-----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, RGckPonVQS3M4yUSD0DI+1oQN1smQTCEht3Hv4XGm7HT+1pBk5ZdJc8V+6Aj4X9O 0EhStln/XlxeKsSV5QvH0w== /in/edgar/work/0000950148-00-002355/0000950148-00-002355.txt : 20001115 0000950148-00-002355.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950148-00-002355 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOUSING PROGRAMS LTD CENTRAL INDEX KEY: 0000750304 STANDARD INDUSTRIAL CLASSIFICATION: [6500 ] IRS NUMBER: 953906167 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13808 FILM NUMBER: 765724 BUSINESS ADDRESS: STREET 1: 9090 WILSHIRE BLVD STREET 2: STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 3102782191 MAIL ADDRESS: STREET 1: 9090 WILSHIRE BLVD STREET 2: SUITE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 FORMER COMPANY: FORMER CONFORMED NAME: REAL ESTATE ASSOCIATES LTD VIII DATE OF NAME CHANGE: 19840823 10-Q 1 v67030e10-q.txt FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended SEPTEMBER 30, 2000 Commission File Number 0-13808 HOUSING PROGRAMS LIMITED (A California Limited Partnership) I.R.S. Employer Identification No. 95-3906167 9090 WILSHIRE BLVD., SUITE 201 BEVERLY HILLS, CALIF. 90211 Registrant's Telephone Number, Including Area Code (310) 278-2191 Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] 2 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2000 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets, September 30, 2000 and December 31, 1999 ................. 1 Statements of Operations, Nine and Three Months Ended September 30, 2000 and 1999............. 2 Statement of Partners' Deficiency, Nine Months Ended September 30, 2000 ............................... 3 Statements of Cash Flow, Nine Months Ended September 30, 2000 and 1999....................... 4 Notes to Financial Statements ............................................ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation................................ 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings..................................................... 16 Item 6. Exhibits and Reports on Form 8-K...................................... 16 Signatures..................................................................... 17
3 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 ASSETS
2000 (Unaudited) 1999 --------------- --------------- INVESTMENTS IN LIMITED PARTNERSHIPS $ -- $ -- CASH AND CASH EQUIVALENTS (Note 1) 866,604 817,796 --------------- --------------- TOTAL ASSETS $ 866,604 $ 817,796 =============== =============== LIABILITIES AND PARTNERS' DEFICIENCY LIABILITIES: Notes payable (Notes 3 and 6) $ 4,600,000 $ 4,600,000 Accrued fees and expenses due general partners (Note 4) 1,632,903 1,730,608 Accrued interest payable (Notes 3 and 6) 6,342,611 6,014,861 Accounts payable (Note 2) 62,353 63,528 --------------- --------------- 12,637,867 12,408,997 --------------- --------------- COMMITMENTS AND CONTINGENCIES (Notes 2, 4 and 5) PARTNERS' DEFICIENCY: General partners (368,460) (366,659) Limited partners (11,402,803) (11,224,542) --------------- --------------- (11,771,263) (11,591,201) --------------- --------------- TOTAL LIABILITIES AND PARTNERS' DEFICIENCY $ 866,604 $ 817,796 =============== ===============
The accompanying notes are an integral part of these financial statements. 1 4 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited)
Nine months Three months Nine months Three months ended ended ended ended Sept 30, 2000 Sept 30, 2000 Sept 30, 1999 Sept 30, 1999 ------------ ------------ ------------ ------------ INTEREST INCOME $ 150 $ -- $ 7,244 $ 105 ------------ ------------ ------------ ------------ OPERATING EXPENSES: Management fees - general partner (Note 4) 195,295 64,739 312,732 104,244 General and administrative (Note 4) 54,967 22,068 70,314 16,122 Legal and accounting (Note 4) 72,724 2,700 81,020 14,151 Interest (Notes 3 and 4) 327,750 109,250 327,750 109,250 ------------ ------------ ------------ ------------ Total operating expenses 650,736 198,757 791,816 243,767 ------------ ------------ ------------ ------------ LOSS FROM OPERATIONS (650,586) (198,757) (784,572) (243,662) GAIN ON SALE OF LIMITED PARTNERSHIP INTEREST (Note 2) 323,759 -- -- -- DISTRIBUTIONS FROM LIMITED PARTNERSHIPS RECOGNIZED AS INCOME 146,765 44,158 627,531 66,820 EQUITY IN INCOME OF LIMITED PARTNERSHIPS AND AMORTIZATION OF ACQUISITION COSTS (Note 2) -- -- -- -- ------------ ------------ ------------ ------------ NET LOSS $ (180,062) $ (154,599) $ (157,041) $ (176,842) ============ ============ ============ ============ NET LOSS PER LIMITED PARTNERSHIP $ (15) $ (12) $ (13) $ (14) ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 2 5 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' DEFICIENCY NINE MONTHS ENDED SEPTEMBER 30, 2000 (Unaudited)
General Limited Partners Partners Total ------------ ------------ ------------ PARTNERSHIP INTERESTS 12,368 ============ DEFICIENCY, January 1, 2000 $ (366,659) $(11,224,542) $(11,591,201) Net loss for the nine months ended September 30, 2000 (1,801) (178,261) (180,062) ------------ ------------ ------------ DEFICIENCY, September 30, 2000 $ (368,460) $(11,402,803) $(11,771,263) ============ ============ ============
The accompanying notes are an integral part of these financial statements. 3 6 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (Unaudited)
2000 1999 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(180,062) $(157,041) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Gain on sale of partnership interests (323,759) -- Increase in other assets -- (64,300) Increase in accrued interest payable 327,750 327,750 (Decrease) increase in accrued fees and expenses due general partners (97,705) 377,031 Decrease in accounts payable (1,175) (223,780) --------- --------- Net cash (used in) provided by operating activities (274,951) 259,660 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Sales proceeds 323,759 202,714 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to partners -- (702,714) --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 48,808 (240,340) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 817,796 831,751 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 866,604 $ 591,411 ========= =========
The accompanying notes are an integral part of these financial statements. 4 7 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The information contained in the following notes to the financial statements is condensed from that which would appear in the annual audited financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the Housing Programs Limited (the "Partnership") annual report for the year ended December 31, 1999. National Partnership Investments Corp. ("NAPICO") is a general partner for the Partnership. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim period presented are not necessarily indicative of the results for the entire year. In the opinion of NAPICO, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals) necessary to present fairly the financial position of the Partnership at September 30, 2000 and the results of operations for the nine and three months then ended and changes in cash flows for the nine months then ended. 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 NAPICO, and Coast Housing Investment Associates (CHIA), a limited partnership, and Housing Programs Corporation II. The general partners have a 1 percent interest in profits and losses of the Partnership. The limited partners have the remaining 99 percent interest which is allocated in proportion to their respective individual investments. Casden Properties Inc. owns a 95.25% economic interest in NAPICO, with the balance owned by Casden Investment Corporation ("CIC"). CIC, which is wholly owned by Alan I. Casden, owns 95% of the voting common stock of NAPICO. On December 30, 1998, the Partnership sold its limited partnership interests in 7 local limited partnerships for net proceeds of $202,714 to subsidiaries of Casden Properties Inc. 5 8 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. BASIS OF PRESENTATION The accompanying financial statements have been prepared in conformity with accounting principles generally in the United States of America. METHOD OF ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS The investments in local limited partnerships are accounted for on the equity method. Acquisition, selection fees and other costs related to the acquisition of the projects have been capitalized to the investment account and 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. 6 9 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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. NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS The Partnership holds limited partnership interests in 10 limited partnerships. As of September 30, 2000, the limited partnerships own residential low income rental projects consisting of 1,685 apartment units. The mortgage loans of these projects are payable to or 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. Distributions from the limited partnerships are recognized as a reduction of capital until the investment balance has been reduced to zero or to a negative amount equal to further capital contributions required. Subsequent distributions are recognized as income. The Partnership has no carrying value in investments in limited partnerships as of September 30, 2000. 7 10 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED) The following are unaudited combined estimated statements of operations for the nine and three months ended September 30, 2000 and 1999 for the limited partnerships in which the Partnership has investments:
Nine months Three months Nine months Three months ended ended ended ended Sept. 30, 2000 Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 1999 ------------ ------------ ------------ ------------ INCOME Rental and Other $ 7,741,000 $ 2,580,000 $ 12,630,000 $ 4,210,000 ------------ ------------ ------------ ------------ EXPENSES Depreciation 1,550,000 517,000 2,523,000 841,000 Interest 1,313,000 438,000 2,439,000 813,000 Operating 5,632,000 1,878,000 8,127,000 2,709,000 ------------ ------------ ------------ ------------ Total expenses 8,495,000 2,833,000 13,089,000 4,363,000 ------------ ------------ ------------ ------------ Net Loss $ (754,000) $ (253,000) $ (459,000) $ (153,000) ============ ============ ============ ============
NAPICO, or one of its affiliates, is the general partner and property management agent for certain of the limited partnerships included above. Under recent adopted law and policy, the United States Department of Housing and Urban Development ("HUD") has determined not to renew the Housing Assistance Payment ("HAP") Contracts on a long term basis under 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 may be the case under existing HAP Contracts. The payments under the renewed HAP Contracts may not be in an amount that would provide sufficient cash flow to permit owners of properties subject to HAP Contracts to meet the debt service requirements of existing loans insured by the Federal Housing Administration of HUD ("FHA") unless such mortgage loans are restructured. 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 ( "MAHRAA"), which was adopted in October 1997, provides for the restructuring of mortgage loans insured by the FHA with respect to properties subject to the Section 8 program. 8 11 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED) Under MAHRAA, an FHA-insured mortgage loan can be restructured into a first mortgage loan which will be amortized on a current basis and a low interest second mortgage loan payable to FHA which will only be payable on maturity of the first mortgage loan. This restructuring results in a reduction in annual debt service payable by the owner of the FHA-insured mortgage loan and is expected to result in an insurance payment from FHA to the holder of the FHA- insured loan due to the reduction in the principal amount. MAHRAA also phases out project- based subsidies on selected properties serving families not located in rental markets with limited supply, converting such subsidies to a tenant-based subsidy. When the HAP Contracts are subject to renewal, there can be no assurance that the local limited partnerships in which the Partnership has an investment will be permitted to restructure its mortgage indebtedness under MAHRAA. In addition, 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 is uncertain. During the nine months ended September 30, 2000, the Partnership surrendered its interests in one limited partnership for a net payment of $323,759. The Partnership recognized a gain of $323,759 from the sale because it had no investment balance related to this partnership. On December 30, 1998, the Partnership sold its limited partnership interests in 7 local limited partnerships to subsidiaries of Casden Properties Inc. The sale resulted in cash proceeds to the Partnership of $202,714 which was collected in 1999. In March 1999, the Partnership made cash distributions of $695,687 to the limited partners and $7,027 to the general partners, primarily using proceeds from the sale of the partnership interests collected in 1999. NOTE 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 $4,600,000 to the sellers of the partnership interests, bearing interest at 9.5 percent per annum to the various sellers of the partnership interests. The notes have principal maturity dates ranging from December 31, 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 9 12 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 3 - NOTES PAYABLE (CONTINUED) 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. Notes payable and related accrued interest payable aggregating became payable in 1999. Due to the Partnership's lack of cash and partners' deficiency, there is substantial doubt about its ability to satisfy these obligations, which would result in the possible foreclosure of the investments in the local limited partnerships. As a result, there is substantial doubt about the Partnerships' ability to continue as a going concern. Management is in process of attempting to negotiate extensions of the maturity dates on the notes payable. NOTE 4 - FEES AND EXPENSES DUE TO GENERAL PARTNERS Under the terms of the Restated Certificate and Agreement of the Limited Partnership, the Partnership is obligated to the general partners for an annual management fee equal to 0.5 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 interests in the capital accounts of the respective limited partnerships. As of September 30, 2000, 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. NOTE 5 - CONTINGENCIES On August 27, 1998, two investors holding an aggregate of eight units of limited partnership interests in Real Estate Associates Limited III (an affiliated partnership in which NAPICO is the managing general partner) and two investors holding an aggregate of five units of limited partnership interest in Real Estate Associates Limited VI (another affiliated partnership in which NAPICO is the managing general partner) commenced an action in the United States District Court for the Central District of California against the Partnership, NAPICO and certain other affiliated entities. The complaint alleges that the defendants breached their 10 13 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 2000 NOTE 5 - CONTINGENCIES (CONTINUED) fiduciary duty to the limited partners of certain NAPICO managed partnerships and made materially false and misleading statements in the consent solicitation statements sent to the limited partners of such partnerships relating to approval of the transfer of partnership interests in limited partnerships, owning certain of the properties, to subsidiaries of Casden Properties Inc., organized by an affiliate of NAPICO. The plaintiffs seek equitable relief, as well as compensatory damages and litigation related costs. On August 4, 1999, one investor holding one unit of limited partnership interest in the Partnership (another affiliated partnership in which NAPICO is the managing general partner) commenced a virtually identical action in the United States District Court for the Central District of California against the Partnership, NAPICO and certain other affiliated entities. The managing general partner of such NAPICO managed partnerships and the other defendants believe that the plaintiffs' claims are without merit and are contesting the actions vigorously. NAPICO is a plaintiff in various lawsuits and has also been named as defendant in other lawsuits arising from transactions in the ordinary course of business. In the opinion of NAPICO, the claims will not result in any material liability to the Partnership. NOTE 6 - 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 and amounts due general partner. 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. 11 14 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 2000 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Partnership's primary sources of funds include interest income on money market accounts and certificates of deposit and distributions from limited partnerships in which the Partnership has invested. It is not expected that any of the local limited partnerships in which the Partnership has invested will generate cash flow sufficient to provide for distributions to the Partnership's limited partners in any material amount. The Partnership made a distribution to the investors in March 1999, which included using proceeds from disposition of its investments in certain limited partnerships. RESULTS OF OPERATIONS Partnership revenues consist primarily of interest income earned on certificates of deposit and other temporary investment of funds. The Partnership also receives distributions from the lower-tier limited partnerships in which it has invested. Distributions received from limited partnerships are recognized as return of capital until the investment balance has been reduced to zero or to a negative amount equal to future capital contributions required. Subsequent distributions received are recognized as income. Except for certificates of deposit and money market funds, the Partnership's investments consist entirely of interests in other limited partnerships owning government assisted housing projects. Available cash is invested to provide interest income as reflected in the statements of operations. These funds can be converted to cash to meet obligations as they arise. The Partnership intends to continue investing available funds in this manner. 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 $195,000 and $312,732 for the nine months ended September 30, 2000 and 1999, respectively. The fees have decreased due to the sale of partnership interests in 1998, which reduced the invested assets. 12 15 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 2000 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) The Partnership is obligated on non-recourse notes payable of $4,600,000 at September 30, 2000 and December 31, 1999, which bear interest at 9.5 percent per annum and mature on December 31, 1999. The Partnership was relieved of notes payable in the amount of $4,069,743 in connection with the sale of the partnership interests to Casden Properties Inc. 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. Operating expenses, other than management fees and interest expense, consist of legal and accounting fees for services rendered to the Partnership and administrative expenses. Legal and accounting fees were $72,724 and $81,020 for the nine months ended September 30, 2000 and 1999, respectively. General and administrative expenses were $54,967 and $70,314 for the nine months ended September 30, 2000 and 1999, respectively. The Partnership accounts for its investments in the local limited partnerships on the equity method, thereby adjusting its investment balance by its proportionate share of the income or loss of the local limited partnerships. Losses incurred after the limited partnership investment account is reduced to zero are not recognized. Under recent adopted law and policy, the United States Department of Housing and Urban Development ("HUD") has determined not to renew the Housing Assistance Payment ("HAP") Contracts on a long term basis under 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 may be the case under existing HAP Contracts. The payments under the renewed HAP Contracts may not be in an amount that would provide sufficient cash flow to permit owners of properties subject to HAP Contracts to meet the debt service requirements of existing loans insured by the Federal Housing Administration of HUD ("FHA") unless such mortgage loans are restructured. 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 ("MAHRAA"), which was adopted in October 1997, provides for the restructuring of mortgage loans insured by the FHA with respect to properties subject to the Section 8 program. Under 13 16 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 2000 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS (CONTINUED) MAHRAA, an FHA-insured mortgage loan can be restructured into a first mortgage loan which will be amortized on a current basis and a low interest second mortgage loan payable to FHA which will only be payable on maturity of the first mortgage loan. This restructuring results in a reduction in annual debt service payable by the owner of the FHA-insured mortgage loan and is expected to result in an insurance payment from FHA to the holder of the FHA-insured loan due to the reduction in the principal amount. MAHRAA also phases out project-based subsidies on selected properties serving families not located in rental markets with limited supply, converting such subsidies to a tenant-based subsidy. When the HAP Contracts are subject to renewal, there can be no assurance that the local limited partnerships in which the Partnership has an investment will be permitted to restructure its mortgage indebtedness under MAHRAA. In addition, 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 is uncertain. During the nine months ended September 30, 2000, the Partnership surrendered its interests in one limited partnership for a net payment of $323,759. The Partnership recognized a gain of $323,759 from the sale because it had no investment balance related to this partnership. On December 30, 1998, the Partnership sold its limited partnership interests in 7 local limited partnerships to subsidiaries of Casden Properties Inc. The sale resulted in cash proceeds to the Partnership of $202,714 which was collected in 1999. In March 1999, the Partnership made cash distributions of $695,687 to the limited partners and $7,027 to the general partners, primarily using proceeds from the sale of the partnership interests. 14 17 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 2000 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On August 27, 1998, two investors holding an aggregate of eight units of limited partnership interests in Real Estate Associates Limited III (an affiliated partnership in which NAPICO is the managing general partner) and two investors holding an aggregate of five units of limited partnership interest in Real Estate Associates Limited VI (another affiliated partnership in which NAPICO is the managing general partner) commenced an action in the United States District Court for the Central District of California against the Partnership, NAPICO and certain other affiliated entities. The complaint alleges that the defendants breached their fiduciary duty to the limited partners of certain NAPICO managed partnerships and made materially false and misleading statements in the consent solicitation statements sent to the limited partners of such partnerships relating to approval of the transfer of partnership interests in limited partnerships, owning certain of the properties, to subsidiaries of Casden Properties Inc., organized by an affiliate of NAPICO. The plaintiffs seek equitable relief, as well as compensatory damages and litigation related costs. On August 4, 1999, one investor holding one unit of limited partnership interest in the Partnership (another affiliated partnership in which NAPICO is the managing general partner) commenced a virtually identical action in the United States District Court for the Central District of California against the Partnership, NAPICO and certain other affiliated entities. The managing general partner of such NAPICO managed partnerships and the other defendants believe that the plaintiffs' claims are without merit and are contesting the actions vigorously. As of September 30, 2000, NAPICO was a plaintiff or defendant in several lawsuits. None of these suits are related to the Partnership. In the opinion of NAPICO, the claims will not result in any material liability to the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) No exhibits are required per the provision of Item 6 of regulation S-K and no reports on Form 8-K were filed during the quarter ended September 30, 2000. 15 18 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 2000 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HOUSING PROGRAMS LIMITED (a California limited partnership) By: National Partnership Investments Corp. its General Partner By: /s/ BRUCE NELSON -------------------------------------- Bruce Nelson President Date: November 14, 2000 ------------------------------------ By: /s/ BRIAN H. SHUMAN -------------------------------------- Brian H. Shuman Chief Financial Officer Date: November 14, 2000 ------------------------------------ 16 EX-27 2 v67030ex27.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 866,604 0 0 0 0 866,604 0 0 866,604 62,353 0 0 0 0 (11,771,263) 866,604 0 470,674 0 0 322,986 0 327,750 (180,062) 0 (180,062) 0 0 0 (180,062) 0 0
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