-----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, CkLFAJkPpohE7vHZld4ka2HODEclVgUFn1rcS8BCpuOmNoN0HjyB1GtYAlwEXCXZ 8QQEdeX+R8ZlVVg9ip3r+Q== 0000950148-98-000927.txt : 19980416 0000950148-98-000927.hdr.sgml : 19980416 ACCESSION NUMBER: 0000950148-98-000927 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980415 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-K SEC ACT: SEC FILE NUMBER: 000-13808 FILM NUMBER: 98594242 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-K 1 FORM 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, 1997 Commission File Number 0-13808 HOUSING PROGRAMS LIMITED A CALIFORNIA LIMITED PARTNERSHIP (Formerly, Shearson Lehman/Coast Savings Housing Partners, Limited) I.R.S. Employer Identification No. 95-3906167 9090 WILSHIRE BLVD., SUITE 201, BEVERLY HILLS, CALIFORNIA 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 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. [ ] 2 PART I. ITEM 1. BUSINESS Housing Programs Limited (the "Partnership") is a limited partnership which was formed under the laws of the State of California on May 15, 1984. On September 12, 1984, the Partnership offered 3,000 units consisting of 6,000 Limited Partnership Interests and warrants to purchase a maximum of 6,000 Additional Limited Partnership Interests through a public offering. The general partners of the Partnership are National Partnership Investments Corp. ("NAPICO"), Housing Programs Corporation II and National Partnership Investments Associates II ("NPIA") (collectively, the "General Partners"). The business of the Partnership is conducted primarily by its General Partners as Housing Programs Limited has no employees of its own. NAPICO is a wholly owned subsidiary of Casden Investment Corporation ("CIC"), which is wholly owned by Alan I. Casden. The current members of NAPICO's Board of Directors are Charles H. Boxenbaum, Bruce E. Nelson, Alan I. Casden, Henry C. Casden and Brian D. Goldberg. LBI Group Inc. owns all of the stock of Housing Programs Corporation II. CHIA is a limited partnership formed under the California Limited Partnership Act and consists of Messrs. Nicholas G. Ciriello, an unrelated individual, as general partner and Charles H. Boxenbaum, as limited partner. The Partnership holds limited partnership interests in seventeen local limited partnerships (referred herein as the "local" or "lower-tier" limited partnerships) as of December 31, 1997. NAPICO holds a general partnership interest in nine of the local limited partnerships. The remaining local partnerships general partners are unaffiliated with the Partnership. Each of the local partnerships owns a low income housing project which is subsidized and/or has a mortgage note payable to or insured by agencies of the federal or local government. In order to stimulate private investment in low income housing, the federal government and certain state and local agencies provided ownership incentives, including among others, interest subsidies, rent supplements, and mortgage insurance, with the intent of reducing certain market risks and providing investors with certain tax benefits, plus limited cash distributions and the possibility of long-term capital gains. There remains, however, significant risks associated with the ownership of low income housing projects. The long-term nature of investments in government assisted housing limits the ability of the Partnership to vary its portfolio in response to changing economic, financial and investment conditions; such investments are also subject to changes in local economic circumstances and housing patterns, as well as rising operating costs, vacancies, rent collection difficulties, energy shortages and other factors which have an impact on real estate values. These projects also require greater management expertise and may have higher operating expenses than conventional housing projects. Under recent adopted law and policy, HUD has determined not to renew HAP Contracts on a long term basis on the existing terms. In connection with renewals of the HAP Contracts under such new law and policy, the amount of rental assistance payments under renewed HAP Contracts will be based on market rentals instead of above market rentals, which was generally the case under existing HAP Contracts. As a result, existing HAP Contracts that are renewed in the future on projects insured by the FHA will not provide sufficient cash flow to permit owners of properties to meet the debt service requirements of these existing FHA-insured mortgages. In order to address the reduction in payments under HAP Contracts as a result of this new policy, the Multi-family Assisted Housing Reform and Affordability Act of 1997 (the "MAHRAA"), which was adopted in October 1997, provides for the restructuring of mortgage loans insured by the FHA with respect to properties subject to HAP Contracts that have been renewed under the new policy. The restructured loans will be held by the current lender or another lender. Under MAHRAA, an FHA-insured mortgage loan can be restructured to reduce the annual debt service on such loan. There can be no assurance that the Partnership will be permitted to restructure its mortgage indebtedness pursuant to the new HUD rules implementing MAHRAA or that the Partnership would choose to restructure such mortgage indebtedness if it were eligible to participate in the MAHRAA program. It should be noted that there are uncertainties as to the economic impact on the Partnership of the combination of the reduced payments under the HAP Contracts and the restructuring of the existing FHA-insured mortgage loans under MAHRAA. Accordingly, the General Partners are unable to predict with certainty their impact on the Partnership's future cash flow. The Partnership became the limited partner in the local limited partnerships pursuant to arm's-length negotiations with the local limited partnerships' general partners who are often the original project developers. In certain other cases, the Partnership invested in newly formed local limited partnerships which, in turn, acquired the projects. As a limited partner, the Partnership's liability for obligations of the local limited partnership is limited to its investment. The general partner of the local limited partnership retains responsibility for maintaining, operating and managing the project. Under certain circumstances, the Partnership has the right to replace the general partner of the limited partnerships. Although each of the partnerships in which the Partnership has invested will generally own a project which must compete in the market place for tenants, interest subsidies and rent supplements from governmental agencies make it possible to offer these dwelling units to eligible "low income" tenants at a cost significantly below the market rate for comparable conventionally financed dwelling units in the area. 3 During 1997, all of the projects in which the Partnership had invested were substantially rented. The following is a schedule of the status, as of December 31, 1997, of the projects owned by local partnerships in which the Partnership has invested. SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS IN WHICH HOUSING PROGRAMS LIMITED HAS AN INVESTMENT DECEMBER 31, 1997
Units Authorized For Rental No. of Assistance Under Units Percentage of Name & Location Units Section 8 Occupied Total Units - --------------- ----- --------------- -------- ------------ Bannock Arms Apts. 66 66 66 100% Boise, ID Berkeley Gardens 132 26 128 97% Martinsburg, WV Cape LaCroix 125 0 120 96% Cape Girardeau, MO Cloverdale 100 0 97 97% Crawfordsville, IN Cloverleaf 94 94 93 99% Indianapolis, IN Evergreen Apts 330 330 323 98% Oshtemo, MI Friendship Arms 151 150 151 100% Hyattsville, MD Jenny Lind Hall 78 78 78 100% Springfield, MO Lancaster Heights 198 0 184 93% Normal, IL Locust House 99 98 99 100% Westminster, MD Midpark Towers 202 202 200 99% Dallas, TX Oxford House 156 152 156 100% Decatur, IL
4 SCHEDULE OF PROJECTS OWNED BY LOCAL LIMITED PARTNERSHIPS IN WHICH HOUSING PROGRAMS LIMITED HAS AN INVESTMENT DECEMBER 31, 1997
Units Authorized For Rental No. of Assistance Under Units Percentage of Name & Location Units Section 8 Occupied Total Units - --------------- ----- --------------- -------- ------------ Plaza Village 228 114 219 96% Woonsocket, RI Round Barn Manor 156 156 156 100% Champaign, IL Santa Fe Towers 252 251 244 97% Overland Park, KS Walnut Towers 78 77 78 100% Winfield, KS Westwood Terrace 97 97 96 99% ----- ----- ----- Moline, IL TOTAL 2,542 1,909 2,488 98% ===== ===== =====
5 ITEM 2. PROPERTIES Through its investments in local limited partnerships, the Partnership holds interests in real estate properties. ITEM 3. LEGAL PROCEEDINGS As of December 31, 1997, NAPICO was a plaintiff or defendant in several lawsuits. None of these suits are related to the Partnership. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II. ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS The Limited Partnership Interests are not traded on a public exchange, and 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. Currently, there are 2,870 registered holders of Limited Partnership Interests in the Partnership. The Partnership has invested in certain government assisted projects under programs which in many instances restrict the cash return available to project owners. The Partnership was not designed to provide cash distributions to investors in circumstances other than refinancing or dispositions of its investments in limited partnerships. 6 ITEM 6. SELECTED FINANCIAL DATA:
Year Ended December 31, --------------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ------------ ------------ ------------ ------------ ------------ Loss From Operations $ (1,554,011) $ (1,698,332) $ (1,727,047) $ (1,690,366) $ (1,699,642) Distribution From Limited Partnerships Recognized as Income 468,618 387,721 307,474 520,001 473,210 Equity in Income (Loss) of Limited Partnerships and amortization of acquisition costs 367,144 142,894 87,795 (210,249) 616,683 Extraordinary gain - debt forgiveness $ 2,149,096 $ -- $ -- $ -- $ -- ------------ ------------ ------------ ------------ ------------ Net Income (Loss) $ 1,430,847 $ (1,167,717) $ (1,331,778) $ (1,380,614) $ (609,749) ============ ============ ============ ============ ============ Net Income (Loss) per Limited Partner Interest $ 116 $ (94) $ (108) $ (111) $ (49) ============ ============ ============ ============ ============ Total assets $ 14,571,452 $ 15,312,532 $ 15,191,113 $ 15,692,284 $ 15,858,598 ============ ============ ============ ============ ============ Investments in Limited Partnerships $ 13,409,054 $ 14,364,056 $ 14,470,783 $ 14,533,940 $ 15,184,763 ============ ============ ============ ============ ============ Notes payable $ 8,669,743 $ 10,169,743 $ 10,169,743 $ 10,177,433 $ 10,177,433 ============ ============ ============ ============ ============ Fees and Expenses Due to General Partners $ 1,562,552 $ 1,317,044 $ 990,393 $ 1,092,620 $ 714,742 ============ ============ ============ ============ ============
7 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: LIQUIDITY The Partnership's primary sources of funds include interest income on money market accounts and certificates of deposit and distributions from local partnerships in which the Partnership has invested. It is not expected that any of the local partnerships in which the Partnership has invested will generate cash flow sufficient to provide for distributions to the Partnership's limited partners in any material amount. CAPITAL RESOURCES The Partnership received $30,920,000 in subscriptions for units of Limited Partnership Interests (at $5,000 per unit) during the period September 12, 1984, to June 30, 1986, pursuant to a registration statement filed on Form S-11. The Partnership made its capital contributions to the local limited partnerships in stages, over a period of two to five years, with each contribution due on a specified date, provided that certain conditions regarding construction or operation of the project were fulfilled. The Partnership has no further capital commitments to the local limited partnerships. RESULTS OF OPERATIONS The Partnership was formed to provide various benefits to its partners as discussed in Item 1. It is anticipated that the local limited partnerships in which the Partnership has invested could produce tax losses for as long as 20 years. Tax benefits will decline over time as the advantages of accelerated depreciation are greatest in the earlier years, as deductions for interest expense will decrease as mortgage principal is amortized and as the Tax Reform Act of 1986 limits the deductions available. At December 31, 1997, the Partnership has investments in 17 limited partnerships, all of which own housing projects that were substantially all rented. The Partnership, as a limited partner, is entitled to 75% to 99% of the profits and losses of the local limited partnerships. 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. 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 limited partnership investment account is reduced to zero are not recognized. Limited partners are not liable for losses beyond their contributed capital. 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. The total losses from the 17 local limited partnerships that were allocated to the Partnership were $485,000, $1,148,000 and $1,379,000 for the years ended December 31, 1997, 1996 and 1995, respectively. However, because losses incurred after the investment account is reduced to a zero balance are not recognized, the Partnership recognized equity in income of limited partnerships of $367,144, $142,894 and $87,795 for the years ended December 31, 1997, 1996 and 1995, respectively. The cumulative amount of the unrecognized equity in losses of certain limited partnerships was approximately $12,507,000 and $11,603,000 as of December 31, 1997 and 1996, respectively. Distributions from the local limited partnerships in which the Partnership did not have a positive investment balance were $486,618, $387,721 and $307,474 for the years ended December 31, 1997, 1996 and 1995, respectively. These amounts were recognized as income on the accompanying statements of operations, in accordance with the equity method of accounting. 8 As of December 31, 1997, 1996 and 1995, the Partnership has cash and cash equivalents of $1,162,398, $948,476 and $595,330, respectively. Substantially all of these amounts are on deposit with one money market mutual fund, earning interest. This resulted in the Partnership earning approximately $58,000, $40,000 and $44,000 in interest income for the years ended December 31, 1997, 1996 and 1995, respectively. The amount of interest income varies with market rates available on deposits and with the amount of funds available for investment. Cash equivalents can be converted to cash to meet obligations of the Partnership as they arise. The Partnership intends to continue investing available funds in this manner. A recurring partnership expense is the annual management fee. The fee is payable to the General Partners of the Partnership and is calculated at .5 percent of the Partnership's invested assets. The management fee is paid to the General Partners for their continuing management of partnership affairs. The fee is payable beginning with the month following the Partnership's initial investment in a local limited partnership. Management fees were $509,806, $526,651 and $547,773 for the years ended December 31, 1997, 1996 and 1995, respectively. The fees have decreased due to the foreclosure of a property owned by a local partnership in 1995 and the sale of another property in 1997, which reduced the invested assets. The Partnership is obligated on non-recourse notes payable of $8,669,743 and $10,169,743 at December 31, 1997 and 1996, respectively, which bear interest at 9.5 percent per annum and have principal maturities ranging from December 1999 to December 2001. Effective January 1, 1995, the interest rate for two notes totalling $1,500,000 changed from 9.5 percent to 12.5 percent per the terms of the notes, and the note holders accepted a reduced payment of $1,000,000 in full satisfaction of all obligations in 1997 in connection with the sale of the related property. The notes and related interest are payable from cash flow generated from operations of the related rental properties as defined in the notes. These obligations are collateralized by the Partnership's investments in the limited partnerships. Unpaid interest is due at maturity of the notes. In addition, pursuant to a Memorandum of Understanding entered into on August 11, 1995, the Partnership paid $16,207 in interest on May 1, 1996 to an affiliate of NAPICO that served as the management company for properties owned by the Partnership. The interest relates to funds advanced to the Partnership by the master disbursement account maintained by the management company. Interest expense totalled $917,376, $1,027,333 and $1,011,127 for 1997, 1996 and 1995, respectively. Operating expenses, other than management fees and interest expense, consist of legal and accounting fees for services rendered to the Partnership and administrative expenses, which were generally consistent for the three years presented. Legal and accounting fees were $109,225, $124,958 and $125,941 for the years ended December 31, 1997, 1996 and 1995, respectively. Included in legal and accounting fees in 1996, is $15,000 that the Partnership reimbursed Housing Programs Corporation II for professional fees, which were paid on behalf of the Partnership in connection with issues raised in the Memorandum of Understanding. General and administrative expenses were $75,592, $59,324 and $86,350 for the years ended December 31, 1997, 1996 and 1995, respectively. Included in administrative expenses are reimbursements to NAPICO for certain expenses, which totalled $0, $9,948 and $29,845 for the years ended December 31, 1997, 1996 and 1995, respectively. The results of operations of the local limited partnerships were fairly constant during the years ended December 31, 1997, 1996 and 1995, after adjusting for the sale of Deep Lake Hermitage Apartments ("Deep Lake") in June 1997 (see below). Contributing to the relative stability of operations at the local partnerships is the fact that substantially all of the local partnerships are operating apartment projects which are subsidized and have mortgage notes payable to or insured by agencies of the federal or local government. Total revenue for the 17 local partnerships remained fairly constant, and was $17,633,000, $17,935,000 and $17,132,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Total expenses for the 17 local partnerships remained fairly consistent, and were $18,123,000, $19,091,000 and $18,525,000 for the years ended December 31, 1997, 1996 and 1995, respectively. In addition to expenses decreasing 9 as a result of the sale of Deep Lake, interest expense decreased in 1997 as a result of the interest rate being reduced on several properties' notes payable. The total net loss for the 17 local partnerships for 1997, 1996 and 1995 aggregated $490,000, $1,156,000 and $1,393,000, respectively. The losses allocated to the Partnership were $485,000, $1,148,000 and $1,379,000 for 1997, 1996 and 1995, respectively. The Montecito local partnership had been operating at a deficit, and the General Partner of the Montecito Local Partnership was unsuccessful in its attempt to negotiate a mortgage modification with the lender to improve the situation. No mortgage payments were made subsequent to May 1994 and the mortgage was in default. On July 18, 1995, the property was foreclosed by the lender. 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 the Montecito Local Partnership at December 31, 1996 and 1995. During the year ended December 31, 1997, the lower-tier partnership that owns Deep Lake consummated the sale of the apartment complex for $4,800,000. There were two notes payable by the Partnership to sellers of interests in the lower-tier partnership that owns the Deep Lake property in the aggregate principal amount of $1,500,000, which were secured by the Partnership's interest in the local limited partnership. The notes had accrued interest of $1,650,696, for a total amount due of $3,150,696. The Partnership entered into an agreement with the note holders, who accepted a reduced payment of $1,001,600 in full satisfaction of all obligations, in order to enable the sale of property. This was paid by the lower tier partnership from proceeds of the sale, and approximated the Partnership's investment balance in Deep Lake. In addition, the apartment complex had a first mortgage note of approximately $3,500,000 which was paid off from proceeds of the sale. The Partnership recognized an extraordinary gain of $2,149,096 from the forgiveness of the debt. Under recent adopted law and policy, HUD has determined not to renew HAP Contracts on a long term basis on the existing terms. In connection with renewals of the HAP Contracts under such new law and policy, the amount of rental assistance payments under renewed HAP Contracts will be based on market rentals instead of above market rentals, which was generally the case under existing HAP Contracts. As a result, existing HAP Contracts that are renewed in the future on projects insured by the FHA will not provide sufficient cash flow to permit owners of properties to meet the debt service requirements of these existing FHA-insured mortgages. In order to address the reduction in payments under HAP Contracts as a result of this new policy, the Multi-family Assisted Housing Reform and Affordability Act of 1997 (the "MAHRAA"), which was adopted in October 1997, provides for the restructuring of mortgage loans insured by the FHA with respect to properties subject to HAP Contracts that have been renewed under the new policy. The restructured loans will be held by the current lender or another lender. Under MAHRAA, an FHA-insured mortgage loan can be restructured to reduce the annual debt service on such loan. There can be no assurance that the Partnership will be permitted to restructure its mortgage indebtedness pursuant to the new HUD rules implementing MAHRAA or that the Partnership would choose to restructure such mortgage indebtedness if it were eligible to participate in the MAHRAA program. It should be noted that there are uncertainties as to the economic impact on the Partnership of the combination of the reduced payments under the HAP Contracts and the restructuring of the existing FHA-insured mortgage loans under MAHRAA. Accordingly, the General Partners are unable to predict with certainty their impact on the Partnership's future cash flow. A real estate investment trust organized by an affiliate of NAPICO has advised the Partnership that it intends to make a proposal to purchase from the Partnership certain of the real estate assets of the Partnership. The REIT proposes to purchase such limited partner interests for cash, which it plans to raise in connection with a private placement of its equity securities. The purchase is subject to, among other things (i) consummation of such private placement by the REIT; (ii) the purchase of the general partner interests in the local limited partnerships by the REIT; (iii) the approval of HUD and certain state housing finance agencies; (iv) the consent of the limited partners to the sale of the local limited partnership interests held for investment by the Partnership; and (v) the consummation of a minimum number of purchase transactions with other Casden affiliated partnerships. As of March 31, 1998, the REIT had completed buy-out negotiations with a majority of the general partners of the local limited partnerships. A proxy is contemplated to be sent to the limited partners setting forth the terms and conditions of the purchase of the limited partners' interests held for investment by the Partnership, together with certain amendments to the Partnership Agreement and other disclosures of various conflicts of interest in connection with the transaction. The Partnership, as a Limited Partner in the local partnerships in which it has invested, is subject to the risks incident to the construction, management, and ownership of improved real estate. The Partnership investments are also subject to adverse general economic conditions, and, accordingly, the status of the national economy, including substantial unemployment and concurrent inflation, could increase vacancy levels, rental payment defaults, changing legislation and operating expenses, which in turn, could substantially increase the risk of operating losses for the projects. The Partnership has assessed the potential impact of the Year 2000 computer systems issue on its operations. The Partnership believes that no significant actions are required to be taken by the Partnership to address the issue and that the impact of the Year 2000 computer systems issue will not materially affect the Partnership's future operating results or financial condition. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA: The Financial Statements and Supplementary Data are listed under Item 14. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE: Not applicable. 10 HOUSING PROGRAMS LIMITED (a California limited partnership) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS DECEMBER 31, 1997 11 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Partners of Housing Programs Limited (A California limited partnership) We have audited the accompanying balance sheets of Housing Programs Limited (a California limited partnership) as of December 31, 1997 and 1996, and the related statements of operations, partners' equity (deficiency) and cash flows for each of the three years in the period ended December 31, 1997. Our audits also included the financial statement schedules listed in the index on item 14. These financial statements and financial statement schedules are the responsibility of the management of the Partnership. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We did not audit the financial statements of certain limited partnerships, the investments in which are reflected in the accompanying financial statements using the equity method of accounting. The investments in these limited partnerships represent 26 percent and 27 percent of total assets as of December 31, 1997 and 1996, respectively, and the equity in income (loss) of these limited partnerships represent 8 percent, 23 percent and 15 percent of the total net loss of the Partnership for the years ended December 31, 1997, 1996 and 1995, respectively, and represent a substantial portion of the investee information in Note 2 and the financial statement schedules. The financial statements of these limited partnerships are audited by other auditors. Their reports have been furnished to us and our opinion, insofar as it relates to the amounts included for these limited partnerships, is based solely on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform 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 our audits and the reports of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Housing Programs Limited as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. Also, in our opinion, based on our audits and the reports of other auditors, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Los Angeles, California April 6, 1998 12 [ALTSCHULER, MELVOIN AND GLASSER LLP LETTERHEAD] INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS AND ADDITIONAL FINANCIAL DATA REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT To the Partners of Bannock Arms Second Limited Partnership We have audited the accompanying balance sheets of BANNOCK ARMS SECOND LIMITED PARTNERSHIP (a limited partnership), FHA Project No. 124-35019-PM, (the "Partnership"), as of December 31, 1997 and 1996, and the related statements of income, changes in partners' equity 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 audits 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 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 Bannock Arms Second Limited Partnership as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the financial statements takes as a whole. The accompanying 1997 additional financial data (shown on pages 13 through 19) are presented for purposes of additional analysis and are not a required part of the financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in the audit of the 1997 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. 2 13 In accordance with Government Auditing Standards, we have also issued a report dated February 10, 1998 on our consideration of the Partnership's internal control and a report dated February 10, 1998 on its compliance with laws and regulations. /s/ ALTSCHULER, MELVOIN AND GLASSER LLP Los Angeles, California February 10, 1996 3 14 [ALTSCHULER, MELVOIN AND GLASSER LLP LETTERHEAD] INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS AND ADDITIONAL FINANCIAL DATA REQUIRED BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT To the Partners of Bannock Arms Second Limited Partnership We have audited the accompanying balance sheets of BANNOCK ARMS SECOND LIMITED PARTNERSHIP, FHA Project No. 124-35019-PM, (the "Partnership") as of December 31, 1996 and 1995, and the related statements of income, changes in partners' equity 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 audits. We conducted our audits 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 Bannock Arms Second Limited Partnership as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued a report dated February 17, 1997 on our consideration of the Partnership's internal control structure and a report dated February 17, 1997 on its compliance with laws and regulations. 2. 15 Our audit was conducted for the purpose of forming an opinion on the financial statements take as a whole. The accompanying 1996 additional financial data shown on pages 13 through 20 are presented for purposes of additional analysis and are not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the 1996 financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ ALTSCHULER, MELVOIN AND GLASSER LLP Los Angeles, California February 17, 1997 3. 16 [REZNICK FEDDER & SILVERMAN LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners Berkeley Gardens Limited Partnership We have audited the accompanying balance sheet of Berkeley Gardens Limited Partnership as of December 31, 1997, and the related statements of profit and loss (on HUD Form No. 92410), 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 audits 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 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 Berkeley Gardens Limited Partnership as of December 31, 1997, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles. Our 1997 audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 19 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. -6- 17 In accordance with Government Auditing Standards and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated January 28, 1998 on our consideration of Berkeley Gardens Limited Partnership's internal control and on its compliance with specific requirements applicable to major and nonmajor HUD programs, fair housing and non-discrimination, and laws and regulations applicable to the financial statements. [SIG] Federal Employer Identification Number: 52-1088612 Bethesda, Maryland January 28, 1998 Audit Principal: Craig Birmingham -7- 18 [REZNICK FEDDER & SILVERMAN LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners Berkeley Gardens Limited Partnership We have audited the accompanying balance sheet of Berkeley Gardens Limited Partnership as of December 31, 1996, and the related statements of profit and loss (on HUD Form No. 92410), 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 audits 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 Berkeley Gardens Limited Partnership as of December 31, 1996, and the results of its operations, the changes in partners' equity and 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 19 through 24 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. -6- 19 In accordance with Government Auditing Standards and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated January 28, 1997 on our consideration of Berkeley Gardens Limited Partnership's internal control and on its compliance with specific requirements applicable to major and nonmajor HUD programs, affirmative fair housing, and laws and regulations applicable to the financial statements. [SIG] ---------------------------------------- Federal Employer Identification Number: 52-1088612 Bethesda, Maryland January 28, 1997 Audit Principal: Craig Birmingham -7- 20 [REZNICK FEDDER & SILVERMAN] INDEPENDENT AUDITORS' REPORT To the Partners Berkeley Gardens Limited Partnership We have audited the accompanying balance sheet of Berkeley Gardens Limited Partnership as of December 31, 1995, and the related statements of profit and loss (on HUD Form No. 92410), 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 Berkeley Gardens Limited Partnership as of December 31, 1995, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles. -6- 21 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 19 through 24 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, we have also issued reports dated January 19, 1996 on our consideration of Berkeley Gardens Limited Partnership internal control structure and on its compliance with specific requirements applicable to major and nonmajor HUD programs, affirmative fair housing, and laws and regulations applicable to the financial statements. /s/ RESNICK FEDDER & SILVERMAN ----------------------------------- Bethesda, Maryland Federal Employer January 19, 1996 Identification Number: 52-1088612 Audit Principal: Craig Birmingham -7- 22 [COOPERS & LYBRAND L.L.P. LETTERHEAD] REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Oshtemo Limited Dividend Housing Association: We have audited the accompanying balance sheet of Oshtemo Limited Dividend Housing Association (a Michigan limited partnership), MSHDA Development No. 544, as of December 31, 1997 and the related statements of profit and loss, 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 referred to above present fairly, in all material respects, the financial position of Oshtemo Limited Dividend Housing Association, MSHDA Development No. 544, as of December 31, 1997 and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued a report dated January 26, 1998 on our consideration of Oshtemo Limited Dividend Housing Association's internal control structure and a report dated January 26, 1998 on its compliance with laws and regulations. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental data included on pages 13 and 14 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Oshtemo Limited Dividend Housing Association. This supplementary data is the responsibility of the Partnership's management. 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. 1 23 We have previously audited and expressed an unqualified opinion on the financial statements of Oshtemo Limited Dividend Housing Association for the years 1990 through 1995. In our opinion, the supplemental data included on page 15, relating to the years 1990 through 1997, is fairly stated, in all material respects, in relation to the basic financial statements from which it has been derived. The data on page 15 for the years 1983 through 1989 was not audited by us and, accordingly, we do not express an opinion on such data. That data was audited by other auditors who have ceased operation and whose report, dated January 24, 1990, stated that such information was fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. /s/ COOPERS & LYBRAND L.L.P. Detroit, Michigan January 26, 1998 2 24 [COOPERS & LYBRAND LETTERHEAD] Report of Independent Accountants To the Partners of Oshtemo Limited Dividend Housing Association: We have audited the accompanying balance sheet of Oshtemo Limited Dividend Housing Association (a Michigan limited partnership), MSHDA Development No. 544, as of December 31, 1996 and the related statements of profit and loss, 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 Oshtemo Limited Dividend Housing Association, as of December 31, 1996 and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued a report dated January 31, 1997 on our consideration of Oshtemo Limited Housing Association's internal control structure and a report dated January 31, 1997 on its compliance with laws and regulations. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental data included on pages 13 and 14 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Oshtemo Limited Dividend Housing Association. 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. 1 25 We have previously audited and expressed an unqualified opinion on the financial statements of Oshtemo Limited Dividend Housing Association for the years 1990 through 1995. In our opinion, the supplemental data included on page 15, relating to the years 1990 through 1996, is fairly stated, in all material respects, in relation to the basic financial statements from which it has been derived. The data on page 15 for the years 1983 through 1989 was not audited by us and, accordingly, we do not express an opinion on such data. That data was audited by other auditors who have ceased operation and whose report, dated January 24, 1990, stated that such information was fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. /s/ COOPERS & LYBRAND L.L.P. Detroit, Michigan January 31, 1997 2 26 [COOPERS & LYBRAND LETTERHEAD] REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Oshtemo Limited Dividend Housing Association: We have audited the accompanying balance sheet of Oshtemo Limited Dividend Housing Association (a Michigan limited partnership), MHSDA Development No. 544, as of December 31, 1995 and the related statements of profit and loss, 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 Oshtemo Limited Housing Association, as of December 31, 1995 and the results of its operation and its cash flows for the year then ended, in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued a report dated January 25, 1996 on our consideration of Oshtemo Limited Dividend Housing Association's internal control structure and a report dated January 25, 1996 on its compliance with laws and regulations. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental data included on pages 13 and 14 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Oshtemo Limited Dividend Housing Association. 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. 1 27 We have previously audited and expressed an unqualified opinion on the financial statements of Oshtemo Limited Dividend Housing Association for the years 1990 through 1994. In our opinion, the supplemental data included on page 15, relating to the years 1990 through 1995, is fairly stated, in all material respects, in relation to the basic financial statements from which it has been derived. The data on page 15 for the years 1983 through 1989 was not audited by us and, accordingly, we do not express an opinion on such data. That data was audited by other auditors who have ceased operation and whose report, dated January 24, 1990, stated that such information was fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. /s/ COOPERS & LYBRAND L.L.P. Detroit, Michigan January 25, 1996 2 28 [REZNICK FEDDER & SILVERMAN LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners Hyattsville Housing Associates We have audited the accompanying balance sheet of Hyattsville Housing Associates as of December 31, 1997, and the related statements of profit and loss (on HUD Form No. 92410), 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 Berkeley Gardens Limited Partnership as of December 31, 1997, and the results of its operations, the changes in partners' equity and 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 19 through 29 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for that portion marked "unaudited," on which we express no opinion, 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. -6- 29 In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs, we have also issued reports dated January 4, 1998, on our consideration of Hyattsville Housing Associates' internal control structure and on its compliance with specific requirements applicable to CDA programs, fair housing and non-discrimination, and laws and regulations applicable to the financial statements. /s/ RESNICK FEDDER & SILVERMAN ----------------------------------- Baltimore, Maryland Federal Employer Identification January 4, 1998 Number: 52-1088612 Audit Principal: Richard G. Schaefer -7- 30 [REZNICK FEDDER & SILVERMAN LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners Hyattsville Housing Associates We have audited the accompanying balance sheet of Hyattsville Housing Associates as of December 31, 1996, and the related statements of profit and loss (on HUD Form No. 92410), 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 audits 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 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 Hyattsville Housing Associates as of December 31, 1996, 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. 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 19 through 30 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for that portion marked "unaudited," on which we express no opinion, 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. -6- 31 In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs, we have also issued reports dated January 17, 1997, on our consideration of Hyattsville Housing Associates' internal control structure and on its compliance with specific requirements applicable to CDA programs, affirmative fair housing, and laws and regulations applicable to the financial statements. /s/ REZNICK FEDDER & SILVERMAN Federal Employer Identification Number: 52-1088612 Baltimore, Maryland January 17, 1997 Audit Principal: Richard G. Schaefer -7- 32 [REZNICK FEDDER & SILVERMAN LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners Hyattsville Housing Associates We have audited the accompanying balance sheet of Hyattsville Housing Associates as of December 31, 1995, and the related statements of profit and loss (on HUD Form No. 92410), 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 audits 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 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 Hyattsville Housing Associates as of December 31, 1995, 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. -6- 33 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 19 through 28 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for that portion marked "unaudited," on which we express no opinion, 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, we have also issued reports dated January 18, 1996, on our consideration of Hyattsville Housing Associates' internal control structure and on its compliance with specific requirements applicable to CDA programs, affirmative fair housing, and laws and regulations applicable to the financial statements. /s/ REZNICK FEDDER & SILVERMAN Federal Employer Identification Number: 52-1088612 Baltimore, Maryland January 18, 1996 Audit Principal: Richard G. Schaefer -7- 34 [REZNICK FEDDER & SILVERMAN LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners Locust House Associates We have audited the accompanying balance sheet of Locust House Associates as of December 31, 1997, and the related statements of profit and loss (on HUD Form No. 92410), 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 audits 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 audits 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 Locust House Associates as of December 31, 1997, and the results of its operations, the changes in partners' equity and 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 whole. The supplemental information on pages 19 through 29 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for that portion marked "unaudited," on which we express no opinion, has been subjected to the audit 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. -6- 35 In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs, we have also issued reports dated January 3, 1998 on our consideration of Locust House Associates' internal control and on its compliance with specific requirements applicable to CDA programs, affirmative fair housing, and laws and regulations applicable to the financial statements. /s/ RESNICK FEDDER & SILVERMAN Federal Employer Identification Number: 52-1088612 Baltimore, Maryland January 3, 1998 Audit Principal: Craig Birmingham -7- 36 [REZNICK FEDDER & SILVERMAN LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners Locust House Associates We have audited the accompanying balance sheet of Locust House Associates as of December 31, 1996, and the related statements of profit and loss (on HUD Form No. 92410), 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 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 Locust House Associates as of December 31, 1996, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 19 through 30 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information except for that portion marked "unaudited," on which we express no opinion, has been subjected to the audit 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. -6- 37 In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs, we have also issued reports dated January 8, 1997 on our consideration of Locust House Associates' internal control structure and on its compliance with specific requirements applicable to CDA programs, affirmative fair housing, and laws and regulations applicable to the financial statements. /s/ RESNICK FEDDER & SILVERMAN Federal Employer Identification Number: 52-1088612 Baltimore, Maryland January 8, 1997 Audit Principal: Richard G. Schaefer -7- 38 [REZNICK FEDDER & SILVERMAN LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners Locust House Associates We have audited the accompanying balance sheet of Locust House Associates as of December 31, 1995, and the related statements of profit and loss (on HUD Form No. 92410), 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 audits 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 Locust House Associates as of December 31, 1995, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles. -6- 39 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 28 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for that portion marked "unaudited," on which we express no opinion, 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, we have also issued reports dated January 8, 1996, on our consideration of Locust House Associates' internal control structure and on its compliance with specific requirements applicable to HUD and CDA programs, affirmative fair housing, and laws and regulations applicable to the financial statements. /s/ REZNICK FEDDER & SILVERMAN Federal Employer Identification Number: 52-1088612 Baltimore, Maryland January 6, 1996 Audit Principal: Richard G. Schaefer -7- 40 [KPMG PEAT MARWICK LLP LOGO] REPORT ON AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION INDEPENDENT AUDITORS' REPORT The Partners Plaza Village Group: We have audited the accompanying balance sheet of Plaza Village Group (the "Partnership"), FHA Project No. 016-44076-LDT-SUP as of December 31, 1997, and the related statements of profit and loss (on HUD Form No. 92410), 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, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 1997, and the results of its operations, 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 supplementary information included in Schedules 1 through 8 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, we have also issued reports dated January 23, 1998 on: our consideration of the Partnership's internal controls, the Partnership's compliance with specific requirements applicable to major HUD programs, and the Partnership's compliance with specific requirements applicable to fair housing and non-discrimination. /s/ KPMG PEAT MARWICK LLP ----------------------------------- Providence, Rhode Island 02903-9605 January 23, 1998 41 [KPMG PEAT MARWICK LLP LOGO] REPORT ON AUDITED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION INDEPENDENT AUDITORS' REPORT The Partners Plaza Village Group: We have audited the accompanying balance sheet of Plaza Village Group (the "Partnership"), FHA Project No. 016-44076-LDT-SUP as of December 31, 1996, and the related statements of profit and loss (on HUD Form No. 92410), 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, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued reports dated January 24, 1997 on: our consideration of the Partnership's internal control structure, the Partnership's compliance with specific requirements applicable to major HUD programs, and the Partnership's compliance with specific requirements applicable to affirmative fair housing. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information included in Schedules 1 through 7 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/ KPMG PEAT MARWICK LLP ----------------------------------- Providence, Rhode Island 02903-9605 January 24, 1997 42 [KPMG PEAT MARWICK LLP LOGO] INDEPENDENT AUDITORS' REPORT The Partners Plaza Village Group (A Limited Partnership): We have audited the accompanying balance sheet of Plaza Village Group (A Limited Partnership), FHA Project No. 016-44076-LDT-SUP as of December 31, 1995, and the related statements of profit and loss (on HUD Form No. 92410), changes in partners' equity and cash flows for the year 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 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 Plaza Village Group (A Limited Partnership) FHA Project No. 016-44076-LDT-SUP December 31, 1995 and the results of its operations 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 supplementary information required by the U.S. Department of Housing and Urban Development ("HUD") included in Schedules 1 through 7 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 presented in all material respects in relation to the basic financial statements taken as a whole. /s/ KPMG PEAT MARWICK LLP ----------------------------------- Providence, Rhode Island 02903-9605 January 26, 1996 43 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS DECEMBER 31, 1997 AND 1996 ASSETS
1997 1996 ------------ ------------ INVESTMENTS IN LIMITED PARTNERSHIPS (Notes 1 and 2) $ 13,409,054 $ 14,364,056 CASH AND CASH EQUIVALENTS (Note 1) 1,162,398 948,476 ------------ ------------ TOTAL ASSETS $ 14,571,452 $ 15,312,532 ============ ============ LIABILITIES AND PARTNERS' DEFICIENCY LIABILITIES: Notes payable (Notes 3 and 7) $ 8,669,743 $ 10,169,743 Accrued fees and expenses due general partners (Note 4) 1,562,552 1,317,044 Accrued interest payable (Notes 3 and 7) 9,921,172 10,811,557 Accounts payable 3,855 30,905 ------------ ------------ 20,157,322 22,329,249 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Notes 2, 4 and 6) PARTNERS' DEFICIENCY: General partners (306,605) (320,913) Limited partners (5,279,265) (6,695,804) ------------ ------------ (5,585,870) (7,016,717) ------------ ------------ TOTAL LIABILITIES AND PARTNERS' DEFICIENCY $ 14,571,452 $ 15,312,532 ============ ============
The accompanying notes are an integral part of these financial statements. 44 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995 ----------- ----------- ----------- INTEREST INCOME $ 57,988 $ 39,934 $ 44,144 ----------- ----------- ----------- OPERATING EXPENSES: Management fees - general partner (Note 4) 509,806 526,651 547,773 General and administrative (Note 4) 75,592 59,324 86,350 Legal and accounting (Note 4) 109,225 124,958 125,941 Interest (Notes 3 and 4) 917,376 1,027,333 1,011,127 ----------- ----------- ----------- Total operating expenses 1,611,999 1,738,266 1,771,191 ----------- ----------- ----------- LOSS FROM OPERATIONS (1,554,011) (1,698,332) (1,727,047) DISTRIBUTIONS FROM LIMITED PARTNERSHIPS RECOGNIZED AS INCOME 468,618 387,721 307,474 EQUITY IN INCOME OF LIMITED PARTNERSHIPS AND AMORTIZATION OF ACQUISITION COSTS (Note 2) 367,144 142,894 87,795 ----------- ----------- ----------- NET LOSS BEFORE EXTRAORDINARY GAIN (718,249) (1,167,717) (1,331,778) EXTRAORDINARY GAIN - DEBT FORGIVENESS 2,149,096 -- -- ----------- ----------- ----------- NET INCOME (LOSS) $ 1,430,847 $(1,167,717) $(1,331,778) =========== =========== =========== NET LOSS BEFORE EXTRAORDINARY GAIN PER LIMITED PARTNERSHIP INTEREST $ (58) $ (94) $ (108) =========== =========== =========== NET INCOME (LOSS) PER LIMITED PARTNERSHIP INTEREST $ 116 $ (94) $ (108) =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 45 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' DEFICIENCY FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
General Limited Partners Partners Total ----------- ----------- ----------- DEFICIENCY, January 1, 1995 $ (295,918) $(4,221,304) $(4,517,222) Net loss, 1995 (13,318) (1,318,460) (1,331,778) ----------- ----------- ----------- DEFICIENCY, December 31, 1995 (309,236) (5,539,764) (5,849,000) Net loss, 1996 (11,677) (1,156,040) (1,167,717) ----------- ----------- ----------- DEFICIENCY, December 31, 1996 (320,913) (6,695,804) (7,016,717) Net income, 1997 14,308 1,416,539 1,430,847 ----------- ----------- ----------- DEFICIENCY, December 31, 1997 $ (306,605) $(5,279,265) $(5,585,870) =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 46 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 1,430,847 $(1,167,717) $(1,331,778) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Extraordinary gain (2,149,096) -- -- Equity in income of limited partnerships (399,271) (181,384) (126,285) Amortization of acquisition costs 32,127 38,490 38,490 Increase in accrued interest payable 760,313 947,012 947,014 Increase (decrease) in accrued fees and expenses due general partners 245,508 326,651 (102,227) (Decrease) increase in accounts payable (27,050) 15,473 (6,490) ----------- ----------- ----------- Net cash used in operating activities (106,622) (21,475) (581,276) ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital contributions to limited partnerships (520,287) (915,568) (671,865) Distributions from limited partnerships recognized as a return of capital 1,842,431 1,165,189 822,817 Decrease in short term investments -- 125,000 408,409 ----------- ----------- ----------- Net cash provided by investing activities 1,322,144 374,621 559,361 ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of notes payable (1,001,600) -- (7,690) ----------- ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 213,922 353,146 (29,605) CASH AND CASH EQUIVALENTS, beginning of year 948,476 595,330 624,935 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS, end of year $ 1,162,398 $ 948,476 $ 595,330 =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for interest $ 158,665 $ 80,321 $ 64,113 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 47 HOUSING PROGRAMS LIMITED (a California limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Housing Programs Limited (the "Partnership"), formed under the California Uniform Limited Partnership Act, was organized on May 15, 1984. The Partnership was formed to invest primarily in other limited partnerships which own or lease and operate federal, state or local government-assisted housing projects. The general partners of the Partnership are National Partnership Investments Corp. (NAPICO), and Coast Housing Investment Associates (CHIA), a limited partnership and Housing Programs Corporation II. Casden Investment Corp. owns 100 percent of NAPICO's stock. The limited partner of CHIA is an officer of NAPICO. The Partnership offered and issued 6,184 units of limited partnership interests through a public offering. Each unit was comprised of two limited partnership interests and one warrant, which entitled the investor two additional limited partnership interests. An additional 6,184 of interests were issued from the exercise of warrants and the sale of interests associated with warrants not exercised. The general partners have a 1 percent interest in profits and losses of the Partnership. The limited partners have the remaining 99 percent interest in proportion to their respective investments. The Partnership shall be dissolved only upon the expiration of 50 complete calendar years (December 31, 2034) from the date of the formation of the Partnership or upon the occurrence of various other events as described in the terms of the Partnership agreement. Upon total or partial liquidation of the Partnership or the disposition or partial disposition of a project or project interest and distribution of the proceeds, the general partners will be entitled to a liquidation fee as stipulated in the Partnership agreement. The limited partners will have a priority return equal to their invested capital attributable to the project(s) or project interest(s) sold and shall receive from the sale of the project(s) or project interest(s) an amount sufficient to pay state and federal income taxes, if any, calculated at the maximum rate then in effect. The general partners' liquidation fee may accrue but shall not be paid until the limited partners have received distributions equal to 100 percent of their capital contributions. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Method of Accounting for Investments in Limited Partnerships The investments in local limited partnerships are accounted for on the equity method. Acquisition, selection and other costs related to the acquisition of the projects have been capitalized to the investment 48 HOUSING PROGRAMS LIMITED (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) account and are being amortized on a straight line basis over the estimated lives of the underlying assets, which is generally 30 years. Net Loss Per Limited Partnership Interest Net loss per limited partnership interest was computed by dividing the limited partners' share of net loss by the number of limited partnership interests outstanding during the year. The number of limited partnership interests was 12,368 for all years presented. 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. The Partnership has its cash and cash equivalents on deposit primarily with one money market mutual fund. Such cash and cash equivalents are uninsured. Impairment of Long-Lived Assets The Partnership reviews long-lived assets to determine if there has been any permanent impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the assets, the Partnership recognizes an impairment loss. 2. INVESTMENTS IN LIMITED PARTNERSHIPS The Partnership now holds limited partnership interests in 17 limited partnerships. The partnerships own residential rental projects consisting of 2,542 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. 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. The cumulative amount of unrecognized equity in losses of certain limited partnerships was approximately $12,507,000 and $11,603,000 as of December 31, 1997 and 1996, respectively. 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. 49 HOUSING PROGRAMS LIMITED (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1997 2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED) The following is a summary of the investments in limited partnerships and reconciliation to the limited partnership accounts:
1997 1996 ----------- -------- Investment balance, beginning of year $14,364,056 $14,470,783 Equity in income of limited partnerships 399,271 181,384 Amortization of capitalized acquisition costs and fees (32,127) (38,490) Capital Contributions 520,287 915,568 Distributions recognized as a return of capital (1,842,433) (1,165,189) ------------ ------------ Investment balance, end of year $13,409,054 $14,364,056 =========== ===========
The difference between the investment per the accompanying balance sheets at December 31, 1997 and 1996, and the equity per the limited partnerships' combined financial statements is due primarily to cumulative unrecognized equity in losses of certain limited partnerships, costs capitalized to the investment account and cumulative distributions recognized as income. Selected financial information from the combined financial statements of the limited partnerships at December 31, 1997 and 1996 and for each of the three years in the period ended December 31, 1997 is as follows: Balance Sheets
1997 1996 -------- -------- (in thousands) Land and buildings, net $ 51,149 $ 57,726 ======== ======== Total assets $ 71,789 $ 77,431 ======== ======== Mortgages payable $ 52,219 $ 56,826 ======== ======== Total liabilities $ 75,642 $ 79,446 ======== ======== Equity of Housing Programs Limited $ (3,495) $ (1,640) ======== ======== Deficiency of other partners $ (358) $ (375) ======== ========
50 HOUSING PROGRAMS LIMITED (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1997 2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED) Statements of Operations
1997 1996 1995 -------- -------- -------- (in thousands) Total revenues $ 17,633 $ 17,935 $ 17,132 ======== ======== ======== Interest expense $ 3,450 $ 3,634 $ 3,706 ======== ======== ======== Depreciation $ 3,438 $ 3,532 $ 3,524 ======== ======== ======== Total expenses $ 18,123 $ 19,091 $ 18,525 ======== ======== ======== Net loss $ (490) $ (1,156) $ (1,393) ======== ======== ======== Net loss allocable to Housing Programs Limited $ (485) $ (1,148) $ (1,379) ======== ======== ========
An affiliate of NAPICO is the general partner in 10 of the limited partnerships included above and another affiliate of NAPICO receives property management fees of approximately 5 to 6 percent of revenues from 4 of these partnerships. The affiliate received property management fees of $211,938, $244,827 and $234,903 in 1997, 1996 and 1995, respectively. The following sets forth the significant data for these partnerships, reflected in the accompanying financial statements using the equity method of accounting:
1997 1996 1995 -------- --------- ------- (in thousands) Total assets $ 34,962 $ 40,380 ======== ======== Total liabilities $ 46,250 $ 49,766 ======== ======== Deficiency of Housing Programs Limited $(11,070) $ (9,151) ======== ======== Deficiency of other partners $ (219) $ (235) ======== ======== Total revenue $ 9,119 $ 9,741 $ 9,283 ======== ======== ======== Net loss $ (745) $ (686) $ (828) ======== ======== ========
The Montecito local partnership had been 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 51 HOUSING PROGRAMS LIMITED (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1997 2. INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED) payments to the lender were made subsequent to May 1994 and the mortgage was in default. On July 18, 1995, the property was foreclosed by the lender. The Partnership's original investment in the Montecito local partnership represents approximately 5% of the Partnership's total capital raised. No loss was recognized upon foreclosure, as the Partnership had a zero investment balance in Montecito. A real estate investment trust organized by an affiliate of NAPICO has advised the Partnership that it intends to make a proposal to purchase from the Partnership certain of the real estate assets of the Partnership. The REIT proposes to purchase such limited partner interests for cash, which it plans to raise in connection with a private placement of its equity securities. The purchase is subject to, among other things, (i) consummation of such private placement by the REIT; (ii) the purchase of the general partner interests in the local limited partnerships by the REIT; (iii) the approval of HUD and certain state housing finance agencies; (iv) the consent of the limited partners to the sale of the local limited partnership interests held for investment by the Partnership; and (v) the consummation of a minimum number of purchase transactions with other Casden affiliated partnerships. As of March 31, 1998, the REIT had completed buy-out negotiations with a majority of the general partners of the local limited partnerships. A proxy is contemplated to be sent to the limited partners setting forth the terms and conditions of the purchase of the limited partners' interests held for investment by the Partnership, together with certain amendments to the Partnership Agreement and other disclosures of various conflicts of interest in connection with the transaction. 3. NOTES PAYABLE Certain of the Partnership's investments involved purchases of partnership interests from partners who subsequently withdrew from the operating partnership. The Partnership is obligated for non-recourse notes payable of $8,669,743 to the sellers of the partnership interests, bearing interest at 9.5 percent. Two notes payable totalling $1,500,000 bore interest at 9.5 percent through December 31, 1994 and 12.5 percent thereafter, and the note holders accepted a reduced payment of $1,000,000 in full satisfaction of all obligations in 1997 in connection with the sale of the related property. The notes have principal maturity dates ranging from December 1999 to December 2001 or upon sale 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 is due at maturity of the notes. During the year ended December 31, 1997, the lower-tier partnership that owns Deep Lake Hermitage Apartments ("Deep Lake") consummated the sale of the apartment complex for $4,800,000. There were two notes payable by the Partnership to sellers of interests in the lower-tier partnership that owns the Deep Lake property in the aggregate principal amount of $1,500,000, which were secured by the Partnership's interest in the local limited partnership. The notes had accrued interest of $1,650,696, for a total amount due of $3,150,696. The Partnership entered into an agreement with the note holders, who accepted a reduced payment of $1,001,600 in full satisfaction of all obligations, in order to enable the sale of property. This was paid by the lower tier partnership from proceeds of the sale, and approximated the Partnership's investment balance in Deep Lake. In addition, the apartment complex had a first mortgage note of approximately $3,500,000 which was paid off from proceeds of the sale. The Partnership recognized an extraordinary gain of $2,149,096 from the forgiveness of the debt. 52 HOUSING PROGRAMS LIMITED (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1997 3. NOTES PAYABLE (CONTINUED) Maturity dates on the notes and related accrued interest payable are as follows:
Years Ending Accrued December 31, Notes Interest Total ------------- ----------- ----------- ----------- 1998 $ -- $ -- $ -- 1999 7,669,743 8,714,054 16,383,797 2000 -- -- -- 2001 1,000,000 1,207,118 2,207,118 ----------- ----------- ----------- $ 8,669,743 $ 9,921,172 $18,590,915 =========== =========== ===========
4. FEES AND EXPENSES DUE 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 asset management fee equal to .5% of the original 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 interest in the capital accounts of the respective limited partnerships. As of December 31, 1997, the fees and expenses due the general partners exceeded the Partnership's cash. The general partners, during the forthcoming year, will not demand payment of amounts due in excess of such cash or such that the Partnership would not have sufficient operating cash; however, the Partnership will remain liable for all such amounts. The Partnership reimburses NAPICO for certain expenses. The reimbursement to NAPICO was $9,948 and $29,845 in 1996 and 1995, respectively, and is included in operating expenses. Pursuant to a Memorandum of Understanding entered into on August 11, 1995, the Partnership paid $16,207 in interest on May 1, 1996 to an affiliate of NAPICO, that served as the management company for properties owned by the Partnership. The interest relates to funds advanced to the Partnership by the master disbursement account maintained by the management company. In addition, the Partnership on May 1, 1996 reimbursed Housing Programs Corporation II $15,000 for professional fees, which were paid on behalf of the Partnership in connection with issues raised in the Memorandum of Understanding. 5. 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. The major differences in tax and financial reporting result from the use of different bases and depreciation methods for the properties held by the limited partnerships. Differences in tax and financial reporting also arise as losses are not recognized for financial 53 HOUSING PROGRAMS LIMITED (a California limited partnership) NOTES TO FINANCIAL STATEMENTS (CONTINUED) DECEMBER 31, 1997 5. INCOME TAXES (CONTINUED) reporting purposes when the investment balance has been reduced to zero or to a negative amount equal to further capital contributions required. 6. CONTINGENCIES NAPICO is a plaintiff in various lawsuits and has also been named as a 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. The Partnership has assessed the potential impact of the Year 2000 computer systems issue on its operations. The Partnership believes that no significant actions are required to be taken by the Partnership to address the issue and that the impact of the Year 2000 computer systems issue will not materially affect the Partnership's future operating results or financial condition. 7. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments, when it is practicable to estimate that value. The notes payable are collateralized by the Partnership's investments in investee limited partnerships and are payable only out of cash distributions from the investee partnerships. The operations generated by the investee limited partnerships, which account for the Partnership's primary source of revenues, are subject to various government rules, regulations and restrictions which make it impracticable to estimate the fair value of the notes payable and related accrued interest. The carrying amount of other assets and liabilities reported on the balance sheets that require such disclosure approximates fair value due to their short-term maturity. 8. FOURTH-QUARTER ADJUSTMENT The Partnership's policy is to record its equity in the loss of limited partnerships on a quarterly basis using estimated financial information furnished by the various local operating general partners. The equity in income (loss) of limited partnerships reflected in the accompanying financial statements is based primarily upon audited financial statements of the investee limited partnerships. The difference, $258,010, between the estimated nine-month equity in income and the actual 1997 year-to-date equity in loss has been recorded in the fourth quarter. 54 SCHEDULE HOUSING PROGRAMS LIMITED INVESTMENTS IN LIMITED PARTNERSHIPS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Year Ended December 31, 1997 ----------------------------------------------------------------------------------- Cash Balance Distri- Balance January Capital butions Equity in December 31, Limited Partnerships 1, 1997 Contributions Received Income/(Loss) 1997 - -------------------------- ------------- -------------- ------------- ---------------- ------------- Bannock Arms $ 638,495 $ 15,234 $ (198,839) $ 160,885 $ 615,775 Berkeley Gardens 316,528 (28,421) 288,107 Cape La Croix 6,784 (6,784) Cloverdale Cloverleaf 22,229 (22,229) Deep Lake Hermitage 979,876 (979,876) Evergreen Apts 8,762,504 (77,703) 497,071 9,181,872 Friendship Arms 2,189,065 (35,184) (98,381) 2,055,500 Jenny Lind Hall Lancaster Heights 22,079 (21,858) (221) Locust House 1,032,519 (16,898) (35,852) 979,769 Midpark Towers 247,203 (247,203) Oxford Towers Plaza Village 445,069 (29,101) (127,937) 288,031 Round Barn Manor Santa Fe Towers 99,802 (99,802) Walnut Towers 75,714 (75,714) Westwood Terrace 31,242 (31,242) ----------- ----------- ----------- ----------- ----------- $14,364,056 $ 520,287 $(1,842,433) $ 367,144 $13,409,054 =========== =========== =========== =========== ===========
55 SCHEDULE (CONTINUED)
HOUSING PROGRAMS LIMITED INVESTMENTS IN LIMITED PARTNERSHIPS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 Year Ended December 31, 1996 ------------------------------------------------------------------------------------------------ Cash Balance Distri- Balance January Capital butions Equity in December Limited Partnerships 1, 1996 Contributions Received Income/(Loss) 31, 1996 - ------------------- ----------- ------------- ----------- ----------- ----------- Bannock Arms $ 553,880 $ 157,898 $ (193,780) $ 120,497 $ 638,495 Berkeley Gardens 419,312 (102,783) 316,529 Cape La Croix 5,957 (5,957) Cloverdale Cloverleaf 4,394 (4,394) Deep Lake Hermitage 1,057,356 (84,178) 6,698 979,876 Evergreen Apts 8,384,177 (77,702) 456,029 8,762,504 Friendship Arms 2,340,564 (35,183) (116,316) 2,189,065 Jenny Lind Hall 55,300 (55,300) Lancaster Heights 22,079 (21,858) (221) Locust House 1,137,223 (16,897) (87,807) 1,032,519 Midpark Towers 446,072 (446,072) Oxford Towers Plaza Village 578,271 (133,203) 445,068 Round Barn Manor Santa Fe Towers 96,484 (96,484) Walnut Towers 96,143 (96,143) Westwood Terrace 31,241 (31,241) ----------- ----------- ----------- ----------- ----------- $14,470,783 $ 915,568 $(1,165,189) $ 142,894 $14,364,056 =========== =========== ============ =========== ===========
56 SCHEDULE (CONTINUED)
HOUSING PROGRAMS LIMITED INVESTMENTS IN LIMITED PARTNERSHIPS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 Year Ended December 31, 1995 ------------------------------------------------------------------------------------------------ Cash Balance Distri- Balance January 1, Capital butions Equity in December 31, Limited Partnerships 1995 Contributions Received Income/(Loss) 1995 - ------------------- ----------- ------------- --------- ------------- ------------ Bannock Arms $ 490,588 $184,684 $(229,495) $ 108,103 $ 553,880 Berkeley Gardens 497,349 (78,037) 419,312 Cape La Croix 6,405 (6,405) Cloverdale Cloverleaf 6,517 (6,517) Deep Lake Hermitage 1,189,101 (131,745) 1,057,356 Evergreen Apts 7,971,008 (77,702) 490,871 8,384,177 Friendship Arms 2,364,500 (35,183) 11,247 2,340,564 Jenny Lind Hall 45,504 (45,504) Lancaster Heights 24,881 (24,881) Locust House 1,221,828 (16,897) (67,708) 1,137,223 Midpark Towers 184,124 (184,124) Montecito Apartments 23,641 (23,641) Oxford Towers Plaza Village 799,566 (221,295) 578,271 Round Barn Manor Santa Fe Towers 95,250 (95,250) Walnut Towers 69,618 (69,618) Westwood Terrace 31,241 (31,241) ----------- -------- ---------- --------- ----------- $14,533,940 $671,865 $(822,817) $ 87,795 $14,470,783 =========== ======== ========== ========= ===========
57 SCHEDULE (CONTINUED) HOUSING PROGRAMS LIMITED INVESTMENTS IN LIMITED PARTNERSHIPS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 NOTES: 1. Equity in income (losses) of the limited partnerships represents the Partnership's allocable share of the net income (loss) from the limited partnerships for the year. Equity in losses of the limited partnerships will be recognized until the investment balance is reduced to zero or below zero to an amount equal to future capital contributions to be made by the Partnership. 2. Cash distributions from the limited partnerships will be treated as a return on the investment and will reduce the investment balance until such time as the investment is reduced to an amount equal to additional contributions. Distributions subsequently received will be recognized as income. 58 SCHEDULE III HOUSING PROGRAMS LIMITED REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS IN WHICH H P L HAS INVESTMENTS DECEMBER 31, 1997
BUILDINGS, FURNISHINGS & EQUIPMENT NUMBER OUTSTANDING AMOUNT CARRIED OF MORTGAGE AT CLOSE OF ACCUMULATED PARTNERSHIP/LOCATION APTS. LOAN LAND PERIOD TOTAL DEPRECIATION - ---------------------------- ------ ----------- ------ ---------------------- ------- ------------- Bannock Arms 66 $1,446,194 $ 78,000 $ 2,865,472 $2,943,472 $1,289,421 Boise, ID Deep Lake Hermitage 144 0 0 0 0 0 Lake Villa, IL Jenny Lind Hall 78 1,397,894 111,000 2,729,647 2,840,647 1,254,345 Springfield, MO Lancaster Heights 198 2,154,899 200,000 4,785,054 4,985,054 2,048,441 Normal, IL Midpark Towers 202 4,108,425 532,593 8,729,209 9,261,802 4,114,933 Dallas, TX Oxford House 156 4,922,784 300,000 4,796,928 5,096,928 2,186,728 Decatur, IL Round Barn Manor 156 5,209,567 200,000 5,213,709 5,413,709 2,258,651 Champaign, IL Santa Fe Towers 252 5,945,987 316,724 11,480,545 11,797,269 5,267,139 Overland Park, KS Walnut Towers 78 1,406,120 85,229 3,056,802 3,142,031 1,395,677 Winfield, KS Westwood Terrace 97 2,924,494 109,200 4,262,787 4,371,987 2,560,115 Moline, IL Friendship Arms 151 3,982,363 262,879 7,966,139 8,229,018 4,200,881 Hyattsville, MO Locust House 99 2,153,134 201,113 4,642,884 4,843,997 2,542,472 Westminster, MO Berkeley Gardens 132 1,465,671 149,071 3,849,967 3,999,038 2,393,325 Martinsburg, WV Cape La Croix 125 1,374,327 169,000 2,484,615 2,653,615 1,171,807 Cape Girardeau, MO Cloverdale 100 999,315 100,000 2,051,596 2,151,596 951,624 Crawfordsville, IN Cloverleaf 94 916,339 123,000 1,927,274 2,050,274 905,390 Indianapolis, IN Evergreen Apts. 330 8,483,030 617,369 15,149,027 15,766,396 6,627,588 Oshtemo, MI Plaza Village 228 3,328,432 369,700 7,040,956 7,410,656 4,639,761 Woonsocket, RI ------ ----------- ---------- ----------- ----------- ----------- 2,686 $52,218,975 $3,924,878 $93,032,611 $96,957,489 $45,808,298 ====== =========== ========== =========== =========== ===========
59 SCHEDULE III (CONTINUED) HOUSING PROGRAMS LIMITED REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS IN WHICH HPL HAS INVESTMENTS DECEMBER 31, 1997 1. Each local limited partnership has developed, owns and operates the housing project. Substantially all project costs, including construction period interest expense, were capitalized by the local limited partnerships. 2. Depreciation is provided for by various methods over the estimated useful lives of the projects. The estimated composite useful lives of the buildings are from 25 to 40 years. 3. Investments in property and equipment - limited partnerships:
Buildings, Furnishings, And Land Equipment Total ------------- ------------- ------------- Balance, January 1, 1995 $ 4,284,878 $ 97,585,326 $ 101,870,204 Net additions in 1995 -- 543,225 543,225 ------------- ------------- ------------- Balance, December 31, 1995 4,284,878 98,128,551 102,413,429 Net additions in 1996 -- 536,527 536,527 ------------- ------------- ------------- Balance, December 31, 1996 4,284,878 98,665,078 102,949,956 Net additions in 1997 (360,000) (5,632,467) (5,992,467) ------------- ------------- ------------- Balance, December 31, 1997 $ 3,924,878 $ 93,032,611 $ 96,957,489 ============= ============= =============
60 SCHEDULE III (CONTINUED) HOUSING PROGRAMS LIMITED REAL ESTATE AND ACCUMULATED DEPRECIATION OF PROPERTY HELD BY LOCAL LIMITED PARTNERSHIPS IN WHICH HPL HAS INVESTMENTS DECEMBER 31, 1997
Buildings, Furnishings, And Equipment ----------- ACCUMULATED DEPRECIATION: Balance, January 1, 1995 $38,513,676 Net additions for 1995 3,239,884 ----------- Balance, December 31, 1995 41,753,560 Net additions for 1996 3,470,865 ----------- Balance, December 31, 1996 45,224,425 Net additions for 1997 583,873 ----------- Balance, December 31, 1997 $45,808,298 ===========
61 PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT: HOUSING PROGRAMS LIMITED (the "Partnership") has no directors or executive officers of its own. The general partners of the Partnership are National Partnership Investments Corp. ("NAPICO"), Coast Housing Investments Associates (an affiliate of NAPICO) and Housing Programs Corporation II. NAPICO is a wholly-owned subsidiary of Casden Investment Company, an affiliate of The Casden Company. Housing Programs Corporation II is a wholly-owned subsidiary of LB I Group Inc. The following biographical information is presented for the directors and executive officers of NAPICO and officers of Housing Programs Corporation II with principal responsibility for the Partnership's affairs. CHARLES H. BOXENBAUM, 68, Chairman of the Board of Directors and Chief Executive Officer of NAPICO. Mr. Boxenbaum has been associated with NAPICO since its inception. He has been active in the real estate industry since 1960, and prior to joining NAPICO was a real estate broker with the Beverly Hills firm of Carl Rhodes Company. Mr. Boxenbaum has been a guest lecturer at national and state realty conventions, certified properties exchanger's seminars, Los Angeles Town Hall, National Association of Home Builders, International Council of Shopping Centers, Society of Conventional Appraisers, California Real Estate Association, National Institute of Real Estate Brokers, Appraisal Institute, various mortgage banking seminars, and the North American Property Forum held in London, England. In 1963, he was the winner of the Snyder Award, the highest annual award offered by the National Association of Real Estate Boards for Best Exchange. He is one of the founders and a past director of the First Los Angeles Bank, organized in November 1974. Mr. Boxenbaum was a member of the Board of Directors of the National Housing Council. Mr. Boxenbaum received his Bachelor of Arts degree from the University of Chicago. BRUCE E. NELSON, 46, President and a director of NAPICO. Mr. Nelson joined NAPICO in 1980 and became President in February 1989. He is responsible for the operations of all NAPICO sponsored limited partnerships. Prior to that he was primarily responsible for the securities aspects of the publicly offered real estate investment programs. Mr. Nelson is also involved in the identification, analysis, and negotiation of real estate investments. From February 1979 to October 1980, Mr. Nelson held the position of Associate General Counsel at Western Consulting Group, Inc., private residential and commercial real estate syndicators. Prior to that time Mr. Nelson was engaged in the private practice of law in Los Angeles. Mr. Nelson received his Bachelor of Arts degree from the University of Wisconsin and is a graduate of the University of Colorado School of Law. He is a member of the State Bar of California and is a licensed real estate broker in California and Texas. ALAN I. CASDEN, 52, Chairman of The Casden Company, an affiliate of Casden Properties (formerly CoastFed Properties), a director and member of the audit committee of NAPICO, and chairman of the Executive Committee of NAPICO. Mr. Casden is Chairman of the Board, Chief Executive Officer and sole shareholder of The Casden Company and Casden Investment Corporation. Prior to that, he was the president and chairman of Mayer Group, Inc., which he joined in 1975. He is also chairman of Mayer Management, Inc., a real estate management firm. Mr. Casden has been involved in approximately $3 billion of real estate financings and sales and has been responsible for the development and construction of more than 12,000 apartment units and 5,000 single-family homes and condominiums. 62 Mr. Casden is a member of the American Institute of Certified Public Accountants and of the California Society of Certified Public Accountants. Mr. Casden is a member of the advisory board of the National Multi-Family Housing Conference, the Multi-Family Housing Council, and the President's Council of the California Building Industry Association. He also serves on the advisory board to the School of Accounting of the University of Southern California. He holds a Bachelor of Science and a Masters in Business Administration degree from the University of Southern California. HENRY C. CASDEN, 54, President, Chief Operating Officer and Secretary of The Casden Company and a director and secretary of NAPICO. Mr. Casden has been President and Chief Operating Officer of The Casden Company, as well as a director of NAPICO since February 1988. He became secretary of both companies in late 1994. From 1982 to 1988, Mr. Casden was of counsel and a partner in the Los Angeles law firm of Troy, Casden & Gould. From 1978 to 1981, he was of counsel and a partner in the Los Angeles law firm of Loeb & Loeb. From 1972 to 1978, Mr. Casden was a member of the Beverly Hills law firm of Fink & Casden, Professional Corporation. Mr. Casden received his Bachelor of Arts degree from the University of California at Los Angeles, and is a graduate of the University of San Diego Law School. Mr. Casden is a member of the State Bar of California and has numerous professional affiliations. BOB SCHAFER, 56, Senior Vice President of Finance. Mr. Schafer joined NAPICO in 1984 and is the Corporate Controller responsible for the financial reporting function of the Company. Prior to this, he was a Group and Division Controller at Bergen Brunswig for over eight years, Controller at a Flintkote subsidiary for over four years, and Assistant Controller at an electronics subsidiary of General Electric for two years. Mr. Schafer is a member of the California Society of Certified Public Accountants. He holds a Bachelor of Science degree in accounting from Woodbury University, Los Angeles. PATRICIA W. TOY, 68, Senior Vice President - Communications and Assistant Secretary. Mrs. Toy joined NAPICO in 1977, following her receipt of an MBA from the Graduate School of Management, UCLA. From 1952 to 1956, Mrs. Toy served as a U.S. Naval Officer in communications and personnel assignments. She holds a Bachelor of Arts Degree from the University of Nebraska. MARK L. WALTHER, 37, Executive Vice President, General Counsel and Assistant Secretary. Mr. Walther joined NAPICO in 1987 and is responsible for the legal affairs of the NAPICO sponsored limited partnerships. Prior to joining NAPICO, Mr. Walther worked in the San Francisco law firm of Browne and Kahn which specialized in construction litigation. Mr. Walther received his Bachelor of Arts Degree in Political Science from the University of California, Santa Barbara and is a graduate of the University of California, Davis, School of Law. He is a member of the State Bar of Hawaii. ROCCO F. ANDRIOLA, 39, serves as President and Chief Financial Officer of Housing Programs Corporation II and Managing Director of Lehman Brothers Inc. in its Diversified Asset Group. He has held such position with Lehman since October 1996. Since joining Lehman in 1986, Mr. Andriola has been involved in a wide range of restructuring and asset management activities involving real estate and other direct investment transactions. From June 1991 through September 1996, Mr. Andriola held the position of Senior Vice President in Lehman's Diversified Asset Group. From June 1989 through May 1991, Mr. Andriola held the position of First Vice President in Lehman's Capital Preservation and Restructuring Group. From November 1986 through May 1989, Mr. Andriola held the position of Vice President in the Corporate Transactions Group of Shearson Lehman Brothers, Office of the General Counsel. From September 1982 through October 1986, Mr. Andriola was employed by the law firm of Donovan Leisure Newton & Irvine as a corporate and securities attorney. Mr. Andriola graduated summa cum laude from Fordham University in 1979 with a 63 B.A. degree in Economics and Political Science. Mr. Andriola received a J.D. degree and an LL.M degree in Corporate Law from New York University School of Law in 1982 and 1986, respectively. JOHN H. NG, 47, is a Vice President of Housing Programs Corporation II and Vice President of Lehman Brothers Inc. He has been employed by Lehman since November 1977. He is an asset manager of the Diversified Asset Group of Lehman and has held such position since 1985. From 1980 to 1985, Mr. Ng served as Senior Financial Analyst in the Corporate Planning and Development Department and from 1977 to 1980 he was an analyst in the Controller's Department. Prior to joining Lehman, he served as a Teaching Assistant in Finance and Economics at the University of Minnesota. Mr. Ng received an M.B.A. with a concentration in Corporate Finance from the University of Minnesota in 1977 and a B.A. magna cum laude in Economics with a specialization in Monetary Economics from Moorhead State University in 1975. DOREEN ODELL, 38, Senior Vice President, has worked with the Diversified Asset Group since June 1988. Ms. Odell graduated Phi Beta Kappa and received a B.A. in Economics summa cum laude from Wellesley College in 1981. She received a M.S. in Real Estate Development from the Massachusetts Institute of Technology in 1986. Prior to joining Lehman, Ms. Odell was involved in real estate development in both the public and private sectors. As a development manager with N.Y.C. Public Development Corporation, she structured joint ventures with private developers. She also worked with a private development company, The Harborside Corporation, evaluating real estate investments and development projects. From 1981 to 1984, Ms. Odell was a construction loan officer with Manufacturer's Hanover Trust Company. NAPICO and several of its officers, directors and affiliates, including Charles H. Boxenbaum, Bruce E. Nelson and Alan I. Casden, consented to the entry, on June 25, 1997, of an administrative cease and desist order by the U.S. Securities and Exchange Commission (the "Commission"), without admitting or denying any of the findings made by the Commission. The Commission found that NAPICO and others had violated certain federal securities laws in connection with transactions unrelated to the Partnership. The Commission's order did not impose any cost, burden or penalty on any partnership managed by NAPICO and does not impact NAPICO's ability to serve as the Partnership's Managing General Partner. 64 ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS: Housing Programs Limited has no officers, employees, or directors. However, under the terms of the Restated Certificate and Agreement of Limited Partnership, the Partnership is obligated to pay the general partners an annual management fee. The annual management fee is approximately equal to .5% of the invested assets, including the Partnership's allocable share of the mortgages related to real estate properties held by local limited partnerships. The fee is earned beginning in the month the Partnership makes its initial contribution to the local partnership. In addition, the Partnership reimburses NAPICO for certain expenses. An affiliate of NAPICO is responsible for the on-site property management for certain properties owned by the limited partnerships in which the Partnership has invested. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT: (a) Security Ownership of Certain Beneficial Owners The general partners own all of the outstanding general partnership interests of Housing Programs Limited. No person is known to own beneficially in excess of 5% of the outstanding limited partnership interests. (b) With the exception of the Initial Limited Partner, Bruce Nelson, who is an officer of NAPICO, none of the officers or directors of NAPICO own directly or beneficially any limited partnership interests in the Partnership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: The Partnership has no officers, directors or employees of its own. All of its affairs are managed by the Corporate General Partner, National Partnership Investments Corp. The Partnership is obligated to NAPICO for an annual management fee equal to .5 percent of the original 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 interest in the capital accounts of the respective partnerships. The management fee was $509,806, $526,651 and $547,773 for the three years ended December 31, 1997, 1996 and 1995, respectively. The Partnership reimburses NAPICO for certain expenses. The reimbursement to NAPICO was $0, $9,948 and $29,845 in 1997, 1996 and 1995, respectively, and is included in operating expenses. An affiliate of NAPICO is the general partner in 9 of the limited partnerships in which the Partnership has an investment, and another affiliate receives property management fees of approximately 5 to 6 percent of the revenue from five of these partnerships. The affiliate received property management fees of $211,938, $244,827 and $234,903 in 1997, 1996 and 1995, respectively. Pursuant to a Memorandum of Understanding entered into on August 11, 1995, the Partnership paid $16,207 in interest on May 1, 1996 to an affiliate of NAPICO, that served as the management company for properties owned by the Partnership. The interest relates to funds advanced to the Partnership by the master disbursement account maintained by the management company. In addition, the Partnership on May 1, 1996 reimbursed Housing Programs Corporation II, a general partner, $15,000 for professional fees, which were paid on behalf of the Partnership in connection with issues raised in the Memorandum of Understanding. A real estate investment trust organized by an affiliate of NAPICO has advised the Partnership that it intends to make a proposal to purchase from the Partnership certain of the real estate assets of the Partnership. The REIT proposes to purchase such limited partner interests for cash, which it plans to raise in connection with a private placement of its equity securities. The purchase is subject to, among other things, (i) consummation of such private placement by the REIT; (ii) the purchase of the general partner interests in the local limited partnerships by the REIT; (iii) the approval of HUD and certain state housing finance agencies; (iv) the consent of the limited partners to the sale of the local limited partnership interests held for investment by the partnership; and (v) the consummation of a minimum number of purchase transactions with other Casden affiliated partnerships. As of March 31, 1998, the REIT had completed buy-out negotiations with a majority of the general partners of the local limited partnerships. 65 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K: FINANCIAL STATEMENTS Reports of Independent Public Accountants. Balance Sheets as of December 31, 1997 and 1996. Statements of Operations for the years ended December 31, 1997, 1996 and 1995. Statements of Partners' Equity (Deficiency) for the years ended December 31, 1997, 1996 and 1995. Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995. Notes to Financial Statements. FINANCIAL STATEMENT SCHEDULES APPLICABLE TO HOUSING PROGRAMS LIMITED AND LIMITED PARTNERSHIPS IN WHICH HOUSING PROGRAMS LIMITED HAS INVESTMENTS Schedule - Investments in Limited Partnerships for the years ended December 31, 1997, 1996 and 1995. Schedule III - Real Estate and Accumulated Depreciation of Property Held by Local Limited Parnterships, December 31, 1997. The remaining schedules are omitted because the required information is included in the financial statements and notes thereto or they are not applicable or not required. EXHIBITS (3) Articles of incorporation and bylaws: The registrant is not incorporated. The Partnership Agreement was filed with Form S-11 #2-92352 incorporated herein by reference. (10) Material contracts: The registrant is not party to any material contracts, other than the Restated Certificate and Agreement of Limited Partnership dated May 15, l984, and the nineteen contracts representing the partnership's investment in local limited partnerships as previously filed at the Securities Exchange Commission, File #2-92352 which is hereby incorporated by reference. REPORTS ON FORM 8-K No reports on Form 8K were filed during the year ended December 31, 1997. 66 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 in the City of Los Angeles, State of California. HOUSING PROGRAMS LIMITED By: NATIONAL PARTNERSHIP INVESTMENTS CORP. The General Partner /s/ CHARLES H. BOXENBAUM - -------------------------------------- Charles H. Boxenbaum Chairman of the Board of Directors and Chief Executive Officer /s/ BRUCE E. NELSON - -------------------------------------- Bruce E. Nelson Director and President /s/ ALAN I. CASDEN - -------------------------------------- Alan I. Casden Director /s/ HENRY C. CASDEN - -------------------------------------- Henry C. Casden Director /s/ BOB E. SCHAFER - -------------------------------------- Bob E. Schafer Senior Vice President of Finance EX-27 2 EX-27
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. 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 1,162,398 0 0 0 0 1,162,398 0 0 14,571,452 3,855 0 0 0 0 (5,585,370) 14,571,452 0 893,750 0 0 694,623 0 917,376 (718,249) 0 (718,249) 0 2,149,096 0 1,430,847 0 0
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