0000950148-95-000563.txt : 19950822 0000950148-95-000563.hdr.sgml : 19950822 ACCESSION NUMBER: 0000950148-95-000563 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950821 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOUSING PROGRAMS LTD CENTRAL INDEX KEY: 0000750304 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953906167 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13808 FILM NUMBER: 95565518 BUSINESS ADDRESS: STREET 1: 9090 WILSHIRE BLVD STREET 2: STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 310-278-2191 MAIL ADDRESS: STREET 1: 9090 WILSHIRE BLVD STREET 2: SUITE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 FORMER COMPANY: FORMER CONFORMED NAME: REAL ESTATE ASSOCIATES LTD VIII DATE OF NAME CHANGE: 19840823 10-Q 1 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR QUARTER ENDED JUNE 30, 1995 COMMISSION FILE NUMBER 2-92352 HOUSING PROGRAMS LIMITED (FORMERLY SHEARSON LEHMAN/COAST SAVINGS HOUSING PARTNERS, LIMITED) A CALIFORNIA LIMITED PARTNERSHIP I.R.S. EMPLOYER IDENTIFICATION NO. 95-3906167 9090 Wilshire Blvd., Suite 201 Beverly Hills, Calif. 90211 Registrant's Telephone Number, Including Area Code (310) 278-2191 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 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 --- --- 2 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) INDEX TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets, June 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . 1 Statements of Operations, Six and Three Months Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . 2 Statement of Partners' Equity, Six Months Ended June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Statements of Cash Flow, Six Months Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Item 2. Management's Analysis and Discussion of Financial Condition and Results of Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS JUNE 30, 1995 AND DECEMBER 31, 1994 ASSETS
1995 1994 (Unaudited) (Audited) ----------- ----------- INVESTMENTS IN AND ADVANCES TO LIMITED PARTNERSHIPS $14,427,918 $14,533,940 CASH AND CASH EQUIVALENTS 1,130,965 624,935 SHORT TERM INVESTMENTS 125,000 533,409 ----------- ----------- TOTAL ASSETS $15,683,883 $15,692,284 =========== =========== LIABILITIES AND PARTNERS' DEFICIENCY LIABILITIES: Notes and capital contributions payable $10,177,433 $10,177,433 Accrued fees and expenses due general partners 1,277,072 1,092,620 Accrued interest payable 9,392,145 8,917,531 Accounts payable and other liabilities 44,808 21,922 ----------- ----------- 20,891,458 20,209,506 PARTNERS' DEFICIENCY (5,207,575) (4,517,222) ----------- ----------- TOTAL LIABILITIES AND PARTNERS' DEFICIENCY $15,683,883 $15,692,284 =========== ===========
The accompanying notes are an integral part of these financial statements. 1 4 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENT OF OPERATIONS SIX AND THREE MONTHS ENDED JUNE 30, 1995 AND 1994 (Unaudited)
Six months Three months Six months Three months ended ended ended ended June 30, 1995 June 30, 1995 June 30, 1994 June 30, 1994 ------------- ------------- ------------- ------------- INTEREST INCOME $ 26,616 $ 21,255 $ 8,118 $ 2,970 --------- --------- --------- --------- OPERATING EXPENSES Management fees-general partners 284,448 142,224 284,448 142,224 General and administrative 39,846 22,276 48,563 26,401 Legal and accounting 90,272 32,024 56,881 17,419 Interest expense 483,062 241,531 483,062 241,531 --------- --------- --------- --------- Total operating expenses 897,628 438,055 872,954 427,575 --------- --------- --------- --------- LOSS FROM PARTNERSHIP OPERATIONS (871,012) (416,800) (864,836) (424,605) DISTRIBUTIONS RECOGNIZED AS INCOME 143,419 - 428,151 65,216 EQUITY IN INCOME OF LIMITED PARTNERSHIPS AND AMORTIZATION OF ACQUISITION COSTS 37,240 18,620 308,000 154,000 --------- --------- --------- --------- NET LOSS $(690,353) $(398,180) $(128,685) $(205,389) ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements. 2 5 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENT OF PARTNERS' DEFICIENCY SIX MONTHS ENDED JUNE 30, 1995 (Unaudited)
General Limited Partners Partners Total --------- ------------ ----------- PARTNERSHIP INTERESTS June 30, 1995 12,368 =========== PARTNERS' DEFICIENCY, at January 1, 1995 $(295,918) $(4,221,304) $(4,517,222) Net loss for the six months ended June 30, 1995 (6,904) (683,449) (690,353) --------- ----------- ----------- PARTNERS' DEFICIENCY, at June 30, 1995 $(302,822) $(4,904,753) $(5,207,575) ========= =========== ===========
The accompanying notes are an integral part of these financial statements. 3 6 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (Unaudited)
1995 1994 ---------- --------- CASH FLOWS USED IN OPERATING ACTIVITIES: Net loss $ (690,353) $ (128,685) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Equity in income of limited partnerships (57,240) (328,000) Amortization of acquisition costs 20,000 20,000 Increase in advances to limited partnerships (31,331) - Increase in - Accrued interest payable 474,614 440,804 Accrued fees due general partners 184,452 186,694 Accounts payable 22,886 160,792 ---------- ---------- Net cash (used in) provided by operating activities (76,972) 351,605 ---------- ---------- CASH FLOWS PROVIDED BY INVESTING ACTIVITIES: Distributions from limited partnerships recognized as a return of capital 174,593 381,690 Decrease in short term investment 408,409 - ---------- ---------- Net cash provided by investing activities 583,002 381,690 ---------- ---------- NET INCREASE IN CASH AND CASH EQUIVALENTS 506,030 733,295 CASH AND CASH EQUIVALENTS, beginning of period 624,935 673,835 ---------- ---------- CASH AND CASH EQUIVALENTS, end of period $1,130,965 $1,407,130 ========== ==========
The accompanying notes are an integral part of these financial statements. 4 7 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS JUNE 30, 1995 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The information contained in the following notes to the financial statements is condensed from that which would appear in the annual audited financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the Housing Programs Limited (formerly, Shearson Lehman/Coast Savings Housing Partners, Limited) (the "Partnership") annual report for the year ended December 31, 1994. National Partnership Investments Corp. ("NAPICO") is the corporate general partner for the Partnership. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim period presented are not necessarily indicative of the results for the entire year. In the opinion of the Partnership, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals) necessary to present fairly the financial position of the Partnership at June 30, 1995 and the results of operations and changes in cash flow for the six months then ended. METHOD OF ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS The investments in local limited partnerships are accounted for on the equity method. Acquisition, selection fees and other costs related to the acquisition of the projects have been capitalized to the investment accounts. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash and bank certificates of deposit with an original maturity of three months or less. SHORT TERM INVESTMENTS Short term investments consist of bank certificates of deposit and other securities with original maturities ranging from more than three months to twelve months. The fair value of these securities, which have been classified as held for sale, approximates their carrying value. INCOME TAXES No provision has been made for income taxes in the accompanying financial statements since such taxes, if any, are the liability of the individual partners. 5 8 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1995 NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS The Partnership now holds limited partnership interests in 18 limited partnerships because of the Montecito foreclosure. The 18 local limited partnerships own residential rental projects consisting of 2,803 apartment units. The mortgage loans of these projects are insured by various governmental agencies. The Partnership, as a limited partner, is entitled to 99 percent of the profits and losses of the limited partnerships. As of June 30, 1995, the Partnership is obligated, if certain conditions are met, to invest additional capital of approximately $90,000 in an investee partnership, at some time in the future. This amount has not been recorded as a liability in the accompanying financial statements. Equity in losses of limited partnerships is recognized in the financial statements until the limited partnership investment account is reduced to a zero balance. Losses incurred after the investment account is reduced to zero are not recognized. Distributions from the limited partnerships are recognized as a reduction of capital until the investment balance has been reduced to zero or to a negative amount equal to further capital contributions required. Subsequent distributions are recognized as income. The following is a summary of the investment in limited partnerships as of June 30, 1995: Balance, beginning of period $14,533,940 Advances to limited partnerships 31,331 Distributions recognized as return of capital (174,593) Amortization of acquisition costs (20,000) Equity in income of limited partnerships 57,240 ----------- Balance, end of period $14,427,918 ===========
The following are unaudited combined estimated statements of operations for the limited partnerships in which the Partnership has investments:
Six months Three months Six months Three months ended ended ended ended June 30, 1995 June 30, 1995 June 30, 1994 June 30, 1994 ------------- ------------- ------------- ------------- INCOME Rental and Other $8,408,000 $4,204,000 $ 9,316,000 $ 4,658,000 EXPENSES Depreciation 1,754,000 877,000 1,906,000 953,000 Interest 1,886,000 943,000 2,318,000 1,159,000 Operating 5,580,000 2,790,000 5,886,000 2,943,000 ---------- ---------- ----------- ----------- Total expenses 9,220,000 4,610,000 10,110,000 5,055,000 ---------- ---------- ----------- ----------- NET LOSS $ (812,000) $ (406,000) $ (794,000) $ (397,000) ========== ========== =========== ===========
6 9 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1995 NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED) The Montecito local partnership was operating at a deficit and the general partner was unsuccessful in its attempt to negotiate a mortgage modification with the lender to improve the situation. No mortgage payments were made since June 6, 1994 and the mortgage was in default. On July 18, 1995, the property was foreclosed upon. The Partnership's original investment in the Montecito local partnership represented approximately 5% of the Partnership's total capital raised. The Partnership's financial statements reflect no investment in Montecito at June 30, 1995. NOTE 3 - NOTES AND CAPITAL CONTRIBUTIONS PAYABLE Certain of the Partnership's investments involved purchases of partnership interest from partners who subsequently withdrew from the operating partnership. The Partnership is obligated for non-recourse notes payable of $10,177,433, bearing interest at 9.5 percent, to the sellers of the partnership interests. The notes have principal maturity dates ranging from October 1996 to December 1999 or upon or refinancing of the underlying partnership properties. These obligations and the related interest are collateralized by the Partnership's investment in the investee limited partnerships and are payable only out of cash distributions from the investee partnerships, as defined in the notes. Unpaid interest, in the amount of $9,392,145 at June 30, 1995, is due at maturity of the notes. NOTE 4 - ACCRUED FEES AND EXPENSES DUE TO GENERAL PARTNERS Under the terms of the Restated Certificate and Agreement of the Limited Partnership, the Partnership is obligated to the general partners for an annual management fee equal to .5 percent of the invested assets of the limited partnerships. Invested assets is defined as the costs of acquiring project interests including the proportionate amount of the mortgage loans related to the Partnership's interests in the capital accounts of the respective partnerships. The fees accrued for the six months ended June 30, 1995 and 1994 were approximately $284,000. While as of June 30, 1995, the fees and expenses due the general partners exceeded the Partnership's cash, NAPICO was paid $100,000 for the six months ended June 30, 1995. The Partnership reimburses NAPICO for certain expenses. In 1995, the reimbursement to NAPICO of $14,923 has been paid and included in the Partnership's operating expenses. NOTE 5 - CONTINGENCIES NAPICO is a plaintiff in various lawsuits and has also been named as defendant in other lawsuits arising from transactions in the ordinary course of business. In the opinion of management and NAPICO, the claims will not result in any material liability to the Partnership. 7 10 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 1995 ITEM 2. MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Partnership's primary sources of funds include interest income earned from investing available cash and distributions from limited partnerships in which the Partnership has invested. It is not expected that any of the local limited partnerships in which the Partnership has invested will generate cash flow sufficient to provide for distributions to limited partners in any material amount. RESULTS OF OPERATIONS Partnership revenues consist primarily of interest income earned on certificates of deposit and other temporary investment of funds not required for investment in local partnerships. Operating expenses consist of recurring general and administrative expenses, professional fees for services rendered to the Partnership and accrued interest on the notes payable. In addition, an annual Partnership management fee in an amount equal to .5 percent of invested assets is payable to the general partners. The Partnership accounts for its investments in the local limited partnerships on the equity method, thereby adjusting its investment balance by its proportionate share of the income or loss of the local limited partnerships. Losses incurred after the limited partnership investment account is reduced to zero are not recognized. Distributions received from limited partnerships are recognized as return of capital until the investment balance has been reduced to zero or to a negative amount equal to future capital contributions required. Subsequent distributions received are recognized as income. Except for certificates of deposit and money market funds, the Partnership's investments are entirely interests in other limited partnerships owning government assisted projects. Available cash is invested providing interest income as reflected in the statements of operations. These funds can be converted to cash to meet obligations as they arise. The Partnership intends to continue investing available funds in this manner. The Montecito local partnership was operating at a deficit, and the general partner was unsuccessful in its attempt to negotiate a mortgage modification with the lender to improve the situation. No mortgage payments were made since June 6, 1994 and the mortgage was in default. On July 18, 1995, the property was foreclosed upon. The Partnership's original investment in the Montecito local partnership represented approximately 5% of the Partnership's total capital raised. The Partnership's financial statements reflect no investment in Montecito at June 30, 1995. 8 11 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) JUNE 30, 1995 PART II. OTHER INFORMATION ITEM 3. LEGAL PROCEEDINGS As of June 30, 1995, the Partnership's corporate general partners were plaintiffs or defendants in several suits including the following: The Montecito local partnership was operating at a deficit, and the general partner was unsuccessful in its attempt to negotiate a mortgage modification with the lender to improve the situation. No mortgage payments were made since June 6, 1994 and the mortgage was in default. On July 18, 1995, the property was foreclosed upon. The Partnership's original investment in the Montecito local partnership represented approximately 5% of the Partnership's total capital raised. The Partnership's financial statements reflect no investment in Montecito at June 30, 1995. Housing Programs Corporation II, a General Partner of the Partnership and certain of its affiliates, on their own behalf and on behalf of the Partnership and certain other partnerships with which they are associated (collectively, the "Plaintiff Partnerships"), and NAPICO and certain of its affiliates, have entered into a Memorandum of Understanding dated August 11, 1995. In addition to establishing certain Partnership controls, the Memorandum of Understanding resolves and settles various management and control issues which were under discussion for some time and various claims which were raised in a lawsuit filed in the Los Angeles Superior Court on June 9, 1995 by Housing Programs Corporation II, the Partnership, and others against your Managing General Partner, among others ("the Lawsuit"). All parties entered into the Memorandum of Understanding without any admission of wrongdoing or liability by any defendant as to any claim in the Lawsuit, in a desire to avoid continued litigation that would be expensive, time consuming and complex. By virtue of the Memorandum of Understanding, the parties thereto have agreed, among other things, that: 1. NAPICO has agreed to allow the accounting firm of Price Waterhouse to complete its analysis of the books and records of the Partnership including an analysis of the books and records of the master disbursement account maintained by an affiliate of NAPICO. NAPICO has also agreed that it and its affiliates will pay to the Partnership any amounts (with interest thereon) properly determined to be owed to the Partnership as a result of the Price Waterhouse analysis. 2. HAPI Management, Inc., ("HAPI"), an affiliate of NAPICO shall continue to manage the five Partnership properties it currently manages, subject to various agreed-upon modifications to the existing Management Agreements, and HAPI will not currently manage the other properties of the Partnership. All future management arrangements with HAPI will be subject to Housing Programs Corporation II's reasonable approval. 3. The Partnership will continue to retain Deloitte & Touche as the Partnership's auditors for 1995, but will solicit competitive bids from at least three Big Six accounting firms for the Partnership's audit work beginning with fiscal year 1996 and at least every three (3) years thereafter. 9 12 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) JUNE 30, 1995 PART II. OTHER INFORMATION ITEM 3. LEGAL PROCEEDINGS (CONTINUED) 4. The Partnership will employ an independent Cash Manager, designated by Housing Programs Corporation II, and approved by NAPICO, to perform cash management services, including maintenance of the Partnership's bank accounts and reserves, payment of property management fees and other accounts payable, payments to affiliates of NAPICO, and payment of cash distributions, if any, to the Limited Partners. NAPICO has agreed to prepare detailed annual budgets to be approved by Housing Programs Corporation II and thereafter used by the Cash Manager as a guide and control over Partnership operations. 5. The parties to the Memorandum of Understanding have agreed to enter into a formal Settlement Agreement and, concurrently therewith, (a) the plaintiffs in the Lawsuit will execute a special release of the defendants with respect to the allegations contained in the Lawsuit, (b) the defendants in the Lawsuit will execute a special release of each plaintiff in the Lawsuit that is a general partner of a Plaintiff Partnership with respect to all claims which would have been compulsory counterclaims thereunder, and (c) the defendants will execute a special release of any claims, other than those regarding specifically scheduled contractual relations, which any defendant may have against this Partnership or any of the other Plaintiff Partnerships. 6. Upon the uncured breach of certain provisions of the Memorandum of Understanding, or upon a future breach of NAPICO's fiduciary duties, Housing Programs Corporation II may cause NAPICO to resign as a general partner of the Partnership and become a limited partner thereof. Any Limited Partner who desires a copy of the Memorandum of Understanding may call Pat Toy at 1-800-666-6274 or by writing the Managing General Partner. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) No exhibits are required per the provision of item 7 of regulation S-K. 10 13 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) JUNE 30, 1995 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HOUSING PROGRAMS LIMITED (a California limited partnership) By: National Partnership Investments Corp. General Partner Date: ------------------------------------- By: ------------------------------------- Bruce Nelson President Date: ------------------------------------- By: ------------------------------------- Shawn Horwitz Executive Vice President and Chief Financial Officer 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1,130,965 0 0 0 0 1,255,965 0 0 15,683,883 44,808 0 0 0 0 (5,207,575) 15,683,883 0 207,275 0 0 414,566 0 483,062 (690,353) 0 (690,353) 0 0 0 (690,353) 0 0