, the project can use these funds
for operating deficits. Additionally, withdrawals can be made with MHFA approval
upon the project achieving certain financial goals as described in the
development fund agreement. The balance in the escrow account at December 31,
1997 was $217,888 and is reported on the balance sheet on line 209. It is
anticipated that the remaining funds will be needed by the operations of the
development.
The Partnership has entered into a contract with the MHFA through its
Rental Housing Development Action Loan Program (RDAL) whereby MHFA will advance
funds to the project. The funds (the RDAL loan) are expected to total
approximately $3,550,000, subject to, and conditioned upon, annual
appropriations of the Commonwealth of Massachusetts, payable in installments
through 2010 and bearing interest at 5% per annum. In the event of a sale or
refinancing of the project, the entire balance of the RDAL loan plus accrued
interest shall become due. Otherwise, principal and accrued interest thereon
will mature in 2010. During 1997, proceeds from this program totaled $200,630
and $60,649 of interest was accrued and added capital. At December 31, 1997,
advances totaled $1,307,039 with accrued interest of $233,406.
The Boston Redevelopment Authority has provided additional secondary
financing totaling $275,000, secured by the property, which bears simple
interest at the rate of 5% per annum. Interest is payable from cash flow as
defined in the agreement. All unpaid principal and interest is due on or before
2010. Interest of $13,750 accrued during 1997. At December 31, 1997, accrued
interest to date totaled $108,781.
Under the terms of the regulatory agreement with MHFA, distributions
are limited to $50,500 per annum subject to the availability of surplus cash at
year end, as defined in the regulatory agreement.
NOTE C - CAPITAL CONTRIBUTIONS
The general partner has contributed $10 in exchange for a 1% interest
in the profits, losses and distributions. The remaining 99% is allocated to the
special limited and limited partners who contributed $2,640,439. The special
limited partner is entitled to receive a one time distribution of $10,000 which
will be funded by sale or refinancing proceeds.
- -10-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE D - RENTAL REVENUES
Tenant rents are being subsidized under the Massachusetts Rental
Voucher program which also restricts assistance to those tenants who qualify,
including maximum income limitations.
NOTE E - GOING CONCERN
The project has suffered significant operating losses in recent years.
The general partner has begun negotiations with the limited partners
for additional capital contributions. Additionally, negotiations have commenced
with the MHFA for a modification to the existing financing agreement. Management
continues to streamline expenses while focusing on maintaining occupancy at high
levels. These financial statements do not include any adjustments that may
result from the outcome of this uncertainty.
-11-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
FINANCIAL STATEMENTS
AND
SUPPLEMENTARY INFORMATION
PROJECT NO. 89-008-R
For the Year Ended December 31, 1996
<PAGE>
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS
Balance Sheet
(MHFA Forms F.C. -3A & -3B) 2
Statement of Changes in Partners' Equity (Deficiency)
(MHFA Form F.C.-3C) 4
Statement of Operations
(MHFA Form F.C. -2A) 5
Statement of Cash Flows
(MHFA Forms F.C. -4A, -4B, & -4C) 6
Notes to Financial Statements 9
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION 12
MHFA SUPPLEMENTARY INFORMATION 13
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH THE
REGULATORY AND MANAGEMENT AGREEMENTS 20
MORTGAGOR'S AND GENERAL PARTNER'S CERTIFICATE 21
<PAGE>
AUDUBON GROUP LIMITED PARTNERHSIP
(a Massachusetts limited partnership)
FINANCIAL STATEMENTS
For the Year Ended December 31, 1996
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
Audubon Group Limited Partnership
We have audited the accompanying balance sheet (MHFA Forms F.C.-3A &
- -3B) of Audubon Group Limited Partnership (a Massachusetts limited partnership)
(Project No. 89-008-R) as of December 31, 1996, and the related statements of
changes in partners' equity (deficiency) (MHFA Form F.C.-3C), operations (MHFA
Form F.C.-2A), and cash flows (MHFA Forms F.C.-4A, -4B & -4C) for the year then
ended. These financial statements are the responsibility of the general partner.
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 the
general partner, 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 Audubon Group
Limited Partnership as of December 31, 1996, and the results of its operations,
its changes in partners' equity 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 Partnership will continue as a going concern. As discussed in Note F to the
financial statements, the Partnership's significant operating raise substantial
doubt about its ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/Ziner & Company
February 22, 1997
-1-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
BALANCE SHEET
December 31, 1996
ASSETS
<TABLE>
<S> <C> <C> <C>
Current Assets:
Cash and Cash Equivalents:
201. Partnership 0
--------------
202. Development 1,186
--------------
203. Subtotal 1,186
---------------
Cash Reserved or Escrowed:
205. Tenant Security Deposits 9,592
--------------
206. Insurance & R.E. Tax Escrow 13,307
--------------
209. Special & Other Escrow * 208,617
--------------
210. Subtotal 231,516
---------------
Accounts Receivable:
215. Tenant 18,560
--------------
216. HUD 0
--------------
218. Other 0
--------------
220. Subtotal 18,560
---------------
222. Residual Receipts Receivable 0
---------------
223. Short-Term Investments 0
---------------
225. Due from General Partners & Affiliates 0
---------------
227. Prepaid Expenses 7,634
---------------
228. All Other Current Assets 0
---------------
230. Total Current Assets 258,896
---------------
Property & Equipment
- --------------------
231. Land 0
--------------
232. Building & Equipment 5,683,729
--------------
234. Subtotal 5,683,729
---------------
235. Accumulated Depreciation 1,010,429
---------------
236. Net 4,673,300
---------------
Other Assets:
240. Capital Contributions Receivable 0
---------------
241. Reserve for Replacement Escrow * 20,994
---------------
242. Excess Rental Income Escrow Account 0
---------------
243. Long-Term Investments 0
---------------
243.A Market Value 0
--------------
244. Net Organizational and Financing Costs 143,832
---------------
245 Accumulated Amortization 35,958
--------------
246. Deferred Syndication Costs 0
---------------
248. Deposits & Other 0
---------------
250. Total Assets 5,097,022
---------------
250.A *Unreimbursed R/R & Special Escrow
Withdrawals Included in Above 0
</TABLE>
FORM F.C. -3A
The accompanying notes are an integral part of the
financial statements.
-2-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
BALANCE SHEET
December 31, 1996
LIABILITIES & PARTNERS' EQUITY (DEFICIENCY)
<TABLE>
<S> <C> <C> <C>
Current Liabilities:
251. Current Portion of Mortgage Payable 37,115
252. Notes & Advances - due within 1 year 0
Accounts Payable:
255. Trade - due within 30 days 129,452
257. Other 0
260. Subtotal 129,452
262. Residual Receipts Payable 0
Accrued Expenses:
265. Interest 29,257
266. R.E. Taxes & Insurance 0
267. Other 13,532
270. Subtotal 42,789
272. Tenant Security Deposits 9,372
274. Prepaid Rent 0
278. All Other Current Liabilities 0
280. Total Current Liabilities 218,728
Long-Term Liabilities:
- -
281. Mortgage Payable, net of current portion 3,124,874
Notes & Advances:
282. Energy Notes 0
283. Arrearage & Flexible Subsidy Notes 0
284. Other Notes & Advances 1,381,409
285. Subtotal 1,381,409
286. Accrued Interest on Long-Term Liabilities 267,788
287. Due to General Partners & Affiliates 20,500
288. Development Fees Payable 0
289. All Other Long-Term Liabilities 0
290. Total Long-Term Liabilities 4,794,571
291. Total Liabilities 5,013,299
Partners' Equity (Deficiency):
- -
292. Total Partners' Equity 83,723
(Deficiency)
294. Total Liabilities & Partners' 5,097,022
Equity (De
</TABLE>
FORM F.C.-3B
The accompanying notes are an integral part of the financial statements.
- -3-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY)
FOR THE YEAR ENDED December 31, 1996
295. Balance, Beginning of Year $ 486,730
----------------
295.A Add/(Substract) Prior Period Adjustments 0
----------------
296 Add: Capital Contributions 0
----------------
297. Add: Income or (Loss) (403,007)
----------------
298. Deduct: Distributions - Regulatory 0
----------------
299. Deduct Distriubtions - Refinancing & Other 0
----------------
300. Balance, End of Year $ 83,723
----------------
FORM F.C. - 3c
The accompanying notes are an integral part of the
financial statements.
-4-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP STATEMENT OF OPERATIONS For the Year Ended
December 31, 1996
<TABLE>
<S> <C> <C> <C>
DEVELOPMENT
REVENUES:
100. Gross Potential Rental Income 374,003
103. Less Vacancies, Bad Debts & Section 236 Excess Renta (10,747)
105. Effective Rental Income 363,256
106. Interest Subsidy 0
107. Other Income - Total 18,317
108. Residual Receipts (Remitted) or Reimbursed 0
110. Total Income 381,573
OPERATING EXPENSES:
- -
111. Administration 42,793
112. Maint., Res. Svcs. & Security 81,874
113. Utilities 94,516
114. Taxes (R.E. & Other) 26,060
115. Insurance 17,889
116. Interest (Financing & Other) 365,275
120. Subtotal 628,407
125. Operating Income (264,834)
130. Depreciation & Amortization 156,173
135. Net Income or (Loss) for the Development before Non- (403,007)
140. Non-Operating Items [Gains or (Losses)] 0
145. Net Income or (Loss) for the Development (403,007)
PARTNERSHIP
ADD: REVENUES OF PARTNERSHIP NOT APPLICABLE TO THE DEVELOPMEN
146.A "Cliff" Type Investments 0
146.B Other Partnership Investments 0
146.C Other Revenues 0
146.D Subtotal 0
SUBTRACT: EXPENSES OF PARTNERSHIP NOT APPLICABLE TO THE DEVEL
147.A Paid in Lieu of Distributions 0
147.B Paid from Syndication Proceeds 0
147.C Accrued but not Paid 0
147.D Management Fees - Incentive 0
147.E Other Expenses 0
147.F Subtotal 0
148. Net Income or (Loss) for the Partnership (403,007)
</TABLE>
FORM F.C.-2A
The accompanying notes are an integral part of the financial
statements.
-5-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED December 31, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
LINE CASH LINE CASH LINE NET
NUMBER PROVIDED NUMBER USED NUMBER CASH
OPERATING ACTIVITIES
NET INCOME OR (LOSS) 301 341 $ 403,007
------------- -------------
ADJUSTMENT TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION & AMORTIZATION
302 156,173
-------------
NON-OPERATING ITEMS [(GAINS OR LOSSES)]
303 0 343 0
------------- -------------
CHANGES IN OPERATING ASSETS & LIABILITIES:
DECR/INCR IN ACCOUNTS RECEIVABLE
304 0 344 1,339
------------- -------------
DECR/INCR IN RESIDUAL RECEIPTS RECEIVABLE
304A 0 344A 0
------------- -------------
DECR/INCR IN PREPAID EXPENSES
305 5,840 345 0
------------- -------------
DECR/INCR IN ALL OTHER CURRENT ASSETS
306 0 346 0
------------- -------------
DECR/INCR IN DEPOSITS & OTHER
307 0 347 0
------------- -------------
DECR/INCR IN TENANT SECURITY DEPOSIT ESCROW
308 0 348 1,072
------------- -------------
DECR/INCR IN INSURANCE R/E/ TAX ESCROWS
309 1,468 349 0
------------- -------------
DECR/INCR IN ACCOUNTS PAYABLE
310 58,772 350 0
------------- -------------
DECR/INCR IN RESIDUAL RECEIPTS PAYABLE
310A 0 350A 0
------------- -------------
DECR/INCR IN ACCRUED EXPENSES
311 351 27,897
------------- -------------
DECR/INCR IN TENANT SECURITY DEPOSIT LIAB.
312 1,006 352 0
------------- -------------
DECR/INCR IN PREPAID RENT
313 0 353 0
------------- -------------
DECR/INCR IN ALL OTHER CURRENT LIABILITIES
314 0 354 0
------------- -------------
DECR/INCR IN ACCRUED INTEREST ON L-T LIABS.
315 64,752 355 0
------------- -------------
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES
320 $ 288,011 360 $ 433,315 381 $(145,304)
------------ ------------
</TABLE>
FORM F.C.-4A
The accompanying notes are an integral part of the
financial statements.
-6-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED December 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
LINE CASH LINE CASH LINE NET
NUMBER PROVIDED NUMBER USED NUMBER CASH
INVESTING ACTIVITIES
DISPOSAL/ACQUISITION OF LAND, BUILDING & EQUIP.
321 $ 0 361 $ 0
------------ -------------
DISPOSAL/ACQUISITION OF SHORT-TERM INVESTMENTS
322 0 361 0
------------- -------------
DECR/INCR IN DUE FROM G.P.'S & AFFILIATES
323 0 363 0
------------- -------------
DECR/INCR IN RESERVE FOR REPLACEMENT
324 7,000 364 9,252
------------- -------------
DECR/INCR IN EXCESS RENT ACCOUNT
325 0 365 0
------------- -------------
DECR/INCR IN SPECIAL & OTHER ESCROWS
326 0 366 9,540
------------- -------------
ADDITIONAL FINANCING & ORGANIZATION COSTS 367 0
------------
DISPOSAL/ACQUISITION OF LONG-TERM INVESTMENTS
328 0 368 0
------------- -------------
NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES
330 7,000 370 18,792 382 (11,792)
------------- ------------- -------------
FINANCING ACTIVITIES
INCR/DECR IN CURRENT PORTION OF MORG PAYABLE
331 3,272 371 0
------------- -------------
INCR/DECR IN L-T PORTION OF MORT PAYABLE
332 0 372 27,665
------------- -------------
INCR/DECR IN NOTES & ADVANCES DUE WITHIN 1 YR
333 0 373 0
------------- -------------
INCR/DECR IN L-T PORTION OF NOTES & AFFILIATES
334 172,720 374 0
------------- -------------
INCR/DECR IN DUE TO G.P.'S & AFFILIATES
335 9,000 375 0
------------- -------------
INCR/DECR IN ALL OTHER LONG-TERM LIABILITIES
336 0 376 0
------------- -------------
CAPITAL CONTRIBUTIONS
337 0
-------------
EQUITY DISTRIBUTIONS 378 0
---------------
INCR/DECR IN DEVELOPMENT FEES PAYABLE
339 0 379 0
------------- -------------
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES
340 $ 184,992 380 $ 27,665 383 $157,327
------------ ------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS 384 231
-------------
CASH & CASH EQUIVALENTS AT BEGINNING OF YEAR 385 955
-------------
CASH & CASH EQUIVALENTS AT END OF YEAR 386 1,186
</TABLE>
FORM F.C.-4B
The accompanying notes are an integral part of the
financial statements.
-7-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1996
<TABLE>
LINE CASH LINE CASH LINE NET
NUMBER PROVIDED NUMBER USED NUMBER CASH
<S> <C> <C> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest - net of RDAL loan proceeds of $170,720 391
$ 151,608
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
& FINANCING ACTIVITIES:
Increase Decrease
Increase/Decrease in
Capital Contribs.
Receivable 394 $ 395 $
------------------
Increase/Decrease in
Deferred Syndication
Costs 396 $ 397 $
------------------
</TABLE>
Other (Describe)
The accompanying Statement of Cash Flows has been prepared in the format
prescribed by the Massachusetts Housing Finance Agency (MHFA). Generally
accepted accounting principles (GAAP) require that non-cash investing and
financing activities be disclosed separately. The following schedule reconciles
the prescribed format to a presentation in accordance with generally accepted
accounting principles.
<TABLE>
Net Cash Provided Net Cash Provided
(Used) in Operating (Used) in Financing
Activities Activities
<S> <C> <C>
As reported above $ (145,304) $ 157,327
Proceeds of RDAL paid directly to
MHFA on behalf of Partnership 172,720 (172,720)
----------- --------------
As revised to comply with GAAP $ 27,416 $ (15,393)
============= ==============
</TABLE>
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the Statement of Cash Flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash or
cash equivalents.
Form F.C.-4C
The accompanying notes are an integral part of the
financial statements.
-8-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
Audubon Group Limited Partnership (Partnership) was formed on November
22, 1988 to acquire, develop and operate 37 rental units in Boston,
Massachusetts.
Method of Accounting
The accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting principles.
Financial statements are prepared in a format which conforms to the regulatory
requirements of the Massachusetts Housing Finance Agency (MHFA).
Income Taxes
No provision has been made for federal or state income taxes since each
partner includes his pro-rata share of net income or loss and tax credits in his
tax return.
Low-Income Housing Tax Credit
The project is eligible for low-income housing tax credits over a 10
year period which are calculated at approximately 9% of certain costs incurred
in connection with the building rehabilitation. The project has received an
annual allocation of up to $504,000 from the Executive Office of Communities and
Development (EOCD).
Provisions of the enabling legislation regarding the credit restrict
occupancy to qualified low income tenants for a 15 year period. Provisions of
the legislation could result in a recapture of a portion of the credits by the
partners if these provisions are not met.
Depreciation and Amortization
Building and related improvements are being depreciated over 40 years
which approximates their useful life. Site improvements are depreciated on an
accelerated basis over 15 years. Equipment is being depreciated over 7 years.
Finance fees of $179,790 are being amortized over 32 years.
At December 31, 1996 property and equipment (at cost) consist of the
following:
Buildings $ 5,515,558
Site improvements 90,000
Equipment 78,171
--------------
$ 5,683,729
Estimates
The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NOTE B - FINANCING
Permanent financing is being provided by MHFA in the form of a 30 year
mortgage which is secured by the property and bears interest at 9.65% per annum.
Installments of $29,043 for principal and interest are due monthly until 2020.
Monthly remittances of $848 are due to fund the reserve for replacements.
-9-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE B - FINANCING (continued)
Annual maturities of debt for this mortgage for the ensuing five years
are as follows:
1997 $37,115
1998 40,696
1999 44,623
2000 48,929
2001 53,651
As required by MHFA, an operating deficit escrow was funded at the
permanent loan closing. These funds will remain in the escrow account for
approximately four years. During this period, the project can use these funds
for operating deficits. Additionally, withdrawals can be made with MHFA approval
upon the project achieving certain financial goals as described in the
development fund agreement. The balance in the escrow account at December 31,
1996 was $208,617 and is reported on the balance sheet on line 209. It is
anticipated that the remaining funds will be needed by the operations of the
development.
The Partnership has entered into a contract with the MHFA through its
Rental Housing Development Action Loan Program (RDAL) whereby MHFA will advance
funds to the project. The funds (the RDAL loan) are expected to total
approximately $3,550,000, subject to, and conditioned upon, annual
appropriations of the Commonwealth of Massachusetts, payable in installments
through 2010 and bearing interest at 5% per annum. In the event of a sale or
refinancing of the project, the entire balance of the RDAL loan plus accrued
interest shall become due. Otherwise, principal and accrued interest thereon
will mature in 2010. During 1996, proceeds from this program totaled $172,720
and $51,002 of interest was accrued. At December 31, 1996, advances totaled
$1,106,409 with accrued interest of $172,757.
The Boston Redevelopment Authority has provided additional secondary
financing totaling $275,000, secured by the property, which bears simple
interest at the rate of 5% per annum. Interest is payable from cash flow as
defined in the agreement. All unpaid principal and interest is due on or before
2010. Interest of $13,750 accrued during 1996 At December 31, 1996, accrued
interest to date totaled $95,031.
Under the terms of the regulatory agreement with MHFA, distributions
are limited to $50,500 per annum subject to the availability of surplus cash at
year end, as defined in the regulatory agreement.
NOTE C - CAPITAL CONTRIBUTIONS
The general partner has contributed $10 in exchange for a 1% interest
in the profits, losses and distributions. The remaining 99% is allocated to the
special limited and limited partners who contributed $2,640,439. The special
limited partner is entitled to receive a one time distribution of $10,000 which
will be funded by sale or refinancing proceeds.
NOTE D - RENTAL REVENUES
Tenant rents are being subsidized under the Massachusetts Rental
Voucher program which also restricts assistance to those tenants who qualify,
including maximum income limitations.
-10-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE E - RELATED PARTY TRANSACTIONS
During 1996, the general partner advanced $9,000 to the Partnership to
pay operating deficits. Aggregate advances of $20,000 are non-interest bearing.
NOTE F- GOING CONCERN
The project has suffered significant operating losses in recent years.
The general partner has begun negotiations with the limited and special
limited partners for additional capital contributions. Additionally,
negotiations have commenced with the MHFA for a modification to the existing
financing agreement. Management continues to streamline expenses while focusing
on maintaining occupancy at high levels and has replaced the management agent in
February, 1997. These financial statements do not include any adjustments that
may result from the outcome of this uncertainty.
-11-
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
To the Partners of
Audubon Group Limited Partnership
Our report on our audit of the basic financial statements of Audubon
Group Limited Partnership for 1996 appears on page 1. That audit was made for
the purpose of forming an opinion on the basic financial statements taken as a
whole. The accompanying information, which has been presented in accordance with
regulations of the Massachusetts Housing Finance Agency, 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.
/s/Ziner & Company
February 22, 1997
-12-
<PAGE>
MHFA SUPPLEMENTARY INFORMATION
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF FUNDS FLOW AVAILABLE FOR EQUITY
For the Year Ended December 31, 1996
<TABLE>
<S> <C> <C> <C> <C>
FUNDS RECEIVED RESIDENTIAL COMMERCIAL TOTAL
1. Base Rental - Occupancy 374,003 0
2. Gross Excess Rental Income 0
3. Parking Rentals 0 0
5. Gross Potential Rental Income 374,003 0 374,003
6. Less: Vacancies - Occupancy 10,747 0
7. Less: Vacancies - Parking 0 0
8. Less: Bad Debts 0 0
9. Less: Excess S13 Rental Income Escrowed 0
10. Less: Excess S236 Rental Income Remitted 0
11. Total Deductions 10,747 0 10,747
13. Effective Rental Income 363,256 0 363,256
14.A Interest Subsidy 0 0
14.B SHARP Subsidy 0 0
14.C RDAL/Other Subsidy 172,720 172,720
15.A Other Income - Interest-Ordinary 11,778 0
15.B - Interest-Annuity 0
15.C - Laundry/Vending 5,950 0
15.D - Commercial Lease Guarantee 0
15.E - Other (Specify) 0 0
16. Total Other Income 17,728 0 17,728
17. Total Effective Income 553,704 0 553,704
18.A Replacement Reserve Reimbursements 0 0 0
18.B Special Escrow Account Reimbursements 0 0 0
19. Developer's Contributions 0 0
20. Total Funds Received 553,704 0 553,704
FUNDS DISBURSED
ADMINISTRATIVE EXPENSES
21. Management Fee - Contractual 14,477 0
22.A Payroll 10,824 0
22.B Payroll Taxes & Fringe Benefits 0 0
23. Legal 2,875 0
24. Audit 8,500 0
25. Marketing 0 0
26. Telephone 0 0
27. Office Supplies & Services 205 0
28.A Accounting & Data Proc. Svs. 2,664 0
28.B Central Office Fee 0 0
29. Miscellaneous 3,248 0
30. Total Administrative Expenses 42,793 0 42,793
</TABLE>
FORM F.C.-1
-13-
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF FUNDS FLOW AVAILABLE FOR EQUITY
For the Year Ended December 31, 1996
<TABLE>
<S> <C> <C> <C> <C> <C>
MAINTENANCE EXPENSES RESIDENTIAL COMMERCIAL TOTAL
31.A Payroll 30,479 0
31.B Payroll Taxes & Fringe Benefits 1,787 0
32. Janitorial Material & Services 4,937 0
33. Landscaping 9,354 0
34. Decorating (Interior Only) 11,475 0
35. Repairs (Interior & Exterior) 12,927 0
36. Elevator Maintenance 0 0
37. Garbage & Trash Removal 6,066 0
38. Snow Removal 0 0
39. Exterminating 683 0
40. Recreation 0 0
41. Miscellaneous 1,159 0
43. Total Maintenance Expenses 78,867 0 78,867
44. Resident Services 0 0
45. Security 2,418 2,418
UTILITIES
46. Electricity 30,364 0
47. Gas 25,525 0
48. Oil 0 0
49. Water & Sewer 38,627 0
50. Total Utilities 94,516 0 94,516
53. Replacement Reserve Deposits 8,480 0 8,480
54. Special Escrow Deposits 0 0 0
TAXES, INSURANCE & INTEREST
55. Taxes - Real Estate 26,060 0
56. Taxes - Other 0 0
57. Insurance 17,889 0
58. Interest 204 0
59. Total Taxes, Insurance & Int. 44,153 0 44,153
61. Totl Disb Prior to Cap Exp & D/S 271,227 0 271,227
62. Totl Funds Flow Prior to CE & DS 282,477 0 282,477
63. Cap. Exp. (Exc. of Mortg. Increases, Flex Sub Funds,
Bank Loans, and Capitalized Leases, ect.) 0
65. Funds Flow Prior to D/S 282,477
</TABLE>
FORM F.C.-1
-14-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF FUNDS FLOW AVAILABLE FOR EQUITY
For the Year Ended December 31, 1996
GROSS DEBT SERVICE
66. Gross Debt Service - Mortgage (MHFA) $ 324,712
67. Gross Debt Service - Arrearage & Flexible Subsidy No 0
68. Gross Debt Service - Energy Loans 0
69. Gross Debt Service - Secondary Financing 64,752
70. Gross Debt Service - Other Notes Payable 0
71. Total Gross Debt Service 389,464
73. Funds Flow Prior to Non-Operating Items (106,987)
75. Non-Operating Items [Gain or (Loss)] 0
CALCULATIONS OF NET AVAILABLE FOR EQUITY
76. Net Available for Equity - Current Operating Cycle B (106,987)
77. Add: Interest Expense Recorded but not Paid on D/S
(i.e. SHARP and Arrearage Notes, Flex. Sub. Notes 64,752
78. Subtract: Interest Income Earned on R/R and Special (10,312)
80. Net Available for Equity - Distribution Basis (52,547)
81.A Add/Subtract: Excess (Deficient) Contributions to R/R 0
81.B Add/Subtract: Excess (Deficient) Contributions to Spec 0
82. Subtract: Tax Abatements Applicable to Prior Report 0
83. Non-Operating Intems [Loss or (Gain)] 0
84.A Management Fee - Incentive 0
84.B Other Timing Differences 0
85. Net Available Equity - Normalized Basis (52,547)
FORM F.C.-1
-15-
AUDUBON GROUP LIMITED PARTNERSHIP RECONCILIATION TO FORM F.C.-1 For the Year
Ended December 31, 1996
150. Net Income or (Loss) for the Development (403,007)
155. Add: Depreciation & Amortization 156,173
156. : Residual Receipts Remitted 0
160. : SHARP Subsidy 0
161. : RDAL/Other Subsidy 172,720
162. : Developer's Contribution 0
164. : Replacement Reserve Reimbursements 0
165. : Special Escrow Account Reimbursements 0
166. Subtotal 328,893
168. Less: Excess Section 13A Rental Income Escrowed 0
169. : Residual Receipts Reimbursed 0
170. : Debt Service (Principal) 24,393
175. : Replacement Reserve Deposits 8,480
176. : Special Escrow Deposits 0
180. : Capital Expenditures
(Exclusive of Flexible Subsidies and Mo 0
186. Subtotal 32,873
190. Other Reporting Differences 0
195. Net Available for Equity - Current Operating Cycle B
(See Line #76 of Form F.C.-1) (106,987)
FORM F.C.-2b
-16-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
SUPPLEMENTAL SCHEDULE OF LONG-TERM LIABILITIES
For the Year Ended December 31, 1996
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Number Balance Number Interest Number Balance
Energy Loans 401$ 0 426 $ 0 451 $ 0
Arrearage Notes 402 0 427 0 452 0
Flexible Subsidy
Notes 403 0 428 0 453 0
SHARP Notes 404 0 429 0 454 0
Secondary Financing
Notes 404 275,000 430 95,031 455 370,031
Residual Proceeds
Notes 406 0 431 0 456 0
Bank Loans (Notes) 407 0 432 0 457 0
Capitalized Lease
Obligation Notes 408 0 433 0 458 0
HODAG 409 0 434 0 459 0
UDAG 410 0 435 0 460 0
RDAL 411 1,106,409 436 172,757 461 1,279,166
Other 412 0 437 0 462 0
Subtotal 415 1,381,409 440 267,788 465 1,649,197
Due to GP & Affiliates 420 20,500 445 0 470 20,500
Development Fees
Payable 421 0 446 0 471 0
All Other Long-Term
Liabilities 422 0 447 0 472 0
Total 425 1,401,909 450 267,788 47 1,669,697
</TABLE>
FORM F.C.-3D
-17-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF FUNDS AVAILABLE FOR DISTRIBUTION
For the Year Ended December 31, 1996
(1) Calcualtion of Funds Available for Distribution
Sources of Available Funds:
500 Cash and Cash Equivalents $ 1,186
505 Short-term Investments 0
507 Accounts Receivable & Residual Receipts Receivable 18,560
508 Prepaid Expenses 7,634
509 Unreimbursed R/R and Special Escrow Withdrawals 0
510 Total Sources 27,380
Uses of Available Funds:
515 Accrued interest expenses 29,257
520 Delinquent Mortgage Payments & Interest 0
525 Delinquent Deposits to R/R 0
528 Delinquent Deposits to Insurance R/E. Tax Escrows 0
530 Delinquent Deposits Special & Other Escrows 0
535 Accounts Payable & Residual Receipts Payable 129,452
540 Accrued Expenses (not escrowed) 13,532
546 Notes & Advances - Operating Exepenses
(due within 30 days) 0
550 Unfunded Security Deposits 0
555 Prepaid Rent 0
561 Due to General Partners & Affiliates
(exclusive of developmemt fee) 0
565 Total Uses 172,241
570 Funds Available for Distribution (144,861)
572 Maximum Allowable Distribution if Funds Available 0
FORM F.C. -5
-18-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
STATEMENT OF FUNDS AVAILABLE FOR DISTRIBUTION
For the Year Ended December 31, 1996
(iii) Calcualtion of Funds Available for Distribution
575 Maximum permissible distribution for current year 50,500
581 Excess net available for distribution from current
Year applied to 3 proceeding years 0
583 Excess net available for distribution from 3
proceeding years applied to current year 0
586 Distributions earned for Prior years but not paid
as of beginning of the year 252,500
586 Less: Distribution paid during current year 0
587 Balance at Year's end 252,500
591 Maximum possible distriubution if Funds available 303,000
(IV) Statistics:
595 Accumulated Partnership distributions 0
600 Stated Equity 2,525,023
Form F.C.-5
-19-
<PAGE>
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH THE
REGULATORY AND MANAGEMENT AGREEMENTS
To the Partners of
Audubon Group Limited
Partnership
We have audited, in accordance with generally accepted auditing
standards, the balance sheet of Audubon Group Limited Partnership (a
Massachusetts limited partnership) as of December 31, 1996, and the related
statements of operations, changes in partners' equity (deficiency) and cash
flows for the year then ended, and have issued our report thereon dated February
22, 1997.
In connection with the audit, nothing came to our attention that caused
us to believe that the Partnership failed to comply with the terms, covenants,
provisions or conditions of Section 6, 7, 8a, 8b, 8c, 9, 11a through 11j and 16
of the Regulatory Agreement, dated December 19, 1990, between the Massachusetts
Housing Finance Agency and Audubon Group Limited Partnership, and Sections 5i,
6, 16, 10d, 10e, 10f, and 21 of the Management Agreement, dated May 30, 1990,
between Audubon Group Limited Partnership and Peabody Properties, Inc. insofar
as they relate to accounting matters. However, our audit was not directed
primarily toward obtaining knowledge of such noncompliance.
This report is intended solely for the information and use of the
general partner and management company of Audubon Group Limited Partnership, and
the Massachusetts Housing Finance Agency and is not intended to be and should
not be used by anyone other than these specified parties.
/s/Ziner & Company
February 22, 1997
-20-
<PAGE>
AUDUBON GROUP LIMITED PARTNERSHIP
(a Massachusetts limited partnership)
December 31, 1996
MORTGAGOR'S AND GENERAL PARTNER'S CERTIFICATE
I hereby certify that I have examined the accompanying financial
statements and supplementary information of Audubon Group Limited Partnership
(Project No. 89-008-R) and, to the best of my knowledge and belief, the same is
complete and accurate.
I hereby certify that for fiscal year ended December 31, 1996, there
has been no change in the general partner of Audubon Group Limited Partnership.
General Partner Date
Partnership Federal
Identification Number 04-3070968
-21-
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
HUD PROJECT NO. IL06-E000-093
FINANCIAL STATEMENTS
DECEMBER 31, 1996
<PAGE>
<TABLE>
<CAPTION>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTSLAKESIDE SQUARE LIMITED PARTNERSHIP
Index to Financial Statements
Page(s)
<S> <C>
Independent Auditors' Report 1
Auditor Information 1
Balance Sheet 2
Statement of Profit and Loss 3 - 4
Statement of Changes in Partners' Capital 5
Statement of Cash Flows 6 - 7
Notes to Financial Statements 8 - 12
Supplementary Data 13 - 15
Independent Auditors' Report on Internal Control Structure 16 - 17
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs 18
Auditors' Schedule of Findings 19
Auditee's Corrective Action Plan 20
Auditor's Comments on Audit Resolution Matters 21
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Affirmative Fair Housing 22
Certification of Partners and Managing Agent 23
</TABLE>
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY Of
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report
To the Partners of
Lakeside Square Limited Partnership
We have audited the accompanying balance sheet of Lakeside Square Limited
Partnership, a limited partnership, (HUD Project No. IL06-E000-093) as of
December 31, 1996, and the related statements of profit and loss, changes in
partners' capital, and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's managing general partner.
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 the managing general partner, 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 Lakeside Square Limited
Partnership as of December 31, 1996, and the results of its operations, changes
in partners' capital and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued reports
dated January 22 and January 24, 1997 on our consideration of Lakeside Square
Limited Partnership's (the "Partnership") internal control structure and the
Partnership's compliance with laws and regulations, respectively.
The supplementary data included in the report (shown on pages 13 to 20) are
presented for the purposes of additional analysis and are not a required part of
the basic financial statements of Lakeside Square Limited Partnership. Such
information has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly presented, in
all material respects, in relation to the financial statements taken as a whole.
/s/Vacek, Lange & Westerfield, P.C.
Houston, Texas
January 22, 1997
- -------------------------------------------------------------------------------
Under the direct supervision of Randy G. Lange, C.P.A., Texas License No. 24214,
the audit of Lakeside Square Limited Partnership's December 31, 1996 financial
statements was performed by Vacek, Lange & Westerfield, P.C., FIN: 76-0192275,
Texas License C 1882-001, 11 Greenway Plaza, Suite 1524, Houston, Texas 77046,
713-623-2929.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Balance Sheet
December 31, 1996
<TABLE>
<CAPTION>
Asset
Current assets:
<S> <C> <C> <C>
1120 Cash $ 687,769
1130 Tenant accounts receivable 3,157
1140 Release from reserve for replacement receivable 19,688
1190 Rent subsidy receivable from HUD 23,158
1240 Prepaid property and liability insurance 57,390
1290 Miscellaneous prepaid expenses 875
1310 Mortgage escrow deposits 157,821
Total current assets 949,858
1191 Tenants' security deposits held in trust 78,779
1320 Reserve for replacement (Note 2) 287,925
Property and equipment (Notes 1 and 3):
1410 Land $ 400,000
1420 Buildings and improvements 10,326,151
1440 Building equipment - portable 121,053
1450 Furniture 15,874
1480 Transportation equipment 15,497
10,878,575
Less: accumulated depreciation -2,630,431
Net property and equipment 8,248,144
1800 Organization costs 680
1900 Debt issue costs, net of amortization of $84,886 75,759
Total assets $9,641,145
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
2320 Current portion of mortgage payable $ 154,904
2110 Accounts payable 8,720
2120 Accrued wages and payroll taxes 7,753
2150 Accrued property taxes payable 297,738
2190 Miscellaneous accrued expenses and current liabilities 68,540
2210 Deferred rental income 3,402
Total current liabilities 541,057
2191 Tenant security deposits 53,682
2320 Long-term portion of mortgage payable 6,178,202
Total liabilities 6,772,941
3130 Partners' capital 2,868,204
Total liabilities and partners' capital $ 9,641,145
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<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.1/31/95)
For Month/Period Project Number: Project Name:
Beginning: Ending:
JAN. 1, 1996 DEC 31,1996 IL06-E000-093 LAKESIDE SQUARE LIMITED PARTNERSHIP
<S> <C> <C> <C> <C>
Part I Description of Account Acct. No. Amount*
Apartments or Member Carrying Charges (Coops) 5120 625,921
Tenant Assistance Payments 5121 2,228,695
Rental Furniture and Equipment 5130
Income Stores and Commercial 5140
5100 Garage and Parking Spaces 5170 73,313
Flexible Subsidy Income 5180
Miscellaneous (specify) 5190
Total Rent Revenue - Potential at 100% Occupancy 2,927,929
Apartments 5220 21,018
Furniture and Equipment 5230
Vacancies Stores and Commercial 5240
5200 Garage and Parking Spaces 5270
Miscellaneous (specify) 5290
Total Vacancies 21,018
Net Rental Revenue - Rent Revenue Less Vacancies 2,906,911
Elderly and Congregate Services Income--5300
Total Service Income - (Schedule Attached) 5300
Interest Income--Project Operations 5410 22,573
Financial Income from Investments--Residual Receipts 5430
Revenue Income from Investments--Reserve for Replacement 5440 9,548
5400 Income from Investments--Miscellaneous 5490
Total Financial Revenue 32,121
Laundry and Vending 5910 22,640
NSF and Late Charges 5920 3,429
Other Damages and Cleaning Fees 5930
Revenue Forfeited Tenant Security Deposits 5940 678
5900 Other Revenue (specify) Miscellaneus 5990
Total Other Revenue 26,747
Total Revenue 2,965,779
Advertising 6210
Other Administrative Expense 6250
Office Salaries 6310 95,272
Office Supplies 6311 25,261
Office or Model Apartment Rent 6312
Administrative - Management 6320 180,609
Expenses Manager or Superintendent Salaries 6330 59,796
6200/6300 Manager or Superintendent Rent Free Unit 6331 7,932
Legal Expenses (Project) 6340 17,275
Auditing Expenses (Project) 6350 13,056
Bookkeeping Fees/Accounting Services 6351
Telephone and Answering Service 6360 9,821
Bad Debts 6370
Miscellaneous Administrative Expenses (specify) 6390 17,098
Total Administrative Expenses 426,120
Fuel Oil/Coal 6420
Utilities Electricity (Light and Misc. Power) 6450 56,007
Expense Water 6451 43,943
6400 Gas 6452 163,544
Sewer 6453
Total Utilities Expense 263,494
Page 1 of 2 form HUD-92410 (7/91)
ref Handbook 4370.2
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Janitor and Cleaning Payroll 6510
Janitor and Cleaning Supplies 6515 20,612
Janitor and Cleaning Contract 6517
Exterminating Payroll/Contract 6519
Exterminating Supplies 6520 6,642
Garbage and Trash Removal 6525 31,261
Security Payroll/Contract 6530 157,395
Grounds Payroll 6535
Grounds Supplies 6536 2,223
Operating and Grounds Contract 6537 1,395
Maintenance Repairs Payroll 6540 158,636
Expenses Repairs Material 6541 45,156
6500 Repairs Contract 6542 40,330
Elevator Maintenance/Contract 6545 22,658
Heating/Cooling Repairs and Maintenance 6546 3,305
Swimming Pool Maintenance/Contract 6547
Snow Removal 6548
Decorating Payroll/Contract 6560 14,950
Decorating Supplies 6561 11,586
Other 6570 530
Miscellaneous Operating and Maintenance Expenses 6590 6,145
Total Operating and Maintenance Expenses 522,824
Real Estate Taxes 6710 257,506
Payroll Taxes (FICA) 6711 25,666
Miscellaneous Taxes, Licenses and Permits 6719
Taxes Property and Liability Insurance (Hazard) 6720 55,283
and Fidelity Bond Insurance 6721 318
Insurance Workmen's Compensation 6722 9,029
6700 Health Insurance and Other Employee Benefits 6723 36,276
Other Insurance (specify) Vehicle 6729 2,194
Total Taxes and Insurance 386,272
Interest on Bonds Payable 6810
Interest on Mortgage Payable 6820 496,823
Financial Interest on Notes Payable (Long-Term) 6830
Expenses Interest on Notes Payable (Short-Term) 6840 2,568
6800 Mortgage Insurance Premium/Service Charge 6850
Miscellaneous Financial Expenses 6890 450
Total Financial Expenses 499,841
Elderly & Total Service Expenses- --Schedule Attached 6900
Congregate Total Cost of Operations Before Depreciation 2,098,551
Service Profit (Loss) Before Depreciation 867,228
Expenses Depreciation (Total)--6600 (specify) 6600 395,553
6900 Operating Profit or (Loss) 471,675
Officer Salaries 7110
Corporate or Legal Expenses (Entity) 7120
Mortgagor Taxes (Federal-State-Entity) 7130-32
Entity Other Expenses (Entity) 7190 53,751
Expenses Total Corporate Expenses 53,751
7100 Net Profit or (Loss) 417,924
WARNING: HUD will prosecute false claims and statements. Conviction may result in
criminal and/or civil penalties.(18 U.S.C. 1001, 1010, 1012;31U.S.C. 3729, 3802)
Miscellaneous or other Income and Expense 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.
Part II
1. Total principal payments required under the mortgage, even if payments under a Workout $143,388
Agreement are less or more than those required under the mortgage.
2. Replacement Reserve deposits required by the Regulatory Agreement or $72,000
Amendments thereto, even if payments may be temporarily suspended
or waived.
3. Replacement or Painting Reserve releases which are included as expense items on this $1,975
Profit and Loss statement.
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
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Statement of Changes in Partners' Equity
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Partners'
Capital
Owner- (Deficit) Net Cash
ship % 12/31/95 Income Withdrawals
General Partner:
<S> <C> <C> <C> <C> <C>
Texas Lakeside Group
Limited Partnership 1% -$726,345 $348,967 -$501,000
Investor Limited Partner:
Boston Financial Qualified
Housing Tax Credits LP, IV 99% 3,776,643 68,957 -99,000
Special Limited Partner:
SLP 89, Inc. NIL --- --- ---
Class A Limited Partner:
Radney Management and
Investments, Inc. NIL -18 --- ---
--- --- ---
$3,050,280 $417,924 -$600,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C> <C>
Rental receipts $ 2,897,874
Interest receipts 32,121
Other receipts 7,059
Total reciepts 2,937,054
Administrative expenses -93,298
Management fees -177,900
Utilities -254,499
Salaries and wages -312,015
Operating and maintenance expenses -377,778
Real estate taxes -257,506
Miscellaneous taxes and insurance -73,947
Property insurance -66,235
Interest on mortgage note -496,823
Miscellaneous financial expenses -2,963
Tenant security and other deposits -24,472
-2,137,436
Net cash provided by operating activities 799,618
(See page 7 for reconciliation to net income)
Cash flows from investing activities:
Building improvements and acquisition of other depreciable assets -17,713
Contributions to reserve for replacement -81,544
Releases from reserve for replacement 19,688
Net cash (used) by investing activities -79,569
Cash flows from financing activities:
Mortgage principal payments -143,388
Mortgagor expenses -42,224
Cash distributions paid to partners -600,000
Net cash (used) by financing activities -785,612
Net increase in cash -65,563
Cash - beginning of period 753,332
Cash - end of period $ 687,769
The accompanying notes are an integral part
of these financial statements.
- - 6 -
</TABLE>
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Notes to Financial Statements
December 31, 1996
Note 1 - The Organization and Summary of Significant Account Policies
Organization
Lakeside Square Limited Partnership (the "Partnership") was organized on
October 2, 1989 as a limited partnership under the laws of the State of
Illinois to acquire an apartment building located in Chicago, Illinois,
and to operate under the National Housing Act, such apartment project
consisting of 308 units. The apartment project is regulated by the U.S.
Department of Housing and Urban Development ("HUD") as to rent charges
and certain operating methods. Additionally, the Partnership entered into
a Housing Assistance Payments Contract ("HAP") which limits annual
distributions to partners to an amount equivalent to surplus cash, as
defined. Surplus cash is calculated on a specific date in time and is not
cumulative for purposes of determining allowable distributions to
partners. Surplus cash at December 31, 1996 is $664,636 and is calculated
on page 18 of this report. The amended partnership agreement specifies
that the term of the Partnership shall not extend beyond December 31,
2040.
As specified in the HAP contract, the Partnership's rental income is
subsidized under Section 8 of the National Housing Act. Accordingly, HUD
subsidizes and pays to the Partnership a portion of each qualifying
tenant's rent. The amount of subsidy is based on the tenant's adjusted
income but is not to exceed 100% of contract rent and certain utility
allowances. The provisions stated herein are defined by the HAP contract,
and such contract had an original 15 year term commencing in October
1989.
Under terms of the Partnership Agreement, profits and losses of the
Partnership are allocated in accordance with each partner's percentage
interest, which are as follows:
Texas Lakeside Group Limited Partnership 1%
Boston Financial Qualified Housing Tax
Credits L.P. IV (the "Investor Limited Partner") 99%
Other Partners NIL
For years in which cash flow is distributed to partners, profits will be
allocated to the partners ratably in accordance with such distributions.
Generally, the partnership agreement specifies that distributions of cash
flow, as defined, prior to January 1, 1992, shall be distributed to the
general partner. Thereafter and through December 31, 2010, a cumulative
"Priority Distribution" of $61,000 per year through 1995 and $110,000 per
year, thereafter, is payable to the Investor Limited Partner and, in
essence, any remaining cash flow shall be distributed to the General
Partner. Distributions of cash flow subsequent to December 31, 2010, will
be made in accordance with provisions of the Partnership Agreement.
<PAGE>
The Partnership Agreement and other agreements with HUD, provides for
Radney Management & Investments, Inc. to be paid a management fee of 6%
of gross collections (See Note 5).
Management's 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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Debt Issue Costs
Costs incurred to refinance the apartment project acquisition and to
secure funds to rehabilitate the project are capitalized and amortized
over the life of the related loans using the effective interest rate
method of amortization. Amortization of debt issue costs for 1996
totalled $11,960 and is included in mortgagor entity expenses.
Cash Equivalents Cash Flows
For purposes of the statement of cash flows, the Partnership considers
all highly liquid debt instruments purchased with a maturity of three
months or less and all certificates of deposit to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the following estimated useful lives:
Life
Buildings and improvements 27.5 years
Building equipment and furniture 7.0 years
Vehicle 5.0 years
Expenditures for major renewals and betterments which substantially
increase the project's remaining estimated useful life are capitalized.
Expenditures for maintenance and repairs are charged to expense as
incurred. When properties are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the respective
accounts and any gain or loss is recognized currently.
Income Taxes
The Partnership is not a tax paying entity. Income, deductions and
credits of the Partnership must be shown on each individual partner's tax
return. Accordingly, a provision for Federal income taxes has not been
made in the financial statements. The Partnership's net income for
Federal income tax purposes is approximately $420,700. The difference
between financial statement and income tax reporting net income is due to
differing depreciation methods and recognition of deferred rents as
taxable income when collected.
<PAGE>
A substantial portion of the Partnership's assets qualify to generate low
income housing tax credits. Low income housing tax credits for 1996 are
estimated to be $643,000. If the Partnership meets specific requirements
under existing income tax regulations, certain low income housing tax
credits will be available annually through December 31, 2001.
Revenue Recognition
Monthly rents from occupied units are recognized as income on the first
day of each month. Rents collected prior to the first day of the month
are deferred.
Mortgagor Entity Expenses
Mortgagor entity expenses generally consist of wages, payroll benefit
allowance expense, travel expenses, legal expense, amortization of debt
issue costs and miscellaneous expenses.
Note 2 - Reserve for Replacement
Pursuant to terms of the Community Investment Corporation ("CIC") loan
agreement, the Partnership is currently required to deposit $3,000 per
month to a "Reserve for Replacement". For 1996, however, the Partnership
elected to make a nonrecurring additional deposit of $36,000. Monthly
deposits to the fund will continue until the fund accumulates $400,000.
Withdrawals from the fund require approval from CIC and are generally
limited to expenditures necessary to improve or replace buildings and
equipment. During 1996, the Partnership had expended funds and rquested
CIC to approve the release of $19,688 from the fund. Accordingly, the
financial statements and surplus cash calculations reflect a receivable
for this amount.
Note 3 - Long-Term Debt
Long-term mortgage debt as December 31, 1996 consists of:
Nonrecourse note payable to Community Investment Corporation, secured by
mortgage on apartment complex and assignment of rents generated thereby,
interest rate is adjustable every third year beginning March 1, 1993, but such
adjustment shall not exceed 2% points per adjustment or 5% points in aggregate,
interest accrues at the rate of 7.75% during three year period beginning March
1, 1996, principal and interest are payable in monthly installments of $20,065,
the note is amortized assuming a twenty-five year level annuity; however, any
unpaid principal is due on
March 20, 2005 $ 2,343,370
<PAGE>
Nonrecourse note payable to Community Investment Corporation, secured by
mortgage on apartment complex and assignment of rents generated thereby,
interest rate is adjustable every third year beginning March 1, 1993, but such
adjustment shall not exceed 2% points per adjustment or 5% points in aggregate.
The current interest rate is 7.75%, principal and interest are payable in
monthly installments of $33,292, the note is amortized assuming a twenty-five
year level annuity; however, any unpaid principal is due on March 20, 2005
3,989,736
6,333,106
Less - current maturities 154,904
-------------
$ 6,178,202
Six individuals related to the Partnership's general partner have
severally guaranteed $500,000 of the notes payable to CIC.
For the succeeding five years, aggregate maturities applicable to
long-term debt outstanding at December 31, 1996 are as follows:
Year Ending
December 31,
1997 $ 154,902
1998 $ 167,344
1999 $ 180,784
2000 $ 195,305
2001 $ 210,989
Note 4 - Concentration of Credit Risk
The Partnership maintains cash balances and other deposits with banks
which, in aggregate, are $751,639 in excess of insured limits established
by the Federal Deposit Insurance Corporation.
Note 5 - Related Party Transactions
The apartment project is managed by Radney Management and Investments,
Inc. ("Radney"), a limited partner in the Partnership. Management fees
payable to Radney are based on six percent of gross collections, which
the Partnership's management interprets to include $92,595 for utility
allowances that are withheld by HUD from gross rents. For the period
ended December 31, 1996, management fees totalled $180,609.
For the year ended December 31, 1996, Radney provided the Partnership
with all personnel necessary and assigned to operate the project and was
reimbursed or accrued for actual costs incurred totalling $375,646.
Additionally, Radney was paid $11,440 for "non front line" employee
salaries and an employee benefit allowance expense equivalent to 7.7% of
wages which totalled $24,411. The non front line employee salaries and
employee benefit allowance expense are mortgagor entity expenses which
are essentially paid from partnership funds.
<PAGE>
As of December 31, 1996, non-interest bearing advances due to the
Partnership's general partner totalling $8,361 are included in the
Balance Sheet item captioned "Miscellaneous accrued expenses and current
liabilities". The advances were made in previous years to fund key man
life insurance premiums.
Note 6 - Accrued Property Taxes Payable
The Partnership is assessed ad valorem taxes by the Tax Assessor for the
County of Cook, Illinois. Property taxes for the year ended December 31,
1996 will be determined and assessed during the summer of 1997. The
Partnership has estimated this assessment will not vary materially from
the 1996 tax assessment. Accordingly, the December 31, 1996 financial
statements reflect a property tax liability based upon this estimate.
During 1996, the Partnership's 1992 property tax assessment was
redetermined and the Partnership received a refund of amounts previously
paid totalling $44,369. This refund is reflected as a reduction to the
Partnership's 1996 real estate tax expense.
Note 7 - Union Contracts
All of the Partnership's maintenance personnel are employed under a collective
bargaining agreement between the Service Employees International Union (AFL-CIO)
and the Apartment Building Owners & Managers Association. This annual contract
expires on November 30, 1997. The Partnership's administrative personnel do not
participate in collective bargaining agreement.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Supplementary Data
December 31, 1996
Accounts and notes receivable (other than tenants):
Receivables other than from tenants at December 31, 1996 consists of (1) rent
subsidy due from HUD of $23,158 and (2) a release due from the Reserve for
Replacement of $19,688.
Delinquent tenant accounts receivable:
At December 31, 1996 rents receivable from tenants are as follows:
Number of Amount
tenants past due
Delinquent 30 days...............20... .........$ 2,718
Delinquent 31-60 days.............6................. 439
Delinquent 61-90 days............ 0 0
Total........................................$ 3,157
Mortgage escrow deposits:
Estimated amount required as of December 31, 1996 for future payment of:
City, state, school and county taxes............$100,625
Property insurance................................12,992
Mortgage insurance........................... N/A
...............................................$ 113,617
Total deposits reconciled to mortgagee........$ 157,821
==========
Amount per financial statements in excess
(deficient) of estimated requirements......$ 44,204
==========
Tenant security deposits:
Tenant security deposits of $53,682 are held in the name of the project at Old
Kent Bank-Chicago, money market account # 1063480. This account is insured by
the Federal Deposit Insurance Corporation. Tenants receive interest on their
deposits calculated at the annual rate of 5%.
<PAGE>
Reserve for replacement:
In accordance with the provisions of the Partnership's note agreement,
restricted cash is held by the Partnership to be used for repair or replacement
of property or equipment with the approval of the mortgagee. The balance of
funds in such reserve is as follows:
Balance, December 31, 1995...................$ 226,069
Plus: Monthly deposits..........................36,000
Plus: Non-recurring deposit (6/18/96)...........36,000
Less: December 19 release requested
Refrigerators & stoves - capital.... .(17,713)
December 19 release requested
Refrigerators & stoves - expense.......(1,975)
Plus: Interest earned..................... 9,544
-----------
Balance, December 31, 1996, as confirmed..... $ 287,925
The reserve account is maintained with Old Kent Bank - Chicago.
Changes in Property and Equipment:
See page 16 for detailed analysis.
Accounts payable (other than trade creditors):
Accounts payable other than trade creditors represents $8,361 payable to the
Partnership's general partner for previous cash advances and life insurance
premiums paid. The repayment thereof, from partnership funds, is expected to
occur more than sixty days after December 31, 1996. The payable of $8,361 is
included in the balance sheet caption "miscellaneous accrued expenses and
current liabilities."
Accrued taxes:
Description Basis for Period Date Amount
of Tax Accrual Covered Due Accrued
--------------------------------------------------------------------------
School 1995 Assessed Value 1996 * $ 154,395
City 1995 Assessed Value 1996 * 69,356
County 1995 Assessed Value 1996 * 31,913
Other 1995 Assessed Value 1996 * 42,074
----------
$297,738
* 50% of all taxes are due March 1, 1997 and the remaining 50% is due
September 1, 1997.
Notes Payable (other than mortgage):
None
<PAGE>
Changes in Ownership Interests:
None
Distributions Paid to Partners
The following distributions were paid from Surplus Cash available as of December
31, 1995:
Date Partner Amount
- ------------------------------------------------------------------------------
January 30, 1996 Texas Lakeside Group Limited Partnership $ 401,000
January 30, 1996 BFQH Tax Credit LP, IV. $ 99,000
April 30, 1996 Texas Lakeside Group Limited Partnership $ 100,000
Unauthorized Distribution of Project Revenue:
None
Comments on Balance Sheet Items:
None
Compensation of Partners or Officers:
Compensation was not paid to partners during 1996. However, see Note 5 to the
financial statements regarding management fees of $180,609 paid to Radney
Management & Investments, Inc., a Class A Limited Partner.
Apartment unit not producing revenue:
Sofia Slobodetsky, Lakeside Square Limited Partnership's office clerk, currently
resides at the project site and is provided a one-bedroom unit rent free.
Listing of Identity of Interest Companies and Activity:
See page 17.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Supplementary Data
Changes in Property and Equipment
For the Year Ended December 31,
1996
<TABLE>
<CAPTION>
Asset Accumulated Depreciation
Net Book
Balance Balance Balance Balance Value
December 31, December 31, December 31, December 31, December 31,
1995 Additions Retirements 1996 1995 Additions Retirements 1996 1996
---- --------- ----------- ----------- ---------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Land $400,000 - - - - - - $400,000 $0 - - - - - - $0 $400,000
Buildings $10,326,151 - - - - - - $10,326,151 $2,167,023 375,496 - - - $2,542,519 $7,783,632
Building equipment:
Portable $103,340 17,713 - - - $121,053 $52,039 14,866 - - - $66,905 $54,148
Furniture $15,874 --- - - - $15,874 $8,327 2,091 - - - $10,418 $5,456
-------
Transportation
equipment $15,497 - - - - - - $15,497 $7,489 3,100 - - - $10,589 $4,908
------- ----- ----- ------- ------ ----- ----- ------- ------
$10,860,862 $17,713 $0 $10,878,575 $2,234,878 $395,553 $0 $2,630,431 $8,248,144
</TABLE>
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Identity of Interest Companies and Activity
For the Year Ended December 31, 1996
(Supplementary Information)
<TABLE>
<CAPTION>
<S> <C> <C>
Identity of Interest Company Services Amount
Radney Management & Investments,Inc. Management of Project 180,609
Managing Agent
Radney Management & Investments,Inc. Reimbursement for project salaries,
Managing Agent payroll taxes, retirement benefits
and health insurance 375,646
</TABLE>
<PAGE>
Computation of Surplus Cash, U. S. Department of Housing
Distributions and Residual and Urban Development
Receipts Office of Housing
Federal Housing Commissioner
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PROJECT NAME FISCAL PERIOD ENDED PROJECT NUMBER
Lakeside Square
Limited Partnership 12 / 31 / 96 IL06-E000-093
Part A - Compute Surplus Cash
Cash
1. Cash (Accounts 1110, 1120, 1191, 1192) $764,214
2. Tenant subsidy vouchers due for period covered by financial statement $23,158
3. Other (describe)
Release from Reserve for Replacement receivable $19,688
(a) Total Cash (Add Lines 1, 2 and 3) $807,060
Current obligations
4. Accrued mortgage interest payable 5. Delinquent mortgage principal
payments 6. Delinquent deposits to reserve for replacements
7. Accounts payable (due within 30 days) $8,720
8. Loans and notes (due within 30 days) $12,456
9. Deficient Tax Insurance or MIP Escrow Deposits
10. Accrued expenses (not escrowed) $64,164
11. Prepaid Rents (Account 2210) $3,402
12. Tenant security deposits liability (Account 2191) $53,682
13. Other (Describe)
(b) Less Total Current Obligations (Add Lines 4 through 13) $142,424
(c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $664,636
PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS
1. Surplus Cash $664,636
Limited Dividend Projects
2a. Annual Distribution Earned During Fiscal Period
Coverd 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
5. Deposit Due Residual Receipts
(Must be deposited with Mortgagee within 60 days after Fiscal
Period ends) PREPARED BY REVIEWED BY
Loan Technician Loan Servicer
Date Date
</TABLE>
(See Reverse for Instructions) HUD-93486 (8/95)
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Statement of Receipts and Disbursements
For the Year Ending December 31, 1996
(Supplementary Data)
<TABLE>
<CAPTION>
SOURCE OF FUNDS
Operations:
Revenues
<S> <C> <C>
Rental income $ 2,897,874
Other income 39,180
$ 2,937,054
Expenses
Administrative expenses 93,298
Management fees 177,900
Operating expenses (utilities) 254,499
Payrolls 312,015
Maintenance expenses 377,778
Taxes - real estate 257,506
Taxes - other 25,666
Insurance 114,513
Interest on building loan 496,826
Miscellaneous financial expenses 2,963
2,112,964
Cash provided by operations before amortization 824,090 Amortization
of mortgage 143,388 Cash provided by operations after debt service
680,702 Other Increase in mortgage escrow deposits -23,644 Release
from Reserve for replacement 19,688
Total sources 676,746
APPLICATION OF FUNDS
Reserve for replacement - funded 81,544
Tenant security deposits 828
Mortgagor expenses 42,224
Acquisition of fixed assets 17,713
Distributions to partners 600,000
Total application of funds 742,309
Increase in cash -65,563
Unrestricted cash at beginning of year 753,332
Unrestricted cash at end of year $ 687,769
</TABLE>
- 19 -
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Schedule of Funds In Financial Institutions
December 31, 1996
(Supplementary Data)
<TABLE>
<CAPTION>
Funds Held by Mortgagor, Regular Operating Account:
<S> <C>
Frost National Bank - money market - 4.17% $444,124
Bank of Chicago - money market - 3.15% 222,993
Old Kent Bank, Chicago - checking 17,818
Operating account, sub-total 684,935
Petty cash 500
Partnership funds 2,334
Cash per balance sheet $687,769
Funds Held by Mortgagor, In Trust, Tenant Security Deposit:
Old Kent Bank - Chicago, Money Market - 3.30% $78,779
Funds Held by Mortgagor, In Trust, Reserve for Replacement:
Old Kent Bank - Chicago, Money Market - 3.50% $287,925
Funds Held by Mortgagor $1,051,639
Funds Held by Mortgagee:
Tax and insurance escrow held by Community Investment
Corporation $157,821
</TABLE>
All bank accounts maintained by Mortgagor were confirmed with
the financial institution.
Funds held by the Mortgagee were confirmed with Community
Investment Corporation.
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report on Internal Control Structure
To the Partners
Lakeside Square Limited Partnership
We have audited the financial statements of Lakeside Square Limited Partnership
as of and for the year ended December 31, 1996, and have issued our report
thereon dated January 22, 1997. We have also audited Lakeside Square Limited
Partnership's compliance with requirements applicable to HUD-assisted programs
and have issued our report thereon dated January 24, 1997.
We conducted our audits 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 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 Lakeside Square Limited Partnership complied with laws and regulations,
noncompliance with which would be material to a HUD-assisted program.
The management of Lakeside Square Limited 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 and that
transactions are executed in accordance with management 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.
In planning and performing our audits for the year ended December 31, 1996, we
obtained an understanding of the design of 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 financial
statements of Lakeside Square Limited Partnership and on its compliance with
specific requirements applicable to its major HUD-assisted program and to report
on the internal control structure in accordance with provisions of the Guide and
not to provide any assurance 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 applicable to Lakeside Square Limited
Partnership's HUD-assisted program. 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.
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 reportable 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 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. 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 Lakeside Square Limited
Partnership's partners, 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/ Vacek, Lange & Westerfield, P.C.
January 22, 1997
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs
To the Partners
Lakeside Square Limited Partnership
We have audited the financial statements of Lakeside Square Limited Partnership
as of and for the year ended December 31, 1996 and have issued our report
thereon dated January 22, 1997.
We have also audited Lakeside Square Limited Partnership's compliance with the
specific program requirements governing (1) rent subsidy requests, and (2)
tenant application, eligibility and recertification that are applicable to its
only major HUD-assisted program (Section 8 rent subsidy) for the year ended
December 31, 1996. The management of Lakeside Square Limited Partnership 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 Comptroller General of the United
States, and 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 Lakeside Square Limited
Partnership's compliance with those requirements. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, Lakeside Square Limited Partnership complied, in all material
respects, with the requirements described above that are applicable to its major
HUD-assisted program for the year ended December 31, 1996.
This report is intended for the information of Lakeside Square Limited
Partnership's partners, 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/Vacek, Lange & Westerfield, P.C.
January 24, 1997
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Auditors' Schedule of Findings
There are no findings to report.
<PAGE>
Auditee's Corrective Action Plan
Project: Lakeside Square Limited Partnership.
Audit Firm: Vacek, Lange & Westerfield, P.C.
Audit Period: December 31, 1996
C. Status of Corrective Action or Prior Findings
Our December 31, 1995 audit did not disclose any findings.
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Auditors' Comments on Audit Resolution Matters
Our December 31, 1995 audit did not reveal any matters to report.
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Affirmative Fair Housing
To the Partners of
Lakeside Square Limited Partnership
We have audited the financial statements of Lakeside Square Limited Partnership
as of and for the year ended December 31, 1996, and have issued our report
thereon dated January 22, 1997.
We have applied procedures to test Lakeside Square Limited Partnership's
compliance with the Affirmative Fair Housing requirements applicable to its
HUD-assisted program, for the year ended December 31, 1996.
Our procedures were limited to the applicable compliance requirement 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 Lakeside Square
Limited Partnership'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.
This report is intended for the information of Lakeside Square Limited
Partnership's partners, management and the Department of Housing and Urban
Development. However, this report is a matter of public record and its
distribution is not limited.
January 24, 1997
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Certificate of Partners and Managing Agent
I hereby certify that I have examined the accompanying financial statements and
supplementary data of Lakeside Square Limited Partnership (Federal
Identification No. 76-0288740) and to the best of my knowledge and belief, the
same is complete and accurate.
/s/ John N. Barineau, III February 24, 1997
------------------------------------------------
John N. Barineau, III Date
as President of J.B. Lakeside, Inc.
Managing General Partner of
Texas Lakeside Group Limited Partnership,
General Partner of Lakeside Square Limited Partnership
Also as, President of
Radney Management & Investments, Inc.
Project Managing Agent and as individual directly
responsible for project managament
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
HUD PROJECT NO. IL06-E000-093
FINANCIAL STATEMENTS
DECEMBER 31, 1997
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
LAKESIDE SQUARE LIMITED PARTNERSHIP
Index to Financial Statements
<TABLE>
<CAPTION>
Page(s)
<S> <C>
Independent Auditors' Report 1
Auditor Information 1
Balance Sheet 2
Statement of Profit and Loss 3 - 4
Statement of Changes in Partners' Capital 5
Statement of Cash Flows 6 - 7
Notes to Financial Statements 8 - 12
Supplementary Data 13 - 15
Independent Auditors' Report on Internal Control 16 - 17
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs 18
Auditors' Schedule of Findings 19
Auditee's Corrective Action Plan 20
Auditor's Comments on Audit Resolution Matters 21
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Fair Housing and Non-Discrimination 22
Certification of Partners and Managing Agent 23
<PAGE>
</TABLE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report
To the Partners of
Lakeside Square Limited Partnership
We have audited the accompanying balance sheet of Lakeside Square Limited
Partnership, a limited partnership, (HUD Project No. IL06-E000-093) as of
December 31, 1997, and the related statements of profit and loss, changes in
partners' capital, and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's managing general partner.
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 the managing general partner, 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 Lakeside Square Limited
Partnership as of December 31, 1997, and the results of its operations, changes
in partners' capital and its cash flows for the year then ended in conformity
with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary data included in the
report (shown on pages 13 to 20) are presented for the purposes of additional
analysis and are not a required part of the basic financial statements of
Lakeside Square Limited Partnership. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly presented, in all material respects, in relation to
the financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued reports
dated January 23, 1998 on our consideration of Lakeside Square Limited
Partnership's (the "Partnership") internal controls and the Partnership's
compliance with laws and regulations.
/s/Vacek,Lange & Westerfield, P.C.
Houston, Texas
January 23, 1998
Under the direct supervision of Randy G. Lange, C.P.A., Texas License No. 24214,
the audit of Lakeside Square Limited Partnership's December 31, 1997 financial
statements was performed by Vacek, Lange & Westerfield, P.C., FIN: 76-0192275,
Texas License C 1882-001, 11 Greenway Plaza, Suite 1524, Houston, Texas 77046,
713-623-2929.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Balance Sheet
December 31, 1997
<TABLE>
<CAPTION>
ASSETS
Current assets:
<S> <C> <C> <C>
1120 Cash $ 825,436
1130 Tenant accounts receivable 5,534
1240 Prepaid property and liability insurance 49,702
1290 Miscellaneous prepaid expenses 1,062
Total current assets 881,734
1191 Tenants' security deposits held in trust 81,419
Restricted deposits and funded reserves:
1320 Reserve for replacement (Note 2) 309,038
1310 Mortgage escrow deposits 139,842
Total deposits 448,880
Property and equipment (Notes 1 and 3):
1410 Land$ 400,000
1420 Buildings and improvements 10,326,151
1440 Building equipment - portable 135,041
1450 Furniture 19,159
1480 Transportation equipment 15,497
10,895,848
Less: accumulated depreciation -3,024,059
Net property and equipment 7,871,789
1800 Organization costs 680
1900 Debt issue costs, net of amortization of $96,846 63,799
Total assets $ 9,348,301
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
2320 Current portion of mortgage payable $ 167,344
2110 Accounts payable 18,594
2120 Accrued wages and payroll taxes 7,761
2150 Accrued property taxes payable 309,304
2190 Miscellaneous accrued expenses and current liabilities 56,717
2210 Deferred rental income 8,922
Total current liabilities 568,642
2191 Tenant security deposits 54,460
2320 Long-term portion of mortgage payable 6,010,858
Total liabilities 6,633,960
3130 Partners' capital 2,714,341
Total liabilities and partners' capital $ 9,348,301
The accompanying notes are an integral part of these financial statements.
- 2 -
</TABLE>
<PAGE>
>
Statement of U.S. Department of Housing
Profit and Loss and Urban Development
Office of Housing
<TABLE>
<CAPTION>
Federal Housing Commissioner
OMB Approval No.2502-0052 (Exp.9/30/98)
For Month/Period Project Number: Project Name:
Beginning: Ending:
JAN. 1, 1997 DEC 31,1997 IL06-E000-093 LAKESIDE SQUARE LIMITED PARTNERSHIP
<S> <C> <C> <C> <C>
Part I Description of Account Acct. No. Amount*
Apartments or Member Carrying Charges (Coops) 5120 642,661
Tenant Assistance Payments 5121 2,297,975
Rental Furniture and Equipment 5130
Income Stores and Commercial 5140
5100 Garage and Parking Spaces 5170 72,696
Flexible Subsidy Income 5180
Miscellaneous (specify) 5190
Total Rent Revenue Potential at 100% Occupancy 3,013,332
Apartments 5220 6,353
Furniture and Equipment 5230
Vacancies Stores and Commercial 5240
5200 Garage and Parking Spaces 5270
Miscellaneous (specify) 5290
Total Vacancies 6,353
Net Rental Revenue Rent Revenue Less Vacancies 3,006,979
Elderly and Congregate Services Income--5300
Total Service Income (Schedule Attached) 5300
Interest Income--Project Operations 5410 23,824
Financial Income from Investments--Residual Receipts 5430
Revenue Income from Investments--Reserve for Replacement 5440 10,826
5400 Income from Investments--Miscellaneous 5490
Total Financial Revenue 34,650
Laundry and Vending 5910 22,181
NSF and Late Charges 5920 2,540
Other Damages and Cleaning Fees 5930
Revenue Forfeited Tenant Security Deposits 5940 2,363
5900 Other Revenue (specify) Miscellaneus 5990 1,703
Total Other Revenue 28,787
Total Revenue 3,070,416
Advertising 6210
Other Administrative Expense 6250
Office Salaries 6310 92,575
Office Supplies 6311 15,987
Office or Model Apartment Rent 6312
Administrative Management 6320 187,651
Expenses Manager or Superintendent Salaries 6330 57,618
6200/6300 Manager or Superintendent Rent Free Unit 6331 8,274
Legal Expenses (Project) 6340 14,830
Auditing Expenses (Project) 6350 10,996
Bookkeeping Fees/Accounting Services 6351
Telephone and Answering Service 6360 9,197
Bad Debts 6370
Miscellaneous Administrative Expenses (specify) 6390 43,109
Total Administrative Expenses 440,237
Fuel Oil/Coal 6420
Utilities Electricity (Light and Misc. Power) 6450 49,600
Expense Water 6451 45,772
6400 Gas 6452 172,857
Sewer 6453
Total Utilities Expense 268,229
Page 1 of 2 form HUD-92410 (7/91)
ref Handbook 4370.2
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Janitor and Cleaning Payroll 6510
Janitor and Cleaning Supplies 6515 15,893
Janitor and Cleaning Contract 6517 1,478
Exterminating Payroll/Contract 6519
Exterminating Supplies 6520 4,122
Garbage and Trash Removal 6525 29,001
Security Payroll/Contract 6530 159,226
Grounds Payroll 6535
Grounds Supplies 6536 2,220
Operating and Grounds Contract 6537 3,785
Maintenance Repairs Payroll 6540 157,251
Expenses Repairs Material 6541 23,422
6500 Repairs Contract 6542 122,566
Elevator Maintenance/Contract 6545 26,345
Heating/Cooling Repairs and Maintenance 6546 2,603
Swimming Pool Maintenance/Contract 6547
Snow Removal 6548
Decorating Payroll/Contract 6560
Decorating Supplies 6561 8,938
Other 6570 442
Miscellaneous Operating and Maintenance Expenses 6590 8,862
Total Operating and Maintenance Expenses 566,154
Real Estate Taxes 6710 318,937
Payroll Taxes (FICA) 6711 23,243
Miscellaneous Taxes, Licenses and Permits 6719
Taxes Property and Liability Insurance (Hazard) 6720 64,049
and Fidelity Bond Insurance 6721 318
Insurance Workmen's Compensation 6722 10,147
6700 Health Insurance and Other Employee Benefits 6723 36,569
Other Insurance (specify) Vehicle 6729 2,103
Total Taxes and Insurance 455,366
Interest on Bonds Payable 6810
Interest on Mortgage Payable 6820 485,060
Financial Interest on Notes Payable (Long-Term) 6830
Expenses Interest on Notes Payable (Short-Term) 6840 2,600
6800 Mortgage Insurance Premium/Service Charge 6850
Miscellaneous Financial Expenses 6890 450
Total Financial Expenses 488,110
Elderly & Total Service Expenses- --Schedule Attached 6900
Congregate Total Cost of Operations Before Depreciation 2,218,096
Service Profit (Loss) Before Depreciation 852,320
Expenses Depreciation (Total)--6600 (specify) 6600 393,628
6900 Operating Profit or (Loss) 458,692
Officer Salaries 7110
Corporate or Legal Expenses (Entity) 7120
Mortgagor Taxes (Federal-State-Entity) 7130-32
Entity Other Expenses (Entity) 7190 52,555
Expenses Total Corporate Expenses 52,555 7100 Net Profit or (Loss) 406,137
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 Expense 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.
Part II
1. Total principal payments required under the mortgage, even if payments under a Workout $154,904
Agreement are less or more than those required under the mortgage.
2. Replacement Reserve deposits required by the Regulatory Agreement or $36,000
Amendments thereto, even if payments may be temporarily suspended
or waived.
3. Replacement or Painting Reserve releases which are included as expense items on this $16,208
Profit and Loss statement.
4. Project Improvement Reserve Releases under the Flexible Subsidy Program
that are included as expense items on this Profit and Loss Statement. N/A
</TABLE>
Page 2 of 2
form HUD-92410 (7/91)
The accompanying notes are an integral part of these financial statements.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Statement of Changes in Partners' Equity
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Partners' Partners'
Capital Capital
Owner- (Deficit) Net Cash (Deficit)
ship % 12/31/96 Income Withdrawals 12/31/97
<S> <C> <C> <C> <C> <C>
General Partner:
Texas Lakeside Group
Limited Partnership 1% -$878,378 $326,360 -$450,000 -$1,002,018
Investor Limited Partner:
Boston Financial Qualified
Housing Tax Credits LP, IV 99% 3,746,600 79,777 -110,000 3,716,377
Special Limited Partner:
SLP 89, Inc. NIL --- --- --- ---
Class A Limited Partner:
Radney Management and
Investments, Inc. NIL -18 --- --- -18
--- --- --- ---
$3,050,280 $406,137 -$560,000 $2,714,341
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Rental receipts $ 3,033,280
Interest receipts 34,650
Other receipts 28,787
Total reciepts 3,096,717
Administrative expenses -105,007
Management fees -179,998
Utilities -280,069
Salaries and wages -307,436
Operating and maintenance expenses -404,604
Real estate taxes -307,370
Miscellaneous taxes and insurance -72,380
Property insurance -56,548
Interest on mortgage note -485,060
Miscellaneous financial expenses -3,018
Tenant security and other deposits 16,117
-2,185,373
Net cash provided by operating activities 911,344
(See page 7 for reconciliation to net income)
Cash flows from investing activities:
Building improvements and acquisition of other depreciable assets -17,273
Contributions to reserve for replacement -46,826
Releases from reserve for replacement 45,401
Net cash (used) by investing activities -18,698
Cash flows from financing activities:
Mortgage principal payments -154,904
Mortgagor expenses -40,075
Cash distributions paid to partners -560,000
Net cash (used) by financing activities -754,979
Net increase in cash 137,667
Cash - beginning of period 687,769
Cash - end of period $ 825,436
The accompanying notes are an integral part of these financial statements.
- 6 -
</TABLE>
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the Year Ended December 31, 1997
Reconciliation of net income to net cash provided
operating activities:
<TABLE>
<CAPTION>
<S> <C>
Net income $ 406,137
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 393,628
Amortization 11,960
Mortgagor expenses 40,075
Decrease (increase) in:
Tenant accounts receivable -2,377
Rent subsidy receivable from HUD 23,158
Tenant security deposits held in Trust -2,640
Prepaid property and liability insurance 7,501
Mortgage escrow deposits 17,979
Increase (decrease) in:
Accounts payable 9,874
Deferred rental income 5,520
Miscellaneous accrued expenses -249
Tenant security deposit 778
Net cash provided by operating activities $ 911,344
The accompanying notes are an integral part of these financial statements.
- -7-
</TABLE>
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Notes to Financial Statements
December 31, 1997
Note 1 - The Organization and Summary of Significant Account Policies
Organization
Lakeside Square Limited Partnership (the "Partnership") was organized on
October 2, 1989 as a limited partnership under the laws of the State of
Illinois to acquire an apartment building located in Chicago, Illinois,
and to operate under the National Housing Act, such apartment project
consisting of 308 units. The apartment project is regulated by the U.S.
Department of Housing and Urban Development ("HUD") as to rent charges
and certain operating methods. Additionally, the Partnership entered into
a Housing Assistance Payments Contract ("HAP") which limits annual
distributions to partners to an amount equivalent to surplus cash, as
defined. Surplus cash is calculated on a specific date in time and is not
cumulative for purposes of determining allowable distributions to
partners. Surplus cash at December 31, 1997 is $753,534 and is calculated
on page 18 of this report. The amended partnership agreement specifies
that the term of the Partnership shall not extend beyond December 31,
2040.
As specified in the HAP contract, the Partnership's rental income is
subsidized under Section 8 of the National Housing Act. Accordingly, HUD
subsidizes and pays to the Partnership a portion of each qualifying
tenant's rent. The amount of subsidy is based on the tenant's adjusted
income but is not to exceed 100% of contract rent and certain utility
allowances. The provisions stated herein are defined by the HAP contract,
and such contract had an original 15 year term commencing in October
1989.
Under terms of the Partnership Agreement, profits and losses of the
Partnership are allocated in accordance with each partner's percentage
interest, which are as follows:
Texas Lakeside Group Limited Partnership 1%
Boston Financial Qualified Housing Tax
Credits L.P. IV (the "Investor Limited Partner") 99%
Other Partners NIL
For years in which cash flow is distributed to partners, profits will be
allocated to the partners ratably in accordance with such distributions.
Generally, the partnership agreement specifies that distributions of cash
flow, as defined, prior to January 1, 1992, shall be distributed to the
general partner. Thereafter and through December 31, 2010, a cumulative
"Priority Distribution" of $61,000 per year through 1995 and $110,000 per
year, thereafter, is payable to the Investor Limited Partner. The next
$500,000 of cash flow shall be distributed to the General Partner and any
amounts in excess thereof is to be distributed in accordance with each
partner's percentage interest. Distributions of cash flow subsequent to
December 31, 2010, will be made in accordance with provisions of the
Partnership Agreement.
<PAGE>
The Partnership Agreement and other agreements with HUD, provide for
Radney Management & Investments, Inc. to be paid a management fee of
6% of gross collections (See Note 5).
Management's 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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Debt Issue Costs
Costs incurred to refinance the apartment project acquisition and to
secure funds to rehabilitate the project are capitalized and amortized
over the life of the related loans using the effective interest rate
method of amortization. Amortization of debt issue costs for 1996
totalled $11,960 and is included in mortgagor entity expenses.
Cash Equivalents Cash Flows
For purposes of the statement of cash flows, the Partnership considers
all highly liquid debt instruments purchased with a maturity of three
months or less and all certificates of deposit to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the following estimated useful lives:
Life
Buildings and improvements 27.5 years
Building equipment and furniture 7.0 years
Vehicle 5.0 years
The Partnership accounts for the carrying value of long-lived assets in
accordance with the requirements of Statements of Financial Accounting
Standards #121.
Expenditures for major renewals and betterments which substantially
increase the project's remaining estimated useful life are capitalized.
Expenditures for maintenance and repairs are charged to expense as
incurred. When properties are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the respective
accounts and any gain or loss is recognized currently.
<PAGE>
Income Taxes
The Partnership is not a tax paying entity. Income, deductions and
credits of the Partnership must be shown on each individual partner's tax
return. Accordingly, a provision for Federal income taxes has not been
made in the financial statements. The Partnership's net income for
Federal income tax purposes is approximately $417,200. The difference
between financial statement and income tax reporting net income is due to
differing depreciation methods and recognition of deferred rents as
taxable income when collected.
A substantial portion of the Partnership's assets qualify to generate low
income housing tax credits. Low income housing tax credits for 1997 are
estimated to be $643,000. If the Partnership meets specific requirements
under existing income tax regulations, certain low income housing tax
credits will be available annually through December 31, 2001.
Revenue Recognition
Monthly rents from occupied units are recognized as income on the
first day of each month. Rents collected prior to the first day of the
month are deferred.
Mortgagor Entity Expenses
Mortgagor entity expenses generally consist of wages, payroll benefit
allowance expense, travel expenses, legal expense, amortization of debt
issue costs and miscellaneous expenses.
Note 2 - Reserve for Replacement
Pursuant to terms of the Community Investment Corporation ("CIC") loan
agreement, the Partnership is currently required to deposit $3,000 per
month to a "Reserve for Replacement". Monthly deposits to the fund will
continue until the fund accumulates $400,000. Withdrawals from the fund
require approval from CIC and are generally limited to expenditures
necessary to improve or replace buildings and equipment.
Note 3 - Long-Term Debt
Long-term mortgage debt as December 31, 1997 consists of:
Nonrecourse note payable to Community Investment Corporation, secured by
mortgage on apartment complex and assignment of rents generated thereby,
interest rate is adjustable every third year beginning March 1, 1993, but such
adjustment shall not exceed 2% points per adjustment or 5% points in aggregate,
interest accrues at the rate of 7.75% during three year period beginning March
1, 1996, principal and interest are payable in monthly installments of $20,065,
the note is amortized assuming a twenty-five year level annuity; however, any
unpaid principal is due on March 20, 2005
<TABLE>
<CAPTION>
<S> <C>
$ 2,282,664
<PAGE>
Nonrecourse note payable to Community Investment Corporation, secured by
mortgage on apartment complex and assignment of rents generated thereby,
interest rate is adjustable every third year beginning March 1, 1993, but such
adjustment shall not exceed 2% points per adjustment or 5% points in aggregate.
The current interest rate is 7.75%, principal and interest are payable in
monthly installments of $33,292, the note is amortized assuming a twenty-five
year level annuity; however, any unpaid principal is due on March 20, 2005
3,895,538
6,178,202
Less - current maturities 167,344
-------------
$ 6,010,858
</TABLE>
Six individuals related to the Partnership's general partner have
severally guaranteed $500,000 of the notes payable to CIC.
For the succeeding five years, aggregate maturities applicable to
long-term debt outstanding at December 31, 1997 are as follows:
Year Ending
December 31,
1998 $ 167,344
1999 $ 180,784
2000 $ 195,305
2001 $ 210,989
2002 $ 227,903
Note 4 - Concentration of Credit Risk
The Partnership maintains cash balances and other deposits with banks
which, in aggregate, are $659,624 in excess of insured limits established
by the Federal Deposit Insurance Corporation.
Note 5 - Related Party Transactions
The apartment project is managed by Radney Management and Investments,
Inc. ("Radney"), a limited partner in the Partnership. Management fees
payable to Radney are based on six percent of gross collections, which
the Partnership's management interprets to include $92,595 for utility
allowances that are withheld by HUD from gross rents. For the period
ended December 31, 1997, management fees totalled $187,651. For the year
ended December 31, 1997, Radney provided the Partnership with all
personnel necessary and assigned to operate the project and was
reimbursed or accrued for actual costs incurred totalling $367,111.
Additionally, Radney was paid $8,435 for "non front line" employee
salaries and an employee benefit allowance expense equivalent to 7.7% of
wages which totalled $23,672. The non front line employee salaries and
employee benefit allowance expense are mortgagor entity expenses which
are essentially paid from partnership funds.
<PAGE>
As of December 31, 1997, non-interest bearing advances due to the
Partnership's general partner totalling $8,361 are included in the
Balance Sheet item captioned "Miscellaneous accrued expenses and current
liabilities". The advances were made in previous years to fund key man
life insurance premiums.
Note 6 - Accrued Property Taxes Payable
The Partnership is assessed ad valorem taxes by the Tax Assessor for the
County of Cook, Illinois. Property taxes for the year ended December 31,
1997 will be determined and assessed during the summer of 1998. The
Partnership has estimated this assessment will not vary materially from
the 1997 tax assessment. Accordingly, the December 31, 1997 financial
statements reflect a property tax liability based upon this estimate.
Note 7 - Union Contracts
All of the Partnership's maintenance personnel are employed under a
collective bargaining agreement between the Service Employees
International Union (AFL-CIO) and the Apartment Building Owners &
Managers Association. This annual contract expires on November 30, 1998.
The Partnership's administrative personnel do not participate in
collective bargaining agreement.
Note 8 - Contingency
The Partnership is a defendant in a lawsuit arising in the normal course
of business. The Partnership intends to defend its position vigorously.
However, the ultimate outcome of this suit cannot be determined at this
time. The Managing General Partner does not, however, believe the outcome
will have a material adverse effect on the Partnership.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Supplementary Data
December 31, 1997
Accounts and notes receivable (other than tenants):
None
Delinquent tenant accounts receivable:
At December 31, 1997 rents receivable from tenants are as follows:
Number of Amount
tenants past due
Delinquent 30 days..........9.................$ 2,080
Delinquent 31-60 days.......6...................1,235
Delinquent 61-90 days.......5................. 2,219
Total.....................................$5,534
Mortgage escrow deposits:
Estimated amount required as of December 31, 1997 for future payment of:
City, state, school and county taxes..........$103,101
Property insurance..............................12,181
Mortgage insurance......................... N/A
.............................................$ 115,282
Total deposits reconciled to mortgagee...... $ 139,842
==========
Amount per financial statements in excess
(deficient) of estimated requirements......$ 24,560
==========
Tenant security deposits:
Tenant security deposits of $54,460 are held in the name of the project at Old
Kent Bank-Chicago, money market account # 1063480. This account is insured by
the Federal Deposit Insurance Corporation. Tenants receive interest on their
deposits calculated at the annual rate of 5%.
<PAGE>
Reserve for replacement:
In accordance with the provisions of the Partnership's note agreement,
restricted cash is held by the Partnership to be used for repair or replacement
of property or equipment with the approval of the mortgagee. The balance of
funds in such reserve is as follows:
Balance, December 31, 1996..................$ 287,925
Plus: Monthly deposits.........................36,000
Less: November 19 release requested
Hotwater Heaters - expense............(16,208)
November 19 release requested
Refrigerators & stoves - capital.......(9,505)
Plus: Interest earned...................... 10,826
-----------
Balance, December 31, 1997, as confirmed....$ 309,038
The reserve account is maintained with Old Kent Bank - Chicago.
Changes in Property and Equipment:
See page 16 for detailed analysis.
Accounts payable (other than trade creditors):
Accounts payable other than trade creditors represents $8,361 payable to the
Partnership's general partner for previous cash advances and life insurance
premiums paid. The repayment thereof, from partnership funds, is expected to
occur more than sixty days after December 31, 1997. The payable of $8,361 is
included in the balance sheet caption "miscellaneous accrued expenses and
current liabilities."
Accrued taxes:
Description Basis for Period Date Amount
of Tax Accrual Covered Due Accrued
--------------------------------------------------------------------------
School 1996 Assessed Value 1997 *.............$ 163,436
City 1996 Assessed Value 1997 *............ ..71,394
County 1996 Assessed Value 1997 *........... ...32,359
Other 1996 Assessed Value 1997 *............ 42,115
----------
...............$309,304
* 50% of all taxes are due March 1, 1998 and the remaining 50% is due September
1, 1998.
<PAGE>
Notes Payable (other than mortgage):
None
Changes in Ownership Interests:
None
Distributions Paid to Partners
The following distributions were paid from Surplus Cash available as of December
31, 1996:
Date Partner Amount
- -------------------------------------------------------------------------------
February 12, 1997 Texas Lakeside Group Limited Partnership $ 450,000
February 12, 1997 BFQH Tax Credit LP, IV. $ 110,000
Unauthorized Distribution of Project Revenue:
None
Comments on Balance Sheet Items:
None
Compensation of Partners or Officers:
Compensation was not paid to partners during 1997. However, see Note 5 to
the financial statements regarding management fees of $187,651 paid to Radney
Management & Investments, Inc., a Class A Limited Partner.
Apartment unit not producing revenue:
Sofia Slobodetsky, Lakeside Square Limited Partnership's office clerk, currently
resides at the project site and is provided a one-bedroom unit rent free.
Listing of Identity of Interest Companies and Activity:
See page 17.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Supplementary Data
Changes in Property and Equipment
For the Year Ended December 31, 1997
Accumulated Depreciation
<TABLE>
<CAPTION>
Net Book
Balance Balance Balance Balance Value
December 31, December 31, December 31, December 31, December 31,
1996 Additions Retirements 1997 1996 Additions Retirements 1997 1997
---------- --------- ----------- ----------- ----------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Land $400,000 - - - - - - $400,000 $0 - - - - - - $0 $400,000
Buildings $10,326,151 - - - - - - $10,326,151 $2,542,519 375,496 - - - $2,918,015 $7,408,136
Building equipment:
Portable $121,053 13,988 - - - $135,041 $66,905 13,429 - - - $80,334 $54,707
Furniture $15,874 3,285 - - - $19,159 $10,418 1,603 - - - $12,021 $7,138
Transportation $15,497 - - - - - - $15,497 $10,589 3,100 - - - $13,689 $1,808
equipment ----------- ----- ----- ---------- ------- ----- ----- ----------- ----------
$10,878,575 $17,273 $0 $10,895,848 $2,630,431 $393,628 $0 $3,024,059 $7,871,789
</TABLE>
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Identity of Interest Companies and Activity
For the Year Ended December 31, 1997
(Supplementary Information)
<TABLE>
<CAPTION>
<S> <C> <C>
Identity of Interest Company Services Amount
Radney Management & Investments,Inc. Management of Project 187,651
Managing Agent
Radney Management & Investments,Inc. Reimbursement for project salaries,
Managing Agent payroll taxes, retirement benefits
and health insurance 367,111
J. M. Brown Construction Company, Inc. Reimbursement for travel expenses
20% Shareholder in general partner of acting manager
1,132
</TABLE>
<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 PROJECTNUMBER
Lakeside Square
Limited Partnership 12 / 31 / 97 IL06-E000-093
Part A - Compute Surplus Cash
Cash
<S> <C> <C> <C>
1. Cash (Accounts 1110, 1120, 1191, 1192) $900,794
2. Tenant subsidy vouchers due for period covered by financial statement
3. Other (describe)
(a) Total Cash (Add Lines 1, 2 and 3) $900,794
Current obligations
4. Accrued mortgage interest payable
5. Delinquent mortgage principal payments
6. Delinquent deposits to reserve for replacements
7. Accounts payable (due within 30 days) $18,594
8. Loans and notes (due within 30 days) $13,455
9. Deficient Tax Insurance or MIP Escrow Deposits
10. Accrued expenses (not escrowed) $51,829
11. Prepaid Rents (Account 2210) $8,922
12. Tenant security deposits liability (Account 2191) $54,460
13. Other (Describe)
(b) Less Total Current Obligations (Add Lines 4 through 13) $147,260
(c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $753,534
PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS
1. Surplus Cash $753,534
</TABLE>
Limited Dividend Projects
2a. Annual Distribution Earned During Fiscal Period
Coverd 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
5. Deposit Due Residual Receipts
(Must be deposited with Mortgagee within 60 days after Fiscal
Period ends) PREPARED BY REVIEWED BY
Loan Tech Loan Servicer
Date Date
(See Reverse for Instructions) HUD-93486 (8/95)
- - 18 -
<PAGE>
<TABLE>
<CAPTION>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Statement of Receipts and Disbursements
For the Year Ending December 31, 1997
(Supplementary Data)
<S> <C> <C>
SOURCE OF FUNDS
Operations:
Revenues
Rental income $ 3,033,280
Other income 63,437
$ 3,096,717
Expenses
Administrative expenses 105,007
Management fees 179,998
Operating expenses (utilities) 280,069
Payrolls 307,436
Maintenance expenses 404,604
Taxes - real estate 307,370
Taxes - other 23,243
Insurance 105,685
Interest on building loan 485,060
Miscellaneous financial expenses 3,018
2,201,490
Cash provided by operations before amortization 895,227
Amortization of mortgage 154,904
Cash provided by operations after debt service 740,323
Other
Decrease in mortgage escrow deposits 17,979
Release from Reserve for replacement 45,401
Total sources 803,703
APPLICATION OF FUNDS
Reserve for replacement - funded 46,826
Tenant security deposits 1,862
Mortgagor expenses 40,075
Acquisition of fixed assets 17,273
Distributions to partners 560,000
Total application of funds 666,036
Increase in cash 137,667
Unrestricted cash at beginning of year 687,769
Unrestricted cash at end of year $ 825,436
</TABLE>
- 19 -
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Schedule of Funds In Financial Institutions
December 31, 1997
(Supplementary Data)
<TABLE>
<CAPTION>
<S> <C>
Funds Held by Mortgagor, Regular Operating Account:
Frost National Bank - money market - 4.25% $543,352
TCF National Bank - money market - 3.10% 40,170
Old Kent Bank, Chicago - checking 234,853
Operating account, sub-total 818,375
Petty cash 1,000
Partnership funds 6,061
Cash per balance sheet $825,436
Funds Held by Mortgagor, In Trust, Tenant Security Deposit:
Old Kent Bank - Chicago, Money Market - 3.30% $81,419
Funds Held by Mortgagor, In Trust, Reserve for Replacement:
Old Kent Bank - Chicago, Money Market - 3.50% $309,038
Funds Held by Mortgagor $1,209,832
Funds Held by Mortgagee:
Tax and insurance escrow held by Community Investment
Corporation $139,842
</TABLE>
All bank accounts maintained by Mortgagor were confirmed
with the financial institution. Funds held by the
Mortgagee were confirmed with Community Investment
Corporation.
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report on Internal Control
To the Partners
Lakeside Square Limited Partnership
We have audited the financial statements of Lakeside Square Limited Partnership
as of and for the year ended December 31, 1997, and have issued our report
thereon dated January 23, 1998. We have also audited Lakeside Square Limited
Partnership's compliance with requirements applicable to HUD-assisted programs
and have issued our report thereon dated January 23, 1998.
We conducted our audits 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 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 Lakeside Square Limited Partnership complied with laws and regulations,
noncompliance with which would be material to a HUD-assisted program.
In planning and performing our audit for the year ended December 31, 1997, we
obtained an understanding of the design of relevant internal controls 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 opinion on the financial statements of Lakeside Square Limited Partnership
and on its compliance with specific requirements applicable to its major
HUD-assisted program and to report on the internal controls in accordance with
provisions of the Guide and not to provide any assurance on the internal
controls.
The management of Lakeside Square Limited Partnership is responsible for
establishing and maintaining internal controls. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of internal controls. The objectives of
internal controls 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 management
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 internal controls, errors,
irregularities, or instances of noncompliance may nevertheless occur and not be
detected. Also, projection of any evaluation 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.
We performed tests of controls, as required by the Guide, to evaluate the
effectiveness of the design and operation of internal controls that we
considered relevant to preventing or detecting material noncompliance with
specific requirements applicable to Lakeside Square Limited Partnership's
HUD-assisted program. Our procedures were less in scope than would be necessary
to render an opinion on internal control policy and procedures. Accordingly, we
do not express such an opinion.
Our consideration of internal controls would not necessarily disclose all
matters in internal controls that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a reportable condition in which the design or operation of
one or more of the internal control components does 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. We noted no matters
involving internal controls and its operation that we consider to be material
weaknesses as defined above.
This report is intended for the information of Lakeside Square Limited
Partnership's partners, 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/Vacek, Lange & Westerfield, P.C.
January 23, 1998
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs
To the Partners
Lakeside Square Limited Partnership
We have audited the financial statements of Lakeside Square Limited
Partnership as of and for the year ended December 31, 1997 and have issued our
report thereon dated January 23, 1998.
We have also audited Lakeside Square Limited Partnership's compliance with the
specific program requirements governing tenant security deposits, cash receipts
and disbursements, distributions to owners, tenant application, tenant
eligibility, tenant recertification, management functions, maintenance and
reexamination of tenants, that are applicable to its only major HUD-assisted
program (Section 8 rent subsidy) for the year ended December 31, 1997. The
management of Lakeside Square Limited Partnership 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 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. 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 Lakeside Square Limited
Partnership's compliance with those requirements. We believe that our audit
provides a reasonable basis for our opinion.
The results of our audit disclosed immaterial instances of noncompliance with
the requirements referred to above which are listed on page 24 herein. We
considered these instances of noncompliance in forming our opinion on
compliance, which is expressed in the following paragraph.
In our opinion, Lakeside Square Limited Partnership complied, in all material
respects, with the requirements described above that are applicable to its major
HUD-assisted program for the year ended December 31, 1997.
This report is intended for the information of Lakeside Square Limited
Partnership's partners, 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/Vacek, Lange & Westerfield, P.C.
January 23, 1998
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Auditors' Schedule of Findings
FINDING #1:
Our audit revealed instances indicative that the procedures employed by Lakeside
Square Apartments may require modification to ensure compliance with guidelines
set forth in HUD Handbook 4350.3 Change-24 "Occupancy Requirements of Subsidized
MultiFamily Housing Programs". Those instances are as follows:
Our sample of five tenant move-ins revealed that applicants' files do not
document Federal Preferences. In the particular instances noted, applicants were
moved-in apartment units under the Federal preference designation "paying in
excess of fifty percent of income for rent". Upon examination of the file
documentation, it was discovered that the file did not contain evidence to
support the Federal Preference claimed. Paragraph 2-28 of HUD Handbook 4350.3
Change-24 essentially requires that applicants with Federal preferences receive
priority over all other applicants.
To ensure Federal Preferences are consistently considered, Lakeside Square
Apartments should consider implementing the use of a checklist, or other
document, whereby leasing personnel can sign-off that a given preference exists.
If the application processing determines that an applicant does not qualify for
a Federal Preference, the leasing personnel should select the next applicant on
the waiting list who has indicated a Federal Preference.
FINDING #2:
During July 1997 the Partnership's waiting list was opened and applications were
accepted. As the applications were processed, qualified applicants were
processed for housing. Three applicants did not meet the Partnership's screening
criteria and, accordingly will not be offered housing. The applicants, however,
had not been given a formal denial. Denial letters should be provided
immediately upon determination so that the applicant is afforded the appeals
right provided by housing regulations.
Findings #1 and #2 appear to relate principally to employee turnover experienced
during 1997.
<PAGE>
Auditee's Corrective Action Plan
Project: Lakeside Square Limited Partnership
Audit Firm: Vacek, Lange & Westerfield, P.C.
Audit Period: December 31, 1997
A. Comments on Findings and Recommendations
Finding #1
Lakeside did opt to use the Preference Rule and it
has been our practice to obtain copies of leases from
the applicants to show that they, indeed, did pay
over 50% of their income on rent. Due to transition
of personnel some of these copies were not made to go
on file. We are in process of trying to obtain the
missing information to correct the deficiency.
Finding #2
It has always been our practice to formally deny
applicants when they do not meet our screening
criteria. We follow the 4350.3 procedures. These
three applicants were inadvertently overlooked to the
best of my knowledge.
B. Action Taken
Findings #1 & #2
The actions taken on above two findings are tighter
controls, periodic site file audits and closer
supervision of site staff.
C. Status of Corrective Action or Prior Findings
Our December 31, 1996 audit did not disclose any findings.
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Auditors' Comments on Audit Resolution Matters
Our December 31, 1996 audit did not reveal any matters to report.
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Fair Housing and Non-Discrimination
To the Partners of
Lakeside Square Limited Partnership
We have audited the financial statements of Lakeside Square Limited Partnership
as of and for the year ended December 31, 1997, and have issued our report
thereon dated January 23, 1998.
We have applied procedures to test Lakeside Square Limited Partnership's
compliance with the Fair Housing and Non-Discrimination requirements applicable
to its HUD-assisted program for the year ended December 31, 1997.
Our procedures were limited to the applicable compliance requirement 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. Our
procedures were substantially less in scope than an audit, the objective of
which would be the expression of an opinion on Lakeside Square Limited
Partnership's compliance with the Fair Housing and Non-Discrimination
requirements.
Accordingly, we do not express such an opinion.
The results of our tests disclosed minor instances of noncompliance that are
required to be reported herein under the Guide and such instances are presented
on page 24 of this report.
This report is intended for the information of Lakeside Square Limited
Partnership's partners, 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/Vacek, Lange & Westerfield, P.C.
January 23, 1998
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Certification of Partners and Management Agent's Certification
I hereby certify that I have examined the accompanying financial statements and
supplementary data of Lakeside Square Limited Partnership HUD Project No.
IL06-E000-093 (Federal Identification No. 76-0288740) and to the best of my
knowledge and belief, the same are complete and accurate.
/s/ John N. Barineau, III January 23, 1998
-------------------------------------------------
John N. Barineau, III Date
as President of J.B. Lakeside, Inc.
Managing General Partner of
Texas Lakeside Group Limited Partnership,
General Partner of Lakeside Square Limited Partnership
Also as, President of
Radney Management & Investments, Inc.
Project Managing Agent and as individual directly
responsible for project management
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
(AN ILLINOIS LIMITED PARTNERSHIP)
HUD PROJECT NO. IL06-E000-093
FINANCIAL STATEMENTS
December 31, 1998
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
Index to Financial Statements
<TABLE>
<CAPTION>
Page(s)
<S> <C>
Independent Auditors' Report 1
Auditor Information 1
Balance Sheet 2
Statement of Profit and Loss 3 - 4
Statement of Changes in Partners' Capital 5
Statement of Cash Flows 6 - 7
Notes to Financial Statements 8 - 12
Supplementary Data 13 - 19
Independent Auditors' Report on Internal Control 20 - 21
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs 22
Auditors' Schedule of Findings 23
Auditee's Corrective Action Plan 24
Auditor's Comments on Audit Resolution Matters 25
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Fair Housing and Non-Discrimination 26
Certification of Partners and Managing Agent 27
</TABLE>
<PAGE>
- 29 -
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report
To the Partners of
Lakeside Square Limited Partnership
We have audited the accompanying balance sheet of Lakeside Square
Limited Partnership, a limited partnership, (HUD Project No.
IL06-E000-093) as of December 31, 1998, and the related statements of
profit and loss, changes in partners' capital, and cash flows for the
year then ended. These financial statements are the responsibility of
the Partnership's managing general partner. 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 the managing general partner, 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 Lakeside
Square Limited Partnership as of December 31, 1998, and the results of
its operations, changes in partners' capital and its cash flows for the
year then ended in conformity with generally accepted accounting
principles.
Our audit was conducted for the purpose of forming an opinion on the
basic financial statements taken as a whole. The supplementary data
included in the report (shown on pages 13 to 19) are presented for the
purposes of additional analysis and are not a required part of the
basic financial statements of Lakeside Square Limited Partnership. Such
information has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, is
fairly presented, in all material respects, in relation to the
financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued
reports dated January 27, 1999 on our consideration of Lakeside Square
Limited Partnership's (the "Partnership") internal controls, and the
Partnership's compliance with specific requirements applicable to major
HUD programs and Fair Housing and Discrimination.
/s/ Vacek,Lange & Westerfield, P.C.
Houston, Texas
January 27, 1999
-----------------------------------------------------------------
Under the direct supervision of Randy G. Lange, C.P.A., Texas License
No. 24214, the audit of Lakeside Square Limited Partnership's December
31, 1998 financial statements was performed by Vacek, Lange &
Westerfield, P.C., FIN: 76-0192275, Texas License C 1882-001, 11
Greenway Plaza, Suite 1524, Houston, Texas 77046, 713-623-2929.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Balance Sheet
December 31, 1998
<TABLE>
<CAPTION>
ASSETS
Current assets:
<S> <C> <C> <C>
1120 Cash - Operations $ 812,926
1125 Cash - Entity 10,022
Total Cash 822,948
1130 Tenant Accounts Receivable 472
1200 Miscellaneous Prepaid Expenses 46,278
1100T Total current assets 869,698
1191 Tenant Deposits Held in Trust 84,147
Restricted deposits and funded reserves:
1310 Escrow Deposits 145,314
1320 Replacement Reserve 347,505
1300T Total deposits 492,819
Property and equipment (Notes 1 and 3):
1410 Land $ 400,000
1420 Buildings 10,326,151
1440 Buildings Equipment 167,044
1465 Office Furniture and Equipment 20,926
1480 Motor Vehicles 15,497
1400T Total Fixed Assets 10,929,618
1495 Accumulated Depreciation 3,418,612
1400N Net Fixed Assets 7,511,006
Intangible Assets
Organization costs 680
Debt issue costs, net of amortization of $108,806 51,839
1520 Total Intangible Assets 52,519
1000T Total assets $ 9,010,189
The accompanying notes are an integral part
of these financial statements.
- 2 -
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
<S> <C> <C>
2109 Accounts Payable (30 days) $ 26,581
2113 Accounts Payable Entity 15,981
2120 Accrued Wages Payable 9,496
2121 Accrued Payroll Taxes Payable 727
2123 Accrued Management Fee Payable 11,190
2150 Accrued Property Taxes 320,000
2170 Mortgage Payable (Short-Term) 180,784
2190 Miscellaneous Current Liabilities 2,832
2210 Prepaid Revenue 660
2122T Total current liabilities 568,251
2191 Tenant Deposits Held In Trust 59,796
2320 Mortgage Payable 5,824,341
2300T Total Long-Term Liabilities 5,884,137
2000T Total liabilities 6,452,388
3130 Partners' Capital 2,557,801
2033T Total Liabilities and Partners' Capital $ 9,010,189
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
Statement of
Profit and Loss
For Month/Period Project Number: Project Name:
Beginning: Ending:
JAN. 1, 1998 DEC 31,1998 IL06-E000-093 LAKESIDE SQUARE LIMITED PARTNERSHIP
<S> <C> <C> <C> <C>
Part I Description of Account Acct. No. Amount*
Gross Potential 5120 755,780
Tenant Assistance Payments 5121 2,308,889
Rental Stores and Commercial 5140
Revenue Garage and Parking Spaces 5170 68,724
5100 Flexible Subsidy Income 5180
Miscellaneous (specify) 5190
Excess Rent 5191
Insurance 5192
Special Claims 5193
Retained Excess Income 5194
Total Rent Revenue 5100T 3,133,393
Apartments 5220 46,249
Stores and Commercial 5240
Vacancies Rental Concessions 5250
5200 Garage and Parking Spaces 5270
Miscellaneous 5290
Total Vacancies 5200T 46,249
Net Rental Revenue 5152N 3,087,144
Nursing Homes/Assited Living
Board Care/ Other Coop (Schedule Attached) 5300
Project Operations 5410 22,957
Financial Residual Receipts 5430
Revenue Reserve for Replacement 5440 11,570
5400 Revenue from Investments--Miscellaneous 5490
Total Financial Revenue 5400T 34,527
Laundry and Vending 5910 19,556
Tenant Charges 5920 5,430
Other Interest Reduction Payments 5945
Revenue Other Revenue (specify) Miscellaneus 5990
5900 Total Other Revenue 5900T 24,986
Total Revenue 5000T 3,146,657
Conventions and Meetings 6203
Management Consultants 6204
Advertising and Marketing 6210
Other Renting Expenses 6250
Office Salaries 6310 81,346
Office Expenses 6311 77,371
Office or Model Apartment Rent 6312
Administrative Management 6320 192,256
Expenses Manager or Superintendent Salaries 6330 54,692
6200/6300 Administrative Rent Free Unit 6331 8,514
Legal Expenses Project 6340 10,893
Audit Expense 6350 12,587
Bookkeeping Fees/Accounting Services 6351
Bad Debts 6370
Miscellaneous Administrative Expense 6390 7,438
Total Administrative Expenses 6263T 445,097
Fuel Oil/Coal 6420
Utilities Electricity 6450 50,710
Expense Water 6451 47,959
6400 Gas 6452 119,691
Sewer 6453
Total Utilities Expense 6400T 218,360
Page 1 of 2
The accompanying notes are an integral part of these financial statements.
-3-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Payroll 6510 155,738
Supplies 6515 57,909
Contracts 6520 214,479
Operating Maintenance Rent Free Unit 6521
Garbage and Trash Removal 6525 8,568
Security Payroll/Contract 6530 162,217
Security Rent Free Unit 6531
Heating/Cooling Repairs and Maintenance 6546 20,805
Snow Removal 6548
Vehicle & Maintenance Equipment Operation & Repairs 6570 8,595
Miscellaneous Operating and Maintenance Expenses 6590 9,884
Total Operating and Maintenance Expenses 6500T 638,195
Real Estate Taxes 6710 321,307
Payroll Taxes (Project's share) 6711 25,571
Taxes Property and Liability Insurance (Hazard) 6720 53,159
and Fidelity Bond Insurance 6721 358
Insurance Workmen's Compensation 6722 7,089
6700 Health Insurance and Other Employee Benefits 6723 33,093
Miscellaneous Taxes, Licenses, Permits and Insurance 6790 2,013
Total Taxes and Insurance 6700T 442,590
Interest on Mortgage Payable 6820 472,620
Financial Interest on Notes Payable (Long-Term) 6830
Expenses Interest on Notes Payable (Short-Term) 6840
6800 Mortgage Insurance Premium/Service Charge 6850
Miscellaneous Financial Expenses 6890 3,282
Total Financial Expenses 6800T 475,902
Elderly &
Congregate Nursing Home/Assited Living, etc.--Schedule Attached 6900
Service
Total Cost of Operations Before Depreciation 6000T 2,220,144
Profit (Loss) Before Depreciation 5060T 926,513
Depreciation Expense 6600 394,553
Amortization Expense 6610 11,960
Operating Profit or (Loss) 5060N 520,000
Officer Salaries 7110
Corporate or Legal Expenses 7120
Mortgagor Federal, State and Other Income Taxes 7130
Entity Interest Income 7140
Expenses Interest on Mortgage Payable 7141
7100 Interest on Notes Payable 7142
Other Expenses 7190 66,540
Total Corporate Expenses 7100T 66,540
Net Profit or (Loss) 3250 453,460
Part II
1.Total mortgage principal payments required during the audit year (12 monthly
payments). This applies to all direct loans and HUD-held and fully insured mortgages.
Any approved second mortgages should be included in the figures. $167,344
2.Total of 12 monthly deposits in the audit year into the Replacement Reserve account,
as required by the Regulatory Agreement even if payments may be temporarily
suspended or reduced. $36,000
3.Replacement Reserves, or Residual Receipts and Releases which are included as
expenseitems on this Profit and Loss statement. $2,200
4.Project Improvement Reserve releases under the Flexible Subsidy Program that are
included as expense items on this Profit and Loss Statement. n/a
</TABLE>
Page 2 of 2
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Statement of Changes in Partners' Equity
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Partners' Partners'
Capital Capital
Owner- (Deficit) Net Cash (Deficit)
ship % 12/31/97 Income Withdrawals 12/31/98
<S> <C> <C> <C> <C> <C>
General Partner:
Texas Lakeside Group
Limited Partnership 1% -$1,002,018 $371,689 -$500,000 -$1,130,329
Investor Limited Partner:
Boston Financial Qualified
Housing Tax Credits LP, IV 99% 3,716,377 81,771 -110,000 3,688,148
Special Limited Partner:
SLP 89, Inc. NIL 0 0 0 0
Class A Limited Partner:
Radney Management and
Investments, Inc. NIL -18 0 0 -18
---------- --------- --------- ----------
$2,714,341 $453,460 -$610,000 $2,557,801
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C> <C>
Rental receipts $ 3,083,944
Interest receipts 34,527
Other receipts 24,986
Total reciepts 3,143,456
Administrative expenses -117,753
Management fees -188,917
Utilities -229,671
Salaries and wages -289,505
Operating and maintenance expenses -495,826
Real estate taxes -310,611
Property insurance -48,670
Miscellaneous taxes and insurance -67,936
Tenant security and other deposits -2,608
Interest on mortgage note -472,620
Miscellaneous financial expenses -3,050
-2,221,951
Net cash provided by operating activities 921,506
(See page 7 for reconciliation to net income)
Cash flows from investing activities:
Building improvements and acquisition of other depreciable assets -33,770
Net deposits to mortgage escrow account -38,467
Net deposits to the reserve for replacement account -33,770
Net cash (used) by investing activities -77,709
Cash flows from financing activities:
Mortgage principal payments -173,077
Cash distributions paid to partners -610,000
Other financing activties (entity expeses) -63,208
Net cash (used) by financing activities -846,285
Net increase in cash -2,488
Cash - beginning of period 825,436
Cash - end of period $ 822,948
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Reconcilation of net income to net cash provided operating activities:
Net income $ 453,460
Adjustments to reconcile net income to net
Cash provided by operating activities:
Depreciation 394,553
Amortization 11,960
Entitiy expenses 66,540
Decrease (increase) in:
Tenant accounts receivable 5,062
Prepaid expenses 4,486
Cash restricted for tenant security deposits -2,728
Increase (decrease) in:
Accounts payable -25,630
Accrued liabilities 16,497
Tenant security deposit 5,336
Prepaid revenue (8,262)
Other items 232
Net cash provided by operating activities $ 921,506
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Notes to Financial Statements
December 31, 1998
Note 1 - The Organization and Summary of Significant Account Policies
Organization
Lakeside Square Limited Partnership (the "Partnership") was organized on
October 2, 1989 as a limited partnership under the laws of the State of
Illinois to acquire an apartment building located in Chicago, Illinois,
and to operate under the National Housing Act, such apartment project
consisting of 308 units. The apartment project is regulated by the U.S.
Department of Housing and Urban Development ("HUD") as to rent charges
and certain operating methods. Additionally, the Partnership entered into
a Housing Assistance Payments Contract ("HAP") which limits annual
distributions to partners to an amount equivalent to surplus cash, as
defined. Surplus cash is calculated on a specific date in time and is not
cumulative for purposes of determining allowable distributions to
partners. Surplus cash at December 31, 1998 is $771,256 and is calculated
on page 18 of this report. The amended partnership agreement specifies
that the term of the Partnership shall not extend beyond December 31,
2040.
As specified in the HAP contract, the Partnership's rental income is
subsidized under Section 8 of the National Housing Act. Accordingly, HUD
subsidizes and pays to the Partnership a portion of each qualifying
tenant's rent. The amount of subsidy is based on the tenant's adjusted
income but is not to exceed 100% of contract rent and certain utility
allowances. The provisions stated herein are defined by the HAP contract,
and such contract had an original 15 year term commencing in October
1989.
Under terms of the Partnership Agreement, profits and losses of the
Partnership are allocated in accordance with each partner's percentage
interest, which are as follows:
Texas Lakeside Group Limited Partnership 1%
Boston Financial Qualified Housing Tax
Credits L.P. IV (the "Investor Limited Partner") 99%
Other Partners NIL
For years in which cash flow is distributed to partners, profits will be
allocated to the partners ratably in accordance with such distributions.
Generally, the partnership agreement specifies that distributions of cash
flow, as defined, prior to January 1, 1992, shall be distributed to the
general partner. Thereafter and through December 31, 2010, a cumulative
"Priority Distribution" of $61,000 per year through 1995 and $110,000 per
year, thereafter, is payable to the Investor Limited Partner. The next
$500,000 of cash flow shall be distributed to the General Partner and any
amounts in excess thereof is to be distributed in accordance with each
partner's percentage interest. Distributions of cash flow subsequent to
December 31, 2010, will be made in accordance with provisions of the
Partnership Agreement.
<PAGE>
The Partnership Agreement and other agreements with HUD, provide for
Radney Management & Investments, Inc. to be paid a management fee of 6%
of gross collections (See Note 5).
Management's 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 revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Debt Issue Costs
Costs incurred to refinance the apartment project acquisition and to
secure funds to rehabilitate the project are capitalized and amortized
over the life of the related loans using the effective interest rate
method of amortization. Amortization of debt issue costs for 1998
totalled $11,960 and is included in mortgagor entity expenses.
Cash Equivalents Cash Flows
For purposes of the statement of cash flows, the Partnership considers
all highly liquid debt instruments purchased with a maturity of three
months or less and all certificates of deposit to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the following estimated useful lives:
Life
Buildings and improvements 27.5 years
Building equipment and furniture 7.0 years
Vehicle 5.0 years
The Partnership accounts for the carrying value of long-lived assets in
accordance with the requirements of Statements of Financial Accounting
Standards #121.
Expenditures for major renewals and betterments which substantially
increase the project's remaining estimated useful life are capitalized.
Expenditures for maintenance and repairs are charged to expense as
incurred. When properties are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the respective
accounts and any gain or loss is recognized currently.
Income Taxes
<PAGE>
The Partnership is not a tax paying entity. Income, deductions and
credits of the Partnership must be shown on each individual partner's tax
return. Accordingly, a provision for Federal income taxes has not been
made in the financial statements. The Partnership's net income for
Federal income tax purposes is approximately $456,000. The difference
between financial statement and income tax reporting net income is due to
differing depreciation methods, non-deductible life insurance and
recognition of deferred rents as taxable income when collected.
A substantial portion of the Partnership's assets qualify to generate low
income housing tax credits. Low income housing tax credits for 1998 are
estimated to be $643,000. If the Partnership meets specific requirements
under existing income tax regulations, certain low income housing tax
credits will be available annually through December 31, 2001.
Revenue Recognition
Monthly rents from occupied units are recognized as income on the
first day of each month. Rents collected prior to the first day of the
month are deferred.
Mortgagor Entity Expenses
Mortgagor entity expenses generally consist of wages, payroll benefit
allowance expense, travel expenses, and miscellaneous office expenses.
Note 2 - Reserve for Replacement
Pursuant to terms of the Community Investment Corporation ("CIC") loan
agreement, the Partnership is currently required to deposit $3,000 per
month to a "Reserve for Replacement". Monthly deposits to the fund will
continue until the fund accumulates $400,000. Withdrawals from the fund
require approval from CIC and are generally limited to expenditures
necessary to improve or replace buildings and equipment.
Note 3 - Long-Term Debt
Long-term mortgage debt as December 31, 1998 consists of:
Nonrecourse note payable to Community Investment Corporation,
secured by mortgage on apartment complex and assignment of rents
generated thereby, interest rate is adjustable every third year
beginning March 1, 1993, but such adjustment shall not exceed 2%
points per adjustment or 5% points in aggregate, interest accrues
at the rate of 7.75% during three year period beginning March 1,
1996, principal and interest are payable in monthly installments
of $20,065, the note is amortized assuming a twenty-five year
level annuity; however, any unpaid principal is due on March 20,
2005 $ 2,211,068
<PAGE>
Nonrecourse note payable to Community Investment Corporation, secured by
mortgage on apartment complex and assignment of rents generated thereby,
interest rate is adjustable every third year beginning March 1, 1993, but such
adjustment shall not exceed 2% points per adjustment or 5% points in aggregate.
The current interest rate is 7.75%, principal and interest are payable in
monthly installments of $33,292, the note is amortized assuming a twenty-five
year level annuity; however, any unpaid principal is due on March 20, 2005
3,794,057
6,005,125
Less - current maturities 180,784
------------
$ 5,824,341
Six individuals related to the Partnership's general partner have severally
guaranteed $500,000 of the notes payable to CIC.
For the succeeding five years, aggregate maturities applicable to long-term debt
outstanding at December 31, 1998 are as follows:
Year Ending
December 31,
1999 $ 180,784
2000 $ 195,305
2001 $ 210,989
2002 $ 227,903
2003 $ 246,207
thereafter $ 4,943,937
Note 4 - Concentration of Credit Risk
The Partnership maintains cash balances and other deposits with banks which, in
aggregate, are $915,684 in excess of insured limits established by the Federal
Deposit Insurance Corporation.
Note 5 - Related Party Transactions
The apartment project is managed by Radney Management and Investments, Inc.
("Radney"), a limited partner in the Partnership. Management fees payable to
Radney are based on six percent of gross collections, which the Partnership's
management interprets to include $92,127 for utility allowances that are
withheld by HUD from gross rents. For the period ended December 31, 1998,
management fees totalled $192,256. Accrued and unpaid management fees as of
December 31, 1998 total $11,190.
For the year ended December 31, 1998, Radney provided the Partnership with all
personnel necessary and assigned to operate the project and was reimbursed or
accrued for actual costs incurred totalling $351,219.
<PAGE>
Additionally, Radney was paid $16,311 for "non front line" employees'
salaries and an employee benefit allowance expense equivalent to 7.7% of
wages which totalled $23,723. Radney was also paid $12,997 for telephone
and office expenses. The non front line employees' salaries, employee
benefit allowance expense, telephone, and office expenses are mortgagor
entity expenses which are essentially paid from "entity" funds.
As of December 31, 1998, non-interest bearing advances due to the
Partnership's general partner totalling $8,361 are included in the
Balance Sheet item captioned "Accounts Payable Entity". The advances were
made in previous years to fund key man life insurance premiums. Also,
accrued employee benefit allowance expenses of $7,620, which are payable
to Radney, are also included in "Accounts Payable Entity".
Note 6 - Accrued Property Taxes Payable
The Partnership is assessed ad valorem taxes by the Tax Assessor for the
County of Cook, Illinois. Property taxes for the year ended December 31,
1998 will be determined and assessed during the summer of 1999. The
Partnership has estimated this assessment will not vary materially from
the 1997 tax assessment. Accordingly, the December 31, 1998 financial
statements reflect a property tax liability based upon this estimate.
Note 7 - Union Contracts
All of the Partnership's maintenance personnel are employed under a
collective bargaining agreement between the Service Employees
International Union (AFL-CIO) and the Apartment Building Owners &
Managers Association. This annual contract expired on November 30, 1998
and the Partnership has negotiated an extended contract through November
1999. The Partnership's administrative personnel do not participate in
collective bargaining agreement.
Note 8 - Contingency
The Partnership has assessed its exposure to date sensitive computer
software programs that may not be operative subsequent to 1999 and has
implemented a requisite course of action to minimize year 2000 risk and
ensure that neither significant costs nor disruption of normal business
operations are encountered. However, because there is no guarantee that
all systems of outside vendors or other entities affecting the
Partnership's operations will be year 2000 complaint, the Partnership
remains susceptible to consequences of the year 2000 issue.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Supplementary Data
December 31, 1998
Accounts and notes receivable (other than tenants):
None
Delinquent tenant accounts receivable:
At December 31, 1998 rents receivable from tenants are as follows:
Number of Amount
tenants past due
Delinquent 30 days 2 $ 271
Delinquent 31-60 days 1 201
Delinquent 61-90 days - - - - -
--------
Total $ 472
========
Mortgage escrow deposits:
Estimated amount required as of December 31, 1998 for future payment of:
City, state, school and county taxes $106,666
Property insurance 11,257
Mortgage insurance N/A
$ 117,923
Total deposits reconciled to mortgagee $ 145,315
=========
Amount per financial statements in excess
(deficient) of estimated requirements $ 27,392
==========
Tenant security deposits:
Tenant security deposits of $84,187 are held in the name of the project at Old
Kent Bank-Chicago, money market account # 1063480. This account is insured by
the Federal Deposit Insurance Corporation. Tenants receive interest on their
deposits calculated at the annual rate of 5%.
<PAGE>
Reserve for replacement:
In accordance with the provisions of the Partnership's note agreement,
restricted cash is held by the Partnership to be used for repair or replacement
of property or equipment with the approval of the mortgagee. The balance of
funds in such reserve is as follows:
Balance, December 31, 1997 $ 309,038
Plus: Monthly deposits 36,000
Less: December 8 release requested:
Replace fire door- expense (2,200)
Refrigerators & stoves - capital (6,903)
Plus: Interest earned 11,570
Balance, December 31, 1998, as confirmed $ 347,505
=========
The reserve account is maintained with Old Kent Bank - Chicago.
Changes in Property and Equipment:
See page 16 for detailed analysis.
Accounts payable (other than trade creditors):
Accounts payable other than trade creditors represents $8,361 payable to the
Partnership's general partner for previous cash advances and life insurance
premiums paid. The repayment thereof, from entity funds, is expected to occur
more than sixty days after December 31, 1998. The payable of $8,361 is included
in the balance sheet caption "Accounts Payable Entity."
Accrued taxes:
Description Basis for Period Date Amount
of Tax Accrual Covered Due Accrued
------------- ------------ --------- ----- ---------
School 1997 Assessed Value 1998 * $ 170,440
City 1997 Assessed Value 1998 * 73,242
County 1997 Assessed Value 1998 * 33,256
Other 199 Assessed Value 1998 * 43,062
----------
$320,000
* 50% of all taxes are due March 1, 1999 and the remaining 50% is due September
1, 1999.
Notes Payable (other than mortgage):
<PAGE>
None
Changes in Ownership Interests:
None
Distributions Paid to Partners
The following distributions were paid from Surplus Cash available as of December
31, 1997:
Date Partner Amount
- ---- -------- --------
January 27, 1998 Texas Lakeside Group Limited Partnership $ 500,000
January 27, 1998 BFQH Tax Credit LP, IV. $ 110,000
Unauthorized Distribution of Project Revenue:
None
Comments on Balance Sheet Items:
None
Compensation of Partners or Officers:
Compensation was not paid to partners during 1998. However, see Note 5 to the
financial statements regarding management fees of $192,256 paid to Radney
Management & Investments, Inc., a Class A Limited Partner.
Apartment unit not producing revenue:
Sofia Slobodetsky, Lakeside Square Limited Partnership's office clerk, currently
resides at the project site and is provided a one-bedroom unit rent free.
Listing of Identity of Interest Companies and Activity:
See page 17.
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Supplementary Data
Changes in Property and Equipment
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
ASSETS ACCUMULATED DEPRECIATION
Balance Balance Balance Not Book
December 31, December 31, December 31, Balance Value
1997 Additions Retirements 1998 1997 Additions Retirements December 31, December 31,
1998 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1410 Land $ 400,000 - - - - - - $ 400,000 $ 0 - - - - - - $ 0 $ 400,000
1420 Buildings $10,326,151 - - - - - - $10,326,151 $2,918,015 375,496 - - - $ 3,293,511 $ 7,032,640
Building
equipment:
1440 Portable $ 135,041 32,003 - - - $ 167,044 $ 80,334 15,440 - - - $ 95,774 $ 71,270
1465 Furniture $ 19,159 1,767 - - - $ 20,926 $ 12,021 1,809 - - - $ 13,830 $ 7,096
1480 Transportatio
equipment $ 15,497 - - - - - - $ 15,497 $ 13,689 1,808 - - - $ 15,497 $ 0
----------- ----- --------- ----------- ---------- -------- ----- -------------- ------------
$10,895,848 $33,770 $0 $10,929,618 $3,024,059 $394,553 $ 0 $ 3,418,612 $ 7,511,006
</TABLE>
Asset additions & retirements Additions Retirements
1440 Fire boxes $ 14,739 ---
1440 Refrigerators (10) -4,450 ---
1440 Ranges (14) -3,440 ---
1440 Computers (3) 7,314 ---
1440 Software - HUD 2000 2,060 ---
$32,033 ---
1465 Desk & office furniture 1,767 ---
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Identity of Interest Companies and Activity
For the Year Ended December 31, 1998
(Supplementary Information)
<TABLE>
<CAPTION>
<S> <C> <C>
Identity of Interest Company Services Amount
Radney Management & Investments,Inc. Management of Project $192,256
Managing Agent
Radney Management & Investments,Inc. Reimbursement for project salaries,
Managing Agent payroll taxes, retirement benefits
and health insurance 351,219
</TABLE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Detail of Miscellaneous Accounts Comprising 10% of Category
For the Year Ended December 31, 1998
(Supplementary Information)
Acct. 7190 - Other Expenses:
Life insurance $5,618
Telephone and office expenses 15,509
Non front- line employee salaries 16,311
Tax return preparation fees 2,633
Travel and other 2,746
Employee benefit allowance paid
to Radney Management & Investments, Inc. 23,723
$66,540
- 17 -
<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 PROJECTNUMBER
Lakeside Square
Limited Partnership 12 / 31 / 98 IL06-E000-093
Part A - Compute Surplus Cash
<S> <C> <C> <C>
Cash
1. Cash (Accounts 1120, 1170, and 1191 less 2105) $897,073
2. Tenant subsidy vouchers due for period covered by financial statement
3. Other (describe)
(a) Total Cash (Add Lines 1, 2 and 3) $897,073
Current obligations
4. Accrued mortgage interest payable 5. Delinquent mortgage
principal payments 6. Delinquent deposits to reserve for
replacements
7. Accounts payable (due within 30 days) $26,581
8. Loans and notes (due within 30 days) $14,535
9. Deficient Tax Insurance or MIP Escrow Deposits
10. Accrued expenses (not escrowed) $24,245
11. Prepaid Rents (Account 2210) $ 60
12. Tenant security deposits liability (Account 2191) $59,796
13. Other (Describe)
(b) Less Total Current Obligations (Add Lines 4 through 13) $125,817
(c) Surplus Cash (Deficiency) (Line (a) minus Line (b)) $771,256
PART B - COMPUTE DISTRIBUTIONS TO OWNERS AND REQUIRED DEPOSIT TO RESIDUAL RECEIPTS
1. Surplus Cash
Limited Dividend Projects
2a. Annual Distribution Earned During Fiscal Period
Coverd 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
5. Deposit Due Residual Receipts
(Must be deposited with Mortgagee within 60 days after Fiscal
Period ends) PREPARED BY REVIEWED BY
Loan Technician Loan Servicer
Date Date
</TABLE>
(See Reverse for Instructions) HUD-93486 (8/95)
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Schedule of Funds In Financial Institutions
December 31, 1998
(Supplementary Data)
<TABLE>
<CAPTION>
<S> <C>
Funds Held by Mortgagor, Regular Operating Account:
Frost National Bank - money market - 4.22% $684,032
TCF National Bank - money market 95,492
Old Kent Bank, Chicago - checking 32,502
Operating account, sub-total 812,026
Petty cash 900
Cash - operations $812,926
Funds Held by Mortgagor, In Trust, Tenant Security Deposit:
Old Kent Bank - Chicago, Money Market $84,147
Funds Held by Mortgagor, In Trust, Reserve for Replacement:
Old Kent Bank - Chicago, Money Market $347,505
Funds Held by Mortgagor $1,244,578
Funds Held by Mortgagee:
Tax and insurance escrow held by Community Investment
Corporation $145,314
</TABLE>
All bank accounts maintained by Mortgagor were confirmed
with the financial institution. Funds held by the
Mortgagee were confirmed with Community Investment
Corporation.
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report on Internal Control
To the Partners
Lakeside Square Limited Partnership
We have audited the financial statements of Lakeside Square Limited
Partnership as of and for the year ended December 31, 1998, and have
issued our report thereon dated January 27, 1999. We have also audited
Lakeside Square Limited Partnership's compliance with requirements
applicable to HUD-assisted programs and have issued our report thereon
dated January 27, 1999.
We conducted our audits 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 the Inspector General. 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 Lakeside Square Limited
Partnership complied with laws and regulations, noncompliance with
which would be material to a HUD-assisted program.
In planning and performing our audit for the year ended December 31,
1998, we obtained an understanding of the design of relevant internal
controls 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 opinion on the financial statements
of Lakeside Square Limited Partnership and on its compliance with
specific requirements applicable to its major HUD-assisted program and
to report on the internal controls in accordance with provisions of the
Guide and not to provide any assurance on the internal controls.
The management of Lakeside Square Limited Partnership is responsible
for establishing and maintaining internal controls. In fulfilling this
responsibility, estimates and judgments by management are required to
assess the expected benefits and related costs of internal controls.
The objectives of internal controls 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 management 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 internal controls,
errors, irregularities, or instances of noncompliance may nevertheless
occur and not be detected. Also, projection of any evaluation 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.
<PAGE>
We performed tests of controls, as required by the Guide, to evaluate the
effectiveness of the design and operation of internal controls that we
considered relevant to preventing or detecting material noncompliance with
specific requirements applicable to Lakeside Square Limited Partnership's
HUD-assisted program. Our procedures were less in scope than would be necessary
to render an opinion on internal control policy and procedures. Accordingly, we
do not express such an opinion.
Our consideration of internal controls would not necessarily disclose all
matters in internal controls that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a reportable condition in which the design or operation of
one or more of the internal control components does 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. We noted no matters
involving internal controls and its operation that we consider to be material
weaknesses as defined above.
This report is intended solely for the information of Lakeside Square Limited
Partnership's partners, management and personnel, and the Department of Housing
and Urban Development and is not intended to be and should not be used by anyone
other than these specified parties.
/s/Vacek, Lange & Westerfield P.C.
January 27, 1999
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Major HUD Programs
To the Partners
Lakeside Square Limited Partnership
We have audited the financial statements of Lakeside Square Limited
Partnership as of and for the year ended December 31, 1998 and have
issued our report thereon dated January 27, 1999.
We have also audited Lakeside Square Limited Partnership's compliance
with the specific program requirements governing tenant security
deposits, cash receipts and disbursements, distributions to owners,
tenant application, tenant eligibility, tenant recertification,
management functions, maintenance and reexamination of tenants, that
are applicable to its only major HUD-assisted program (Section 8 rent
subsidy) for the year ended December 31, 1998. The management of
Lakeside Square Limited Partnership 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 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. 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 Lakeside Square Limited
Partnership's compliance with those requirements. We believe that our
audit provides a reasonable basis for our opinion.
The results of our tests disclosed immaterial instances of
noncompliance with the above requirements, which have been communicated
to management of Lakeside Square Limited Partnership in a separate
letter dated February 10, 1999. We considered those instances of
non-compliance in forming our opinion on compliance, which is expressed
in the following paragraph.
In our opinion, Lakeside Square Limited Partnership complied, in all
material respects, with the requirements described above that are
applicable to its major HUD-assisted program for the year ended
December 31, 1998.
This report is intended solely for the information of Lakeside Square
Limited Partnership's partners, management and personnel, and the
Department of Housing and Urban Development and is not intended to be
and should not be used by anyone other than these specified parties.
/s/Vacek, Lange & Westerfield P.C.
January 27, 1999
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Auditors' Schedule of Findings
There are no findings to report.
<PAGE>
Auditee's Corrective Action Plan
Project: Lakeside Square Limited Partnership
Audit Firm: Vacek, Lange & Westerfield, P.C.
Audit Period: December 31, 1998
A. Comments on Findings and Recommendations
The audit did not disclose any reportable findings.
B. Action Taken
None required.
C. Status of Corrective Action or Prior Findings
-------------------------------------------------------------------------
During 1998 the Partnership discontinued the use of Federal Preferences for
selecting housing applicants. Also, property management was instructed to
issue applicant denial letters expeditiously.
---------------------------------------------------------------------------
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Auditors' Comments on Audit Resolution Matters
The Partnership has taken action to resolve both findings reported in
our December 31, 1997 report. Specifically, Federal Preference are no
longer used to select housing applicants and formal applicant denial
letters are issued on a timely basis.
<PAGE>
VACEK, LANGE & WESTERFIELD, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
ELEVEN GREENWAY PLAZA
SUITE 1524
HOUSTON, TEXAS 77046
(713) 623-2929
Fax: (713) 623-4436
MEMBERS, AMERICAN INSTITUTE OF MEMBERS, TEXAS SOCIETY OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors' Report on Compliance with Specific
Requirements Applicable to Fair Housing and Non-Discrimination
To the Partners of
Lakeside Square Limited Partnership
We have audited the financial statements of Lakeside Square Limited Partnership
as of and for the year ended December 31, 1998, and have issued our report
thereon dated January 27, 1999.
We have applied procedures to test Lakeside Square Limited Partnership's
compliance with the Fair Housing and Non-Discrimination requirements applicable
to its HUD-assisted program for the year ended December 31, 1998.
Our procedures were limited to the applicable compliance requirement 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. Our
procedures were substantially less in scope than an audit, the objective of
which would be the expression of an opinion on Lakeside Square Limited
Partnership's compliance with the Fair Housing and Non-Discrimination
requirements.
Accordingly, we do not express such an opinion.
The results of our tests disclosed immaterial instances of noncompliance with
the above requirements, which have been communicated to management of Lakeside
Square Limited Partnership in a separate letter dated February 10, 1999.
This report is intended solely for the information of Lakeside Square Limited
Partnership's partners, management and personnel, and the Department of Housing
and Urban Development and is not intended to be and should not be used by anyone
other than these specified parties.
/s/Vacek, Lange & Westerfield P.C.
January 27, 1999
<PAGE>
LAKESIDE SQUARE LIMITED PARTNERSHIP
HUD Project No. IL06-E000-093
Certification of Partners and Management Agent's Certification
I hereby certify that I have examined the accompanying financial statements and
supplementary data of Lakeside Square Limited Partnership HUD Project No.
IL06-E000-093 (Federal Identification No. 76-0288740) and to the best of my
knowledge and belief, the same are complete and accurate.
---------------------------------------------
John N. Barineau, III Date
as President of J.B. Lakeside, Inc.
Managing General Partner of
Texas Lakeside Group Limited Partnership,
General Partner of Lakeside Square Limited Partnership
Also as, President of
Radney Management & Investments, Inc.
Project Managing Agent and as individual directly
responsible for project management
<PAGE>
Financial Statements, Additional
Information and Additional Reports
Kenilworth Associates Ltd.
A Limited Partnership
(a.k.a. Mayfair Mansions)
FHA Project No. 000-44160/000-35349
Year ended December 31, 1998
Kenilworth Associates Ltd.
A Limited Partnership
(a.k.a. Mayfair Mansions)
FHA Project No. 000-44160/000-35349
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Financial Statements, Additional
Information and Additional Reports
Year ended December 31, 1998
Contents
Report of Independent Auditors.................................................3
Financial Statements:
Balance Sheet...............................................................4
Statement of Profit and Loss................................................6
Statement of Partners' Equity (Deficit).....................................8
Statement of Cash Flows.....................................................9
Notes to Financial Statements..............................................12
19
<PAGE>
Report of Independent Auditors
To the Partners
Kenilworth Associates Ltd.
We have audited the accompanying balance sheet of Kenilworth Associates Ltd., a
Limited Partnership, FHA Project No.000-44160/000-35349 (the "Partnership"), as
of December 31, 1998, and the related statements of profit and loss, partners'
equity (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 Kenilworth Associates Ltd., a
Limited Partnership, FHA Project No.000-44160/000-35349, as of December 31,
1998, and the results of its operations and cash flows for the year then ended
in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
the report, as referred to in the Table of Contents, is presented for the
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, unless
otherwise noted, and in our opinion, is fairly stated in all material respects
in relation to the financial statements taken as a whole.
In accordance with Government Auditing Standards, we have issued a report dated
February 12, 1999, on our consideration of Kenilworth Associates Ltd.'s, a
Limited Partnership, FHA Project No. 000-44160/000-35349 internal control and
a report dated February 12, 1999, on its compliance with applicable laws and
regulations.
[GRAPHIC OMITTED]
February 12, 1999
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Balance Sheet
December 31, 1998
Assets
Current assets:
1120 Cash - operations $ 311,695
1130 Accounts receivable - tenant 48,603
1160 Accounts receivable - interest 2,542
1191 Tenant security deposits held in trust fund 190,000
1200 Miscellaneous prepaid expense 156,920
---------------------
709,760
Funded Reserves:
1310 Escrow deposits 150,880
1320 Replacement reserve 986,224
1330 Other reserves 1,221,204
1340 Residual receipts reserve 5,985
---------------------
2,364,293
Fixed Assets:
1410 Land 2,080,022
1420 Buildings 28,010,005
1465 Office furniture and equipment 13,921
1470 Maintenance equipment 133,560
1480 Motor vehicles 16,124
1490 Miscellaneous fixed assets 5,269
---------------------
30,258,901
Less: 1495 Accumulated depreciation (10,819,279)
---------------------
19,439,622
Other assets:
1520 Intangible assets, less accumulated amortization of $163,618
133,953
---------------------
Total assets $ 22,647,628
=====================
See accompanying notes.
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Balance Sheet (continued)
December 31, 1998
Liabilities
Current liabilities:
2110 Accounts payable - operations $ 92,568
2120 Accrued wages payable 8,255
2121 Accrued payroll taxes payable 7,057
2123 Accrued management fee payable 18,624
2130 Accrued interest payable - section 236 1,182
2131 Accrued interest payable - first mortgage 69,923
2133 Accrued interest payable - other loans 419,100
2170 Mortgage payable - first mortgage (short-term) 149,575
2172 Mortgage payable - second mortgage (short-term) 217,111
2191 Tenant deposits held in trust 187,796
2210 Prepaid revenue 24,255
-----------------
1,195,446
Long-term liabilities:
2310 Notes payable (long-term) 1,905,000
2320 Mortgage payable - first mortgage, less current portion 13,673,766
2322 Mortgage payable - second mortgage, less current portion 5,691,425
2390 Miscellaneous long-term liabilities 1,221,204
-----------------
22,491,395
Owners' equity
3130 Partners' deficit (1,039,213)
-----------------
Total liabilities and equity $22,647,628
=================
See accompanying notes.
<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: 01/1/98 000-44160/000-35349 Kenilworth Associates Ltd
Ending: 12/31/98
<TABLE>
- ------------------------------- ---------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
PartI Description of Account Acct. No. Amount*
- ----- ------------------------------------------------ ----------- -------------------------------------------------------
------------------------------------------------ -----------
Rent Revenue Gross Potential 5120 $ 2,347,565
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Tenant Assistance Payments 5121 $ 1,521,523
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
RentalStores and Commercial 5140 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
RevenuGarage and Parking Spaces 5170 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
5100 Flexible Subsidy Income 5180 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Excess Rental 5191 $ 31,383
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Rent Revenue Potential at 100% Occupancy $ 3,900,471
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Apartments 5220 ( 170,159)
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Rental Concessions 5250 ( )
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
VacancStores and Commercial 5240 ( )
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
5200 Garage and Parking Spaces 5270 ( )
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Miscellaneous (specify) 5290 ( )
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Vacancies ( 170,159)
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Net Rental Revenue Rent Revenue Less Vacancies $ 3,730,312
------------------------------------------------ ----------- --------------------------
- ----- ------------------------------------------------ ----------- -------------------------- ----------------------------
Elderly and Congregate Services Income - 5300
Total Service Income (Schedule Attached) 5300
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Financial - Project Operations 5410 $ 18,622
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
FinancRevenue from Investments - Residual Receipts 5430 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
RevenuRevenue from Investments - Reserve for 5440 $ 24,530
Replacement
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
5400 Revenue from Investments - Miscellaneous 5490 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Revenue Income - Other $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Financial Reserve 43,152
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Laundry and Vending Revenue 5910 $ 11,313
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Tenant Changes 5920 $ 19,037
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Other Interest Reduction 5945 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
RevenuExpiration of Gift/Owner Reductions 5960 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
5900 Miscellaneous Revenue 5990 $ 7,140
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Other Revenue 37,490
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Revenue 3,810,954
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Advertising and Marketing 6210 $ 5,319
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Other Renting Expense 6250 $ 4,898
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Office Salaries 6310 $ 68,738
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Office Expenses 6311 $ 28,591
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Office or Model Apartment Rent 6312 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
AdminiManagement Fee 6320 $ 202,044
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
ExpensManager or Superintendent Salaries 6330 $ 42,038
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
6200/6Administrative Rent Free Unit 6331 $ 7,056
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Legal Expense Project 6340 $ 24,825
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Auditing Expenses (Project) 6350 $ 28,900
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Bad Debts 6370 $ 37,482
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Miscellaneous Administrative Expenses 6390 $ 4,322
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Administrative Expenses 454,213
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Fuel Oil/Coal 6420 $
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Electricity 6450 $ 54,495
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
UtilitWater 6451 $ 258,650
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
ExpensGas 6452 $ 130,822
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
6400 Sewer 6453 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Utilities Expense 443,967
------------------------------------------------ ----------- -------------------------- ----------------------------
------------------------------------------------ ----------- -------------------------- ---------------------------
- ----- ------------------------------------------------ ----------- -------------------------- ----------------------------
* All amounts must be rounded to the nearest dollar; $.50 and Page 1 of 2
form HUD-92410 (7/91)
over, round up- $.49 and below, round down. ref Handbook 4370.2
- --------------------------------------------------------------------------------------------------------------------------
<PAGE>
- ------------------------------- ---------------------- -------------------------------------------------------------------
For Month/Period Project Number: Project Name:
Beginning: 01/1/98 000-44160/000-35349 Kenilworth Associates Ltd
Ending: 12/31/98
- ------------------------------- ---------------------- -------------------------------------------------------------------
Part Description of Account Acct. No. Amount*
I
- ----- ------------------------------------------------ ---------- --------------------------------------------------------
------------------------------------------------ ---------- --------------------------
Payroll 6510 $ 194,873
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
Supplies 6515 $ 77,366
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
Contract 6520 $ 257,217
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
Garbage and Trash Removal 6525 $ 57,775
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
OperatSecurity Payroll/Contract 6530 $ 142,853
and
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
MainteHeating/Cooling Repairs 6546 $ 49,297
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
ExpensVehicle Maintenance Equipment Operations and 6570 $ 1,001
Repairs
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
6500 Miscellaneous Operating and Maintenance 6590 $ 35,001
Expenses
------------------------------------------------ ---------- -------------------------- -----------------------------
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- -------------------------- -----------------------------
Total Operating and Maintenance Expenses $ 815,383
- ----- ------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
Real Estate Taxes 6710 $ 189,480
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
Taxes Payroll Taxes (Project's share) 6711 $ 31,584
and
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
InsuraProperty and Liability Insurance (Hazard) 6720 $ 115,491
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
6700 Workmen's Compensation 6722 $ 9,211
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
Miscellaneous Taxes, License, Permits, 6790 $ 23,847
Insurance
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
Total Taxes and Insurance $ 369,613
------------------------------------------------ ---------- --------------------------
- ----- ------------------------------------------------ ---------- -------------------------- -----------------------------
Interest on Bonds Payable 6810 $
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
Interest on Mortgage Payable 6820 $ 1,008,356
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
FinancInterest on Notes Payable (Long-Term) 6830 $ 57,150
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
ExpensInterest on Notes Payable (Short-Term) 6840 $
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
6800 Mortgage Insurance Premium/Service Charge 6850 $ 99,903
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
Miscellaneous Financial Expenses 6890 $ 20,672
------------------------------------------------ ---------- -------------------------- -----------------------------
------------------------------------------------ ---------- --------------------------
Total Financial Expenses $ 1,186,081
- ----- ------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- -------------------------- -----------------------------
Total Service Expenses - Schedule Attached 6900 $
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- -------------------------- -----------------------------
ElderlTotal Cost of Operations Before Depreciation $ 3,269,257
&
------------------------------------------------ ---------- -------------------------- -----------------------------
------------------------------------------------ ---------- --------------------------
CongreProfit (Loss) Before Depreciation and $ 541,697
Amortization
------------------------------------------------ ---------- -------------------------- -----------------------------
------------------------------------------------ ---------- --------------------------
ServicDepreciation (Total) - 6600 (specify) 6600 $ 1,105,067
Expenses
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- -------------------------- -----------------------------
6900 Amortization Expense 6610 $ 2,127
------------------------------------------------ ---------- --------------------------
-------------------------------------------------------------------------------------- -----------------------------
Operating Profit or (Loss) $ (565,497)
-------------------------------------------------------------------------------------- -----------------------------
- ----- ------------------------------------------------ ---------- -------------------------- -----------------------------
Officer Salaries 7110
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
CorporLegal Expenses (Entity) 7120 $
or
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
MortgaTaxes (Federal-State-Entity) 7130-32 $
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- --------------------------
EntityOther Expenses (Entity) 7190 $ 1,074,625
------------------------------------------------ ---------- --------------------------
------------------------------------------------ ---------- -------------------------- -----------------------------
ExpensTotal Corporate Expense $ 1,074,625
------------------------------------------------ ---------- -------------------------- -----------------------------
------------------------------------------------ ---------- -------------------------- -----------------------------
7100 Net Profit or (Loss) $ (1,640,122)
- ----- ------------------------------------------------ ---------- -------------------------- -----------------------------
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 Expense Sub-account Groups. If miscellaneous or other income and/or expense
sub-accounts (5190, 5290, 5940, 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 II
- -------------------------------------------------------------------------------------------- -----------------------------
1. Total principal payments required under the mortgage, even if payments under a Workout
Agreement are less or more $ 311,169
than those required under the mortgage.
- -------------------------------------------------------------------------------------------- -----------------------------
2. Replacement Reserve deposits required by the Regulatory Agreement of Amendments
thereto, even if payments may $ 80,856
be temporarily suspended or waived.
- -------------------------------------------------------------------------------------------- -----------------------------
3. Replacement or Painting Reserve releases which are included as expense items on this
Profit and Loss statement $ -
-----------------------------
- -------------------------------------------------------------------------------------------- -----------------------------
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that are
included as expense items on this
Profit and Loss Statement.
- -------------------------------------------------------------------------------------------- -----------------------------
*U.S. Government Printing Office: 1992 - 312-128/60160 Page 2 of 2
form HUD-92410
</TABLE>
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Statement of Partners' Equity (Deficit)
Year ended December 31, 1998
Partners' equity, beginning of year $ 663,447
Distributions (62,538)
Net loss (1,640,122)
-----------------
Partners' deficit, end of year $ (1,039,213)
=================
Percentage of partnership interests:
General 1%
Limited 99%
See accompanying notes.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Statement of Cash Flows
Year ended December 31, 1998
Cash flows from operating activities
Rental receipts $3,702,827
Interest receipts 43,153
Other receipts 37,489
Administrative expenses (141,392)
Administrative salaries (110,776)
Management fees (203,023)
Utilities (427,795)
Operating and maintenance expenses (495,646)
Operating and maintenance payroll (319,739)
Real estate taxes (186,708)
Payroll taxes (26,876)
Miscellaneous taxes (13,954)
Property insurance (118,802)
Miscellaneous insurance (19,104)
Interest on mortgage notes (1,037,783)
Mortgage insurance premium (96,840)
Miscellaneous financial expense (20,672)
-----------------
Net cash provided by rental operating activities 564,359
Tenant security deposits 2,485
Mortgagor entity expenses (387,316)
-----------------
(384,831)
-----------------
Net cash provided by operating activities $ 179,528
-----------------
See accompanying notes.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Statement of Cash Flows (continued)
Year ended December 31, 1998
Cash flows from investing activities
Acquisitions of building improvements $ (49,085)
Acquisitions of equipment (45,646)
Deposits to reserve for replacements (105,357)
-----------------
Net cash used in investing activities (200,088)
-----------------
Cash flows from financing activities
Proceeds from debt refinancing 457,351
Payment for deferred financing costs (136,100)
Mortgage principal payments (311,169)
Distribution to partners (62,538)
-----------------
Net cash used in financing activities (52,456)
-----------------
Net decrease in cash (73,016)
Cash, beginning of year 384,711
-----------------
Cash, end of year $ 311,695
=================
See accompanying notes.
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Statement of Cash Flows (continued)
Year ended December 31, 1998
Reconciliation of net loss to net cash provided
by operating activities:
Net loss $ (1,640,122)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Extraordinary item 755,230
Depreciation 1,105,067
Amortization expense 2,127
Accrued interest payable - other loans 57,150
Decrease (increase) in:
Accounts receivable-tenants (7,717)
Tenant security deposits held in trust fund 2,251
Miscellaneous prepaid expense (6,084)
Escrow deposits 10,065
Increase (decrease) in:
Accounts payable-operations 16,172
Accrued management fee payable (979)
Accrued wages payable 3,251
Accrued interest payable (29,427)
Prepaid revenue (19,768)
Payable to HUD (67,922)
Tenant deposits held in trust 234
-----------------
Total adjustments 1,819,650
-----------------
Net cash provided by operating activities $ 179,528
=================
See accompanying notes.
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements
Year ended December 31, 1998
1. Organization
Kenilworth Associates, Ltd., a Limited Partnership (the "Partnership"), was
formed as a limited partnership under the laws of the District of Columbia on
November 30, 1985, for the purpose of acquiring, rehabilitating and operating a
rental housing project under Section 221(d)(4) of the National Housing Act. The
project consists of 569 units located in Washington, D.C. and is currently
operating under the name of Mayfair Mansions Apartments.
2. Summary of Significant Accounting Policies
Real Estate
Land, buildings and improvements are recorded at cost. Depreciation is computed
using straight-line and accelerated methods over the estimated useful lives of
the assets for financial reporting purposes. Depreciable lives used are twenty-
seven and one-half years for buildings, fifteen years for land improvements, and
five to seven years for personal property. Expenditures for maintenance and
repairs are charged to operations as incurred; expenditures for improvements are
added to the property accounts.
The Partnership's records impairment on losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less then the carrying amount of those assets. Based on management's
estimation process, no impairment losses were recorded as of December 31, 1998.
Deferred Mortgage Costs
Deferred mortgage costs include fees and costs incurred to obtain and modify the
mortgage loan and are being amortized using the straight-line method which
approximates the effective interest method.
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Income Taxes
No provision or benefit for federal income taxes has been included in these
financial statements since taxable income or loss passes through to, and is
reportable by, the partners individually.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Partnership considers all
highly liquid instruments with a maturity of three months or less to be cash
equivalents.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
3. Mortgages Payable
The first mortgage note is insured under Section 221(d)(4) of the National
Housing Act, and secured by a first deed of trust on the rental property. The
first mortgage note is funded by tax-exempt bonds issued by the District of
Columbia Housing Finance Agency. The original bond issuance funding for the
first mortgage note bore interest at a rate of 8.75% per annum. Principal and
interest were payable by the Partnership in equal monthly installments of
$104,345 through July 2030. The original bond issuance was refunded on June 2,
1998 with a new bond issue which bears interest of a lower rate of 6.07% per
annum. With this refunding, the Partnership's principal and interest payments
have been reduced to equal monthly installments of $82,045 through July 2030. In
connection with the refunding, the Partnership incurred an extraordinary loss of
$1,068,304 on extinguishment of debt. This amount is comprised of fees paid to
the underwriters for the refunding bond issuance expenses and the unamortized
issuance costs on the original bonds. The extraordinary loss has been included
in Other Entity Expenses in the accompanying Statement of Profit and Loss.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
3. Mortgages Payable (continued)
The mortgage was funded by proceeds from a $14,555,000 bond issued by the
District of Columbia Housing Finance Agency. In accordance with the terms of the
indenture, the mortgage servicer makes deposits into the bond fund for bond
principal and interest payments. At December 31, 1998, bond funds held by the
trustee are included in other reserves in the accompanying balance sheet and
consisted of the following:
1998
-----------------
Bond fund $ 421,161
Debt service reserve fund 800,043
=================
$1,221,204
=================
If the trustee determines that the deposits into the bond fund as provided for
under the mortgage are over or under the amounts necessary to meet the debt
service requirements, principal and interest payments under the mortgage
will be increased or decreased as appropriate. The Partnership is responsible
for payment of the trustee's fees and administrative expenses incurred in excess
of those provided for in the bond indenture. Any funds remaining after repayment
of all the bonds and any related agency and trustee charges will be transferred
to the Partnership. In addition to trustee's fees and administrative expenses
associated with the bond fund, the Partnership is required to pay loan
administration fees associated with the mortgage loan. These expenses have been
reflected in Miscellaneous Financial Expense in the accompanying Statement of
Profit and Loss.
The second mortgage note is insured under Section 236 of the National Housing
Act and secured by a second deed of trust on the rental property. The note bears
interest at the rate of 7% per annum. The Partnership entered into an interest
subsidy agreement, which reduces the effective interest rate to approximately
1% over the term of the loan. During 1998, interest reduction payments of
$399,917 were applied against interest expense. The reduced payments are due in
equal, monthly installments of $18,330 through June 2014.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
3. Mortgages Payable (continued)
Under agreements with the mortgage lenders 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. The liability of the
Partnership under the mortgage notes is limited to the underlying value of the
real estate collateral plus other amounts deposited with the lenders.
Annual maturities of the mortgages payable for each of the five years following
December 31, 1998 are as follows:
221(d)(4)
236 Loan ------------------- ----------------------
Loan Total
- ------------------
1999 $ 217,111 $ 149,575 $ 366,686
- ------------------
2000 232,805 158,912 391,717
- ------------------
2001 249,635 168,832 418,467
- ------------------
2002 267,682 179,368 447,050
- ------------------
2003 287,032 190,565 477,597
- ------------------
Thereafter 4,654,271 12,976,089 17,630,360
- ------------------
=================================================================
Total $ 5,908,536 $ 13,823,341 $ 19,731,877
=================================================================
4. Residual Receipts Note
The residual receipts note bears interest at 3% per annum commencing September
1, 1991. Principal and interest are due in full on June 9, 2009 or on the
maturity date of the first deed of trust, whichever is later, provided, however,
that if the first trust is prepaid in full, the holder of the residual receipts
note may at its option declare the principal balance and accrued interest
thereon due and payable. Further, this note shall become due and payable if
there is a change in the identity of the maker, refinancing of any indebtedness
of the project, or transfer or sale of the project unless prior written approval
from the holder is obtained. Prepayment of the principal of this note shall be
made from residual
Kenilworth Associates Ltd.
<PAGE>
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
4. Residual Receipts Note (continued)
receipts, as defined by the U.S. Department of Housing and Urban Development
("HUD"), available in any one year, after annual distributions of surplus cash
of $56,222, as limited by HUD (see Note 10), or a lesser amount if approved by
the holder. Annual prepayments shall not exceed an aggregate amount of $130,804.
5. Uncertainty-HUD Housing Assistance Payment (HAP) Contracts
The Partnership recorded $1,521,523 of its revenues during 1998 from HUD under
the terms of a HAP contract, which provides for rental assistance to the
Partnership on behalf of low-income tenants who meet certain qualifications.
The terms of the HAP contracts outstanding as of December 31, 1998 are as
follows:
Contract Number Units Covered Expiration Date
DC39-M000-043 113 September, 1999
DC39-L000-015 207 December, 1999
HUD has new regulations that govern the continuance of project-based subsidies.
Under the new regulations, owners with HAP contracts expiring after September
30, 1998 may elect to (1) renew contract without restructuring for one year, (2)
opt out of the contract, or (3) enter into the Mark-to-Market program, which
includes a potential restructuring of the mortgage and renewal of the contract.
At this time it is not possible to determine which option the Partnership will
elect, and accordingly, it is not possible to determine the ultimate impact on
the operations of the Partnership.
6. Related Party Transactions
Management Agreement
The property is managed by Urban Realty and Development Corporation, an
affiliate of the general partner, pursuant to a management agreement approved by
HUD. The management agreement provides for a managementfee of 5.5% of monthly
rents and other collections related to the project's operations. Such fees
charged to operations during 1998 amounted to $202,044.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
6. Related Party Transactions (continued)
Additionally, the Partnership Agreement provides that the management fee shall
be equal to the lesser of,(i) the HUD approved management fee or, (ii) 5.5% of
the gross revenues of the project provided, however, that such fee may be
greater than 5.5% of such gross revenues up to the HUD approved fee in any
year in which the full cumulative Priority Distribution has been distributed to
the Limited Partners.
7. Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments", requires disclosure of fair value financial
information about certain financial instruments, whether or not recognized on
the balance sheet. The carrying amounts reported in the balance sheet for
cash-operations, tenant security deposits held in trust fund and funded
reserves approximate those assets' fair value.
Payment of other long-term liabilities are generally dependent upon the
Partnership's ability to achieve cash flow, the partners providing additional
funds, the sale of the project or refinancing of the mortgage at the end of the
Regulatory Agreement. Management believes that estimating the fair value of
these long-term liabilities is either not appropriate or, because of excess
costs, considers estimation of fair value to otherwise be impracticable.
8. Working Capital Loans
If the Partnership requires funds to pay project expenses subsequent to December
31, 1993, the end of the Initial Operating Period, the General Partners are
obligated to make Working Capital Loans to the project up to $100,000. Such
loans, if made, bear interest at the prime rate as established by the First
National Bank of Boston. As of December 31, 1998, no working capital loans were
made to the Partnership.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
9. Distributions of Surplus Cash
The Partnership is subject to a limitation on distributions of surplus cash as
defined by HUD. Annual distributions are limited to $191,472. Surplus cash is
to be distributed pursuant to the Partnership Agreement as follows:
To repay any Working Capital Loans and Voluntary Loans including interest.
To pay a priority distribution to the General and Limited Partners in the
amount of $56,222 to be shared in accordance with their percentage
ownership interests. At December 31, 1998, the cumulative unpaid
priority distributions were $56,222.
To repay any Project Expense Loans.
To pay the Incentive Management Fee (see Note 11).
The balance is distributed to the Partners in accordance with their
percentage interests.
Distributions of $61,915 and $6,944 (including Incentive Management Fee of
$6,321-see Note 11) surplus cash were made to the Limited Partner and General
Partners, respectively, during 1998.
10. Guaranteed Priority Distribution
The General Partners guarantee to pay the Limited Partner a minimum Guaranteed
Priority Distribution of $35,000 annually if funds are not available from
surplus cash. This amount is cumulative and is not to be considered a capital
contribution or loan. No such Guaranteed Priority Distributions were made by the
General Partners for 1998.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
11. Incentive Management Fee
The General Partners are entitled to receive an Incentive Management Fee from
distributable cash based on 50% of the remaining distributable cash after
payment of the Priority Distribution of $56,222. The Incentive Management
Fee is limited to 15% of gross collected income in any one year. Incentive
Management Fees distributed during 1998 from the 1997 surplus cash were $6,321
and have been included in Other Entity Expenses in the accompanying Statement of
Profit and Loss.
12. Year 2000 Readiness (unaudited)
The Year 2000 Issue is the result of computer programs using two digits rather
than four to define the applicable year. Any of the Partnership's computer
programs that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculation causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
The Partnership believes it has identified all of its information to assess
their Year 2000 readiness. The Partnership has not incurred any significant
Year 2000 costs and is not aware of any significant problems that would
materially impact the Partnership's results of operations, liquidity or capital
resources as a result of the Year 2000 issue.
33
<PAGE>
FINANCIAL STATEMENTS, ADDITIONAL
INFORMATION AND ADDITIONAL REPORTS
Kenilworth Associates Ltd.
A Limited Partnership
(a.k.a. Mayfair Mansions)
FHA Project No. 000-44160/000-35349
Year ended December 31, 1997
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Financial Statements, Additional
Information and Additional Reports
Year ended December 31, 1997
Table of Contents
Report of Independent Auditors 3
Financial Statements:
Balance Sheet 4
Statement of Profit and Loss (on HUD form No. 92410) 6
Statement of Partners' Equity 8
Statement of Cash Flows 9
Notes to Financial Statements 12
<PAGE>
Ernst & Young LLP
Report of Independent Auditors
To the Partners
Kenilworth Associates Ltd.
We have audited the accompanying balance sheet of Kenilworth Associates Ltd., a
Limited Partnership, FHA Project No.000-44160/000-35349 ( the "Partnership"), as
of December 31, 1997, and the related statements of profit and loss (on HUD Form
No. 92410), partners' equity, 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 the 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 Kenilworth Associates Ltd., a
Limited Partnership, as of December 31, 1997, and the results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
the report, referred to as "Supplementary Information" in the accompanying Table
of Contents, 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 basic financial
statements, unless otherwise noted, and in our opinion, is fairly stated in all
material respects in relation to the financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued our report
dated January 30, 1998, on our consideration of Kenilworth Associates Ltd.s, a
Limited Partnership, internal control over financial reporting and our report
dated January 30, 1998 on its compliance with certain laws, regulations and
contracts.
/S/ Ernst & Young LLP
January 30, 1998
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Balance Sheet
December 31, 1997
Assets
Current assets:
1120 Cash in bank $ 384,711
1130 Tenant accounts receivable 40,886
1160 Interest receivable 2,542
428,139
Deposits held in trust:
1191 Tenant security deposits held in trust fund 192,251
Prepaid expenses:
1240 Property and liability insurance 46,214
1250 Mortgage insurance 9,305
1270 Real estate taxes 93,860
1290 Workmens' compensation insurance 1,457
150,836
Restricted deposits and funded reserves:
1310 Mortgage insurance 28,296
1311 Real estate taxes 69,709
1312 Hazard insurance 62,940
1320 Reserve for replacements 880,867
1340 Residual receipts 5,985
1370 Bond & debt service reserves fund 1,455,838
2,503,635
Rental property:
1410 Land 2,080,022
1420 Buildings and improvements 27,960,920
1430 Building equipment---fixed 123,228
30,164,170
Less: accumulated depreciation (9,714,212)
20,449,958
Other assets:
Mortgage costs, less accumulated amortization of
$338,130 755,210
Total assets $ 24,480,029
See accompanying notes.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Balance Sheet (continued)
December 31, 1997
Liabilities and partners' equity
Current liabilities:
2110 Accounts payable $ 76,396
2120 Accrued payroll and taxes 12,061
2130 Accrued interest payable 100,532
2190 Payable to management agent 19,603
2320 Mortgage notes payable-current maturities 278,583
2390 Real estate taxes payable to HUD 67,922
555,097
Deposits and prepayment liability:
2191 Tenant security deposits 153,515
2191 Accrued interest on tenant security deposits 34,047
2210 Prepaid rents 44,023
231,585
Long - term liabilities:
2130 Accrued interest on residual receipts note 361,950
2300 Residual receipts note 1,905,000
2320 Mortgage note payable, net of current maturities 13,398,563
2320 Mortgage note payable, net of current maturities 5,908,549
2326 Bond and debt service reserve funds 1,455,838
23,029,900
Partners' equity
3130 Partners' equity 663,447
Total liabilities and equity 24,480,029
See accompanying notes.
<PAGE>
Statement of Profit and Loss
U.S. Department of Housing and Urban Development
Office of Housing
Federal Housing Commissioner
OMB Approval No. 2502-0052 ( Exp. 9/30/98)
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. This agency may not collect
this information and you are not required to complete this form unless it
displays a currently valid OMB control number.
For Month/Period: Beginning 1/1/97 and Ending 12/31/97
Project Number : 000-44160-000-35349
Project Name: Kenilworth Associates Ltd.
Rental Income 5100
Apartments or member carrying charges (Coops) 5120 $ 2,290,809
Tenant assistance programs 5121 1,541,332
Furniture and equipment 5130
Stores and commercial 5140
Garage and parking spaces 5170
Flexible subsidy income 5180
Miscellaneous (specify) over basic rents 5190 31,343
Total rent revenue Potential at 100% occupancy
3,863,484
Vacancies 5200
Apartment 5220 (122,806)
Furnitire and equipment 5230
Stores and commercial 5240
Garage and parking spaces 5270
Miscellaneous (specify) 5290
Total vacancies (122,806)
Net rental revenue (rent revenue less vacancies) 3,740,678
Elderly and Congregate Services Income - 5300
Total Service Income (Schedule Attached) 5300
Financial Revenue 5400
Interest income - project operations 5410 20,508
Income from investments - residual receipt 5430
Income from investments - reserve for replacement 5440 20,830
Income from investments - painting 5490
Interest income - other 5491 8,059
Total financial reserve 49,397
Other Revenue 5900
Laundry and Vending 5910 11,632
NSF Late Charges 5920 14,713
Damages and Cleaning fees 5930
Forfeited tenant security deposits 5940
Other revenue (specify) 5990 9,334
Total other revenue
35,679
Total Revenue 3,825,754
Administrative Expenses 6200/6300
Advertising 6210 3,372
Other Administrative expense 6250 3,679
Office salaries 6310 77,536
Office supplies 6311 13,604
Office or model apartment (rent) 6312
Management 6320 205,241
Manager or superintendent salaries 6330 33,188
Manager or superintendent rent free unit 6331 7,056
Legal expenses (project) 6340 36,237
Auditing expenses (project) 6350 28,460
Bookkeeping fees/accounting services 6351
Telephone and answering service 6360 12,815
Bad debts 6370 34,592
Miscellaneous Administrative expenses (specify) 6390 5,062
Total Administrative Expenses
460,842
Utilities Expense 6400
Fuel oil /coal 6420
Electricity (Light and Misc. Power) 6450 51,338
Water 6451 256,086
Gas 6452 117,986
Sewer 6453
Total Utilities Expense
425,410
Operating and Maintenance expense 6500
Janitor and cleaning payroll 6510 65,074
Janitor and cleaning supplies 6515 9,898
Janitor and cleaning contract 6517
Exterminating payroll/contract 6519 12,620
Exterminating supplies 6520
Garbage and trash removal 6525 55,862
Security payroll/contract 6530 145,638
Grounds payroll 6535 25,613
Grounds supplies 6536
Grounds contract 6537 117,450
Repairs payroll 6540 67,128
Repairs material 6541 54,231
Repairs contract 6542 68,545
Elevator maintenance/contract 6545
Heating/cooling repairs and maintenance 6546 24,247
Swimming pool maintenance/ contract 6547 25,446
Snow removal 6548
Decorating Payroll/contract 6560 65,247
Decorating supplies 6561 5,228
Other 6570 386
Miscellaneous operating and maintenance expenses 6590 8,920
Total operating and maintenance expenses 751,533
Taxes and Insurance 6700
Real estate taxes 6710 188,094
Payroll/taxes/ FICA 6711 31,608
Miscellaneous taxes, licenses and permits 6719 13,935
Property and liability insurance (hazard) 6720 98,728
Fidelity Bond insurance 6721
Workman's compensation 6722 9,576
Health insurance and other employee benefits 6723
Other insurance (specify) 6729 7,507
Total taxes and insurance 349,448
Financial Expenses 6800
Interest on bonds payable 6810
Interest on mortgage payable 6820 1,214,057
Interest on notes payable (long term) 6830 57,150
Interest on notes payable (short term) 6840
Mortgage insurance premium/service charge 6850 99,513
Miscellaneous financial expenses 6890 43,056
Total financial expenses 1,413,776
Elderly & congregate service expenses 6900
Total service expenses 6900
Total cost of operations before depreciation 3,401,009
Profit/(loss) before depreciation 424,745
Depreciation (Total) - 6600 (Specify) 1,096,214
Operating Profit or (Loss) (671,469)
Corporate or mortgagor entity expenses 7100
Officer Salaries 7110
Legal expenses (entity) 7120
Taxes (fed, state, entity) 7130-32
Other expenses (entity) 7190 33,722
Total Corporate expenses 33,722
Net Profit or (Loss) (705,191)
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Statement of Partners' Equity
Year ended December 31, 1997
Partners' equity, beginning of year $1,430,957
Distributions (62,319)
Net Loss (705,191)
Partners' equity, end of year $ 663,447
Percentage of partnership interest:
General 1%
Limited 99%
See accompanying notes.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160-35349
Statement of Cash Flows
Year ended December 31, 1997
Cash flows from operating activities
Rental receipts $ 3,772,498
Interest receipts 49,473
Other receipts 35,679
Administrative expenses (144,877)
Administrative salaries (110,724)
Management fees (203,509)
Utilities (398,065)
Operating and maintenance expenses (448,080)
Operating and maintenance payroll (303,453)
Real estate taxes (177,459)
Payroll taxes (28,760)
Miscellaneous taxes (13,935)
Property insurance (97,954)
Miscellaneous insurance (17,083)
Interest on mortgage notes (1,215,587)
Mortgage insurance premium (98,424)
Miscellaneous financial expense (43,056)
Net cash provided by rental operating activities 556,684
Tenant security deposits (270)
Mortgagor entity expenses (9,094)
(9,364)
Net cash provided by operating activities $ 547,320
Cash flows from investing activities
Acquisition of building improvements $ (35,925)
Acquisitions of equipment (25,887)
Deposits to reserve for replacements (101,790)
Net cash used in investing activities (163,602)
Cash flows from financing activities
Mortgage principal payments (258,566)
Distribution to partners (62,319)
Net cash used in financing activities (320,885)
Net increase in cash 62,833
Cash, beginning of the year 321,878
Cash, end of year 384,711
See accompanying notes.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Statement of Cash Flows (continued)
Year ended December 31, 1997
Reconciliation of net loss to net cash provided by
operating activities:
Net loss $ (705,191)
Adjustment to reconcile net loss to net cash
provided by operating activities:
Depreciation 1,096,214
Amortization 24,628
Accrued interest on residual receipts note 57,150
Decrease (increase) in:
Interest receivable 76
Tenant accounts receivable (581)
Accounts receivable 5,720
Tenant security deposits held in trust fund 6,681
Prepaid property and liability insurance (986)
Prepaid mortgage insurance 935
Prepaid real estate taxes 406
Prepaid workmens' compensation insurance 146
Real estate tax escrow 10,229
Hazard insurance escrow 1,760
Mortgage insurance escrow 154
Increase (decrease) in:
Accounts payable 27,345
Payable to management agent 1,732
Accrued payroll and taxes 2,702
Accrued interest payable (1,530)
Prepaid rents 26,681
Tenant security deposits (6,951)
Total adjustments 1,252,511
Net cash provided by operating activities $ 547,320
See accompanying notes.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements
Year ended December 31, 1997
1. Organization
Kenilworth Associates Ltd., a limited partnership (the "partnership"), was
formed as a limited partnership under the laws of the District of Columbia on
November 30, 1985, for the purpose of acquiring, rehabilitating and operating a
rental housing project under section 221(d)(4) of the National Housing Act. The
project consists of 569 units located in Washington D.C. and is currently
operating under the name of Mayfair Mansions Apartments.
2. Summary of Significant Accounting Policies
Depreciation
Depreciation of buildings, improvements and equipment is computed using the
straight - line and accelerated methods over the estimated useful lives of the
assets for financial reporting purposes. Depreciable lives used are twenty-seven
and one-half years for buildings, fifteen years for land improvements, and seven
years for personal property.
Amortization
Mortgage costs are amortized over the term of the mortgage loan using the
straight-line method.
Income Taxes
No provision or benefit for federal taxes has been included in these financial
statements since taxable income or loss passes through to, and is reportable by
the partners individually.
Cash and cash Equivalents
For purposes of the statement of cash flows, the Partnership considers all
highly liquid instruments with a maturity of three months or less to be cash
equivalents.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Long-Lived Assets
The partnership records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less then the carrying amount of those assets. Based on management's
estimation process, no impairment losses were recorded as of December 31, 1997.
3. Mortgages Payable
The first mortgage note is insured under Section 221 (d)(4) of the National
Housing Act and secured by a first deed of trust on the rental property. The
note bears interest at the rate of 8.75% per annum. Principal and interest are
payable by the partnership in equal monthly installments of $104,345 through
July 2030.
The mortgage was funded by proceeds of a $14,475,000 bond issued by the District
of Columbia Housing Finance Agency. In accordance with the terms of the
indenture, the mortgage servicer makes deposits into the bond fund for bond
principal and interest payments. At December 31, 1997 bond funds held by the
trustee consisted of the following:
1997
Bond fund $317,363
Debt service reserve fund 1,138,475
$1,455,838
If the trustee determines that the deposits into the bond fund as provided for
under the mortgage areover or under the amounts necessary to meet the debt
service requirements, principal and interest payments under the mortgage will be
increased or decreased as appropriate. The Partnership is responsible for
payment of the trustee's fees and administrative expenses incurred in excess of
thoseprovided for in the bond indenture. Any funds remaining after repayment of
all the bonds and any related agency and trustee charges will be transferred to
the Partnership. In addition the trustee's fees and administrative expenses
associated with the bond fund, the Partnership is required to pay loan
administration fees associated with the mortgage loan. These expenses have been
reflected in Miscellaneous Financial Expense in the accompanying Statement of
Profit and Loss.
The second mortgage note is insured under Section 236 of the National Housing
Act and secured by a second deed of trust on the rental property. The note bears
interest at the rate of 7% per annum. The Partnership entered into an interest
subsidy agreement, which reduces the effective interest rate to approximately 1%
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
3. Mortgages Payable (continued)
over the term of the loan. During 1997, interest reduction payments of $401,142
were applied against interest expense. The reduced payments are due in equal,
monthly installments of $18,330 through June 2014.
Under agreements with the mortgage lenders 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.
The liability of the Partnership under the mortgage notes is limited to the
underlying value of the real estate collateral plus other amounts deposited with
the lenders.
Annual maturities of the mortgages payable for each of the five years following
December 31, 1997 are as follows:
221 (D)(4)
236 Loans Loan Total
1998 $ 202,473 $ 76,110 $ 278,583
1999 217,111 83,044 300,155
2000 232,805 90,609 323,414
2001 249,635 98,863 348,498
2002 267,682 107,871 375,553
Thereafter 4,941,316 13,018,176 17,959,492
Total $ 6,111,022 $ 13,474,673 $ 19,585,695
4. Residual Receipts Note
The residual receipt note bears interest at 3% per annum commencing September 1,
1991. Principal and interest are due in full on June 9, 2009 or on the maturity
date of the first deed of trust, whichever is later, provided, however, that if
the first trust is prepaid in full, the holder of the residual receipts note may
at its option declare the principal balance and accrued interest thereon due and
payable. Further, this note shall become due and payable if there is a change in
the identity of the maker, refinancing of any indebtedness of the project, or
transfer or sale of the project unless prior written approval from the holder is
obtained. Prepayment of the principal of this note shall be made from residual
receipts, as defined by the U.S. Department of Housing and Urban Development
("HUD"), available in any one year, after annual
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
4. Residual Receipts Note (continued)
distributions of surplus cash of $56,222, as limited by HUD (see Note 10), or a
lesser amount if approved by the holder. Annual prepayments shall not exceed an
aggregate amount of $130,804.
5. Receivables from Tenants
Delinquent receivables from tenants are summarized as follows:
Number of Days
Tenants Past Due Amount
114 Under 31 $ 30,461
32 31-60 5,976
9 Over 60 4,449
155 $ 40,886
6. Uncertainty-Housing Assistance Agreement
HUD has contracted under Section 8 of the Housing Assistance Payments ("HAP")
Program of the United States Housing Act of 1937 to make housing assistance
payments to the Partnership on behalf of low-income tenants who meet certain
qualifications. There are two housing assistance agreements with five-year
terms, which expire on September 30, 1999 and December 31, 1999.
The Partnership received $1,541,332 of its revenue during 1997 from HUD under
the terms of the HAP contracts. HUD is considering various alternatives to
continuing project- based subsidies which may include the non-renewal of the
existing HAP contracts between the Partnership and HUD. HUD has proposed
alternative plans to replace project-based HAP contracts, including issuing rent
vouchers directly to the tenants, which the tenant could then use for rent at
the project of their choice. At this time, there is no assurance that the HAP
contracts will be extended by the HUD. The ultimate impact of HUD's proposal
plans to the partnership cannot presently be determined.
7. Related Party Transactions
Management Agreement
The property is managed by Urban Realty and Development Corporation, an
affiliate of the general partner, pursuant to a management agreement approved by
HUD. The management agreement provides for a management fee of 5.5% of monthly
rents and other collections related to the project's operations. Such fees
charged to operations during 1997 amounted to $205,241.
Additionally, the Partnership Agreement provides that the management fee shall
be equal to the lesser of, (I) the HUD approved management fee or, (ii) 5.5% of
the gross revenues of the project provided, however that such fee may be greater
than 5.5% of such gross revenues up to the HUD approved fee in any year in which
the full cumulative Priority Distribution has been distributed to the Limited
Partners.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
8. Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of financial Instruments", requires disclosures of fair value financial
information about certain financial instruments, whether or not recognized on
the balance sheet. The carrying amounts reported in the balance sheet for those
financial instruments described in the schedule of funds in financial
institutions included in the supporting data required by HUD listed on the
contents page, approximate those assets' fair value.
Payment of other long-term liabilities are generally dependent upon the
Partnership's ability to achieve cash flow, the partners providing additional
funds, the sale of the project or refinancing of the mortgage at the end of the
Regulatory Agreement. Management believes that estimating the fair value of
these long-term liabilities is either not appropriate or, because of excess
costs, considers estimation of fair value to otherwise be impracticable.
9. Working Capital Loans
If the Partnership requires funds to pay project expense subsequent to December
31, 1993, the end of the Initial Operating Period, the General Partners are
obligated to make Working Capital Loans to the project up to $100,000. Such
loans, if made, bear interest at the prime rate as established by the First
national Bank of Boston. As of December 31, 1997, no working capital loans were
made to the Partnership.
10. Distributions of Surplus Cash
The Partnership is subject to a limitation on distributions of surplus cash as
defined by HUD. Annual distributions are limited to $191,472. Surplus cash is
to be distributed pursuant to the Partnership Agreement as follows:
To repay any Working Capital Loans and Voluntary Loans including interest.
To pay a priority distribution to the General and Limited Partners in the
amount of $56,222 to be shared in accordance with their percentage
ownership interests. At December 31, 1997, the cumulative unpaid priority
distributions were $56,222.
To repay any Project Expense Loans.
To pay the Incentive Management Fee (see Note 12).
The balance is distributed to the partners in accordance with their
percentage interests.
Distributions of $61,696 and $6,714 surplus cash were made to the investor
Limited Partner and General Partners, respectively, during 1997.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
11. Guaranteed Priority Distribution
The General Partners guarantee to pay the Investor Limited Partner a minimum
Guaranteed Priority Distribution of $35,000 annually if funds are not available
from surplus cash. This amount is cumulative and is not to be considered a
capital contribution or loan. No such Guaranteed Priority Distributions were
made by the General Partners for 1997.
12. Incentive Management Fee
The General Partners are entitled to receive an Incentive Management Fee from
distributable cash based on 50% of the remaining distributable cash after
payment of the Priority Distribution of $56,222. The Incentive Management Fee
is limited to 15% of gross collected income in any one year. Incentive
Management Fee distributed during 1997 from the 1996 surplus cash were $6,091
and have been included in Other Entity Expenses in the accompanying Statement of
Profit and Loss.
<PAGE>
Financial Statements, Additional
Information and Additional Reports
Kenilworth Associates Ltd.
A Limited Partnership
(a.k.a. Mayfair Mansions)
FHA Project No. 000-44160/000-35349
Year ended December 31, 1996
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Financial Statements, Additional
Information and Additional Reports
Year ended December 31, 1996
Contents
Report of Independent Auditors.................................................3
Financial Statements:
Balance Sheet.............................................................4-5
Statement of Profit and Loss (on HUD Form No. 92410)......................6-7
Statement of Partners' Equity...............................................8
Statement of Cash Flows..................................................9-11
Notes to Financial Statements...........................................12-19
<PAGE>
Report of Independent Auditors
To the Partners
Kenilworth Associates Ltd.
We have audited the accompanying balance sheet of Kenilworth Associates Ltd., a
Limited Partnership, FHA Project No. 000-44160/000-35349 (the "Partnership"),
as of December 31, 1996, and the related statements of profit and loss (on HUD
Form No.92410), partners' equity, 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 Kenilworth Associates Ltd., a
Limited Partnership, FHA Project No. 000-44160/000-35349, as of December 31,
1996, and the results of its operations and cash flows for the year then ended
in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have issued a report dated
January 31, 1997, on our consideration of Kenilworth Associates Ltd.'s, a
Limited Partnership, FHA Project No. 000-44160/000-35349 internal control and a
report dated January 31, 1997, on its compliance with applicable laws and
regulations.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information included in
the report, as referred to in the Table of Contents, is presented for the
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, unless
otherwise noted, and in our opinion, is fairly stated in all material respects
in relation to the financial statements taken as a whole.
January 31, 1997
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Balance Sheet
December 31, 1996
Assets
Current assets:
1120 Cash in bank $ 321,878
1130 Tenant accounts receivable 40,305
1150 Accounts receivable-HUD 5,720
1160 Interest receivable 2,618
----------------------
370,521
Deposits held in trust:
1191 Tenant security deposits held in trust fund 198,932
Prepaid expenses:
1240 Property and liability insurance 45,228
1250 Mortgage insurance 10,240
1270 Real estate taxes 94,266
1290 Workmens compensation insurance 1,603
----------------------
151,337
Restricted deposits and funded reserves:
1310 Mortgage insurance 28,450
1311 Real estate taxes 79,938
1312 Hazard insurance 64,700
1320 Reserve for replacements 779,077
1340 Residual receipts 5,985
1370 Bond & debt service reserves fund 1,637,734
----------------------
2,595,884
Rental property:
1410 Land 2,080,022
1420 Buildings and improvements 27,924,995
1430 Building equipment-fixed 97,341
----------------------
30,102,358
Less: accumulated depreciation (8,617,998)
----------------------
21,484,360
Other assets:
1900 Mortgage costs, less accumulated amortization
of $313,502 779,838
----------------------
Total assets $25,580,872
======================
See accompanying notes.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Balance Sheet (continued)
December 31, 1996
Liabilities and partners' equity
Current liabilities:
2110 Accounts payable $ 49,051
2120 Accrued payroll and taxes 9,359
2130 Accrued interest payable 102,062
2190 Payable to management agent 17,871
2320 Mortgage notes payable-current maturities 258,580
2390 Real estate taxes payable to HUD 67,922
-----------------------
504,845
Deposits and prepayment liability:
2191 Tenant security deposits 160,466
2191 Accrued interest on tenant security deposits 34,047
2210 Prepaid rents 17,342
-----------------------
211,855
Long-term liabilities:
2130 Accrued interest on residual receipts note 304,800
2300 Residual receipts note 1,905,000
2320 Mortgage note payable, net of current maturities 13,474,673
2320 Mortgage note payable, net of current maturities 6,111,008
2326 Bond and debt service reserve funds 1,637,734
-----------------------
23,433,215
Partners' equity:
3100 Partners' equity 1,430,957
-----------------------
Total liabilities and equity $25,580,872
=======================
See accompanying notes.
<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)
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
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: 01/31/96 000-44160/000-35349 Kenilworth Associates Ltd.
Ending: 12/31/96
- ------------------------------- ---------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Part Description of Account Acct. No. Amount*
I
- ----- ------------------------------------------------ ----------- -------------------------------------------------------
------------------------------------------------ -----------
Apartments or Member Carrying Charges (Coops) 5120 $ 2,297,505
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Tenant Assistance Payments 5121 $ 1,415,415
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Furniture and Equipment 5130 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
RentalStores and Commercial 5140 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
IncomeGarage and Parking Spaces 5170 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
5100 Flexible Subsidy Income 5180 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Miscellaneous (specify) Over Basic Rents 5190 $ 43,406
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Rent Revenue Potential at 100% Occupancy $ 3,756,326
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Apartments 5220 ( 96,063)
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Furniture and Equipment 5230 ( )
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
VacancStores and Commercial 5240 ( )
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
5200 Garage and Parking Spaces 5270 ( )
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Miscellaneous (specify) 5290 ( )
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Vacancies ( 96,063)
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Net Rental Revenue Rent Revenue Less Vacancies $ 3,660,263
------------------------------------------------ ----------- --------------------------
- ----- ------------------------------------------------ ----------- -------------------------- ----------------------------
Elderly and Congregate Services Income - 5300
Total Service Income (Schedule Attached) 5300
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Interest Income- Project Operations 5410 $ 23,650
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
FinancIncome from Investments - Residual Receipts 5430 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
RevenuIncome from Investments - Reserve for 5440 $ 14,021
Replacement
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
5400 Income from Investments - Painting 5490 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Interest Income - Other 5491
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Financial Reserve 37,671
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Laundry and Vending 5910 $ 20,205
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
NSF and Late Charges 5920 $ 26,084
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Other Damages and Cleaning Fees 5930 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
RevenuForfeited Tenant Security Deposits 5940 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Other Revenue (specify) 5990 $ 9,537
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Other Revenue 55,826
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Revenue 3,753,760
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Advertising 6210 $ 2,342
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Other Administrative Expense 6250 $ 4,092
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Office Salaries 6310 $ 75,777
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Office Supplies 6311 $ 14,654
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Office or Model Apartment Rent 6312 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
AdminiManagement 6320 $ 200,486
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
ExpensManager or Superintendent Salaries 6330 $ 31,153
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
6200/6Manager or Superintendent Rent Free Unit 6331 $ 6,720
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Legal Expenses (Project) 6340 $ 36,282
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Auditing Expenses (Project) 6350 $ 25,000
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Bookkeeping Fees/Accounting Services 6351 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Telephone and Answering Service 6360 $ 11,684
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Bad Debts 6370 $ 33,655
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Miscellaneous Administrative Expenses (specify) 6390 $ 4,593
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Administrative Expenses 446,438
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Fuel Oil/Coal 6420 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
UtilitElectricity (Light and Misc. Power) 6450 $ 50,247
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
ExpensWater 6451 $ 237,145
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
6400 Gas 6452 $ 114,844
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Sewer 6453 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Utilities Expense 402,236
- ----- ------------------------------------------------ ----------- -------------------------- ----------------------------
* All amounts must be rounded to the nearest dollar; $.50 and Page 1 of 2
form HUD-92410 (7/91)
over, round up- $.49 and below, round down. ref
Handbook 4370.2
- ------------------------------- ---------------------- -------------------------------------------------------------------
For Month/Period Project Number: Project Name:
Beginning: 01/31/96 000-44160/000-35349 Kenilworth Associates Ltd.
Ending: 12/31/96
- ------------------------------- ---------------------- -------------------------------------------------------------------
Part Description of Account Acct. No. Amount*
I
- ----- ------------------------------------------------ ----------- -------------------------------------------------------
------------------------------------------------ ----------- --------------------------
Janitor and Cleaning Payroll 6510 $ 53,649
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Janitor and Cleaning Supplies 6515 $ 8,566
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Janitor and Cleaning Contract 6517 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Exterminating Payroll/Contract 6519 $ 6,200
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Exterminating Supplies 6520 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Garbage and Trash Removal 6525 $ 66,515
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Security Payroll/Contract 6530 $ 144,849
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Grounds Payroll 6535 $ 20,544
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Grounds Supplies 6536 $ 138
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
OperatGrounds Contract 6537 $ 117,800
and
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
MainteRepairs Payroll 6540 $ 71,408
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
ExpensRepairs Material 6541 $ 49,981
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
6500 Repairs Contract 6542 $ 73,889
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Elevator Maintenance/Contract 6545 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Heating/Cooling Repairs and Maintenance 6546 $ 6,834
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Swimming Pool Maintenance/Contract 6547 $ 23,525
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Snow Removal 6548 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Decorating Payroll/Contract 6560 $ 66,485
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Decorating Supplies 6561 $ 5,111
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Other 6570 $ 1,612
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Miscellaneous Operating and Maintenance 6590 $ 22,046
Expenses
------------------------------------------------ ----------- -------------------------- ----------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Operating and Maintenance Expenses $ 739,152
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Real Estate Taxes 6710 $ 188,177
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Payroll Taxes (FICA) 6711 $ 35,876
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Miscellaneous Taxes, Licenses and Permits 6719 $ 14,134
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Taxes Property and Liability Insurance (Hazard) 6720 $ 98,379
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
and Fidelity Bond Insurance 6721 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
InsuraWorkmen's Compensation 6722 $ 9,530
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
6700 Health insurance and Other Employee Benefits 6723 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Other Insurance (specify) 6729 $ 2,979
------------------------------------------------ ----------- -------------------------- ----------------------------
------------------------------------------------ ----------- --------------------------
Total Taxes and Insurance $ 349,075
------------------------------------------------ ----------- --------------------------
- ----- ------------------------------------------------ ----------- -------------------------- ----------------------------
Interest on Bonds Payable 6810 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Interest on Mortgage Payable 6820 $ 1,233,496
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
FinancInterest on Notes Payable (Long-Term) 6830 $ 57,150
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
ExpensInterest on Notes Payable (Short-Term) 6840 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
6800 Mortgage Insurance Premium/Service Charge 6850 $ 100,729
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
Miscellaneous Financial Expenses 6890 $ 40,721
------------------------------------------------ ----------- -------------------------- ----------------------------
------------------------------------------------ ----------- --------------------------
Total Financial Expenses $ 1,432,096
- ----- ------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
Total Service Expenses - Schedule Attached 6900 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
ElderlTotal Cost of Operations Before Depreciation $ 3,368,997
&
------------------------------------------------ ----------- -------------------------- ----------------------------
------------------------------------------------ ----------- --------------------------
CongreProfit (Loss) Before Depreciation $ 384,763
------------------------------------------------ ----------- -------------------------- ----------------------------
------------------------------------------------ ----------- --------------------------
ServicDepreciation (Total) - 6600 (specify) 6600 $ 1,092,811 $ 1,092,811
Expenses
------------------------------------------------ ----------- --------------------------
--------------------------------------------------------------------------------------- ----------------------------
6900 Operating Profit or (Loss) $ (708,048)
- ----- --------------------------------------------------------------------------------------- ----------------------------
------------------------------------------------ ----------- --------------------------
Officer Salaries 7110 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
CorporLegal Expenses (Entity) 7120 $
or
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
MortgaTaxes (Federal-State-Entity) 7130-32 $
------------------------------------------------ ----------- --------------------------
------------------------------------------------ ----------- --------------------------
EntityOther Expenses (Entity) 7190 $ 66,294
------------------------------------------------ ----------- -------------------------- ----------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
ExpensTotal Corporate Expense $ 66,294
------------------------------------------------ ----------- -------------------------- ----------------------------
------------------------------------------------ ----------- -------------------------- ----------------------------
7100 Net Profit or (Loss) $ (774,342)
- ----- ------------------------------------------------ ----------- -------------------------- ----------------------------
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 Expense Sub-account Groups. If miscellaneous or other income and/or expense
sub-accounts (5190, 5290, 5940, 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 II
- --------------------------------------------------------------------------------------------- ----------------------------
1. Total principal payments required under the mortgage, even if payments under a Workout $ 239,918
Agreement are less or more
than those required under the mortgage.
- --------------------------------------------------------------------------------------------- ----------------------------
2. Replacement Reserve deposits required by the Regulatory Agreement of Amendments $ 80,856
thereto, even if payments may
be temporarily suspended or waived.
- --------------------------------------------------------------------------------------------- ----------------------------
3. Replacement or Painting Reserve releases which are included as expense items on this $ -
Profit and Loss statement
- --------------------------------------------------------------------------------------------- ----------------------------
4. Project Improvement Reserve Releases under the Flexible Subsidy Program that are $ -
included as expense items on this
Profit and Loss Statement.
- --------------------------------------------------------------------------------------------- ----------------------------
*U.S. Government Printing Office: 1992 - 312-128/60160 Page 2 of 2
form HUD-92410
</TABLE>
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Statement of Partners' Equity
Year ended December 31, 1996
Partners' equity, beginning of year $2,302,203
Distributions (96,904)
Net loss (774,342)
--------------------
Partners' equity, end of year $1,430,957
====================
Percentage of partnership interests:
General 1%
Limited 99%
See accompanying notes.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Statement of Cash Flows
Year ended December 31, 1996
Cash flows from operating activities
Rental receipts $ 3,663,478
Interest receipts 38,119
Other receipts 55,826
Administrative expenses (139,239)
Administrative salaries (106,930)
Management fees (200,130)
Utilities (454,829)
Operating and maintenance expenses (593,551)
Operating and maintenance payroll (145,601)
Real estate taxes (180,308)
Payroll taxes (40,397)
Miscellaneous taxes (14,134)
Property insurance (97,173)
Miscellaneous insurance (12,509)
Interest on mortgage notes (1,269,383)
Mortgage insurance premium (99,727)
Miscellaneous financial expense (6,253)
---------------------
Net cash provided by rental operating activities 397,259
Tenant security deposits (769)
Mortgagor entity expenses (41,666)
---------------------
(42,435)
---------------------
Net cash provided by operating activities $ 354,824
---------------------
See accompanying notes.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Statement of Cash Flows (continued)
Year ended December 31, 1996
Cash flows from investing activities
Acquisitions of building improvements $ (17,600)
Acquisitions of equipment (31,061)
Deposits to reserve for replacements (94,882)
Withdrawals from paint reserve 73
------------------------
Net cash used in investing activities (143,470)
------------------------
Cash flows from financing activities
Mortgage principal payments (240,025)
Distribution to partners (96,904)
------------------------
Net cash used in financing activities (336,929)
------------------------
Net decrease in cash (125,575)
Cash, beginning of year 447,453
------------------------
Cash, end of year $ 321,878
========================
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Statement of Cash Flows (continued)
Year ended December 31, 1996
Reconciliation of net loss to net cash provided by
operating activities:
Net loss $ (774,342)
Adjustments to reconcile net loss to net cash
provided by operating
activities:
Depreciation 1,092,811
Amortization 24,628
Accrued interest-residual receipts note 57,150
Decrease (increase) in:
Interest receivable 448
Accounts receivable-tenants 526
Accounts receivable-HUD (5,720)
Tenant security deposits held in trust (5,294)
Prepaid property insurance 46
Prepaid mortgage insurance 892
Prepaid real estate taxes (329)
Prepaid workmens' compensation insurance (46)
Real estate tax escrow 8,199
Property insurance escrow 1,160
Mortgage insurance escrow 109
Increase (decrease) in:
Accounts payable-trade (52,593)
Accounts payable-management agent 356
Accounts payable-salary/payroll (4,475)
Accrued interest payable (1,419)
Prepaid rent 8,409
Tenant security deposits payable 4,525
Accrued interest on tenant security deposits (217)
------------------------
Total adjustments 1,129,166
Net cash provided by operating activities $ 354,824
========================
See accompanying notes.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements
Year ended December 31, 1996
1. Organization
Kenilworth Associates, Ltd., a Limited Partnership (the "Partnership"), was
formed as a limited partnership under the laws of the District of Columbia on
November 30, 1985, for the purpose of acquiring, rehabilitating and operating a
rental housing project under Section 221(d)(4) of the National Housing Act. The
project consists of 569 units located in Washington, D.C. and is currently
operating under the name of Mayfair Mansions Apartments.
2. Summary of Significant Accounting Policies
Depreciation
Depreciation of buildings,improvements and equipment is computed using straight-
line and accelerated methods over the estimated useful lives of the assets for
financial reporting purposes. Depreciable lives used are twenty-seven and one-
half years for buildings, fifteen years for land improvements, and five to seven
years for personal property.
Amortization
Mortgage costs are amortized over the term of the mortgage loan using the
straight-line method.
Income Taxes
No provision or benefit for federal income taxes has been included in these
financial statements since taxable income or loss passes through to, and is
reportable by, the partners individually.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Partnership considers all
highly liquid instruments with a maturity of three months or less to be cash
equivalents.
<PAGE>
Kenilworth Associates Ltd.
A Limited Partnership
FHA Project No. 000-44160/000-35349
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Long-Lived Assets
The Partnership's records impairment on losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by those
assets are less then the carrying amount of those assets. Based on management's
estimation process, no impairment losses were recorded as of December 31, 1996.
3. Mortgages Payable
The first mortgage note is insured under Section 221(d)(4) of the National
Housing Act and secured by a first deed of trust on the rental property. The
note bears interest at the rate of 8.75% per annum. Principal and interest are
payable by the Partnership in equal monthly installments of $104,345 through
July 2030.
The mortgage was funded by proceeds of a $14,745,000 bond issued by the District
of Columbia Housing Finance Agency. In accordance with the terms of the
indenture, the mortgage servicer makes deposits into the bond fund for bond
principal and interest payments. At December 31, 1996, bond funds held by the
trustee consisted of the following:
Bond fund $ 499,259
Debt service reserve fund 1,138,475
----------------------
$ 1,637,734
======================
Mortgages Payable (continued)
If the trustee determines that the deposits into the bond fund as provided for
under the mortgage are over or under the amounts necessary to meet the debt
service requirements, principal and interest payments under the mortgage will
be increased or decreased as appropriate. The Partnership is responsible
for payment of the trustee's fees and administrative expenses incurred in excess
of those provided for in the bond indenture. Any funds remaining after repayment
of all the bonds and any related agency and trustee charges will be transferred
to the Partnership. In addition to trustee's fees and administrative expenses
associated with the bond fund, the Partnership is required to pay loan
administration fees associated with the mortgage loan. These expenses have
been reflected in Miscellaneous Financial Expense in the accompanying Statement
of Profit and Loss.
The second mortgage note is insured under Section 236 of the National Housing
Act and secured by a second deed of trust on the rental property. The note bears
interest at the rate of 7% per annum. The Partnership entered into an interest
subsidy agreement, which reduces the effective interest rate to approximately
1% over the term of the loan. During 1996, interest reduction payments of
$402,046 were applied against interest expense. The reduced payments are due in
equal, monthly installments of $18,330 through June 2014.
Under agreements with the mortgage lenders 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.
The liability of the Partnership under the mortgage notes is limited to the
underlying value of the real estate collateral plus other amounts deposited with
the lenders.
3. Mortgages Payable (continued)
Annual maturities of the mortgages payable for each of the five years following
December 31, 1996 are as follows:
221(d)(4)
236 Loan ------------------- ----------------------
Loan Total
- ------------------
1997 $ 188,824 $ 69,756 $ 258,580
- ------------------
1998 202,473 76,110 278,583
- ------------------
1999 217,111 83,044 300,155
- ------------------
2000 232,805 90,609 323,414
- ------------------
2001 249,635 98,863 348,498
- ------------------
Thereafter 5,208,984 13,126,047 18,335,031
- ------------------
=================================================================
Total $6,299,832 $13,544,429 $19,844,261
=================================================================
4. Residual Receipts Note
The residual receipts note bears interest at 3% per annum commencing September
1, 1991. Principal and interest are due in full on June 9, 2009 or on the
maturity date of the first deed of trust, whichever is later, provided, however,
that if the first trust is prepaid in full, the holder of the residual receipts
note may at its option declare the principal balance and accrued interest
thereon due and payable. Further, this note shall become due and payable if
there is a change in the identity of the maker, refinancing of any indebtedness
of the project, or transfer or sale of the project unless prior written approval
from the holder is obtained. Prepayment of the principal of this note shall be
made from residual receipts, as defined by the U.S. Department of Housing and
Urban Development ("HUD"), available in any one year, after annual distributions
of surplus cash of $56,222, as limited by HUD (see Note 10), or a lesser amount
if approved by the holder. Annual prepayments shall not exceed an aggregate
amount of $130,804.
Receivables from Tenants
Delinquent receivables from tenants are summarized as follows:
Number of Days
Tenants ------------------- ----------------
Past Due Amount
65 Under 31 $ 24,441
32 31-60 5,199
51 Over 60 10,665
========================== ================
148 $ 40,305
========================== ================
6. Uncertainty-Housing Assistance Agreement
HUD has contracted under Section 8 of the Housing Assistance Payments ("HAP")
Program of the United States Housing Act of 1937 to make housing assistance
payments to the Partnership on behalf of low-income tenants who meet certain
qualifications. There are two housing assistance agreements with five-year
terms, which expire on December 31, 1999 and September 30, 1999.
The Partnership received $1,415,415 of its revenue during 1996 from HUD under
the terms of the HAP contracts. HUD is considering various alternatives to
continuing project-based subsidies which may include the non-renewal of the
existing HAP contracts between the Partnership and HUD. HUD has proposed
alternative plans to replace project-based HAP contracts, including issuing rent
vouchers directly to the tenants, which the tenant could then use for rent at
the project of their choice. At this time, there is no assurance that the HAP
contract will be extended by HUD. The ultimate impact of HUD's proposed plans
to the Partnership cannot presently be determined.
7. Related Party Transactions
Management Agreement
The property is managed by Urban Realty and Development Corporation, an
affiliate of the general partner, pursuant to a management agreement approved by
HUD. The management agreement provides for a management fee of 5.5% of monthly
rents and other collections related to the project's operations. Such fees
charged to operations during 1996 amounted to $200,486.
Additionally, the Partnership Agreement provides that the management fee shall
be equal to the lesser of, (i) the HUD approved management fee or, (ii) 5.5% of
the gross revenues of the project provided, however, that such fee may be
greater than 5.5% of such gross revenues up to the HUD approved fee in any year
in which the full cumulative Priority Distribution has been distributed to the
Limited Partners.
8. Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires disclosure of fair value financial
information about certain financial instruments, whether or not recognized on
the balance sheet. The carrying amounts reported in the balance sheet for
those financial instruments described in the schedule of funds in
financial institutions included in the supporting data required by HUD listed on
the contents page, approximate those assets' fair value.
Payment of other long-term liabilities are generally dependent upon the
Partnership's ability to achieve cash flow, the partners providing additional
funds, the sale of the project or refinancing of the mortgage at the end of the
Regulatory Agreement. Management believes that estimating the fair value of
these long-term liabilities is either not appropriate or, because of excess
costs, considers estimation of fair value to otherwise be impracticable.
Working Capital Loans
If the Partnership requires funds to pay project expenses subsequent to December
31, 1993, the end of the Initial Operating Period, the General Partners are
obligated to make Working Capital Loans to the project up to $100,000. Such
loans, if made, bear interest at the prime rate as established by the First
National Bank of Boston. As of December 31, 1996, no working capital loans were
made to the Partnership.
10. Distributions of Surplus Cash
The Partnership is subject to a limitation on distributions of surplus cash as
defined by HUD. Annual distributions are limited to $191,472. Surplus cash is
to be distributed pursuant to the Partnership Agreement as follows:
To repay any Working Capital Loans and Voluntary Loans including interest.
To pay a priority distribution to the General and Limited Partners in the amount
of $56,222 to be shared in accordance with their percentage ownership interests.
At December 31, 1996, the cumulative unpaid priority distributions were $56,222.
To repay any Project Expense Loans.
To pay the Incentive Management Fee (see Note 12).
The balance is distributed to the Partners in accordance with their percentage
interests.
Distributions of $95,816 and $41,751 from 1995 surplus cash were made to the
Investor Limited Partner and General Partners, respectively, during 1996.
11. Guaranteed Priority Distribution
The General Partners guarantee to pay the Investor Limited Partner a minimum
Guaranteed Priority Distribution of $35,000 annually if funds are not available
from surplus cash. This amount is cumulative and is not to be considered a
capital contribution or loan. No such Guaranteed Priority Distributions
were made by the General Partners for 1996.
12. Incentive Management Fee
The General Partners are entitled to receive an Incentive Management Fee from
distributable cash based on 50% of the remaining distributable cash after
payment of the Priority Distribution of $56,222. The Incentive Management
Fee is limited to 15% of gross collected income in any one year. Incentive
Management Fees distributed during 1996 from the 1995 surplus cash were $40,663
and have been included in Other Entity Expenses in the accompanying Statement of
Profit and Loss.
56
7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 361,069
<SECURITIES> 703,642
<RECEIVABLES> 31,351
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 12,916,254
<DEPRECIATION> 000
<TOTAL-ASSETS> 29,698,965<F1>
<CURRENT-LIABILITIES> 000
<BONDS> 000
000
000
<COMMON> 000
<OTHER-SE> 17,150,190
<TOTAL-LIABILITY-AND-EQUITY> 29,698,965<F2>
<SALES> 000
<TOTAL-REVENUES> 2,234,267<F3>
<CGS> 000
<TOTAL-COSTS> 000
<OTHER-EXPENSES> 2,129,809<F4>
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 1,029,682
<INCOME-PRETAX> 000
<INCOME-TAX> 000
<INCOME-CONTINUING> 000
<DISCONTINUED> 000
<EXTRAORDINARY> 000
<CHANGES> 000
<NET-INCOME> (166,712)<F5>
<EPS-BASIC> (2.43)
<EPS-DILUTED> 000
<FN>
<F1>Included in Total Assets: Tenant security deposits of $92,851, Investments
in Local Limited Partnerships of $15,022,986, Mortgaged escrow deposits of
$117,008, Deferred charges, net of $196,874, $168,970 and Other assets of
$284,834. <F2>Included in Total Liabilities and Equity: Accounts payable to
affiliates of $104,275, Accounts payable and accrued expenses of $251,458,
Mortgage notes payable of $8,547,201, Interest payable of $655,016, Tenant
security deposits payable of $78,985, Payable to affiliated developer of
$2,482,000 and Minority interest in Local Limited Partnerships of $426,367.
<F3>Total Revenue includes: Rental of $1,802,684, Investment of $93,535, bad
debt recoveries of $119,331 and other of $218,717. <F4>Included in Other
Expenses: Asset management fees, related party of $199,280, General and
administrative of $268,965, Rental operations, exclusive of depreciation of
$871,715, Property management fees of 103,724, Bad Debt Expense $12,792,
Depreciation of $587,103 and Amortization of $86,230. <F5> Net Loss reflects:
Equity in income of Local Limited Partnerships of $25,001, Minority interest in
losses of Local Limited Partnerships of $139,073, Loss on liquidation
of interests in Local Limited Partnerships of $(3,750) and Gain on transfer of
assets of $589,338.
</FN>
</TABLE>
