UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[XX ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________.
Commission File Number 2-43162
URBAN IMPROVEMENT FUND LIMITED
(Exact name of registrant as specified in its charter)
California 95-6448384
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1201 Third Avenue, Suite 5400, Seattle, Washington 98101 3076
(Address of principal executive offices) (ZIP code)
Registrant's telephone number, including area code: (206) 622-9900
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 and (2) has
been subject to such filing requirements for the past 90 days.
Yes XXX No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant as of December 31, 1996: No established market value.
PART I
Item 1. Business
(a) General Development of Business Urban Improvement Fund
Limited, a California limited partnership (the "Registrant"), was formed
in 1972 for the purpose of investing, through Local Limited
Partnerships (LLP's), in federally and state-assisted low and moderate
income housing projects. Units of Limited Partnership Interest were
sold in a public offering to investors who required tax shelter for income
from other sources. The Registrant acquired equity interests as a limited
partner in ten (10) such projects. Four of these projects were sold through
trustee's sales (foreclosures by the Secretary of Housing and Urban
Development). One of these properties, Mott Haven Apartments VI,
was assigned to HUD.
Despite the efforts of the General Partner, the owners and managers of
Mott Haven Apartments VI to preserve the development and provide
decent and affordable housing, the financial stability of the development
is threatened by the imminent expiration of the Section 8 loan
management set-aside contracts and the likelihood that they will not be
renewed on this property for federal budget and policy reasons. HUD,
the owners and the General Partner of Mott Haven Apartments VI
believe that it is in the best interests of the development and its tenants
that the projects be renovated and reconfigured, and that such result can
best be accomplished through replacement of the existing management
and ownership structure with community-based owners and managers.
The General Partner has taken steps to transfer the property of Mott
Haven Apartments VI to HUD.
The Alms Hill Partnership is still in existence with a note receivable for
the sales proceeds of the property. The remaining four (4) properties plus
the Alms Hill Partnership are described in Item 2 hereof.
(b) Financial Information about Industry Segment
The Registrant is engaged in only one line of business.
(c) Narrative Description of Business The real estate business is
highly competitive. The Registrant competes with numerous established
apartment owners and real estate developers of low-income housing
having greater financial resources. There is additional risk of new
construction occurring in areas where the Registrant has invested in
existing government-assisted housing projects.
The outlook for subsidized housing is not determinable, given existing
and proposed federal legislation.
(d) Financial information about foreign and domestic operations
and export sales The Registrant's income is entirely dependent upon
revenues received from the limited partnerships in which it is a limited
partner. Investment in federally-assisted housing is subject to
significant regulations. These regulations limit, among other things, the
amount of return allowed on the initial equity investment, the manner in
which such properties may be sold, and the persons to whom such
properties may be sold. In 1987, fearing the loss of affordable housing
units, Congress passed emergency legislation which prohibited prepayment
of all FHA insured Section 236 or Section 221(d)(3) mortgages. Congress
passed additional legislation in 1990 known as LIHPRHA (the Low
Income Housing Preservation and Resident Homeownership Act).
However, by 1995, Congress had determined the program was too
expensive to continue. In March 1996, Congress changed the
compensation program, severely limited funding, and restored the
property owners' right to prepay the FHA mortgages and change the
use of the properties under legislation known as the Housing Opportunity
Program Extension Act of 1996. The General Partner of the Partnership has
initiated steps to ensure that the Local Limited Partnerships comply with
the provisions of LIHPRHA and subsequent legislation. See financial
information in Item 6, Selected Financial Data, in this report.
Item 2. Properties
The Registrant owns equity interests as a Limited Partner in the following
real estate projects as of December 31, 1996:
<TABLE>
<S> <C> <C> <C>
1995
No. of Percent of
Name Type Units Occupancy
Angeles Apts. No. 1
Los Angeles, California 236 Rehab. 94 Residential 92%
Angeles Apts. No. 2
Los Angeles, California 236 Rehab. 109 Residential 96%
Lakewood Apts
Vinton, Virginia 236 New 108 Residential 99%
The Villages 221(d)(3) 250 Residential 93%
Waco, Texas New
</TABLE>
Mortgage indebtedness associated with each project is shown in
Schedule XI of this report.
The following property was assigned to HUD at December 31, 1996:
<TABLE>
<C> <C> <C>
Mott Haven Apts. VI 236 Rehab. 184 Residential 99%
New York, New York 1 Commercial
The following is a description of each of the above listed properties:
ANGELES APARTMENTS NUMBER 1 consists of 94 residential units
located in the southwest area of Los Angeles, California. The project
includes five two-story rehabilitated buildings with stucco exteriors.
</TABLE>
<TABLE>
<S> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
80 Efficiency 414
14 1 Bedroom 618
</TABLE>
ANGELES APARTMENTS NUMBER 2 consists of 109 residential units
located in the southwest area of Los Angeles, California. The project
includes five rehabilitated two- and three-story buildings with stucco
exteriors.
<TABLE>
<S> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
80 Efficiency 413
29 1 Bedroom 672
</TABLE>
LAKEWOOD APARTMENTS consists of 108 residential units located
on Route #24 in Vinton, Virginia. The project includes nine two and
one-half story buildings with wood siding.
<TABLE>
<S> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
72 2 Bedroom 895
36 3 Bedroom 948
</TABLE>
THE VILLAGES is a 250-unit residential apartment project located at
29th Street and East Burelson in Waco, Texas. The project consists of
thirty-five two-story buildings.
<TABLE>
<S> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
80 1 Bedroom 667
119 2 Bedroom 826
51 3 Bedroom 999
</TABLE>
The Registrant sold its equity interest as a limited partner in the following
real estate project through a resyndication during August 1983:
ALMS HILL APARTMENTS contained 200 residential and 10
commercial units located in the northeast section of Cincinnati, Ohio.
The structure is a ten-story rehabilitated brick and masonry building.
<TABLE>
<S> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
20 Efficiency 405
137 1 Bedroom 650
43 2 Bedroom 775
10 Commercial 2,175
</TABLE>
The following property was assigned to HUD at December 31, 1996:
MOTT HAVEN APARTMENTS VI consists of 184 residential units
and one commercial unit located in the Bronx, New York City, New
York. The project includes twelve five- or six-story rehabilitated
brick buildings.
<TABLE>
<S> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
1 Efficiency 320
46 1 Bedroom 490
76 2 Bedroom 715
32 3 Bedroom 905
29 4 Bedroom 970
1 Commercial 905
</TABLE>
Item 3. Legal Proceedings
There are no material legal proceedings pending at the time, other
than ordinary routine litigation incidental to the Partnership's business,
including the Local Limited Partnerships in which the Partnership is
a limited partner.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders through the
solicitation of proxies or otherwise.
PART II
Item 5. Market for the Registrant's Securities and Related Security
Holder Matters
(a) There is not a ready market for the transfer of limited
partnership interests. Limited partnership interests may be transferred
between individuals with the consent of the General Partner.
(b) Holders
<TABLE>
<S> <C> <C> <C>
Title of Name & Address of Amount and Nature of % of
Class Beneficial Owner Beneficial Ownership Class
General Partner Interfinancial Real 5 Units 100%
Interest Estate Management Co. ($5,000)
1201 Third Avenue, Suite 5400
Seattle, Washington 98101 3076
Limited Partner 350 Limited Partners 5,830 Units 100%
Interest ($5,830,000)
</TABLE>
The Registrant has no officers or directors. Interfinancial Real Estate
Management Company, the General Partner of the Registrant, is a
corporation.
(c) There were no distributions to partners during 1996, 1995,
1994, 1993 or 1992.
Item 6. Selected Financial Data
These statements do not include all disclosures required under
generally accepted accounting principles; however, when read in
conjunction with the related financial statements and notes thereto
included under Item 8, the statements include all generally accepted
accounting principles disclosures for the latest three years.
<TABLE>
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1996 1995 1994 1993 1992
Interest income $ 1,455 $ 118 $ 263 $ 380 $ 628
Operating expenses:
Management fee 40,000 40,000 40,000 40,000 40,000
Other expenses 33,954 15,157 15,226 17,807 11,344
---------- --------- -------- -------- --------
73,954 55,157 55,226 57,807 51,344
Loss before equity in income of Local
Limited Partnerships (72,499) (55,039) (54,963) (57,427) (50,716)
Equity in income of Local Limited
Partnerships 106,919 9,778 6,947 39,081 41,533
Net income (loss) $ 34,420 $(45,261) $(48,016) $(18,346) $ (9,183)
Allocation of net income (loss):
Net income (loss) allocated to
General Partners $30 $(39) $(42) $(17) $(8)
Net income (loss) allocated to
Limited Partners 34,390 (45,222) (47,974) (18,329) (9,175)
$ 34,420 $(45,261) $(48,016) $(18,346) $(9,183)
Net financial reporting income
(loss) per unit:
General partnership units
(5 units outstanding allocated
to General Partner) $6 $(8) $(8) $(3) $(2)
Limited partnership units
(5,830 units outstanding allocated
to Limited Partners) $6 $(8) $(8) $(3) $(2)
Total assets $59,063 $643 $6,009 $11,425 $19,509
Long term
obligations $-0- $-0- $-0- $-0- $-0-
Cash distributions $-0- $-0- $-0- $-0- $-0-
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Partnership has followed the practice of investing available funds not
used in the purchase of properties or in operations into short-term investments.
Interest income resulted from such short-term investments. The
Partnership is dependent upon interest earned and the distributions and
repayment of advances from Local Limited Partnerships for cash flow. As
shown in the table below, the Partnership has received distributions in recent
years. This trend is expected to continue. The Partnership has advanced funds
and received repayments of such advances from selected Local Limited
Partnerships. The General Partner believes these net advances will not
significantly affect the operations of the Partnership.
<TABLE>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
Urban's share of
distributions $ 89,970 $ 9,778 $ 6,947 $ 29,466 $ 41,533
Advances (made to)
repaid by Local Limited
Partnerships $ 16,949 $ -0- $ -0- $ 9,615 $ -0-
</TABLE>
Under the terms of the Limited Partnership Agreement (as amended), the
Partnership is required to pay the General Partner an annual management fee
equal to three-tenths of one percent of invested assets or $64,325. (The fee
will not be more than fifty percent of the Partnership's annual net cash flow,
as defined, subject to an annual minimum of $40,000.) This fee was not payable
during the first six years unless annual tax deductions plus cash distributions
aggregated $550 per unit on a cumulative basis. The required level of tax
deductions was not achieved and, accordingly, the fee was not paid for those
years. However, fees of $240,000 were recorded as a liability to the
General Partner. Management fees payable totaling $540,833 payable to the
General Partner for subsequent years have been accrued because cash flow was not
sufficient to pay the fees. The Partnership will also pay the General Partner
a liquidation fee for the sale of projects. The liquidation fee is the lesser
of (i) ten percent of the net proceeds to the Partnership from the sale of a
project(s) or (ii) one percent of the sales price plus three percent of the net
proceeds after deducting an amount sufficient to pay long-term capital gains
taxes. No part of such fee shall accrue or be paid unless: (i) the Limited
Partners' share of the proceeds has been distributed to them, (ii) the Limited
Partners shall have first received an amount equal to their invested capital
attributable to the project(s) sold, and (iii) the Limited Partners have
recevied an amount sufficient to pay long-term capital gains taxes from the sale
of the project(s), if any, calculated at the maximum rate then in effect.
At December 31, 1996, the Partnership had investments in four active
real estate limited partnerships as a Limited Partner. The Partnership carries
such investments on the equity method of accounting. The Partnership
discontinues recording losses for financial reporting purposes when its
investment in a particular Local Limited Partnership is reduced to zero,
unless the Partnership intends to commit additional funds to the Local Limited
Partnership. At year- end, all of the investments were reduced to zero.
The equity in income in Local Limited Partnerships resulted from
either Local Limited Partnerships, whose investments have not been
reduced to zero, reporting income from operations and/or Local
Limited Partnerships, whose investments have been reduced to zero, who
paid distributions or repaid an advance. Additional advances to Local Limited
Partnerships, after an investment is reduced to zero, are recorded as
losses. The components of the Partnership's equity in net income of the
Local Limited Partnerships for 1996, 1995 and 1994 is summarized as
follows:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Net repayments from (advances to) Partnerships
with zero investments:
Angeles II $ 16,949 $ -0- $ -0-
Distributions received from Partnerships
with zero investments:
Angeles II 45,903 -0- -0-
The Villages 36,013 -0- 6,947
Lakewood Apartments 8,054 9,778 -0-
Equity in income of Local Limited
Partnerships $ 106,919 $ 9,778 $ 6,947
</TABLE>
The actual combined losses of Local Limited Partnerships will
generally decrease as depreciation and interest decreases and the projects
achieve stable operations. Much of the rental revenue of the Local
Limited Partnerships is dependent on subsidy. The rents have increased
for inflation and operating costs. In recent years, several Local
Limited Partnerships have increased operating expenses to fund repairs
and maintenance on the properties. Such repairs are limited by available
cash flow. The distributions to the Partnership from Local Limited Partnerships
are the result of the profitable operations of these projects.
Operating expenses have remained constant from 1992 through 1995.
During 1996, the Partnership incurred additional costs of $18,254 for
consulting service in connection with LIHPHRA and the transfer of the
property of Mott Haven Apartments VI to HUD.
Liquidity
The Partnership is dependent upon distributions from its investments
in Local Limited Partnerships for cash flow. The Partnership may not be
able to generate sufficient cash flow from operations or from distributions
from its interests in Local Limited Partnerships to pay future obligations
as they become due without additional financing or advances from the
General Partner. The General Partner is under no obligation to advance
additional funds to the Partnership. The General Partner is monitoring
the operations of the Local Limited Partnerships to ensure that
sufficient cash will be received from the Local Limited Partnerships
to sustain operations. The General Partner anticipates it will receive
adequate distributions from the Local Limited Partnerships to maintain
operations.
Capital Resources
The General Partner believes that situations may arise where it would be
advantageous to the Partnership to exchange properties in a tax-free
transaction. The Partnership's basis in its properties has been reduced
through depreciation deductions and other losses to levels substantially
below the amount of debt secured by the properties. Additionally, the
rental properties owned and operated by the Local Limited Partnerships have
typically computed depreciation for financial reporting purposes using
the straight-line method over the estimated economic useful life of the
property. For income tax reporting purposes, depreciation generally has
been computed over the same or shorter periods using accelerated
methods. As a result, the carrying values of the Partnership's investments
in Local Limited Partnerships are substantially greater for financial
reporting purposes than for income tax reporting purposes. Upon sale
or other disposition of a property by the Local Limited Partnership, the gain
recognized by the Partnership for income tax reporting purposes
may be substantially greater than the gain recorded for financial
reporting purposes.
Accordingly, if the Properties are sold, the Partners, in all likelihood,
would recognize taxable gain in excess of the cash available for
distribution. If sale proceeds are reinvested in a manner which permits the
original sale to be treated as a like-kind exchange, the Partners can defer
this gain until the new property is sold. Additionally, the Partnership
will receive the benefit of any cash flow or appreciation in value of the
new property. If reinvestments were made, it is likely that the
acquired properties would be conventional, multi-family residential
projects. The Partnership has had inquiries about the sale or
exchange of properties in its portfolio, but no offers have been made.
The Partnership has made no material commitments for
capital expenditures.
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted in a separate section of this report.
Item 9. Change In and Disagreements with Accountants on Accounting
and Financial Disclosure
There have been no disagreements with accountants on any matters
of accounting principles or practices or financial statement disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) The General Partner of the Registrant is Interfinancial Real Estate
Management Company. The Registrant does not have directors as such.
The following is a listing of the Directors of the General Partner of the
Registrant. These Directors are elected to serve one-year terms and
until their successors are duly elected and qualified as directors.
<TABLE>
<S> <C> <C>
Name Age Office
Paul H. Pfleger 61 Director/President
John M. Orehek 42 Director/Senior Vice President
</TABLE>
(b) The General Partner of the Registrant is Interfinancial Real
Estate Management Company. The Registrant does not have executive
officers as such. The following is a listing of the executive officers of the
General Partner of the Registrant. These executive officers are elected
to serve one-year terms and will continue to serve until their successors
are duly elected and qualified as executive officers.
<TABLE>
<S> <C> <C> <C>
Name Age Office
Paul H. Pfleger 61 Chairman of the Board
John M. Orehek 42 Senior Vice President
Michael Fulbright 42 Secretary
</TABLE>
(c) The Registrant has no employees.
(d) There are no family relationships between any directors or
executive officers.
(e) The principal occupation and employment of each of the executive
officers and directors of the General Partner are as follows:
Paul H. Pfleger, President/Director. Mr. Pfleger organized and was
Chairman of the Board of Security Properties Inc. (formerly Security
Pacific, Inc.) from 1969 to the present, except for a period between
1984 and 1986. Farmers Savings acquired Security Properties Inc.
as a wholly-owned subsidiary during 1984 and sold the company back
to the original owners during 1987. The major line of business of
Security Properties Inc. is the administration of previously syndicated,
subsidized multifamily residential real estate. Mr. Pfleger was first
elected an officer and director of the General Partner, Interfinancial
Real Estate Management Company, in July 1981 and has maintained
his dual status since that time.
Mr. Pfleger is the General Partner in over 280 properties with approximately
38,000 housing units throughout the United States.
John M. Orehek, Senior Vice President. Mr. Orehek is the Chief Executive
Officer and President of Security Properties Investment Inc. From 1982 to
1987, he was employed by Security Properties Inc. (SPI) as President of
First Columbia Corporation, its affiliated broker/dealer, and Senior Vice
President of SPI. From 1987 to 1991, when he rejoined SPI, he was
President of Hallmark Capital Partners, Ltd., a Seattle real estate development
corporation. From 1979 to 1982 he was a member of the tax department
in the Cleveland, Ohio and Seattle, Washington offices of Arthur Andersen
& Co., Certified Public Accountants. He received a B.S. degree in Economics
from Allegheny College, Meadville, Pennsylvania and a law degree from
Case Western Reserve University School of Law. Mr. Orehek was first
elected a director of the General Partner, Interfinancial Real Estate
Management Company, during 1992. Michael Fulbright, Secretary.
Mr. Fulbright is General Counsel for Security Properties Inc. He joined the
Company in 1989 as Special Counsel responsible for new development
activities and sales and financing transactions in the syndication portfolio.
Prior to joining SPI, he was a partner at Tousley Brain, a Seattle law firm
that specializes in commercial real estate matters. His practice there
included representation of lenders, institutional investors and commercial
developers. He received a Masters of Business Administration degree from
Texas A&M and a law degree from the University of Washington.
He is a member of the Washington State Bar Association. Mr. Fulbright
was first elected an officer of the General Partner, Interfinancial Real Estate
Management Company, during 1994.
(f) Section 20 of the Amended Certificate and Agreement of
Limited Partnership of the Registrant provides for the indemnification
of the General Partner and its designees and nominees against liability
resulting from errors in judgment or any acts or omissions, whether or
not disclosed, unless caused by a breach of fiduciary duty of such
parties to the Registrant or its limited partners. None of the
officers or directors of the General Partner of the registrant have filed
a petition under the federal bankruptcy laws or any state insolvency
act, nor have they been engaged in any acts over the past five years
that would impair their ability or integrity as directors or executive
officers of the General Partner of the registrant.
Item 11. Executive Compensation
(a) The Registrant does not pay any salary or other remuneration
to the officers of the General Partner of the Registrant.
(b) The Registrant has no plan or arrangement to pay any salary or
other remuneration to the officers in the future.
(c) There are no options, warrants, rights or any other such
remuneration available to the General Partner of the Registrant.
(d) The Registrant will not pay any salary or other remuneration
to the directors of the General Partner of the Registrant.
(e) There are no retirement benefit plans or other remuneration
that would result from the resignation, retirement, termination or
any other change in control of any officer or director of the General
Partner of the Registrant.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
(b) Holders
<TABLE>
<S> <C> <C> <C>
Title of Name & Address of Amount and Nature of % of
Class Beneficial Owner Beneficial Ownership Class
General Partner Interfinancial Real 5 Units 100%
Interest Estate Management Co. ($5,000)
1201 Third Avenue, Suite 5400
Seattle, Washington 98101 3076
</TABLE>
(b) No officers or directors of the General Partner of the Registrant
own a Partnership interest.
(c) No change in control of the Registrant is anticipated.
Item 13. Certain Relationships and Related Transactions
(a) There are no transactions in which the directors or officers of the
General Partner or security holder of the Registrant have a material interest.
(b) There are no transactions in which the directors of the General
Partner have a material interest.
(c) There is no indebtedness of the management of the General Partner
of the Registrant to the Registrant.
PART IV
Item 14.Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) 1.Financial Statements:
Report of independent certified public accountants.
Balance Sheets at December 31, 1996 and 1995.
Statements of Income for the years ended December 31, 1996,
1995 and 1994.
Statements of Changes in Partners' Capital for the years ended
December 31, 1996, 1995 and 1994.
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994.
Notes to Financial Statements.
(a) 2. Financial Statement Schedules:
IV Indebtedness of and to Related Parties
XI Real Estate and Accumulated Depreciation and Amortization
of Local Limited Partnerships.
All other schedules are omitted because they are not applicable or
the required information is included in the financial statements or
the notes thereto.
FINANCIAL STATEMENTS OF UNCONSOLIDATED SUBSIDIARIES
FIFTY PERCENT OWNED PERSONS OR OTHER UNCONSOLIDATED PERSONS
ACCOUNTED FOR ON THE EQUITY METHOD
Separate financial statements of the five limited partnerships
accounted for on the equity method have been omitted because
combined financial statements are included in Note 5 to the
financial statements.
(a) 3. Exhibits
1.A. Form of proposed Selling Brokers' Agreement, incorporated
by reference from Registration Statement on Form S-11 filed 1972.
3.A. Amended Certificate and Agreement of Limited Partnership,
incorporated by reference from Registration Statement on Form S-11
filed 1972.
3.B. Amendment to Certificate of Limited Partnership,
incorporated by reference from Registration Statement on Form S-11 filed 1972.
4.A. Subscription agreement for use prior to effective date of
Registration Statement, incorporated by reference from Registration
Statement on Form S-11 filed 1972.
4.B. Application form to subscribe for Units, incorporated by
reference from Registration Statement on Form S-11 filed 1972.
5.A. Opinion and Consent of Counsel, incorporated by reference
from Registration Statement on Form S-11 filed 1972.
8.A. Opinion and Consent of Tax Counsel, incorporated by
reference from Registration Statement on Form S-11 filed 1972.
10.A. Copy of Agreement between Registrant, the General Partner
and Income-Equities Corporation with respect to certain commitments
made on behalf of the Registrant, incorporated by reference from
Registration Statement on Form S-11 filed 1972.
10.B. Copy of Management Agreement between the Registrant
and Income-Equities Corporation incorporated by reference
from Registration Statement on Form S-11 filed 1972.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the last quarter of 1996.
(c)Exhibits
Form 12b-25
(d)Financial Statement Schedules:
IV Indebtedness of and to Related Parties
XI Real Estate and Accumulated Depreciation and Amortization of
Local Limited Partnerships.
All other schedules are omitted because they are not applicable or
the required information is included in the financial statements or
the notes thereto.
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.
(REGISTRANT) URBAN IMPROVEMENT FUND LIMITED 1972
BY: INTERFINANCIAL REAL ESTATE MANAGEMENT COMPANY
Date: 08-20-97
By: Paul H. Pfleger
President
Interfinancial Real Estate Management Company
Date: 08-20-97
By: John M. Orehek
Senior Vice President
Interfinancial Real Estate Management Company
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
Date: 08-19-97
By: Paul H. Pfleger, Director
Interfinancial Real Estate Management Company
Date 08-19-97
By: John M. Orehek, Director
Interfinancial Real Estate Management Company.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED
SEATTLE, WASHINGTON
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2) AND ITEM 14(d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND FINANCIAL
STATEMENT SCHEDULES
YEAR ENDED December 31, 1996
URBAN IMPROVEMENT FUND LIMITED
(A Limited Partnership)
Form 10-K Items 14(a)(1) and (2)
Form 10-K Item 14(d)
INDEX TO FINANCIAL STATEMENTS
The following financial statements of Urban Improvement
Fund Limited are included in Item 8 and Item 14(a)(1)
Independent auditors' report . . . . . . . . . . . . . . . . . . F-3
Balance sheets at December 31, 1996 and 1995 . . . . F-4
Statements of income
for the years ended December 31, 1996, 1995 and 1994. . F-5
Statements of changes in partners' capital (deficit)
for the years ended December 31, 1996, 1995 and 1994. . F-6
Statements of cash flows
for the years ended December 31, 1996, 1995 and 1994. . F-7
Notes to financial statements. . . . . . . . . . . . . . . . . . F-8
The following financial statement schedules of Urban Improvement
Fund Limited are included in Item 14(a)(2) and 14(d):
IV. Indebtedness of and to Related Parties. . . . . . . . . . .F-22
XI. Real Estate and Accumulated Depreciation of
Local Limited Partnerships. . . . . . . . . . . . . . . .F-23
All other schedules are omitted because they are not applicable
or the required information is included in the financial statements
or the notes thereto.
FINANCIAL STATEMENTS OF UNCONSOLIDATED SUBSIDIARIES
FIFTY PERCENT OWNED PERSONS OR OTHER
UNCONSOLIDATED PERSONS ACCOUNTED FOR ON
THE EQUITY METHOD
Separate financial statements of the four limited partnerships
accounted for on the equity method have been omitted because
combined financial statements are included in Note 5 to the financial
statements.
INDEPENDENT AUDITORS' REPORT
To the Partners
Urban Improvement Fund Limited 1972
We have audited the accompanying balance sheets of Urban
Improvement Fund, Limited (a Limited Partnership) as of
December 31, 1996 and 1995, and the related statements of changes
in partners' capital (deficit), income and cash flows for
the years ended December 31, 1996, 1995 and 1994 and the
related schedules listed in Item 14(a)2 of the annual report on
Form 10-K of Urban Improvement Fund Limited for the years
ended December 31, 1996, 1995 and 1994. These financial
statements and financial statement schedules are the responsibility
of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and financial statement
schedules based on our audits. We did not audit two in 1996
and three in 1995 of the financial statements of Urban Improvement
Fund Limited's Local Limited Partnership investments whose
combined financial statements are shown in Note 5. These statements
were audited by other auditors whose reports have been
furnished to us, and our opinion, to the extent it relates to the
amounts included for these Local Limited Partnership
investments, is based solely on the reports of the other auditors.
Urban Improvement Fund Limited's investment in these
partnerships has been reduced to zero.
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 and the reports of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the reports of other
auditors, the financial statements referred to above present
fairly, in all material respects, the financial position of Urban
Improvement Fund Limited as of December 31, 1996 and 1995,
and the results of its operations and its cash flows for the years
ended December 31, 1996, 1995 and 1994, in conformity with
generally accepted accounting principles. In addition, in our
opinion, based upon our audits and the reports of other auditors,
the financial statement schedules referred to above, when considered
in relation to the basic financial statements taken as a whole, present
fairly, in all material respects, the information required therein.
The accompanying financial statements have been prepared
assuming that Urban Improvement Fund Limited will continue
as a going concern. As discussed in Note 2 to the financial statements,
the Partnership's difficulty in generating sufficient cash flows to
pay its obligations and its net capital deficiency 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 2. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
Atlanta, Georgia
June 4, 1997
URBAN IMPROVEMENT FUND LIMITED
(A Limited Partnership)
BALANCE SHEETS
<TABLE>
<S> <C> <C>
ASSETS
December 31,
1996 1995
Cash and cash equivalents $ 59,063 $ 643
Investments in and advances to Local
Limited Partnerships accounted for
on the equity method - Note 5 -0- -0-
$ 59,063 $ 643
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accounts payable $ 4,000 $ -0-
Management fee payable
Note 4 (Schedule IV) 780,833 760,833
Advance from General
Partner (Schedule IV) 558,586 558,586
Distribution payable 641 641
1,344,060 1,320,060
Partners' capital (deficit) Note 3
General Partners
5 partnership units
authorized, issued and outstanding (1,103) (1,133)
Limited Partners
5,830 partnership units
authorized, issued and outstanding (1,283,894) (1,318,284)
(1,284,997) (1,319,417)
Commitments and contingent liabilities
Notes 2 and 4
$ 59,063 $ 643
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
URBAN IMPROVEMENT FUND LIMITED
(A Limited Partnership)
STATEMENTS OF INCOME
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
1996 1995 1994
Interest income $ 1,455 $ 118 $ 263
Expenses:
Management fees Note 4 40,000 40,000 40,000
Other expenses 33,954 15,157 15,226
73,954 55,157 55,226
Loss before equity in
income of Local Limited
Partnerships (72,499) (55,039) (54,963)
Equity in income of
Local Limited
Partnerships - Note 5 106,919 9,778 6,947
Net income (loss) $ 34,420 $ (45,26) $ (48,016)
Allocation of net
income (loss):
Net income (loss)
allocated to General
Partners $ 30 $ (39) $ (42)
Net income (loss)
allocated to Limited
Partners 34,390 (45,222) (47,974)
$ 34,420 $ (45,261) $ (48,016)
Net financial
reporting income
(loss) per unit:
General partnership
units (5 units
outstanding allocated
to General Partner) $ 6 $ (8) $ (8)
Limited partnership
units (5,830 units
outstanding
allocated to Limited
Partners) $ 6 $ (8) $ (8)
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<S> <C> <C> <C>
General Limited
Partner Partners Total
Partners' capital
(deficit) at
January 1, 1994 $ (1,052) $(1,225,088) $(1,226,140)
Net loss 1994 (42) (47,974) (48,016)
Partners' capital
(deficit) at
December 31, 1994 (1,094) (1,273,062) (1,274,156)
Net loss 1995 (39) (45,222) (45,261)
Partners' capital
(deficit) at
December 31, 1995 (1,133) (1,318,284) (1,319,417)
Net income 1996 30 34,390 34,420
Partners' capital
(deficit) at
December 31, 1996 $ (1,103) $(1,283,894) $(1,284,997)
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C> <C>
Year ended December 31,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 34,420 $ (45,261) $ (48,016)
Adjustments to reconcile
net income (loss) to net
cash used by operating
activities:
Equity in net income
of Local Limited
Partnerships (106,919) (9,778) (6,947)
Increase (decrease) in
accounts payable,
management fees payable
and payable to affiliates 24,000 40,000 42,600
Total adjustments (82,919) 30,222 35,653
Net cash used by operating
activities (48,499) (15,039) (12,363)
CASH FLOWS FROM INVESTING ACTIVITIES:
Current year
distributions received 89,970 9,778 6,947
Net repayments from
(advances to) Local
Limited Partnerships 16,949 -0- -0-
Net cash provided by investing
activities 106,919 9,778 6,947
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in
distribution payable -0- (105) -0-
Net cash used by financing
activities -0- (105) -0-
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 58,420 (5,366) (5,416)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 643 6,009 11,425
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 59,063 $ 643 $ 6,009
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
Note 1 Organization and Accounting Policies
Organization
Urban Improvement Fund Limited (the Partnership) was formed
under the California Uniform Limited Partnership Act on February
22, 1972, for the principal purpose of investing in other limited
partnerships (Local Limited Partnerships), which own federal
and state-assisted housing projects. The Partnership issued
5,830 units of limited partnership interest pursuant to a public
offering of such units which terminated on December 31, 1972.
The Partnership also issued five units of general partnership
interest to Interfinancial Real Estate Management
Company (the General Partner). For income tax and financial
reporting purposes, profits and losses are allocated .08659
percent to the General Partner and 99.91341 percent to
the limited partners.
Investment in Local Limited Partnerships
As of December 31, 1996, the Partnership has investments
in four active real estate limited partnerships (Local
Limited Partnerships), which are accounted for on the
equity method (Note 5). The investment account represents
the sum of the capital investment, advances and unamortized
cost of acquisition less the Partnership's share of losses since
the date of acquisition. The Partnership discontinues
recognizing losses and amortizing cost of acquisition under
the equity method when the investment in a particular Local
Limited Partnership is reduced to zero, unless the Partnership
intends to commit additional funds to the Local Limited
Partnership. Repayment of advances and cash distributions by
the Local Limited Partnerships after the Partnership's
investment has been reduced to zero are recognized as income
by the Partnership in the year received. Additional advances
to a Local Limited Partnership, after an investment is reduced
to zero, are recognized as losses. Initial rent-up fees paid
by the Partnership to the General Partner, deducted when paid
for income tax purposes (Note 2), are capitalized as
costs of acquisition of the Local Limited Partnerships for
financial reporting purposes. These costs and other costs
of acquisition are amortized using the straight-line method
over the lives (fifteen to forty years) of the Local
Limited Partnerships' properties. Amortization is discontinued
when the investment is reduced to zero.
The Partnership has an investment in one limited partnership
that sold its real estate during 1983. This partnership (Alms
Hill Apartments, Ltd.) holds a note receivable for a portion of the
sales proceeds. The sale of the property was recognized on the
cost recovery method to first recognize the recovery of the asset
value, then recognize the gain as the proceeds are received.
Interest will accrue at eighteen percent on the unpaid principal
balance of $500,000. Unpaid interest and principal was due
August 1, 1993. The due date was extended for an additional
five-year term to August 1, 1998, at which time the due
date may be extended for an additional five year term at the
option of the maker of the installment obligation. During the
extension period, interest will accrue only to the extent of surplus
cash. Payments after 1989 can only be made from cash flow of
the Local Limited Partnership, as defined in its partnership
agreement. No cash flow payments have been made.
The Partnership's equity in net income of the Local Limited
Partnerships is summarized as follows:
<TABLE>
<S> <C> <C> <C>
1996 1995 1994
Repayments from (advances to)
Partnerships with zero investments:
Angeles II $ 16,949 $ -0- $ -0-
Distributions received from
Partnerships with zero
investments:
The Villages 36,013 -0- 6,947
Lakewood Apartments 8,054 9,778 -0-
Angeles II 45,903 -0- -0-
Equity in income of
Local Limited
Partnerships $106,919 $ 9,778 $ 6,947
</TABLE>
Significant accounting policies followed by the Local Limited
Partnerships are summarized in Note 5.
Taxes on Income
No provision for taxes on income is required in the financial
statements since all taxable income or loss of the Partnership
is allocated to the partners for inclusion in their respective
tax returns.
Fair Value of Financial Instruments and Use of Estimates
The Partnership estimates that the aggregate fair value of all
financial instruments at December 31, 1996 does not differ
materially from the aggregate carrying values of its financial
instruments recorded in the balance sheet. These estimates
are not necessarily indicative of the amounts that the Partnership
could realize in a current market exchange. The preparation of
financial statements requires the use of estimates and
assumptions. Actual results could differ from those estimates.
Cash Equivalents
Marketable securities that are highly liquid and have maturities of
three months or less at the date of purchase are classified as
cash equivalents.
Note 2 Future Operations
The Partnership's cash flow is insufficient to meet its current
obligations, and the Partnership may not be able to generate
sufficient cash flow to pay its obligations as they become due
without additional financing or advances from the General
Partner. The General Partner is under no obligation to commit
additional funds to the Partnership. However, the General
Partner is monitoring the operations of the Local Limited
Partnerships to ensure that sufficient cash will be received
from the Local Limited Partnerships to sustain operations.
Note 3 Reconciliation Between Net Income (Loss)
and Partners' Capital (Deficit)
For Financial Reporting Purposes and Income
Tax Reporting Purposes
A reconciliation of the Partnership's income (loss) for
financial reporting purposes and the Partnership's income
(loss) for income tax reporting purposes follows:
<TABLE>
<S> <C> <C> <C>
December 31,
1996 1995 1994
Net income (loss) for
financial reporting
purposes $ 34,420 $ (45,261) $ (48,016)
Equity in deductions
taken by Local Limited
Partnerships for income
tax reporting purposes (68,628) 374,945 327,027
Other accrual adjustments 20,000 40,000 40,000
Net income (loss) as reported
on the federal income tax
return $(14,208) $ 369,684 $ 319,011
</TABLE>
A reconciliation of partners' capital (deficit) for financial reporting
purposes and partners' capital (deficit) for income tax reporting purposes
follows:
<TABLE>
<S> <C> <C> <C>
December 31,
1996 1995 1994
Partners' capital (deficit) for
financial reporting purposes $(1,284,997) $(1,319,417) $(1,274,156)
Commissions and offering
expenses capitalized for
income tax reporting
purposes and charged to
capital for financial
reporting purposes 641,492 641,492 641,492
Equity in cumulative
losses of Local Limited
Partnerships for income
tax reporting purposes
in excess of losses for
financial reporting
purposes (6,881,035) (6,812,407) (7,187,352)
Other adjustments 733,333 713,333 673,333
Partners' capital (deficit)
as reported on the federal
incometax return $(6,791,207) $(6,776,999) $(7,146,683)
</TABLE>
Note 4 Management of Urban Improvement Fund Limited
Under the terms of the Limited Partnership Agreement (as
amended), the Partnership is required to pay the General Partner
an annual management fee equal to three-tenths of one percent of
invested assets or $64,325. (The fee will not be more than fifty
percent of the Partnership's annual net cash flow as defined,
subject to an annual minimum of $40,000.) This fee was not
payable during the first six years unless annual tax deductions plus
cash distributions aggregated $550 per unit on a cumulative basis.
The required level of tax deductions was not achieved
and, accordingly, the fee was not paid for those years.
However, fees of $240,000 were recorded as a liability to
the General Partner. Management fees totaling $540,833
payable to the General Partner for subsequent years have
been accrued because cash flow was not sufficient to pay
the fees. The Partnership will also pay the General
Partner a liquidation fee for the sale of projects. The
liquidation fee is the lesser of (i) ten percent of the net
proceeds to the Partnership from the sale of a project(s)
or (ii) one percent of the sales price plus three percent
of the net proceeds after deducting an amount sufficient
to pay long-term capital gains taxes. No part of such fee
shall accrue or be paid unless: (i) the limited partners'
share of the proceeds has been distributed to them, (ii) the
limited partners shall have first received an amount equal
to their invested capital attributable to the project(s) sold,
and (iii) the limited partners have received an amount
sufficient to pay long-term capital gains taxes from the
sale of the project(s), if any, calculated at the maximum
rate then in effect.
The General Partner of the Partnership is a corporation in which
Paul H. Pfleger has a majority interest. Partnership Services, Inc.
(PSI), another corporation in which Paul H. Pfleger is a
majority shareholder, has contracted with the General Partner
and the Partnership to provide certain management and other
services to any projects in which the Partnership has an interest.
No fees were paid to PSI during 1996, 1995 or 1994. In addition,
as shown in the following table, PSI has become the
General Partner in two of the Local Limited Partnerships in
which the Partnership has investments:
<TABLE>
<S> <C>
Date PSI Became
Local Limited Partnership General Partner
Angeles Apartments Associates, No. 1 December 1975
Angeles Apartments Associates, No. 2 December 1975
</TABLE>
Note 5 Investments in and Advances to Local Limited
Partnerships Accounted for on the Equity Method
The Partnership has 83.44 percent to 98 percent interests in
profits and 83.44 percent to 100 percent interests in losses of
the Local Limited Partnerships. Investments in these Local Limited
Partnerships were made in installments based typically on the stage
of completion and/or occupancy.
Investments in and advances to the Local Limited Partnerships
accounted for on the equity method are as follows:
<TABLE>
<S> <C> <C> <C>
Equity In
Capital Income
Contributions (Losses) Subtotal
December 31, 1996:
Angeles No. 1 $216,629 $(335,778) $(119,149)
Angeles No. 2 225,664 (419,272) (193,608)
Lakewood Apts 36,699 (670,450) (633,751)
The Villages 88,463 (1,283,223) (1,194,760)
$ 567,455 $(2,708,723) $(2,141,268)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Equity In Unamortized
Losses Not Costs of
Recorded Advances Acquisition Total
December 31, 1996:
Angeles No. 1 $ 76,588 $ -0- $42,561 $-0-
Angeles No. 2 138,680 3,574 51,354 -0-
Lakewood Apts 570,044 -0- 63,707 -0-
The Villages 1,085,033 -0- 109,727 -0-
$1,870,345 $3,574 $267,349 $-0-
</TABLE>
<TABLE>
<S> <C> <C> <C>
Equity In
Capital Income
Contributions (Losses) Subtotal
December 31, 1995:
Angeles No. 1 $216,630 $(427,157) $(210,527)
Angeles No. 2 271,566 (485,192) (213,626)
Lakewood Apts 44,753 (716,080) (671,327)
Mott Haven VI 900,000 (4,385,743) (3,485,743)
The Villages 124,476 (1,202,800) (1,078,324)
$1,557,425 $(7,216,972) $(5,659,547)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Equity In Unamortized
Losses Not Costs of
Recorded Advances Acquisition Total
December 31, 1995:
Angeles No. 1 $ 167,966 $ -0- $ 42,561 $-0-
Angeles No. 2 141,749 20,523 51,354 -0-
Lakewood Apts 607,620 -0- 63,707 -0-
Mott Haven VI 3,363,483 -0- 122,260 -0-
The Villages 968,597 -0- 109,727 -0-
$5,249,415 $20,523 $389,609 $-0-
</TABLE>
The combined balance sheets of the Local Limited Partnerships
accounted for on the equity method at December 31, 1996 and 1995 and
the related combined statements of operations, changes in partners
capital (deficit), cash flows and selected footnote disclosures from
the audited financial statements of the Local Limited Partnerships
for the years ended December 31, 1996, 1995 and 1994 are summarized
as follows:
COMBINED BALANCE SHEETS OF LOCAL LIMITED PARTNERSHIPS
Assets
<TABLE>
<S> <C> <C>
December 31,
1996 1995
Cash $ 196,457 $ 287,957
Cash in escrow and
other restricted funds 1,014,575 983,143
Accounts receivable 9,957 47,070
Prepaid expenses 46,624 269,875
Other assets (net of
accumulated amortization) 41,954 44,039
1,309,567 1,632,084
Property on the basis of cost:
Land 504,203 635,203
Buildings and improvements 8,752,334 14,604,098
9,256,537 15,239,301
Less accumulated depreciation (6,712,551) (11,510,510)
2,543,986 3,728,791
$ 3,853,553 $ 5,360,875
</TABLE>
Liabilities and Partners' Capital (Deficit)
<TABLE>
<S> <C> <C>
Mortgage notes payable $ 5,467,487 $9,934,153
Accounts payable and
accrued expenses 137,290 621,601
Advances from Urban
Improvement Fund Limited 3,574 20,523
Advances from general partners -0- 298,000
Notes payable 371,970 322,321
Tenants' security and
other deposits 77,135 117,790
6,057,456 11,314,388
Partners' capital (deficit) per accompanying
statements (2,203,903) (5,953,513)
$ 3,853,553 $ 5,360,875
</TABLE>
COMBINED STATEMENTS OF OPERATIONS OF LOCAL LIMITED PARTNERSHIPS
<TABLE>
<S> <C> <C> <C>
Year Ended December 31
1996 1995 1994
REVENUE:
Net rental income $4,628,178 $4,805,244 $4,701,030
Financial income 37,536 42,713 23,183
Other income 57,364 53,572 50,975
Total revenue 4,723,078 4,901,529 4,775,188
EXPENSES:
Administrative 753,077 840,321 826,470
Utilities 1,077,002 1,062,615 1,102,551
Operating 1,587,296 1,345,235 1,428,025
Taxes and insurance 833,331 814,873 651,524
Financial 267,134 269,240 308,766
Depreciation 505,508 525,461 523,503
Other 2,574 2,445 740
Total expenses 5,025,922 4,860,190 4,841,579
Income (loss) before gain on transfer
of property to HUD (302,844) 41,339 (66,391)
Gain on transfer of property
to HUD 4,146,899 -0- -0-
Net income (loss) $3,844,055 $ 41,339 $ (66,391)
</TABLE>
Amortization of capitalized interest was $32,716 in 1996, 1995 and 1994.
COMBINED STATEMENTS OF CHANGES IN PARTNERS'
CAPITAL (DEFICIT) OF LOCAL LIMITED PARTNERSHIPS
<TABLE>
<S> <C> <C> <C> <C>
Urban
Improvement Other
Fund Limited General
Limited Partners Partners Total
Partners' capital (deficit)
at January 1, 1994 $(5,620,938) $(50,789) $(239,444) $(5,911,171)
Net income (loss)1994 (62,665) (434) (3,292) (66,391)
Distributions 1994 (6,947) (219) (146) (7,312)
Partners' capital (deficit)
at December 31, 1994 (5,690,550) (51,442) (242,882) (5,984,874)
Net income (loss) 1995 40,781 5,530 (4,972) 41,339
Distributions 1995 (9,778) (100) (100) (9,978)
Partners' capital (deficit)
at December 31, 1995 (5,659,547) (46,012) (247,954) (5,953,513)
Net income (loss) 1996 3,608,249 (418) 236,224 3,844,055
Distributions 1996 (89,970) (1,705) (2,770) (94,445)
Partners' capital (deficit)
at December 31, 1996 $(2,141,268) $ (48,135) $ (14,500) $(2,203,903)
</TABLE>
STATEMENTS OF CASH FLOWS OF
LOCAL LIMITED PARTNERSHIPS
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,844,055 $ 41,339 $ (66,391)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Gain on transfer of
property to HUD (4,146,899) -0- -0-
Depreciation 503,424 525,461 523,503
Decrease (increase) in escrows and
other restricted funds, receivables,
prepaid expenses and
other assets 417 24,780 (290,251)
Increase (decrease) in accounts pay-
able, accrued expenses, tenant
security deposit liability and
other liabilities 64,657 (27,206) 43,742
Total adjustments (3,578,401) 523,035 276,994
Net cash provided by operating
activities 265,654 564,374 210,603
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (105,956) (208,125) (168,068)
CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage principal
payments (164,454) (237,232) (221,239)
Distributions paid (94,445) (9,978) (7,312)
Advance from (repayment
to) general partner (25,000) 25,000 -0-
Repayments of advances from
affiliates net (16,949) -0- (3,213)
Increase in notes payable 49,649 -0- -0-
Net cash used by financing
activities (251,199) (222,210) (231,764)
NET INCREASE (DECREASE)
IN CASH (91,500) 134,039 (189,229)
CASH BALANCE AT BEGINNING
OF YEAR 287,957 153,918 343,147
CASH BALANCE AT
END OF YEAR $ 196,457 $ 287,957 $ 153,918
SUPPLEMENTAL INFORMATION REGARDING INTEREST
PAYMENTS IS AS FOLLOWS:
Interest paid $ 181,178 $ 212,888 $ 266,367
</TABLE>
A reconciliation between combined net income (loss) for financial
reporting purposes and the combined net income (loss) for income
tax reporting purposes follows:
<TABLE>
<S> <C> <C> <C>
Year Ended December 31,
1996 1995 1994
Combined net income
(loss) for financial
reporting purposes $3,844,055 $ 41,339 $ (66,391)
Differences between depreciation
for income tax reporting
purposes and depreciation
for financial reporting
purposes 382,858 338,707 346,895
Gain on transfer of
property to HUD (4,146,899) -0- -0-
Accrual adjustments
for financial reporting
purposes (30,388) 20,165 69,841
Combined net income
(loss) as reported on the
federal income tax
returns $ 49,626 $ 400,211 $ 350,345
</TABLE>
A reconciliation of combined partners' capital (deficit) for financial
reporting purposes and combined partners' capital (deficit) for income
tax reporting purposes follows:
<TABLE>
<S> <C> <C> <C>
December 31,
1996 1995 1994
Combined partners'
capital (deficit) for
financial reporting purposes $(2,203,903) $(5,953,513) $(5,984,874)
Gain on transfer
of property to HUD (4,146,899) -0- -0-
Carrying costs during construction
capitalized for financial reporting
purposes, excess of depreciation
for income tax reporting
purposes and accrual
adjustments for financial
reporting purposes (799,275) (1,060,003) (1,420,964)
Combined partners' capital (deficit)
as reported on the federal income
tax returns $(7,150,077) $(7,013,516) $(7,405,838)
</TABLE>
Cost of Buildings
For financial reporting purposes, the Local Limited Partnerships
generally capitalized all project costs, including payments to the
general partners, interest, taxes, carrying costs and operating
expenses offset by incidental rental income, up to the cutoff
date for cost certification purposes. For income tax reporting
purposes, certain of these amounts were deducted when paid.
Depreciation of Properties
For financial statement purposes, depreciation is generally
computed using the straight-line method over useful lives of
twenty-five to forty years, from the date of completion of
the building or rehabilitation. For income tax reporting purposes,
buildings are depreciated over generally shorter periods on
various accelerated methods, and certain rehabilitation costs
were amortized using the straight-line method over sixty months
under the provisions of Section 167(k) of the Internal
Revenue Code. The Section 167(k) rehabilitation costs for
the Local Limited Partnerships have been fully depreciated
for income tax reporting purposes.
Certain expenses related to organization of the Local Limited
Partnerships have been deferred and are being amortized for
financial statement purposes using the straight-line method over
periods of twenty to forty years.
Mortgage Notes Payable
The Partnerships have mortgages which are payable to
or are insured by the Department of Housing and Urban
Development (HUD) totaling $5,467,487 at December
31, 1996 and $9,934,153 at December 31, 1995. The
mortgage notes payable are secured by deeds of trust
on rental property and bear interest at the rate of seven
percent per annum. The mortgages will generally be repaid
in monthly installments of principal and interest of
$46,124 over periods of forty years. HUD makes interest
assistance payments on the mortgages insured under
Section 236 which effectively reduce the mortgage payments
to those required for mortgages carrying a one percent
interest rate.
The scheduled principal reductions for the next five years are as follows:
<TABLE>
<S> <C> <C>
1997 $ 176,343
1998 189,092
1999 202,759
2000 217,508
2001 233,135
Beyond 4,448,650
$5,467,487
</TABLE>
Notes Payable
Notes payable include residual receipts notes of $322,321 that
are payable to the former General Partner of two Local Limited
Partnerships. The residual receipts are non-interest bearing,
subordinated to allocable distributions to partners and are due
after liquidation of the HUD-insured mortgages. A Local Limited
Partnership has a low interest rate flexible subsidy note payable
in the amount of $49,649. The note can be repaid from surplus
cash through 1998 with the balance due in 2012.
National Housing Act Subsidies and Restrictions
Under terms of the regulatory agreements with HUD, the
Local Limited Partnerships cannot make cash distributions to
partners of the Local Limited Partnerships in excess of six percent
per annum of stated equity in the respective projects. Such
distributions are cumulative but can only be paid from "surplus cash,"
as defined in the agreements. The Local Limited Partnerships
must deposit all cash in excess of the distributable amounts into
residual receipts funds which are under the control of the
mortgagees, and from which disbursements must be approved by
HUD. As of December 31, 1996, approximately $653,000 could
be paid to partners of the Local Limited Partnerships as surplus
cash becomes available.
Under terms of the regulatory agreements, the Local Limited
Partnerships are required to make monthly deposits into
replacement funds which are under the control of the mortgagees.
Such deposits commence with the initial principal payments on the
mortgage loans. Expenditures from the replacement funds must
be approved by HUD.
All of the Local Limited Partnerships have entered into rent
supplement and/or Section 8 contracts with HUD to provide
financial assistance to qualified tenants of the apartment units.
Under terms of these contracts, HUD will pay a portion of the
rent on behalf of qualified tenants. The maximum dollar amount
of these payments is limited by HUD. A substantial portion of
rental income is collected through these contracts. During
1996 and 1995, the Local Limited Partnerships received
approximately $3,259,000 and $3,231,000, respectively,
in rent supplement and Section 8 funds.
Management
The Local Limited Partnerships have entered into property management
contracts with various agents under which the agents are paid property
management fees of approximately six percent to eleven and one-half
percent of the gross revenues of the respective projects. Most of the
agents are affiliated with the General Partners of the Local Limited
Partnerships.
Note 6 Investment in Mott Haven Associates Number VI
Mott Haven Associates Number VI generated negative cash flows during
1995 and the mortgage note was assigned to HUD. Despite the efforts of
the General Partners, the owners and managers to preserve the development
and provide decent and affordable housing, the financial stability of the
development is threatened by the imminent expiration of the Section 8 loan
management set-aside contracts and the likelihood that they will not be
renewed on this property for federal budget and policy reasons. HUD, the
owners and the General Partners believe that it is in the best interests of
the development and its tenants that the projects be renovated and
reconfigured, and that such result can best be accomplished through
replacement of the existing management and ownership structure with
community-based owners and managers. The General Partner has taken steps
to transfer the property to HUD.
For financial reporting purposes, the Partnership has recorded the
disposition of its investment in Mott Haven Associates Number VI during
November 1996. The components of the gain on the transfer of property to
HUD is summarized as follows:
Assets transferred:
<TABLE>
<S> <C>
Cash $ 24,302
Cash in escrow and other restricted funds 111,818
Accounts receivable 36,239
Prepaid expenses 82,543
Other assets
Property on the basis of cost 6,088,720
Accumulated depreciation (5,301,383)
1,042,239
</TABLE>
Liabilities transferred:
<TABLE>
<S> <C>
Mortgage note payable 4,302,212
Accounts payable and accrued expenses 574,318
Advance from general partner 273,000
Tenant security and other deposits 39,608
5,189,138
Gain on transfer of property to HUD $ 4,146,899
</TABLE>
The General Partner believes that if the Partnership did not consent to the
Workout Agreement (transfer of property to HUD), it is more likely than
not that HUD would take the necessary steps to sell the property at a
foreclosure sale during 1997. Such a foreclosure sale will most probably
not result in the return of any cash to the Limited Partners but would
result in the recognition of a significant taxable gain by each limited
partner. The taxable gain for the limited partners or Urban Improvement
Fund Limited in the aggregate is estimated to be $3,899,695 or approximately
$669 for each unit. This gain would be passive in nature and could be
offset by any suspended passive loss carryforwards. It is estimated that
the maximum tax due on this gain would total approximately $1,502,258 for
all limited partners or $258 per unit.
Note 7 Sale of the Assets of Alms Hill Apartments
The property of Alms Hill Apartments was sold during 1983. The sales
price of $4,252,781 was composed of $3,206,349 for assumption of the
underlying mortgage, $50,000 in cash, the payment of $75,000 of unpaid
mortgage principal delinquency, a commitment to pay $200,000 for HUD
required renovations, and an installment note of $721,432. Between 1983
and 1989, $221,432 was paid against principal. The final installment of
$500,000 was due on August 2, 1993 along with accrued interest.
However, the note could be extended for two additional five year periods by
the election of the maker of the installment obligation. The maker of the
note elected to extend the note through August 1, 1998. Interest will
continue to accrue at eighteen percent per annum and is payable on the
anniversary date of the note to the extent that the property has distributable
cash flow. During the extension period, any unpaid interest will not accrue.
The gain on the sale of the real estate was recognized on the cost recovery
method to first recognize the recovery of the asset value, then recognize the
gain as the proceeds are received.
URBAN IMPROVEMENT FUND LIMITED
(A Limited Partnership)
SCHEDULE IV
INDEBTEDNESS OF RELATED PARTIES
<TABLE>
<S> <C> <C> <C> <C> <C>
December 31,
1996 1995
1996 Change 1995 Change 1994
Advances to (repayment from) Local
Limited Partnerships
Angeles No. 2 $ 3,574 $(16,949) $20,523 $-0- $20,523
</TABLE>
The above advances are included in the balance sheet caption "Investments
in and advances to Local Limited Partnerships accounted for on the equity
method." See Note 5 to the financial statements.
<TABLE>
<S> <C> <C>
December 31,
1996 1995
Indebtedness to general partner:
Management fee payable
to General Partner $ 780,833 $ 760,833
Advances from
General Partner $ 558,586 $ 558,586
</TABLE>
URBAN IMPROVEMENT FUND LIMITED
(A Limited Partnership)
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION OF LOCAL
LIMITED PARTNERSHIPS
December 31, 1996
<TABLE>
<S> <C> <C> <C>
Outstanding
Description Mortgage
Partnership/Location No. of Units Balance
Angeles Apartments
Assoc. No.1
Los Angeles, California 94 apartments $ 962,017
Angeles Apartments
Assoc. No.2
Los Angeles, California 109 apartments 1,149,704
Lakewood Apartments
Vinton, Virginia 108 apartments 1,247,516
The Villages, Ltd.
Waco, Texas 250 apartments 2,108,250
$ 5,467,487
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Buildings
and Accumulated
Partnership/Location Land Improvement Total Depreciation
Angeles Apartments
Assoc. No.1
Los Angeles, California $144,046 $1,675,725 $1,819,771 $(1,139,946)
Angeles Apartments
Assoc. No.2
Los Angeles, California 108,917 2,047,706 2,156,623 (1,398,947)
Lakewood Apartments
Vinton, Virginia 59,882 1,729,845 1,789,727 (1,331,613)
The Villages, Ltd.
Waco, Texas 191,358 3,299,058 3,490,416 (2,842,045)
$504,203 $8,752,334 $9,256,537 $(6,712,551)
</TABLE>
<TABLE>
<S> <C> <C> <C>
Life in Which
Depreciation
in Latest
Date of Income
Completion of Date Statement
Partnership/Location Construction Acquired is Computed
Angeles Apartments
Assoc. No.1
Los Angeles, California 1974 1972 10 to 40 years
Angeles Apartments
Assoc. No.2
Los Angeles, California 1974 1972 5 to 30 years
Lakewood Apartments
Vinton, Virginia 1974 1972 3 to 35 years
The Villages, Ltd.
Waco, Texas 1974 1972 6 to 25 years
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Buildings & Total Accumulated
Land Improvement Cost Depreciation
Balance at
January 1, 1995 635,203 14,395,973 15,031,176 10,985,049
Acquisitions -0- 208,125 208,125 525,461
Balance at
December 31, 1995 635,203 14,604,098 15,239,301 11,510,510
Acquisitions -0- 105,956 105,956 503,424
Assignment of
mortgage to HUD--
Mott Haven
Associates No. 6 (131,000) (5,957,720) (6,088,720) (5,301,383)
Balance at
December 31, 1996 $504,203 $ 8,752,334 $ 9,256,537 $ 6,712,551
</TABLE>
Note-- Capital improvements since original construction or rehabilitation
are not material to the combined financial statements and, as such, are not
disclosed separately. The financial statement category of buildings and
improvements is composed substantially of cost plus the initial renovation
upon acquisition. The total cost of land and buildings for federal income
tax reporting purposes is approximately $8,639,000.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 59,063
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 59,063
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 59,063
<CURRENT-LIABILITIES> 4,641
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (1,284,997)
<TOTAL-LIABILITY-AND-EQUITY> 59,063
<SALES> 0
<TOTAL-REVENUES> 1,455
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 73,954
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 34,420
<INCOME-TAX> 0
<INCOME-CONTINUING> 34,420
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,420
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
