Exhibit
Number Exhibit Description
EX - 21.1 Financial Statements of Laurel Creek Apartments, for the years
ended December 31, 1999 and 1998 together with Independent
Auditors' Report Thereon; a significant subsidiary of the
Partnership.
46
<PAGE>
Laurel Creek Apartments
Table of Contents
Page
Independent Auditors' Report 48
Financial Statements
Balance Sheet 49
Statement of Income, Expenses And Changes In Partners' Capital 50
Statement of Cash Flows 51
Notes to Financial Statements 52
47
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Laurel Creek Apartments
San Luis Obispo, California
We have audited the accompanying balance sheet of Laurel Creek Apartments (A
California Limited Partnership) as of December 31, 1999 and the related
statements of income, expenses, and changes in partners' capital, and cash flows
for the year then ended. These financial statements are the responsibility of
the Partnerships' 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 Laurel Creek Apartments as of
December 31, 1999, and the results of its operations for the year then ended in
conformity with generally accepted accounting principles.
/s/ Wallace, Rowe & Associates
Wallace, Rowe & Associates
January 31, 2000
48
<PAGE>
LAUREL CREEK APARTMENTS
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
CURRENT ASSETS
Cash (Note 2) $ 29,210
Accounts receivable 1,231
Prepaid expenses 711
-----------
TOTAL CURRENT ASSETS 31,152
Restricted reserves (Note 3) 22,819
Land, structures and equipment, net of
accumulated depreciation of $392,698 (Note 4) 1,772,656
Organizational costs, net of accumulated
amortization of $10,657 (Note 5) 16,261
-----------
TOTAL ASSETS $ 1,842,888
===========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable - related party (Note 7) $ 20,352
Accounts payable - other 8,485
Security deposits payable 7,030
Current portion of long-term debt (Note 6) 24,669
-----------
TOTAL CURRENT LIABILITIES 60,536
Long-term debt (Note 6) 635,217
-----------
TOTAL LIABILITIES 695,753
Partners' capital 1,147,135
-----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,842,888
===========
See accompanying notes.
49
<PAGE>
LAUREL CREEK APARTMENTS
STATEMENT OF INCOME, EXPENSES AND
CHANGES IN PARTNERS' CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 1999
OPERATING INCOME
Rental income $ 166,207
Tenant charges 2,492
-----------
TOTAL INCOME 168,699
-----------
OPERATING EXPENSES
Administration 15,702
Insurance and taxes 3,729
Maintenance 29,035
Utilities 20,559
Depreciation and amortization 72,922
-----------
TOTAL EXPENSES 141,947
-----------
NET INCOME (LOSS) FROM OPERATIONS 26,752
-----------
OTHER INCOME AND EXPENSES
Interest income 3,071
Income expense (55,227)
-----------
NET OTHER INCOME UNDER EXPENSES (52,156)
-----------
NET LOSS (25,404)
BEGINNING PARTNERS' CAPITAL 1,190,974
Partner withdrawals (18,435)
-----------
ENDING PARTNERS' CAPITAL $ 1,147,135
===========
See accompanying notes.
50
<PAGE>
LAUREL CREEK APARTMENTS
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (25,404)
Adjustments to reconcile net loss to
Net cash provided by operating activities
Depreciation and amortization 72,922
(Increase) decrease in:
Accounts receivable 92
Prepaid expenses 418
Restricted reserves (1,455)
Increase (decrease) in:
Accounts payable - other (3,506)
Accounts payable - related parties (55,722)
Security deposits payable 401
------------
NET CASH PROVIDED BY OPERATING ACTIVITIES (12,254)
------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital withdrawals (18,435)
Payment of debt (21,439)
------------
NET CASH USED IN FINANCING ACTIVITIES (39,874)
------------
NET INCREASE IN CASH (52,128)
CASH - BEGINNING OF YEAR 81,338
------------
CASH - END OF YEAR $ 29,210
============
See accompanying notes.
51
<PAGE>
LAUREL CREEK APARTMENTS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(Continued)
Note 1 - DEFINITION OF REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The Laurel Creek Apartments is a California Limited Partnership which
was formed on May 17, 1994. The partnership was formed to construct,
acquire, own, operate, maintain, manage, lease, sell, mortgage or
otherwise dispose of a 24 unit apartment complex located in the City
of San Luis Obispo, California.
As of the report date there are two partners in the partnership,
consisting of one general and one limited partner.
Summary of Significant Accounting Policies
a. Basis of accounting
The partnership is accounted for on the accrual basis
of accounting. Under this method revenues are
recognized when they are earned and expenses are
recognized when they are incurred.
b. Fixed assets and depreciation
Fixed assets are carried at cost. Expenditures for the
fixed assets are capitalized. Maintenance and repairs
are charged to operations. Depreciation is calculated
using the straight-line basis over the estimated useful
lives.
c. Income taxes
Taxable income or expenses and related tax credits are
not reflected as expenses or credits of the
partnership. These items are the responsibilities of
the individual partners.
Note 2 - CASH
Cash consists of $28,505 deposited into savings or checking accounts,
and $705 is on deposit with the State of California Local Agency
Investment Fund. At December 31, 1999 the amount deposited into the
savings accounts and the Local Agency Investment Fund earned interest
at rates from 1.25% to 5.49% respectively.
Note 3 - RESTRICTED CASH
Restricted cash consists of $22,819 maintained in a money market
account earning 5.49%. This cash is reserved for the replacement of
structures and equipment.
52
<PAGE>
LAUREL CREEK APARTMENTS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(Continued)
Note 4 - LAND, STRUCTURES AND EQUIPMENT
Property and equipment and accumulated depreciation consist of the
following:
Accumulated
Cost Depreciation
Land $ 275,000 $ -
Building 1,868,634 376,532
Equipment 21,720 16,166
------------ ------------
$ 2,165,354 $ 392,698
============= ============
Note 5 - ORGANIZATION COSTS
Organization costs and accumulated amortization consist of the
following:
Accumulated
Cost Amortization
Organization costs $ 26,918 $ 10,657
============ ============
Note 6 - NOTE PAYABLE
The Agency has a mortgage note payable to the First Bank of San Luis
Obispo. The note requires principal and interest payments totaling
$6,381 each month until 9/1/2014. The note bears interest at 8% per
annum. The following is a schedule of the debt payment requirements to
maturity:
Year ending
December 31
2000 $ 76,569
2001 76,569
2002 76,569
2003 76,569
2004 76,569
Thereafter 740,164
-----------
Total 1,123,009
Less amounts representing
interest 487,792
-----------
$ 635,217
===========
53
<PAGE>
LAUREL CREEK APARTMENTS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(Continued)
Note 7 - RELATED PARTIES
The accounting and administrative functions of the partnership are
performed by employees of the Housing Authority of the City of San
Luis Obispo (the Authority). Two members of the general partner's (San
Luis Obispo Nonprofit Housing Corporation) board of directors are also
members of the board of commissioner's of the Housing Authority of the
City of San Luis Obispo.
At December 31, 1999 the partnership owed the Authority $20,163 and
the Nonprofit Corporation $189. During the year ended December 31,
1999, the partnership paid the Authority $12,002 in administration
costs and management fees.
Note 8 - LAND DONATION AND LEASE
The land upon which the Laurel Creek Apartments were built was
originally leased from the City of San Luis Obispo (the City) by the
Housing Authority of the City of San Luis Obispo (the Authority). This
lease agreement was later assigned from the Authority to the San Luis
Obispo Nonprofit Housing Corporation (the Corporation). The lease was
later assigned to the Laurel Creek Apartments Partnership. Each of the
above mentioned agencies have common board members or in some other
manner have oversight responsibilities over the other organizations;
which would qualify them as related parties.
The lease expires on April 29, 2046. The provisions for extending or
renewing the lease term are not specified and are contingent upon the
continuation of the project being used to provide affordable housing
to lower income families. The annual lease payments are $1 per year.
The land was recorded on the Agency's books of accounts at the
appraised value on the date the land lease was assigned to the Agency.
This appraised value was $275,000. The value of the land was also
recorded as a capital contribution from the general partner on that
date.
54
