<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 8-K/A
AMENDMENT NO. 5
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) JUNE 3, 1997
----------------------
APARTMENT INVESTMENT AND MANAGEMENT COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 1-13232 84-1259577
- -------------------------------- ------------ -------------------
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
1873 SOUTH BELLAIRE STREET, SUITE 1700, DENVER, CO 80222-4348
- -------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 757-8101
--------------------
NOT APPLICABLE
--------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
Acquisition of NHP Real Estate Companies
On June 3, 1997, Apartment Investment and Management Company, a
Maryland corporation ("AIMCO" and, together with its subsidiaries and other
controlled entities, the "Company"), acquired all of the issued and outstanding
capital stock of NHP Partners, Inc., a Delaware corporation ("NHP Partners,
Inc."), and the Company acquired all of the outstanding partnership interests in
NHP Partners Two Limited Partnership, a Delaware limited partnership ("NHP
Partners Two LP" and, together with NHP Partners, Inc. and their subsidiaries,
the "NHP Real Estate Companies").
The Company acquired the NHP Partners, Inc. capital stock from NHP
Partners Limited Partnership, a Delaware limited partnership which is owned
by Demeter Holdings Corporation, a Massachusetts corporation ("Demeter"),
Capricorn Investors, L.P., a Delaware limited partnership ("Capricorn"), and
J. Roderick Heller, III. The Company acquired the interests in NHP Partners
Two LP from Phemus Corporation, a Massachusetts corporation ("Phemus"),
Capricorn, Mr. Heller and NHP Partners Two LLC, a Delaware limited liability
company ("NHP Partners Two LLC") which is owned by Phemus, Capricorn and Mr.
Heller. As consideration, the Company paid $54.8 million in cash and issued
warrants to purchase 399,999 shares of AIMCO's Class A Common Stock, par
value $.01 per share, at an exercise price of $36 per share. The Company
financed the cash consideration with borrowings under its revolving credit
facility (the "Credit Facility") with Bank of America National Trust and Savings
Association.
The acquisition of the NHP Real Estate Companies was made pursuant
to a Real Estate Acquisition Agreement, dated as of May 22, 1997 (the "Real
Estate Agreement"), by and among AIMCO, AIMCO Properties, L.P., a Delaware
limited partnership (the "Operating Partnership"), Demeter, Phemus,
Capricorn, Mr. Heller and NHP Partners Two LLC. The purchase price and other
terms of the Real Estate Agreement were determined based on negotiations
among AIMCO, Demeter, Phemus, Capricorn and Mr. Heller. A copy of the Real
Estate Agreement is filed herewith as Exhibit 2.1 and incorporated herein by
this reference.
NHP Partners, Inc. owns the National Corporation for Housing
Partnerships, a District of Columbia corporation ("NCHP"), and NHP Partners,
Inc. and NHP Partners Two LP own The National Housing Partnership, a District
of Columbia limited partnership (the "NHP Partnership"). NCHP and the NHP
Partnership were organized by Congress in 1970 as private, for-profit
entities pursuant to Title IX of the Housing and Urban Development Act of
1968, to promote private investment in the production of low and moderate
income (affordable) housing. NCHP acts as the general partner of the NHP
Partnership. Through NCHP, the NHP Partnership and other subsidiar-
1
<PAGE>
ies, the NHP Real Estate Companies hold interests in partnerships that own
approximately 534 conventional and affordable multifamily apartment
properties, which contain approximately 87,659 apartment units, as well as a
captive insurance subsidiary and other related assets.
A majority of the properties in which the NHP Real Estate Companies
own interests are managed by NHP Incorporated, a Delaware corporation
("NHP"). On May 5, 1997, AIMCO/NHP Holdings, Inc., a Delaware corporation and
a subsidiary of AIMCO, acquired approximately 51% of the outstanding common
stock of NHP from Demeter, Capricorn and certain Capricorn partners. AIMCO
and NHP have previously announced an agreement pursuant to which a wholly
owned subsidiary of AIMCO would be merged with and into NHP. The merger is
subject to the approval of shareholders of NHP and AIMCO, as well as certain
other conditions. Mr. Heller is the Chairman of the Board, President and
Chief Executive Officer of NHP, and three executive officers of AIMCO
currently serve as directors of NHP. The Company's acquisition of the NHP
Real Estate Companies was approved by a committee of independent directors of
NHP.
On June 6, 1997, AIMCO issued a press release describing the terms
of the acquisition of the NHP Real Estate Companies. The press release is
filed herewith as Exhibit 99.1 and incorporated herein by this reference.
Acquisition of Apartment Properties
On June 6, 1997, the Company acquired The Vinings at the Waterways, a
180-unit apartment community located in Aventura, Florida, for $16.4 million
(including $0.4 million for closing costs and initial capital expenditures at
the property). The Company financed a portion of the purchase price with a
short term loan of $8 million from Amresco, Inc., and the remainder with
additional borrowings under the Credit Facility.
On June 12, 1997, the Company acquired two apartment communities
located in Tustin, California for $9.3 million in cash (including $1.9
million for closing costs and initial capital expenditures at the property)
and 315,419 units ("OP Units") of limited partnership interest in the
Operating Partnership. The Californian Apartments contains 92 apartment
units and Tustin East Village contains 200 apartment units. The two
apartment communities are operated as one complex, together with the
Brookside Apartments which the Company acquired in April 1996. The Company
financed the cash portion of the purchase price with borrowings under its
Credit Facility. On the same date, the Company also acquired from the same
sellers a 45,000 sq. ft. retail shopping center, which is adjacent to the two
acquired apartment communities, for 182,375 OP Units.
2
<PAGE>
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
1. Combined Balance Sheets of NHP Real Estate Companies, as of
December 31, 1996 and 1995, and March 31, 1997 (unaudited), and the related
combined statements of operations, changes in shareholders' equity (deficit) and
partners' capital (deficit), net and cash flows for each of the three years in
the period ended December 31, 1996, and for the three months ended March 31,
1997 (unaudited) and 1996 (unaudited), together with the Report of Independent
Public Accountants (included as Exhibit 99.5 to this Report and incorporated
herein by this reference).
2. Balance Sheets of NHP Southwest Partners, L.P. (a Delaware
Limited Partnership), as of December 31, 1996 and 1995, and the related
statements of operations, changes in partners' capital and cash flows for the
year ended December 31, 1996 and for the period from January 20, 1995 (date of
inception) through December 31, 1995, together with the Report of Independent
Public Accountants (included as Exhibit 99.6 to this Report and incorporated
herein by this reference).
3. Combined Balance Sheets of NHP New LP Entities as of December 31,
1996 and 1995, and the related combined statements of operations, changes in
partners' capital, and cash flows for the year ended December 31, 1996 and for
the period from January 20, 1995 (date of inception) through December 31, 1995,
together with the Report of Independent Public Accountants (included as Exhibit
99.7 to this Report and incorporated herein by this reference).
4. Combined Balance Sheets of NHP Borrower Entities as of December
31, 1996 and 1995, and the related combined statements of operations, changes in
partners' capital, and cash flows for the year ended December 31, 1996 and for
the period from January 20, 1995 (date of inception) through December 31, 1995,
together with the Report of Independent Public Accountants (included as Exhibit
99.8 to this Report and incorporated herein by this reference).
5. Historical Summary of Gross Income and Certain Expenses (Summary)
of The Bay Club at Aventura for the year ended December 31, 1996 and the three
months ended March 31, 1997 (unaudited), together with the Report of Independent
Auditors (included as Exhibit 99.9 to this Report and incorporated herein by
this reference).
(b) Pro Forma Financial Information
The required pro forma financial information is included as Exhibit
99.10 to this Report and incorporated herein by this reference.
(c) Exhibits
3
<PAGE>
The following exhibits are filed with this report:
Exhibit
Number Description
- ------- -----------
2.1 Real Estate Acquisition Agreement, dated as of May 22, 1997, by and
among Apartment Investment and Management Company, AIMCO Properties,
L.P., Demeter Holdings Corporation, Phemus Corporation, Capricorn
Investors, L.P., J. Roderick Heller, III, and NHP Partners Two LLC*
23.1 Consent of Arthur Andersen LLP dated June 23, 1997*
23.2 Consents of Deloitte & Touche LLP dated September 2, 1997*
23.3 Consent of Anders, Minkler & Diehl LLP dated September 2, 1997*
23.4 Consent of Dauby O'Connor & Zaleski, LLC dated September 2, 1997*
23.5 Consent of Edwards Leap & Sauer dated September 2, 1997*
23.6 Consent of Fishbein & Company, P.C. dated September 2, 1997*
23.7 Consents of Freeman and Vessillo dated September 2, 1997*
23.8 Consents of Friduss, Lukee, Schiff & Co., PC dated September 2, 1997*
23.9 Consent of George A. Hieronymous & Company, LLC dated September 2,
1997*
23.10 Consent of Goldenberg Rosenthal Friedlander, LLP dated September 2,
1997*
23.11 Consent of Hansen, Hunter & Kibbee, P.C. dated September 2, 1997*
23.12 Consent of J.H. Cohn LLP dated September 2, 1997*
23.13 Consent of J.A. Plumer & Co., P.A. dated September 2, 1997*
23.14 Consent of Marks Shron & Company, LLP dated September 2, 1997*
23.15 Consent of Prague & Company, P.C. dated September 2, 1997*
23.16 Consent of Reznick Fedder & Silverman dated September 2, 1997*
23.17 Consents of Robert Ercolini & Company dated September 2, 1997*
4
<PAGE>
23.18 Consent of Russell Thompson Butler & Houston dated September 2, 1997*
23.19 Consent of Sciarabba Walker & Co., LLP dated September 2, 1997*
23.20 Consent of Wallace Sanders & Company dated September 2, 1997*
23.21 Consent of Warady and Davis dated September 2, 1997*
23.22 Consent of Ziner and Company, PC dated September 2, 1997*
23.23 Consent of Zinner & Co. dated September 2, 1997*
23.24 Consent of Ernst & Young LLP dated June 23, 1997*
23.25 Consent of Arthur Andersen LLP dated September 2, 1997*
23.26 Consent of Arthur Andersen LLP dated October 21, 1997
99.1 Press Release of Apartment Investment and Management Company, dated
June 6, 1997*
99.2 1994 Reports of Independent Auditors*
99.3 1995 Reports of Independent Auditors*
99.4 1996 Reports of Independent Auditors*
99.5 Financial Statements of NHP Real Estate Companies and Report of
Independent Accountants
99.6 Financial Statements of NHP Southwest Partners, L.P. (a Delaware
Limited Partnership) and Report of Independent Accountants
99.7 Financial Statements of NHP New LP Entities and Report of Independent
Accountants*
99.8 Financial Statements of NHP Borrower Entities and Report of
Independent Accountants*
99.9 Financial Statements of The Bay Club at Aventura and Report of
Independent Auditors*
99.10 Pro Forma Financial Information of Apartment Investment and
Management Company*
__________________
* Previously filed
5
<PAGE>
SIGNATURE
Pursuant to the requirements 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.
APARTMENT INVESTMENT AND
MANAGEMENT COMPANY
Date: October 22, 1997 By: /s/ Leeann Morein
---------------------------------
Leeann Morein
Senior Vice President, Chief
Financial Officer and Secretary
6
<PAGE>
EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K
Exhibit
Number Description
- ------- -----------
2.1 Real Estate Acquisition Agreement, dated as of May 22, 1997,
by and among Apartment Investment and Management Company,
AIMCO Properties, L.P., Demeter Holdings Corporation, Phemus
Corporation, Capricorn Investors, L.P., J. Roderick Heller,
III, and NHP Partners Two LLC*
23.1 Consent of Arthur Andersen LLP dated June 23, 1997*
23.2 Consents of Deloitte & Touche LLP dated September 2, 1997*
23.3 Consent of Anders, Minkler & Diehl LLP dated September 2, 1997*
23.4 Consent of Dauby O'Connor & Zaleski, LLC dated September 2, 1997*
23.5 Consent of Edwards Leap & Sauer dated September 2, 1997*
23.6 Consent of Fishbein & Company, P.C. dated September 2, 1997*
23.7 Consents of Freeman and Vessillo dated September 2, 1997*
23.8 Consents of Friduss, Lukee, Schiff & Co., PC dated September 2, 1997*
23.9 Consent of George A. Hieronymous & Company, LLC dated September 2,
1997*
23.10 Consent of Goldenberg Rosenthal Friedlander, LLP dated September 2,
1997*
23.11 Consent of Hansen, Hunter & Kibbee, P.C. dated September 2, 1997*
23.12 Consent of J.H. Cohn LLP dated September 2, 1997*
23.13 Consent of J.A. Plumer & Co., P.A. dated September 2, 1997*
<PAGE>
23.14 Consent of Marks Shron & Company, LLP dated September 2, 1997*
23.15 Consent of Prague & Company, P.C. dated September 2, 1997*
23.16 Consent of Reznick Fedder & Silverman dated September 2, 1997*
23.17 Consents of Robert Ercolini & Company dated September 2, 1997*
23.18 Consent of Russell Thompson Butler & Houston dated September 2, 1997*
23.19 Consent of Sciarabba Walker & Co., LLP dated September 2, 1997*
23.20 Consent of Wallace Sanders & Company dated September 2, 1997*
23.21 Consent of Warady and Davis dated September 2, 1997*
23.22 Consent of Ziner and Company, PC dated September 2, 1997*
23.23 Consent of Zinner & Co. dated September 2, 1997*
23.24 Consent of Ernst & Young LLP dated June 23, 1997*
23.25 Consent of Arthur Andersen LLP dated September 2, 1997*
23.26 Consent of Arthur Andersen LLP dated October 21, 1997
99.1 Press Release of Apartment Investment and Management Company,
dated June 6, 1997*
99.2 1994 Reports of Independent Auditors*
99.3 1995 Reports of Independent Auditors*
99.4 1996 Reports of Independent Auditors*
99.5 Financial Statements of NHP Real Estate Companies and Report
of Independent Accountants
99.6 Financial Statements of NHP Southwest Partners, L.P. (a
Delaware Limited Partnership) and Report of Independent
Accountants
99.7 Financial Statements of NHP New LP Entities and Report of
Independent Accountants*
99.8 Financial Statements of NHP Borrower Entities and Report of
Independent Accountants*
99.9 Financial Statements of The Bay Club at Aventura and Report
of Independent Auditors*
99.10 Pro Forma Financial Information of Apartment Investment and
Management Company*
__________________
* Previously filed
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report on NHP Real Estate Companies (as defined in Note 1) dated May 5, 1997
(except with respect to the matters discussed in Note 17 and "Investment in
Real Estate Partnerships" in Note 1, as to which the dates are June 3, 1997
and October 21, 1997, respectively), and our report on NHP Southwest
Partners, L.P. dated April 11, 1997 (except with respect to the matters
discussed in Note 7 and Note 3 as to which the dates are June 3, 1997 and
October 21, 1997, respectively), each included in this Current Report on Form
8-K/A, filed with the Securities and Exchange Commission by Apartment
Investment and Management Company ("AIMCO").
We further consent to the incorporation by reference of our reports into
AIMCO's Registration Statement on Form S-3 (No. 333-26415), AIMCO's
Registration Statement on Form S-3 (No. 33-98338), AIMCO's Registration
Statement on Form S-3 (No. 333-828), AIMCO's Registration Statement on Form
S-3 (No. 333-4542), AIMCO's Registration Statement on Form S-3 (No.
333-4546), AIMCO's Registration Statement on Form S-3 (No. 333-8997), AIMCO's
Registration Statement on Form S-3 (No. 333-17431), AIMCO's Registration
Statement on Form S-8 (No. 333-4550), AIMCO's Registration Statement on Form
S-8 (No. 333-4548), AIMCO's Registration Statement on Form S-8 (No.
333-14481), AIMCO's Registration Statement on Form S-3 (No. 333-20755),
AIMCO's Registration Statement on Form S-3 (No. 333-36531), AIMCO's
Registration Statement on Form S-3 (No. 333-36537), and AIMCO's Registration
Statement on Form S-8 (No. 333-36803), all previously filed with the
Securities and Exchange Commission.
/s/ Arthur Andersen LLP
Washington, D.C.
October 21, 1997
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Partners
of NHP Real Estate Companies (as defined in Note 1):
We have audited the accompanying combined balance sheets of NHP Real Estate
Companies, as defined in Note 1 (the "Company"), as of December 31, 1996 and
1995 (both as restated - see Note 1), and the related combined statements of
operations, changes in shareholders' equity (deficit) and partners' capital
(deficit), net and cash flows for each of the three years in the period ended
December 31, 1996 (as restated in 1996 and 1995 - see Note 1). These combined
financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these combined financial statements and schedules based on our
audits. We did not audit the 1996, 1995 and 1994 financial statements of
certain real estate partnerships accounted for under the equity method, which
represent 5 percent and 6 percent of total assets in 1996 and 1995,
respectively, 7 percent and 6 percent in 1996 and 1995, respectively, of
total liabilities and 26 percent, 11 percent, and 20 percent in 1996, 1995,
and 1994, respectively, of net income (loss). The financial statements of
these real estate partnerships were audited by other auditors whose reports
have been furnished to us, and our opinion, insofar as it relates to the
amounts for these real estate partnerships, is based solely on the reports of
the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the reports of other auditors provide a
reasonable basis for our opinion.
Certain of the reports of other auditors referred to above indicate that
there is a substantial doubt about certain of the real estate partnerships'
ability to continue as going concerns. However, in our opinion, the uncertainty
is not material in relation to the combined financial statements.
<PAGE>
Page 2
In our opinion, based on our audits and the reports of other auditors, the
combined financial statements referred to above present fairly, in all
material respects, the financial position of the Company (as defined in Note 1)
as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
combined financial statements taken as a whole. Schedule II -- Rollforward of
Allowance for Doubtful Accounts and Schedule III -- Real Estate and Accumulated
Depreciation are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not a part of the basic combined
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic combined financial statements
and, in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic combined financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
Washington, D.C.,
May 5, 1997 (except with
respect to the matters
discussed in Note 17 and
"Investment in Real Estate
Partnerships" in Note 1,
as to which the dates are
June 3, 1997 and October 21,
1997, respectively)
<PAGE>
NHP REAL ESTATE COMPANIES (as defined in Note 1)
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ MARCH 31,
1995 1996 1997
-------------- -------------- --------------
(RESTATED) (RESTATED) (UNAUDITED)
(RESTATED)
<S> <C> <C> <C>
Assets:
Land, buildings and
furniture, fixtures and
equipment, net............ $ 115,398,707 $ 105,920,840 $ 94,923,423
Investment in real estate
partnerships.............. 25,976,747 26,210,696 24,419,986
Notes receivable............ 17,511,219 9,465,600 9,465,600
Insurance losses
recoverable............... 4,522,215 4,989,950 7,920,355
Deposits and deferred
costs..................... 9,115,127 8,389,860 7,204,825
Cash and cash equivalents... 8,354,833 13,912,591 11,881,985
Investments in securities... 8,335,304 5,007,124 4,961,956
Receivables, substantially all
from related parties net of
allowance for doubtful
accounts of $500,031,
$754,826 and $659,896 at
December 31, 1995, 1996, and
March 31, 1997, respectively 1,282,652 2,212,454 8,110,982
-------------- -------------- --------------
Total assets...... $ 190,496,804 $ 176,109,115 $ 168,889,112
-------------- -------------- --------------
-------------- -------------- --------------
Liabilities:
Mortgages payable........... $ 117,764,384 $ 111,214,993 $ 100,011,755
Notes payable............... 3,261,456 1,080,278 1,080,278
Losses in excess of
investment in real
estate partnerships....... 27,200,731 33,182,128 32,936,972
Insurance claims and loss
reserves.................. 15,113,683 15,667,583 21,254,934
Accrued interest payable.... 3,262,165 3,750,090 1,856,251
Accounts payable, accrued
expenses and other
liabilities............... 5,889,721 6,624,159 8,678,223
Deferred revenue and gains.. 1,916,972 1,975,110 1,457,511
Accrued lease liability..... 16,307,000 12,480,093 11,885,000
Due to NHP Incorporated..... 3,172,029 1,122,915 689,371
-------------- -------------- --------------
Total liabilities. 193,888,141 187,097,349 179,850,295
-------------- -------------- --------------
Minority interest........... 723,287 892,377 968,064
Shareholders' equity (deficit)
and partners' deficit, net:
Unrealized gain on
investments............... 701,313 352,482 302,680
Common stock, $0.01 par value,
10,000 shares authorized;
10,000 shares issued and
outstanding at December 31,
1995, 1996, and March 31,
1997, respectively........ 100 100 100
Additional paid-in capital.. 71,593,724 71,593,724 71,593,724
Retained earnings (deficit). (64,013,257) (73,595,537) (72,413,171)
Partners' deficit........... (12,396,504) (10,231,380) (11,412,580)
-------------- -------------- --------------
Total shareholders'
equity (deficit) and
partners' deficit,
net...................... (4,114,624) (11,880,611) (11,929,247)
-------------- -------------- --------------
Total liabilities and
equity.................... $ 190,496,804 $ 176,109,115 $ 168,889,112
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
<PAGE>
<TABLE>
<CAPTION>
NHP REAL ESTATE COMPANIES (as defined in Note 1)
COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------------------- ---------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- ------------
(RESTATED) (RESTATED) (UNAUDITED) (UNAUDITED)
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental revenues........................ $ 28,487,806 $ 28,625,650 $ 28,161,127 $ 7,220,259 $ 6,729,120
Mortgage finance revenues.............. 447,824 2,110,615 -- -- --
Insurance revenues, substantially all
from related parties................. 2,978,813 3,238,968 4,793,061 996,932 445,949
Income on investment securities........ 338,982 621,893 1,207,144 558,849 203,455
Interest on advances to real estate
partnerships, substantially all from
related parties...................... 1,240,182 1,348,472 1,999,911 12,031 118,794
Partnership administrative and other
fees, substantially all from related
parties.............................. 1,614,943 2,207,198 2,254,064 462,161 479,392
------------- ------------- ------------- ------------- ------------
Total revenues......................... 35,108,550 38,152,796 38,415,307 9,250,232 7,976,710
------------- ------------- ------------- ------------- ------------
Operating expenses:
Salaries and benefits.................. 5,793,779 5,226,383 6,186,631 1,444,768 1,578,675
Other general and administrative
expenses............................. 6,659,178 6,368,265 5,248,149 1,556,952 1,131,734
Other operating expenses............... 10,284,897 10,948,172 10,908,304 2,784,733 2,423,873
Management fee expense................. 1,304,728 1,715,444 1,314,322 326,621 340,387
Depreciation and amortization
expense.............................. 3,681,402 4,001,562 3,903,688 1,038,386 809,920
Provision for insurance claims and loss
reserves............................. 3,015,852 2,456,131 3,971,186 980,872 381,613
Interest expense....................... 10,194,244 10,918,015 10,399,626 2,541,966 2,124,340
------------- ------------- ------------- ------------- ------------
Total operating expenses............... 40,934,080 41,633,972 41,931,906 10,674,298 8,790,542
------------- ------------- ------------- ------------- ------------
Other income (expense):
Write-down of notes receivable......... -- -- (5,219,519) -- --
Equity in real estate partnership
investment income (losses), net...... 1,503,655 (5,691,437) (5,173,113) (2,511,986) (1,089,149)
Gain on disposition of real estate
investments, net..................... 11,877,704 5,577,111 9,587,321 590,895 3,881,522
------------- ------------- ------------- ------------- ------------
Income (loss) before income taxes
and minority interest................ 7,555,829 (3,595,502) (4,321,910) (3,345,157) 1,978,541
Provision for income taxes............. -- -- -- -- --
Income (loss) before minority
interest............................. 7,555,829 (3,595,502) (4,321,910) (3,345,157) 1,978,541
Minority interest...................... (66,200) 14,846 4,754 (10,450) 22,625
------------- ------------- ------------- ------------- ------------
Net income (loss)...................... $ 7,489,629 $ (3,580,656) $ (4,317,156) $ (3,355,607) $ 2,001,166
------------- ------------- ------------- ------------- ------------
------------- ------------- ------------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
<PAGE>
<TABLE>
<CAPTION>
NHP REAL ESTATE COMPANIES (as defined in Note 1)
COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY (DEFICIT) AND PARTNERS' CAPITAL (DEFICIT), NET
TOTAL
SHAREHOLDERS'
EQUITY
(DEFICIT)
COMMON STOCK AND PARTNERS'
--------------------- PARTNERS' ADDITIONAL RETAINED CAPITAL
PAR CAPITAL PAID-IN EARNINGS (DEFICIT),
SHARES VALUE (DEFICIT) CAPITAL (DEFICIT) NET
---------- --------- -------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994................ -- $ -- $ 39,699,540 $ -- $ (57,005,681) $ (17,306,141)
Net income.............................. 3,822,212 -- 3,667,417 7,489,629
---------- --------- -------------- ------------- -------------- ---------------
Balance at December 31, 1994.............. 43,521,752 (53,338,264) (9,816,512)
Formation of NHP Partners, Inc.......... 10,000 100 100
Contribution from NHPI prior to the
Transaction........................... 8,581,131 8,581,131
Contribution of intercompany
receivable from the National
Housing Partnership to NHP
Partners, Inc......................... (63,012,593) 63,012,593
Net Income (loss)(Restated)............. 7,094,337 (10,674,993) (3,580,656)
---------- --------- -------------- ------------- -------------- ---------------
Balance at December 31, 1995(Restated).... 10,000 100 (12,396,504) 71,593,724 (64,013,257) (4,815,937)
Dividend................................ (3,100,000) (3,100,000)
Net income (loss)(Restated)............. 2,165,124 (6,482,280) (4,317,156)
---------- --------- -------------- ------------- -------------- ---------------
Balance at December 31, 1996.............. 10,000 100 (10,231,380) 71,593,724 (73,595,537) (12,233,093)
Dividend (Unaudited).................... (2,000,000) (2,000,000)
Net income (loss) (Unaudited)(Restated). (1,181,200) 3,182,366 2,001,166
---------- --------- -------------- ------------- -------------- ---------------
Balance at March 31, 1997
(Unaudited)(Restated)................... 10,000 $ 100 $ (11,412,580) $ 71,593,724 $ (72,413,171) $ (12,231,927)
---------- --------- -------------- ------------- -------------- ---------------
---------- --------- -------------- ------------- -------------- ---------------
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
<PAGE>
NHP REAL ESTATE COMPANIES (as defined in Note 1)
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
(RESTATED) (RESTATED) (UNAUDITED) (UNAUDITED)
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)..................... $ 7,489,629 $ (3,580,656) $ (4,317,156) $ (3,355,607) $ 2,001,166
Adjustments to reconcile net income
(loss) to net cash used in
operating activities-
Gain on disposition of real estate
investments....................... (11,877,704) (5,577,111) (9,587,321) (590,895) (3,881,522)
(Gain) loss on disposition of
investment in securities, net..... -- (30,823) (484,836) 334,643 (12,369)
Depreciation and amortization....... 3,681,402 4,001,562 3,903,688 1,038,386 809,920
Write-down of notes receivable...... -- -- 5,219,519 -- --
Amortization of deferred financing
costs............................. 189,053 318,489 301,739 75,779 76,483
Equity in real estate partnership
investment (income) losses, net... (1,503,655) 5,691,437 5,173,113 2,511,986 1,089,149
Minority interest................... 66,200 (14,846) (4,754) 10,450 (22,625)
Reduction in accrued lease
liability......................... (1,150,000) (967,873) (3,826,907) (409,000) (595,093)
(Increase) decrease in receivables,
net............................... (320,284) 464,812 (3,003,218) (7,862,143) (6,700,914)
(Increase) in insurance losses
recoverable....................... (669,154) (1,248,386) (467,735) (703,678) (2,930,405)
(Increase) decrease in deposits and
deferred costs.................... (875,485) (1,819,181) 525,658 278,369 966,155
Increase (decrease) in accrued
interest payable.................. 1,066,401 3,062,794 1,037,825 (88,931) (210,191)
Increase (decrease) in accounts
payable, accrued expenses and other
liabilities....................... 1,254,059 (2,355,139) 1,234,989 (232,830) 2,851,742
(Decrease) increase in deferred
revenue and gains................. (838,214) 100,483 59,729 2,955,320 (517,599)
Increase in insurance claims and loss
reserves.......................... 1,639,865 1,244,716 553,900 3,957,172 5,587,351
------------- ------------- ------------- ------------- -------------
Net cash used in
operating activities............ (1,847,887) (709,722) (3,681,767) (2,080,979) (1,488,752)
------------- ------------- ------------- ------------- -------------
Cash flows from investing activities:
Investments in securities............. (4,611,998) (4,926,410) (1,316,461) (405,122) (73,192)
Proceeds from sales/maturities of
investments......................... -- 1,957,012 4,795,994 1,710,233 80,927
Investments in real estate
partnerships-
Proceeds from dispositions/
refinancings...................... 11,696,020 3,703,866 13,484,605 337,238 2,578,739
Return of investment/distributions.. 2,321,311 1,246,852 3,460,868 335,564 518,501
Investments in continuing real
estate partnerships............... (4,917,166) (2,276,788) (3,272,240) (1,707,080) (1,208,372)
New acquisitions.................... -- (8,792,847) (1,689,246) (1,348,246) --
Payments received on notes receivable. -- -- 2,826,100 -- --
(Payments to) proceeds from joint
ventures and other investments...... (62,309) 2,274,789 46,265 47,297 213,564
(Decrease) increase in minority
interest............................ (822,006) 290,427 (18,569) -- --
Purchase of fixed assets.............. (2,105,991) (1,832,585) (711,221) (178,552) (15,239)
------------- ------------- ------------- ------------- -------------
Net cash provided by (used in)
investing activities............ 1,497,861 (8,355,684) 17,606,095 (1,208,668) 2,094,928
------------- ------------- ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
<PAGE>
NHP REAL ESTATE COMPANIES (as defined in Note 1)
COMBINED STATEMENTS OF CASH FLOWS
(Continued)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------------------- ----------------------------
1994 1995 1996 1996 1997
------------- ------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Proceeds from (repayment of)
borrowings, net................... $ (1,615,254) $ (1,445,217) $ (1,022,463) $ 100,436 $ (203,238)
Net borrowings/(repayments)
from/(to) related parties......... -- 1,683,624 (2,181,178) (1,050,646) --
Dividends paid...................... -- -- (3,100,000) -- (2,000,000)
Distributions to minority partners.. (55,990) (91,046) (13,815) -- --
Net borrowings/(repayments)
from/(to) NHP Incorporated......... -- 3,037,993 (2,049,114) 2,696,202 (433,544)
Contribution from
NHPI prior to
the Transaction................... -- 8,553,830 -- -- --
Pre-Transaction activity with NHP
Incorporated...................... (1,714,018) (1,450,567) -- -- --
------------- ------------- ------------- ------------- -------------
Net cash (used in) provided by
financing activities.......... (3,385,262) 10,288,617 (8,366,570) 1,745,992 (2,636,782)
------------- ------------- ------------- ------------- -------------
(Decrease) increase in cash and cash
equivalents......................... (3,735,288) 1,223,211 5,557,758 (1,543,655) (2,030,606)
Cash and cash equivalents, beginning
of period........................... 10,866,910 7,131,622 8,354,833 8,354,833 13,912,591
------------- ------------- ------------- ------------- -------------
Cash and cash equivalents, end of
period.............................. $ 7,131,622 $ 8,354,833 $ 13,912,591 $ 6,811,178 $ 11,881,985
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Supplemental disclosure of cash flow
information:
Cash interest payments.............. $ 8,741,893 $ 10,384,753 $ 9,201,243 $ 2,100,218 $ 2,082,155
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Non-cash investing activities:
Distribution of fixed
assets to NHPI...................... $ -- $ 27,301 $ -- -- --
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- -------------- -------------
- ---------
</TABLE>
The accompanying notes are an integral part of these
combined financial statements.
<PAGE>
NHP REAL ESTATE COMPANIES (as defined in Note 1)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The combined financial statements include the accounts of The National
Housing Partnership, NHP Partners, Inc., and its wholly owned subsidiaries:
NHP Servicing Group, NHP Real Estate Corporation, NHP-HG, Inc., NHP-HG Two,
Inc., NHP-HG III, Inc., NHP-HG Four, Inc., NHP-HG Five, Inc., NHP-HG Ten,
Inc., NHP-HG Eleven, Inc., NHP-HG Twelve, Inc., NHP HDV, Inc., NHP HDV Two,
Inc., NHP Capital Corp., the National Corporation for Housing Partnerships,
HPI Limited, Inc. ("HPI") and their wholly owned subsidiaries and majority
owned real estate partnerships, collectively referred to as "NHP Real Estate
Companies" or the "Company."
As of January 1, 1994, all of the entities forming the Company as listed
above, with the exception of NHP Partners, Inc., were operating subsidiaries
of NHP Incorporated ("NHPI"). On August 16, 1995, NHPI formed a new
subsidiary, NHP Partners, Inc., and contributed all of its subsidiaries
holding real estate operations and HPI (the entities forming the Company as
listed above), with the exception of the National Housing Partnership, to NHP
Partners, Inc. Concurrently, in connection with an initial public offering
("IPO") of its common stock, NHPI sold NHP Partners, Inc. and the National
Housing Partnership to NHP Partners Limited Partnership and NHP Partners Two
Limited Partnership, respectively, (hereafter referred to as the
"Transaction"). At December 31, 1996, both NHP Partners Limited Partnership
and NHP Partners Two Limited Partnership were wholly owned by the previous
controlling shareholders of NHPI, Demeter Holdings Corporation, Capricorn
Investors, L.P., and J. Roderick Heller, III (see Note 17). Due to the
related party nature of the Transaction, the accounts of NHP Partners, Inc.,
and The National Housing Partnership continue to be reflected at their
historical cost.
Combined financial statements have been presented as these entities have
been under common control and management for all periods presented, and are
expected to be acquired in a business combination with Apartment Investment and
Management Company ("AIMCO") (see Note 17).
NATURE OF BUSINESS
The Company's operations consist primarily of owning and acquiring general
and limited partnership interests in multi-family rental housing properties
principally in the United States. One of the Company's wholly owned
subsidiaries, HPI, is a reinsurance company which reinsures certain risks
associated with apartment properties in which the Company has an ownership
interest. HPI's principal activity is the reinsurance of property and general
liability risks for affiliated multi-family rental properties.
<PAGE>
2
COMBINED FINANCIAL STATEMENTS
The combined financial statements include the accounts of the Company and
its subsidiaries and controlled affiliates. Investments in 50 percent or less
owned affiliates over which the Company has the ability to exercise significant
influence are accounted for using the equity method.
NHPI continues to provide services to the Company, and revenues and expenses
between the Company and NHPI both prior to and after the Transaction have not
been eliminated from the Company's revenues and expenses in the combined
financial statements. All material intercompany accounts and transactions have
been eliminated in consolidation.
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 at the
date of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Mortgage finance revenues in 1994 and 1995 represent fees received for
providing asset management, loan servicing and other advisory services to owners
of discounted multi-family debt and real estate sold by the Resolution Trust
Corporation ("RTC"). These fees are recognized as services are rendered. The
Company is no longer providing these services and, thus, no revenues were
recognized in 1996, and no further revenues are anticipated.
Insurance premiums are recognized as revenue on a pro-rata basis over the
periods of the respective policies.
Interest on advances to real estate partnerships relates to loans made to
multi-family partnerships by the Company as general partner. Interest is paid by
the partnerships only to the extent distributable cash flow of the partnerships,
as defined, is available. Partnership administrative fees are earned for
providing administrative services to certain partnerships in which the Company
has an ownership interest. These fees are payable only to the extent
distributable cash flow of the partnership, as defined, is available. The
Company accrues interest on advances and partnership administration fees as they
are earned and establishes a reserve equal to the amount of accrued fees that
are not assured of being paid, which is equal to 100 percent of the fees that
are not currently paid.
<PAGE>
3
Property owned by the Majority-Owned Partnerships (see below) is subject to
numerous tenant leasing arrangements having initial terms of one year or
less. Rental revenue is recognized on a straight-line basis over the term of
the related lease.
REAL ESTATE, GENERAL PARTNER AND LIQUIDITY RISKS
Real property investments are subject to varying degrees of risk. The yields
available from equity investments in real estate depend on the amount of
income generated and expenses incurred. The Company's income and cash flows
from the Majority-Owned Partnerships (see below) and its real estate equity
investments may be adversely affected by the general economic climate, local
conditions such as oversupply of apartments or a reduction in demand for
apartments in the area, the attractiveness of the properties to tenants,
competition from other available apartments, the ability of the properties'
managers to provide adequate maintenance and insurance, and increases in
operating costs (including real estate taxes). The Company's income and cash
flows from the Majority-Owned Partnerships (see below) and its real estate
investments would also be adversely affected if a significant number of
tenants were unable to pay rent or apartments could not be rented on
favorable terms. Certain significant expenditures associated with real
property investments (such as debt service, real estate taxes and maintenance
costs) generally are not reduced when circumstances cause a reduction in
income from the investments. In addition, income and cash flows from
properties and real estate values are also affected by such factors as
applicable laws, including tax laws, interest rate levels and the
availability of financing. The Company is the general partner in the majority
of the entities in which the Company holds partnership interest. Under the
general principles of partnership law, a general partner in a limited
partnership may, under certain circumstances, have liabilities beyond its
original investment to third parties affiliated and doing business with the
partnership.
Aside from cash flow generated by the Majority-Owned Partnerships, the
Company's liquidity is dependent primarily on partnership distributions and
proceeds from sales and refinancings of real estate owned by partnerships in
which the Company has an equity investment.
<PAGE>
4
INCOME TAXES
Because of its organizational structure, income taxes are recognized
differently for certain entities within the Company. The entities structured as
partnerships are not income tax paying entities and, accordingly, no provision
has been recorded for Federal or state income tax purposes. The partners are
individually responsible for reporting their share of taxable income on their
income tax returns. In the event of an examination of the partnerships' tax
returns by the Internal Revenue Service, the income tax liability of the
partners could be changed if an adjustment in the partnerships' income is
ultimately sustained by the taxing authorities.
The entities structured as corporations account for income taxes in
accordance with the requirements of Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes." Deferred taxes result from the
temporary differences between financial and income tax bases of assets and
liabilities. Deferred tax assets not projected to be recovered are reserved as
part of the deferred tax provision (see Note 12).
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with initial maturities
of 90 days or less to be cash equivalents. Of the total cash and cash
equivalents, $3,663,524 and $8,983,036 is held by and used in the operations
of HPI as of December 31, 1995 and 1996, respectively, and $1,780,545 and
$2,393,877 is held by and used in the operations of the Majority Owned
Partnerships as of December 31, 1995 and 1996, respectively, and is not
readily available for use by NHP Partners, Inc., and The National Housing
Partnership.
INVESTMENTS IN SECURITIES
Investments, all of which are held by and used in the operations of HPI and
are not readily available for use by NHP Partners, Inc. and the National
Housing Partnership, are classified as available for sale under the terms of
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" and are stated at market values. The net unrealized gain/loss in
the value of investments is reflected as a separate component of
shareholders' equity (deficit) and partners' capital (deficit), net. Gains
and losses on investments are determined by specific determination.
INVESTMENT IN REAL ESTATE PARTNERSHIPS
The Company has ownership interest (generally 1-5 percent) in over 500 real
estate partnerships (collectively, the "Partnerships," and individually, the
"Partnership") which own multi-family apartment properties located in
approximately 40 states, the District of Columbia and Puerto Rico. As of
December 31, 1996, the Company also owns majority interests in fourteen real
estate partnerships (primarily multi-family housing developments) which are
consolidated for financial reporting purposes (collectively, the
"Majority-Owned Partnerships"). The Company is the general partner in the
majority of the entities in which the Company holds partnership interests.
However, the terms of the related partnership agreements specify that the
limited partners are required to vote on major decisions regarding the
disposal of real estate owned by the partnership. The limited partners also
have the right to remove the general partner as manager of the partnership.
Therefore, as the Company is not in control of some major operating
decisions, investments in partnerships where the Company is the general
partner and owns 50 percent or less are accounted for using the equity
method. Accordingly, the Company reflects as income or expense its percentage
ownership share in earnings or losses of each Partnership. Distributions
received from the Partnerships are recorded as returns or reduction of
investment. Contributions and loans are recorded as an increase in
investment. For a complete list of partnerships and percentage interest, see
Note 19.
<PAGE>
5
Summarized financial information related to the Partnerships which the
Company accounts for under the equity method is as follows:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------
1995 1996
----- -----
(Restated) (Restated)
<S> <C> <C>
Real estate.............................................. $2,081,252,335 $2,063,124,556
Other assets............................................. 518,954,389 496,711,393
-------------- --------------
Total assets......................................... $2,600,206,724 $2,559,835,949
-------------- --------------
Mortgage and other debt.................................. $2,550,764,702 $2,615,679,029
Other liabilities........................................ 125,348,481 136,778,798
Partners' deficit........................................ (75,906,459) (192,621,878)
-------------- --------------
Total liabilities and partners' deficit.............. $2,600,206,724 $2,559,835,449
-------------- --------------
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1994 1995 1996
----- ----- -----
(Restated) (Restated)
<S> <C> <C> <C>
Total revenues............................ $481,901,640 $568,245,288 $621,250,928
------------ ------------ ------------
Depreciation expense...................... 65,545,844 80,911,764 93,308,263
Interest expense.......................... 142,022,848 169,500,614 186,889,750
Other operating expense................... 295,921,264 346,249,715 387,650,571
Provision for write-down of assets to
estimated net realizable value......... 8,793,900 -- 42,308,617
------------ ------------ ------------
Loss before extraordinary item............ (30,382,216) (28,416,805) (88,906,273)
------------ ------------ ------------
Extraordinary gain........................ -- 1,381,444 10,512,640
------------ ------------ ------------
Net loss.................................. $(30,382,216) $(27,035,361) $(78,393,633)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The Company recognizes a gain or loss on disposition of real estate
investments when a Partnership interest is sold or when the underlying assets
of a Partnership are disposed of and the Partnership is subsequently
dissolved. In accordance with the provisions of SFAS No. 66, "Accounting for
Sales of Real Estate," any gain on disposition is recognized after a sales
contract is executed, the transaction meets the conditions of a sale, legal
title passes, and the buyer has made a substantial financial commitment to
pay for the property. Losses are recognized when deemed probable. The 1995
and 1996 financial statements of a Partnership accounted for by the Company
using the equity method have been restated to expense in 1995 the cost of
acquiring the management contracts related to certain multifamily properties.
The acquisition cost was originally capitalized by the Partnership and
amortized over a 70-month period. The Company's 1995 and 1996 financial
statements have been restated to reflect the Company's share of the
Partnership's restated loss. The effect of the restatement was to (decrease)
increase equity in real estate partnership investment income (loss), net by
$(2,786,705) and $566,845 in 1995 and 1996, respectively, in the accompanying
combined statements of operations.
LAND, BUILDINGS AND FURNITURE, FIXTURES AND EQUIPMENT, NET
Land, buildings and furniture, fixtures and equipment relate to those
Partnerships in which the Company has a majority interest. Additions are
recorded at cost and include all major renewals and betterments. Maintenance,
repairs, and minor replacements are expensed as incurred.
Depreciation of buildings is computed using the straight-line method,
assuming varying useful lives ranging from 27.5 to 50 years. Furniture,
fixtures and equipment are depreciated using an accelerated method, assuming
estimated useful lives of three to ten years.
<PAGE>
6
DEFERRED FINANCING COSTS
Certain costs of obtaining the financing arrangements of the Majority-Owned
Partnerships described in Note 6 have been capitalized and are amortized as
interest expense using the straight-line method, which approximates the
effective interest method, over the appropriate debt term. Deferred financing
costs, net of accumulated amortization of $683,000 and $999,000, were $1,537,000
and $1,332,000 as of December 31, 1995 and 1996, respectively, and are included
in deposits and deferred costs on the accompanying combined balance sheets.
INSURANCE CLAIMS AND LOSS RESERVES
The insurance claims and loss reserves and the related provision include
estimates for losses incurred but not reported as well as losses pending
settlement. The reserve is based upon management's best estimates, loss
adjusters' evaluations and actuarial determinations and, in the opinion of
management, such reserve is adequate. Future adjustments to the amounts recorded
at December 31, 1996, resulting from the continual review process as well as
differences between estimates and ultimate payments will be reflected in income
in future years when such adjustments become known. The Company reinsures
certain of its risks with an unrelated insurance entity. Reinsurance does not
relieve the Company of it liabilities under the original policies, however, in
the opinion of management, the Company's reinsurer is sound and any potential
exposure for non-payment is minimal.
IMPLEMENTATION OF NEW ACCOUNTING STANDARD
The Financial Accounting Standards Board has issued SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
Of," which requires the adjustment of the carrying value of long-lived assets
and certain intangibles, if their value is determined to be impaired as
defined in the standard. The Company adopted SFAS No. 121 as of January 1,
1996. The adoption of this statement did not have a material effect on the
Company's financial position or results of operations.
As illustrated above, for the year ended December 31, 1996, certain of the
Partnerships recorded a provision to write-down land, buildings and
improvements to their estimated net realizable value, which is reflected in
the statement of operations of each Partnership for the year ended December
31, 1996. The Company's share of this write-down, based on its appropriate
percentage interest, has been included in equity in real estate partnership
investment income (losses), net, on the accompanying combined statements of
operations.
RECLASSIFICATIONS
Certain 1994 and 1995 amounts have been reclassified to conform with the 1996
presentation.
<PAGE>
7
2. INVESTMENTS IN SECURITIES:
The amortized cost, gross unrealized gains, gross unrealized losses and
market value of investments available for sale, by category, as of December 31,
1995 and 1996, for HPI are as follows:
<TABLE>
<CAPTION>
1995
-------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
U.S. Government............................ $ 5,451,983 $ 176,217 $ (231) $ 5,627,969
Equity securities.......................... 2,182,008 525,327 -- 2,707,335
-------------- ------------ ----------- ------------
$ 7,633,991 $ 701,544 $ (231) $ 8,335,304
-------------- ------------ ----------- ------------
-------------- ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
1996
-------------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
U.S. Government............................ $ 3,959,454 $ 37,039 $ (9,778) $ 3,986,715
Equity securities.......................... 695,188 333,972 (8,751) 1,020,409
-------------- ------------ ----------- ------------
$ 4,654,642 $ 371,011 $ (18,529) $ 5,007,124
-------------- ------------ ----------- ------------
-------------- ------------ ----------- ------------
</TABLE>
The contractual maturity dates of investments available for sale as of
December 31, 1996 are:
<TABLE>
<CAPTION>
AMORTIZED MARKET
MATURITY COST VALUE
- ------------ ------------ ---------
<S> <C> <C>
Due in one year or less........................................... $ -- $ --
Due after one year through five years............................. 3,959,454 3,986,715
Equity securities................................................. 695,188 1,020,409
------------ ------------
$ 4,654,642 $ 5,007,124
------------ ------------
------------ ------------
</TABLE>
Proceeds from sales/maturities of investments were $0, $957,012 and
$3,295,994 for the years ended December 31, 1994, 1995 and 1996, respectively.
Gross realized gains were $0, $48,027 and $513,842 for the years ended December
31, 1994, 1995 and 1996, respectively. Gross realized losses were $0, $17,204
and $29,006 for the years ended December 31, 1994, 1995 and 1996, respectively.
The change in net unrealized gain on investment was a decrease of $78,746 in
1994, an increase of $780,059 in 1995, and a decrease of $348,831 in 1996.
<PAGE>
8
3. NOTES RECEIVABLE:
Notes receivable as of December 31, 1995 and 1996, consist of the following:
<TABLE>
<CAPTION>
1995 1996
------------- ------------
<S> <C> <C>
Collateralized Notes............................................. $ 13,511,219 $ 5,465,600
Oxford Notes..................................................... 4,000,000 4,000,000
------------- ------------
$ 17,511,219 $ 9,465,600
------------- ------------
------------- ------------
</TABLE>
The Company accounts for Notes Receivable in accordance with the provisions
of SFAS No. 114 "Accounting By Creditors for Impairment of a Loan" and SFAS No.
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures."
COLLATERALIZED NOTES
In connection with the syndication or sale of interests in several real
estate partnerships, either to investors or to other purchasers, the Company
received notes receivable secured by the partnership interests and cash flow
from the partnerships (the "Collateralized Notes"). The Collateralized Notes,
carried on the Company's balance sheet at $13.5 million and $5.5 million at
December 31, 1995 and 1996, respectively, have an aggregate face value of
approximately $21.4 million and $17.8 million at December 31, 1995 and 1996,
respectively, and are due between 1997 and 1999, with an earlier maturity if
the underlying real estate is sold. No principal or interest payments are due
prior to maturity, and interest is to accrue at rates ranging from 9.0
percent to 12.0 percent per annum. As these notes are considered impaired,
the Company is currently not accruing interest income. During 1995 and 1996,
$0 and $2.8 million, respectively, was collected on the Collateralized Notes.
The Collateralized Notes are reviewed annually for collectibility on an
individual basis in connection with an internal analysis and valuation of the
affordable multifamily housing projects which secure the Collateralized
Notes. Based on this valuation, and due to a change in conditions for some of
the underlying real estate, the Company has determined that as of December
31, 1996, the net present value of the Collateralized Notes is $5.5 million.
Accordingly, in 1996, the Company recorded a $5.2 million write-down as
related to specific Collateralized Notes (reported as write-down of notes
receivable on the combined statements of operations). In addition, certain
other specific Collateralized Notes, which were originally recorded on the
balance sheet at face value, were subsequently written down to zero prior to
1994, based on valuations by the Company. Due to an improvement in the
conditions of the underlying real estate, the Company has currently valued
these Collateralized Notes at a net present value of $3.6 million. However,
in accordance with generally accepted accounting principles, these
Collateralized Notes have not been written-up in value in the accompanying
combined financial statements.
OXFORD NOTES
In connection with the 1993 acquisition of management rights from Oxford
Development Corporation ("Oxford"), the Company was assigned two notes
receivable secured by the cash flow from approximately 170 Oxford-owned real
estate partnerships (the "Oxford Notes"). The Oxford Notes, carried on the
Company's balance sheet at $4.0 million, have a face value of $33.0 million and
are payable primarily from proceeds generated by refinancing or sale of the
underlying properties. The Oxford Notes bear interest at a rate of 10 percent
per annum, compounded quarterly, and are due in December 2001. As these notes
are considered impaired, the Company is currently not accruing any interest
income relating to the Oxford notes. The value of these notes has been
discounted from face value based on the estimated expected future cash flows
from the notes.
<PAGE>
9
4. LAND, BUILDINGS AND FURNITURE, FIXTURES AND EQUIPMENT, NET:
Land, buildings and furniture, fixtures and equipment represent the
residential real estate owned by the fourteen Majority-Owned Partnerships
(fifteen in 1995), located in ten states, and are collateral for the mortgages
payable described in Note 6.
Land, buildings and furniture, fixtures and equipment as of December 31,
1995 and 1996, consist of the following:
<TABLE>
<CAPTION>
1995 1996
-------------- --------------
<S> <C> <C>
Land......................................................... $ 13,207,340 $ 11,572,845
Buildings and equipment...................................... 122,776,469 117,814,242
Furniture, fixtures, and equipment........................... 7,245,874 6,572,922
-------------- --------------
143,229,683 135,960,009
Accumulated depreciation..................................... (27,830,976) (30,039,169)
-------------- --------------
Net.......................................................... $ 115,398,707 $ 105,920,840
-------------- --------------
-------------- --------------
</TABLE>
5. NOTES PAYABLE:
Notes payable as of December 31, 1995 and 1996, consist of the following:
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Hall Financial Group.............................................. $ 1,050,646 $ --
Shareholders...................................................... 1,130,532 --
Majority-Owned Partnerships-deferred acquisition notes............ 1,080,278 1,080,278
------------ ------------
$ 3,261,456 $ 1,080,278
------------ ------------
------------ ------------
</TABLE>
In connection with a February 1995 transaction in which the Company acquired
an interest in an entity which purchased 32 properties from Hall Financial
Group, Inc. ("Hall"), the Company issued a $4,179,000 note payable to Hall. The
note's interest rate was 10 percent per annum, payable quarterly. One of the
quarterly principal and interest payments to Hall was funded by the Company's
shareholders, resulting in a $1,130,532 note payable to shareholders, with
interest at 15 percent per annum. These notes were paid in full in 1996.
The Majority Owned Partnerships' deferred acquisition notes consist of two
notes: 1) an $800,000 note, with related accrued interest of $834,629 recorded
as accrued interest payable, accruing interest at 10 percent per annum and due
upon the earlier of the sale, transfer, or refinancing of the related property,
or December 27, 1999, and 2) a $280,278 note, with related accrued interest of
$367,489 recorded as accrued interest payable, accruing interest at 10 percent
per annum and $280,278 due on August 1, 1997. The note can be extended to August
1, 1999, with payment of an extension fee of $3,449 per annum to the
noteholders. Management intends to continue paying the extension fee to the
noteholder to further extend the note's maturity date.
<PAGE>
-10-
6. MORTGAGES PAYABLE:
The Majority Owned Partnerships have entered into various mortgage
agreements. These are obligations of the partnerships and are non-recourse to
the general partner unless otherwise disclosed. The lender and related terms of
the mortgage notes are as follows:
<TABLE>
<CAPTION>
LENDER AND TERMS 1995 1996
- ------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Multiple Investor Fund Realty L.P. bearing interest at a rate
of 8.24 % per annum, payable monthly, as amended during
1996 maturing November 14, 1998, and can be extended to
November 14, 2001, with the payment of a $50,000 extension
fee. Although the fee has not been paid as of December 31,
1996, it is the intention of management to extend the note
to November 14, 2001. The note is secured by a deed of
trust on the rental property............................... $ 7,520,383 $ 8,000,000
U.S.G.I., Inc. bearing interest at the rate of 7.5% per
annum. Principal and interest is payable in monthly
installments of $12,622 until August 2018 when all unpaid
principal amounts are due. The note is secured by a deed of
trust on the rental property............................... 1,648,638 1,619,845
First Trust Savings Bank bearing interest at the rate of 7.0%
per annum. Principal and interest is payable in monthly
installments of $4,885 until May 2014 when all unpaid
principal amounts are due. The note is secured by a deed of
trust on the rental property............................... 600,304 583,162
FHA bearing interest at the rate of 3% per annum. Principal
and interest is payable in monthly installments of $1,500
until 2010 when all unpaid principal amounts are due. The
note is secured by a deed of trust on the rental
property................................................... 210,450 198,602
Prudential Insurance Company of America bearing interest at
the rate of 9.5% per annum. Principal and interest is
payable in monthly installments of $181,632 until May 1,
1997 (subsequently extended by a forebearance agreement to
August 1, 1997) when all unpaid principal amounts are due.
It is the intention of management to pursue negotiations
for the refinancing of the property with the current lender.
If a refinancing does not occur, the underlying property
will be sold. The note is secured by a deed of trust on the
rental property............................................ 21,029,846 20,839,968
</TABLE>
<PAGE>
-11-
<TABLE>
<CAPTION>
LENDER AND TERMS 1995 1996
- ------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Prudential Insurance Company of America bearing interest at
the rate of 8.5% per annum through March 1996. Thereafter,
interest is at the rate of 10% per annum until repayment of
the note. Interest only is payable in monthly installments
until November 2018 when all unpaid interest and principal
amounts are due. Any unpaid amounts subsequent to November
2018 will accrue interest at the rate of 18% per annum. The
National Housing Partnership, the general partner, has
entered into a guarantee agreement which guaranteed all
required payments of principal and interest. This agreement
expires the earlier of (i) the property meeting certain
operating income levels, or (ii) anytime after May 1, 1994
if a specified payment of $1,650,000 is made to the mortgagee,
the property is deeded over to Property Capital Trust and
certain other conditions are met. As of December 31, 1996,
the guarantee is still in place. This note has been secured
by a second deed of trust on the rental property........... $ 7,540,000 $ 7,540,000
GMAC with various properties bearing interest from 7-8.5% per
annum. Principal and interest is payable in monthly
installments until dates from March 2011 to February 2016,
at which time all unpaid principal amounts are due. The
notes are secured by a deed of trust on the rental
properties................................................. 3,129,885 3,042,899
Community Investment Corporation bearing interest at the rate
of 7.25% per annum until February 1996, when the interest
rate was adjusted to 8.0% per annum and is adjustable at
three years intervals beginning February 1996. At each
adjustment period, the interest rate shall be set at 2.5%
over the yield on 3-year treasury notes. Principal and
interest is payable in monthly installments of $12,801
until December 2013 when all unpaid principal amounts are
due. The note is collateralized by the property and
assignment of leases and rents............................. 1,638,956 1,615,412
City of Chicago bearing interest at 0%. Principal is payable
in monthly installments of $500 until December 2013 when
all unpaid principal amounts are due. The note is
collateralized by the property and assignment of leases and
rents...................................................... 6,099,050 6,190,951
Illinois Housing Authority bearing interest at the rate of 1%
per annum and a maturity date of January 1, 2014. No
principal and interest payments for the first 18 months,
only interest due for the next 60 months and principal and
interest thereafter. The note is collateralized by the
property and assignment of leases and rents................ 478,133 478,133
Affordable Housing Program Grant bearing interest at 0% and a
maturity of January 14, 2014. At the maturity date, the
loan becomes a grant if all provisions are met............. 250,000 250,000
Lincoln National Bank bearing interest at the rate of
9.25% per annum. Principal and interest is payable in
monthly installments of $145,585 until August 2018 when all
unpaid principal amounts are due........................... 16,547,441 16,321,644
</TABLE>
<PAGE>
-12-
<TABLE>
<CAPTION>
LENDER AND TERMS 1995 1996
- ------------------------------------------------------------- -------------- --------------
<S> <C> <C>
General Electric Capital Corporation bearing interest at a
variable rate equal to 3.1% per annum above the "GECC
Composite Commercial Paper Rate," which at December 31,
1995 was 5.83%. The note matured on June 24, 1995. GECC
agreed to allow the partnership to repay the debt through
sale proceeds, which was paid in full during 1996.......... $ 6,305,730 $ --
Kidder Peabody Mortgage Capital Corporation bearing interest
at the rate of 9.31% per annum. Principal and interest is
payable in monthly installments of $210,000 until May 2000
when all unpaid principal amounts are due. The note is
secured by the deed of trust on the property............... 25,700,428 25,511,720
Patrician Mortgage Company bearing interest at the rate of
8.75% per annum. Principal and interest are payable in
monthly installments of $59,829 until 2029 when all unpaid
principal amounts are due. The note is secured by a deed of
trust on the rental property............................... 7,775,546 7,736,412
Demeter Holdings Corporation ("Demeter"), a majority
shareholder/ partner of the Company at December 31, 1996,
non-recourse note bearing interest, payable quarterly, at a
rate that increases from 9% (as of December 31, 1996) to
14% per annum over its term. The property securing this
note was sold in January 1997, and the note obligation was
satisfied. See Note 16 -- Subsequent Events.... ........... 11,000,000 11,000,000
D.R. Trust bearing interest at the rate of 5% per annum.
Principal and interest is payable in monthly installments
of $1,589 until June 1997 when all unpaid interest and
principal is due........................................... 289,594 286,245
------------- ------------
$117,764,384 $111,214,993
------------ ------------
------------ ------------
</TABLE>
The mortgages payable principal repayment schedule as of December 31, 1996,
is as follows:
YEAR ENDED PRINCIPAL
DECEMBER 31, DUE
------------- -------------
1997.................................... $ 21,811,469
1998.................................... 11,747,356
1999.................................... 815,243
2000.................................... 25,454,373
2001.................................... 8,689,090
Thereafter.................................... 42,697,462
-------------
$ 111,214,993
-------------
-------------
Under various agreements with the above lenders, the properties are required
to make monthly escrow deposits for taxes, insurance and replacement of project
assets, and are subject to restrictions as to operating policies, rental
charges, operating expenditures, and distributions to partners.
<PAGE>
-13-
7. DEFERRED REVENUE AND GAINS:
Included in deferred revenue and gains is $1,459,395 and $1,437,933 as of
December 31, 1995 and 1996, respectively, related to a sale-leaseback agreement
in which a Majority Owned Partnership sold land to Property Capital Trust
("PCT") and leased it back for a 75-year period ending December 31, 2064. The
land sale was accounted for by the partnership as a sale-leaseback, and the
original gain of $1,609,629 was deferred and is amortized over the 75-year lease
term.
8. INSURANCE REVENUES:
HPI limits its losses by reinsuring its general liability policy with other
insurance companies. For the current underwriting year, under the general
liability policy, HPI assumes losses of $250,000 per occurrence and reinsures
losses in the 1996 policy year in the amount of $2,000,000 in excess of an
aggregate of $4,500,000 (1995 policy year--$3,000,000 in excess of an
aggregate of $2,700,000).
HPI's property policy and workers' compensation policy are accounted for
on a deposit basis of accounting. Under the property policy, HPI assumes
losses of $250,000 per occurrence up to an annual aggregate of $3,000,000 in
1996/1997 policy year ($2,500,000 in 1995/1996 policy year). Under the
workers' compensation policy (which was in place in 1996 only), HPI assumes
losses of $250,000 per occurance up to an annual aggregate of $3,016,000. All
losses in excess of these amounts are reinsured. Premiums received exceed the
aggregate, thus the premiums received for the property policy are accounted
for as a deposit payable and are reduced by losses paid. The difference
between the premiums received and the maximum liability for losses, is
recognized on a pro-rata basis over the policy period.
9. INSURANCE CLAIMS AND LOSS RESERVE:
Activity in the insurance claims and loss reserves and insurance claims
expense account is summarized as follows:
1995 1996
------------- -------------
Balance, beginning of year................. $ 11,421,900 $ 15,113,683
Less-- Losses recoverable................ 3,273,829 4,522,215
------------- -------------
Net balance, beginning of year............. 8,148,071 10,591,468
------------- -------------
Incurred related to:
Current year............................. 2,741,164 4,007,188
Prior years.............................. (285,033) (36,002)
------------- -------------
Total incurred......................... 2,456,131 3,971,186
------------- -------------
Paid related to:
Current year............................. 388,442 387,348
Prior years.............................. 2,394,947 3,362,203
------------- -------------
Total paid............................. 2,783,389 3,749,551
------------- -------------
Net balance, end of year................... 7,820,813 10,813,103
Plus losses recoverable.................. 4,522,215 4,989,950
------------- -------------
<PAGE>
-14-
Reserve for losses, end of year............ 12,343,028 15,803,053
Change in losses payable................... 935,737 (767,114)
Change in insurance balances payable....... 340,941 174,277
Change in deposits held under
reinsurance contracts............... 1,493,977 457,367
------------- -------------
Balance, end of year....................... $ 15,113,683 $ 15,667,583
------------- -------------
------------- -------------
As a result of changes in estimates of insured events in prior years, the
insurance claims and loss reserves and expense (net of reinsurance recoveries of
$669,154, $1,248,386 and $467,735, for the years ended December 31, 1994, 1995
and 1996, respectively) increased by $619,745 and decreased by $285,033 and
$36,002 for the years ended December 31, 1994, 1995 and 1996, respectively. No
additional premiums are due as a result of prior year effects.
10. CONCENTRATION AND CREDIT RISKS:
Several properties owned by the Majority-Owned Partnerships and a
substantial portion of the properties and units of the Partnerships as of
December 31, 1996, are affordable properties and units. A substantial portion of
the affordable properties were built or acquired with the assistance of programs
administered by the United States Department of Housing and Urban Development
("HUD") that provide mortgage insurance, favorable financing terms, or rental
assistance payments to the owners. As a condition to the receipt of assistance
under these and other HUD programs, the properties must comply with various HUD
requirements including limiting rents on these properties to amounts approved by
HUD. For the past several years, various proposals have been advanced by HUD,
the Congress and others proposing the restructuring of Section 8 of the United
States Housing Act of 1937 ("Section 8"). These proposals generally seek to
lower subsidized rents to market levels and to lower the required debt service
costs as needed to ensure financial viability at the reduced rents, but vary
greatly as to how that result is to be achieved. Some proposals include a
phase-out of project-based subsidies on a property-by-property basis upon
expiration of a property's Housing Assistance Payments Contract ("HAP
Contract"), with a conversion to a tenant-based subsidy. Under a tenant-based
system, rent vouchers would be issued to qualified tenants who then could elect
to reside at a property of their choice, provided the tenant has the
financial viability to pay the difference between the selected property's
monthly rent and the value of the voucher, which would be established based on
HUD's regulated fair market rent for that geographic area.
Congress has not yet accepted any of these restructuring proposals and
instead has elected to renew expiring Section 8 HAP Contracts for one year
terms, generally at existing rents. While the Company does not believe that the
proposed changes would result in a significant number of tenants relocating,
there can be no assurance that the proposed changes would not significantly
affect the Company or the Partnerships. Furthermore, there can be no assurance
that changes in federal subsidies will not be more restrictive than currently
proposed or that other changes in policy could occur. Any such changes could
have an adverse effect on the Company's occupancy rates and revenues of the
Company's majority owned properties and or properties in which this Company has
an ownership interest.
<PAGE>
-15-
HPI is party to financial instruments with concentration and credit risks.
These financial instruments include cash and cash equivalents, deposits with
ceding insurers and investments. As of December 31, 1996, significant cash and
cash equivalents are on deposit at two financial institutions. The deposit with
one ceding insurer is held as collateral under reinsurance agreements to pay for
losses arising under those agreements. Losses recoverable are due from one
insurer. Approximately 80 percent of the investment in securities as of December
31, 1996, were held in U.S. Treasury notes. HPI's investment portfolio does not
contain any other security issued by a single insurer that exceed 5 percent of
HPI's total investments. Credit risk arises from the failure of the counterparty
to perform according to the terms of a contract. The Company does not require
collateral or other security to support financial instruments with credit risk.
11. INSURANCE STATUTORY CAPITAL AND SURPLUS:
HPI is registered under the Bermuda Insurance Act of 1978 and Related
Regulations (the "Act") and is obliged to comply with various provisions of the
Act regarding solvency and liquidity. These provisions have been met and the
required capital and surplus as of December 31, 1995 and 1996, is approximately
$782,000 and $842,000, respectively. HPI's actual statutory capital and surplus
as of these dates is approximately $4,489,000 and $3,861,000.
12. INCOME TAXES:
Because of its organizational structure, income taxes are recognized
differently for certain entities within the Company. The entities structured
as partnerships are not income tax paying entities; the partners are
individually responsible for reporting their share of the Partnership's
taxable income on their income tax returns. NHP Partners, Inc. files a
combined Federal income tax return which includes the accounts of HPI and
other subsidiaries and in some states files combined tax returns. Prior to
the Transaction, the tax paying entities were included in the combined
Federal income tax return of NHPI. At December 31, 1994 NHPI had combined net
operating loss carryforwards ("NOLs") of approximately $140 million. In
connection with the Transaction, NOLs relating primarily to losses of the
Real Estate Companies of approximately $60 million were utilized by NHPI and
the remaining NOLs were allocated between NHPI and the Company.
At the present time no income, profit, capital, or capital gain taxes are
levied in Bermuda and accordingly, no provision for such taxes has been recorded
by HPI. In the event that such taxes are levied, the Company has received an
undertaking from the Bermuda Government exempting it from all such taxes until
March 28, 2016.
On a combined basis, NHP Partners, Inc. reports no provision or benefit for
income taxes primarily because of NOLs generated in prior years which result
largely from partnership losses. A valuation allowance equal to the net
deferred tax asset reflects the uncertainty, on a combined basis, of
realizing these benefits in future years.
The following table summarizes the combined tax effect related to the
Company's NOLs, temporary book-tax differences and the valuation allowance as
of December 31, 1995 and 1996. The Company's NOLs expire through 2011.
<PAGE>
-16-
1995 1996
------------ -----------
Deferred tax assets:
Net operating loss carryforwards..... $ 3,298,000 $ 7,163,000
Accrued lease liability.............. 6,522,800 5,116,838
----------- -----------
Total deferred tax assets.............. 9,820,800 12,279,838
----------- -----------
----------- -----------
Deferred tax liabilities:
Investments in real estate
partnerships....................... 6,533,993 3,302,735
Allowance for loan losses............ 1,200,000 1,230,000
Other temporary differences between
book and tax....................... 834,552 971,759
----------- -----------
Total deferred tax liabilities......... 8,568,545 5,504,494
----------- -----------
Valuation allowance for net deferred
tax assets........................... (1,252,255) (6,775,344)
----------- -----------
Net deferred tax asset................. $ -- $ --
----------- -----------
----------- -----------
A reconciliation of income tax expense attributable to the Company computed
at the statutory Federal and state rates to the provision for income taxes
included in the combined statements of operations is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1994 1995 1996
---------- ----------- -----------
(Restated) (Restated)
<S> <C> <C> <C>
Federal income tax provision (benefit) at
the Federal statutory rate--34% in 1994
and 1995, 35% in 1996................... $2,546,474 $(1,253,229) $(1,511,005)
State income tax provision (benefit), net
of Federal income tax benefit--6%....... 449,378 (214,839) (259,030)
Change in net deferred tax asset.......... (1,528,885) 20,803,300 (3,444,290)
Change in valuation allowance for net
deferred tax asset...................... (1,466,967) (19,335,232) 5,214,325
----------- ------------ ------------
Provision for income taxes................ $ -- $ -- $ --
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
The components of the provision for income taxes attributable to the Company
for 1994, 1995 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ----------- -----------
(Restated) (Restated)
<S> <C> <C> <C>
Current provision (benefit)............ $2,413,348 $(1,634,073) $(2,030,594)
Deferred provision (benefit)........... 582,504 166,005 260,559
Change in net deferred tax asset....... (1,528,885) 20,803,300 (3,444,290)
Change in valuation allowance for net
deferred tax asset................... (1,466,967) (19,335,232) 5,214,325
---------- ----------- -----------
Provision for income taxes............. $ -- $ -- $ --
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
13. RELATED PARTY TRANSACTIONS:
NHPI, through its wholly owned subsidiary NHP Management Company ("NHPMC"),
is the property management agent for a majority of the real estate partnerships
in which the Company has an interest. As of December 31, 1996, certain parties
owning approximately 60 percent of the voting common stock of NHPI also own,
through other corporations and partnerships, 100 percent of NHP Partners, Inc.,
and The National Housing Partnership.
During 1994, 1995 and 1996, the personnel working at the Majority-Owned
Partnerships properties and other properties that are managed by NHPMC and
owned by Partnerships in which the Company has an interest, were employees of
NHPI. NHPI is reimbursed for actual salaries and related benefits. In addition,
NHPMC received fees for its services as management agent equal to a set
percentage of revenues of the various properties. The various properties also
pay NHPI or its subsidiaries certain fees for other services provided, such as
risk management services and membership in a group discount purchasing
organization. NHPMC received $1,731,266, $1,691,651 and $1,671,809, in fees for
management and other services provided to the Majority-Owned Partnerships in
1994, 1995 and 1996, respectively.
In connection with the Transaction, the Company entered into a series of
agreements with NHPI, which establish an ongoing relationship between NHPI and
the Company. These agreements include:
<PAGE>
-17-
- -- The Master Property Management Agreement which requires 1) selection of
NHPI as property manager for properties in which the Company has controlling
interest, subject to certain conditions, for an initial period of 25 years
beginning in 1995, and 2) payment of a management termination fee to NHPI if
the Company disposes of certain properties managed by NHPI;
- -- The Services Agreement and Cost Allocation Agreement providing that the
Company, which has no employees, reimburses NHPI (at NHPI's cost) for
certain services provided to the Company. Reimbursements to NHPI under such
agreements amounted to $3,128,000, $4,149,000 and $4,598,000 in 1994,
1995 and 1996, respectively.
The Company had a liability of $3,172,029 and $1,122,915, payable to NHPI as
of December 31, 1995 and 1996, respectively. Of this liability, $2,058,984
and $44,576, related to services provided to the Company by NHPI and other
borrowings by NHP Partners, Inc., to fund periodic cash requirements, as of
December 31, 1995 and 1996, respectively. NHPI's credit agreement with a
group of banks permits NHPI to advance up to $7,500,000 to NHP Partners,
Inc., for operating activities. The credit agreement further permits NHPI to
advance up to an additional $10,000,000 to NHP Partners, Inc., for purposes
of acquiring interests in multifamily residential housing properties in order
that NHPI may obtain rights to manage those properties. Advances under these
agreements accrue interest at prime rate plus 100 basis points per annum, 9.5
percent and 9.25 percent, as of December 31, 1995 and 1996, respectively. No
advances have been made or are outstanding under the $10,000,000 provision.
Interest paid to NHPI under this agreement was $0, $26,151 and $143,550 in
1994, 1995 and 1996, respectively. Also included in the December 31, 1995 and
1996, payable to NHPI is $975,103 which relates to certain escrow deposits
(reported as deposits and deferred costs) which, when received by the
Company, will be paid to NHPI.
Demeter, a shareholder/partner of the Company at December 31, 1996, paid
$7.5 million to purchase, from an unrelated party, an $11 million non-recourse
note made by the Capital Group I Limited Partnership ("Capital Partnership"),
one of the Majority Owned Partnerships. The note matures February 28, 1998,
bears interest, payable quarterly, at a rate which increases from 9 percent (the
current rate) to 14 percent per annum over its term. The note may be repaid at
any time. Upon such prepayment, including prepayment due to default and
acceleration, Capital Partnership must pay the lesser of the outstanding balance
of principal and interest or such amount as will provide Demeter with a 25
percent internal rate of return on its $7.5 million purchase price. NCHP has a
limited conditional guaranty in the amount of approximately $2.3 million plus
future interest, fees and obligations of Capital Partnership to fund operating
expenses. This conditional guaranty is only triggered if Capital Partnership
files for bankruptcy petition or takes similar voluntary insolvency-related
actions or if Capital Partnership takes any action to impede Demeter's efforts
to foreclose on the loan or to realize on the note security. In January 1997,
the property securing this note was sold and the note obligation repaid. See
Note 16, Subsequent Events.
In connection with the Transaction as described in Note 1, the shareholders
of the Company agreed to provide a line of credit to the Company in an
aggregate amount of $5.5 million, to be available for a period of three years
from the date of the Transaction (August 1998). This line of credit will be
available to satisfy specific obligations of the Company to NHPI and, with the
consent of NHPI, for other uses. There were no borrowings under this line of
credit as of December 31, 1995 or 1996.
<PAGE>
-18-
14. COMMITMENTS AND CONTINGENT LIABILITIES:
LEASES
The Company is party to an office lease in Washington, D.C. that expires
in October 2001. The space, which had served as corporate headquarters for
NHPI, has been vacated by the Company and is either sublet to various
subtenants or is available for sublease. An accrued lease liability was
established in 1991 representing the estimated future payments less the
estimated future receipts from the subtenants. The liability entails various
estimates of future sublease receipts as well as buildout, leasing
commissions, professional fees and other costs related to subleasing space.
To the extent subtenant lease receipts or costs related to subleasing the
space vary from amounts originally estimated, the difference will be
reflected in expense for those years when such amounts become known. Such
difference resulted in a $1.2 million decrease in the estimated liability in
1996 which was accounted for as a reduction of other general and
administrative expenses in the accompanying combined statements of operations.
Future cash commitments and sublease rental income on executed leases, as of
December 31, 1996, which expire between 1997 and 2001 and have initial or
remaining noncancelable lease terms in excess of one year, are as follows:
YEAR ENDED LEASE SUBLEASE
DECEMBER 31, COMMITMENTS INCOME
--------------- ------------- -------------
1997........... $ 4,828,000 $ 2,035,000
1998........... 4,973,000 2,436,000
1999........... 5,173,000 2,464,000
2000........... 5,321,000 2,468,000
2001........... 4,126,000 1,854,000
----------- -----------
$24,421,000 $11,257,000
----------- -----------
----------- -----------
The Company has two sale-leaseback agreements related to Majority-Owned
Partnerships that provide for land to be leased back for 75-year periods ending
between December 2063 and 2064. Commitments under the leases include base rent
and participation rent based on the properties' gross rental receipts. The
National Housing Partnership has guaranteed the rent payments under the lease
agreements.
Minimum lease payments, as of December 31, 1996, under the sale-leaseback
agreements, excluding the aforementioned participation rent, are as follows:
BASE
YEAR ENDED RENTAL
DECEMBER 31, DUE
---------------- -------------
1997............ $ 623,000
1998............ 623,000
1999............ 623,000
2000............ 623,000
2001............ 623,000
Thereafter...... 38,626,000
-------------
$ 41,741,000
-------------
-------------
<PAGE>
-19-
COMMITMENTS
HPI has a security trust agreement with National Union Fire Insurance
Company of Pittsburgh. All investments and approximately $718,000 of cash and
cash equivalents as of December 31, 1995 and 1996, are held in trust to provide
funds for the payment of future insurance losses.
GUARANTEES AND INDEMNIFICATIONS
In addition to the liabilities reflected on the combined balance sheets, the
Company is guarantor of, or has agreed to indemnify others with respect to,
losses relating to certain activities and transactions.
The Company has provided a $1.65 million and $1.15 million guarantee to a
mortgagor in connection with secondary financing of two properties owned by
Majority-Owned Partnerships. The Company, together with NHPI, has provided a
$1.2 million tax credit repurchase guarantee and operating deficit guarantee
with respect to one tax credit transaction. The Company has provided a total
of $5.6 million of indemnification to a mortgagor in connection with mortgage
financing of two properties, which indemnifications arise only under certain
circumstances. The Company has provided a guarantee to a surety company with
respect to approximately $1.0 million of surety bonds issued in connection
with utility services to properties. In the opinion of management, future
calls, if any, on these guarantees or indemnifications are not expected to
have a material adverse effect on the financial position of the Company.
In addition to these guarantees and indemnities, the Company has undertaken
to indemnify NHPI for losses in connection with NHPI's ownership (as opposed to
management) of properties prior to its IPO and for environmental claims, if any,
relating to the properties owned by the Company. The Company has also agreed to
indemnify NHPI for certain tax liabilities arising out of the transfer of assets
to the Company and relating to ownership or operation of the properties prior to
the IPO. The indemnified tax liabilities may include potential liabilities with
respect to certain past state sales and use taxes, to the extent the properties
assessed those taxes are unable to pay. In the opinion of management, future
calls, if any, of these guarantees and indemnifications are not expected to have
a material adverse effect on the financial position of the Company.
<PAGE>
-20-
SALES AND USE TAX
A state government has asserted that certain services provided by NHPI to
properties in which the Company holds partnership interests constitute services
taxable under that state's sales and use tax laws. This state and other states
have claimed that taxes are due for prior periods, and have asserted liability
against the applicable properties and/or NHPI for such taxes plus interest and
penalties. The Company believes that any liability for such taxes and interest
will ultimately be borne by the properties. The Company may be responsible for
any such taxes that are assessed against the properties but cannot be paid by
the properties, but any potential funding will be reimbursed, if possible, by
the applicable property. The amount of the Company's ultimate liability with
respect to these matters cannot be determined at this time. However, in the
opinion of management, the resolution of these matters will not have a material
adverse effect on the financial position or results of operations of the
Company.
LITIGATION
In the normal course of business, the Company is a party to various legal
actions and claims. In the opinion of management, based on advice of counsel,
the resolution of these actions and claims will not have a material adverse
effect on the financial position or results of operations of the Company.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company adopted SFAS No. 107, "Disclosures About Fair Value of
Financial Instruments," as of December 31, 1995. SFAS No. 107 requires
disclosure of the fair value of financial instruments when fair value is
estimable. The estimated fair value of the financial instruments has been
determined based on pertinent information available to management and
appropriate valuation methodologies. The carrying amounts of cash and cash
equivalents, receivables, deposits, accounts payable and accrued expenses
approximate fair value because of the short-term maturities of those items. As
discussed in Note 1, investments in securities have been recorded at market
value in accordance with SFAS No. 115. In addition, as discussed in Note 3,
notes receivable have been recorded at fair value using estimated discounted
cash flows in accordance with SFAS No. 114. Also, as discussed in Note 3,
certain notes with zero carrying value and thus not reported as notes
receivable, have an estimated fair value, based on estimated discounted cash
flows, of $3.6 million. The carrying amount of the Company's notes payable
and mortgages payable, with the exception of those identified below, are
considered to approximate fair value as the related interest rates are
variable and change with market interest rates, or are fixed rates but are
comparable to market interest rates as of December 31, 1996. The mortgages
payable to FHA, City of Chicago, Illinois Housing Authority and Affordable
Housing Program Grant, as discussed in Note 6, do not bear interest at
market interest rates, but have been issued in connection with affordable
housing authorities and therefore their fair value is not considered
practicable to estimate. It is also not practicable to estimate the fair
value of the amount due to NHPI due to the related-party nature of the
liability. In the opinion of management, the fair value of the Company's
financial instruments are not materially different from the carrying value
shown in the accompanying combined financial statements.
<PAGE>
-21-
16. SUBSEQUENT EVENTS:
On January 30, 1997, the property owned by Capital Group I, a Majority Owned
Partnership, was sold and the related note obligation repaid. Based on the
Company's net investment in the partnership, the Company recognized a gain of
approximately $2.4 million in the period ending March 31, 1997. No cash proceeds
were received by the Company from this sale. This sale resulted in non-cash
activity not reflected on the combined statement of cash flows for the three
months ended March 31, 1997 as follows: decrease in accounts receivable of
$62,836, decrease in other assets of $151,322, decrease in net property and
equipment of $10,189,850, repayment of mortgage note payable and accrued
interest of $11,000,000 and $1,762,848, respectively, and repayment of
accounts payable and accrued expenses of $7,959,174.
On April 21, 1997, NHPI announced that it had entered into a definitive
Merger Agreement pursuant to which NHPI will be acquired by Apartment Investment
and Management Company ("AIMCO"), a real estate investment trust whose shares
are traded on the New York Stock Exchange. Upon completion of the merger, each
of NHPI's stockholders will receive for each share of NHPI common stock, at the
stockholder's election, either (i) a combination of .37383 shares of AIMCO
common stock and $10.00 cash per share of NHPI common stock, or (ii) .74766
shares of AIMCO common stock. The merger is conditioned on the approval of
NHPI's stockholders and AIMCO stockholders, the completion of the transactions
between AIMCO and the majority stockholders of the Company described below, and
customary state and federal regulatory and other approvals.
AIMCO has separately entered into a Stock Purchase Agreement with Demeter
Holdings Corporation ("Demeter") and Capricorn Investors, L.P. ("Capricorn"),
who together hold a majority of the outstanding shares of NHPI's common stock
(approximately 54.8 percent). Pursuant to the Stock Purchase Agreement, AIMCO
will acquire all of NHPI's common stock held by Demeter and Capricorn. AIMCO
will pay Demeter $20 in cash per share for 50 percent of NHPI shares held
directly and indirectly by Demeter. For the remainder of Demeter's shares and
Capricorn's shares, AIMCO will pay .74766 shares of AIMCO common stock per share
of NHPI common stock. On May 5, 1997, AIMCO acquired 6,496,071 shares of NHPI
stock from Demeter and Capricorn, or approximately 51 percent of NHPI's
outstanding shares, pursuant to the Stock Purchase Agreement. Upon completion of
AIMCO's purchase of this portion of the shares held by Demeter and Capricorn,
AIMCO holds a majority of the issued and outstanding shares of NHPI's common
stock. The Stock Purchase Agreement provides for AIMCO to acquire the remaining
434,051 shares of NHPI common stock owned by Demeter and Capricorn. The merger
with AIMCO will, however, require approval by two-thirds vote of all shares of
NHPI common stock held by persons other than AIMCO.
17. CHANGE IN CONTROL:
On June 3, 1997, AIMCO acquired the Company from Demeter, Capricorn, Phemus
Corporation, a Massachusetts corporation and an affiliate of Demeter ("Phemus"),
J. Roderick Heller, III, and NHP Partners Two LLC, a Delaware limited liability
company, for $54.8 million in cash and warrants to purchase 399,999 shares of
AIMCO common stock.
18. SEGMENT INFORMATION:
The following table sets forth the revenue and expenses by business segment
for the years ended December 31, 1994, 1995 and 1996. The Company's business
segments are defined as follows:
<PAGE>
-22-
Real estate operations -- owns and acquires general and limited
partnership interests in multi-family rental housing properties principally
in the United States.
Insurance operations -- primarily reinsures properties in which the
Company has an ownership interest for property and general liability risks.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED REAL ESTATE INSURANCE
DECEMBER 31, OPERATIONS OPERATIONS ELIMINATIONS TOTAL
- ---------------------------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
1996
- ----------------------------------
Revenues.......................... $ 32,415,102 $ 6,000,205 $ -- $ 38,415,307
Intersegment revenues............. -- 86,524 (86,524) --
------------- -------------- ------------- -------------
$ 32,415,102 $ 6,086,729 $ (86,524) $ 38,415,307
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
1995
- ----------------------------------
Revenues.......................... $ 34,291,935 $ 3,860,861 $ -- $ 38,152,796
Intersegment revenues............. -- 370,087 (370,087) --
------------- -------------- ------------- -------------
$ 34,291,935 $ 4,230,948 $ (370,087) $ 38,152,796
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
1994
- ----------------------------------
Revenues.......................... $ 31,790,755 $ 3,317,795 $ -- $ 35,108,550
Intersegment revenues............. -- 390,412 (390,412) --
------------- -------------- ------------- -------------
$ 31,790,755 $ 3,708,207 $ (390,412) $ 35,108,550
------------- -------------- ------------- -------------
------------- -------------- ------------- -------------
Depreciation and amortization
1996................ $ 3,903,688 $ -- $ -- $ 3,903,688
1995................ 4,001,562 -- -- 4,001,562
1994................ 3,681,402 -- -- 3,681,402
Capital expenditures
1996................ $ 711,221 $ -- $ -- $ 711,221
1995................ 1,832,585 -- -- 1,832,585
1994................ 2,105,991 -- -- 2,105,991
Identifiable assets
1996................ $ 159,312,547 $ 20,195,212 $ (3,398,644) $ 176,109,115
1995................ 179,973,439 19,913,630 (6,603,560) 190,496,804
</TABLE>
19. REAL ESTATE PARTNERSHIPS:
Below is a listing of partnerships in which the Company has invested and its
percentage ownership.
<PAGE>
-23-
NHP Partners and The National Housing Partnership List of Partnerships and
Percentage Interest 12/31/96
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
107-145 West 135th St Associates Limited Partnership.............................. 25.00% 4.00% 29.00%
2900 Van Ness Associates.......................................................... 1.00% 1.00%
6000 King Drive Limited Partnership............................................... 1.00% 1.00%
60th & King Drive Joint Venture................................................... 1.00% 1.00%
62nd Street Limited Partnership................................................... 2.61% 2.61%
630 East Lincoln Ave Associates Limited Partnership............................... 5.00% 5.00%
7400 Roosevelt Investors.......................................................... 1.00% 1.00%
Abbott Associates Limited Partnership............................................. 24.00% 1.00% 25.00%
Academy Gardens Associates LP..................................................... 5.00% 5.00%
Adirondack Apartments Saranac Associates LP....................................... 5.00% 5.00%
Algonquin Tower Limited Partnership............................................... 1.00% 1.00%
All Hallows Associates............................................................ 5.00% 5.00%
Allentown Towne House Limited Partnership......................................... 8.90% 1.00% 9.90%
Anglers Manor Associates LP....................................................... 6.00% 6.00%
Antioch Apartments Limited........................................................ 5.00% 5.00%
Arvada House Limited Partnership.................................................. 6.00% 6.00%
Aspen Stratford Apartments Company B.............................................. 5.00% 5.00%
Aspen Stratford Apartments Company C.............................................. 5.00% 5.00%
Athens Arms Associates............................................................ 4.79% 1.00% 5.79%
Audobon Park Associates........................................................... 5.00% 5.00%
Baisley Park Associates LP........................................................ 6.00% 6.00%
Baldwin Oaks Elderly Limited...................................................... 16.00% 16.00%
Baldwin Towers Associates......................................................... 2.00% 2.00%
Basswood Manor Limited Partnership................................................ 4.79% 1.00% 5.79%
Bayview Hunters Point Apartments.................................................. 6.00% 6.00%
Beautiful Village Associates LP Redevelopment Company............................. 5.00% 5.00%
Benjamin Banneker Plaza Associates................................................ 5.00% 5.00%
Bensalem Gardens Associates Limited............................................... 1.00% 1.00%
Bensalem Gardens Associates Limited Partnership................................... 1.00% 1.00%
Benton Square Partnership......................................................... 5.00% 5.00%
Berkley Limited Partnership....................................................... 6.00% 6.00%
Bloomsburg Elderly Associates..................................................... 5.00% 5.00%
Boynton Beach Limited Partnership*................................................ 1.00% 91.04% 92.04%
Branchwood Towers Limited Partnership............................................. 4.50% 4.50%
Briarwood Apartments.............................................................. 1.00% 1.00%
Brightwood Limited Partnership.................................................... 1.00% 1.00%
Brightwood Manor Associates....................................................... 24.00% 2.00% 26.00%
Brinton Manor No 1 Associates..................................................... 4.00% 4.00%
Brinton Towers Associates......................................................... 21.00% 5.00% 26.00%
Brookside Apartments Associates................................................... 5.85% 5.85%
Brookview Apartments Co Limited................................................... 1.00% 1.00%
Brunswick Village Limited Partnership............................................. 0.99% 0.99%
Buckingham Hall Associates Limited Partnership.................................... 5.00% 5.00%
Buena Vista Apartments Limited.................................................... 1.00% 1.00%
Buffalo Village Associates........................................................ 49.00% 1.00% 50.00%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-24-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Cabell Associates Of Lakeview..................................................... 1.00% 1.00%
California Square II Limited Partnership.......................................... 2.00% 2.00%
California Square Limited Partnership............................................. 4.90% 4.90%
Cambridge Heights Apartments Limited*............................................. 45.00% 6.00% 51.00%
Campbell Heights Associates Limited Partnership................................... 5.00% 5.00%
Canterbury Gardens Associates Limited Partnership................................. 14.00% 5.00% 19.00%
Capital Group I Associates*....................................................... 100.00% 100.00%
Capital Park Limited Partnership.................................................. 1.00% 1.00%
Caroline Arms Limited Partnership................................................. 1.00% 1.00%
Caroline Associates I, Limited Partnership........................................ 5.90% 5.90%
Carter Associates Limited Partnership............................................. 16.00% 16.00%
Casa Del Mar Associates Limited Partnership....................................... 5.54% 5.54%
Center Square Associates.......................................................... 4.00% 2.00% 6.00%
Central Village Associates Limited Partnership.................................... 1.88% 1.00% 2.88%
Central Woodlawn LP............................................................... 1.00% 1.00%
Central Woodlawn Rehabilitation Joint Venture..................................... 75.00% 75.00%
Chapel Housing Limited Partnership................................................ 6.00% 6.00%
Chateau Gardens................................................................... 1.00% 1.00%
Cheek Road Limited Partnership.................................................... 10.19% 1.00% 11.19%
Chesterfield Housing Associates................................................... 5.00% 5.00%
Cheyenne Village Apartments Limited Partnership*.................................. 66.00% 1.00% 67.00%
Christopher Court Housing Co Limited Partnership.................................. 5.00% 5.00%
Church Street Associates LP....................................................... 0.25% 0.25%
Churchview Gardens Associates..................................................... 1.00% 1.00%
Churchview Gardens Limited Partnership............................................ 1.00% 1.00%
Citrus Park Associates Limited.................................................... 1.00% 1.00%
Clay Cts Associates Limited Partnership........................................... 5.50% 5.50%
Clover Ridge East Limited Partnership............................................. 48.10% 1.00% 49.10%
Club Apartment Associates......................................................... 2.00% 2.00%
Club Apartments Associates........................................................ 1.00% 1.00%
College Heights Limited Partnership............................................... 1.88% 1.00% 2.88%
College Park Associates........................................................... 1.00% 1.00%
College Park Associates Limited Partnership....................................... 5.00% 5.00%
Colonial Terrace I Associates..................................................... 4.79% 1.00% 5.79%
Colonial Terrace II Associates.................................................... 4.79% 1.00% 5.79%
Colony Apartments Co Limited...................................................... 1.00% 1.00%
Columbus Square Associates I Limited Partnership.................................. 6.00% 6.00%
Columbus Square Associates II Limited Partnership................................. 6.00% 6.00%
Community Circle II Limited....................................................... 5.20% 5.20%
Community Developers Of High Point Limited Partnership............................ 5.00% 5.00%
Community Developers Of Princeville Limited Partnership........................... 4.10% 4.10%
Concord Houses Associates......................................................... 5.00% 5.00%
Congress Park Associates II Limited Partnership................................... 2.00% 2.00%
Congress Park Associates Limited Partnership...................................... 1.10% 1.10%
Connecticut Colony Associates Limited Partnership................................. 1.00% 1.00%
Copperstone Circle Limited Partnership............................................ 1.00% 1.00%
Copperstone Limited Partnership................................................... 1.00% 1.00%
Copperwood II Limited Partnership................................................. 5.00% 5.00%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-25-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Copperwood Limited Partnership.................................................... 5.00% 5.00%
Cottonwood Apartments............................................................. 1.00% 1.00%
Country Lakes Associates Two LP................................................... 1.00% 1.00%
Country Villa Associates.......................................................... 2.00% 2.00%
Countrybrook Associates........................................................... 1.00% 1.00%
Crosland Housing Associates....................................................... 5.00% 5.00%
Cross Creek Limited Partnership................................................... 1.00% 1.00%
Cumberland Court Associates....................................................... 6.00% 5.00% 11.00%
Darby Townhouses Limited Partnership.............................................. 1.00% 1.00%
Darbytown Development Associates LP............................................... 1.00% 1.00%
DarbyTownhouses Associates........................................................ 1.00% 1.00%
Delcar T Limited Partnership...................................................... 1.00% 1.00%
Delcar-S Limited.................................................................. 1.00% 1.00%
Diakonia Associates............................................................... 1.00% 1.00%
Dip Limited Partnership........................................................... 4.00% 1.00% 5.00%
Dip Limited Partnership II........................................................ 5.00% 5.00%
Dip Limited Partnership III....................................................... 5.00% 5.00%
Doral Gardens Associates.......................................................... 1.00% 1.00%
Doral Limited Partnership......................................................... 5.47% 5.47%
Downing Apartments................................................................ 1.00% 1.00%
Duke Manor Associates............................................................. 5.00% 5.00%
Duquesne Associates No. 1......................................................... 1.00% 1.00%
East Hampton Limited Partnership.................................................. 1.00% 1.00%
Eastcourt Village Partners........................................................ 14.00% 5.00% 19.00%
Easton Terrace I Associates Limited Partnership................................... 2.41% 1.00% 3.41%
Easton Terrace II Associates Limited Partnership*................................. 100.00% 100.00%
Eastridge Apartments.............................................................. 1.00% 1.00%
Eastridge Associates.............................................................. 4.41% 4.41%
Edgewood II Associates............................................................ 5.00% 5.00%
Edmond Estates Limited Partnership................................................ 1.00% 1.00%
Elden Limited Partnership......................................................... 1.00% 1.00%
Elderly Housing Associates Limited Partnership.................................... 5.00% 5.00%
Elm Creek Limited Partnership*.................................................... 1.00% 95.75% 96.75%
Emory Grove Associates Limited Partnership........................................ 3.97% 3.97%
Emory Grove Limited Partnership................................................... 1.00% 1.00%
Esbro Limited Partnership......................................................... 1.00% 1.00%
Eustis Apartments Limited......................................................... 5.00% 5.00%
Fairburn & Gordon Associates Phase II............................................. 1.00% 1.00%
Fairburn & Gordon Associates Phase I.............................................. 1.00% 1.00%
Fairfax Associates Limited Partnership............................................ 1.00% 1.00%
Fairmeadows Limited............................................................... 1.00% 1.00%
Fairmont #1 Limited Partnership................................................... 1.25% 1.25%
Fairmont #2 Limited Partnership................................................... 1.25% 1.25%
Fairview Homes Associates......................................................... 4.90% 4.90%
Fairwood Associates............................................................... 5.00% 5.00%
Federal Square Village Limited Partnership........................................ 1.00% 1.00%
Ferncliff Limited Partnership..................................................... 11.70% 11.70%
Field Associates.................................................................. 1.00% 1.00%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-26-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
First Alexandria Associates Limited Partnership................................... 1.00% 1.00%
Flatbush Nsa Associates Limited Partnership....................................... 5.00% 5.00%
Forest Apartments Associates...................................................... 1.00% 1.00% 2.00%
Forest Green Limited Partnership.................................................. 1.00% 1.00%
Forrester Gardens Limited......................................................... 1.00% 1.00%
Forst Park Elderly Associates Limited Partnership................................. 6.00% 6.00%
Fort Carson Associates Limited Partnership........................................ 1.00% 1.00%
Franklin Chandler Associates...................................................... 9.00% 9.00%
Franklin Chapel Hill Associates................................................... 2.00% 2.00%
Franklin Eagle Rock Associates.................................................... 2.00% 2.00%
Franklin Housing Associates....................................................... 1.00% 1.00%
Franklin Kelly Associates......................................................... 1.00% 1.00%
Franklin New York Avenue Associates............................................... 1.00% 1.00%
Franklin Park Limited Partnership................................................. 1.00% 1.00%
Franklin Pheasant Ridge Associates................................................ 1.00% 1.00%
Franklin Ridgewood Associates..................................................... 1.10% 1.10%
Franklin Sentry Four Associates................................................... 1.00% 1.00%
Franklin Square School Associates Limited Partnership............................. 2.10% 2.10%
Franklin Victoria Associates. I................................................... 8.70% 8.70%
Franklin Woods Associates......................................................... 1.00% 1.00%
Friendset Housing Co Limited Partnership.......................................... 25.00% 4.00% 29.00%
Frio Housing Limited Partnership.................................................. 5.00% 5.00%
Galion Limited Partnership........................................................ 1.00% 1.00%
Garfield Hill Associates Limited Partnership...................................... 1.10% 1.10%
Gate Manor Apartments Limited..................................................... 5.00% 5.00%
Gates Mill I Limited Partnership.................................................. 1.00% 1.00%
Gateway Village Associates........................................................ 1.00% 1.00%
Genesee Gardens Associates Limited Partnership.................................... 1.88% 1.00% 2.88%
Gladys Hampton Homes Associates Limited Partnership............................... 5.00% 5.00%
Golden Apartments I............................................................... 5.00% 5.00%
Golden Apartments II.............................................................. 5.00% 5.00%
Grandland Realty Associates....................................................... 1.00% 1.00%
Grandview Apartments.............................................................. 1.00% 1.00%
Greater Hartford Associates Limited Partnership................................... 1.00% 1.00%
Greater Mt Calvary Terrace Limited................................................ 1.00% 1.00%
Greater Richmond Cmnty Dev Corp #1 & Associates................................... 15.00% 15.00%
Greater Richmond Cmnty Dev Corp #2 & Associates................................... 15.00% 15.00%
Green Mtn Manor Limited Partnership............................................... 2.97% 1.00% 3.97%
Greenfield Apartments Limited Partnership......................................... 1.00% 1.00%
Greenfield Limited Partnership.................................................... 2.55% 2.55%
Greenfield North Apartments Limited Partnership................................... 1.00% 1.00%
Greenfield North Limited Partnership.............................................. 2.55% 2.55%
Griffith Limited Partnership...................................................... 1.00% 1.00%
Grosvenor House Associates Limited Partnership.................................... 1.00% 1.00%
Grove Park Villas, Limited........................................................ 5.00% 5.00%
Gulfway Limited Partnership....................................................... 1.00% 1.00%
GW Carver Limited................................................................. 5.00% 5.00%
Haili Associates.................................................................. 5.00% 5.00%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-27-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Haines Associates Limited Partnership............................................. 1.00% 1.00%
Hamilton House Associatesiates Limited Partnership................................ 5.56% 5.56%
Harold House Limited Partnership.................................................. 1.00% 1.00%
Harris Park Limited Partnership*.................................................. 98.00% 1.00% 99.00%
Hatillo Housing Associates........................................................ 1.00% 5.00% 6.00%
Hawksworth Gardens Associates..................................................... 1.00% 1.00%
Heights Associates Limited Partnership............................................ 5.00% 5.00%
Hemingway Housing Associates Limited Partnership.................................. 5.00% 5.00%
Heritage Village Limited Partnership.............................................. 1.00% 1.00%
Hickory Ridge Associates Limited.................................................. 1.00% 1.00%
Highlands Village II Limited...................................................... 5.00% 5.00%
Hillcrest Green Apartments Limited................................................ 2.00% 2.00%
Hillside Village Associates....................................................... 5.00% 5.00%
Hilltop Apartments Associates..................................................... 10.00% 1.00% 11.00%
Hilltop Limited Partnership....................................................... 1.00% 1.00%
Hollows Associates Limited Partnership............................................ 5.00% 5.00%
Hollywood Gardens................................................................. 4.10% 4.10%
Housing Assistance Of Mt Dora Limited............................................. 5.00% 5.00%
Housing Assistance Of Orange City Limited......................................... 5.00% 5.00%
Housing Assistance Of Vero Beach Limited.......................................... 5.00% 5.00%
Housing Assistance Sebring Limited................................................ 5.00% 5.00%
Houston Aristocrat Apartments Limited Partnership................................. 9.00% 1.00% 10.00%
HRH Properties, Limited........................................................... 5.00% 5.00%
Hudson Terrace Associates Limited Partnership..................................... 21.00% 1.00% 22.00%
Hunters Run Partners Limited...................................................... 1.00% 1.00%
Hurbell I Limited Partnership..................................................... 1.00% 1.00%
Hurbell II Limited Partnership.................................................... 1.00% 1.00%
Hurbell III Limited Partnership................................................... 1.00% 1.00%
Hurbell IV Limited Partnership.................................................... 1.00% 1.00%
IDA Tower......................................................................... 24.00% 1.00% 25.00%
Indian Valley II Limited Partnership.............................................. 1.00% 1.00%
Indian Valley III Limited Partnership............................................. 1.00% 1.00%
Indian Valley Limited Partnership................................................. 1.00% 1.00%
Ingram Square Apartments Limited.................................................. 5.00% 5.00%
Intown West Associates Limited Partnership........................................ 3.00% 3.00%
Ivanhoe Associates Limited Partnership............................................ 1.00% 1.00%
Jamestown Village Associates...................................................... 1.94% 1.94%
Jersey Park Associates Limited Partnership........................................ 5.00% 5.00%
JFK Associates.................................................................... 5.00% 5.00%
Johnson Square Associates......................................................... 6.00% 6.00%
Johnston Square Associates Limited Partnership.................................... 0.00% 0.00%
JVL 18 Associates Limited Partnership Verified.................................... 5.90% 5.90%
JVL 19 Associates Limited Partnership Verified.................................... 5.00% 5.00%
JVL Limited Partnership........................................................... 5.85% 5.85%
JVL Sixteen Limited Partnership................................................... 6.00% 6.00%
Kapuna Associates................................................................. 5.00% 5.00%
Kemar Townhouses Associates....................................................... 1.00% 1.00%
Kennedy Homes Limited Partnership................................................. 1.00% 1.00%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-28-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Kenneth Arms...................................................................... 1.00% 1.00%
Key Parkway West Associates Limited Partnership................................... 5.00% 5.00%
Kimberton Limited Partnership..................................................... 1.00% 1.00%
King Bell Associates.............................................................. 1.00% 1.00%
Knollcrest Apartments Limited Partnership......................................... 1.00% 1.00%
Koolau Housing Associates......................................................... 5.00% 5.00%
La Salle Apartments............................................................... 6.00% 6.00%
La Vista Associates............................................................... 1.00% 1.00%
Lafayette Manor Associates Limited Partnership.................................... 4.85% 4.85%
Lafayette Towne Elderly Limited Partnership....................................... 6.00% 6.00%
Lafayette Towne Family Limited Partnership........................................ 6.00% 6.00%
Laing Village Limited Partnership................................................. 5.00% 5.00%
Lake Avenue Associates............................................................ 1.00% 1.00%
Lake Crossing Limited Partnership................................................. 42.90% 1.00% 43.90%
Lake Forest Apartments............................................................ 1.84% 1.84%
Lake Wales Villas Limited......................................................... 5.00% 5.00%
Lakehaven Associates One Limited Partnership...................................... 1.00% 1.00%
Lakehaven Associates Two Limited Partnership...................................... 1.00% 1.00%
Lakeland East Limited Partnership................................................. 1.00% 1.00%
Lakeview Arms Associates Limited Partnership...................................... 6.00% 6.00%
Lakeview Villas Limited........................................................... 5.00% 5.00%
Las Americas Housing Associates................................................... 1.00% 5.00% 6.00%
Lassen Associates................................................................. 5.00% 5.00%
Laurel Gardens, A Partnership In Commendam........................................ 1.00% 1.00%
Lee Hy Manor Associates Limited Partnership....................................... 5.00% 5.00%
Lewisburg Associates.............................................................. 5.00% 5.00%
Lewisburg Elderly Associates...................................................... 5.00% 5.00%
Lincmar Associates................................................................ 1.00% 1.00%
Lincoln Park Associates........................................................... 5.00% 5.00%
Linden Court Associates Limited Partnership....................................... 5.00% 5.00%
Lock Haven Elderly Associates..................................................... 1.00% 5.00% 6.00%
Lock Haven Gardens Associates..................................................... 1.00% 5.00% 6.00%
Locust Park Associates............................................................ 10.00% 10.00%
Loring Towers Apartments Limited Partnership...................................... 1.00% 1.00%
Loring Towers Associates.......................................................... 26.00% 26.00%
Loudoun House Limited Partnership................................................. 1.00% 1.00%
M&P Development Co................................................................ 6.00% 6.00%
Manzanita Arms.................................................................... 1.00% 1.00%
Maple Hill Associates............................................................. 5.00% 5.00%
Maple Park East Limited Partnership............................................... 10.19% 1.00% 11.19%
Maple Park West Limited Partnership............................................... 10.19% 1.00% 11.19%
Marten Manor Realty Associates.................................................... 1.00% 1.00%
Mayfair Manor Limited Partnership................................................. 1.00% 1.00%
McColl Housing Associates......................................................... 5.00% 5.00%
Meadowood Associates Limited Partnership.......................................... 1.00% 1.00%
Meadowood III Associates Limited Partnership...................................... 1.00% 1.00%
Meadowood Townhouses I Limited Partnership........................................ 1.00% 1.00%
Meadowood Townhouses III Limited Partnership...................................... 1.00% 1.00%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-29-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Meadows Apartments Limited Partnership............................................ 1.00% 1.00%
Meadows East Apartments Limited Partnership....................................... 1.00% 1.00%
Menlo Park Limited Partnership.................................................... 1.00% 1.00%
Merced Commons.................................................................... 5.00% 5.00%
Merced Commons II................................................................. 4.00% 4.00%
Miami Elderly Associates Limited Partnership...................................... 1.00% 1.00%
Mill Street Associates Limited Partnership........................................ 5.00% 5.00%
Milliken Apartments Company....................................................... 1.00% 1.00%
Miramar Housing Associates Limited Partnership.................................... 6.00% 6.00%
Monaco Arms Associates I.......................................................... 1.00% 1.00%
Monaco Arms Associates II Limited................................................. 1.00% 1.00%
Monmouth Associates Limited Partnership........................................... 1.00% 1.00%
Montblanc Gardens Apartments Associates........................................... 10.00% 10.00%
Montblanc Housing Associates...................................................... 1.00% 5.00% 6.00%
Monument Street Limited Partnership............................................... 6.00% 6.00%
Morrisania Towers Housing Co Limited Partnership.................................. 5.00% 5.00%
Moss Gardens Limited, a Partnership in Commendam.................................. 5.00% 5.00%
MRR Limited Partnership*.......................................................... 80.00% 80.00%
Murphy Blair Associates III Associates Limited Partnership........................ 1.00% 1.00%
Muske Limited Partnership......................................................... 1.00% 1.00%
Natick Associates................................................................. 1.00% 1.00%
National Housing Partnership Realty Fund I........................................ 2.00% 2.00%
National Housing Partnership Realty Fund III...................................... 2.00% 2.00%
National Housing Partnership Realty Fund IV....................................... 1.00% 1.00%
National Housing Partnership Realty Fund Two...................................... 2.05% 2.05%
National Housing Partnership RESI Associates I Limited Partnership................ 1.00% 1.00%
Neighborhoods Of The Universities Lock St Apartments Co........................... 5.00% 5.00%
New Vistas Apartments Associates Phase II......................................... 1.00% 1.00%
New Vistas Apartments Limited Partnership......................................... 5.00% 5.00%
New West 111th St Housing Company Limited Partnership............................. 5.00% 5.00%
New West 111th St Two Associates Limited Partnership.............................. 5.00% 5.00%
Newton Hill Limited Partnership................................................... 1.00% 1.00%
NHP Bayberry Associates LP........................................................ 0.50% 0.50%
NHP Bayshore Gardens L.P.......................................................... 0.50% 0.50%
NHP Carriage Associates LP........................................................ 0.50% 0.50%
NHP Carriage, LP.................................................................. 0.50% 0.50%
NHP Center Associates LP.......................................................... 0.50% 0.50%
NHP Center, LP.................................................................... 0.50% 0.50%
NHP Chapparal Associates LP....................................................... 1.00% 1.00%
NHP Coach Associates LP........................................................... 0.50% 0.50%
NHP Coach, LP..................................................................... 0.50% 0.50%
NHP Cornerstone Associates. LP.................................................... 0.50% 0.50%
NHP Cornerstone, LP............................................................... 0.50% 0.50%
NHP Country Club Woods Associates LP.............................................. 1.00% 1.00%
NHP Dove Associates. LP........................................................... 0.50% 0.50%
NHP Dove, LP...................................................................... 0.50% 0.50%
NHP Elk Associates. LP............................................................ 0.50% 0.50%
NHP Elk, LP....................................................................... 0.50% 0.50%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-30-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
NHP Forest II Associates. LP...................................................... 0.50% 0.50%
NHP Forest II, LP................................................................. 0.50% 0.50%
NHP Forest IV Associates. LP...................................................... 0.50% 0.50%
NHP Forest IV, LP................................................................. 0.50% 0.50%
NHP Gates of Arlington Associates LP.............................................. 0.50% 0.50%
NHP Gates of Arlington, LP........................................................ 0.50% 0.50%
NHP Greeen Associates LP.......................................................... 0.50% 0.50%
NHP Greeen, LP.................................................................... 0.50% 0.50%
NHP Greenbriar Associates LP...................................................... 1.00% 1.00%
NHP Greenbriar, LP................................................................ 1.00% 1.00%
NHP Heather I Associates LP....................................................... 0.50% 0.50%
NHP Heather I, LP................................................................. 0.50% 0.50%
NHP Heather II Associates. LP..................................................... 0.50% 0.50%
NHP Heather II, LP................................................................ 0.50% 0.50%
NHP Hessian Hills Associates LP................................................... 1.00% 1.00%
NHP Hessian Hills, LP............................................................. 1.00% 1.00%
NHP High River Associates LP...................................................... 1.00% 1.00%
NHP High River, LP................................................................ 1.00% 1.00%
NHP Joint Ventures, Inc........................................................... 50.00% 50.00%
NHP Lane Associates LP............................................................ 0.50% 0.50%
NHP Lane, LP...................................................................... 0.50% 0.50%
NHP Laurel III Associates LP...................................................... 0.50% 0.50%
NHP Laurel III, LP................................................................ 0.50% 0.50%
NHP Longfellow Associates. LP..................................................... 0.50% 0.50%
NHP Longfellow, LP................................................................ 0.50% 0.50%
NHP Mattapony, LP................................................................. 15.67% 1.00% 16.67%
NHP Midland Associates LP......................................................... 0.50% 0.50%
NHP Midland, LP................................................................... 0.50% 0.50%
NHP Mill Creek Associates LP...................................................... 0.50% 0.50%
NHP Mill Creek, LP................................................................ 0.50% 0.50%
NHP Oak Associates LP............................................................. 0.50% 0.50%
NHP Oak, LP....................................................................... 0.50% 0.50%
NHP Paradise Bay Associates. LP................................................... 0.50% 0.50%
NHP Paradise Bay, LP.............................................................. 0.50% 0.50%
NHP Park Associates LP............................................................ 0.50% 0.50%
NHP Park Village L.P.............................................................. 0.50% 0.50%
NHP Parkview Associates LP........................................................ 0.50% 0.50%
NHP Parkview, LP.................................................................. 0.50% 0.50%
NHP Pembroke Associates LP........................................................ 1.00% 1.00%
NHP Pine Creek Manor Associates. LP............................................... 0.50% 0.50%
NHP Pine Creek Manor, LP.......................................................... 0.50% 0.50%
NHP Port Richey Associates LP..................................................... 0.50% 0.50%
NHP Port Richey, LP............................................................... 0.50% 0.50%
NHP Regal Associates LP........................................................... 0.50% 0.50%
NHP Regal, LP..................................................................... 0.50% 0.50%
NHP Southeast Partners, LP........................................................ 21.60% 2.80% 24.40%
NHP Southwest Partners, LP........................................................ 49.50% 5.00% 50.00%
NHP Spring Lake Manor Associates LP............................................... 1.00% 1.00%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-31-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- -------- --------- -----------
<S> <C> <C> <C>
NHP Spring Lake Manor, LP......................................................... 1.00% 1.00%
NHP Summer Associates LP.......................................................... 0.50% 0.50%
NHP Summer, LP.................................................................... 0.50% 0.50%
NHP Summit Associates LP.......................................................... 0.50% 0.50%
NHP Summit, LP.................................................................... 0.50% 0.50%
NHP Sunridge Associates LP........................................................ 0.50% 0.50%
NHP Sunridge, LP.................................................................. 0.50% 0.50%
NHP Three Chopt West Associates LP................................................ 1.00% 1.00%
NHP Three Chopt West, LP.......................................................... 1.00% 1.00%
NHP Timberview Associates LP...................................................... 0.50% 0.50%
NHP Timberview, LP................................................................ 0.50% 0.50%
NHP Town & Country, LP............................................................ 1.00% 1.00%
NHP Town & Country/Country Place Associates LP.................................... 1.00% 1.00%
NHP Town & Country/Country Place, LP.............................................. 1.00% 1.00%
NHP Townhouse Associates LP....................................................... 1.00% 1.00%
NHP Townhouse LP.................................................................. 1.00% 1.00%
NHP Twin Associates LP............................................................ 0.50% 0.50%
NHP Twin Gates East Associates LP................................................. 1.00% 1.00%
NHP Twin Gates East,LP............................................................ 1.00% 1.00%
NHP Twin, LP...................................................................... 0.50% 0.50%
NHP Villa Associates LP........................................................... 0.50% 0.50%
NHP Villas L.P.................................................................... 0.50% 0.50%
NHP Will-O-Wisp Arms Associates LP................................................ 1.00% 1.00%
NHP Will-O-Wisp Arms, L.P......................................................... 1.00% 1.00%
NHP Windsor Crossing L.P.......................................................... 1.00% 1.00%
NHP Woodcreek Associates LP....................................................... 0.50% 0.50%
NHP Woodcreek, LP................................................................. 0.50% 0.50%
NHP-HG Ten, LP.................................................................... 99.00% 1.00% 100.00%
Norco Associates.................................................................. 1.00% 1.00%
North Lake Terrace Associates Limited Partnership................................. 1.00% 1.00%
North Washington Park Partnership................................................. 5.00% 5.00%
Northgate Village Limited Partnership............................................. 1.00% 1.00%
Northwest Terrace Associates Limited Partnership.................................. 1.00% 1.00%
Oak Hollow South Associates....................................................... 5.00% 5.00%
Oak West Limited Partnership...................................................... 1.00% 1.00%
Oakcrest Terrace Associates....................................................... 5.00% 5.00%
Oakland City West End Associates Limited.......................................... 5.00% 5.00%
Oakland Village Townhouse Associates Limited Partnership.......................... 6.10% 6.10%
Oakwood Limited Partnership....................................................... 1.00% 1.00%
Oakwood Muskegon Limiterd Partnership............................................. 1.00% 1.00%
Ocala Place Limited............................................................... 5.00% 5.00%
Old Farm Associates............................................................... 0.60% 0.60%
Olde Rivertown Venture Limited Partnership........................................ 1.00% 1.00%
One Lytle Place................................................................... 24.67% 24.67%
One West Conway Associates Limited Partnership.................................... 4.00% 4.00%
Orange City Villas II Limited..................................................... 5.00% 5.00%
Orange Village Associates......................................................... 5.00% 5.00%
Orangeburg Manor.................................................................. 5.00% 5.00%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-32-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Orchard Mews Associates Limited Partnership....................................... 6.00% 6.00%
Orlando-Lake Conway Limited Partnership........................................... 1.00% 1.00%
Overbrook Park Limited............................................................ 5.00% 5.00%
Oxford Oaks Investors Limited Partnership......................................... 6.41% 6.41%
Oxford Place Associates........................................................... 5.00% 5.00%
P W III Associates Limited Partnership............................................ 4.90% 4.90%
P W IV Associates Limited Partnership............................................. 5.90% 5.90%
P W V Associates Limited Partnership.............................................. 5.00% 5.00%
P W VI Associates Limited Partnership............................................. 3.52% 3.52%
Palm House Limited Partnership.................................................... 1.00% 1.00%
Palmer Square Apartments Associates............................................... 0.66% 0.66%
Park Ave West I Limited Partnership............................................... 1.00% 1.00%
Park Ave West II Limited Partnership.............................................. 1.00% 1.00%
Park Creek Limited Partnership.................................................... 3.97% 3.97%
Parkview Apartments Limited Partnership........................................... 5.00% 5.00%
Parkview Arms Associates I Limited Partnership.................................... 1.00% 1.00%
Parkview Arms Associates II Limited Partnership................................... 1.00% 1.00%
Parkview Associates Limited Partnership Verified.................................. 4.94% 4.94%
Parkways Associates Limited Partnership........................................... 5.50% 5.50%
Pavilion Associates............................................................... 3.97% 3.97%
Pendleton Riverside Apartments Oregon Limited..................................... 1.00% 1.00%
Penn Hall Associates Limited Partnership.......................................... 1.00% 1.00%
Peppertree Village Of Avon Park Limited........................................... 5.00% 5.00%
Pershing Waterman Phase I Limited Partnership..................................... 29.90% 29.90%
Pittsfield Neighborhood Associates................................................ 5.00% 5.00%
Place One Limited Partnership..................................................... 6.00% 6.00%
Plantation Partners Limited....................................................... 0.66% 0.66%
Pleasant Valley Apartments Limited Partnership.................................... 4.50% 4.50%
Point West Limited Partnership.................................................... 1.00% 1.00%
Portfolio Properties Eight Associated Limited Partnership......................... 1.00% 1.00%
Portfolio Properties Eleven Associated Limited Partnership........................ 1.00% 1.00%
Portfolio Properties Fifteen Associated Limited Partnership....................... 2.20% 2.20%
Portfolio Properties Five Associated Limited Partnership.......................... 1.00% 1.00%
Portfolio Properties Four Associated Limited Partnership.......................... 1.00% 1.00%
Portfolio Properties Nine Associated Limited Partnership.......................... 3.68% 3.68%
Portfolio Properties Seven Associated Limited Partnership......................... 1.97% 1.97%
Portfolio Properties Six Associated Limited Partnership........................... 1.00% 1.00%
Portfolio Properties Ten Associated Limited Partnership........................... 1.00% 1.00%
Portfolio Properties Three Associated Limited Partnership......................... 1.00% 1.00%
Portfolio Properties Two Associated Limited Partnership........................... 1.00% 1.00%
Portland Plaza Limited Partnership................................................ 1.10% 1.10%
Portner Place Associates Limited Partnership...................................... 5.00% 5.00%
Post St Associates Limited Partnership............................................ 6.00% 6.00%
Pride Gardens*.................................................................... 92.00% 6.00% 98.00%
Prince Street Towers Limited Partnership.......................................... 9.90% 9.90%
Pueblo Limited Partnership........................................................ 2.00% 2.00%
Queenstown Apartments Limited Partnership......................................... 5.00% 5.00%
Rancho Arms....................................................................... 1.00% 1.00%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-33-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Rancho Townhouse Associates....................................................... 5.00% 5.00%
Registry Square Limited Partnership............................................... 5.00% 5.00%
Retirement Manor Associates....................................................... 1.00% 1.00%
RI-15 Limited Partnership......................................................... 5.00% 5.00%
Richlieu Associates............................................................... 1.94% 1.94%
Ridge Carlton Associates Limited Partnership...................................... 1.00% 1.00%
River Woods Associates Limited Partnership........................................ 1.00% 1.00%
Riverfront Apartments Limited Partnership......................................... 9.90% 9.90%
Riverloft Associates Limited Partnership.......................................... 1.00% 1.00%
Riverloft Apartments Limited Partnership.......................................... 1.00% 1.00%
Riverview II Associates Limited Partnership....................................... 5.00% 5.00%
Rockwell Limited Partnership...................................................... 1.00% 1.00%
Rodeo Drive Limited Partnership................................................... 1.00% 1.00%
Rolling Meadows Of Ada Limited.................................................... 2.00% 2.00%
Royal Towers Limited Partnership.................................................. 1.00% 1.00%
Ruffin Road Associates Limited Partnership........................................ 6.00% 6.00%
Ruscombe Gardens Limited Partnership.............................................. 3.90% 3.90%
Rutherford Park Townhouses Associates............................................. 3.00% 3.00%
Saint George Villas Limited Partnership........................................... 5.00% 5.00%
San Jose Limited Partnership...................................................... 1.00% 1.00%
San Juan Apartments............................................................... 1.00% 1.00%
San Juan Del Centro Limited Partnership........................................... 1.00% 1.00%
Sandy Springs Associates Limited.................................................. 5.00% 5.00%
Savoy Court Associates............................................................ 4.20% 4.20%
Scotch Lane Associates Limited Partnership........................................ 1.00% 1.00%
Scotch Lane Associates Limited Partnership........................................ 1.00% 1.00%
Sencit F/G Metropolitan Associates................................................ 1.00% 1.00%
Sencit Jacksonville Company, Limited.............................................. 5.85% 5.85%
Sencit Lebanon Company............................................................ 6.00% 6.00%
Sencit Towne House LP............................................................. 9.90% 9.90%
Sherman Terrace Associates........................................................ 11.00% 11.00%
Shoreview Apartments.............................................................. 6.00% 6.00%
Site 10 Community Alliance Associates Limited Partnership......................... 4.50% 4.50%
Sleepy Hollow Apartments Limited Partnership*..................................... 51.00% 1.00% 52.00%
Snap IV Limited Partnership....................................................... 1.02% 1.02%
SNI Development Company Limited Partnership....................................... 5.85% 5.85%
South Hiawassee Village Limited................................................... 5.00% 5.00%
South Mountain Terrace Limited.................................................... 5.00% 5.00%
Southmont Apartments.............................................................. 16.00% 16.00%
Southridge Apartments Limited Partnership......................................... 1.00% 1.00%
Southward Limited Partnership..................................................... 1.00% 1.00%
Southwest Affordable Housing Fund II Limited Partnership.......................... 21.67% 21.67%
Spring Bright Limited Partnership................................................. 3.20% 3.20%
Spring Meadow Limited Partnership................................................. 1.00% 1.00%
Spruce Limited Partnership........................................................ 1.00% 1.00%
Spuce Palm Limited Partnership.................................................... 1.00% 1.00%
St. Nicholas Associates Limited Partnership....................................... 6.00% 6.00%
Stafford Apartments Limited Partnership........................................... 24.50% 24.50%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-34-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Standart Woods Associates Limited LP.............................................. 1.00% 1.00%
Stock Island Limited Partnership.................................................. 11.83% 11.83%
Storey Manor Associates Limited Partnership....................................... 5.00% 5.00%
Strawbridge Square Associates Limited Partnership................................. 5.00% 5.00%
Summersong Townhouse Limited Partnership.......................................... 5.00% 5.00%
Sunrise Associates Limited Partnership............................................ 5.00% 5.00%
Sunset Plaza Apartments........................................................... 1.00% 1.00%
Susquehanna View LP............................................................... 9.90% 9.90%
Tamarac Pines II Limited Partnership.............................................. 5.00% 5.00%
Tamarac Pines Limited Partnership................................................. 5.00% 5.00%
Tara Bridge Limited Partnership*.................................................. 76.01% 1.00% 77.01%
Taunton Green Associates.......................................................... 4.00% 4.00%
Taunton II Associates............................................................. 1.00% 1.00%
Texas Affordable Housing Investment Fund I LP..................................... 1.00% 1.00%
Texas Affordable Housing Investment Fund II*...................................... 100.00% 100.00%
The Crossings II Limited Partnership*............................................. 1.00% 89.00% 90.00%
The Meadows Apartments Limited.................................................... 5.00% 5.00%
The National Housing Partnership-I................................................ 1.00% 1.00%
The National Housing Partnership-II............................................... 1.00% 1.00%
The National Housing Partnership-III.............................................. 1.00% 1.00%
The Oak Park Partnership.......................................................... 11.07% 1.00% 12.07%
The Rogers Park Partnership....................................................... 6.00% 6.00%
Tiffany Rehab Associates Limited Partnership...................................... 4.00% 4.00%
Timberlake Apartments Limited Partnership......................................... 2.41% 2.41%
Timuquana Park Associates......................................................... 5.00% 5.00%
Tinker Creek Limited Partnership.................................................. 1.00% 1.00%
Tompkins Terrace Associates....................................................... 41.00% 41.00%
Town North, a Limited Partnership................................................. 1.00% 1.00%
Townview Towers I Partnership, Limited............................................ 1.00% 1.00%
Treeslope Apartments, a Limited Partnership....................................... 4.10% 4.10%
Trinity Hills Village Apartments Limited Partnership.............................. 1.00% 1.00%
Trinity Towers 14th St Associates Limited Partnership............................. 5.00% 5.00%
Tumast Associates................................................................. 4.85% 4.85%
Twin Gables Associates Limited Partnership........................................ 1.00% 1.00%
Twin Towers Associates............................................................ 5.00% 5.00%
Two Bridges Associates Limited Partnership........................................ 30.56% 30.56%
Tyee Associates................................................................... 1.00% 1.00%
Unied Housing Partners Elmwood Limited............................................ 5.00% 5.00%
United Front Homes................................................................ 5.00% 5.00%
United Handicap Federation Apartments Associates.................................. 16.00% 16.00%
United House Associates........................................................... 5.00% 5.00%
United Housing Partners Morristown Limited Partnership............................ 5.00% 5.00%
United Housing Partners Welch Limited............................................. 5.00% 5.00%
United Housing Partners-Cuthbert Limited.......................................... 5.00% 5.00%
United Housing Partners Carbondale Limited........................................ 6.00% 6.00%
United Redevelopment Associates Limited Partnership............................... 5.00% 5.00%
University Plaza Associates....................................................... 6.00% 6.00%
Urbanizacion Maria Lopez Housng Company Limited Partnership....................... 5.00% 5.00%
</TABLE>
* Majority-Owned Partnership
<PAGE>
-35-
<TABLE>
<CAPTION>
Limited General Total
Partner Partner Ownership
PARTNERSHIP NAME Interest Interest Interest
- ---------------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Vantage '78 Limited Partnership................................................... 4.00% 4.00%
Verdes Del Oriente................................................................ 5.00% 5.00%
Villa De Guadalupe Associates..................................................... 4.90% 4.90%
Village Circle Apartments Limited Partnership..................................... 5.00% 5.00%
Village Green Apartments Company Limited.......................................... 1.00% 1.00%
Village Green Limited Partnership................................................. 1.00% 1.00%
Village Park II................................................................... 6.00% 6.00%
Vineville Towers Associates Limited............................................... 5.00% 5.00%
Vistas De San Juan Associates Limited Partnership................................. 1.00% 1.00%
Vistula Heritage Village.......................................................... 5.00% 5.00%
Waico Apartments Associates Limited Partnership................................... 5.00% 5.00%
Waico Phase II Associates Limited Partnership..................................... 4.00% 4.00%
Waipahu Associates................................................................ 5.00% 5.00%
Walden Oaks Associates Limited Partnership........................................ 5.00% 5.00%
Walmsley Terrace Associates Limited Partnership................................... 6.00% 6.00%
Walnut Hills Associates Limited................................................... 5.00% 5.00%
Wash-West Properties.............................................................. 5.00% 5.00%
Washington Chinatown Associates Limited Partnership............................... 8.13% 8.13%
Washington Manor Limited Partnership.............................................. 5.79% 5.79%
Washington Northgate Associates................................................... 1.00% 1.00%
Washington Westgate Associates.................................................... 6.83% 6.83%
Waterman Limited Partnership...................................................... 17.05% 17.05%
Waters Towers Associates Limited Partnership...................................... 5.00% 5.00%
West Lake Arms Limited Partnership................................................ 1.00% 1.00%
Westgate Apartments............................................................... 2.00% 2.00%
Westminister Limited Partnership.................................................. 5.00% 5.00%
Whitefield Place Limited Partnership.............................................. 5.00% 5.00%
Wigar, Limited.................................................................... 5.90% 5.90%
Windsor Crossing Limited Partnership SFJV*........................................ 100.00% 100.00%
Wollaston Manor Associates........................................................ 1.00% 1.00%
Woodcrest Apartments Limited Partnership.......................................... 6.00% 6.00%
Woodmark Limited Partnership...................................................... 1.00% 1.00%
Woodside Village.................................................................. 1.00% 1.00%
Woodside Villas Of Arcadia Limited................................................ 5.00% 5.00%
Worcester Episcopal Housing Company............................................... 5.00% 5.00%
Wyntre Brook Associates........................................................... 1.00% 1.00%
Yadkin Associates Limited Partnership............................................. 5.00% 5.00%
</TABLE>
* Majority-Owned Partnership
20. SUBSEQUENT EVENT (UNAUDITED)
On July 29, 1997, the Company confirmed its intention to sell its
interests in approximately 65 individual real estate partnerships
(collectively, the "Hall Portfolio") to other partners within the
partnerships who are unaffiliated with the Company. The aggregate
sale price for the Company's interests in the Hall Portfolio is
$4,250,000, with no future recourse to the Company. The sale is
subject to customary closing conditions and is expected to be completed
by the end of 1997, although there can be no assurance that the sale
will ultimately close. In the opinion of management, the sale of the
Hall Portfolio will not have an adverse effect on the financial position
of the Company.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
NHP Southwest Partners, L.P.:
We have audited the accompanying balance sheets of NHP Southwest Partners,
L.P. (a Delaware Limited Partnership) as of December 31, 1996 and 1995 (both
as restated - see Note 3), and the related statements of operations, changes
in partners' capital (deficit), and cash flows for the year ended December
31, 1996, and for the period from January 20, 1995 (date of inception)
through December 31, 1995 (both as restated - see Note 3). These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's 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 NHP Southwest Partners, L.P. as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for the year ended December 31, 1996, and for the period from January 20,
1995 (date of inception), through December 31, 1995, in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Washington, D.C.,
April 11, 1997 (except with
respect to the matters discussed in
Note 7 and Note 3 as to which the dates are
June 3, 1997 and October 21, 1997, respectively)
<PAGE>
NHP SOUTHWEST PARTNERS, L.P.
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995 (BOTH AS RESTATED)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................ $ 75,891 $ 495,968
Due from New LPs................................................. 826,741 272,862
Investment in real estate limited partnerships................... 6,632,441 15,468,400
----------- -----------
Total assets................................................. $ 7,535,073 $16,237,230
----------- -----------
----------- -----------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Related-Party Note, net of discount of $3,423,603 and $4,297,715. $ 8,320,453 $ 7,446,341
Accounts payable and accrued interest............................ 970,645 124,107
Partners' capital (deficit)...................................... (1,756,025) 8,666,782
----------- -----------
Total liabilities and partners' capital (deficit)............ $ 7,535,073 $16,237,230
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
NHP SOUTHWEST PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996, AND
FOR THE PERIOD FROM JANUARY 20, 1995 (DATE OF INCEPTION),
THROUGH DECEMBER 31, 1995 (BOTH AS RESTATED)
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
Equity in losses of real estate limited partnerships............. $ (8,462,222) $ (4,194,139)
Interest income from New LPs..................................... 69,696 15,772
-------------- -------------
(8,392,526) (4,178,367)
-------------- -------------
Expenses:
Purchase of management contracts............................. -- 6,645,072
Interest on Related-Party Note............................... 1,936,545 1,425,999
Other........................................................ 21,716 98,248
-------------- -------------
1,958,261 8,169,319
-------------- -------------
Net loss................................................... $ (10,350,787) $ (12,347,686)
-------------- -------------
-------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NHP SOUTHWEST PARTNERS, L.P.
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1996, AND
FOR THE PERIOD FROM JANUARY 20, 1995 (DATE OF INCEPTION),
THROUGH DECEMBER 31, 1995 (BOTH AS RESTATED)
<TABLE>
<CAPTION>
ALBUQUERQUE ALBUQUERQUE
NHP-HG WHALER 95- NHP-HG WHALER 95-
TEN, INC. EJV CORP. TEN, L.P. HJV L.P.
(.5% GP) (.5% GP) (49.5% LP) (49.5% LP) TOTAL
---------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Initial capital contribution............. $ 108,402 $ 108,402 $ 10,731,799 $ 10,731,799 $ 21,680,402
Net loss............................. (61,738) (61,738) (6,112,105) (6,112,105) (12,347,686)
Distributions........................ (8,980) (8,980) (323,987) (323,987) (665,934)
---------- ------------ ------------- ------------- -------------
Balance, December 31, 1995............... 37,684 37,684 4,295,707 4,295,707 8,666,782
Net loss............................. (51,754) (51,754) (5,123,639) (5,123,640) (10,350,787)
Distributions........................ (1,801) (1,801) (68,418) -- (72,020)
---------- ------------ ------------- ------------- -------------
Balance, December 31, 1996............... $ (15,871) $ (15,871) $ (896,350) $ (827,933) $ (1,756,025)
---------- ------------ ------------- ------------- -------------
---------- ------------ ------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NHP SOUTHWEST PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996, AND
FOR THE PERIOD FROM JANUARY 20, 1995 (DATE OF INCEPTION),
THROUGH DECEMBER 31, 1995 (BOTH AS RESTATED)
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss..................................................... $(10,350,787) $(12,347,686)
Adjustments to reconcile net loss to net cash used in
operating activities--
Amortization of discount on Hall note...................... 874,112 801,269
Equity in losses of real estate limited partnerships....... 8,462,222 4,194,139
Purchase of management contracts........................... -- 6,645,072
Change in accounts payable and accrued interest............ 846,538 124,107
------------ ------------
Net cash used in operating activities.................... (167,915) (583,099)
------------ ------------
Cash flows from investing activities:
Initial investment in real estate limited partnerships....... -- (21,680,402)
Change in due from New LPs................................... (553,879) (272,862)
Distributions received from real estate limited
partnerships............................................... 373,737 2,017,863
------------ ------------
Net cash used in investing activities.................... (180,142) (19,935,401)
------------ ------------
Cash flows from financing activities:
Capital contributions........................................ -- 21,680,402
Distributions to partners.................................... (72,020) (665,934)
------------ ------------
Net cash (used in) provided by financing activities...... (72,020) 21,014,468
------------ ------------
Net (decrease) increase in cash and cash equivalents........... (420,077) 495,968
Cash and cash equivalents, beginning of period................. 495,968 --
------------ ------------
Cash and cash equivalents, end of period....................... $ 75,891 $ 495,968
------------ ------------
------------ ------------
Supplemental information:
Cash paid for interest....................................... $ 212,955 $ 577,274
------------ ------------
------------ ------------
Supplemental schedule of noncash financing activities:
Financing for purchase of management contracts............... $ -- $ 6,645,072
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NHP SOUTHWEST PARTNERS , L.P.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
1. ORGANIZATION:
NHP Southwest Partners, L.P. (the "Partnership") was organized on January 20,
1995 (date of inception), pursuant to the laws of the state of Delaware, for
the sole purpose of investing in real estate by acquiring and holding a
limited partnership interest in various limited partnerships. The Partnership
was organized in conjunction with the formation of 32 other limited
partnerships (collectively, the "New LPs"). The Partnership is a 79 percent
limited partner in each New LP (Note 3). The Limited Partnership Agreement of
NHP Southwest Partners, L.P., (the "Partnership Agreement") stipulates that
the term of the Partnership will continue until December 31, 2044, unless
terminated at an earlier date, in accordance with the provisions of the
Partnership Agreement.
Albuquerque Whaler 95-EJV Corporation and NHP-HG Ten, Inc., are the general
partners of the Partnership. The general partners have equal and exclusive
authority to make partnership decisions. At inception, the general partners
each made capital contributions of $108,402, which represents a 0.5 percent
interest, respectively, in the Partnership. The Partnership's limited
partners are Albuquerque Whaler 95-HJV Limited Partnership and NHP-HG Ten,
L.P., who contributed $10,731,799 each for a 49.5 percent ownership interest,
respectively, in the Partnership. NHP-HG Ten, Inc. and NHP-HG Ten L.P. are
wholly owned subsidiaries of NHP Partners, Inc.
The Partnership derives all of its cash flow from distributions made by the
New LPs, who in turn receive distributions from their real estate
investments. As more fully described in Note 3, such investments incurred
significant losses in 1995 and 1996. Furthermore, as discussed in Note 4, in
March 1996, the Partnership failed to make the interest payment required under
the terms of the Related-Party Note. This failure constitutes a non-major
interest payment default, as defined. The ability of the Partnership to
continue as a going concern and meet its obligations will be impacted by the
ability of the New LPs to continue making cash distributions to the
Partnership. Management believes that cash flows from New LP distributions
will be sufficient to allow the Partnership to continue to fulfill its
obligations and continue as a going concern.
2. SIGNIFICANT ACCOUNTING POLICIES:
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.
<PAGE>
BASIS OF ACCOUNTING
The Partnership maintains its books on an accrual basis for financial
statement and Federal income tax purposes.
INVESTMENT IN REAL ESTATE LIMITED PARTNERSHIPS
The Partnerships' investments in the New LPs are accounted for using the
equity method of accounting.
INCOME TAXES
The Partnership is not a tax paying entity and, accordingly, no provision
has been recorded for Federal or state income tax purposes. The partners are
individually responsible for reporting their share of the Partnership's taxable
income on their income tax returns. In the event of an examination of the
Partnership's tax return by the Internal Revenue Service, the tax liability of
the partners could be changed if an adjustment in the Partnership's income is
ultimately sustained by the tax authorities.
Certain transactions of the Partnership may be subject to accounting methods
for income tax purposes that differ from the accounting methods used in
preparing these financial statements in accordance with generally accepted
accounting principles. Accordingly, the net income or loss of the Partnership
and the resulting balances in the partners' capital accounts reported for income
tax purposes may differ from the balances reported for those same items in these
financial statements.
REVIEW FOR ASSET IMPAIRMENT
Management periodically assesses the carrying value of its equity
investments in real estate limited partnerships. Whenever there are recognized
events or changes in circumstances that could affect the carrying amount of the
real estate, management reviews the assets for possible impairment.
In accordance with generally accepted accounting principles, management uses
estimated expected future net cash flows (undiscounted, including expected
sales price and excluding interest costs) to measure the recoverability of
investments in real estate limited partnerships. The estimation of expected
future net cash flows is inherently uncertain and relies to a considerable
extent on assumptions regarding current and future economic and market
conditions, the expected property improvements, and the ability to attract
and retain new tenants.
RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform with the 1996
presentation.
<PAGE>
3. INVESTMENT IN REAL ESTATE LIMITED PARTNERSHIPS:
The Partnership has a 79 percent limited partnership interest in the New
LPs, which were organized effective January 20, 1995, for the sole purpose of
investing in real estate.
The New LPs' general partners are NHP-HG Eleven, Inc. (an affiliate of NHP,
Partners, Inc.) and Albuquerque Whaler 95-NLP Corporation, each with a 0.5
percent interest in each New LP. The New LPs' limited partners are NHP
Southwest Partners, L.P., Albuquerque Whaler 95-PLP Limited Partnership, and
a third limited partner affiliated with Hall Financial Group, which is unique
to each New LP, with 79, 0 and 20 percent ownership interests in each New LP,
respectively.
The New LPs were organized for the purpose of investing in real estate
through holdings in other affiliated limited partnerships (collectively, the
"Borrowers") that own real estate.
Each New LP has a 99 percent limited partnership interest in one of the
Borrowers, and each Borrower owns a multifamily apartment complex. The New
LPs' initial investments in the Borrowers were recorded at an amount equal to
their capital contributions to the Borrowers. The New LPs' investments in the
Borrowers are accounted for using the equity method. In addition, as part of
the acquisition, the Partnership incurred costs to purchase the management
contracts in place at the date of acquisition and secure the right to appoint
the property manager for the real estate owned by the Borrowers. The
Partnership believed that control over the appointment of property manager
was required in order to enhance the properties' profitability and maximize
the Partnership's return on its investment. The investment was recorded at an
amount equal to the discounted value of the Related-Party Note (Note 4)
issued as consideration for the purchase of the contracts ($6,645,072). This
cost was originally reported by the Partnership on the balance sheet as an
investment in real estate partnerships and amortized over 70 months, the then
expected holding period of the investments. The financial statements have
been restated to report this cost as a period expense in 1995, which is
reflected as purchase of management contracts in the 1995 statement of
operations. In addition, the 1996 amortization of the investment, previously
recorded as equity in losses of real estate limited partnerships, has also
been eliminated in the restated 1996 statement of operations. The effect of
the restatement was to (decrease) increase the net loss by $(1,139,155) and
$5,600,846 in 1996 and 1995, respectively.
Summarized combined condensed financial information for the New LPs and the
Borrowers as of December 31, 1996 and 1995, and for the year ended December
31, 1996, and for the period from January 20, 1995 (date of inception),
through December 31, 1995, is as follows:
<PAGE>
NEW LPS
SUMMARIZED COMBINED CONDENSED BALANCE SHEETS
AS OF DECEMBER 31,
--------------------------
1996 1995
----------- -----------
Investments in real estate partnerships........ $60,326,268 $71,290,336
Other assets................................... 202,927 257,928
----------- -----------
Total assets............................... $60,529,195 $71,548,264
----------- -----------
----------- -----------
Note payable................................... $17,951,495 $17,289,778
Other liabilities.............................. 1,109,362 555,068
----------- -----------
Total liabilities.......................... 19,060,857 17,844,846
Partners' capital.............................. 41,468,338 53,703,418
----------- -----------
Total liabilities and partners' capital.... $60,529,195 $71,548,264
----------- -----------
----------- -----------
NEW LPS
SUMMARIZED COMBINED CONDENSED STATEMENTS OF OPERATIONS
1996 1995
------------- -------------
Equity in loss of limited partnerships...... $ (7,601,933) $ (2,689,889)
------------- -------------
Total revenue......................... (7,601,933) (2,689,889)
------------- -------------
Interest expense............................ 2,716,150 2,375,474
Other expenses.............................. 418,227 218,564
------------- -------------
3,134,377 2,594,038
------------- -------------
Net loss.............................. $ (10,736,310) $ (5,283,927)
------------- -------------
------------- -------------
BORROWERS
SUMMARIZED COMBINED CONDENSED BALANCE SHEETS
AS OF DECEMBER 31,
------------------------------
1996 1995
-------------- --------------
Rental property, net....................... $ 218,955,941 $ 228,027,812
Other assets............................... 15,364,441 17,922,065
-------------- --------------
Total assets......................... $ 234,320,382 $ 245,949,877
-------------- --------------
-------------- --------------
Mortgage note payable...................... $ 166,997,173 $ 166,714,244
Other liabilities.......................... 6,603,428 7,218,365
-------------- --------------
Total liabilities.................... 173,600,601 173,932,609
Partners' capital.......................... 60,719,781 72,017,268
-------------- --------------
Total liabilities and
partners' capital................. $ 234,320,382 $ 245,949,877
-------------- --------------
-------------- --------------
<PAGE>
BORROWERS
SUMMARIZED COMBINED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
Net rental revenue............................................. $ 42,927,992 $ 37,482,063
Other revenue.................................................. 2,179,437 1,998,493
-------------- -------------
Total revenue............................................ 45,107,429 39,480,556
-------------- -------------
General and administrative expenses............................ 7,001,487 5,792,360
Utilities expense.............................................. 4,627,719 3,676,905
Operating and maintenance expenses............................. 9,088,323 7,990,090
Taxes and insurance............................................ 5,652,374 4,581,205
Interest on mortgage notes payable............................. 16,733,178 15,290,414
Depreciation and amortization.................................. 9,905,741 4,866,639
-------------- -------------
Total expenses........................................... 53,008,822 42,197,613
-------------- -------------
Net loss....................................................... $ (7,901,393) $ (2,717,057)
-------------- -------------
-------------- -------------
</TABLE>
A summary of the Partnership's investments in the New LPs is as follows:
1996 1995
(Restated) (Restated)
------------- -------------
Beginning balance........................... $ 15,468,400 $ --
Initial investment in New LPs............. -- 21,680,402
Distributions from New LPs................ (373,737) (2,017,863)
Equity in loss of New LPs................. (8,462,222) (4,194,139)
------------- ------------
Ending balance.............................. $ 6,632,441 $ 15,468,400
------------- ------------
------------- ------------
4. RELATED-PARTY NOTE:
The Related-Party Note represents a note payable to Hall Financial Group,
Inc. (the "Payee"), which is affiliated with one of the Partnership's limited
partners, Albuquerque Whaler 95-HJV Limited Partnership. Payments of interest
only are payable monthly at an interest rate of 6 percent per annum,
compounded monthly. In the event of a non-major interest payment default, as
defined, interest accrues at a rate of 9 percent per annum. Interest payments
made by the Partnership amounted to $212,955 and $577,274 for the year ended
December 31, 1996, and for the period from January 20, 1995, (date of debt
origination) through December 31,1995, respectively. No principal payments
are required on the Related-Party Note until its maturity date on December
10, 2000.
In March 1996, the Partnership failed to make the interest payment required
under the terms of the Related-Party Note. This failure constitutes a
non-major interest payment default, as defined. Accordingly, interest on the
Related-Party Note began accruing at the rate of 9 percent per annum as of
the date of the default. The Payee has no other rights or remedies as a
result of this non-major interest payment default.
<PAGE>
The Related-Party Note has been discounted for financial reporting purposes
because the contractual interest rate of 6 percent per annum is below a
market interest rate. The face value of the Related-Party Note is
$11,744,056. The book value of the Related-Party Note at its origination date
was $6,645,072, using an estimated market rate of 15 percent per annum at the
origination date of the Related-Party Note. To account for this difference in
interest rates, a discount of $5,098,984 was recorded. The discount is being
amortized into interest expense over the life of the loan using the effective
interest method. Amortization of the discount was $874,112 and $801,269 for
the year ended December 31, 1996, and for the period ended December 31, 1995,
respectively.
The Related-Party Note is secured by the Partnership's interest in the New
LPs and the interests of the general partners in the New LPs, in accordance with
the Pledge and Security Agreement dated February 8, 1995. Under separate
agreements, the Partnership's interest and the interests of the general partners
in the New LPs have been pledged to secure the New LPs' obligations to make
interest payments to their preferred A limited partner and distributions to
their preferred B limited partner.
5. RELATED-PARTY TRANSACTIONS AND COMPENSATION TO PARTNERS:
GENERAL AND ADMINISTRATIVE SERVICES
NHPMC is the project management agent for the Borrowers. The management
agreement has a primary term which expires November 7, 2000, and thereafter can
be extended on an annual basis under certain conditions. As of December 31, 1996
certain stockholders owning approximately 60 percent of the voting common stock
of NHP Incorporated also own the entities which are general and limited partners
of the Partnership.
During 1996 and 1995, personnel working at the Properties were employees of
NHP Incorporated, and therefore the Property reimbursed NHP Incorporated for the
actual salaries and related benefits totaling $4,245,949 and $3,458,934 in 1996
and 1995, respectively, as reflected in the Borrowers' combined financial
statements. At December 31, 1996 and 1995, trade payables include $231,348 and
$40,382, respectively, due to NHP Incorporated.
During 1996 and 1995, NHPMC received aggregate fees of $1,762,457 and
$1,399,190, respectively, for its services as management agent equal to 4
percent of the Properties rental collections. In addition, NHPMC and other
affiliates of NHP Incorporated received $331,484 and $453,872, respectively, as
of December 31, 1996 and 1995, for other services provided to the Properties.
During 1996 and 1995, NHP Partners, Inc., which wholly owns NHP-HG Ten, Inc.
received $8,482 and $0, respectively, relating to direct administrative
costs, financial and tax reporting and loans and partnership agreement
compliance.
DISTRIBUTIONS TO PARTNERS
Distributions of Partnership Receipts, as defined in the Partnership
Agreement, are made to the partners in proportion to their respective
ownership interests in the Partnership, monthly (if available), subject to a
certain order of priorities, as defined in the Partnership Agreement. Net
income is allocated among all partners first, to the extent of any current or
prior period loss allocations or distributions in excess of current or prior
period net profit allocations and second, in proportion to each Partner's
ownership interest. Net losses are allocated to the Partners in proportion to
their ownership interests.
<PAGE>
SPECIAL DISTRIBUTION
Upon mutual consent of the Partnership's partners, a distribution in the
amount of approximately $676,965 was made to the Partnership in June 1995
outside of the distribution method required under the New LPs' partnership
agreements. The funds for this distribution originated from the sale of a hedge
instrument by the Borrowers. Each Borrower distributed funds received related to
this sale to their respective New LPs, who in turn distributed the funds to the
Partnership. The Partnership in turn distributed approximately $646,000 of these
funds to its limited partners.
DUE FROM NEW LPS
Due from New LPs represents various advances to New LPs. These advances arise
when cash is needed to fund operating deficits and certain distributions
required by the New LPs. Principal and interest payments on these advances
are due monthly at an interest rate of 10 percent per annum, compounded
monthly. Of these amounts, $50,176 advanced in 1996 represents NPF Priority
Funds (as defined in the Partnership Agreement) which have certain repayment
priorities over other advances and over other distributions. Interest
payments received by the Partnership amounted to $21,403 and $7,038 for the
year ended December 31, 1996, and for the period from January 20, 1995 (date
of inception), through December 31, 1995, respectively.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS:
In accordance with the requirements of SFAS No. 107, "Disclosure About Fair
Value of Financial Instruments," the Partnership must disclose the fair value of
its financial instruments as of December 31, 1996 and 1995. In the opinion of
management, with the exception of the Hall Note, the fair value of the
Partnership's financial instruments is not materially different from the
carrying amounts shown in the accompanying financial statements. Due to the
occurrence of a non-major default on the Related-Party Note, it is not
practicable to estimate the fair value of the Related-Party Note.
7. SUBSEQUENT EVENT:
On June 3, 1997, NHP Partners, Inc. was acquired by Apartment Investment and
Management Company ("AIMCO"), a real estate investment trust whose shares are
traded on the New York Stock Exchange.
