Exhibit 99.1

Uptown Housing Partners, LP

Financial Statements

December 31, 2012

Contents
Independent Auditor's Report	1
Financial Statements
Balance Sheets	2
Statements of Operations	3
Statements of Partners' Equity (Deficit)	4
Statements of Cash Flows	5
Notes to Financial Statements	6-12

Independent Auditor's Report

General and Limited Partners

Uptown Housing Partners, LP

Cleveland, Ohio

Report on the Financial Statements

We have audited the accompanying financial statements of Uptown Housing Partners, LP (“the Partnership”) which comprise the balance sheets as of December 31, 2012 and 2011, and the related statements of operations, partners’ equity (deficit) and cash flows for each of the three years in the period ended December 31, 2012 and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Partnership’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Uptown Housing Partners, LP as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, 2011 and 2010 in accordance with accounting principles generally accepted in the United States of America.

/s/ McGladrey LLP

Cleveland, Ohio

March 27, 2013

1

Member of the RSM International network of independent accounting, tax and consulting firms.

Uptown Housing Partners, LP
Balance Sheets
	December 31,
	2012			2011
Assets
Real Estate
Building and improvements	$	161,849,008		$	161,816,255
Leasehold improvements	8,595,809			8,595,809
Furniture and fixtures	11,368,592			11,368,592
Total	181,813,409			181,780,656
Less accumulated depreciation	(24,187,587		)	(18,889,315		)
Net real estate	157,625,822			162,891,341
Cash and cash equivalents	2,343,521			2,320,626
Accounts receivable	136,304			82,768
Prepaid expenses	950,640			912,944
Mortgage procurement costs, net	1,452,527			1,490,921
Lease procurement costs, net	113,631			136,357
Total assets	$	162,622,445		$	167,834,957
Liabilities and Partners' Equity (Deficit)
Mortgage note payable, net	$	141,007,609		$	140,911,290
Loan payable	17,720,596			16,502,368
Accounts payable and accrued expenses	6,700,494			5,535,010
Accrued interest	2,535,111			2,535,111
Deferred rental revenue	126,747			122,768
Security deposits	355,740			308,176
Total liabilities	168,446,297			165,914,723
Partners' Equity (Deficit)	(5,823,852		)	1,920,234
Total liabilities and partners' equity (deficit)	$	162,622,445		$	167,834,957
See Notes to Financial Statements.

2

Uptown Housing Partners, LP
Statements of Operations
	Years Ended December 31,
	2012			2011			2010
Revenues
Revenue from real estate operations	$	11,376,224		$	10,398,012		$	9,695,998
Other revenue	709,232			642,220			571,038
Total revenues	12,085,456			11,040,232			10,267,036
Operating Expenses
Depreciation and amortization	5,425,319			5,428,751			5,423,396
Administrative expenses	1,041,647			1,193,554			1,610,553
Utilities expenses	461,123			628,781			577,978
Operating and maintenance expenses	1,520,325			1,683,944			1,403,034
Real estate taxes	1,774,013			1,752,193			1,844,853
Other taxes and insurance	1,047,739			919,908			1,056,750
Management fees	356,043			330,985			302,992
Total operating expenses	11,626,209			11,938,116			12,219,556
Operating income (loss)	459,247			(897,884		)	(1,952,520		)
Other Expenses
Interest expense	10,964,939			10,930,770			6,277,911
Amortization of mortgage procurement costs	38,394			38,394			38,394
Net loss	$	(10,544,086	)	$	(11,867,048	)	$	(8,268,825	)
See Notes to Financial Statements.

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Uptown Housing Partners, LP
Statements of Partners' Equity (Deficit)
			2012
	Ownership		Balance								Net			Balance
	Percentage		January 1,			Contributions		Distributions			Loss			December 31,
Uptown Housing Placeholder, LLC	0.01	%	$	—		$	—	$	—		$	—		$	—
Uptown Apartments, LLC	99.99		1,920,234			2,800,000		—			(10,544,086		)	(5,823,852		)
Total	100.00	%	$	1,920,234		$	2,800,000	$	—		$	(10,544,086	)	$	(5,823,852	)
			2011
	Ownership		Balance								Net			Balance
	Percentage		January 1,			Contributions		Distributions			Loss			December 31,
Uptown Housing Placeholder, LLC	0.01	%	$	—		$	—	$	—		$	—		$	—
Uptown Apartments, LLC	99.99		11,137,282			2,650,000		—			(11,867,048		)	1,920,234
Total	100.00	%	$	11,137,282		$	2,650,000	$	—		$	(11,867,048	)	$	1,920,234
			2010
	Ownership		Balance								Net			Balance
	Percentage		January 1,			Contributions		Distributions			Loss			December 31,
Uptown Housing Placeholder, LLC	0.01	%	$	—		$	—	$	—		$	—		$	—
Uptown Apartments, LLC	99.99		(1,597,120		)	22,810,000		(1,806,773		)	(8,268,825		)	11,137,282
Total	100.00	%	$	(1,597,120	)	$	22,810,000	$	(1,806,773	)	$	(8,268,825	)	$	11,137,282
See Notes to Financial Statements.

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Uptown Housing Partners, LP
Statements of Cash Flows
	Years Ended December 31,
	2012			2011			2011
Cash Flows From Operating Activities
Net loss	$	(10,544,086	)	$	(11,867,048	)	$	(8,268,825	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization	5,463,713			5,467,145			5,461,790
Bond discount amortization	96,319			89,732			21,558
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable	(53,536		)	46,006			1,993,278
Prepaid expenses	(37,696		)	11,344			(924,263		)
Increase (decrease) in:
Accounts payable and accrued expenses	1,165,484			862,725			629,206
Deferred rental revenue	3,979			53,175			(25,795		)
Security deposits	47,564			5,257			46,068
Net cash used in operating activities	(3,858,259		)	(5,331,664		)	(1,066,983		)
Cash Flows From Investing Activities
Decrease in restricted cash	—			—			473,801
Capital expenditures	(137,074		)	(252,404		)	(262,822		)
Decrease in construction related payables	—			—			(147,289		)
Net cash provided by (used in) investing activities	(137,074		)	(252,404		)	63,690
Cash Flows From Financing Activities
Proceeds from loan payable	1,218,228			1,625,821			1,739,259
Payment of swap termination settlement	—			—			(19,200,000		)
Contributions from partners	2,800,000			2,650,000			22,810,000
Distributions to partners	—			—			(1,806,773		)
Net cash provided by financing activities	4,018,228			4,275,821			3,542,486
Net increase (decrease) in cash and cash equivalents	22,895			(1,308,247		)	2,539,193
Cash and cash equivalents
Beginning of year	2,320,626			3,628,873			1,089,680
Ending of year	$	2,343,521		$	2,320,626		$	3,628,873
Supplemental Disclosure of Cash Flow Information -
Cash paid during the year for interest	$	10,085,334		$	10,057,778		$	3,116,618
Supplemental Disclosure of Noncash Transactions -
Write-off of fully depreciated building components	$	104,321		$	73,969		$	43,305
Change in fair value of swap contract	$	—		$	—		$	(6,896,000	)
Write-off of fully amortized mortgage procurement costs	$	—		$	—		$	800,000
See Notes to Financial Statements.

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Uptown Housing Partners, LP

Notes to Financial Statements

December 31, 2012, 2011 and 2010

Note 1.    Organization

Uptown Housing Partners, LP (the Partnership) was formed by Uptown Apartments, LLC (Apartments), as General Partner, and Uptown Housing Placeholder, LLC (Placeholder), as Limited Partner, (collectively the Partners) on September 14, 2005 to develop, construct, own and operate a three-building residential housing complex consisting of 665 apartment units, 533 parking spaces, 9,000 square feet of retail space and operation of a 25,000 square foot public park located in Oakland, California (the Project). FC Oakland, Inc. (FC Oakland) and Uptown Partners, LLC are both members of Apartments and Placeholder. The Project is operated under the terms of a Regulatory Agreement and Declaration of Restrictive Covenants (the Agreement) with the Redevelopment Agency (the Agency) of the City of Oakland, California. Under the terms of the Agreement, the Partnership is required to set aside not less than 20% of the units for occupancy by low and moderate income tenants with not less than one half of those units being available for occupancy on a priority basis by “Very Low Income Tenants,” as defined in the Agreement. The term of the Agreement ends on the later of 15 years (September 2024) or when no Multifamily Revenue Bonds (the Bonds) remain outstanding with the Redevelopment Agency of the City of Oakland.

Note 2.    Summary of Significant Accounting Policies

The Partnership

The Partnership is a 50% owned equity method investment of Forest City Enterprises, Inc. (“FCE”), a publicly traded company, and was deemed to be a significant subsidiary of FCE for FCE’s fiscal year ended January 31, 2013. As a result, audited financial statements for the Partnership are required to be filed with the Securities and Exchange Commission in accordance with Rule 3‑09 of Regulation S-X, as of and for the year ended December 31, 2012. FCE’s 50% ownership in the Partnership is through its wholly‑owned subsidiary, FC Oakland. FCE has no ownership interest in the other 50% partner, Uptown Partners, LLC.

The Partnership’s net income or loss and cash flows are allocated in accordance with the terms of the Partnership Agreement.

Basis of Accounting

The financial statements are prepared on the accrual basis of accounting. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) 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.

Real Estate

Real estate is recorded at cost. Depreciation of property is calculated using predominantly the straight-line method over the estimated useful lives of the assets which range from 5 to 50 years. The cost of maintenance and repairs is charged to expense as incurred and significant renewals and asset improvements are capitalized.

Cash and Cash Equivalents

The Partnership considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents. Balances with financial institutions may exceed federally insured limits.

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Uptown Housing Partners, LP

Notes to Financial Statements

December 31, 2012, 2011 and 2010

Note 2.    Summary of Significant Accounting Policies (Continued)

Accounts Receivable

Accounts receivable are uncollateralized tenant obligations. Based upon management’s review of delinquent accounts and assessment of historical evidence of collections, an account is charged against the allowance when deemed uncollectible. The Partnership determined that no allowance for doubtful accounts was necessary at December 31, 2012 and 2011.

Mortgage Procurement Costs

Mortgage procurement costs are being amortized over the life of the related mortgage. Accumulated amortization was $280,651 and $242,257 as of December 31, 2012 and 2011, respectively.

Lease Procurement Costs

Lease procurement costs are being amortized over the terms of the respective leases using the straight-line method. Accumulated amortization was $113,631 and $90,905 as of December 31, 2012 and 2011, respectively.

Impairment of Real Estate

The Partnership reviews long lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Partnership has determined no impairments of the Partnership's property have occurred during the years ended December 31, 2012, 2011 or 2010.

Income Taxes

No provision has been made for federal and state income taxes since these taxes are the responsibility of the partners.  Tax returns filed by the Partnership and the amount of allocable profit or losses are subject to examination by federal and state taxing authorities for years ended after December 31, 2008.  The tax liability of the partners could be modified if such an examination results in changes to the Partnership’s profits or losses. 

The Financial Accounting Standards Board (FASB) has provided guidance for how uncertain tax positions should be recognized, measured, disclosed and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the entity’s tax returns to determine whether the tax positions are more-likely-than-not to be sustained when challenged or when examined by the applicable taxing authority. No liabilities for uncertain tax positions were required to be recorded as of December 31, 2012 and 2011.

Recognition of Revenue

Revenue is principally derived from one year or shorter termed operating leases on apartment units. Accordingly, rental revenue is recognized in accordance with the tenant’s lease terms.

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Uptown Housing Partners, LP

Notes to Financial Statements

December 31, 2012, 2011 and 2010

Note 2.    Summary of Significant Accounting Policies (Continued)

Fair Value of Financial Instruments

GAAP provides guidance for using fair value to measure assets and liabilities, defines a fair value hierarchy, establishes a framework based on valuation inputs for measuring fair value, and expands disclosures about fair value measurements. For assets and liabilities that are measured using quoted prices in active markets (Level 1), total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs, discounts or blockage factors. Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities (Level 2), adjusted for contract restrictions and other terms specific to that asset or liability; for these items, a significant portion of fair value is derived by reference to quoted prices of similar assets or liabilities in active markets. For all remaining assets and liabilities, fair value is derived using other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques (Level 3), and not based on market exchange, dealer, or broker traded transactions. These valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

The Partnership is required to disclose fair value information about financial instruments, whether or not recognized on the balance sheet. Because certain financial instruments and all non-financial instruments are excluded from being recognized at fair value, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Partnership. The Partnership’s management believes that the carrying value of its assets (exclusive of rental property) and current liabilities approximates fair value due to the relatively short maturity of these instruments. In an effort to revitalize the area surrounding the Project, the Agency provided a loan payable arrangement with favorable terms to incentivize the Partnership to develop the Project. The Partnership’s management believes the loan payable arrangement with the Agency would not be available at comparable terms from a traditional lender. As a result, management believes the fair value of the loan payable arrangement would be significantly less than the carrying value based upon currently available terms from a traditional lender. The fair value of the Partnership’s mortgage note is discussed in Note 3.

Derivative Instrument and Hedging Activities

The Partnership was a party to one derivative transaction subject to accounting guidance on derivative instruments and hedging activities. In October 2005, the Partnership entered into a total rate of return swap (TRS), which terminated upon expiration in September 2010, with a notional amount of $160,000,000 on its tax-exempt fixed-rate borrowings (the Bonds). The Partnership designated the TRS as a hedge of fair value of a recognized asset or liability (fair value hedge). The Partnership discontinued hedge accounting in September 2010 upon termination of the interest rate swap agreement and paid a swap termination settlement of $19,200,000 (Note 3). Upon the termination of the swap, the Bonds are no longer adjusted to fair value and the adjustment in effect on the termination date of $19,200,000 is reflected as an adjustment to the carrying amount of the Bonds and is amortized into earnings over the remaining life of the Bonds using the effective interest rate method. During the years ended December 31, 2012, 2011 and 2010, amortization of the bond discount was $96,319, $89,732 and $21,558, respectively, and is included in interest expense.

Subsequent Events

The Partnership has evaluated subsequent events for potential recognition and/or disclosure through March 27, 2013, the date the financial statements were available to be issued. No events have occurred subsequent to December 31, 2012 that require adjustments to or disclosure in the financial statements.

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Uptown Housing Partners, LP

Notes to Financial Statements

December 31, 2012, 2011 and 2010

Note 3.    Mortgage Note Payable

In October 2005, the Agency issued $160,000,000 of Redevelopment Agency of the City of Oakland Multifamily Revenue Bonds (Uptown Apartment Projects), 2005 Series A (the Bonds) to provide financing for the cost of acquiring, constructing and equipping the Project. Pursuant to the Loan Agreement between the City of Oakland, Wells Fargo Bank National Association (the Trustee) and the Partnership, the Agency agreed to fund a mortgage note with the Partnership from the proceeds of the Bonds. The note was assigned to the Trustee to secure payment of the Bonds. The terms of the mortgage note and the Bonds are the same and are as follows:

	2012			2011
Principal balance	$	160,000,000		$	160,000,000
Unamortized bond discount	(18,992,391		)	(19,088,710		)
Balance at December 31	$	141,007,609		$	140,911,290

Interest expense for the years ended December 31, 2012, 2011 and 2010 was $10,181,653, $10,147,510 and $5,097,053, respectively.

The Loan Agreement specifies that the Partnership is required to make payments under the mortgage note payable in such amounts and at such times as are sufficient to pay all amounts required to pay principal, interest and any other amounts due on the Bonds. The Bonds are interest only, payable semi‑annually on April 1 and October 1, at the fixed rate of 6.2% on $160,000,000 per annum and mature in October 2050.

In accordance with GAAP, the Partnership is required to disclose the fair value of financial instruments, whether or not recognized on the balance sheet. The estimated fair value of the Partnership’s mortgage note was $157,920,000 and $146,832,000 as of December 31, 2012 and 2011, respectively, and was determined using bond pricing models and bond yield quotes for similar instruments and maturities as the mortgage note, which are primarily Level 3 inputs.

In October 2005, the Partnership entered into a total rate of return interest rate swap agreement with Merrill Lynch Capital Services (MLCS) based upon a notional amount of $160,000,000. MLCS later merged with the Bank of America Corporation (BAC) and the terms of the agreement transferred to BAC as originally stated. Under the terms of the agreement, MLCS owed a fixed interest rate of 6.2% (the fixed rate) to the Partnership. The Partnership owed the Securities Industry and Financial Markets Association (SIFMA) Index Rate, plus a spread of .65% per annum through May 1, 2009 and then .55% per annum until October 2009 (the variable rate). The agreement was amended in August 2009 to extend the agreement until September 2010 and to change the spread to 1.5% effective October 2009. The Partnership remitted to or received from MLCS the difference between the fixed rate and the variable rate. The Partnership did not renew the TRS upon expiration in September 2010.

Certain affiliates of the Partnership are required to maintain cash collateral deposits and provide a guarantee in accordance with various agreements. As of December 31, 2012 and 2011, cash collateral of $2,803,850 and $2,802,615, respectively, was provided by FC Oakland and a guarantee of $25,200,000, was provided by Uptown Partners, LLC for 2012 and 2011. The cash collateral is recorded in the financial statements of FC Oakland. The Partnership incurs an annual fee of 2% of the outstanding dollar amount of the cash collateral deposits and guarantees. During the years ended December 31, 2012, 2011 and 2010, the Partnership incurred guarantee fees of $561,534, $559,861 and $1,002,692, respectively, which were included in interest expense. At December 31, 2012 and 2011, $3,073,861and $2,512,327, respectively, of guarantee fees were included in accounts payable and accrued expenses.

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Uptown Housing Partners, LP

Notes to Financial Statements

December 31, 2012, 2011 and 2010

Note 3.    Mortgage Note Payable (Continued)

The liability of the Partnership under the mortgage note is limited to the underlying value of the buildings, improvements, personal property and amounts deposited with the Trustee. The Bonds are secured by a first mortgage on the property, an assignment of rents and leases, service contracts, warranties and guarantees, an assignment of the management agreement, and an environmental compliance and indemnification agreement.

Note 4.     Fair Value Measurements

The accounting guidance related to estimating fair value specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (also referred to as observable inputs). The following summarizes the fair value hierarchy:

Level 1 – Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant observable inputs are available, either directly or indirectly such as interest rates and yield curves that are observable at commonly quoted intervals; and

Level 3 – Prices or valuations that require inputs that are unobservable

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Partnership’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Partnership’s financial assets and liabilities subject to fair value measurements in 2010 were the TRS and borrowings subject to the TRS. The Partnership did not have any financial assets and liabilities subject to fair value measurements in 2012 and 2011.

To determine the fair value of the underlying Bonds subject to the TRS, the base price is initially used as the estimate of fair value. The Partnership adjusted the base price based upon observable and unobservable measures, such as the financial performance of the underlying collateral, interest rate risk spreads for similar transactions and loan to value ratios. In the absence of such evidence, management’s best estimate is used.

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Uptown Housing Partners, LP

Notes to Financial Statements

December 31, 2012, 2011 and 2010

Note 4.     Fair Value Measurements (Continued)

The table below presents a reconciliation of all financial assets and liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) during the year ended December 31, 2010.

				Fair Value
	Net			Adjustment to the			Total TRS
	TRS			Underlying Bonds			Related		Total
Balance, January 1, 2010	$	(26,096,000	)	$	26,096,000		$	—	$	—
Total realized and unrealized
gains (losses) (A)	6,896,000			(6,896,000		)	—		—
Settlements	19,200,000			—			—		19,200,000
Other (B)	—			(19,200,000		)	—		(19,200,000		)
Balance, December 31, 2010	$	—		$	—		$	—	$	—
(A) The realized and unrealized gains (losses) on the TRS and the underlying Bonds are reported in
other revenue and exactly offset for the year ended December 31, 2010.
(B) Upon termination of the swap agreement in September 2010, the Bonds are no longer adjusted to
fair value and are recorded at their outstanding balance net of discount (Note 2).

Note 5.    Loan Payable

In accordance with the Lease Disposition and Development Agreement and Ground Lease Agreement with the Agency, for the purpose of providing additional financing for the Project, the Agency has committed $24,415,000 (Total Repayment Amount) of financing for the Project. The Total Repayment Amount is comprised of a $12,920,000 loan and a maximum of $11,495,000 of tax increment financing (TIF) assistance. The TIF assistance is derived from tax increments resulting from property taxes or possessory interest taxes assessed against the properties or improvements during the increment pledge term (the Pledge Term). The Pledge Term begins on the first day of the fiscal tax year 2007-2008 and ends at the earlier of June 2020 or the date on which the Agency ceases to generate tax increments for debt repayment.

The loan and TIF assistance are unsecured, non-interest bearing and payable in annual installments commencing April 2016, as defined in the Ground Lease Agreement. Any remaining outstanding balance of the Total Repayment Amount is due in full in April 2034. As of December 31, 2012 and 2011, the Agency has made loan advances of $12,920,000 and TIF advances of $4,800,596 and $3,582,368, respectively.

Note 6.    Ground Lease

The Partnership entered into a Ground Lease Agreement with the Agency in October 2005. The initial lease term is for 66 years with an option to extend the term for an additional 33 years. Total lease payments under the agreement, including the renewal period, required to be made will be equal to the Total Repayment Amount (see Note 5) as defined in the Lease Disposition and Development Agreement. No ground lease payments are required under this lease from the lease's inception through April 2016 and for the period from April 2034 through the expiration term of the lease, including the renewal period. Beginning April 2016 and annually thereafter through April 2034, the Partnership shall make annual rent payments, as defined, equal to the lesser of the scheduled annual payment or 75% of the Partnership's net operating income, determined on a cash basis, for the preceding year. Net operating income is defined as gross income less operating expenses, debt service, payments of security deposits received from subtenants, and property taxes and assessments. The scheduled annual payment is determined

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Uptown Housing Partners, LP

Notes to Financial Statements

December 31, 2012, 2011 and 2010

Note 6.    Ground Lease (Continued)

based on the cumulative TIF assistance drawn and the amount of annual payments required as determined by the Agency.

Pursuant to the Ground Lease Agreement, the Partnership has an option to purchase the land at any time during the term of the ground lease. The purchase price varies based upon when the option is exercised. The agreement also allows for the Partnership to have the first right of refusal to purchase the property from the Agency.

Note 7.    Transactions With Affiliates

FC Oakland and Forest City Residential Management, Inc., the managing agent, are affiliated entities through common ownership. In accordance with the terms of the management agreement, project management fees are 3% of gross monthly receipts as defined in the management agreement. Management fees of $356,043, $330,985 and $302,992 were expensed during the years ended 2012, 2011 and 2010, respectively.

An affiliate of Uptown Partners, LLC provides property and casualty insurance to the Partnership. The Partnership incurred insurance expense of $809,267, $711,587 and $813,401 during the years ended 2012, 2011 and 2010, respectively, which was included in other taxes and insurance. As of December 31, 2012 and 2011 $2,886,043 and $2,076,767, respectively, of property and casualty insurance were included in accounts payable and accrued expenses.

As of December 31, 2012 and 2011, payables to affiliated entities, including guarantee fees (Note 3), advances and management fees, in the amount of $3,142,833 and $2,574,596, respectively, were also included in accounts payable and accrued expenses.

Note 8.    Commitments and Contingencies

The Partnership is subject to certain claims and litigation that arise in the normal course of operations. As claims arise, management will assess them and defend the Partnership as appropriate. As of December 31, 2012, management is unaware of any claims or litigation against the Partnership.

Note 9.    Partnership Matters

In accordance with the Second Amended and Restated Operating Agreement of Apartments (Operating Agreement), FC Oakland is responsible for locating a tax credit investor limited partner. The terms of the Operating Agreement also state in the event a tax credit investor limited partner is not located by December 31, 2006, then FC Oakland or an affiliate of FC Oakland is responsible for contributing capital to the Partnership in amounts equal to sixty-five cents per dollar of tax credit and subsequently receive an allocation of substantially all the tax credits. As of December 31, 2012, a tax credit investor had not been found.  The Partnership is impeded from the implementation of these provisions of the Operating Agreement because the manner in which the Partnership is currently structured does not allow FC Oakland to receive an allocation of substantially all of the tax credits.

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