-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PiToxkDST7xDDhfyqqXxoCwBjORudmckzuaUTESPRFzgOX8GL+cEJw6AMCfURVD6 9QReyeqW+hcjMJDowWFHXQ== 0000718915-03-000004.txt : 20030521 0000718915-03-000004.hdr.sgml : 20030521 20030521144158 ACCESSION NUMBER: 0000718915-03-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20030228 FILED AS OF DATE: 20030521 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMBRIDGE RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000718915 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133161322 STATE OF INCORPORATION: MA FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12634 FILM NUMBER: 03714383 BUSINESS ADDRESS: STREET 1: 625 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124215333 MAIL ADDRESS: STREET 1: 625 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON & RELATED HOUSING PROPERTIES LTD PARTNERSHIP DATE OF NAME CHANGE: 19940615 10-K 1 f10k_camr-march.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE - ------ ACT OF 1934 For the fiscal year ended February 28, 2003 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - ------ EXCHANGE ACT OF 1934 Commission File Number 0-12634 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP ---------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 13-3161322 - -------------------------------- --------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 Madison Avenue, New York, New York 10022 - -------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 421-5333 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Initial Limited Partnership Interests ------------------------------------- Title of Class Additional Limited Partnership Interests ---------------------------------------- Title of Class Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No X ----- ----- The approximate aggregate book value of the voting and non-voting common equity held by non-affiliates of the Registrant as of August 31, 2002 was ($28,378,000) based on Limited Partner equity (deficit) as of such date. Registrant's voting and non-voting common equity is not publicly traded. DOCUMENTS INCORPORATED BY REFERENCE None PART I Item 1. Business. General - ------- Cambridge + Related Housing Properties Limited Partnership (the "Partnership") is a limited partnership which was formed under the laws of the Commonwealth of Massachusetts on April 28, 1983. The general partners of the Partnership are Government Assisted Properties, Inc. (the "Assisted General Partner") and Related Housing Programs Corporation (the "Related General Partner"), both of which are Delaware corporations affiliated with an affiliate of The Related Companies, L.P. ("Related"), a New York limited partnership, and Cambridge/Related Housing Associates Limited Partnership ("Cambridge Related Associates"), a Massachusetts limited partnership, (together the "General Partners"). The general partners of Cambridge Related Associates are the Assisted General Partner and the Related General Partner. The General Partners manage and control the affairs of the Partnership. See Item 10, Directors and Executive Officers of the Registrant, below. The Partnership completed its initial public offering (the "Offering") on May 4, 1984. Pursuant to the Offering, the Partnership issued 5,019 Initial Limited Partnership Interests in 1984 and 5,019 Additional Limited Partnership Interests in 1985, resulting in $50,190,000 in Gross Proceeds and $36,638,700 of net proceeds available for investment and reserves. The Partnership is currently in the process of winding up its operations and disposing of its investments. See "Sales of Underlying Properties/Local Partnership Interests" below. As of February 28, 2003, the Partnership has disposed of forty-two of its forty-four original investments. Subsequently on March 11, 2003, the property and related assets and liabilities of one investment was sold. The remaining investment is under contract to be sold. Investment Objectives/Government Incentives - ------------------------------------------- The Partnership was formed to invest, as a limited partner, in other limited partnerships (referred to herein as "Local Partnerships" or "Subsidiary Partnerships"), each of which owns and operates an existing residential housing development (an "Apartment Complex") which is receiving some form of local, State or Federal assistance, such as mortgage insurance, rental assistance payments, permanent mortgage financing and/or interest reduction payments ("Government Assistance"). The Partnership's investment objectives are to: (1) provide current tax benefits in the form of passive losses which holders of Limited Partnership Interests may use to offset passive income from other sources; (2) provide long-term capital appreciation through an increase in the value of the Partnership's investments in Local Partnerships; (3) provide cash distributions from sale or refinancing transactions; and (4) preserve and protect the Partnership's capital. The Partnership is in the process of winding down its operations as it continues to sell its assets;. therefore investment objectives (1), (2) and (4) are no longer applicable. The Partnership has to date distributed approximately $6,683,000 from sales transactions and expects to continue to make distributions from excess sales proceeds, although such aggregate distributions are not currently anticipated to equal the original investment. The Partnership will no longer be generating passive losses due to the sale of properties. However, passive losses previously allocated (to the extent unused by a limited partner) are available to offset the income expected to be generated from the sales effort. 2 Federal, state and local government agencies have provided significant incentives in order to stimulate private investment in government assisted housing. The intent of these incentives is to reduce certain market risks and permit investors to receive (i) tax benefits, (ii) limited cash distributions and (iii) long-term capital appreciation. Notwithstanding these factors, there remain significant risks. These risks include, and are not limited to, the financial strength and expertise of the local general partners. The long-term nature of the investments in government-subsidized housing and the continuance of government incentives has limited the ability of the Partnership to vary its investment portfolio in response to changing economic, financial and investment conditions; such investments have also been subject to changes in local economic circumstances and housing patterns which have had an impact on real estate values and, in the Partnership's current liquidation phase, the ability to achieve a profit on the sale of the apartment complexes. These Apartment Complexes have also required greater management expertise and have had higher operating expenses than conventional apartment buildings. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, below. Investments - ----------- The interests in the Local Partnerships in which the Partnership invested ("Local Partnership Interests") were acquired from unaffiliated sellers. The Partnership became the principal limited partner in these Local Partnerships pursuant to local limited partnership agreements. The Partnership has acquired a 98.99% interest in each of the Local Partnerships. As a limited partner, the Partnership's liability for obligations of the Local Partnerships is limited to its investment. The general partners of the Local Partnerships ("Local General Partners") retain responsibility for maintaining, operating and managing the Apartment Complexes. Under certain circumstances, the Partnership has the right to replace the Local General Partner of the Local Partnership. The Partnership purchased the Local Partnership Interests for a purchase price consisting in each case of a cash down payment, a deferred cash payment due in April of the following year and a Purchase Money Note (as defined below), secured in each case by the Local Partnership Interest for which it was given in payment. The cash payments were made in part as the purchase price of the Local Partnership Interests and in part as capital contributions to the Local Partnerships. Such contributions were generally used by the Local Partnership to pay partnership management fees to the Local General Partners and fees to the Local General Partners for guaranteeing the funding of operating deficits (generally for a period of three to five years and subject to a maximum amount). Purchase Money Notes - -------------------- Nonrecourse purchase money notes (the "Purchase Money Notes") were issued to the selling partners of the Subsidiary Partnerships as part of the purchase price, and are secured only by the Partnership's interest in the Subsidiary Partnership to which the Purchase Money Note relates. The Purchase Money Notes, which provide for simple interest, will not be in default if not less than 60% of the cash flow actually distributed to the Partnership by the corresponding Subsidiary Partnership (generated by the operations, as defined) is applied first to accrued interest and then to current interest thereon. As of February 28, 2003, the maturity dates of the Purchase Money Notes associated with the remaining properties owned by the Subsidiary Partnerships were extended through a fifth year. These are the final extensions for these Purchase Money Notes (see below). Any interest not paid currently accrues, without further interest thereon, through the extended due date of each of the Purchase Money Notes, respectively. Continued accrual of such interest without payment would impact the effective rate of the Purchase Money Notes, specifically by reducing the current effective interest rate of 9%. The exact effect is not determinable inasmuch as it is dependent on the actual future interest payments and ultimate repayment dates of the Purchase Money Notes. 3 Unpaid interest of $3,669,010 (with respect to the two remaining notes) and $24,273,106 (with respect to the fourteen remaining notes) at February 28, 2003 and 2002, respectively, has been accrued and is included in the caption due to selling partners. In general, the interest on and the principal of each Purchase Money Note is also payable to the extent of the Partnership's actual receipt of proceeds from the sale or refinancing of the Apartment Complex, or in some cases the Local Partnership Interest to which the Purchase Money Note relates. The Partnership was permitted to extend the term of the Purchase Money Notes for up to five additional years. In connection with such extensions, the Partnership incurred an extension fee of 1/2% per annum of the outstanding principal balance of the Purchase Money Notes. The Partnership sent an extension notice to each Purchase Money Note holder, pursuant to the Purchase Money Note, that it was extending the maturity date of such notes. However in certain cases, the Partnership did not pay the extension fee at that time, deferring such payment to the future. The two properties with Purchase Money Notes are now extended with maturity dates of August and October 2003. These are the final extensions for these Purchase Money Notes. Extension fees of $107,118 were accrued and added to the balance of these Purchase Money Notes. The Partnership expects that upon final maturity it will be required to sell its investments in the Local Partnerships in order to pay the Purchase Money Notes and accrued interest thereon. Based on the historical operating results of the Local Partnerships, the prices realized on the sale of the Partnership's investment sold to date and the current economic conditions including changes in tax laws, it is unlikely that the proceeds from such sales will be sufficient to meet the outstanding balances. No assurance can be given that management's efforts will be successful in selling the Partnership's investment in the remaining property. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the sellers' recourse, in the event of non-payment, would be to foreclose on the Partnership's interests in the respective Local Partnerships. Sales of Underlying Properties/Local Partnership Interests - ---------------------------------------------------------- General - ------- The Partnership is currently in the process of winding up its operations and disposing of its investments. As of February 28, 2003, the Partnership has disposed of forty-two of its forty-four original investments. Subsequently, on March 11, 2003 one additional investment was sold. The one remaining investment is under contract to be sold within the next several months. There can be no assurance that the Partnership will dispose of its last remaining investment during this time frame or the amount of proceeds which may be received. In order to facilitate an orderly disposition of the Partnership's assets, the Partnership formed two entities: Cambridge Liquidating Trust LLC ("Trust I"), a Massachusetts limited liability company which is owned 99.99% by the Partnership and .01% by affiliates of Related; and, Cambridge Liquidating Trust II ("Trust II"), a Massachusetts general partnership which is owned 99% by Cambridge Liquidating GP II, L.L.C. ("GP II") and 1% by Cambridge Liquidating GP I, L.L.C. ("GP I"). Both GP I and GP II are owned by the Partnership. On December 30, 1998, the Partnership contributed its limited partnership interest in Bethany Glen Associates, Westwood, Ltd., Parktowne, Ltd., Rolling Meadows Apartments, Ltd., Buena Vista Apartments, Ltd. and Wingate Associates, Ltd. to Trust I. On December 31, 1998, the Partnership contributed its limited partnership interests in Grandview-Blue Ridge Manor Limited, Breckenridge-Chaparral Apartments II, Ltd., El Paso-Gateway East, Ltd., Albequerque-Lafayette Square Apartments, Ltd., Corpus Christi-Oso Bay Apartments, Ltd., Westgate Associates Limited, San Diego-Logan Square Gardens Co., Ardmore-Rolling Meadows of Ardmore, Ltd., Fort Worth-Northwoods Apartments, Ltd. and Stephenville-Tarleton Arms Apartments, Ltd. to Trust II. In each case, 4 the interests were contributed subject to each respective Purchase Money Note. The contribution did not involve any consideration being paid to the Partnership, therefore, there was no tax effect to the limited partners of the Partnership. As of February 28, 2003 all Local Partnerships named above were sold except Gateway, which was subsequently sold on March 11, 2003. Information Regarding Disposition - --------------------------------- On January 2, 2003, the Partnership's limited partnership interest in Caddo Parish - Villas South, Ltd. ("Villas South") was transferred to the Local General Partner resulting in a gain in the amount of approximately $2,726,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $7,344,000 resulting in a gain of approximately $7,344,000. On December 19, 2002, the property and the related assets and liabilities of Wingate Associates, Limited ("Wingate") were sold to an unaffiliated third party purchaser for approximately $2,600,000 resulting in a gain in the amount of approximately $132,000. The Partnership used approximately $1,043,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,447,000 resulting in forgiveness of indebtedness income of approximately $404,000. On October 31, 2002, the Partnership's limited partnership interest in Grandview-Blue Ridge Manor, Ltd. ("Blue Ridge"), Breckenridge-Chaparral Apartments II, Ltd. ("Chaparral"), Albuquerque-Lafayette Square Apts., Ltd. ("Lafayette"), Fort Worth-Northwood Apartments, Ltd. ("Northwood"), Corpus Christi-Oso Bay Apartments, Ltd. ("Oso Bay"), Ardmore-Rolling Meadows of Ardmore, Ltd. ("Ardmore") and Stephenville-Tarleton Arms Apartments, Ltd. ("Tarleton") were sold back to the Local General Partner for approximately $100 each resulting in losses of approximately $453,000, $667,000, $1,687,000, $1,416,000, $1,053,000, $866,000 and $1,377,000, respectively. No proceeds were used to settle the associated Purchase Money Notes and accrued interest thereon, which had total outstanding balances of approximately $1,525,000, $1,999,000, $3,592,000, $2,050,000, $2,364,000, $2,229,000 and $2,851,000, respectively, resulting in gains on sale of properties in amounts equal to the interest and principal due on such Purchase Money Notes. On July 12, 2002, the property and the related assets and liabilities of San Diego-Logan Square Gardens Company ("Logan") were sold to the Local General Partners for approximately $9,241,000 resulting in a gain in the amount of approximately $5,403,000. The Partnership used approximately $5,740,000 to fully settle the associated Purchase Money Note and accrued interest thereon. The Partnership netted approximately $1,104,000 of cash which was placed into working capital to pay Partnership expenses. On March 27, 2002, the property and the related assets and liabilities of Ziegler Boulevard, Ltd. ("Ziegler") were sold to an unaffiliated third party purchaser for approximately $2,379,000 resulting in a loss in the amount of approximately $485,000. The Partnership used approximately $340,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,746,000 resulting in forgiveness of indebtedness income of approximately $2,406,000. On March 27, 2002, the Partnership's limited partnership interest in Eastwyck III, Ltd. Limited Partnership ("Eastwyck") was sold to the Local General Partners for approximately $5,000 resulting in a loss of approximately $336,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,220,000 resulting in a gain on sale of approximately $1,220,000. On December 4, 2001, the Partnership's limited partnership interest in Crossett Apartments, Ltd. ("Crossett") was sold to the Local General Partner effective 5 January 1, 2002 for $7,920 resulting in a loss of approximately $212,000 and the related Purchase Money Note was assigned to the Local General Partner. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,117,000 resulting in a gain on sale of property of approximately $1,117,000. On December 4, 2001, the Partnership's limited partnership interest in Cedar Hill Apartments, Ltd. ("Cedar Hill") was sold to the Local General Partner effective January 1, 2002 for $11,988 resulting in a loss of approximately $479,000 and the related Purchase Money Note was assigned to the Local General Partner. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,220,000 resulting in a gain on sale of property of approximately $1,220,000. On November 26, 2001, the Partnership's limited partnership interest in Buena Vista Manor Apartments, Ltd. ("Buena Vista") was sold to the Local General Partners for $125,000 resulting in a loss in the amount of approximately $596,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $5,092,000 resulting in a gain of approximately $5,092,000. On August 31, 2001, the property and the related assets and liabilities of Rolling Meadows Apartments, Ltd. ("Rolling Meadows") were sold to an unaffiliated third party purchaser for $1,925,000 resulting in a loss in the amount of approximately $485,000. The Partnership used approximately $201,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,757,000 resulting in forgiveness of indebtedness income of approximately $3,556,000. On March 16, 2001, the property and the related assets and liabilities of Char-Mur Apartments ("Char-Mur") were sold to an affiliate of the Local General Partner for $475,000, resulting in a loss in the amount of approximately $193,000. The Partnership used approximately $85,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $986,000, resulting in forgiveness of indebtedness income of $901,000. In addition, approximately $21,000 of accounts payable to an unrelated party were forgiven in the current year. On December 20, 2000, the property and the related assets and liabilities of New Jersey, Ltd. ("New Jersey") were sold to an unaffiliated third party for $2,049,600 resulting in a gain of approximately $65,000. The Partnership used approximately $500,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $2,369,000 resulting in forgiveness of indebtedness income of approximately $1,869,000. On December 1, 2000, the property and the related assets and liabilities of Westgate Associates, Limited ("Westgate") were sold to an unaffiliated third party for $2,055,000, resulting in a loss of approximately $164,000. The Partnership used approximately $601,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,516,000, resulting in forgiveness of indebtedness income of approximately $915,000. On September 14, 2000, the property and the related assets and liabilities of Westwood Apartments Company, Ltd. ("Westwood") were sold to an unaffiliated third party for $2,025,000, resulting in a loss of approximately $356,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,059,000, resulting in forgiveness of indebtedness income. On September 14, 2000, the property and the related assets and liabilities of Parktowne Ltd. ("Parktowne") were sold to an unaffiliated third party for $2,500,000, resulting in a gain of approximately $476,000. The Partnership used 6 approximately $844,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $1,804,000, resulting in forgiveness of indebtedness income of approximately $960,000. On April 28, 2000, the property and the related assets and liabilities of Pacific Palms were sold to a third party for approximately $4,900,000, resulting in a gain of approximately $2,554,000. The Partnership used approximately $1,668,000 of the net proceeds to settle the associated Purchase Money Notes and accrued interest thereon which had a total outstanding balance of approximately $5,214,000, resulting in forgiveness of indebtedness of approximately $3,546,000. The Partnership netted approximately $1,940,000 of cash which was placed into working capital to pay Partnership expenses. Tax Matters - ----------- The Tax Reform Act of 1986 (the "TRA") provides as of 1991 that the passive losses generated by the Partnership can only be used to shelter passive income or, in the alternative, may be carried forward to offset a gain upon the sale of properties. Segments - -------- The Partnership operates in one segment, which is the investment in multi-family residential property. Competition - ----------- The real estate business is highly competitive and each of the Local Partnerships in which the Partnership has invested owns an Apartment Complex which must compete for tenants in the marketplace. However, the rental assistance and preferred interest rates on mortgage financing generally make it possible to offer the apartments to eligible tenants at a cost to the tenant significantly below the market rate for comparable conventionally financed apartments in the area. Employees - --------- The Partnership does not have any direct employees. All services are performed for the Partnership by its General Partner and their affiliates. The General Partners receive compensation in connection with such activities as set forth in Items 11 and 13. In addition, the Partnership reimburses the General Partners and certain of their affiliates for expenses incurred in connection with the performance by their employees of services for the Partnership in accordance with the Partnership's Amended and Restated Agreement and Certificate of Limited Partnership (the "Partnership Agreement"). 7 Item 2. Properties. As of February 28, 2003, the Partnership holds a 98.99% limited partnership interest in each of two Local Partnerships, which own two residential Apartment Complexes receiving Government Assistance. During the fiscal year ended February 28, 2003, the property and the related assets and liabilities owned by three Local Partnerships were sold and the Partnership's Local Partnership Interest in nine other Local Partnerships were sold. Through the fiscal year ended February 28, 2003, the properties and the related assets and liabilities owned by eighteen Local Partnerships were sold and the Partnership's Local Partnership Interest in twenty-four other Local Partnerships were sold. Set forth below is a schedule of these Local Partnerships, including certain information concerning the Apartment Complexes (the "Local Partnership Schedule"). See Schedule III to the financial statements included herein for additional information, including encumbrances, pertaining to the Apartment Complexes.
Local Partnership Schedule -------------------------- Government Assistance Percentage of Units Year ------------- Occupied at December 31, Name and Location of Property Com- HUD -------------------------------------------- (Number of Units)(b) pleted Programs (a) 2002 2001 2000 1999 1998 - -------------------- ------ ------------- ------ ------ ------ ------ ------ Caddo Parish-Villas South, Ltd. 1972 Sec.221(d)(4) (r) 86% 86% 86% 86% Shreveport, Louisiana (172) Oklahoma City-Town and 1973 Sec.207 (j) (j) (j) (j) (j) Country Village Apartments, Ltd. Oklahoma City, Oklahoma (201) Rolling Meadows of Chickasha, Ltd. 1972 Sec.236 (f) (f) (f) (f) (f) Chickasha, Oklahoma (112) New Jersey, Ltd. 1977 Sec.221(d)(4) (n) (n) (n) 83% 96% Mobile, Alabama (112) Zeigler Boulevard, Ltd. 1981 Sec.221(d)(4) (q) 80% 76% 85% 100% Mobile, Alabama (112) Eastwyck III, Ltd. 1979 Sec.221(d)(4) (r) 90% 100% 98% 96% Mobile, Alabama (48) Breckenridge-Chaparral Apartments II, Ltd. 1973 Sec.236 (r) 91% 87% (k) 94% Breckenridge, Texas (88) Country, Ltd. 1978 Sec.221(d)(4) (i) (i) (i) (i) (i) Ridgeland, Mississippi (112)(c) Westwood Apartments Company, Ltd. 1978 Sec.221(d)(4) (n) (n) (n) 57% 45% Montgomery, Alabama (176) Parktowne, Ltd. 1978 Sec.221(d)(4) (n) (n) (n) 93% 97% Montgomery, Alabama (144)
8
Local Partnership Schedule -------------------------- (continued) ----------- Government Assistance Percentage of Units Year ------------- Occupied at December 31, Name and Location of Property Com- HUD -------------------------------------------- (Number of Units)(b) pleted Programs (a) 2002 2001 2000 1999 1998 - -------------------- ------ ------------- ------ ------ ------ ------ ------ Corpus Christi-Oso Bay Apartments, Ltd. 1973 Sec.236 (r) 99% 95% (k) 99% Corpus Christi, Texas (104) Northbrook III, Ltd. 1981 Sec.221(d)(4) (i) (i) (i) (i) (i) Jackson, Mississippi (68)(c) Sec.8 Bethany Glen Associates 1971 Sec.221(d)(3) (l) (l) (l) (l) 95% Glendale, Arizona (150) Sec.8 Albuquerque-Lafayette Square Apts., Ltd. 1973 Sec.236 (r) 96% 99% (k) 99% Albuquerque, New Mexico (188) Roper Mountain Apartments 1979 Sec.221(d)(4) (e) (e) (e) (e) (e) Greenville, South Carolina (152) Warren Manor Apartments Limited Partnership Warren, Michigan Warren Manor I (344) 1968 Sec.221(d)(4) (m) (m) (m) (m) 95% Warren Manor II (136) 1970 Sec.221(d)(4) (m) (m) (m) (m) 95% Golf Manor Apartments 1970 Sec.221(d)(4) (m) (m) (m) (m) 98% Limited Partnership Roseville, Michigan (128) Warren Woods Apartments 1971 Sec.221(d)(4) (m) (m) (m) (m) 99% Limited Partnership Warren, Michigan (192) Canton Commons Apartments 1973 Sec.221(d)(4) (m) (m) (m) (m) 96% Canton, Michigan (452) Sec.236 Sec.8 Los Caballeros Apartments 1976 Sec.236 (h) (h) (h) (h) (h) Thornton, Colorado (144) (d) Rosewood Manor Apartments 1972 Sec.236 (m) (m) (m) (m) 99% Rosewood, Michigan (207) Sec.8 Grosvenor South Apartments 1969 Sec.221(d)(3) (h) (h) (h) (h) (h) Limited Partnership Taylor, Michigan (182) Grosvenor South Apartments 1969 Sec.221(d)(4) (h) (h) (h) (h) (h) #2 Limited Partnership Taylor, Michigan (54)
9
Local Partnership Schedule -------------------------- (continued) ----------- Government Assistance Percentage of Units Year ------------- Occupied at December 31, Name and Location of Property Com- HUD -------------------------------------------- (Number of Units)(b) pleted Programs (a) 2002 2001 2000 1999 1998 - -------------------- ------ ------------- ------ ------ ------ ------ ------ Clinton Plaza Apartments 1969 Sec.221(d)(3) (h) (h) (h) (h) (h) Limited Partnership Clinton, Michigan (168) Clinton Plaza Apartments 1970 Sec.221(d)(3) (h) (h) (h) (h) (h) #2 Limited Partnership Clinton, Michigan (192) Oakland-Keller Plaza 1972 Sec.236 (e) (e) (e) (e) (e) Oakland, California (200) Sec.8 San Diego-Logan Square Gardens Company 1970 Sec.236 (q) 100% 98% (k) 98% San Diego, California (170) Sec.8 Grandview-Blue Ridge Manor, Ltd. 1972 Sec.236 (r) 96% 95% (k) 93% Grandview, Missouri (80) Ardmore-Rolling Meadows of Ardmore, Ltd. 1974 Sec.236 (r) 100% 100% (k) 98% Ardmore, Oklahoma (101) El Paso-Gateway East, Ltd. 1972 Sec.236 (s) 96% 99% (k) 96% El Paso, Texas (104) Sec.8 Fort Worth-Northwood Apartments, Ltd. 1972 Sec.236 (r) 97% 99% (k) 92% Fort Worth, Texas (100) Stephenville-Tarleton Arms Apartments, Ltd. 1972 Sec.236 (r) 99% 95% (k) 95% Stephenville, Texas (128) Sec.8 Cudahy Gardens, a Limited Partnership 1971 Sec.236 (i) (i) (i) (i) (i) Cudahy, California (100) Sec.8 Pacific Palms, a Limited Partnership 1972 Sec.236 (n) (n) (n) 90% 98% Palm Springs, California (139) Riverside Gardens, a Limited Partnership 1971 Sec.236 (i) (i) (i) (i) (i) Riverside, California (192) Bay Village Company 1971 Sec.236 99% 100% 99% 99% 95% Fall River, Massachusetts (206) Sec.8
10
Local Partnership Schedule -------------------------- (continued) ----------- Government Assistance Percentage of Units Year ------------- Occupied at December 31, Name and Location of Property Com- HUD -------------------------------------------- (Number of Units)(b) pleted Programs (a) 2002 2001 2000 1999 1998 - -------------------- ------ ------------- ------ ------ ------ ------ ------ Buena Vista Manor Apartments, Ltd. 1969 Sec.221(d)(3) (p) (p) 98% 98% 100% Nashville, Tennessee (200) Sec.8 Rolling Meadows Apartments, Ltd. 1971 Sec.236 (o) (o) 94% 98% 96% Midwest City, Oklahoma (200) Sec.8 Westgate Associates, Limited 1971 Sec.236 (n) (n) (n) 93% 89% Brattleboro, Vermont (100) Sec.8 Wingate Associates Limited 1972 Sec.236 (q) 95% 99% 98% 97% Laconia, New Hampshire (100) Sec.8 South Munjoy Associates, Limited 1966 Sec.221(d)(3) (g) (g) (g) (g) (g) Portland, Maine (140) Cedar Hill Apartments, Ltd. 1973 Sec.236 (p) (p) 97% 100% 93% Monticello, Arkansas (60) Char-Mur Apartments, Ltd. 1973 Sec.236 (o) (o) 46% 77% 58% Trumann, Arkansas (48) Crossett Apartments, Ltd. 1973 Sec.236 (p) (p) 100% 100% 98% Crossett, Arkansas (50)
(a) The Partnership invested in Local Partnerships owning existing Apartment Complexes which receive either Federal or State subsidies. HUD, through FHA, administers a variety of subsidies for low and moderate-income housing. FHA administers similar housing programs for non-urban areas. The federal programs generally provide one or a combination of the following forms of assistance: (i) mortgage loan insurance, (ii) rental subsidies, (iii) reduction of mortgage interest payments. 1) HUD provides mortgage insurance for rental housing projects pursuant to a number of sections of Title II of the National Housing Act ("NHA"), including Section 236, Section 221(d)(4), Section 221(d)(3) and Section 220. Under all of these programs, HUD will generally provide insurance equal to 100% of the total replacement cost of the project to non-profit owners and 90% of the total replacement cost to limited-distribution owners. Mortgages are provided by institutions approved by HUD, including banks, savings and loan companies and local housing authorities. Section 221(d)(4) of NHA provides for federal insurance of private construction and permanent mortgage loans to finance new construction of rental apartment complexes containing five or more units. The most significant difference between the 221(d)(4) program and the 221(d)(3) program is the maximum amount of the loan which may be obtained. Under the 221(d)(3) program, non-profit sponsors may obtain a permanent mortgage equal to 100% of the total replacement cost; no equity contribution is required of a non-profit sponsor. In all other respects, the 221(d)(3) program is substantially similar to the 221(d)(4) program. 11 2) Many of the tenants in HUD insured projects receive some form of rental assistance payments, primarily through the Section 8 Housing Assistance Payments Program (the "Section 8 Program"). Apartment Complexes not receiving assistance through the Section 8 Program ("Section 8 Payments") will generally have limitations on the amounts of rent which may be charged. One requirement imposed by HUD regulations effective for apartment complexes initially approved for Section 8 payments on or after November 5, 1979, is to limit the amount of the owner's annual cash distributions from operations to 10% of the owner's equity investment in an Apartment Complex if the apartment complex is intended for occupancy by families, and to 6% of the owner's equity investment in an Apartment Complex intended for occupancy by elderly persons. The owner's equity investment in the apartment complex is 10% of the project's replacement cost as determined by HUD. HUD released the American Community Partnerships Act (the "ACPA"). The ACPA is HUD's blueprint for providing for the nation's housing needs in an era of static or decreasing budget authority. Two key proposals in the ACPA that could affect the Local Partnerships are: (i) a discontinuation of project-based Section 8 subsidy payments and (ii) an attendant reduction in debt on properties that were supported by the Section 8 payments. The ACPA calls for a transition during which the project-based Section 8 would be converted to a tenant-based voucher system. Any FHA insured debt would then be "marked-to-market", that is revalued in light of the reduced income stream, if any. 3) Section 236 Program. As well as providing mortgage insurance, the Section 236 program also provides an interest credit subsidy which reduces the cost of debt service on a project mortgage, thereby enabling the owner to charge the tenants lower rents for their apartments. Interest credit subsidy payments are made monthly by HUD directly to the mortgagee of the Project. Each payment is in an amount equal to the difference between (i) the monthly interest payment required by the terms of the mortgage to pay principal, interest and the annual mortgage insurance premium and (ii) the monthly payment which would have been required for principal and interest if the mortgage loan bore interest at the rate of 1%. These payments are credited against the amounts otherwise due from the owner of the Project, who makes monthly payments of the balance. (b) State of jurisdiction is the same state as the location, unless otherwise indicated. (c) State of jurisdiction is Alabama. (d) State of jurisdiction is Michigan. (e) The property and the related assets and liabilities were sold during the fiscal year ended February 28, 1997 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (f) The Partnership's Local Partnership Interest in this Local Partnership was sold during the fiscal year ended February 28, 1997 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (g) The property and the related assets and liabilities were sold during the fiscal year ended February 28, 1998 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (h) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended February 28, 1998 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (i) The property and the related assets and liabilities were sold during the fiscal year ended February 28, 1999 (see Note 10 in Item 8. Financial Statements and Supplemental Data). 12 (j) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended February 28, 1999 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (k) As a result of on-going litigation, which was subsequently settled, related to the Roar Properties (as defined herein), occupancy rates were not provided by the management agent pursuant to the instructions from the Local General Partner. (l) The property and the related assets and liabilities were sold during the fiscal year ended February 29, 2000 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (m) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended February 29, 2000 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (n) The property and the related assets and liabilities were sold during the fiscal year ended February 28, 2001 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (o) The property and the related assets and liabilities were sold during the fiscal year ended February 28, 2002 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (p) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended February 28, 2002 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (q) The property and the related assets and liabilities were sold during the fiscal year ended February 28, 2003 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (r) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended February 28, 2003 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (s) The property and the related assets and liabilities were sold on March 11, 2003 (see Note 13 in Item 8. Financial Statements and Supplemental Data). All leases are generally for periods not greater than one to two years and no tenant occupies more than 10% of the rentable square footage. See Item 1, Business, above for the general competitive conditions to which the properties described above are subject. Item 3. Legal Proceedings None. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of security holders during the fiscal year covered by this report through the solicitation of proxies or otherwise. 13 PART II Item 5. Market for the Registrant's Limited Partnership Interests and Related Security Holder Matters. At February 28, 2003, the Partnership had issued and outstanding 10,038 Limited Partnership Interests, of which 5,019 are Initial Limited Partnership Interests and 5,019 are Additional Limited Partnership Interests, each representing a $5,000 capital contribution per unit to the Partnership, for aggregate gross proceeds of $50,190,000. Additional Limited Partnership Interests are the Limited Partnership Interests acquired upon the exercise of warrants or sold by the Partnership upon the non-exercise of the warrants. The warrants are rights granted pursuant to the Partnership Agreement as part of the purchase of an Initial Limited Partnership Interest. No further issuance of Initial Limited Partnership Interests or Additional Limited Partnership Interests is anticipated and all warrants have expired. As of February 28, 2003, the Partnership had 4,223 registered holders of Limited Partnership Interests. Limited Partnership Interests are not traded in any organized market. It is not anticipated that any public market will develop for the purchase and sale of any Limited Partnership Interests. Limited Partnership Interests may be transferred only if certain requirements are satisfied, including that in the opinion of counsel to the Partnership such transfer would not cause a termination of the Partnership under Section 708 of the Internal Revenue Code and would not violate any federal or state securities laws. In March 2003 and 2002, there were no distributions paid to the limited partners or the General Partners, from net proceeds from the sale of properties (see Item 7. below). There are no material restrictions upon the Partnership's present or future ability to make distributions in accordance with the provisions of the Partnership Agreement. However, the Partnership has invested in Local Partnerships owning Apartment Complexes which receive Government Assistance under programs which in many instances restrict the cash return available to owners. See Item 8, Note 11(i). The Partnership does not anticipate providing cash distributions to its Limited Partners in circumstances other than refinancing or sale, nor do the General Partners expect that the Partnership will distribute sufficient net proceeds from sales or refinancings to return the Limited Partners' original investment. Item 6. Selected Financial Data. 14 The information set forth below presents selected financial data of the Partnership. Additional financial information is set forth in the audited financial statements in Item 8 hereof.
Year Ended -------------------------------------------------------------------------- February 28, February 28, February 28, February 28, February 28, OPERATIONS 2003 2002 2001 2000 1999 - ---------- ------------ ------------ ------------ ------------ ------------ Revenues $ 32,956,656 $ 17,797,723 $ 16,831,588 $ 14,075,165 $ 35,823,217 Operating expenses 8,909,188 14,449,409 17,101,952 22,632,634 31,032,957 ------------ ------------ ------------ ------------ ------------ Income (loss) before minority interest and extraordinary 24,047,468 3,348,314 (270,364) (8,557,469) 4,790,260 item Minority interest in income (loss) of subsidiaries 225,786 6,242 (2,300) (1,430) (424,099) ------------ ------------ ------------ ------------ ------------ Income (loss) before extraordinary item 24,273,254 3,354,556 (272,664) (8,558,899) 4,366,161 Extraordinary item-forgiveness of indebtedness 2,831,151 4,456,996 10,348,388 26,725,364 7,583,482 ------------ ------------ ------------ ------------ ------------ Net income $ 27,104,405 $ 7,811,552 $ 10,075,724 $ 18,166,465 $ 11,949,643 ============ ============ ============ ============ ============ Income (loss) before extraordinary item per limited $ 2,394 $ 331 $ (27) $ (844) $ 431 partnership unit Extraordinary item per limited partnership unit 279 440 1,020 2,636 748 ------------ ------------ ------------ ------------ ------------ Net income per limited partnership unit $ 2,673 $ 771 $ 993 $ 1,792 $ 1,179 ============ ============ ============ ============ ============ Year Ended -------------------------------------------------------------------------- February 28, February 28, February 28, February 28, February 28, FINANCIAL POSITION 2003 2002 2001 2000 1999 - ------------------ ------------ ------------ ------------ ------------ ------------ Total assets $ 7,443,777 $ 30,584,781 $ 37,735,134 $ 49,506,785 $ 74,790,559 ============ ============ ============ ============ ============ Long-term obligations $ 9,047,068 $ 57,097,277 $ 72,474,005 $ 93,199,151 $134,392,143 ============ ============ ============ ============ ============ Total liabilities $ 12,151,677 $ 62,151,701 $ 77,233,742 $ 98,569,533 $141,014,105 ============ ============ ============ ============ ============ Minority interest $ (91,601) $ 153,784 $ 33,648 $ 28,932 $ 30,399 ============ ============ ============ ============ ============
During the years ended February 28, 1999, February 29, 2000, February 28, 2001, 2002 and 2003 total assets decreased primarily due to the sale of properties (see Item 8., Note 10), depreciation and a loss for the impairment of assets, partially offset by an increase in cash and cash equivalents resulting from net proceeds from the sales and net additions to property and equipment. Long-term obligations and total liabilities decreased for the years ended February 28, 1999, February 29, 2000, February 28, 2001, 2002 and 2003 primarily due to the repayment of and forgiveness of indebtedness on Purchase Money Notes, mortgage notes payable and amounts due to selling partners as a result of the sale of underlying properties, partially offset by accruals of interest on Purchase Money Notes. * As restated - see Note 12 to the financial statements. 15
Selected Quarterly Financial Data (Unaudited) Quarter Ended ---------------------------------------------------------- May 31, August 31, November February OPERATIONS 2002 30, 2002 30, 2002 2003 - ----------------------- ------------ ------------ ------------ ------------ Revenues $ 3,229,118 $ 2,300,581 $ 7,599,804 $ 19,827,153 Operating expense 2,900,900 2,240,167 2,748,700 1,019,421 ------------ ------------ ------------ ------------ Income before minority interest 328,218 60,414 4,851,104 18,807,732 Minority interest in income (loss) of subsidiaries 125,715 (2,848) 115,316 (12,397) ------------ ------------ ------------ ------------ Income before extra-ordinary items 453,933 57,566 4,966,420 18,795,335 Extra-ordinary item -- forgiveness of indebtedness 2,427,492 0 0 403,659 ------------ ------------ ------------ ------------ Net income $ 2,881,425 $ 57,566 $ 4,966,420 $ 19,198,994 ============ ============ ============ ============ Income before extra-ordinary item per limited partnership unit $ 44.77 $ 5.68 $ 489.81 $ 1,853.70 Extra ordinary item per limited partnership unit 239.41 0 0 39.81 ------------ ------------ ------------ ------------ Net income per limited partnership unit $ 284.18 $ 5.68 $ 489.81 $ 1,893.51 ============ ============ ============ ============ Quarter Ended ---------------------------------------------------------- May 31, August 31, November February OPERATIONS 2001 30, 2001 30, 2001* 2002* - ----------------------- ------------ ------------ ------------ ------------ Revenues $ 2,988,398 $ 3,139,040 $ 2,430,468 $ 9,239,817 Operating expenses 3,815,298 3,651,928 3,047,884 3,934,299 ------------ ------------ ------------ ------------ (Loss) income before minority interest (826,900) (512,888) (617,416) 5,305,518 Minority interest in (loss) income of subsidiaries (462) (832) 5,772 1,764 ------------ ------------ ------------ ------------ (Loss) income before extra-ordinary items (827,362) (513,720) (611,644) 5,307,282 Extra-ordinary item -- forgiveness of indebtedness 901,219 0 3,861,270 (305,493) ------------ ------------ ------------ ------------ Net income (loss $ 73,857 $ (513,720) $ 3,249,626 $ 5,001,789 ============ ============ ============ ============ (Loss) income before extra-ordinary item per limited partnership unit $ (81.60) $ (50.66) $ (60.32) $ 523.43 Extra ordinary item per limited partnership unit 88.88 0.00 380.82 (30.13) ------------ ------------ ------------ ------------ Net income (loss) per limited partnership unit $ 7.28 $ (50.66) $ 320.50 $ 493.30 ============ ============ ============ ============
* As restated - see Note 12. 16 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. Liquidity and Capital Resources - ------------------------------- General - ------- The Partnership's primary sources of funds are (i) cash distributions from operations, (ii) cash distributions from sales of the Local Partnerships in which the Partnership has invested, (iii) interest earned on funds, and (iv) cash in working capital reserves. All these sources of funds are available to meet the obligations of the Partnership. During the fiscal year ended February 28, 2003, the property and the related assets and liabilities owned by three Local Partnerships and the Partnership's Limited Partnership Interest in nine Local Partnerships were sold. Through the fiscal year ended February 28, 2003, the properties and the related assets and liabilities owned by eighteen Local Partnerships were sold and the Partnership's Local Partnership Interest in twenty-four other Local Partnerships were sold. The Partnership had a working capital reserve of approximately $628,000 and $135,000 at February 28, 2003 and 2002, respectively. The working capital reserve is temporarily invested in money market accounts which can be easily liquidated to meet obligations as they arise. The General Partners believe that the Partnership's reserves, net proceeds from future sales and future cash flow distributions will be adequate for its operating needs, and plans to continue investing available reserves in short-term investments. The General Partners fees are being paid currently other than approximately $1,976,000 of Partnership management fees which were accrued and continue to be deferred. During the fiscal year ended February 28, 2003, cash and cash equivalents of the Partnership and its consolidated Local Partnerships increased approximately $71,000. This increase was due to proceeds from sale of properties ($13,893,000), a decrease in mortgage escrow deposits relating to investing activities ($657,000) which exceeded cash used in operating activities ($170,000), acquisition of property and equipment ($487,000), payments to selling partners ($4,105,000), net principal payments of mortgage notes and purchase money notes ($8,202,000), costs paid relating to sale of properties ($1,496,000) and a decrease in minority interest ($20,000). Included in the adjustments to reconcile the net income to cash provided by operating activities is gain on sale of properties ($25,095,000), forgiveness of indebtedness income ($2,831,000) and depreciation ($352,000). Cash flow distributions aggregating $207,440, $71,144 and $196,814 were made to the Partnership in the 2002, 2001 and 2000 Fiscal Years, respectively. Of such distributions, $169,833, $56,426 and $118,246, respectively, was used to pay interest on the Purchase Money Notes. Distribution of proceeds from sales aggregating $8,994,812 and $289,581 were made to the Partnership in the 2002 and 2001 Fiscal Years, respectively of which $7,123,995 and $286,080, respectively, was used to pay principal and interest on the Purchase Money Notes. Critical Accounting Policies - ---------------------------- In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements. The summary should be read in conjunction with the more complete discussion of the Company's accounting policies included in Note 2 to the consolidated financial statements in this annual report on Form 10-K. 17 a) Property and Equipment Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The Partnership complies with Statement of Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis are below depreciated cost. At that time property investments themselves are reduced to estimated fair value (generally using discounted cash flows) when the property is considered to be impaired and the depreciated cost exceeds estimated fair value. b) Income Taxes No provision has been made for income taxes in the accompanying consolidated financial statements since such taxes, if any, are the responsibility of the individual partners. For income tax purposes, the Partnership has a fiscal year ending December 31. Purchase Money Notes - -------------------- For a discussion of Purchase Money Notes Payable, see Note 7 to the Financial Statements. Sales of Underlying Properties/Local Partnership Interests - ---------------------------------------------------------- For a discussion of the sale of properties in which the Partnership owns direct and indirect interest, see Note 10 to the Financial Statements. For a discussion of contingencies affecting certain Local Partnerships, see Results of Operations of Certain Local Partnerships below. Since the maximum loss the Partnership would be liable for is its net investment in the respective Local Partnerships, the resolution of the existing contingencies is not anticipated to impact future results of operations, liquidity or financial condition in a material way. Except as described above, management is not aware of any trends or events, commitments or uncertainties which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. Management believes the only impact would be from laws that have not yet been adopted. Due to the sale of properties, the portfolio is not diversified by the location of the properties around the United States. The remaining property may not be protected against a general downturn in the national economy. Results of Operations - --------------------- Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis are below depreciated cost. At the time property investments themselves are reduced to estimated fair value (generally using discounted cash 18 flows) when the property is considered to be impaired and the depreciated cost exceeds estimated fair value. At the time management commits to a plan to dispose of assets, said assets are adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. All property and equipment for subsidiary partnerships whose assets and liabilities are under sales contracts are classified as assets held for sale. Through February 28, 2003, the Partnership has recorded approximately $8,889,000 as a loss on impairment of assets. The following is a summary of the results of operations of the Partnership for the Fiscal Years ended February 28, 2003, 2002 and 2001 (the 2002, 2001 and 2000 Fiscal Years, respectively). The results of operations of the Partnership, as well as the Local Partnerships, excluding administrative and management, taxes and insurance, gain on sale of properties and forgiveness of indebtedness income, remained fairly constant during the 2002, 2001 and 2000 Fiscal Years. 2002 vs. 2001 - ------------- Rental income decreased by approximately 35% during the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Excluding Char Mur, Rolling Meadows, Logan, Wingate and Ziegler which sold their properties and Buena Vista, Cedar Hill, Crossett, Eastwyck, Blue Ridge, Chaparral, Lafayette, Northwood, Oso Bay, Ardmore, Tarleton and Villa South in which the Partnership's interest was sold (collectively the "Sold Assets"), rental income increased approximately 3% during the 2002 Fiscal Year as compared to the 2001 Fiscal Year primarily due to rental increases at the Local Partnerships. A gain on sale of properties and forgiveness of indebtedness was recorded in the 2002 Fiscal Year (see Notes 10 and 11, respectively, in Item 8. Financial Statements and Supplemental Data). Total expenses, excluding the Sold Assets, administrative and management and taxes and insurance, remained fairly consistent with a decrease of approximately 2% for the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Administrative and management decreased approximately $1,079,000 for the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Excluding the Sold Assets, administrative and management decreased approximately $126,000 primarily due to a decrease in legal fees at the Partnership level. Taxes and insurance decreased approximately $309,000 for the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Excluding the Sold Assets, taxes and insurance increased approximately $24,000, primarily due to increases of insurance premiums at one Local Partnership. Administration and management-related parties, operating, repairs and maintenance, financial and depreciation expense decreased approximately $247,000, $787,000, $1,170,000, $1,163,000 and $785,000, respectively, for the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Excluding the Sold Assets, and Gateway East, Ltd. and Bay Village, for depreciation only, such expenses remained fairly consistent with (decreases) increases of approximately ($26,000), ($56,000), $23,000, $24,000 and $0, respectively, for the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Gateway East, Ltd. and Bay Village are not depreciated during the period because they are classified as assets held for sale. 2001 vs. 2000 - ------------- Rental income decreased by approximately 14% during the 2001 Fiscal Year as compared to the 2000 Fiscal Year. Excluding New Jersey, Westgate, Parktowne, Westwood, Pacific Palm, Char-Mur and Rolling Meadows which sold their properties and Buena Vista, Cedar Hill and Crossett in which the Partnership's interest was sold (collectively the "Sold Assets"), rental income increased approximately 6% 19 during the 2001 Fiscal Year as compared to the 2000 Fiscal Year primarily due to rental increases and decreases in vacancies at several Local Partnerships. Other income decreased approximately $99,000 during the year ended February 28, 2002 as compared to 2001. Excluding the Sold Assets, other income increased approximately $62,000, primarily due to larger cash and cash equivalent balances earning interest at three Local Partnerships, increased laundry income at a fourth Local Partnership and a state grant received at a fifth Local Partnership. A gain on sale of properties and forgiveness of indebtedness was recorded in the 2001 Fiscal Year (see Notes 10 and 11, respectively, in Item 8. Financial Statements and Supplemental Data). Total expenses, excluding Sold Assets, operating and taxes and insurance, remained fairly consistent with an increase of less than 2% for the 2001 Fiscal Year as compared to the 2000 Fiscal Year. Operating decreased approximately $91,000 for the year ended February 28, 2002, as compared to 2001. Excluding the Sold Assets, operating increased approximately $294,000, primarily due to an increase in utility costs at five Local Partnerships. Taxes and insurance decreased approximately $165,000 for the year ended February 28, 2002, as compared to 2001. Excluding the Sold Assets, taxes and insurance increased approximately $151,000, primarily due to increases of insurance premiums at three Local Partnerships. Administrative and management, repairs and maintenance, financial and depreciation expense decreased approximately $444,000, $536,000, $813,000 and $469,000, respectively, for the 2001 Fiscal Year as compared to the 2000 Fiscal Year. Excluding the Sold Assets, and Zeigler Boulevard Ltd, Eastwyck III, Ltd., Wingate Associates, Ltd., Logan Square, Lafayette Square, Gateway East, Ltd, Bay Village and Northwood Apts. Ltd., for depreciation only, such expenses remained fairly consistent with decreases of approximately $11,000, $74,000, $12,000 and $9,000 respectively, for the 2001 Fiscal Year as compared to the 2000 Fiscal Year. Zeigler Boulevard Ltd., Eastwyck III, Ltd, Wingate Associates, Ltd., Logan Square, Lafayette Square, Gateway East, Ltd., Bay Village and Northwood Apartments, Ltd. are not depreciated during the period because they are classified as assets held for sale. Results of Operations of Certain Local Partnerships - --------------------------------------------------- Caddo Parish-Villas South, Ltd. ("Villas South") - ------------------------------------------------ Villas South filed for protection under Chapter 11 of the United States Bankruptcy Code on November 12, 1996 and the equivalent of a receiver was appointed. The bankruptcy case was subsequently dismissed on April 18, 2002. On January 2, 2003, the limited partnership interest in Villas South was transferred to the Local General Partners (See Note 10 in Item 8.). Other - ----- The Partnership's investment, as a limited partner in the Local Partnerships, is subject to the risks incident to the potential losses arising from management and ownership of improved real estate. The Partnership's investments could also be adversely affected by poor economic conditions generally, which could increase vacancy levels, rental payment defaults, and increased operating expenses, any or all of which could threaten the financial viability of one or more of the Local Partnerships. There are also substantial risks associated with the operation of Apartment Complexes receiving Government Assistance. These include governmental regulations concerning tenant eligibility, which may make it more difficult to rent apartments in the complexes; difficulties in obtaining government approval for rent increases; limitations on the percentage of income which low and moderate-income tenants may pay as rent; the possibility that Congress may not appropriate funds to enable HUD to make the rental assistance payments it has 20 contracted to make; and that when the rental assistance contracts expire there may not be market demand for apartments at full market rents in a Local Partnership's Apartment Complex. The Local Partnerships are impacted by inflation in several ways. Inflation allows for increases in rental rates generally to reflect the impact of higher operating and replacement costs. Inflation generally does not impact the fixed long-term financing under which real property investments were purchased. Inflation also affects the Local Partnerships adversely by increasing operating costs, particularly items such as fuel, utilities and labor. However, continued inflation should allow for appreciated values of the Local Partnerships' Apartment Complexes over a period of time as rental revenues and replacement costs continue to increase, the benefit of which may be recognized at the point in time when the Partnership is required to refinance or sell its investments in Local Partnerships in order to meet its obligations under the Purchase Money Notes. Item 7A. Quantitative and Qualitative Disclosures About Market Risk None. 21 Item 8. Financial Statements and Supplementary Data. Sequential Page ---------- (a) 1. Financial Statements Independent Auditors' Report 23 Consolidated Balance Sheets at February 28, 2003 and 2002 76 Consolidated Statements of Income for the Years Ended February 28, 2003, 2002 and 2001 77 Consolidated Statements of Partners' Deficit for the Years Ended February 28, 2003, 2002 and 2001 78 Consolidated Statements of Cash Flows for the Years Ended February 28, 2003, 2002 and 2001 79 Notes to Consolidated Financial Statements 82 22 INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners of Cambridge + Related Housing Properties Limited Partnership and Subsidiaries We have audited the consolidated balance sheets of Cambridge + Related Housing Properties Limited Partnership and Subsidiaries as of February 28, 2003 and 2002, and the related consolidated statements of income, partners' deficit, and cash flows for the years ended February 28, 2003, 2002 and 2001 (the 2002, 2001 and 2000 Fiscal Years, respectively). 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 did not audit the financial statements for 14 (2002 Fiscal Year), 19 (2001 Fiscal Year) and 24 (2000 Fiscal Year) subsidiary partnerships whose (losses) income constituted $(1,844,282), $(787,626) and $1,221,181 of the Partnership's net income during the 2002, 2001 and 2000 Fiscal Years, respectively, and whose assets constituted 90% (2002 Fiscal Year) and 85% (2001 Fiscal Year) of the Partnership's assets at February 28, 2003 and February 28, 2002, presented in the accompanying consolidated financial statements. The financial statements for 14 (2002 Fiscal Year), 18 (2001 Fiscal Year) and 23 (2000 Fiscal Year) of these subsidiary partnerships were audited by other auditors whose reports thereon have been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for these subsidiary partnerships, is based solely upon the reports of the other auditors. The financial statements of one (2001 and 2000 Fiscal Years) of these subsidiary partnerships were unaudited. We conducted our audits in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based upon our audits, and the reports of the other auditors, the accompanying consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cambridge + Related Housing Properties Limited Partnership and Subsidiaries at February 28, 2003 and 2002, and the results of their operations, and their cash flows for the years ended February 28, 2003, 2002 and 2001, in conformity with U.S. generally accepted accounting principles. As discussed in Notes 10 and 13, the Partnership is currently in the process of winding up its operations and disposing of its investments. As of February 28, 2003 the Partnership has disposed of forty-two of its forty-four investments. On March 11, 2003 one additional investment was sold and the remaining investment is under contract to be sold. TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI, LLP New York, New York May 20, 2003 23 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners New Jersey, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of New Jersey, Ltd. as of December 31, 2000. This financial statement is the responsibility of the partnership's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above present fairly, in all material respects, the changes in net assets in liquidation for the year ended December 31, 2000 in conformity with generally accepted accounting principles. As described in note A to the financial statement, effective as of June 19, 2000, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. On December 20, 2000, the partnership sold the rental property. As a result, the partnership's financial statement is presented on the liquidation basis of accounting. Our audit was made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information on pages 8 through 10 is presented for purposes of additional analysis and is not a required part of the basic financial statement. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland February 2, 2001 24 [Letterhead of Browder & Associates, P.C.] INDEPENDENT AUDITORS' REPORT To the Partners Caddo Parish-Villas South, Ltd. We have audited the accompanying statement of Caddo Parish-Vallas South, Ltd., a limited partnership organized under the laws of the State of Louisiana, as of December 31, 2002, and the related statement of changes in net assets in liquidation for the year then ended. This financial statement is the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note A, the Partnership's policy is to prepare its financial statements on the liquidation basis of accounting. In our opinion, the financial statement referred to above presents fairly, in all material respects, the net assets in liquidation of Caddo Parish-Villas South, Ltd. As of December 31, 2002, and the changes in net assets in liquidation for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Browder & Associates, P.C. Birmingham, Alabama March 13, 2003 25 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Zeigler Boulevard, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of Zeigler Boulevard, Ltd. for the period January 1, 2002 through May 31, 2002. This financial statement is the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above presents fairly, in all material respects, the changes in net assets in liquidation for the period January 1, 2002 through Mary 31, 2002, in conformity with accounting principles generally accepted in the United States of America. As discussed in note A to the financial statement, during 2001, the Partnership adopted a plan to sell the rental property and liquidate the Partnership in lieu of continuing the business. On March 27, 2002, the Partnership sold the rental property. As a result, the partnership's financial statement is presented on the liquidation basis of accounting. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 8 through 10 is presented for purposes of additional analysis and is not a required part of the basic financial statement. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statement taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland August 1, 2002 26 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Zeigler Boulevard, Ltd. We have audited the accompanying statement of net assets in liquidation of Zeigler Boulevard, Ltd. as of December 31, 2001, and the related statement of changes in net assets in liquidation for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in note A to the financial statements, during 2001, the Partnership adopted a plan to sell the rental property and liquidate the Partnership in lieu of continuing the business. As a result, the partnership's financial statements are presented on the liquidation basis of accounting. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Zeigler Boulevard, Ltd., as of December 31, 2001, and the changes in net assets in liquidation for the year then ended, in conformity with accounting principles generally accepted in the United States of America. As discussed in note A to the financial statements, there is a letter of intent to purchase the property. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 11 through 13 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland February 25, 2002 27 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Zeigler Boulevard, Ltd. We have audited the accompanying balance sheet of Zeigler Boulevard, Ltd. as of December 31, 2000, and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Zeigler Boulevard, Ltd., as of December 31, 2000, and the results of its operations, the changes in partners' equity and its cash flows for the year then ended, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 21 through 25 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated March 14, 2001 on our consideration of Zeigler Boulevard, Ltd's internal control and on its compliance with specific requirements applicable to major HUD programs and fair housing and non-discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. /s/ Reznick Fedder & Silverman Lead Auditor: Stephen Shumrak Bethesda, Maryland Taxpayer Identification Number: 52-1088612 March 14, 2001 28 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Eastwyck III, Ltd. We have audited the accompanying statement of net assets in liquidation of Eastwyck III, Ltd. as of March 26, 2002, and the related statement of changes in net assets in liquidation for the period January 1, 2002 through March 26, 2002. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in note A to the financial statements, during 2001, the Partnership adopted a plan to sell the rental property and liquidate the Partnership in lieu of continuing the business. As a result, the Partnership's financial statements are presented on the liquidation basis of accounting. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Eastwyck III, Ltd., as of March 26, 2002, and the changes in net assets in liquidation for the January 1, 2002 through March 26, 2002, in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 11 through 13 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland August 1, 2002 29 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Eastwyck III, Ltd. We have audited the accompanying statement of net assets in liquidation of Eastwyck III, Ltd. as of December 31, 2001, and the related statement of changes in net assets in liquidation for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in note A to the financial statements, during 2001, the Partnership adopted a plan to sell the rental property and liquidate the Partnership in lieu of continuing the business. As a result, the Partnership's financial statements are presented on the liquidation basis of accounting. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Eastwyck III, Ltd., as of December 31, 2001, and the changes in net assets in liquidation for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 11 through 13 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland February 25, 2002 30 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Eastwyck III, Ltd. We have audited the accompanying balance sheet of Eastwyck III, Ltd., as of December 31, 2000, and the related statements of operations, partners' equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Eastwyck III, Ltd., as of December 31, 2000, and the results of its operations, the changes in partners' equity (deficit) and its cash flows for the year then ended, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 20 through 23 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated March 14, 2001 on our consideration of Eastwyck III, Ltd.'s internal control and on its compliance with specific requirements applicable to major HUD programs and fair housing and non-discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. /s/ Reznick Fedder & Silverman Lead Auditor: Stephen Shumrak Bethesda, Maryland Taxpayer Identification Number: 52-1088612 March 14, 2001 31 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the partners of Breckenridge-Chaparral Apartments II, Ltd. Breckenridge, Texas We have audited the accompanying balance sheet of Breckenridge-Chaparral Apartments II, Ltd., Project No. 113-44016-LD, as of October 31, 2002, and the related statements of profit and loss, changes in owners' equity, and cash flows for the period then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of October 31, 2002 and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated November 30, 2002 on our consideration of the Project's internal controls and on our tests of its compliance with certain laws, regulations contracts, and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 November 30, 2002 32 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the Partners of Breckenridge-Chaparral Apartments II, Ltd. Breckenridge, Texas We have audited the accompanying balance sheet of Breckenridge-Chaparral Apartments II, Ltd. (the Project), Project No. 113-44016-LD as of December 31, 2001, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2001 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2002 on our consideration of the Project's internal controls and reports dated January 15, 2002 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, specific requirements applicable to the nonmajor HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2002 33 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the Partners of Breckenridge-Chaparral Apartments II, Ltd. Breckenridge, Texas We have audited the accompanying balance sheet of Breckenridge-Chaparral Apartments II, Ltd. (the Project), Project No. 113-44016-LD as of December 31, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2000 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2001 on our consideration of the Project's internal controls and reports dated January 15, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, specific requirements applicable to the nonmajor HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2001 34 [Letterhead of Reznick, Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Westwood Apartments Company, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of Westwood Apartments Company, Ltd. for the year ended December 31, 2000. This financial statement is the responsibility of the partnership's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above present fairly, in all material respects, the changes in net assets in liquidation for the year ended December 31, 2000, in conformity with generally accepted accounting principles. As described in note A to the financial statement, during 1999, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. On September 14, 2000, the partnership sold the rental property. As a result, the partnership's financial statement is presented on the liquidation basis of accounting. Our audit was made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information on pages 8 through 10 is presented for purposes of additional analysis and is not a required part of the basic financial statement. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statement and, in our opinion, is fairly stated in all material respects in relation to the basic financial statement taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland January 15, 2001 35 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Parktowne, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of Parktowne, Ltd. as of December 31, 2000. This financial statement is the responsibility of the partnership's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above present fairly, in all material respects, the changes in net assets in liquidation for the year ended December 31, 2000, in conformity with generally accepted accounting principles. As described in note A to the financial statement, during 1999, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. On September 14, 2000, the partnership sold the rental property. As a result, the partnership's financial statement is presented on the liquidation basis of accounting. Our audit was made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information on pages 8 through 10 is presented for purposes of additional analysis and is not a required part of the basic financial statement. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statement and, in our opinion, is fairly stated in all material respects in relation to the basic financial statement taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland January 16, 2001 36 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the partners of Oso Bay Apartments, Ltd. Corpus Christi, Texas We have audited the accompanying balance sheet of Oso Bay Apartments, Ltd., Project No. 115-44129-LDP, as of October 31, 2002, and the related statements of profit and loss, changes in owners' equity, and cash flows for the period then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of October 31, 2002 and the results of its operations and cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued reports dated November 30, 2002 on our consideration of the Project's internal controls and on our tests of its compliance with certain laws, regulations, contracts, and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ BROWDER & ASSOCIATES P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 November 30, 2002 37 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the Partners of Corpus Christi-Oso Bay Apartments, Ltd. Corpus Christi, Texas We have audited the accompanying balance sheet of Corpus Christi-Oso Bay Apartments, Ltd. (the Project), Project No. 115-44129-LDP, as of December 31, 2001, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2001 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2002 on our consideration of the Project's internal controls and reports dated January 15, 2002 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD programs, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ BROWDER & ASSOCIATES P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2002 38 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the Partners of Corpus Christi-Oso Bay Apartments, Ltd. Corpus Christi, Texas We have audited the accompanying balance sheet of Corpus Christi-Oso Bay Apartments, Ltd. (the Project), Project No. 115-44129-LDP, as of December 31, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2000 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2001 on our consideration of the Project's internal controls and reports dated January 15, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD programs, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ BROWDER & ASSOCIATES P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2001 39 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the partners of Lafayette Square Apartments, Ltd. Albuquerque, New Mexico We have audited the accompanying balance sheet of Lafayette Square Apartments, Project No. 116-44022-LDP, as of October 31, 2002, and the related statements of profit and loss, changes in owners' equity, and cash flows for the period then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of October 31, 2002 and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued reports dated November 30, 2002 on our consideration of the Project's internal controls and on our tests of its compliance with certain laws, regulations, contracts, and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 November 30, 2002 40 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Albuquerque-Lafayette Square Apartments, Ltd. Albuquerque, New Mexico We have audited the accompanying balance sheet of Albuquerque-Lafayette Square Apartments, Ltd. (the Project), Project No. 116-44022-LDP, as of December 31, 2001, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2001 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2002 on our consideration of the Project's internal controls and reports dated January 15, 2002 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, specific requirements applicable to the nonmajor HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2002 41 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Albuquerque-Lafayette Square Apartments, Ltd. Albuquerque, New Mexico We have audited the accompanying balance sheet of Albuquerque-Lafayette Square Apartments, Ltd. (the Project), Project No. 116-44022-LDP, as of December 31, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2000 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2001 on our consideration of the Project's internal controls and reports dated January 15, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, specific requirements applicable to the nonmajor HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2001 42 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of San Diego-Logan Square Gardens Company San Diego, California We have audited the accompanying balance sheet of San Diego-Logan Square Gardens Company, Project No. 129-44051-LD, as of July 11, 2002, and the related statements of profit and loss, changes in owners' equity, and cash flows for the period then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of July 11, 2002 and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued reports dated July 16, 2002 on our consideration of the Project's internal controls and on our tests of its compliance with certain laws, regulations, contracts, and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 July 16, 2002 43 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of San Diego-Logan Square Gardens Company HUD Field Office Director San Diego, California San Diego, CA We have audited the accompanying balance sheet of San Diego-Logan Square Gardens Company (the Project), Project No. 129-44051-LD, as of December 31, 2001, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2001 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2002 on our consideration of the Project's internal controls and reports dated January 15, 2002 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD programs, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2002 44 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of San Diego-Logan Square Gardens Company HUD Field Office Director San Diego, California San Diego, CA We have audited the accompanying balance sheet of San Diego-Logan Square Gardens Company (the Project), Project No. 129-44051-LD, as of December 31, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2000 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Project will continue as a going concern. As discussed in the Notes to the Financial Statements, the Project is in a poor cash position. This condition raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in the footnotes to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2001 on our consideration of the Project's internal controls and reports dated January 15, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD programs, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2001 45 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the partners of Blue Ridge Manor Apartments, Ltd. Grandview, Missouri We have audited the accompanying balance sheet of Blue Ridge Manor Apartments, Project No. 084-44127-LDP, as of October 31, 2002, and the related statements of profit and loss, changes in owners' equity, and cash flows for the period then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of October 31, 2002 and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued reports dated November 30, 2002 on our consideration of the Project's internal controls and on our tests of its compliance with certain laws, regulations, contracts, and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 November 30, 2002 46 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Blue Ridge Manor, Ltd. HUD Field Office Director Grandview, Missouri Kansas City, MO We have audited the accompanying balance sheet of Blue Ridge Manor, Ltd. (the Project), Project No. 084-44127-LDP, as of December 31, 2001, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2001 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2002 on our consideration of the Project's internal controls and reports dated January 15, 2002 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2002 47 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Blue Ridge Manor, Ltd. HUD Field Office Director Grandview, Missouri Kansas City, MO We have audited the accompanying balance sheet of Blue Ridge Manor, Ltd. (the Project), Project No. 084-44127-LDP, as of December 31, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2000 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2001 on our consideration of the Project's internal controls and reports dated January 15, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2001 48 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the partners of Ardmore-Rolling Meadows of Ardmore, Ltd. Ardmore, Texas We have audited the accompanying balance sheet of Ardmore-Rolling Meadows of Ardmore, Ltd., Project No. 117-44044-LD, as of October 31, 2002, and the related statements of profit and loss, changes in owners' equity, and cash flows for the period then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of October 31, 2002 and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued reports dated November 30, 2002 on our consideration of the Project's internal controls and on our tests of its compliance with certain laws, regulations, contracts, and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 November 30, 2002 49 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Ardmore-Rolling Meadows of Ardmore, Ltd. HUD Field Office Director Ardmore, Oklahoma Oklahoma City, OK We have audited the accompanying balance sheet of Ardmore-Rolling Meadows of Ardmore, Ltd. (the Project), Project No. 117-44044-LD, as of December 31, 2001, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2001 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2002 on our consideration of the Project's internal controls and reports dated January 15, 2002 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD programs, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2002 50 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Ardmore-Rolling Meadows of Ardmore, Ltd. HUD Field Office Director Ardmore, Oklahoma Oklahoma City, OK We have audited the accompanying balance sheet of Ardmore-Rolling Meadows of Ardmore, Ltd. (the Project), Project No. 117-44044-LD, as of December 31, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2000 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2001 on our consideration of the Project's internal controls and reports dated January 15, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD programs, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2001 51 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the partners of El Paso-Gateway East Apartments El Paso, Texas We have audited the accompanying balance sheet of El Paso Gateway East Apartments, Project No. 133-44016-LD, as of December 31, 2002, and the related statements of profit and loss, changes in owners' equity, and cash flows for the period then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2002 and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued reports dated January 22, 2003 on our consideration of the Project's internal controls and on our tests of its compliance with certain laws, regulations, contracts, and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 22, 2003 52 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of El Paso-Gateway East Apartments, Ltd. HUD Field Office Director El Paso, Texas Fort Worth, TX We have audited the accompanying balance sheet of El Paso-Gateway East Apartments, Ltd. (the Project), Project No. 133-44016-LD, as of December 31, 2001, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2001 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2002 on our consideration of the Project's internal controls and reports dated January 15, 2002 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, specific requirements applicable to the nonmajor HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2002 53 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of El Paso-Gateway East Apartments, Ltd. HUD Field Office Director El Paso, Texas Fort Worth, TX We have audited the accompanying balance sheet of El Paso-Gateway East Apartments, Ltd. (the Project), Project No. 133-44016-LD, as of December 31, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2000 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2001 on our consideration of the Project's internal controls and reports dated January 15, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, specific requirements applicable to the nonmajor HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2001 54 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the partners of Fort Worth-Northwood Apartments, Ltd. Forth Worth, Texas We have audited the accompanying balance sheet of Forth Worth-Northwood Apartments, Ltd., Project No. 113-44025-LDP-SUP, as of October 31, 2002, and the related statements of profit and loss, changes in owners' equity, and cash flows for the period then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of October 31, 2002 and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued reports dated November 30, 2002 on our consideration of the Project's internal controls and on our tests of its compliance with certain laws, regulations, contracts, and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 November 30, 2002 55 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Fort Worth-Northwood Apartments, Ltd. HUD Field Office Director Fort Worth, Texas Fort Worth, TX We have audited the accompanying balance sheet of Fort Worth-Northwood Apartments, Ltd. (the Project), Project No. 113-44025-LDP-SUP, as of December 31, 2001, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2001 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2002 on our consideration of the Project's internal controls and reports dated January 15, 2002 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2002 56 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Fort Worth-Northwood Apartments, Ltd. HUD Field Office Director Fort Worth, Texas Fort Worth, TX We have audited the accompanying balance sheet of Fort Worth-Northwood Apartments, Ltd. (the Project), Project No. 113-44025-LDP-SUP, as of December 31, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2000 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2001 on our consideration of the Project's internal controls and reports dated January 15, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, specific requirements applicable to the nonmajor HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2001 57 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the partners of Stephenville-Tarleton Arms Apartments, Ltd. Stephenville, Texas We have audited the accompanying balance sheet of Stephenville-Tarleton Arms Apartments, Ltd., Project No. 113-44034-LD, as of October 31, 2002, and the related statements of profit and loss, changes in owners' equity, and cash flows for the period then ended. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of October 31, 2002 and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued reports dated November 30, 2002 on our consideration of the Project's internal controls and on our tests of its compliance with certain laws, regulations, contracts, and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 November 30, 2002 58 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Stephenville-Tarleton Arms Apartments, Ltd. HUD Field Office Director Stephenville, Texas Fort Worth, TX We have audited the accompanying balance sheet of Stephenville-Tarleton Arms Apartments, Ltd. (the Project), Project No. 113-44034-LD, as of December 31, 2001, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2001 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2002 on our consideration of the Project's internal controls and reports dated January 15, 2002 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2002 59 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Stephenville-Tarleton Arms Apartments, Ltd. HUD Field Office Director Stephenville, Texas Fort Worth, TX We have audited the accompanying balance sheet of Stephenville-Tarleton Arms Apartments, Ltd. (the Project), Project No. 113-44034-LD, as of December 31, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2000 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 15, 2001 on our consideration of the Project's internal controls and reports dated January 15, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, specific requirements applicable to the nonmajor HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2001 60 [Ercolini & Company LLP Letterhead] INDEPENDENT AUDITOR'S REPORT The General Partners of Bay Village Company (a Massachusetts Limited Partnership) Boston, Massachusetts We have audited the accompanying balance sheets of Bay Village Company (a Massachusetts Limited Partnership) as of December 31, 2002 and 2001 and the related statements of income, partners' equity, and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bay Village Company as of December 31, 2002 and 2001, and the results of its operations, changes in partners' equity, and its cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. /s/ Robert Ercolini & Company LLP Boston, Massachusetts January 24, 2003 61 [Robert Ercolini & Company LLP Letterhead] INDEPENDENT AUDITOR'S REPORT The General Partners of Bay Village Company (a Massachusetts Limited Partnership) Boston, Massachusetts We have audited the accompanying balance sheets of Bay Village Company (a Massachusetts Limited Partnership) as of December 31, 2001 and 2000 and the related statements of operations, partners' equity, and cash flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bay Village Company as of December 31, 2001 and 2000, and the results of its operations, changes in partners' equity, and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. /s/ Robert Ercolini & Company LLP Boston, Massachusetts January 21, 2002 62 [CFL Accounting Services Letterhead] Independent Auditors' Report To The Partners of Buena Vista Manor Apartments, Ltd. I have audited the accompanying balance sheet of Buena Vista Manor Apartments, Ltd. as of November 26, 2001, and the related statements of income, changes in partners' capital, and cash flows for the eleven months then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit. The financial statements of Buena Vista Manor Apartments, Ltd. as of December 31, 2000 were audited by other auditors whose report dated January 20, 2001 expressed an unqualified opinion on those statements. I conducted my audit in accordance with U.S. generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Buena Vista Manor Apartments, Ltd., as of November 26, 2001, and the results of its operations, changes in partners' capital, and cash flows for the eleven months then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, I have also issued a report dated January 20, 2001, on my consideration of Buena Vista Manor Apartments, Ltd.'s internal control, and reports dated January 20, 2001, on its compliance with specific requirements applicable to its major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. My audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information included in the report is presented for the purposes of additional analysis and is not a required part of the basic financial statements of Buena Vista Manor Apartments, Ltd. Such information has been subjected to the auditing procedures applied to the audit of the basic financial statements and, in my opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. /s/ CFL Accounting Services Nashville, Tennessee February 7, 2002 63 [Akersloot, Patterson & Associates, P.L.L.C. Letterhead] Independent Auditors' Report To The Partners of Buena Vista Manor Apartments, Ltd. We have audited the accompanying balance sheet of Buena Vista Manor Apartments, Ltd. (a limited partnership), which includes HUD Project No. 086-35009-SUP-LD as of December 31, 2000, and the related statements of operations, changes in partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the "Guide") issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Buena Vista Manor Apartments, Ltd., (a limited partnership) as of December 31, 2000, and the results of its operations, changes in partners' equity, and its cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 20, 2001, on our consideration of Buena Vista Manor Apartments, Ltd.'s internal control, and reports dated January 20, 2001, on its compliance with specific requirements applicable to its major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information included in the report is presented for the purposes of additional analysis and is not a required part of the basic financial statements of Buena Vista Manor Apartments, Ltd. (a limited partnership). Such information has been subjected to the auditing procedures applied to the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Akersloot, Patterson & Associates, P.L.L.C. January 20, 2001 Brentwood, Tennessee 64 [CBEW Professional Group, LLP. Letterhead] Independent Auditor's Report To the Partners Rolling Meadows Apartments, Ltd. We have audited the accompanying balance sheet of Rolling Meadows Apartments, Ltd., (A Limited Partnership) , as of December 31, 2001 and 2000, and the related statements of income, changes in partners' capital (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Rolling Meadows Apartments, Ltd. at December 31, 2001 and 2000 and the results of its operations and changes in partners' capital (deficit) and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ CBEW Professional Group, LLP Certified Public Accountants Cushing, Oklahoma January 3, 2002 65 [EDWARD LEMKIN Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Westgate Associates Limited I have audited the accompanying balance sheet of Westgate Associates Limited, HUD Project No.: 026-44008-SHM (a Vermont limited partnership) as of December 1, 2000, and the related statements of income, changes in partners' capital, and cash flows for the period then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards and Governing Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Westgate Associates Limited, HUD Project No.: 026-44008-SHM, as of December 1, 2000, and the results of its operations, changes in partners' capital, and its cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, I have also issued a report dated January 4, 2001, on my consideration of Westgate Associates Limited's internal control and reports dated January 4, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to Fair Housing and Non-Discrimination, and specific requirements applicable to nonmajor HUD programs transactions. My audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information shown on pages 16-18 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Westgate Associates Limited. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Edward Lemkin Certified Public Accountant Orange, Connecticut January 4, 2001 66 [EDWARD LEMKIN Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Wingate Associates Limited Bridgeport, Connecticut I have audited the accompanying statements of income, gain on sale of apartment project, changes in partners' capital, and cash flows of Wingate Associates Limited, HUD Project No.: 024-44018-LDP (a New Hampshire limited partnership), for the period January 1, 2002 to December 18, 2002. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the statements of income, gain on sale of apartment project, changes in partners' capital, and cash flows referred to above present fairly, in all material respects, the results of operations of Wingate Associates Limited for the period January 1, 2002 to December 18, 2002, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, I have also issued my reports dated January 30, 2003, on my consideration of Wingate Associates Limited's internal control and on my tests of its compliance with certain provisions of laws, regulations, contracts, and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of my audit. The accompanying supplementary information shown on pages 17-18 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Wingate Associates Limited. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Edward Lemkin Certified Public Accountant Orange, Connecticut January 30, 2003 67 [EDWARD LEMKIN Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Wingate Associates Limited I have audited the accompanying balance sheet of Wingate Associates Limited, HUD Project No.: 024-44018-LDP (a New Hampshire limited partnership), as of December 31, 2001, and the related statements of income, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wingate Associates Limited, HUD Project No.: 024-44018-LDP, as of December 31, 2001, and the results of its operations, changes in partners' capital, and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, I have also issued a report dated January 25, 2002, on my consideration of Wingate Associates Limited's internal control and reports dated January 25, 2002, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to Fair Housing and Non-Discrimination, and specific requirements applicable to nonmajor HUD programs transactions. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of my audit. My audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information shown on pages 19-21 is presented for purposes of additional analysis and is not a required part of the basic financial statements of the partnership. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Edward Lemkin Certified Public Accountant Orange, Connecticut January 25, 2002 68 [EDWARD LEMKIN Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Wingate Associates Limited I have audited the accompanying balance sheet of Wingate Associates Limited, HUD Project No.: 024-44018-LDP (a New Hampshire limited partnership), as of December 31, 2000, and the related statements of income, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wingate Associates Limited, HUD Project No.: 024-44018-LDP, as of December 31, 2000, and the results of its operations, changes in partners' capital, and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, I have also issued a report dated January 20, 2001, on my consideration of Wingate Associates Limited's internal control and reports dated January 20, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to Fair Housing and Non-Discrimination, and specific requirements applicable to nonmajor HUD programs transactions. My audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information shown on pages 17-20 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Wingate Associates Limited. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Edward Lemkin Certified Public Accountant Orange, Connecticut January 20, 2001 69 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Cedar Hill Apartments: We have audited the accompanying balance sheet of Cedar Hill Apartments, (the "Partnership") as of December 31, 2001 and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cedar Hill Apartments as of December 31, 2001, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 16, 2002, on our consideration of Cedar Hill Apartments' internal control and reports dated January 16, 2002, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information shown on pages 10 and 11 is presented for the purpose of additional analysis and are not a required part of the basic financial statements of Cedar Hill Apartments. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 16, 2002 70 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Cedar Hill Apartments: We have audited the accompanying balance sheet of Cedar Hill Apartments, (the "Partnership") as of December 31, 2000 and the related statements of income, changes in partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Cedar Hill Apartments as of December 31, 2000, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 29, 2001, on our consideration of Cedar Hill Apartments' internal control and reports dated January 29, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information shown on pages 9 and 10 is presented for the purpose of additional analysis and are not a required part of the basic financial statements of Cedar Hill Apartments. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 29, 2001 71 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Char-Mur Apartments: We have audited the accompanying special-purpose balance sheet of Char-Mur Apartments (the "Partnership") as of March 16, 2001, and the related special-purpose statements of income, partners' equity, and cash flows for the period then ended. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partner, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying special-purpose financial statements have been prepared, as described in Note 1 to the financial statements, for the purpose of consolidation with those of Cambridge + Related Housing Properties Limited Partnership ("Cambridge"), and on the basis of accounting practices specified by the management of Cambridge. These financial statements are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America. In our opinion, such special-purpose financial statements present fairly, in all material respects, the financial position of the Partnership as of March 16, 2001, and the results of its operations and its cash flows for the period then ended in conformity with basis of accounting described in Note 1. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 1 and 8 to the financial statements, the Partnership sold its sole revenue producing asset during the period and its liabilities exceed its assets by approximately $120,000 at March 16, 2001, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. This report is intended solely for the information and use of the partners of Char-Mur Apartments, management and Cambridge and should not be used for any other purpose. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas June 13, 2001 72 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Char-Mur Apartments: We have audited the accompanying financial statements of Char-Mur Apartments (the "Partnership") as of December 31, 2000, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partner, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2000, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 1 to the financial statements, the Partnership has incurred a net loss and its total current liabilities exceed its total current assets, which raises substantial doubt about its ability to continue as a going concern. Management's plan regarding those matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. In accordance with Government Auditing Standards, and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated February 9, 2001, on our consideration of Char-Mur Apartments' internal control and reports dated February 9, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information shown on pages 10 and 11 are presented for the purpose of additional analysis and are not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas February 9, 2001 73 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Crossett Apartments, Ltd.: We have audited the accompanying financial statements of Crossett Apartments, Ltd. (the "Partnership") as of December 31, 2001, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2001, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 16, 2002, on our consideration of Crossett Apartments, Ltd.'s internal control, and reports dated January 16, 2002, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions and specific requirement applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information on pages 9 and 10 are presented for purposes of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 16, 2002 74 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Crossett Apartments, Ltd.: We have audited the accompanying balance sheet of Crossett Apartments, Ltd. (the "Partnership") as of December 31, 2000, and the related statements of income, changes in partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2000, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of Hud Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 20, 2001, on our consideration of Crossett Apartments, Ltd.'s internal control and reports dated January 20, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions, and specific requirement applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information on pages 9-10 are presented for purposes of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 20, 2001 75 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS February 28, February 28, 2003 2002* ------------ ------------ Property and equipment - at cost, less accumulated depreciation (Notes 2, 4, 6 and 7) $ 0 $ 5,941,766 Property and equipment-held for sale 5,029,926 16,273,634 Cash and cash equivalents (Notes 2 and 11) 851,768 780,650 Cash - restricted for tenants' security deposits 11,457 235,380 Mortgage escrow deposits (Notes 5, 6 and 11) 1,207,847 6,203,393 Rents receivable 8,372 194,567 Prepaid expenses and other assets 334,407 955,391 ------------ ------------ Total assets $ 7,443,777 $ 30,584,781 ============ ============ LIABILITIES AND PARTNERS' DEFICIT Mortgage notes payable (Notes 6 and 11) $ 2,953,940 $ 16,740,978 Purchase money notes payable (Note 7) 2,408,117 16,067,193 Due to selling partners (Note 7) 3,685,011 24,289,106 Accounts payable, accrued expenses and other liabilities 374,298 2,362,862 Tenants' security deposits payable 11,457 235,380 Due to general partners of subsidiaries and their affiliates (Note 8) 33,423 8,423 Due to general partners and affiliates (Note 8) 2,685,431 2,447,759 ------------ ------------ 12,151,677 62,151,701 Minority interest (Note 2) (91,601) 153,784 ------------ ------------ Commitments and contingencies (Note 11) Partners' deficit: Limited partners (4,121,609) (30,954,969) General Partners (494,690) (765,735) ------------ ------------ Total partners' deficit (4,616,299) (31,720,704) ------------ ------------ Total liabilities and partners' deficit $ 7,443,777 $ 30,584,781 ============ ============
* As restated - see note 12 See accompanying notes to consolidated financial statements. 76 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Year Ended February 28, ------------------------------------------ 2003 2002* 2001 ------------ ------------ ------------ Revenues Rentals, net $ 7,446,674 $ 11,526,261 $ 13,309,693 Other 415,327 807,705 945,008 Gain on sale of properties (Note 10) 25,094,655 5,463,757 2,576,887 ------------ ------------ ------------ Total revenues 32,956,656 17,797,723 16,831,588 ------------ ------------ ------------ Expenses Administrative and management 1,864,265 2,943,077 3,311,645 Administrative and management-related parties (Note 8) 1,215,390 1,462,655 1,672,915 Operating 1,549,319 2,335,867 2,426,925 Repairs and maintenance 1,769,229 2,939,677 3,475,553 Taxes and insurance 1,137,048 1,446,091 1,610,907 Financial, principally interest 1,021,743 2,184,701 2,997,610 Depreciation 352,194 1,137,341 1,606,397 ------------ ------------ ------------ Total expenses 8,909,188 14,449,409 17,101,952 ------------ ------------ ------------ Income (loss) before minority interest and extraordinary item 24,047,468 3,348,314 (270,364) Minority interest in income (loss) of subsidiaries 225,786 6,242 (2,300) ------------ ------------ ------------ Income (loss) before extraordinary item 24,273,254 3,354,556 (272,664) Extraordinary item - forgiveness of indebtedness income (Note 10) 2,831,151 4,456,996 10,348,388 ------------ ------------ ------------ Net income $ 27,104,405 $ 7,811,552 $ 10,075,724 ============ ============ ============ Income (loss) before extraordinary item - limited partners $ 24,030,522 $ 3,321,010 $ (269,938) Extraordinary item - limited partners 2,802,839 4,412,426 10,244,904 ------------ ------------ ------------ Net income - limited partners $ 26,833,361 $ 7,733,436 $ 9,974,966 ============ ============ ============ Number of limited partnership units outstanding 10,038 10,038 10,038 ============ ============ ============ Income (loss) before extraordinary item per limited partnership unit $ 2,394 $ 331 $ (27) Extraordinary item per limited partnership unit 279 440 1,020 ------------ ------------ ------------ Net income per limited partnership unit $ 2,673 $ 771 $ 993 ============ ============ ============
* As reclassified for comparative purposes and restated - see note 12. See accompanying notes to consolidated financial statements. 77 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
Limited General Total Partners Partners ------------ ------------ ------------ Balance - March 1, 2000 (49,091,680) (48,152,233) (939,447) Net income - year ended February 28, 2001 10,075,724 9,974,966 100,758 Distributions (516,300) (511,139) (5,161) ------------ ------------ ------------ Balance - February 28, 2001 (39,532,256) (38,688,406) (843,850) Net income - year ended February 28, 2002 - as restated (see Note 12) 7,811,552 7,733,436 78,116 ------------ ------------ ------------ Balance - February 28, 2002 - as restated (see Note 12) (31,720,704) (30,954,970) (765,734) Net income - year ended February 28, 2003 27,104,405 26,833,361 271,044 ------------ ------------ ------------ Balance - February 28, 2003 $ (4,616,299) $ (4,121,609) $ (494,690) ============ ============ ============
See accompanying notes to consolidated financial statements. 78 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (decrease) in Cash and Cash Equivalents
Year Ended February 28, -------------------------------------------- 2003 2002* 2001 ------------ ------------ ------------ Cash flows from operating activities: Net income $ 27,104,405 $ 7,811,552 $ 10,075,724 ------------ ------------ ------------ Adjustments to reconcile net income to net cash (used in) provided by operating activities: Gain on sale of properties (Note 10) (25,094,655) (5,463,757) (2,576,887) Extraordinary item - forgiveness of indebtedness income (Note 10) (2,831,151) (4,456,996) (10,348,388) Depreciation 352,194 1,137,341 1,606,397 (Increase) decrease in assets: Cash - restricted for tenants' security deposits 21,883 (2,805) 136,769 Mortgage escrow deposits 101,301 (436,686) (178,953) Rents receivable 75,609 (28,409) (168,786) Prepaid expenses and other assets 25,655 383,168 216,327 Increase (decrease) in liabilities: Due to selling partners 917,354 1,265,343 2,082,541 Accounts payable, accrued expenses and other liabilities (839,584) 492,760 (241,568) Tenants' security deposits payable (39,846) (1,284) (106,395) Increase in due to general partners of subsidiaries and their affiliates 55,000 2,998 54,053 Decrease in due to general partners of subsidiaries and their affiliates (30,000) (165,473) (21,281) Due to general partners and affiliates 237,672 751,235 188,506 Minority interest in (loss) income of subsidiaries (225,786) (6,242) 2,300 ------------ ------------ ------------ Total adjustments (27,274,354) (6,528,807) (9,355,365) ------------ ------------ ------------ Net cash (used in) provided by operating activities (169,949) 1,282,745 720,359 ------------ ------------ ------------ Cash flows from investing activities: Proceeds from sale of properties 13,893,200 2,564,158 13,529,600 Costs paid relating to sale of properties (1,496,160) 0 (547,886) Acquisition of property and equipment (486,918) (592,837) (533,266) Decrease (increase) in mortgage escrow deposits 657,293 (634,668) (321,601) ------------ ------------ ------------ Net cash provided by investing activities 12,567,415 1,336,653 12,126,847 ------------ ------------ ------------
79 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (decrease) in Cash and Cash Equivalents (continued)
Year Ended February 28, -------------------------------------------- 2003 2002* 2001 ------------ ------------ ------------ Cash flows from financing activities: Distributions 0 (516,300) (1,004,200) Principal payments of mortgage notes payable (5,012,921) (2,845,578) (8,680,311) Payments to selling partners (4,104,999) (284,433) (118,247) Principal payments of purchase money notes payable (3,188,829) (796,274) (4,001,078) (Decrease) increase in minority interest (19,599) 126,378 2,416 ------------ ------------ ------------ Net cash used in financing activities (12,326,348) (4,316,207) (13,801,420) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 71,118 (1,696,809) (954,214) Cash and cash equivalents, beginning of year 780,650 2,477,459 3,431,673 ------------ ------------ ------------ Cash and cash equivalents, end of year $ 851,768 $ 780,650 $ 2,477,459 ============ ============ ============ Supplemental disclosure of cash flows information: Cash paid during the year for interest $ 4,161,021 $ 513,569 $ 881,422 ============ ============ ============ Supplemental disclosures of noncash investing and financing activities: Distributions payable $ 0 $ 0 $ 516,300 Increase in property and equipment-held for sale reclassified from property and equipment 5,589,572 10,578,791 1,331,305 Increase in purchase money notes payable due to the capitalization of prepaid expenses and other assets 177,053 232,803 340,337 Forgiveness of indebtedness (Note 10): (Decrease) increase in purchase money notes payable (720,000) 1,643,270 (2,174,744) Decrease in due to selling partners (2,089,453) (2,813,726) (8,173,644) Decrease in accounts payable, accrued expenses and other liabilities (21,698) 0 0
80 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Increase (decrease) in Cash and Cash Equivalents (continued)
Year Ended February 28, -------------------------------------------- 2003 2002* 2001 ------------ ------------ ------------ Summarized below are the components of the gain on sale of properties: Decrease in property and equipment, net of accumulated depreciation $ 0 $ 2,313,463 $ 0 Decrease in property and equipment-held for sale 17,320,198 3,491,217 10,074,931 Decrease in cash-restricted for tenants' security deposits 202,040 51,018 0 Decrease in rents receivable 110,586 85,253 47,606 Decrease in mortgage escrow deposits 4,236,952 478,995 195,540 Decrease in prepaid expenses and other assets 772,382 113,347 82,810 (Decrease) increase in accounts payable, accrued expenses and other liabilities (1,127,282) 27,268 170,965 Decrease in tenants' security deposits payable (184,077) (46,929) (30,374) Decrease in mortgage notes payable (8,774,117) (1,625,397) 0 Decrease in due to general partners of subsidiaries and affiliates 0 (51,382) (136,651) Decrease in purchase money notes payable (9,927,300) (2,937,300) 0 Decrease in due to selling partners (15,326,997) (4,600,946) 0 Increase (decrease) in due to general partners and their affiliates 0 (198,206) 0
* As restated - see note 12 See accompanying notes to consolidated financial statements. 81 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 NOTE 1 - Organization Cambridge + Related Housing Properties Limited Partnership, (the "Partnership") was formed pursuant to the laws of the State of Massachusetts on April 28, 1983. The Partnership invests, as a limited partner, in other limited partnerships (referred to herein as "Local Partnerships", "subsidiary" or "subsidiary partnerships"), each of which owns and operates an existing apartment complex (an "Apartment Complex") which is receiving some form of local, State or Federal assistance, including mortgage insurance, rental assistance payments, permanent mortgage financing and/or interest reduction payments ("Government Assistance"). The general partners of the Partnership are Government Assisted Properties, Inc. (the "Assisted General Partner") and Related Housing Programs Corporation (the "Related General Partner"), both of which are Delaware corporations affiliated with an affiliate of The Related Companies, L.P. ("Related"), a New York limited partnership, and Cambridge/Related Housing Associates Limited Partnership ("Cambridge Related Associates"), a Massachusetts limited partnership, (together, the "General Partners"). The general partners of Cambridge Related Associates are the Assisted General Partner and the Related General Partner. Pursuant to the public offering, which occurred during 1983 through 1985, the Partnership received $50,190,000 of gross proceeds from 4,297 investors. No further issuance of Initial Limited Partnership Interests or Additional Limited Partnership Interests is anticipated. As of February 28, 2003, the Partnership holds an interest in each of the remaining Local Partnerships, which own Apartment Complexes receiving Government Assistance. During the fiscal year ended February 28, 2003, the properties and the related assets and liabilities owned by three Local Partnerships were sold and the Partnership's Local Partnership Interest in nine other Local Partnerships were sold. Through the fiscal year ended February 28, 2003, the properties and the related assets and liabilities owned by eighteen Local Partnerships were sold and the Partnership's Local Partnership Interest in twenty-four other Local Partnerships were sold (See Note 10). The terms of the Amended and Restated Agreement and Certificate of Limited Partnership of the Partnership (the "Partnership Agreement") provide, among other things, that profits or losses, in general, be shared 99% by the limited partners and 1% by the General Partners. NOTE 2 - Summary of Significant Accounting Policies a) Basis of Consolidation The consolidated financial statements include the accounts of the Partnership and 14, 19 and 24 subsidiary partnerships in which the Partnership is a limited partner for the years ended February 28, 2003, 2002, and 2001, respectively. Through the rights of the Partnership and/or a General Partner, which General Partner has a contractual obligation to act on behalf of the Partnership to remove the general partner of the subsidiary partnerships and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships. For financial reporting purposes, the Partnership's fiscal year ends on the last day of February. All subsidiaries have fiscal years ending December 31. Accounts of subsidiaries have been adjusted for intercompany transactions from January 1 82 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 through the last day of February. The Partnership's fiscal year ends on the last day of February in order to allow adequate time for the subsidiaries' financial statements to be prepared and consolidated. The books and records of the Partnership are maintained on the accrual basis of accounting, in accordance with U.S. generally accepted accounting principles ("GAAP"). All intercompany accounts and transactions have been eliminated in consolidation. Increases (decreases) in the capitalization of consolidated subsidiaries attributable to minority interest arise from contributions and distributions to the minority interest partners. Losses attributable to minority interests which exceed the minority interests' investment in a subsidiary have been charged to the Partnership. No such losses have been aggregated for the years ended February 28, 2003, 2002 and 2001, (the 2002, 2001 and 2000 Fiscal Years), respectively. The Partnership's investment in each subsidiary is equal to the respective subsidiary's partners' equity less minority interest capital, if any. b) Property and Equipment Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The Partnership complies with Statement of Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis are below depreciated cost. At that time property investments themselves are reduced to estimated fair value (generally using discounted cash flows) when the property is considered to be impaired and the depreciated cost exceeds estimated fair value. At the time management commits to a plan to dispose of assets, said assets are adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. All property and equipment for subsidiary partnerships whose assets and liabilities are under sales contracts are classified as assets held for sale. Through February 28, 2003, the Partnership has recorded approximately $8,889,000 as a loss on impairment of assets. c) Interest Subsidies Interest expense has been reduced by interest subsidies (Note 6). d) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks, and investments in short-term investments with an original maturity of three months or less. 83 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 e) Income Taxes No provision has been made for income taxes in the accompanying consolidated financial statements since such taxes, if any, are the responsibility of the individual partners. For income tax purposes, the Partnership has a fiscal year ending December 31 (Note 9). f) Loss Contingencies The Partnership records loss contingencies as a charge to income when information becomes available which indicates that it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated. g) Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NOTE 3 - Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments (all of which are held for non-trading purposes) for which it is practicable to estimate that value: Cash and Cash Equivalents, Certificates of Deposit, Cash-Restricted for Tenants' - -------------------------------------------------------------------------------- Security Deposits and Mortgage Escrow Deposits - ---------------------------------------------- The carrying amount approximates fair value because of the short maturity of those instruments. Mortgage Notes Payable - ---------------------- The fair value of mortgage notes payable is estimated, where practicable, based on the borrowing rate currently available for similar loans. 84 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 The estimated fair values of the Partnership's mortgage notes payable are as follows:
February 28, 2003 February 28, 2002 ------------------------- ------------------------- Carrying Carrying Amount* Fair Value Amount* Fair Value ----------- ----------- ----------- ----------- Mortgage notes payable for which it is: Practicable to estimate fair value $ 0 $ 0 $ 2,448,648 $ 2,518,585 Not practicable (a) 2,953,940 (a) 14,292,330 (a) Purchase money notes payable for which it is not practicable (b) $ 2,408,118 $ 0 $16,329,543 $ 0
(a) The mortgage notes payable are insured by the Department of Housing and Urban Development (the "HUD") primarily in accordance with Section 236 of the National Housing Act. New loans are no longer being insured in accordance with Section 236 and presently existing loans are subject to restrictions regarding prepayment. Management believes the estimation of fair value to be impracticable. (b) For the reasons discussed in Note 11(b), it is not practicable to estimate the fair value of these notes. *The carrying amount of other assets and liabilities, except for related party liabilities, reported on the statement of financial position that require such disclosure approximate fair value. Regarding the fair value of the related party liabilities, it has been determined that fair value is not practicable to determine due to the unique nature, repayment terms and related conditions pertaining to these instruments. NOTE 4 - Property and Equipment and Property and Equipment-Held for Sale The components of property and equipment and their estimated useful lives are as follows:
February 28, February 28, Estimated 2003 2002 Useful Lives ------------ ------------ ------------ Land $ 0 $ 1,068,090 Building and improvements 0 12,374,820 15-40 years Furniture and fixtures 0 3,318,627 3-10 years ------------ ------------ 0 16,761,537 Less: Accumulated depreciation (0) (10,819,771) ------------ ------------ $ 0 $ 5,941,766 ============ ============
Depreciation expense for the 2002, 2001 and 2000 Fiscal Years amounted to $352,194, $1,137,341 and $1,606,397, respectively. 85 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 The components of property and equipment-held for sale are as follows:
February 28, February 28, 2003 2002 ------------ ------------ Land $ 498,671 $ 1,802,764 Building and improvement 9,770,692 30,852,595 Furniture and fixtures 628,749 1,165,017 ------------ ------------ 10,898,112 33,820,376 Less: Accumulated depreciation (5,868,186) (17,546,742) ------------ ------------ $ 5,029,926 $ 16,273,634 ============ ============
NOTE 5 - Mortgage Escrow Deposits Mortgage escrow deposits consist of the following:
February 28, February 28, 2003 2002 ------------ ------------ Reserve for replacements $ 696,545 $ 4,195,312 Real estate taxes, insurance and other 491,504 1,988,283 Preservation Acts 19,798 19,798 ------------ ------------ $ 1,207,847 $ 6,203,393 ============ ============
86 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 NOTE 6 - Mortgage Notes Payable The mortgage notes are payable in aggregate monthly installments of approximately $38,000, including principal and interest at rates ranging from 7.0% to 9.0% per annum, through May 2013. Each subsidiary partnership's mortgage note payable is collateralized by the land and buildings of the respective subsidiary partnership, the assignment of certain subsidiary partnership's rents and leases and is without further recourse. These mortgage notes were eligible for interest rate subsidies under the terms of regulatory agreements with HUD. Accordingly, the subsidiary partnerships paid only that portion of the monthly payments that would be required if the interest rate was 1% per annum; the balance was subsidized under Section 236 of the National Housing Act. Annual principal payment requirements for each of the next five fiscal years are as follows:
Year Ending December 31 Amount - ----------------------- ------------- 2003 $ 221,703 2004 240,583 2005 261,069 2006 283,316 2007 307,469 Thereafter 1,639,800 ------------- $ 2,953,940 =============
The mortgage agreements require monthly deposits to reserves for replacements aggregating approximately $32,000 and monthly deposits to escrow accounts for real estate taxes, insurance and other (Note 5). NOTE 7 - Purchase Money Notes Payable Nonrecourse purchase money notes (the "Purchase Money Notes") were issued to the selling partners of the Subsidiary Partnerships as part of the purchase price, and are secured only by the Partnership's interest in the Subsidiary Partnership to which the Purchase Money Note relates. The Purchase Money Notes, which provide for simple interest, will not be in default if not less than 60% of the cash flow actually distributed to the Partnership by the corresponding Subsidiary Partnership (generated by the operations, as defined) is applied first to accrued interest and then to current interest thereon. As of February 28, 2003, the maturity dates of the Purchase Money Notes associated with the remaining properties owned by the Subsidiary Partnerships were extended through a fifth year. These are the final extensions for the Purchase Money Notes (see below). Any interest not paid currently accrues, without further interest thereon, through the extended due date of each of the Purchase Money Notes, respectively. Continued accrual of such interest without payment would impact the effective rate of the Purchase Money Notes, specifically by reducing the current effective interest rate of 9%. The exact effect is not determinable inasmuch as it is dependent on the actual future interest payments and ultimate repayment dates of the Purchase Money Notes. Unpaid interest of $3,669,010 (with respect to the two remaining notes) and $24,273,106 (with respect to the fourteen remaining notes) at February 28, 2003 and 2002, respectively, has been accrued and is included in the caption due to selling partners. In general, the interest on and the principal of each Purchase Money Note is also payable to the extent of the Partnership's actual receipt of 87 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 proceeds from the sale or refinancing of the Apartment Complex, or in some cases the Local Partnership Interest to which the Purchase Money Note relates. The Partnership was permitted to extend the term of the Purchase Money Notes for up to five additional years. In connection with such extensions, the Partnership incurred an extension fee of 1/2% per annum of the outstanding principal balance of the Purchase Money Notes. The Partnership sent an extension notice to each Purchase Money Note holder, pursuant to the Purchase Money Note, that it was extending the maturity date of such notes. However in certain cases, the Partnership did not pay the extension fee at that time, deferring such payment to the future. The two properties with Purchase Money Notes are now extended with maturity dates of August and October 2003. These are the final extensions for these Purchase Money Notes. Extension fees of $107,118 were accrued and added to the balance of these Purchase Money Notes. The Partnership expects that upon final maturity it will be required to refinance or sell its investments in the Local Partnerships in order to pay the Purchase Money Notes and accrued interest thereon. Based on the historical operating results of the Local Partnerships, the prices realized on the sale of the Partnership's investment sold to date and the current economic conditions including changes in tax laws, it is unlikely that the proceeds from such sales will be sufficient to meet the outstanding balances. No assurance can be given that management's efforts will be successful in selling the Partnership's investment in the remaining property. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the sellers' recourse, in the event of non-payment, would be to foreclose on the Partnership's interests in the respective Local Partnerships. Cash flow distributions aggregating $207,440, $71,144 and $196,814 were made to the Partnership in the 2002, 2001 and 2000 Fiscal Years, respectively. Of such distributions, $169,833, $56,426 and $118,246, respectively, was used to pay interest on the Purchase Money Notes. Distribution of proceeds from sales aggregating $8,994,812 and $289,581 were made to the Partnership in the 2002 and 2001 Fiscal Years, respectively, of which $7,123,995 and $286,080, respectively, was used to pay principal and interest on the Purchase Money Notes. 88 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 NOTE 8 - Related Party Transactions The costs incurred to related parties for the years ended February 28, 2003, 2002 and 2001 were as follows:
Year Ended February 28, ------------------------------------ 2003 2002 2001 ---------- ---------- ---------- Partnership management fees (a) $ 966,838 $ 966,838 $ 966,838 Expense reimbursement (b) 117,897 137,059 107,602 Property management fees incurred to affiliates of the General Partners (c) 0 0 75,455 Local administrative fee (d) 7,500 12,500 16,250 ---------- ---------- ---------- 1,092,235 1,116,397 1,166,145 Property management fees incurred to affiliates of the subsidiary partnership's general partners (c) 123,155 346,258 499,165 Subsidiary partnerships general partners' incentive fee (e) 0 0 7,605 ---------- ---------- ---------- Total general and administrative related parties $1,215,390 $1,462,655 $1,672,915 ========== ========== ==========
(a) After all other expenses of the Partnership are paid, an annual partnership management fee of up to .5% of invested assets is payable to the Partnership's general partners and affiliates. Partnership management fees have been charged to operations and are included in administrative and management-related parties' expenses. Partnership management fees owed to the General Partners amounting to approximately $1,976,000 and $1,759,000 were accrued and unpaid as of February 28, 2003 and 2002, respectively. (b) The Partnership reimburses the General Partners and their affiliates for actual Partnership operating expenses incurred by the General Partners and their affiliates on the Partnership's behalf. The amount of reimbursement from the Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the General Partners performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnerships' performance. (c) Property management fees paid by Local Partnerships to affiliates of the Local Partnerships amounted to approximately $123,155, $346,258 and $499,165 for the 2002, 2001 and 2000 Fiscal Years, respectively. Of such fees $0, $0 and $75,455 was paid to a company which is also an affiliate of the Related General Partner for the 2002, 2001 and 2000 Fiscal Years, respectively. (d) Cambridge/Related Associates, a limited partner of the subsidiary partnerships, is entitled to receive a local administrative fee of up to $2,500 from each subsidiary partnership. (e) The Partnership entered into an agreement with the local general partner of Parktowne Ltd. and Westwood Apartment Company Ltd., which provides for an annual incentive fee based on cash flow distributed from the respective properties. Such fee amount to $0, $0 and $7,605 for the years ended February 28, 2003, 2002 and 2001, respectively. 89 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 Cambridge/Related Associates has a .01% interest, as a limited partner, in each of the subsidiary partnerships. Due to local general partners and affiliates at December 31, 2002 and 2001 includes operating advances of $33,423 and $8,423, respectively. NOTE 9 - Income Taxes A reconciliation of the financial statement net income to the income tax income for the Partnership and its consolidated subsidiaries is as follows:
Year Ended December 31, -------------------------------------------- 2002 2001* 2000 ------------ ------------ ------------ Financial statement net income $ 27,104,405 $ 7,811,552 $ 10,075,724 Difference between depreciation expense re- corded for financial reporting purposes and the accelerated cost recovery system utilized for income tax purposes 256,983 913,361 1,151,452 Difference resulting from parent company hav- ing a different fiscal year for income tax and financial reporting purposes (546,749) (14,565) (47,960) Difference between gain on sale of properties recorded for financial reporting purposes and for income tax purposes (11,254,958) 770,835 7,755,939 Difference between extraordinary item- forgiveness of indebtedness income recorded for financial reporting purposes and for in- come tax purposes 17,451,841 731,715 33,770 Other (442,571) (743,310) 2,300 ------------ ------------ ------------ Net income as shown on the income tax return for the calendar year ended $ 32,568,951 $ 9,469,588 $ 18,971,225 ============ ============ ============
* As restated - see Note 12. NOTE 10 - Sale of Properties General - ------- The Partnership is currently in the process of winding up its operations and disposing of its investments. As of February 28, 2003, the Partnership has disposed of forty-two of its forty-four original investments. Subsequently, on March 11, 2003 one additional investment was sold. The remaining investment is under contract to be sold within the next several months. There can be no 90 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 assurance that the Partnership will dispose of its last remaining investment or the amount of proceeds which may be received. In order to facilitate an orderly disposition of the Partnership's assets, the Partnership formed two entities: Cambridge Liquidating Trust LLC ("Trust I"), a Massachusetts limited liability company which is owned 99.99% by the Partnership and .01% by affiliates of Related; and, Cambridge Liquidating Trust II ("Trust II"), a Massachusetts general partnership which is owned 99% by Cambridge Liquidating GP II, L.L.C. ("GP II") and 1% by Cambridge Liquidating GP I, L.L.C. ("GP I"). Both GP I and GP II are owned by the Partnership. On December 30, 1998, the Partnership contributed its limited partnership interest in Bethany Glen Associates, Westwood, Ltd., Parktowne, Ltd., Rolling Meadows Apartments, Ltd., Buena Vista Apartments, Ltd. and Wingate Associates, Ltd. to Trust I. On December 31, 1998, the Partnership contributed its limited partnership interests in Grandview-Blue Ridge Manor Limited, Breckenridge-Chaparral Apartments II, Ltd., El Paso-Gateway East, Ltd., Albequerque-Lafayette Square Apartments, Ltd., Corpus Christi-Oso Bay Apartments, Ltd., Westgate Associates Limited, San Diego-Logan Square Gardens Co., Ardmore-Rolling Meadows of Ardmore, Ltd., Fort Worth-Northwoods Apartments, Ltd. and Stephenville-Tarleton Arms Apartments, Ltd. to Trust II. In each case, the interests were contributed subject to each respective Purchase Money Note. The contribution did not involve any consideration being paid to the Partnership, therefore, there was no tax effect to the limited partners of the Partnership. As of February 28, 2003, all Local Partnerships named above were sold except Gateway, which was subsequently sold on March 11, 2003. Information Regarding Disposition - --------------------------------- On January 2, 2003, the Partnership's limited partnership interest in Caddo Parish - Villas South, Ltd. ("Villas South") was transferred to the Local General Partner resulting in a gain in the amount of approximately $2,726,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $7,344,000 resulting in a gain of approximately $7,344,000. On December 19, 2002, the property and the related assets and liabilities of Wingate Associates, Limited ("Wingate") were sold to an unaffiliated third party purchaser for approximately $2,600,000 resulting in a gain in the amount of approximately $132,000. The Partnership used approximately $1,043,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,447,000 resulting in forgiveness of indebtedness income of approximately $404,000. On October 31, 2002, the Partnership's limited partnership interest in Grandview-Blue Ridge Manor, Ltd. ("Blue Ridge"), Breckenridge-Chaparral Apartments II, Ltd. ("Chaparral"), Albuquerque-Lafayette Square Apts., Ltd. ("Lafayette"), Fort Worth-Northwood Apartments, Ltd. ("Northwood"), Corpus Christi-Oso Bay Apartments, Ltd. ("Oso Bay"), Ardmore-Rolling Meadows of Ardmore, Ltd. ("Ardmore") and Stephenville-Tarleton Arms Apartments, Ltd. ("Tarleton") were sold back to the Local General Partner for approximately $100 each resulting in losses of approximately $453,000, $667,000, $1,687,000, $1,416,000, $1,053,000, $866,000 and $1,377,000, respectively. No proceeds were used to settle the associated Purchase Money Notes and accrued interest thereon, which had total outstanding balances of approximately $1,525,000, $1,999,000, $3,592,000, $2,050,000, $2,364,000, $2,229,000 and $2,851,000, respectively, resulting in gains on sale of properties in amounts equal to the interest and principal due on such Purchase Money Notes. 91 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 On July 12, 2002, the property and the related assets and liabilities of San Diego-Logan Square Gardens Company ("Logan") were sold to the Local General Partners for approximately $9,241,000 resulting in a gain in the amount of approximately $5,403,000. The Partnership used approximately $5,740,000 to fully settle the associated Purchase Money Note and accrued interest thereon. The Partnership netted approximately $1,104,000 of cash which was placed into working capital to pay Partnership expenses. On March 27, 2002, the property and the related assets and liabilities of Ziegler Boulevard, Ltd. ("Ziegler") were sold to an unaffiliated third party purchaser for approximately $2,379,000 resulting in a loss in the amount of approximately $485,000. The Partnership used approximately $340,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,746,000 resulting in forgiveness of indebtedness income of approximately $2,406,000. On March 27, 2002, the Partnership's limited partnership interest in Eastwyck III, Ltd. Limited Partnership ("Eastwyck") was sold to the Local General Partners for approximately $5,000 resulting in a loss of approximately $336,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,220,000 resulting in a gain on sale of approximately $1,220,000. On December 4, 2001, the Partnership's limited partnership interest in Crossett Apartments, Ltd. ("Crossett") was sold to the Local General Partner effective January 1, 2002 for $7,920 resulting in a loss of approximately $212,000 and the related Purchase Money Note was assigned to the Local General Partner. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,117,000 resulting in a gain on sale of property of approximately $1,117,000. On December 4, 2001, the Partnership's limited partnership interest in Cedar Hill Apartments, Ltd. ("Cedar Hill") was sold to the Local General Partner effective January 1, 2002 for $11,988 resulting in a loss of approximately $479,000 and the related Purchase Money Note was assigned to the Local General Partner. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,220,000 resulting in a gain on sale of property of approximately $1,220,000. On November 26, 2001, the Partnership's limited partnership interest in Buena Vista Manor Apartments, Ltd. ("Buena Vista") was sold to the Local General Partners for $125,000 resulting in a loss in the amount of approximately $596,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $5,092,000 resulting in a gain of approximately $5,092,000. On August 31, 2001, the property and the related assets and liabilities of Rolling Meadows Apartments, Ltd. ("Rolling Meadows") were sold to an unaffiliated third party purchaser for $1,925,000 resulting in a loss in the amount of approximately $485,000. The Partnership used approximately $201,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,757,000 resulting in forgiveness of indebtedness income of approximately $3,556,000. On March 16, 2001, the property and the related assets and liabilities of Char-Mur Apartments ("Char-Mur") were sold to an affiliate of the Local General Partner for $475,000, resulting in a loss in the amount of approximately $193,000. The Partnership used approximately $85,000 to settle the associated 92 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $986,000, resulting in forgiveness of indebtedness income of $901,000. On December 20, 2000, the property and the related assets and liabilities of New Jersey, Ltd. ("New Jersey") were sold to an unaffiliated third party for $2,049,600 resulting in a gain of approximately $65,000. The Partnership used approximately $500,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $2,369,000 resulting in forgiveness of indebtedness income of approximately $1,869,000. On December 1, 2000, the property and the related assets and liabilities of Westgate Associates, Limited ("Westgate") were sold to an unaffiliated third party for $2,055,000, resulting in a loss of approximately $164,000. The Partnership used approximately $601,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,516,000, resulting in forgiveness of indebtedness income of approximately $915,000. On September 14, 2000, the property and the related assets and liabilities of Westwood Apartments Company, Ltd. ("Westwood") were sold to an unaffiliated third party for $2,025,000, resulting in a loss of approximately $356,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,059,000, resulting in forgiveness of indebtedness income. On September 14, 2000, the property and the related assets and liabilities of Parktowne Ltd. ("Parktowne") were sold to an unaffiliated third party for $2,500,000, resulting in a gain of approximately $476,000. The Partnership used approximately $844,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $1,804,000, resulting in forgiveness of indebtedness income of approximately $960,000. On April 28, 2000, the property and the related assets and liabilities of Pacific Palms were sold to a third party for approximately $4,900,000, resulting in a gain of approximately $2,554,000. The Partnership used approximately $1,668,000 of the net proceeds to settle the associated Purchase Money Notes and accrued interest thereon which had a total outstanding balance of approximately $5,214,000, resulting in forgiveness of indebtedness of approximately $3,546,000. The Partnership netted approximately $1,940,000 of cash which was placed into working capital to pay Partnership expenses. NOTE 11 - Commitments and Contingencies a) Events of Default and Going Concern Caddo Parish-Villas South, Ltd. - ------------------------------- Villas South filed for protection under Chapter 11 of the United States Bankruptcy Code on November 12, 1996 and the equivalent of a receiver was appointed. The bankruptcy case was subsequently dismissed on April 18, 2002. On January 2, 2003, the limited partnership interest in Villas South was transferred to the Local General Partners. See Note 10 above. 93 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2003 b) Purchase Money Notes As part of the purchase price of its investment in the Local Partnerships, the Partnership issued approximately $61,029,000 of Purchase Money Notes. As of the end of the 2002 Fiscal Year, unpaid accrued interest on the Purchase Money Notes amounted to approximately $3,699,010. The principal of and all accrued interest on the Purchase Money Notes is due at maturity. The Partnership was permitted to extend the term of the Purchase Money Notes for up to five additional years. In connection with such extensions, the Partnership incurred an extension fee of 1/2% per annum of the outstanding principal balance of the assets. The Partnership sent an extension notice to each Purchase Money Note holder that pursuant to the note, it was extending the maturity. However, in certain cases the Partnership did not pay the extension fee at that time, deferring such payment to the future. The holders of the Note could argue that until the fee is paid the Note has not been properly extended. c) Uninsured Cash and Cash Equivalents The Partnership maintains its cash and cash equivalents in various banks. Accounts at each bank are guaranteed by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000. As of February 28, 2003, uninsured cash and cash equivalents and mortgage escrow deposits approximated $464,000. NOTE 12 - Prior Period Adjustment During the quarter ended November 30, 2001, extension fees in connection with the Purchase Money Notes were overaccrued by $671,850. Such extension fees were capitalized and amortized over the period of extension, and during the fiscal year end February 28, 2002 the Partnership amortized $335,925 of such extension fees resulting in net income being understated for that year. To correct the misstatement Partners' deficit has been increased by $335,925 for the fiscal year ended February 28, 2002 NOTE 13 - Subsequent Event On March 11, 2003, the property and the related assets and liabilities of Gateway East, Ltd. ("Gateway") were sold to an unaffiliated third party for approximately $2,700,000 resulting in a gain in the amount of approximately $1,333,000. The Partnership used approximately $2,416,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,463,000, resulting in forgiveness of indebtedness income of approximately $47,000. 94 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None PART III Item 10. Directors and Executive Officers of the Registrant. The Partnership has no directors or officers. The Partnership's affairs are managed and controlled by the General Partners. Government Assisted Properties, Inc. (the "Assisted General Partner") and Related Housing Programs Corporation (the "Related General Partners") are affiliated with The Related Companies, L.P. ("Related"). The general partner of Related is The Related Realty Group, Inc., of which Stephen M. Ross is president, director and a stockholder. The General Partners manage and control the affairs of the Partnership by engaging other affiliates of Related. The Assisted General Partner was incorporated in Delaware on April 15, 1983 and the Related General Partner was incorporated in Delaware on July 2, 1982. In December 2002, Charter Municipal Mortgage Acceptance Company ("CharterMac"), which is also managed by an affiliate of Related Capital Company, announced a proposed acquisition of Related Capital Company, an affiliate of the General Partner. Pursuant to the proposed acquisition, CharterMac will acquire controlling interests in the general partners of the General Partners. This acquisition will not affect the Partnership or its day-to-day operations as management of the General Partners will not change. Certain information concerning the directors and officers of the General Partners are set forth below. The director and officers of the Related General Partner are as follows: Name Position - ---- -------- Stephen M. Ross Director Alan P. Hirmes President Stuart J. Boesky Senior Vice President Denise Kiley Vice President Marc Schnitzer Vice President Mark E. Carbone Vice President Robert Bordonaro Vice President Glenn F. Hopps Treasurer Teresa Wicelinski Secretary Susan J. McGuire Assistant Secretary 95 STEPHEN M. ROSS, 63, is the President, a Director and a shareholder of The Related Realty Group, Inc., the general partner of The Related Companies, L.P. He graduated from the University of Michigan School of Business Administration with a Bachelor of Science degree and from Wayne State University School of Law with a Juris Doctor degree. Mr. Ross then received a Master of Laws degree in taxation from New York University School of Law. He joined the accounting firm of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York, where he worked for two large Wall Street investment banking firms in their real estate and corporate finance departments. Mr. Ross formed the predecessor of The Related Companies, L.P. ("TRCLP") in 1972 to develop, manage, finance and acquire subsidized and conventional apartment developments. Mr. Ross also serves on the Board of Trustees of Charter Municipal Mortgage Acceptance Company. ALAN P. HIRMES, 48, has been a Certified Public Accountant in New York since 1978. Prior to joining Related in October 1983, Mr. Hirmes was employed by Weiner & Co., Certified Public Accountants. Mr. Hirmes is also a Vice President of Capital. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts degree. Mr. Hirmes also serves on the Board of Trustees of Charter Municipal Mortgage Acceptance Company. STUART J. BOESKY, 47, practiced real estate and tax law in New York City with the law firm of Shipley & Rothstein from 1984 until February 1986 when he joined Capital. From 1983 to 1984, Mr. Boesky practiced law with the Boston law firm of Kaye Fialkow Richard & Rothstein, and from 1978 to 1980 was a consultant specializing in real estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan State University with a Bachelor of Arts degree and from Wayne State School of Law with a Juris Doctor degree. He then received a Master of Laws degree in Taxation from Boston University School of Law. Mr. Boesky also serves on the Board of Trustees of Charter Municipal Mortgage Acceptance Company and American Mortgage Acceptance Company. DENISE L. KILEY, 43, is responsible for overseeing the due diligence and asset management of all multifamily residential properties invested in RCC sponsored corporate, public and private equity and debt funds. Prior to joining Related in 1990, Ms. Kiley had experience acquiring, financing and asset managing multifamily residential properties. From 1981 through 1985 she was an auditor with Price Waterhouse. Ms. Kiley holds a Bachelor of Science in Accounting from Boston College. MARC D. SCHNITZER, 42, joined Related in January 1988 after receiving his Master of Business Administration degree from The Wharton School of The University of Pennsylvania in December 1987. From 1983 to 1986, Mr. Schnitzer was a Financial Analyst with The First Boston Corporation in New York, an international investment banking firm. Mr. Schnitzer received a Bachelor of Science degree, summa cum laude, in Business Administration, from the School of Management at Boston University in May 1983. MARK E. CARBONE, 46, rejoined Related in 1998 where his primary responsibility has been disposition of real estate. From 1994 to 1998 he was President of WHC, Inc., a distressed asset real estate fund. From 1986 to 1994 he was President of Marigold Real Estate and Development, Inc., a real estate development company located in Greenwich, CT. From 1979 to 1986 he was a Vice President at Related Capital Company. He received a Bachelor of Arts in Government from Harvard University in 1979. ROBERT BORDONARO, 49, is a Vice President - Finance of Related. He has also served as Controller of Related. Mr. Bordonaro has been a Certified Public Accountant in New York since 1977. Prior to joining Related, Mr. Bordonaro was employed by the accounting firms of Weiner & Co. from 1982 to 1985 and Arthur Young from 1975 to 1981. Mr. Bordonaro graduated summa cum laude from New York University with a Bachelor of Science degree and with a Masters degree in Business Administration. 96 GLENN F. HOPPS, 40, joined Related in December 1990, and prior to that date was employed by Marks Shron & Company and Weissbarth, Altman and Michaelson certified public accountants. Mr. Hopps graduated from New York State University at Albany with a Bachelor of Science Degree in Accounting. TERESA WICELINSKI, 37, joined Related in June 1992, and prior to that date was employed by Friedman, Alpren & Green, certified public accountants. Ms. Wicelinski, graduated from Pace University with a Bachelor of Arts Degree in Accounting. SUSAN J. McGUIRE, 56, graduated from William Cullen Bryant High School in Woodside, New York, and attended Queensboro Community College. Since January 1977, she has served as Assistant to the President and Office Manager at Capital. From May 1973 to January 1977, she was employed as an administrative assistant with Condren, Walker & Co., Inc., an investment banking firm in New York City. The directors and executive officers of the Assisted General Partner are as follows: Name Position - ---- -------- Michael Brenner Director Alan P. Hirmes President Stuart J. Boesky Executive Vice President Marc D. Schnitzer Vice President Denise L. Kiley Vice President Mark E. Carbone Vice President Glenn F. Hopps Treasurer Teresa Wicelinski Secretary MICHAEL BRENNER, 57, is the Executive Vice President and Chief Financial Officer of TRCLP. Prior to joining TRCLP in 1996, Mr. Brenner was a partner with Coopers & Lybrand, having served as managing partner of its Industry Programs and Client Satisfaction initiatives from 1993-1996, managing partner of the Detroit group of offices from 1986-1993 and Chairman of its National Real Estate Industry Group from 1984-1986. Mr. Brenner graduated summa cum laude from the University of Detroit with a Bachelors degree in Business Administration and from the University of Michigan with a Masters of Business Administration, with distinction. Mr. Brenner also serves on the Board of Trustees of Charter Municipal Mortgage Acceptance Company. Biographical information with respect to Messrs. Hirmes, Boesky, Schnitzer, Kiley, Carbone, Hopps and Ms. Wicelinski is set forth above. Item 11. Executive Compensation. The Partnership has no officers or directors. The Partnership does not pay or accrue any fees, salaries or other forms of compensation to directors or officers of the General Partners for their services. However, under the terms of the Partnership Agreement, the General Partners and their affiliates are entitled to receive compensation from the Partnership in consideration of certain services rendered to the Partnership by such parties. In addition, the General Partners collectively hold a 1% interest in all profits, losses and distributions attributable to operations and a subordinated 15% interest in such items attributable to sales and refinancings. See Note 8 to the Financial 97 Statements in Item 8 above, which information is incorporated herein by reference thereto. Certain directors and officers of the General Partners receive compensation from the General Partner and their affiliates for services performed for various affiliated entities which may include services performed for the Partnership. Tabular information concerning salaries, bonuses and other types of compensation payable to executive officers has not been included in this annual report. As noted above, the Partnership has no executive officers. The levels of compensation payable to the General Partners and/or their affiliates is limited by the terms of the Partnership Agreement and may not be increased therefrom on a discretionary basis. Item 12. Security Ownership of Certain Beneficial Owners and Management. The General Partners own all of the outstanding general partnership interests in the Partnership. The General Partners collectively have a 1% interest in all profits, losses and distributions of the Partnership from operations and a subordinated 15% interest in such items from sale or refinancing proceeds. Except as aforesaid, no person is known to own beneficially in excess of 5% of the outstanding partnership interests. At February 28, 2003, security ownership by the General Partners and their affiliates was as follows:
Name and Address of Amount of Percentage Title of Class Beneficial Ownership Beneficial Ownership of Class - -------------- -------------------- -------------------- ----------- General Partnership Government Assisted Interest in the Properties, Inc. $ 1 25% Partnership 625 Madison Avenue New York, NY 10022 Related Housing Programs Corporation 1 25% 625 Madison Avenue New York, NY 10022 Cambridge/Related Housing Associates Limited Partnership 998 50% 625 Madison Avenue New York, NY 10022
The Assisted General Partner and the Related General Partner each hold a .5% general partnership interest in Cambridge Related Associates. Ronald W. Weiss and J. Michael Fried each own a 49.5% limited partner interest in Cambridge Related Associates. Ronald W. Weiss is not affiliated with the Assisted or Related General Partner. J. Michael Fried is no longer affiliated as of December 31, 1999. 98 Item 13. Certain Relationships and Related Transactions. The Partnership has and will continue to have certain relationships with the General Partner and its affiliates, as discussed in Item 11 and also Note 8 to the Financial Statements in Item 8 above, which are incorporated herein by reference thereto. However, there have been no direct financial transactions between the Partnership and the directors and officers of the General Partners. Item 14. Controls and Procedures The Principal Executive Officer and Principal Financial Officer of Government Assisted Properties, Inc. and Related Housing Programs Corporation, each of which is a general partner of the Partnership, has evaluated the Partnership's disclosure controls and procedures relating to the Partnership's annual report on Form 10-K for the period ending February 28, 2003 as filed with the Securities and Exchange Commission and has judged such controls and procedures to be effective as of February 28, 2003 (the "Evaluation Date"). There have been no significant changes in the internal controls or in other factors that could significantly affect internal controls relating to the Partnership since the Evaluation Date. 99 PART IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Sequential Page ---------- (a) 1. Financial Statements Independent Auditors' Report 23 Consolidated Balance Sheets at February 28, 2003 and 2002 76 Consolidated Statements of Income for the Years Ended February 28, 2003, 2002 and 2001 77 Consolidated Statements of Partners' Deficit for the Years Ended February 28, 2003, 2002 and 2001 78 Consolidated Statements of Cash Flows for the Years Ended February 28, 2003, 2002 and 2001 79 Notes to Consolidated Financial Statements 82 (a) 2. Financial Statement Schedules ----------------------------- Independent Auditors' Report 106 Schedule I - Condensed Financial Information of Registrant 107 Schedule III - Real Estate and Accumulated Depreciation 110 All other schedules have been omitted because the required information is included in the financial statements and notes thereto or they are not applicable or not required. (a) 3. Exhibits ----------- (3) The Partnership's Amended and Restated Agreement and Certificate of Limited Partnership, as filed with the Secretary of State of the Commonwealth of Massachusetts, incorporated by reference to Exhibit (3) to the Partner- ship's Annual Report on Form 10-K for the fiscal year ended February 29, 1984 (Commission File #0-12634). (21) The Local Partnerships set forth in Item 2 may be con- sidered subsidiaries of the Registrant (b) Reports on Form 8-K ------------------- None (c) Additional Exhibits ------------------- 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. 105 100 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CAMBRIDGE + RELATED HOUSING PROPERTIES -------------------------------------- LIMITED PARTNERSHIP ------------------- By: GOVERNMENT ASSISTED PROPERTIES, INC., a general partner Date: May 20, 2003 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes President, Chief Executive Officer and Chief Financial Officer and By: RELATED HOUSING PROGRAMS CORPORATION, a general partner Date: May 20, 2003 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes President, Chief Executive Officer and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated: Signature Title Date - ------------------ ----------------------------------------- ------------ President, Chief Executive Officer and /s/ Alan P. Hirmes Chief Financial Officer of Related - ------------------ Housing Programs Corporation and Alan P. Hirmes Government Assisted Properties, Inc. May 20, 2003 Treasurer (principal accounting /s/ Glenn F. Hopps officer) of Related Housing - ------------------ Programs Corporation and Glenn F. Hopps Government Assisted Properties, Inc. May 20, 2003 /s/ Stephen M. Ross Director of Related Housing - ------------------- Programs Corporation Stephen M. Ross May 20, 2003 CERTIFICATION I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Government Assisted Properties, Inc. and Related Housing Programs Corporation (the "General Partners"), each of which is a general partner of Cambridge + Related Housing Properties L.P. (the "Partnership"), hereby certify that: 1. I have reviewed this annual report on Form 10-K for the year ending February 28, 2003 of the Partnership; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Partnership as of, and for, the periods presented in this annual report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15-d-14) for the Partnership and I have: a) designed such disclosure controls and procedures to ensure that material information relating to the Partnership, including and its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the Partnership's disclosure controls and procedures as of February 28, 2003 (the "Evaluation Date"); and c) presented in this annual report my conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date; 5. I have disclosed, based on my most recent evaluation, to the Partnership's auditors and to the board of directors of the General Partners: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Partnership's ability to record, process, summarize and report financial data and have identified for the Partnership's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership's internal controls; and 6. I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes President, Chief Executive Officer and Chief Financial Officer May 20, 2003 Exhibit 99.1 CERTIFICATION PURSUANT TO 18.U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Cambridge + Related Housing Properties Limited Partnership (the "Partnership") on Form 10-K for the year ending February 28, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Government Assisted Properties, Inc. and Related Housing Programs Corporation, each of which is a general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. By: /s/Alan P. Hirmes ----------------- Alan P. Hirmes President, Chief Executive Officer and Chief Financial Officer May 20, 2003 INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners of Cambridge + Related Housing Properties Limited Partnership and Subsidiaries In connection with our audits of the consolidated financial statements of Cambridge + Related Housing Properties Limited Partnership and Subsidiaries included in this Form 10-K as presented in our opinion dated May 20, 2003 on page 23, and based on the reports of other auditors, we have also audited supporting Schedules I and III for the 2002, 2001 and 2000 Fiscal Years. In our opinion, and based on the reports of other auditors, these consolidated schedules present fairly, when read in conjunction with the related consolidated financial statements, the financial data required to be set forth therein. As discussed in Notes 10 and 13, the Partnership is currently in the process of winding up its operations and disposing of its investments. As of February 28, 2003 the Partnership has disposed of forty-two of its forty-four investments. On March 11, 2003 one additional investment was sold and the remaining investment is under contract to be sold. TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI, LLP New York, New York May 20, 2003 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT Summarized condensed financial information of registrant (not including consolidated subsidiary partnerships) CONDENSED BALANCE SHEETS
ASSETS February 28, February 28, 2003 2002(*) ------------ ------------ Cash and cash equivalents $ 627,816 $ 134,880 Investment in and advances to subsidiary partnerships 3,335,608 13,670,503 Other assets 57,567 135,062 ------------ ------------ Total assets $ 4,020,991 $ 13,940,445 ============ ============ LIABILITIES AND PARTNERS' DEFICIT Purchase money notes payable $ 2,408,117 $ 16,067,194 Due to general partner and affiliates 2,490,376 2,332,646 Due to selling partners 3,685,011 24,289,106 Other liabilities 25,374 23,156 ------------ ------------ Total liabilities 8,608,878 42,712,102 Partners' deficit (4,587,887) (28,771,657) ------------ ------------ Total liabilities and partners' deficit $ 4,020,991 $ 13,940,445 ============ ============
(*) As restated (see Footnote 12 in consolidated financial statements). Investments in subsidiary partnerships are recorded in accordance with the equity method of accounting, wherein the investments are not reduced below zero. Accordingly, partners' deficit on the consolidated balance sheet will differ from partners' deficit shown above. CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENTS OF OPERATIONS
Year Ended February 28, -------------------------------------------- 2003 2002(*) 2001 ------------ ------------ ------------ Revenues Other $ 12,965 $ 0 $ 59,849 ------------ ------------ ------------ 12,965 0 59,849 ------------ ------------ ------------ Expenses Administrative and management 315,430 889,154 1,043,674 Administrative and management- related parties 1,084,735 1,103,897 1,082,045 Financial, principally interest 844,914 1,338,918 2,082,541 ------------ ------------ ------------ 2,245,079 3,331,969 4,208,260 ------------ ------------ ------------ (2,232,114) (3,331,969) (4,148,411) Gain on sale of investments in subsidiary partnerships 19,957,479 6,141,555 0 Forgiveness of indebtedness income 2,809,454 4,456,996 10,348,388 Equity in gain income of subsidiary partnerships (**) 3,648,951 696,003 3,884,831 ------------ ------------ ------------ Net income $ 24,183,770 $ 7,962,585 $ 10,084,808 ============ ============ ============
(*) As restated (see Footnote 12 in consolidated financial statements). (**) Includes suspended prior year losses in excess of investment in accordance with equity method of accounting amounting to $3,064,862, $0 and $0 for the years ended February 28, 2003, 2002 and 2001. CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENTS OF CASH FLOWS
Year Ended February 28, -------------------------------------------- 2003 2002(*) 2001 ------------ ------------ ------------ Cash flows from operating activities: Net income $ 24,183,770 $ 7,962,585 $ 10,084,808 ------------ ------------ ------------ Adjustments to reconcile net income to net cash used in operating activities: Gain on sale of investments in subsidiary partnerships (19,957,479) (6,141,555) 0 Forgiveness of indebtedness income (2,809,453) (4,456,996) (10,348,388) (Increase) decrease in assets: Equity in income of subsidiary partnerships (3,648,951) (747,261) (3,884,831) Other assets 135,835 636,274 367,339 Increase (decrease) in liabilities: Due to general partners and affiliates 157,730 694,862 185,433 Due to selling partners 917,354 1,674,843 2,082,541 Other liabilities 2,218 (23,070) (50,782) ------------ ------------ ------------ Total adjustments (25,202,746) (8,362,903) (11,648,688) ------------ ------------ ------------ Net cash used in operating activities (1,018,976) (400,318) (1,563,880) ------------ ------------ ------------ Cash flows from investing activities: (Expenses paid) proceeds from sale of investments in subsidiary partnerships (324,071) 164,158 0 Repayments from investment in and advances to subsidiaries 0 (78,654) 107,803 Distributions from subsidiaries 9,129,811 403,556 6,121,971 ------------ ------------ ------------ Net cash provided by investing activities 8,805,740 489,060 6,229,774 ------------ ------------ ------------ Cash flows from financing activities: Principal payments of purchase money notes (3,188,829) (1,132,199) (4,001,079) Payments to selling partners (4,104,999) (22,081) (118,246) Distributions to partners 0 (516,300) (1,004,200) ------------ ------------ ------------ Net cash used in financing activities (7,293,828) (1,670,580) (5,123,525) ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 492,936 (1,581,838) (457,631) Cash and cash equivalents, beginning of year 134,880 1,716,718 2,174,349 ------------ ------------ ------------ Cash and cash equivalents, end of year $ 627,816 $ 134,880 $ 1,716,718 ============ ============ ============
(*) As restated (see Footnote 12 in consolidated financial statements). CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral FEBRUARY 28, 2003
Initial Cost to Partnership Cost Capitalized ------------------------------------------- Subsequent to Buildings and Acquisition: Subsidiary Partnership's Residential Property Encumbrances Land Improvements Improvements - --------------------------------------------- ------------ ----------- -------------- ---------------- (9) Bay Village Company $ 3,737,713 $ 333,604 $ 6,053,390 $ 1,579,830 (12) Bethany Glen Associates 0 341,004 3,025,540 (3,366,544) (11) Grandview-Blue Ridge Manor, Limited 0 128,604 2,011,867 (2,140,471) (4) Buena Vista Manor Apts. Ltd. 0 258,604 4,355,907 (4,614,511) (7) Canton Commons Apartments 0 683,605 11,875,258 (12,558,863) (18) Cedar Hill Apartments, Ltd. 0 67,419 1,337,361 (1,404,780) (10) Breckenridge-Chaparral Apartments II, Ltd. 0 123,604 2,010,522 (2,134,126) (18) Char-mur Apartments 0 55,048 1,080,372 (1,135,420) (7) Clinton Plaza Apartments L. P. 0 238,604 4,443,787 (4,682,391) (7) Clinton Plaza Apartments #2 L. P. 0 288,604 5,293,492 (5,582,096) (18) Crossett Apartments, Ltd. 0 61,840 1,176,962 (1,238,802) (8) Cudahy Gardens, Ltd. 0 168,604 3,092,733 (3,261,337) (10) El Paso-Gateway East, Ltd. 1,624,344 158,604 2,422,623 350,061 (7) Golf Manor Apartments, Ltd. 0 183,605 3,060,084 (3,243,689) (7) Grosvenor South Apartments L. P. 0 233,604 4,341,549 (4,575,153) (7) Grosvenor South Apartments #2 L. P. 0 81,104 1,460,463 (1,541,567) (3) Oakland-Keller Plaza 0 358,605 5,742,056 (6,100,661) (16) Lafayette Square Apartment's Ltd. 0 348,604 4,116,308 (4,464,912) (8) San Diego-Logan Square Gardens Co. 0 308,604 5,005,103 (5,313,707) (6) Los Caballeros Apartments 0 223,604 4,124,963 (4,348,567) (3) South Munjoy Associates Ltd. 0 208,604 3,456,920 (3,665,524) (13) Country, Ltd. 0 210,827 3,807,680 (4,018,507) (13) Northbrook III, Ltd. 0 131,383 2,305,900 (2,437,283) (10) Forth Worth-Northwood Apartments, Ltd. 0 118,604 2,226,552 (2,345,156) (10) Corpus Christi-Oso Bay Apartments, Ltd. 0 158,604 2,501,173 (2,659,777) (8) Pacific Palms, Ltd. 0 233,604 4,819,956 (5,053,560) (14) Zeigler Blvd., Ltd. 0 218,605 3,945,003 (4,163,608) (14) Parktowne, Ltd. 0 176,605 3,273,501 (3,450,106) (8) Riverside Gardens, Ltd. 0 308,604 5,357,903 (5,666,507) (5) Rolling Meadows Apts., Ltd. 0 258,604 4,418,421 (4,677,025) (5) Ardmore-Rolling Meadows of Ardmore, Ltd. 0 138,604 2,320,412 (2,459,016) (5) Rolling Meadows of Chickasha, Limited 0 128,604 2,298,164 (2,426,768) (15) Roper Mountain Apartments 0 258,605 4,925,617 (5,184,222) (7) Rosewood Manor Apartments 0 508,604 5,328,672 (5,837,276) (14) New Jersey, Ltd. 0 178,605 3,214,241 (3,392,846) (10) Stephenville-Tarleton Arms 0 238,604 2,832,970 (3,071,574) (5) Oklahoma City-Town & Country Village 0 408,604 7,307,195 (7,715,799) (17) Caddo Parish-Villas South, Ltd. 0 298,604 6,019,236 (6,317,840) (14) Eastwyck III, Ltd. 0 108,605 1,790,877 (1,899,482) (7) Warren Manor Apts., Ltd.-Property A and B 0 758,604 10,506,325 (11,264,929) (7) Warren Woods Apartments, Ltd. 0 308,605 4,697,009 (5,005,614) (1) Westgate Associates Ltd. 0 183,604 2,824,512 (3,008,116) Gross Amount at which Carried At Close of Period ------------------------------------------------ Buildings and Accumulated Subsidiary Partnership's Residential Property Land Improvements Total Depreciation - --------------------------------------------- ------------ ---------------- ------------- --------------- (9) Bay Village Company $ 334,015 $ 7,632,808 $ 7,966,823 $ (4,144,839) (12) Bethany Glen Associates 0 0 0 0 (11) Grandview-Blue Ridge Manor, Limited 0 0 0 0 (4) Buena Vista Manor Apts. Ltd. 0 0 0 0 (7) Canton Commons Apartments 0 0 0 0 (18) Cedar Hill Apartments, Ltd. 0 0 0 0 (10) Breckenridge-Chaparral Apartments II, Ltd. 0 0 0 0 (18) Char-mur Apartments 0 0 0 0 (7) Clinton Plaza Apartments L. P. 0 0 0 0 (7) Clinton Plaza Apartments #2 L. P. 0 0 0 0 (18) Crossett Apartments, Ltd. 0 0 0 0 (8) Cudahy Gardens, Ltd. 0 0 0 0 (10) El Paso-Gateway East, Ltd. 164,656 2,766,633 2,931,289 (1,723,347) (7) Golf Manor Apartments, Ltd. 0 0 0 0 (7) Grosvenor South Apartments L. P. 0 0 0 0 (7) Grosvenor South Apartments #2 L. P. 0 0 0 0 (3) Oakland-Keller Plaza 0 0 0 0 (16) Lafayette Square Apartment's Ltd. 0 0 0 0 (8) San Diego-Logan Square Gardens Co. 0 0 0 0 (6) Los Caballeros Apartments 0 0 0 0 (3) South Munjoy Associates Ltd. 0 0 0 0 (13) Country, Ltd. 0 0 0 0 (13) Northbrook III, Ltd. 0 0 0 0 (10) Forth Worth-Northwood Apartments, Ltd. 0 0 0 0 (10) Corpus Christi-Oso Bay Apartments, Ltd. 0 0 0 0 (8) Pacific Palms, Ltd. 0 0 0 0 (14) Zeigler Blvd., Ltd. 0 0 0 0 (14) Parktowne, Ltd. 0 0 0 0 (8) Riverside Gardens, Ltd. 0 0 0 0 (5) Rolling Meadows Apts., Ltd. 0 0 0 0 (5) Ardmore-Rolling Meadows of Ardmore, Ltd. 0 0 0 0 (5) Rolling Meadows of Chickasha, Limited 0 0 0 0 (15) Roper Mountain Apartments 0 0 0 0 (7) Rosewood Manor Apartments 0 0 0 0 (14) New Jersey, Ltd. 0 0 0 0 (10) Stephenville-Tarleton Arms 0 0 0 0 (5) Oklahoma City-Town & Country Village 0 0 0 0 (17) Caddo Parish-Villas South, Ltd. 0 0 0 0 (14) Eastwyck III, Ltd. 0 0 0 0 (7) Warren Manor Apts., Ltd.-Property A and B 0 0 0 0 (7) Warren Woods Apartments, Ltd. 0 0 0 0 (1) Westgate Associates Ltd. 0 0 0 0 Life on which Depreciation in Latest Income Year of Statement is Subsidiary Partnership's Residential Property Construction Acquired Computed (c)(d) - --------------------------------------------- --------------- ----------- --------------- (9) Bay Village Company (c) 10/83 15-30 (12) Bethany Glen Associates (c) 10/83 10-30 (11) Grandview-Blue Ridge Manor, Limited (c) 9/83 30 (4) Buena Vista Manor Apts. Ltd. (c) 11/83 20-30 (7) Canton Commons Apartments (c) 8/83 25 (18) Cedar Hill Apartments, Ltd. (c) 12/84 20-35 (10) Breckenridge-Chaparral Apartments II, Ltd. (c) 9/83 30 (18) Char-mur Apartments (c) 12/84 35 (7) Clinton Plaza Apartments L. P. (c) 8/83 30 (7) Clinton Plaza Apartments #2 L. P. (c) 8/83 30 (18) Crossett Apartments, Ltd. (c) 12/84 30 (8) Cudahy Gardens, Ltd. (c) 9/83 10-30 (10) El Paso-Gateway East, Ltd. (c) 9/83 25-30 (7) Golf Manor Apartments, Ltd. (c) 8/83 25 (7) Grosvenor South Apartments L. P. (c) 8/83 30 (7) Grosvenor South Apartments #2 L. P. (c) 8/83 30 (3) Oakland-Keller Plaza (c) 9/83 15-30 (16) Lafayette Square Apartment's Ltd. (c) 9/83 15-30 (8) San Diego-Logan Square Gardens Co. (c) 9/83 7-30 (6) Los Caballeros Apartments (c) 9/83 30 (3) South Munjoy Associates Ltd. (c) 11/83 30-40 (13) Country, Ltd. (c) 8/83 5-30 (13) Northbrook III, Ltd. (c) 8/83 30 (10) Forth Worth-Northwood Apartments, Ltd. (c) 9/83 10-30 (10) Corpus Christi-Oso Bay Apartments, Ltd. (c) 9/83 27.5-30 (8) Pacific Palms, Ltd. (c) 9/83 9-30 (14) Zeigler Blvd., Ltd. (c) 8/83 40 (14) Parktowne, Ltd. (c) 8/83 15-30 (8) Riverside Gardens, Ltd. (c) 9/83 15-30 (5) Rolling Meadows Apts., Ltd. (c) 11/83 27 (5) Ardmore-Rolling Meadows of Ardmore, Ltd. (c) 9/83 15-30 (5) Rolling Meadows of Chickasha, Limited (c) 11/83 27 (15) Roper Mountain Apartments (c) 8/83 25 (7) Rosewood Manor Apartments (c) 9/83 30 (14) New Jersey, Ltd. (c) 8/83 30 (10) Stephenville-Tarleton Arms (c) 9/83 15-40 (5) Oklahoma City-Town & Country Village (c) 9/83 10-30 (17) Caddo Parish-Villas South, Ltd. (c) 9/83 15-30 (14) Eastwyck III, Ltd. (c) 8/83 30 (7) Warren Manor Apts., Ltd.-Property A and B (c) 8/83 25 (7) Warren Woods Apartments, Ltd. (c) 8/83 25 (1) Westgate Associates Ltd. (c) 11/83 40
CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral FEBRUARY 28, 2003
Initial Cost to Partnership Cost Capitalized ------------------------------------------- Subsequent to Buildings and Acquisition: Subsidiary Partnership's Residential Property Encumbrances Land Improvements Improvements - --------------------------------------------- ------------ ----------- -------------- ---------------- (14) Westwood Apartments Company, Limited 0 233,605 4,168,757 (4,402,362) (2) Wingate Associates Ltd. 0 198,604 2,968,529 (3,167,133) ------------ ----------- -------------- ---------------- $ 5,362,057 $10,619,983 $ 173,345,865 $ (173,067,736) ============ =========== ============== ================ Gross Amount at which Carried At Close of Period ------------------------------------------------ Buildings and Accumulated Subsidiary Partnership's Residential Property Land Improvements Total Depreciation - --------------------------------------------- ------------ ---------------- ------------- --------------- (14) Westwood Apartments Company, Limited 0 0 0 0 (2) Wingate Associates Ltd. 0 0 0 0 ------------ ---------------- ------------- --------------- $ 498,671 $ 10,399,441 $ 10,898,112 $ (5,868,186) ============ ================ ============= ============== Life on which epreciation in Latest Income Year of Date Statement is Subsidiary Partnership's Residential Property Construction Acquired Computed (c)(d) - --------------------------------------------- --------------- ----------- --------------- (14) Westwood Apartments Company, Limited (c) 8/83 15-30 (2) Wingate Associates Ltd. (c) 11/83 30-40
(a) Properties are subject to mortgage notes and purchase money notes, as shown above. (b) No carrying costs have been capitalized since all properties were acquired after completion of construction. (c) Since all properties were acquired as operating properties, depreciation is computed using primarily the straight-line method over the estimated useful lives determined by the Partnership date of acquisition. (d) Furniture and fixtures, included in building and improvements, are depreciated primarily by the straight-line method over the estimated useful lives ranging from 5 to 15 years. (e) These amounts differ from the amounts presented in the audited financial statements of these subsidiary partnerships due to a difference in accounting between these partnerships and the other forty-one subsidiary partnerships. This difference, which is significant to the individual subsidiary partnerships, relates to discounts on the respective mortgages payable and the related acquisition cost and current carrying value of property and equipment. Geographic Locations: (1) Vermont, (2) New Hampshire, (3) Maine, (4) Tennessee, (5) Oklahoma, (6) Colorado, (7) Michigan, (8) California, (9) Massachusetts, (10) Texas, (11) Missouri, (12) Arizona, (13) Mississippi, (14) Alabama, (15) South Carolina, (16) New Mexico, (17) Louisiana, (18) Arkansas
Cost of Property and Equipment Accumulated Deprecication -------------------------------------------- -------------------------------------------- Year Ended February 28, -------------------------------------------------------------------------------------------- 2003 2002 2001 2003 2002 2001 ------------ ------------ ------------ ------------ ------------ ------------ Balance at beginning of period $ 50,581,913 $ 64,915,831 $ 84,972,630 $ 28,366,513 $ 36,351,247 $ 45,259,984 Additions during period: Improvements 486,918 592,837 441,990 Depreciation expense 352,194 1,137,341 1,606,397 Reductions during period: Dispositions (40,170,719) (14,926,755) (20,498,789) (22,850,521) (9,122,075) (10,515,134) ------------ ------------ ------------ ------------ ------------ ------------ Balance at end of period $ 10,898,112 $ 50,581,913 $ 64,915,831 $ 5,868,186 $ 28,366,513 $ 36,351,247 ============ ============ ============ ============ ============ ============
At the time the local partnerships were acquired by Cambridge + Related Housing Properties Limited Partnership, the entire purchase price paid by Cambridge + Related Housing Properties Limited Partnership was pushed down to the local partnerships as property and equipment with an offsetting credit to capital. Since the projects were in the construction phase at the time of acquisition, the capital accounts were insignificant at the time of purchase. Therefore, there are no material differences between the original cost basis for tax and GAAP. -----END PRIVACY-ENHANCED MESSAGE-----