-----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, CiWF0eTOiE5/BjXRPQjyE1ZAsJ0AN0NO759BWB3GBJ9v6YiqbXMuc8UWrvk848NN 0bPh0QKSay6ITOpMZAykjg== 0000950148-99-001275.txt : 19990623 0000950148-99-001275.hdr.sgml : 19990623 ACCESSION NUMBER: 0000950148-99-001275 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990524 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOUSING PROGRAMS LTD CENTRAL INDEX KEY: 0000750304 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953906167 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13808 FILM NUMBER: 99633083 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 FORM 10-Q (03/31/1999) 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 MARCH 31, 1999 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 MARCH 31, 1999 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets, March 31, 1999 and December 31, 1998......................1 Statements of Operations, Three Months Ended March 31, 1999 and 1998..........................2 Statement of Partners' Deficiency, Three Months Ended March 31, 1999 ..................................3 Statements of Cash Flow, Three Months Ended March 31, 1999 and 1998..........................4 Notes to Financial Statements.............................................5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation................................11 PART II. OTHER INFORMATION Item 1. Legal Proceedings ....................................................14 Item 6. Exhibits and Reports on Form 8-K .....................................14 Signatures ....................................................................15
3 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS MARCH 31, 1999 AND DECEMBER 31, 1998 ASSETS
1999 1998 (Unaudited) (Audited) ------------ ------------ CASH DUE FROM ESCROW (Note 2) $ -- $ 202,714 CASH AND CASH EQUIVALENTS (Note 1) 62,403 831,751 - ------------------------------------------------- ------------ ------------ TOTAL ASSETS $ 62,403 $ 1,034,465 ============ ============ LIABILITIES AND PARTNERS' DEFICIENCY LIABILITIES: Notes payable (Notes 3) $ 4,600,000 $ 4,600,000 Accrued fees and expenses due general partners (Note 4) 1,459,763 1,355,519 Accrued interest payable (Notes 3) 5,687,111 5,577,861 Accounts payable 82,104 300,309 ------------ ------------ 11,828,978 11,833,689 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Notes 2, 4 and 5) PARTNERS' DEFICIENCY: General partners (368,413) (358,739) Limited partners (11,398,162) (10,440,485) ------------ ------------ (11,766,575) (10,799,224) ------------ ------------ TOTAL LIABILITIES AND PARTNERS' DEFICIENCY $ 62,403 $ 1,034,465 ============ ============
The accompanying notes are an integral part of these financial statements. 4 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (Unaudited)
1999 1998 --------- --------- INTEREST INCOME $ 6,872 $ 15,350 --------- --------- OPERATING EXPENSES: Management fees - general partner (Note 4) 104,244 123,240 General and administrative (Note 4) 30,697 18,192 Legal and accounting (Note 4) 27,318 51,362 Interest (Notes 3 and 4) 109,250 205,906 --------- --------- Total operating expenses 271,509 398,700 --------- --------- LOSS FROM OPERATIONS (264,637) (383,350) DISTRIBUTIONS FROM LIMITED PARTNERSHIPS RECOGNIZED AS INCOME 117,568 EQUITY IN INCOME OF LIMITED PARTNERSHIPS AND AMORTIZATION OF ACQUISITION COSTS (Note 2) 92,000 NET LOSS $(264,637) $(173,782) ========= ========= NET LOSS PER LIMITED PARTNERSHIP INTEREST $ (21) $ (14) ========= =========
The accompanying notes are an integral part of these financial statements. 5 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' DEFICIENCY THREE MONTHS ENDED MARCH 31, 1999 (Unaudited)
General Limited Partners Partners Total ------------ ------------ ------------ PARTNERSHIP INTERESTS 12,368 =========== DEFICIENCY, January 1, 1999 $ (358,739) $(10,440,485) $(10,799,224) Distributions (7,027) (695,687) (702,714) Net loss for the three months ended March 31, 1999 (2,646) (261,991) (264,637) ------------ ------------ ------------ DEFICIENCY, March 31, 1999 $ (368,413) $(11,398,162) $(11,766,575) ============ ============ ============
The accompanying notes are an integral part of these financial statements. 6 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (Unaudited)
1999 1998 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (264,637) $ (173,782) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Equity in income of limited partnerships -- (100,000) Amortization of acquisition costs -- 8,000 Increase in accrued interest payable 109,250 205,906 Increase in accrued fees and expenses due general partners 104,244 73,241 Increase (decrease) in accounts payable (218,205) 333,077 ----------- ----------- Net cash (used in) provided by operating activities (269,348) 346,442 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Sale proceeds 202,714 -- Distributions to partners (702,714) -- ----------- ----------- Net cash used in investing activities (500,000) -- ----------- ----------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (769,348) 346,442 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 831,751 1,162,398 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 62,403 $ 1,508,840 =========== ===========
The accompanying notes are an integral part of these financial statements. 7 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS MARCH 31, 1999 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, 1998. 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 March 31, 1999 and the results of operations and changes in cash flows for the three 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 National Partnership Investments Corp. (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. National Partnership Investments Corp. (NAPICO) is the corporate general partner of the Partnership. Casden Properties Inc. owns a 92.25% 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. 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. 5 8 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1999 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. 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 March 31, 1999, after selling its interests in 7 limited partnerships. The limited partnerships owned as of March 31, 1999, 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. 6 9 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1999 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED) 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 equity investment in limited partnerships as of March 31, 1999. The following are unaudited combined estimated statements of operations for the three months ended March 31, 1999 and 1998 for the limited partnerships in which the Partnership has investments:
Three months Three months ended ended March 31, 1999 March 31, 1998 -------------- -------------- INCOME Rental and Other $ 4,210,000 $ 4,408,000 ----------- ----------- EXPENSES Depreciation 841,000 860,000 Interest 813,000 862,000 Operating 2,709,000 2,809,000 ----------- ----------- Total expenses 4,363,000 4,531,000 ----------- ----------- NET LOSS $ (153,000) $ (123,000) =========== ===========
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 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. The payments under the renewed HAP Contracts are not expected to 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 MAHRAA, an FHA-insured mortgage loan can be restructured into a first mortgage loan which will be amortized on a 7 10 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1999 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED) 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. MAHRAA provides that properties begin the restructuring process in federal fiscal year 1999 (beginning October 1, 1998). On September 11, 1998, HUD issued interim regulations implementing MAHRAA and final regulations are expected to be issued in 1999. With respect to the local limited partnerships' expiring HAP Contracts, it is expected that the HAP payments will be reduced or terminated pursuant to the terms of MAHRAA. 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. As a result of the foregoing, the Partnership in 1997 undertook an extensive review of disposition, refinancing or re-engineering alternatives for the properties in which the limited partnerships have invested and are subject to HUD mortgage and rental subsidy programs. The Partnership has incurred expenses in connection with this review by various third party professionals, including accounting, legal, valuation, structural and engineering costs, which amounted to $43,096 through December 31, 1998. On December 30, 1998, the Partnership sold its limited partnership interests in 7 local limited partnerships to the Operating Partnership. The sale resulted in cash proceeds to the Partnership of $202,714 and a net gain of $5,398,973, after being relieved of notes and interest payable and deducting selling costs. The cash proceeds were held in escrow at December 31, 1998 and were collected in 1998. In March 1999, the Partnership made cash distributions of $695,687 to the limited partners and $7,027 to the general partners, which included using proceeds from the sale of the partnership interests. The Operating Partnership purchased such limited partner interests for cash, which it raised in connection with a private placement of its equity securities. The purchase was subject to, among other things, (i) the purchase of the general partner interests in the local limited partnerships by the Operating Partnership; (ii) the approval of HUD and certain state housing finance agencies; and (iii) the consent of the limited partners to the sale of the local limited partnership interests held for investment by the Partnership. In August 1998, a consent solicitation statement was 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 8 11 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1999 NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED) with certain amendments to the Partnership Agreement and other disclosures of various conflicts of interest in connection with the proposed transaction. Prior to the sale of the partnership interests, the consents of the limited partners to the sale and amendments to the Partnership Agreement were obtained. 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 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 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 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. 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 March 31, 1999, 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 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. 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. 9 12 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) MARCH 31, 1999 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 cash flow generated by operations of 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. 10 13 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 1999 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 $104,244 and $123,240 for the three months ended March 31, 1999 and 1998, respectively. The fees have decreased due to the sale of a property owned by a local partnership in 1997, which reduced the invested assets. The Partnership is obligated on non-recourse notes payable of $4,600,000 at March 31, 1999 and December 31, 1998, 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. 11 14 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 1999 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATION (CONTINUED) 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 periods presented. Legal and accounting fees were $27,318 and $51,362 for the three months ended March 31, 1999 and 1998, respectively. General and administrative expenses were $30,697 and $18,192 for the periods ended March 31, 1999 and 1998, 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 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. The payments under the renewed HAP Contracts are not expected to 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 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. MAHRAA provides that properties begin the restructuring process in federal fiscal year 1999 (beginning October 1, 1998). On September 11, 1998, HUD issued interim regulations implementing MAHRAA and final regulations are expected to be issued in 1999. With respect to the local limited partnerships' expiring HAP Contracts, it is expected that the HAP payments will be reduced or terminated pursuant to the terms of MAHRAA. 12 15 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 1999 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATION (CONTINUED) 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. As a result of the foregoing, the Partnership in 1997 undertook an extensive review of disposition, refinancing or re-engineering alternatives for the properties in which the limited partnerships have invested and are subject to HUD mortgage and rental subsidy programs. The Partnership has incurred expenses in connection with this review by various third party professionals, including accounting, legal, valuation, structural and engineering costs, which amounted to $43,096 through December 31, 1998. On December 30, 1998, the Partnership sold its limited partnership interests in 7 local limited partnerships to the subsidiaries of Casden Properties Inc. The sale resulted in cash proceeds to the Partnership of $202,714 and a net gain of $5,398,973, after deducting selling costs. The cash proceeds were held in escrow at December 31, 1998 and were collected subsequent to year-end. 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. Casden Properties Inc. purchased such limited partner interests for cash, which it raised in connection with a private placement of its equity securities. The purchase was subject to, among other things, (i) the purchase of the general partner interests in the local limited partnerships by Casden Properties Inc.; (ii) the approval of HUD and certain state housing finance agencies; and (iii) the consent of the limited partners to the sale of the local limited partnership interests held for investment by the Partnership. In August 1998, a consent solicitation statement was 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 proposed transaction. Prior to the sale of the partnership interests, the consents of the limited partners to the sale and amendments to the Partnership Agreement were obtained. 13 16 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 1999 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As of March 31, 1999, 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 reports on Form 8-K were filed during the quarter ended March 31, 1999. 14 17 HOUSING PROGRAMS LIMITED (A CALIFORNIA LIMITED PARTNERSHIP) MARCH 31, 1999 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HOUSING PROGRAMS LIMITED (a California limited partnership) By: National Partnership Investments Corp. General Partner /s/ BRUCE NELSON ---------------------------------------- Bruce Nelson President Date: May 20, 1999 ------------------------------------ /s/ CHARLES H. BOXENBAUM ---------------------------------------- Charles H. Boxenbaum Chief Executive Officer Date: May 20, 1999 ------------------------------------ 15 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 62,403 0 0 0 0 62,403 0 0 62,403 82,104 0 0 0 0 (11,766,575) 62,403 0 6,872 0 0 271,509 0 0 (264,637) 0 (264,637) 0 0 0 (264,637) 0 0
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