-----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, KeWTFgqUPUOvVshON6ionO2Q8nwihTOxsafrlatJoRMrTBclOMGWwB/msEMz3xOh OWzW54W9tezl7kqer9/XmA== 0000721465-99-000002.txt : 19990331 0000721465-99-000002.hdr.sgml : 19990331 ACCESSION NUMBER: 0000721465-99-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: APT HOUSING PARTNERS LTD PARTNERSHIP CENTRAL INDEX KEY: 0000721465 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042791736 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 002-84474 FILM NUMBER: 99578378 BUSINESS ADDRESS: STREET 1: 500 W CUMMINGS PARK STE 6050 CITY: WOBURN STATE: MA ZIP: 01801 BUSINESS PHONE: 6179354200 MAIL ADDRESS: STREET 1: 500 W CUMMINGS PARK STE 6050 CITY: WOBURN STATE: MA ZIP: 01801 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1998 Commission File Number 2-84474 APT HOUSING PARTNERS LIMITED PARTNERSHIP A Massachusetts Limited Partnership I.R.S. Employer Identification No. 04-2791736 500 West Cummings Park, Suite 6050, Woburn, Massachusetts 01801 Registrant's Telephone Number, Including Area Code (781) 935-4200 Securities Registered Pursuant to Section 12(b) or 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed with the commission by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or 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]. DOCUMENTS INCORPORATED BY REFERENCE NONE TOTAL NUMBER OF PAGES 50 INDEX TO EXHIBITS AT PAGE 15 PART I ITEM 1. BUSINESS: General APT HOUSING PARTNERS LIMITED PARTNERSHIP (the "Partnership") is a limited partnership which was formed under the laws of the Commonwealth of Massachusetts on June 8, 1983. The General Partner of the Partnership is APT Asset Management, Inc., a Massachusetts corporation. APT Asset Management, Inc. is a wholly owned subsidiary of APT Financial Services, Inc. (a Delaware Corporation) whose majority shareholder is John M. Curry. The Partnership's business is to invest, as a limited partner, in Local Limited Partnerships owning government-assisted housing developments and to provide its partners current tax benefits, potential appreciation in real estate investments, distribution of net capital transaction proceeds and distributable cash to the extent available. On September 30, 1983, the Partnership offered for sale 9,000 units of limited partnership interests at $1,000 each pursuant to a prospectus dated September 30, 1983. The offering was subsequently amended on March 30, 1984 to provide for 3,700 units of limited partnership interests at $1,000 each. The public offering was managed by American Investment Team, Inc. ("AIT") ("the dealer manager"), an affiliate of the General Partner of the Partnership. The minimum investment allowed was $5,000. The Partnership received $3,700,000 of subscriptions for limited partnership interests during the period September 30, 1983 through April 30, 1984 from 329 Investors. No further issuance of partnership interests is anticipated. The net proceeds ($3,071,000) of the public offering were primarily used to purchase limited partnership interests in existing multi-family rental housing developments known as Ashland Commons Associates, Rockledge Apartments Associates and Historic Cohoes II. The Partnership's investments in each Local Limited Partnership represents 95.5%, 97% and 97%, respectively. On December 18, 1986 the Partnership withdrew its 97% investment interest in Historic Cohoes II and received its original investment of $1,321,234 from the Local Limited Partnership. A distribution of the same amount was made to the Limited Partners on April 3, 1987. Federal, state or local government agencies have provided significant incentives in order to stimulate private investment in government-assisted housing. The intent of these incentives was to reduce certain market risks and provide investors (i) tax benefits, (ii) limited cash distributions and (iii) long-term capital appreciation. Notwithstanding these factors, there remain significant risks. These risks include, but are not limited to, the financial strength of the local general partners. The long-term nature of investments in government-assisted housing limits the ability of the Partnership to vary its investment portfolio in response to changing economic, financial and investment conditions; such investments are also subject to changes in local economic circumstances and housing patterns which have an impact on real estate values. These housing developments also require greater management expertise and may have higher operating expenses than conventional housing developments. The Partnership became the principal limited partner in these Local Limited Partnerships pursuant to Local Limited Partnership agreements entered into with the local general partners. As a limited partner, the Partnership's liability for obligations of the Local Limited Partnerships is limited to its investment. The local general partners of the Local Limited Partnerships retain responsibility for maintaining, operating and managing the housing developments. Under certain circumstances, the Partnership has the right to replace the local general partner of the Local Limited Partnerships. John M. Curry is a General Partner in one of the Local Limited Partnerships. An affiliated company in which John M. Curry is the President, is the General Partner in the other Local Limited Partnership. Although each of the Local Limited Partnerships in which the Partnership has invested owns a housing development which must compete for tenants in the market place, the rental assistance and below market interest rates on mortgage financing provided by government-assisted housing programs make it possible to offer apartments to eligible tenants at a cost to the tenant significantly below the market rate for comparable conventionally-financed apartments in the area. The Internal Revenue Service (IRS) scrutinizes, in general, "tax shelters" that generate tax losses in any taxable year. The Local Limited Partnerships will deduct certain fees such as General Partners' fees and other expenses on the basis that such expenses constitute ordinary and necessary expenses of carrying on the business. If the federal income tax information return filed annually by the Partnership or by any Local Limited Partnership are audited, no assurance can be given as to what extent the deductions claimed for these fees will be allowed. Any disallowance by the IRS that is not successfully rebutted will have the effect of increasing the taxable income or decreasing the taxable loss of each Limited Partner for the year in question. The Limited Partners do not have a right to participate in the management of the Partnership or its operations. However, a majority in interest of the Limited Partners have the authority to (1) approve or disapprove the sale of all or substantially all of the assets of the Partnership in a single transaction or a related series of transactions, (2) dissolve the Partnership, (3) remove the General Partner, for cause, or (4) elect a substitute General Partner. Limited Partners holding 10% or more of the limited partnership interests have the right to call meetings of the Partnership and propose amendments to the Partnership Agreement. As a Limited Partner of each of the Local Limited Partnerships, the Partnership does not have the right to participate in the management of such Local Limited Partnerships or their operations. The Partnership retains certain rights with respect to voting on or approving certain matters, including the sale of the housing developments. By the existence or exercise of such rights, it could be asserted that the Partnership was taking part in the control of the Local Limited Partnerships' operations and should thereby incur liability for all debts and obligations of the Local Limited Partnerships. If this were found to be the case, the Partnership interest in one Local Limited Partnership could be reached by creditors of another Local Limited Partnership. The Partnership has received opinions of counsel for the Local Limited Partnerships that the existence and exercise of such rights will not subject it to liability as a Local General Partner of the Local Limited Partnership. Holders of the Partnership's limited partnership interests will need to bear the economic risk of their investment for an indefinite period of time. Transferability of the limited partnership interests is restricted so as not to cause a termination of the Partnership for tax purposes. In California, Maine, New Hampshire, Pennsylvania and South Carolina, transferability of the limited partnership interests is restricted to transferees meeting the investor suitability standards. In addition, a transfer of limited partnership interests is subject to the consent of the General Partner, which may be withheld in its sole discretion. Losses recognized for tax purposes from the ownership and operations of the housing developments decline over time. This occurs because the tax advantages of accelerated depreciation are greatest in earlier years and decline over the life of the housing developments, and because those portions of the level mortgage payment attributable to deductible interest likewise decrease with the passage of time. In addition, the benefits to be received in the form of tax savings in future years may decline as a result of the enactment of the Tax Reform Act of 1986, depending on the individual circumstances of each Limited Partner. For these reasons, among others, it is not anticipated that any public market will develop for the purchase and sale of limited partnership interests. Consequently, holders of limited partnership interests in the Partnership may not be able to liquidate their investments in the event of an emergency and limited partnership interests probably will not be readily acceptable as collateral for loans. Moreover, should a limited partner dispose of his limited partnership interest, he will realize taxable income to the extent that his allocable share of the mortgage debt obligations plus the other consideration he receives upon such disposition exceeds his tax basis, while at the same time he may not receive sufficient cash to pay such taxes. Competition The real estate rental business in which the Local Limited Partnerships are engaged is highly competitive and the properties owned by the Local Limited Partnerships are expected to be subject to active competition from similar properties in their respective vicinities. The Local Limited Partnerships compete with many other entities providing residential rental housing through government-assisted and conventionally-financed housing developments. Some of these entities are owned by large real estate operators with significantly greater resources than the Partnership as well as local organizations which own and operate a relatively small number of properties. The Local Limited Partnerships believe that they have a reputation for providing safe, clean, quality residential housing which enables them to compete effectively for tenants. While the Local Limited Partnerships believe that they will continue to compete effectively for tenants, there can be no assurance that they will do so or that they will not encounter further increased competition in the future due to changes in the various government-assisted housing programs and from rehabilitated or new housing developments in their respective vicinities. Employees The Partnership does not have any direct employees. All services are performed for the Partnership by its General Partner and its affiliates. The General Partner receives compensation in connection with such activities as set forth in Item 11. In addition, the Partnership reimburses the General Partner and certain of its 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"). ITEM 2. PROPERTIES: The Partnership holds limited partnership interests in two (2) Local Limited Partnerships as of December 31, 1998. Set forth is a schedule of the Local Limited Partnerships including certain information concerning the Apartment Complexes. Name and Location % of Units Occupied (Number of Units) Date Acquired at December 31, 1998 1997 1996 1995 1994 Ashland Commons Associates March 30, 1984 100% 99% 100% 99% 100% Ashland, MA (96) Rockledge Apartments Associates June 22, 1984 97% 98% 97% 98.2% 100% Wakefield, MA (60) The Local Limited Partnerships in which the Partnership has invested own existing Apartment Complexes which receive either Federal or State subsidies. The U.S. Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), administers a variety of subsidy programs for low- and moderate-income housing developments. The Federal programs generally provide one of a combination of the following forms of assistance: (i) mortgage loan insurance (ii) rental subsidies, (iii) reduction of mortgage interest payments. i) HUD provides mortgage insurance for rental housing projects pursuant to a number of sections of Title II of the National Housing Act ("NHA") including, among others, Section 236 and Section 221(d)(4). Under these programs, HUD will generally provide insurance equal to 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 the 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. ii) Many of the tenants in HUD insured projects receive some form of rental assistance payments, primarily through the Section 8 Housing Assistance Payments Program ("Section 8 Program"). Apartment Complexes receiving assistance through the Section 8 Program will generally have limitations on the amount 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 Limited Partnerships are: A discontinuation of project-based Section 8 subsidy payments and 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. Currently, any Section 8 subsidy contract that expires, HUD is renewing on a year to year basis until such time as a new program is implemented, if any. The impact of ACPA, if enacted in its present form, is not presently determinable. Several industry sources have already commented to HUD and Congress that in the event the ACPA were fully enacted in its present form, the reduction in mortgage indebtedness would be considered taxable income to limited partners in the Partnership. Legislative relief has been proposed to exempt "mark-to-market" debt from cancellation of indebtedness income treatment. iii) The Section 236 Program, as well as providing mortgage insurance, also provides a subsidy which reduces the 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 payment required by the terms of the mortgage to pay principal and interest and (ii) the monthly payment which would have been required for principal and interest if the mortgage loan provided for 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. All tenant leases are generally for periods not greater than one to two years and no tenant occupies more than 10% of the rentable square footage. Management continuously reviews the physical state of the properties and budgets improvements when required which are generally funded from cash flow from operations or release of replacement reserve escrows. No improvements are expected to require additional financing. See Item 1, Business, above for the general competitive conditions to which the properties described herein are subject. Real estate taxes are calculated using rates and assessed valuations determined by the town or city in which the property is located. ITEM 3. LEGAL PROCEEDINGS: None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS: Limited partnership interests are not traded in a public market but were sold through a public offering managed by American Investment Team, Inc. It is not anticipated that any public market will develop for the purchase and sale of any limited partnership interest. Limited partnership interests may be transferred only if certain requirements are satisfied. As of March 15, 1999, there were 326 registered holders of an aggregate of 3,700 units of limited partnership interests in the Partnership. The Partnership has invested in Local Limited Partnerships owning housing developments which receive governmental assistance under programs which restrict the cash return available to housing development owners. The Partnership does not anticipate providing significant cash distributions to its limited partners in circumstances other than a refinancing or sale. On February 24, 1995, the Partnership distributed $200,000 to the partners, of which $196,000 or $52.97 per unit of limited partnership interest, was distributed to the Limited Partners. The Partnership does not anticipate that it will make any further cash distributions. ITEM 6. SELECTED FINANCIAL DATA: The information set forth below presents selected financial data of the Partnership. Additional financial information is set forth in the audited financial statements in Part IV, Item 14, beginning on page 15. Year Ended December 31, OPERATIONS 1998 1997 1996 1995 1994 Revenue $ 4,868 $ 2,610 $ 1,389 $ 1,884 $ 4,843 Expenses 45,472 46,464 45,891 46,948 46,713 Loss before share of losses of and distributions from the Local Limited Partnerships ( 40,604) ( 43,854) ( 44,502) ( 45,064) ( 41,870) Distribution from Local Limited Partnership 87,903 87,903 87,903 87,064 82,255 Share of losses of Local Limited Partnerships - - - - - Net income $ 47,299 $ 44,049 $ 43,401 $ 42,000 $ 40,385 Net income per weighted average limited partnership unit $ 12.53 $ 11.67 $ 11.50 $ 11.12 $ 10.70 FINANCIAL POSITION December 31, 1998 1997 1996 1995 1994 Total assets $ 155,218 $ 108,175 $ 64,360 $ 20,946 $ 179,140 Investment in Local Limited Partnerships $ -0- $ -0- $ -0- $ -0- $ -0- Total liabilities $ 17,101 $ 17,357 $ 17,591 $ 17,578 $ 17,772 Total partners' capital $ 138,117 $ 90,818 $ 46,769 $ 3,368 $ 161,368 Cash distributions per limited partnership unit $ -0- $ -0- $ -0- $ 52.97 $ -0- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: Liquidity and Capital Resources The Partnership's primary source of funds were the proceeds of its public offering. Other sources of liquidity include interest earned on funds and cash distributions from operations of the Local Limited Partnerships in which the Partnership has invested. These sources of liquidity are available to meet obligations of the Partnership. The Partnership received $3,700,000 in gross proceeds from the sale of partnership interests pursuant to the public offering, resulting in net proceeds available for investment, after volume discounts, establishment of working capital reserves, payment of sales commissions, acquisition fees and offering expenses, of $3,071,000. As of December 31, 1998, the Partnership has invested all of the net proceeds available for investment. The Partnership's commitment to investments requiring initial capital contributions has been paid. The Partnership has no other significant capital commitments. 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 Limited Partnerships are: A discontinuation of project based Section 8 subsidy payments and 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. Currently, any Section 8 subsidy contract that expires, HUD is renewing on a year to yd Expense (15) 123 9 (Increase) Decrease in Escrow Deposits 18,302 (14,196) 7,173 (Increase) Decrease in Restricted Cash 350 (109) (1,860) Increase (Decrease) in Accounts Payable and Accrued Expenses (16,007) 30,311 (61,908) Increase (Decrease) in Tenants Security Deposits (388) 700 1,269 Increase (Decrease) in Prepaid Rents 6,300 166 (86) Net Cash Provided (Used) by Operating Activities 112,028 158,358 157,532 CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) Decrease in Reserve for Replacements (19,783) (41,229) (39,870) (Increase) Decrease in Residual Receipts Reserve ( 9,185) (80,242) (24,092) Net Cash Provided (Used) by Investing Activities (28,968) (121,471) (63,962) CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in Mortgage Loan Payable (28,020) (24,934) (22,187) Distributions to Partners (92,045) (92,045) (92,045) Net Cash Used by Financing Activities 120,065 116,979 114,232 Net Increase (Decrease) in Cash and Cash Equivalents (37,005) (80,092) (20,662) Cash and Cash Equivalents, Beginning of Year 219,932 300,024 320,686 Cash and Cash Equivalants, End of Year 182,927 219,932 300,024 Supplemental Disclosure Cash Paid During Year For Interest 574,808 576,623 587,042 See accompanying summary of accounting policies and notes to financial statements ASHLAND COMMONS ASSOCIATES (a limited partnership) PROJECT NO: 023-35279 SUMMARY OF ACCOUNTING POLICIES BASIS OF ACCOUNTING Financial statements are prepared on the accrual basis and all development and construction costs were capitalized. The partnership, for tax purposes, charged to expense certain costs, such as interest and real estate taxes during construction. Accordingly, the cost of property and equipment shown in these statements includes $649,227 which has been deducted for tax purposes. The balance sheet does not give effect to any assets that the partners may have outside their interest in the partnership, nor to any personal obligations, including income taxes, of the individual partners. PROPERTY, EQUIPMENT AND DEPRECIATION Property and equipment are stated at cost. Depreciation of buildings is based on a 25 year life using the straight-line method for financial reporting purposes. For income tax purposes, accelerated depreciation methods are used. AMORTIZATION Amortization of financing costs is based on a forty year life using the straight-line method for both financial reporting and income tax purposes. INCOME TAXES The partnership, as an entity, is not subject to income tax. The partners' share of the loss for tax purposes is includable in their income tax returns. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. ASHLAND COMMONS ASSOCIATES (a limited partnership) PROJECT NO: 023-35279 NOTES TO FINANCIAL STATEMENTS NOTE 1 - GENERAL Ashland Commons Associates is a Massachusetts limited partnership which was formed on September 29, 1982 for the purpose of owning, rehabilitating and operating a multi-unit apartment complex containing 96 residential units under the provisions of Section 221 (d)(4) of the National Housing Act. The partnership has a Section 8 contract with HUD to receive rent subsidy equal to approximately 83% of the total rental income. The contract expires September, 2002. NOTE 2 - MORTGAGE LOAN PAYABLE The mortgage note is insured by the Federal Housing Administration (FHA) and is payable in monthly installments of approximately $48,283, including interest at 11.728% per annum, through 2024. Annual principal payments will average $40,312 each year for the next five years. The partnership is required to make monthly payments of $2,094 into a fund for replacements. Withdrawals from this fund can only be made upon the approval for the Federal Housing Commissioner. The partnership and its partners have no personal liability on the mortgage loan; the mortgaged property is the only collateral for the loan. NOTE 3 - RELATED PARTY TRANSACTIONS The partnership pays a 4.5% management fee based on gross revenues collected, which, at present, is capped at $43 PUPM, to an affiliate of a general partner, and $506 per month for bookkeeping. Further, the management company is reimbursed at cost for salaries and wages and related employee expenses such as payroll taxes, health insurance, disability insurance, worker compensation and other insurance. ASHLAND COMMONS ASSOCIATES (a limited partnership) PROJECT NO: 023-35279 NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 4 - CAPITAL DISTRIBUTION RESTRICTION No distribution of assets may be made except from "surplus cash" as defined in the regulatory agreement with HUD. Total distributions are limited to $92,045, per annum as allowed by HUD. NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of the Partnership's financial instruments have been determined at a specific point in time, based on relevant market information and information about the financial instrument. Estimates of fair value are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions could affect the estimates. The carrying amounts of cash and cash equivalents, tenant's security deposits cash, tenant's accounts receivable, restricted deposits and funded reserves, and accounts payable and other liabilities approximate their fair market values because of the short-term maturity of these instruments. The Partnership obtained its mortgage financing under Section 221 (d)(4) of the National Housing Act, as amended, and is supported by a Section 8 rent subsidy contract. Currently, no new mortgages are being insured under these combined programs. Accordingly, management does not believe that it is practicable to estimate the fair value of its mortgage loan. Additional information pertinent to the value of this loan is provided in Note 2. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N REPORT ON FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996 CONTENTS Page Independent Auditors' Report 3 Financial Statements: Balance Sheet 4 Statement of Operations 5 Statement of Partners' Equity (Deficit) 6 Statement of Cash Flows 7 Summary of Accounting Policies 8 Notes to Financial Statements 9 INDEPENDENT AUDITORS' REPORT January 26, 1999 To the Partners of Rockledge Apartments Associates Woburn, Massachusetts We have audited the accompanying balance sheet of MHFA Project No. 71-187-N Rockledge Apartments Associates, (a limited partnership) as of December 31, 1998, 1997 and 1996 and the related statements of operations, partners'equity (deficit) and cash flows for the years 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 statements 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 Rockledge Apartments Associates as of December 31, 1998, 1997, and 1996 and the results of its operations and its cash flow for the years then ended in conformity with generally accepted accounting principles. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N BALANCE SHEET DECEMBER 31, 1998 DECEMBER 31, 1998 1997 1996 ASSETS Property and Equipment (Mortgaged) - Note 2 Land $ 90,000 $ 90,000 $ 90,000 Building 1,624,825 1,624,825 1,624,825 Equipment and furnishings 263,535 263,535 263,535 1,978,360 1,978,360 1,978,360 Less: Accumulated Depreciation 1,207,939 1,142,946 1,077,953 Net Property and Equipment 770,421 835,414 900,407 Cash and Cash Equivalents 257,365 243,429 164,844 Rents and Other Receivables 7,386 5,266 7,196 Escrow Deposits 18,387 26,604 16,219 Restricted Cash - Tenants' Security Deposits 26,611 25,287 25,103 Reserve for Replacements 98,212 104,513 173,341 1,178,382 1,240,513 1,287,110 LAIBILITIES AND PARTNERS' DEFICIT LIABILITIES: Mortgage Loan Payable - Note 2 1,203,633 1,228,943 1,252,527 Note Payable Affiliate (Note 3) 20,046 28,052 35,922 Accrued Interest Payable 1,695 1,841 1,977 Accounts Payable and Accrued Expenses 29,749 28,731 18,802 Tenants' Security Deposits Payable 24,869 25,287 23,358 Prepaid Rents 115 3,564 2 TOTAL LIABILITIES 1,280,107 1,316,418 1,332,588 COMMITMENTS AND CONTINGENCIES Notes 2,3 and 4 PARTNERS' DEFICIT - Note 4 General Partner 1,971 2,746 3,659 Limited Partner ( 103,696) ( 78,651) ( 49,137) TOTAL PARTNERS' DEFICIT ( 101,725) ( 75,905) ( 45,478) 1,178,382 1,240,513 1,287,110 See accompanying summary of accounting policies and notes to financial statements ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1998 1997 1996 RENT AND RELATED INCOME $ 386,277 $ 383,550 $ 375,241 OPERATING EXPENSES: Administrative & Marketing 93,960 85,095 85,653 Utilities 42,070 47,791 46,256 Maintenance and Repair 157,588 167,323 157,368 Real Estate Tax 39,577 34,785 24,035 Interest 23,326 25,976 28,648 Insurance 5,956 5,530 5,598 Depreciation and Amortization 64,993 64,993 65,048 Total Operating Expenses 427,470 431,493 412,606 OPERATING INCOME (LOSS) (41,193) (47,943) (37,365) OTHER INCOME - Interest 15,373 17,516 18,848 NET INCOME (LOSS) $(25,820) $(30,427) $(18,517) NET INCOME (LOSS) TO GENERAL PARTNERS $ (775) $ (913) $ (556) NET INCOME (LOSS) TO LIMITED PARTNERS $(25,045) $(29,514) $(17,961) See accompanying summary of accounting policies and notes to financial statements. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N STATEMENT OF PARTNERS' EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, 1996 General Limited Total Partner Partners BALANCE, at December 31, 1995 $ (26,961) $ 4,215 $ (31,176) Net loss (18,517) (556) (17,961) BALANCE, at December 31, 1996 (45,478) 3,659 (49,137) Net loss (30,427) (913) (29,514) BALANCE, at December 31, 1997 (75,905) 2,746 (78,651) Net loss (25,820) (775) (25,045) BALANCE, at December 31, 1998 $ (101,725) $ 1,971 $(103,696) Percentage of interest in profit and losses 100% 3% 97% See accompanying summary of accounting policies and notes to financial statements ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1998 1997 1996 CASH FLOWS FROM ACTIVITIES Net Loss $( 25,820) $ (30,427) $ (18,517) Adjustments to reconcile Net Loss to Net Cash Provided (Used) by Operating Activities: Depreciation and Amortization 64,993 64,993 65,048 (Increase) Decrease in Receivables ( 2,120) 1,930 7,144 (Increase) Decrease in Escrow Deposits 8,217 (10,385) 1,201 (Increase) Decrease in Restricted Deposits (1,324) ( 184) (1,017) Increase (Decrease) in Accounts Payable and Accrued Expenses 872 9,793 (8,187) Increase (Decrease) in Tenants Security Deposits ( 418) 1,929 ( 510) Increase (Decrease) in Prepaid Rents (3,449) 3,562 2 Net Cash Provided (Used) by Operating Activities 40,951 41,211 45,164 CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) Decrease in Reserve for Replacements 6,301 68,828 (55,267) CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in Mortgage Loan Payable (25,310) (23,584) (21,979) Note Payable - Affiliate ( 8,006) ( 7,870) ( 7,743) Net Cash Used by Financing Activities 33,316 31,454 29,722 Net Increase (Decrease) in Cash and Cash Equivalents 13,936 78,585 (39,825) Cash and Cash Equivalents, Beginning of Year 243,429 164,844 204,669 Cash and Cash Equivalents, End of Year $ 257,365 $ 243,429 $ 164,844 See accompanying summary of accounting policies and notes to financial statements ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N SUMMARY OF ACCOUNTING POLICIES BASIS OF ACCOUNTING Financial statements are prepared on the accrual basis and all development and construction costs were capitalized. The balance sheet does not give effect to any assets that the partners may have outside their interest in the partnership, nor to any personal obligations, including income taxes, of the individual partners. PROPERTY, EQUIPMENT AND DEPRECIATION Property and equipment are stated at cost. Depreciation of buildings and equipment is based on a 25 year life and a 5 year life respectively. The ACRS method is used for tax purposes. INCOME TAXES The partnership, as an entity, is not subject to income tax. The partners' share of the loss for tax purposes is includable in their income tax returns. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N NOTES TO FINANCIAL STATEMENTS NOTE 1 - GENERAL Rockledge Apartments Associates is a Massachusetts limited partnership which was formed on February 23, 1973 for the purpose of owning, rehabilitating and operating a multi-unit apartment complex containing 60 residential units. The partnership has a contract with HUD to receive rent subsidy equal to approximately 84% of the total rental income. The contract expires in May, 2018. NOTE 2 - MORTGAGE LOAN PAYABLE The mortgage note is payable to the Massachusetts Housing Finance Agency (MHFA) over a 40 year period, in monthly installments of approximately $3,841 (after interest subsidy payments of $6,597 monthly), including interest at 7.5485% per annum thru 2018. Principal payments for the next five years are as follows: 1999 $27,116 2000 29,163 2001 31,311 2002 33,623 2003 36,113 The partnership is required to make monthly payments of $7,582 to MHFA for real estate taxes, insurance and a reserve for replacements. Withdrawals must have the approval of MHFA. The partnership and its partners have no personal liability on the mortgage loan; the mortgaged property is the only collateral for the loan. NOTE 3 - NOTE PAYABLE The note payable to affiliate bears interest at the rate of 12% per annum for a period of 15 years at which time the note is payable in full. Interest is payable only from Distributable Cash and residual amounts of Net Capital Transactions proceeds. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 4 - RELATED PARTY TRANSACTIONS The partnership pays to an affiliate of a general partner a monthly management fee of 6% of rents collected and a monthly bookkeeping fee of $385, and an annual fee of $1,862 to another affiliate of a general partner. NOTE 5 - CAPITAL DISTRIBUTION RESTRICTION No distribution of assets may be made except from "surplus cash" as defined in the regulatory agreement with the MHFA. Annual distributions are limited to $9,847, as allowed by MHFA. NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of the Partnership's financial instruments have been determined at a specific point in time, based on relevant market information and information about the financial instrument. Estimates of fair value are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions could affect the estimates. The carrying amounts of cash and cash equivalents, tenant's security deposits cash, tenant's accounts receivable, restricted deposits and funded reserves, and accounts payable and other liabilities approximate their fair market values because of the short-term maturity of these instruments. The Partnership obtained its mortgage financing under Section 236 of the National Housing Act, as amended, and is supported by a Section 8 rent subsidy contract. Currently, no new mortgages are being insured under these combined programs. Accordingly, management does not believe that it is practicable to estimate the fair value of its mortgage loan. Additional information pertinent to the value of this loan is provided in Note 2. INDEX TO EXHIBITS Sequentially Exhibit Numbered No. Description Page (3) Articles of Incorporation and By-laws: The registrant is not incorporated. The partnership Agreement was filed with the registrant's Registration Statement on Form S-11 (#2-84474) and is incorporated herein by reference. (10.1) Purchase and Sale Agreement, dated as of March 30, 1984, relating to Ashland Commons Associates (filed with Registrant's Form 8-K dated March 30, 1984 and incorporated herein by reference). (10.2) Purchase and Sale Agreement, dated as of April 30, 1984, relating to Historic Cohoes, II (filed with Registrant's Form 8-K dated April 30, 1984 and incorporated herein by reference). (10.3) Purchase and Sale Agreement, dated as of June 22, 1984, relating to Rockledge Apartment Associates (filed with Registrant's Form 8-K dated June 22, 1984 and incorporated herein by reference). (10.4) Withdrawal of APT Housing Partners Limited Partners as a Limited Partner in a Local Limited Partnership, dated as of December 18, 1986, relating to Historic Cohoes, II, (filed with Registrant's Form 8-K dated March 30, 1987 and incorporated herein by reference). (27) Financial data schedule. 49 APT HOUSING PARTNERS LIMITED PARTNERSHIP FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the balance sheet and statement of income on pages 18 through 19 of the Partnership's 1998 Annual Report on Form 10-K and is qualified in its entirety by reference to such financial statements. Item Number Item Description Year End 1998 5-02(1) Cash and cash items $ 155,218 5-02(2) Marketable securities -0- 5-02(3)(a)(1) Notes and accounts receivable-trade -0- 5-02(4) Allowance for doubtful accounts -0- 5-02(6) Inventory -0- 5-02(9) Total current assets 155,218 5-02(13) Property, plant and equipment -0- 5-02(14) Accumulated depreciation -0- 5-02(18) Total assets 155,218 5-02(21) Total current liabilities 17,101 5-02(22) Bonds, mortgages and similar debt -0- 5-02(28) Preferred stock-mandatory redemption -0- 5-02(29) Preferred stock-no mandatory redemption -0- 5-02(30) Common stock -0- 5-02(31) Other stockholders' equity 138,117 5-02(32) Total liabilities and stockholders' equity 155,218 Item Number Item Description Year Ended 1998 5-03(b)1(a) Net sales of tangible products $ -0- 5-03(b)1 Total revenues 92,771 5-03(b)2(a) Cost of tangible goods sold -0- 5-03(b)2 Total costs and expenses applicable to sales and revenues -0- 5-03(b)3 Other costs and expenses 45,472 5-03(b)5 Provision for doubtful accounts and notes -0- 5-03(b)(8) Interest and amortization of debt discount -0- 5-03(b)(10) Income before taxes and other items 47,299 5-03(b)(11) Income tax expense -0- 5-03(b)(14) Income/loss continuing operations 47,299 5-03(b)(15) Discontinued operations -0- 5-03(b)(17) Extraordinary items -0- 5-03(b)(18) Cumulative effect-changes in accounting principles -0- 5-03(b)(19) Net income or loss 47,299 5-03(b)(20) Earnings per share-primary 12.53 5-03(b)(20) Earnings per share-fully diluted 12.53 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. APT HOUSING PARTNERS LIMITED PARTNERSHIP By: APT Asset Management, Inc. General Partner Date:___________ [SIGNATURE] Jeff Ewing, President APT ASSET MANAGEMENT, INC. EX-27 2
5 12-MOS DEC-31-1998 DEC-31-1998 155,218 0 0 0 0 155,218 0 0 155,218 17,101 0 0 0 0 138,117 155,218 0 92,771 0 0 45,472 0 0 47,299 0 47,299 0 0 0 47,299 12.53 12.53
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