-----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, AdFRSqviE2Bq0q8P2iMWbSE0Q9KsWNJrUfomc963L8RH3+WXKwjaVFcGXTyf7hIB dhonQ1TItI6gvF6Z6tFKFg== 0000944209-98-001628.txt : 19980915 0000944209-98-001628.hdr.sgml : 19980915 ACCESSION NUMBER: 0000944209-98-001628 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980914 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFC LOW INCOME HOUSING CREDIT PARTNERS-I CENTRAL INDEX KEY: 0000823170 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 954115893 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-18517 FILM NUMBER: 98708443 BUSINESS ADDRESS: STREET 1: 12100 WILSHIRE BLVD STE 1400 CITY: LOS ANGELES STATE: CA ZIP: 90025-7114 BUSINESS PHONE: 2138291700 10-K 1 FORM 10-K FOR THE PERIOD ENDED 12/31/1997 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 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 33-17726 AFC-LOW INCOME HOUSING CREDIT PARTNERS-I INVESTMENT IN AFFORDABLE HOUSING A California Limited Partnership I.R.S. Employer Identification No. 95-4115893 12100 Wilshire Boulevard, Suite 1400 Los Angeles, California 90025 (310) 207-0704 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 No X ----- ----- The registrant is a limited partnership and therefore has no voting stock. As of December 31, 1997, 24,065 limited partnership interests ("Interests") in the registrant were outstanding. These Interests had been issued during 1988, 1989 and 1990 at a subscription price of $500 per Interest. The Interests are not currently traded on any market. Therefore, no market selling price and no average bid or asked prices exist for the 60 days prior to the date of filing. DOCUMENTS INCORPORATED BY REFERENCE Registrant's Prospectus dated May 24, 1988, included within the Registrant's registration statement on Form S-11 (File No. 33-17726), previously filed with the Commission on October 6, 1987, and declared effective on May 24, 1988, as amended and supplemented (the "Prospectus"), and Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, filed with the Commission on August 11, 1993 (the "1991 Report") and Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, filed with the Commission on October 21, 1994 (the "1992 Report"). Designated portions of the Prospectus, the 1991 Report and the 1992 Report are incorporated by reference into Parts I, II and III of this Annual Report on Form 10-K. TABLE OF CONTENTS PART I
ITEM 1. Business.......................................................................... 1 ITEM 2. Properties........................................................................ 1 ITEM 3. Legal Proceedings................................................................. 4 ITEM 4. Submission of Matters to a Vote of Security Hold.................................. 5 PART II ITEM 5. Market for the Registrant's Partnership Interests and Related Matters............. 5 ITEM 6. Selected Financial Data........................................................... 5 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operation......................................................................... 7 ITEM 8. Financial Statements and Supplementary Data....................................... 8 ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.............................................................. 9 PART III ITEM 10. Directors and Executive Officers of the Registrant................................ 9 ITEM 11. Executive Compensation............................................................ 9 ITEM 12. Security Ownership of Certain Beneficial Owners and Management.................... 10 ITEM 13. Certain Relationships and Related Transactions.................................... 10 PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................. 12
PART I ITEM 1. Business. - ------- -------- AFC-Low Income Housing Credit Partners-I Investment in Affordable Housing, a California limited partnership (the "Partnership"), was formed on July 28, 1987 to invest, through other limited partnerships ("Operating Partnerships"), in government assisted multi-family housing developments ("Government-Assisted Properties") expected to qualify for the Low Income Housing Tax Credit under Section 42 of the Internal Revenue Code. The general partners of the Partnership are AFC Capital Corporation, a Delaware corporation, and A. Bruce Rozet (the "General Partners"). The investment objectives of the Partnership are to: (i) provide current tax benefits to Limited Partners to the extent permitted by law, including, but not limited to, passive losses and Low Income Housing Tax Credits that Limited Partners may use to offset federal income taxes on certain types and amounts of income from other sources; (ii) provide capital appreciation through potential increases in value of the Partnership's investments; and (iii) provide potential cash distributions from sales or refinancings of the Partnership's investments and, to a lesser extent, if at all, from operations. See the information included on pages 49 through 58 of the Prospectus, which is incorporated herein by this reference. As of January 15, 1990, the Partnership had offered and sold 24,065 limited partnership interests ("Interests"), resulting in total offering proceeds of $12,032,500. As of December 31, 1997, 24,065 Interests were issued and outstanding. Prior to the termination of the Partnership's offering of Interests, the Partnership had provided capital to, and had become a limited partner in, six Operating Partnerships, each of which owned or was in the process of constructing a Government-Assisted Property. Partly as a result of the termination of the offering of Interests, the Partnership terminated its investments in two of the Operating Partnerships. Two of the remaining four Operating Partnerships encountered difficulties as a result of disputes with HUD and Kentucky Housing Corporation, which resulted in delays in the rehabilitation of one Property and the foreclosure of another Property. See "Properties-- Recent Developments" and "Legal Proceedings," below. ITEM 2. Properties. - ------- ---------- Set forth below is a schedule of the Government-Assisted Properties currently owned by Operating Partnerships in which the Partnership is a limited partner, together with information as to the Partnership's investment in each Operating Partnership, percentage ownership in each operating Partnership, the occupancy rates at each Government-Assisted Property and the Low Income Housing Tax Credits generated by each Government-Assisted Property. 1 Information Concerning Operating Partnerships --------------------------------------------- and Government-Assisted Properties ---------------------------------- (As of December 31, 1997) - ------------------------------------------------------------------------------------------------------------------------ Operating Partnership: United-Stinson United-Germano-Millgate Coliseo Housing Limited Partnership, Limited Partnership, Partnership, a Pennsylvania an Illinois limited a California limited limited partnership partnership partnership - ------------------------------------------------------------------------------------------------------------------------ Operating General Partner(s): United Housing Chicago Community United Housing Preservation Development Corporation Preservation Corporation Corporation/1/ - ------------------------------------------------------------------------------------------------------------------------ Property Name: Stinson Tower Germano Millgate Villa Del Apartments Apartments Coliseo/Gilbert Chester, PA Chicago, IL Lindsay Manor Los Angeles, CA - ------------------------------------------------------------------------------------------------------------------------ Total Units: 150 350 137 - ------------------------------------------------------------------------------------------------------------------------ Occupancy Percentage: 99.3% 95.0% 89.06% - ------------------------------------------------------------------------------------------------------------------------ Date of Acquisition: 1988 1988 1989 - ------------------------------------------------------------------------------------------------------------------------ Partnership's Capital $981,120 $2,577,120 $6,078,590 Contribution: - ------------------------------------------------------------------------------------------------------------------------ Partnership's Percentage 95% 14.1% 67.9% Ownership: - ------------------------------------------------------------------------------------------------------------------------ Actual Low Income Housing $223,371 $1,326,973/3/ $1,399,159 Tax Credits allocated to Operating Partnerships for 1996/2/: - ------------------------------------------------------------------------------------------------------------------------
Recent Developments Set forth below is a more detailed description of recent developments with respect to each of the Government-Assisted Properties in which the Partnership has a material investment through the Operating Partnerships. Germano-Millgate Apartments --------------------------- The Germano-Millgate Apartments (the "Germano Property") is owned by the United-Germano-Millgate Limited Partnership (the "Germano Partnership"), an Operating Partnership in which the Partnership had invested. The 1991 Report contained a description of certain disputes among the Germano Partnership, HUD - -------------------- /1/ POZ Development Corporation is also a general partner. /2/ Of these amounts, the amounts of Low Income Housing Tax Credits allocated to the Partnership for 1997 were $211,893, $344,557 and $950,029, respectively. /3/ This figure represents the Partnership's 1996 Low Income Housing Tax Credit Allocation based on acquisition credits. In 1997, the Partnership was allocated rehabilitation credits of $1,148,52875 and acquisition credits of $199,509. 2 and certain other parties relating to the Germano Partnership, and a description of legal and administrative proceedings relating to the Germano Property. That information is contained on pages 4 through 10 of the 1991 Report and is incorporated herein by this reference. As described in greater detail therein, the Partnership currently is a partner in Germano Investment L.P., which was admitted as a limited partner in the Germano Partnership, with a 14.2% interest in profits and losses and a seventy percent (70%) share of the acquisition credits. The Germano Partnership's general partner, Chicago Community Development Corporation ("CCDC"), was temporarily allocated an 84.8% limited partnership interest in the Germano Partnership, until Independence Tax Credit Plus II, L.P. ("Independence") was admitted to the Germano Partnership on October 15, 1993. In accordance with the agreements governing the admission of Independence to the Germano Partnership, Independence made a capital contribution to the Germano Partnership in the amount of $2,000,000 concurrently with its admission to that partnership. Independence has made additional required contributions totaling $2,427,581. An additional $200,000 which will be released upon the Germano Property's meeting certain occupancy and cash flow tests. The Germano Partnership completed the rehabilitation of the Germano Property, using the proceeds of the $500,000 loan from the Illinois Housing Development Authority, capital contributions from Independence and disbursements under the HUD "Flex Loan" in the amount of $4,613,112. The Germano Partnership obtained a new allocation of Low Income Housing Tax Credits relating to rehabilitation expenses in the amount of $1,011,546, per year for 10 years commencing 1995. As stated above, the Partnership's share of the rehabilitation tax credits will be approximately $142,000 per year, based on its 14.1% interest in the Germano Partnership. This is in addition to the acquisition credits of $280,998 per year, specially allocated to the Partnership. Due primarily to vacancies resulting from the rehabilitation of the project. Germano fell behind in making mortgage payments during 1994. During 1996, the mortgage was brought current. Villa Del Coliseo/Gilbert Lindsay Manor --------------------------------------- The sources of financing for the construction of the Villa Del Coliseo Apartments, now doing business as Gilbert Lindsay Manor, is described on page 14 of the 1991 Report, which information is incorporated herein by this reference. The Property received its Certificate of Occupancy on April 4, 1991. The Property is servicing its mortgage debt commitments on time, and is current on its insurance and tax payments. As of December 31, 1997, the amount of the Property's reserve for replacements was approximately $78,400. The Property's management agent maintains a policy of stringent screening of all prospective tenants. While low and moderate income families have priority on the waiting list, home visits are required before any prospective tenant is accepted. Currently, the management agent conducts a number of tenant programs, including arts and crafts activities for tots, a variety of team sports for youths aged 7-15, and several seasonally-oriented social events intended for family participation. 3 Management's plan to raise occupancy includes implementation of an advertising campaign highlighting our efforts to create a clean wholesome environment for families to live within the inner city, increased security, rent rebates and incentives. Additionally, tenants will be offered financial counseling to assist them in budgeting their household income more efficiently which will enable them to pay the rent on time and decrease the number of evictions due to non-payment of rent. During 1997 revenues increased by $80,208 from 1996 due primarily to decreased occupancy on the Property. The Property had a negative cash flow from operating activities of $37,504 in 1997. Trade accounts payable and accrued expenses increased by $24,579. Stinson Tower Apartments ------------------------ Stinson Tower Apartments, specifically designed to accommodate the elderly, blind and physically handicapped, currently reports 99% occupancy, with a substantial waiting list. All 150 units presently receive Section 8 Housing Rental Assistance (rental subsidies), administered by the Pennsylvania Housing Authority. Stinson Tower Apartments functions within budget, with tenant receivables at an acceptable level, and payables discharged within normal time limits. Mortgage payments and other debt service commitments are current, and replacement reserves were reported at approximately $286,000 as of December 31, 1997. ITEM 3. Legal Proceedings. - ------- ----------------- On May 8, 1997, the United States filed an action against Associated Financial Corporation, certain members of the AFC Group, including Messrs. Ross and Rozet, and others, in the United States District Court for the Northern District of California charging that the defendants were wrongfully participating in the fees earned by the management agent for several properties (not including any of the properties invested in by the Partnership) and had not disclosed this arrangement and, thus, were violating provisions of the applicable regulatory agreements and other agreements governing the subject properties. The Complaint did, however, allege that the defendants made certain false claims regarding the condition of the Stinson Tower Apartments. Defendants filed an answer on August 11, 1997, denying the material allegations of the Complaint, and asserting various separate and additional defenses. The government filed an amended complaint on March 2, 1998, adding additional defendants none of whom are part of the AFC Group and added a claim that the defendants, including the new defendants made false claims in connection with the obtaining of insurance for various HUD-insured properties. The defendants have filed answers to the First Amended Complaint, again denying the material allegations of the Complaint and asserting various separate and additional defenses. While substantial document discovery has been completed, the defendants intend to move to compel significant delivery from the government of substantial additional documentation. Deposition discovery is in its early stages. Given the defendants need to obtain significant additional discovery, 4 counsel can offer no opinion as to the outcome of the litigation at this time. The General Partner believes that when all of the facts are presented to an impartial judge, the defendants will be exonerated. However, the complaint contains serious allegations against the defendants and every effort will be made to show that the government is wrong in bringing the lawsuit. At this time, the general partner does not believe that there will be any material adverse affect to the Partnership and the operation of its investments. ITEM 4. Submission of Matters to a Vote of Security Hold - ------- ------------------------------------------------ During the year ended December 31, 1997, no matter was submitted to a vote of Interest holders. PART II ITEM 5. Market for the Registrant's Partnership Interests and Related Matters. - ------- --------------------------------------------------------------------- (a) Market Information. The Partnership has no common stock. ------------------ Interests are not freely transferable, and no public trading market exists. Original sales of Interests were made at a price of $500 per Interest. (b) Holders. As of December 31, 1997, 24,065 Interests were held by ------- 1186 Limited Partners. These figures are based upon the number of Limited Partners of record as reported by the General Partners. (c) Dividends. The Partnership has made no distributions to Limited --------- Partners, and it is not currently expected that distributions will be made in the near future. Partnership allocations and distributions are described on pages 68 and 71 of the Prospectus, which are incorporated herein by reference. ITEM 6. Selected Financial Data. - ------- ----------------------- The following summary of selected financial data should be read in conjunction with the financial statements filed in response to Item 14 herein, which also includes a summary of the Partnership's significant accounting policies. 5 Statements of Operation -----------------------
Year Ended Year Ended Year Ended December 31, 1997 December 31, 1996 December 31, 1995 ----------------- ----------------- ----------------- Income) $ -0- $ -0- $ 40,042 Expenses (miscellaneous) 16,500 14,775 18,970 --------- ----------- ----------- Income/(Loss) from Operations (16,500) (14,775) 21,072 Share of Loss of Operating Partnerships (922,003) ( 833,918) (1,058,346) --------- ----------- ----------- Net Loss $(938,503) $( 844,693) $(1,037,274) ========= =========== =========== Net Loss Per Limited Partner Interest/1/ $ (39.00) $ (34.64) $ (43.10) ========= =========== ===========
Year Ended Year Ended December 31, 1994 December 31, 1993 ----------------- ----------------- Income $ 15 $ 29 Expenses (miscellaneous) (12,954) 58,343 --------- ----------- Income/(Loss) from Operations (12,939) (58,343) Share of Loss of Operating Partnerships (982,544) (1,049,521) --------- ----------- Net Loss $(995,483) $(1,107,835) ========= =========== Net Loss Per Limited Partner Interest/1/ $ (41.37) $ (46.04) ========= ===========
- -------------------- /1/ This figure represents the net loss per Limited Partner Interest based on the aggregate number of Interests outstanding as of December 31 of the respective year. Actual net loss per Interest for years prior to 1991 varied depending upon each Limited Partner's month of entry into the Partnership. 6 Balance Sheets as of December 31 --------------------------------
1997 1996 1995 ---- ---- ---- Total Assets $1,400,540 $2,324,044 $3,155,237 ========== ========== ========== Total Liabilities $ 34,744 $ 19,745 $ 17,245 Partners' Equity 1,365,796 2,304,299 3,137,992 ---------- ---------- ---------- Liabilities and Net Worth $1,400,540 $2,324,044 $3,155,237 ========== ========== ==========
1994 1993 ---- ---- Total Assets $4,252,303 $5,529,930 ========== ========== Total Liabilities $ 77,037 $ 89,181 Partners' Equity 4,175,266 5,170,749 ---------- ---------- Liabilities and Net Worth $4,252,303 $5,529,930 ========== ==========
ITEM 7. Management's Discussion and Analysis of Financial Condition and - ------- --------------------------------------------------------------- Results of Operation. -------------------- Liquidity and Capital Resources ------------------------------- The Partnership's primary source of funds was the proceeds of its public offering of Interests. Other sources of liquidity have included (i) interest earned on capital contributions held pending investment, (ii) working capital reserves, and (iii) cash distributions, if any, from operations of the Operating Partnerships in which the Partnership has invested. As of the end of 1988, the Partnership had received $2,481,000 in subscription for Interests, for a net of $2,170,875 after payment of brokerage fees and expenses. The Partnership received an additional $9,423,500 in subscriptions for Interests during 1989, or an additional $7,947,936 after payment of brokerage fees and expenses, and an additional $128,000 in subscriptions for Interests during 1990, or an additional $108,800 after payment of brokerage fees and expenses. As of December 31, 1989, the Partnership had committed to investments in Operating Partnerships requiring cash payments of approximately $10,200,000. During 1989, cash investments totaling approximately $5,520,000 were made in Operating Partnerships, and, at December 31, 1989, the Partnership held $1,497,863 in cash. During 1990, the Partnership received $2,313,000 as a return of its investment in two Operating Partnerships and invested an aggregate of approximately $3,545,000 in Operating Partnerships, leaving the Partnership with $43,917 in cash as of December 31, 1990. For 1991 contributions totaled $300 and cash as of December 31, 1991 was $3,505. No contributions were received in 1993, 1994, 1995, 1996 and 1997. Cash as of December 31, 1995 was $71 as of December 31, 1996 was $17,471 and as of December 31, 1997 was $12,970. The Partnership's remaining cash may not be adequate to meet future obligations of the Partnership (primarily accounting costs and costs associated with the Partnership's periodic reporting obligations). The Partnership's balance sheet reflects total assets of 7 $5,259,930 as of December 31, 1993, $4,252,303 as of December 31, 1994, $3,155,237 as of December 31, 1995 and $2,324,044 as of December 31, 1996 and $1,400,540 as of December 31, 1997 the diminution in assets result from small operating losses of the Partnership and from the Partnership's recognition of its share of losses at the Operating Partnership level. The Government-Assisted Properties owned by the Operating Partnerships are regulated either by HUD or by state or local agencies as to rent charges and operating methods. Regulatory agreements covering the properties require monthly payments to escrow funds to be used for replacement of major items, and limit annual distributions to the Partnership to "surplus cash" available at the end of each year. All cash in excess of cumulative allowable distributions must be held in a residual receipts reserve under the control of mortgage holders, and disbursements must be approved by HUD or the governing state agency. Because each of the Government-Assisted Properties is highly leveraged, because rent levels are regulated and because most excess cash must be placed in a reserve to meet contingencies, it is not expected that the Partnership will realize significant cash revenues by virtue of the operation of properties owned by the Operating Partnerships. Results of Operations --------------------- During the 1995, 1996 and 1997 fiscal years, the Partnership had no distributions of cash flow from the Operating Partnerships. No significant distributions of cash flow from the Operating Partnerships are anticipated in future years due to the restrictions on cash flow at the Operating Partnership level described above. The Partnership expects that all of its income will be used to pay operating expenses, including fees, if funds sufficient for payment of such fees are available. The Partnership had no interest income in 1995, 1996 or 1997. Income for the year ended December 31, 1995 of $40,042 was a result of a write off of accounts payable. The Partnership does not expect to generate cash from operations or other sources to enable it to pay fees to the General Partners or others in the foreseeable future. In the event of any sale or refinancing of a Government- Assisted Property or a sale of an interest in an Operating Partnership, the General Partners may be entitled to a Disposition Fee, or a share of such sale or refinancing proceeds, but only after Limited Partners have received back cumulative cash distributions from sales or refinancings equal to their aggregate capital contributions to the Partnership plus a preferred return. See pages 22-25 of the Prospectus for a description of the compensation, fees and reimbursement payable to the General Partners and others. ITEM 8. Financial Statements and Supplementary Data. - ------- ------------------------------------------- The financial statements together with the auditors' reports thereon are set forth at the pages indicated in Item 14(a)(1) and (2). 8 ITEM 9. Changes in and Disagreements With Accountants on Accounting and - ------- --------------------------------------------------------------- Financial Disclosure. - -------------------- No accountant of the Partnership has resigned or been dismissed during the three fiscal years of the Partnership ending December 31, 1996, or the subsequent period. There have been no known disagreements between the Partnership and its accountants on any accounting principles or policies. PART III ITEM 10. Directors and Executive Officers of the Registrant. - -------- -------------------------------------------------- (a), (b), (c) and (e) The Partnership has no officers, directors or significant employees. A. Bruce Rozet is the individual General Partner, and AFC Capital Corporation is the corporate General Partner. The names, ages, and business experience for Mr. Rozet and the executive officers and directors of AFC Capital Corporation and certain significant Affiliates are described on pages 41 to 49 of the Prospectus. Business experience of the General Partners and Affiliates is described on pages 38 to 41 of the Prospectus. These portions of the Prospectus are incorporated herein by reference. Mr. Rozet and Deane Earl Ross are directors of NIDC Managers, Inc., a corporation that serves as general partner of American Housing Partners, a limited partnership that is subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended. (d) Family relationships. -------------------- None. (f) Involvement in certain legal proceedings. ---------------------------------------- See response to Item 3, above. (g) Promoters and control persons. ----------------------------- Not applicable. ITEM 11. Executive Compensation. - -------- ---------------------- (a), (c) and (d) The Partnership has no executive officers. However, as described in the Prospectus at pages 22 to 25, which are incorporated herein by reference, various types of compensation and fees are payable to the General Partners, their Affiliates, and the Operating Partnership General Partners. See footnote 3 to the financial statements included in response to Item 14 of this Annual Report on Form 10-K for amounts accrued or paid to the General Partners and their Affiliates during the year ended December 31, 1996. (b) and (e) None. ITEM 12. Security Ownership of Certain Beneficial Owners and Management. - -------- -------------------------------------------------------------- 9 (a) Security ownership of certain beneficial owners. ----------------------------------------------- As of December 31, 1997, 24,065 Interests were issued and outstanding. No person is known to own beneficially in excess of 5% of the outstanding Interests. (b) Security ownership of management. -------------------------------- With certain exceptions described at pages 70 and 71 of the Prospectus, which are incorporated herein by reference, the General Partners own in the aggregate a 1% interest in all profits, losses, tax credits and distributions of the Partnership. (c) Changes in control. ------------------ The Partnership knows of no arrangement the operation of which may at a subsequent date result in a change of control of the Partnership. ITEM 13. Certain Relationships and Related Transactions. - -------- ---------------------------------------------- (a) Transactions with management and others. --------------------------------------- The General Partners of the Partnership are A. Bruce Rozet, the individual General Partner, and AFC Capital Corporation, a Delaware corporation, the corporate General Partner, which is a wholly-owned subsidiary of Associated Financial Corporation, a Delaware corporation. Associated Financial Corporation is beneficially owned and controlled by A. Bruce Rozet and Deane Earl Ross. United Housing Preservation Corporation, an affiliate of the General Partners, was a general partner of each of the Operating Partnerships, but is no longer a general partner of the Germano Partnership. As described in the Prospectus, Supplement No. 1 to the Prospectus (pp. S- 15 to S-20), Supplement No. 3 to the Prospectus (pp. S-8 to S-11) and Supplement No. 6 to the Prospectus (pp. 1-5), as of the date of such Supplements affiliates of the General Partners controlled or participated in the management of each of the Operating Partnerships in which the Partnership has invested. For a description of the terms of the Partnership's acquisition of interests in Operating Partnerships, see the pages of the Prospectus and Supplements thereto cited above, which are incorporated herein by this reference. See the information included on pages 45 through 49 of the Prospectus, which is incorporated herein by this reference, for a description of the affiliates of the General Partners involved in the transactions described above. For a description of the compensation, fees and reimbursement accrued or paid to the General Partners and their affiliates during 1995, see footnote 3 to the financial statements included in response to Item 14 of this Annual Report on Form 10-K. (b) Certain business relationships. ------------------------------ See response to (a) above. (c) Indebtedness of management. -------------------------- Pursuant to the Partnership Agreement, the Partnership was required to 10 reimburse the General Partners and their affiliates for their actual expenses incurred in connection with the public offering and the organization of Operating Partnerships. The General Partners in turn agreed to reimburse the Partnership to the extent that the combination of those expenses and dealer allowances (which are paid to unaffiliated dealers) exceeded 15% of the gross proceeds of the offering. As of December 31, 1988, the General Partners owed the Partnership $356,583, representing reimbursement of offering and selling expenses in excess of 15% of the gross offering proceeds. With the increase in the size of the public offering during 1989, the amount of offering and selling expenses reimbursable to the General Partners increased, leaving the Partnership with a net indebtedness to the General Partners of $114,196 as of December 31, 1989. As of December 31, 1990, offering expenses and dealer allowances had again increased to in excess of 15% of the gross proceeds of the offering, leaving the General Partners with a reimbursement obligation to the Partnership equal to approximately $186,000. The amount of that obligation fell to $173,378 as of December 31, 1991, and to $155,378 as of December 31, 1992 and $115,959 as of December 31, 1993, $90,959 as of December 31, 1994, $73,259 as of December 31, 1995, $______ as of December 31, 1996 and $_________ as of December 31, 1997. (d) Transactions with promoters. --------------------------- Not applicable. 11 PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. - -------- ---------------------------------------------------------------- (1) Financial Statements: Page Independent Auditor's Report F-1 Balance Sheets as of December 31, 1997 and 1996 F-3 Statements of Operation for the Years Ended December 31, 1997, 1996 F-4 and 1995 Statements of Changes in Partners' Equity (Deficit) for the Years F-5 Ended December 31, 1997, 1996 and 1995 Statements of Cash Flows for the Years Ended December 31, 1997, 1996 F-6 and 1995 Notes to Financial Statements F-7 (2) Financial Statement Schedules Independent Auditor's Report on Schedules S-1 Schedule XI S-2 Real Estate and Accumulated Depreciation of Limited Partnerships in which the Partnership has an investment S-4 Schedule XII Mortgage Loans on Real Estate owned by Limited Partnerships in which the Partnership has an investment (3) Exhibits See Exhibit Index. (b) Reports on Form 8-K. -------------------
No reports on Form 8-K were filed by the Partnership during fiscal year 1997. 12 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. AFC-LOW INCOME HOUSING CREDIT PARTNERS-I INVESTMENT IN AFFORDABLE HOUSING, a California limited partnership By: AFC Capital Corporation, its corporate general partner Date: September 9, 1998 By: /s/ Deane Earl Ross ------------------------------------------ Deane Earl Ross, President and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: September 9, 1998 By: /s/ A. Bruce Rozet ------------------------------------------ A. Bruce Rozet, Chairman of the Board and Chief Executive Officer of AFC Capital Corporation Date: September 9, 1998 By: /s/ Deane Earl Ross ------------------------------------------ Deane Earl Ross, Director, President and Treasurer (Chief Financial Officer) of AFC Capital Corporation 13 EXHIBIT INDEX -------------
Exhibit Number Description - ------- ----------- 3.1 Form of Agreement of Limited Partnership of AFC-Low Income Housing Credit Partners-I Investment in Affordable Housing, a California limited partnership, dated as of July 28, 1987 by and among A. Bruce Rozet, an individual, and AFC Capital Corporation, a Delaware corporation, as General Partners; and A. Bruce Rozet and Deane Earl Ross, as the original limited partners, filed as Exhibit C to the Registrants' prospectus dated May 24, 1988, as supplemented./1/ 3.2 Certificate of Limited Partnership of the Partnership, as filed with the California Secretary of State on July 28, 1978./2/ 10.1 Agreement of Limited Partnership of United-Stinson limited partnership, a Pennsylvania limited partnership, dated as of October 1, 1988 by and between United Housing Preservation Corporation, a California corporation, and Housing Preservation Partners, a California limited partnership; together with the First and Second Amendments to the Agreement of Limited Partnership./3/ 10.2 Certificate and Agreement of Limited Partnership of United- Germano-Millgate Limited Partnership, an Illinois limited partnership, dated as of June 1, 1988 by and between United Housing Preservation Corporation, a California corporation, and Western Housing Associates, Ltd., a California limited partnership; together with the First, Second, Third and Fourth Amendments to Certificate and Agreement of Limited Partnership./3/ 10.3 Fifth Amendment and Fourth Revised Sixth Amendment to Certificate and Agreement of Limited Partnership of United-Germano-Millgate Limited Partnership./4/ 10.4 Amended and Restated Agreement of Limited Partnership of Coliseo Housing Partnership, as amended, a California limited partnership, by and between POZ Village Development Corporation, United Housing Preservation Corporation, The Bedford Group, D&S Development Company, Housing Preservation Partners and AFC Low Income Housing Credit Partners-I; together with the First Amendment to the Amended and Restated Agreement of Limited Partnership./4/ 10.5 Disposition and Development Agreement between Coliseo Housing Partnership and the Community Redevelopment Agency of the City of Los Angeles./4/
- -------------------- /1/ Previously filed on June 3, 1988 as a part of the Partnership's Prospectus pursuant to Rule 424 (Registration Statement No. 33-17726). /2/ Previously filed with Registration Statement No. 33-17726 on March 16, 1988. /3/ Previously filed with Registration Statement No. 33-17726 on November 26, 1989. /4/ Previously filed on August 11, 1993, with the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, dated August 10, 1993. 14
10.6 Subordination Agreement by Coliseo Housing Limited Partnership and the Community Redevelopment Agency of the City of Los Angeles in favor of Savings Associations Mortgage Co., Inc./4/ 10.7 Second Deed of Trust and Security Agreement by and between Coliseo Housing Partnership, Chicago Title Company and the Community Redevelopment Agency of the City of Los Angeles./4/ 10.8 Promissory Note secured by Deed of Trust to the Community Redevelopment Agency of the City of Los Angeles in the principal amount of $3,954,000 executed by the Coliseo Housing Partnership./4/ 10.9 Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing executed by the Community Redevelopment Agency of the City of Los Angeles and Coliseo Housing Partnership in favor of Savings Associations Mortgage Co., Inc.; together with rider to Deed of Trust./4/ 10.10 Notes secured by Deed of Trust in the principal amount of $3,500,000 executed by the Coliseo Housing Partnership and payable to Savings Associations Mortgage Co., Inc./4/ 10.11 Unsecured Environmental Indemnity Agreement entered into by Coliseo Housing Partnership for the benefit of Savings Associations Mortgage Co., Inc./4/ 10.12 Ground Lease by and between Coliseo Housing Partnership and The Community Redevelopment Agency of the City of Los Angeles./4/ 16. Letter dated July 23, 1992 from Deloitte & Touche, the Registrant's former independent accountants, regarding statements made by the Registrant in Registrant's Current Report on Form 8-K dated July 2, 1992./5/ 22. Subsidiaries of the Registrant./6/
- -------------------- /5/ Previously filed on July 30, 1992 with Amendment No. 1 dated July 28, 1992 to the Partnership's Current Report on Form 8-K dated July 2, 1992. /6/ Filed as an exhibit to this Annual Report. 15 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP FINANCIAL STATEMENTS DECEMBER 31, 1995 THROUGH DECEMBER 31, 1997 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP TABLE OF CONTENTS -----------------
Page ------ Independent auditors' report F-1 - F-2 Financial statements: Balance sheets F-3 Statements of operations F-4 Statements of changes in partners' equity [deficit] F-5 Statements of cash flows F-6 Notes to financial statements F-7 - F-21 Supplementary information: Independent auditors' report on supplementary information S-1 Real estate and accumulated depreciation of limited partnerships in which the partnership has an investment S-2 - S-3 Mortgage loans on real estate owned by limited partnerships in which the partnership has an investment S-4 - S-6
[LETTERHEAD OF HABIF, AROGETI & WYNNE, P.C.] INDEPENDENT AUDITORS' REPORT To the Partners AFC-Low Income Housing Credit Partners - I Investment in Affordable Housing We have audited the balance sheets of AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING [a California Limited Partnership] as of December 31, 1997 and 1996, and the related statements of operations, changes in partners' equity [deficit], and cash flows for each of the three years in the period ended December 31, 1997. 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 did not audit the financial statements of certain limited partnerships in which the Partnership has an investment, which statements reflect total assets constituting 42% of total assets as of December 31, 1997 and 1996, and total losses constituting 37%, 52%, and 40% for the years ended December 31, 1997, 1996, and 1995, respectively, of the combined totals of the limited partnerships in all years presented. Such financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included in Note 2, is based solely on the report of such 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 that our audits and the report of other auditors provide a reasonable basis for our opinion. INDEPENDENT AUDITORS' REPORT [CONTINUED] In our opinion, based on our audits and the report of other auditors, the financial statements present fairly, in all material respects, the financial position of AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING 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. /s/ Habif, Arogeti & Wynne, P.C. Atlanta, Georgia January 30, 1998, except for Note 5 as to which the date is March 2, 1998 F-2 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- BALANCE SHEETS DECEMBER 31, 1997 AND 1996 - --------------------------------------------------------------------------------
ASSETS - ------ 1 9 9 7 1 9 9 6 ---------- ---------- Cash $ 12,970 $ 17,471 Investments in limited partnerships, equity method (Note 2) 1,298,886 2,220,889 Due from general partner (Note 3) 68,584 68,584 Due from Coliseo Housing Partnership (Note 3) 20,100 17,100 --------- --------- TOTAL $1,400,540 $2,324,044 ========= ========= LIABILITIES AND PARTNERS' EQUITY - -------------------------------- LIABILITIES: Accounts payable $ 34,744 $ 19,745 CONTINGENCIES (NOTE 5) PARTNERS' EQUITY 1,365,796 2,304,299 --------- --------- TOTAL $1,400,540 $2,324,044 ========= =========
See auditors' report and notes to financial statements. F-3 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- STATEMENTS OF OPERATIONS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - -----------------------------------------------------------------
1 9 9 7 1 9 9 6 1 9 9 5 --------- --------- --------- REVENUE: Interest $ -0- $ -0- $ -0- Miscellaneous -0- -0- 40,042 EXPENSES: Miscellaneous 16,500 14,775 18,970 --------- --------- --------- INCOME [LOSS] FROM OPERATIONS [ 16,500] [ 14,775] 21,072 EQUITY IN LOSSES OF LIMITED PARTNERSHIPS (NOTE 2) [ 922,003] [ 818,918] [1,058,346] --------- --------- --------- NET LOSS $[ 938,503] $[ 833,693] $[1,037,274] ========= ========= =========
See auditors' report and notes to financial statements. F-4 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- STATEMENTS OF CHANGES IN PARTNERS' EQUITY [DEFICIT] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - -----------------------------------------------------------------
Limited General Total Partners Partners --------- ---------- ---------- Partnership interest 100% 99% 1% === == = Balances - December 31, 1994 $ 4,175,266 $ 4,230,840 $[55,574] Net loss - 1995 [1,037,274] [1,026,901] [10,373] --------- --------- ------ Balances - December 31, 1995 3,137,992 3,203,939 [65,947] Net loss - 1996 [ 833,693] [ 825,356] [ 8,337] --------- --------- ------ Balances - December 31, 1996 2,304,299 2,378,583 [74,284] Net loss - 1997 [ 938,503] [ 929,118] [ 9,385] --------- --------- ------ Balances - December 31, 1997 $ 1,365,796 $ 1,449,465 $[83,669] ========= ========= ======
See auditors' report and notes to financial statements. F-5 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- STATEMENTS OF CASH FLOWS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- INCREASE (DECREASE) IN CASH
1 9 9 7 1 9 9 6 1 9 9 5 --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $[ 938,503] $[833,693] $[1,037,274] -------- ------- --------- Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Equity in losses of limited partnerships 922,003 818,918 1,058,346 Increase (Decrease) in accounts payable 14,999 2,497 [ 59,792] -------- ------- --------- Total adjustments 937,002 821,415 998,554 -------- ------- --------- Net cash provided by [used in] operating activities [ 1,501] [ 12,278] [ 38,720] -------- ------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Advance to Coliseo Housing Partnership [ 3,000] -0- [ 17,100] Partnership distributions received -0- 25,000 38,100 -------- ------- --------- Net cash provided by [used in] investing activities [ 3,000] 25,000 21,000 -------- ------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from [payments to] general partners -0- 4,678 17,700 -------- ------- --------- NET INCREASE [DECREASE] IN CASH [ 4,501] 17,400 [ 20] CASH, BEGINNING OF YEAR 17,471 71 91 -------- ------- --------- CASH, END OF YEAR $ 12,970 $ 17,471 $ 71 ======== ======= =========
See auditors' report and notes to financial statements. F-6 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization - AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN ------------ AFFORDABLE HOUSING, A California Limited Partnership [the Partnership], was formed on July 28, 1987. The general partners are A. Bruce Rozet, an individual, and AFC Capital Corporation, a Delaware corporation, each having contributed $2,500 and owning 5 partnership interests. Through January 15, 1990, the Partnership offered partnership interests, at $500 per interest, to limited partners through public offering. As of December 31, 1997, 1996, and 1995, the Partnership had received subscriptions for 24,065, 24,065, and 24,065 partnership interests, respectively. The Partnership exceeded the minimum offering of 2,000 partnership interests in 1988, which resulted in the subscription proceeds being released from the escrow account to the Partnership. As a result of certain actions taken by HUD, the Partnership ceased offering partnership interests as of January 15, 1990. In accordance with the Agreement of Limited Partnership, profits, losses, and low-income housing tax credits are allocated 99% to the limited partners and 1% to the general partners. Profits from the sale or refinancing of the projects are allocated 90% to the limited partners and 10% to the general partners, after the limited partners have received their capital contributions plus a preferred return. The accompanying financial statements include only the assets, liabili ties, and results of operations which relate to the Partnership, and not those attributable to the partners' individual activities. Line of Business - The Partnership is primarily engaged in investing in ---------------- limited partnerships that own and operate government assisted multi-family residential rental projects. Each of the projects qualifies for the low- income housing tax credit under Section 42 of the Internal Revenue Code of 1986, as amended. Certain partners, including a general partner, of the limited partnerships in which the Partnership has invested are affiliates of the general partners of the Partnership. F-7 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED] Investments in Limited Partnerships - The Partnership owns limited ----------------------------------- partnership interests in three operating limited partnerships with ownership interests, as of December 31, 1997, varying from 14.058% to 95%. The Partnership is using the equity method to account for its investments in those limited partnerships. The operating limited partnerships are not being consolidated because control of those limited partnerships is under the general partner. On May 25, 1993, the Partnership's investment in the Germano Partnership was diluted from a 96% interest to an effective 14.058% interest. The Company is using the equity method to account for its investment in the Germano Partnership due to its continued influence in the partnership. Public Offering Expenses - These expenses have been recorded as a direct ------------------------ reduction to the capital accounts of the limited partners. 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. 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 the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. INVESTMENTS IN LIMITED PARTNERSHIPS The Partnership owns partnership interests in the following limited partnerships at December 31, 1997, each of which owns, and is operating a multi-family residential rental project.
Percentage Limited Partnerships Interest -------------------- ------------ Germano Investment Limited Partnership (Germano LP) 99% [an effective 14.058% in United - Germano - Milligate Limited Partnership (Germano)] United - Stinson Limited Partnership (Stinson) 95% Coliseo Housing Partnership (Coliseo) 67.9%
F-8 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED] The projects owned by the limited partnerships are regulated by the United States Department of Housing and Urban Development (HUD) or a state agency as to rent charges and operating methods. The regulatory agreements require monthly payments to escrow funds to be used for replacement of major items, and limit annual distributions to the owners to "surplus cash" available at the end of each year. Undistributed amounts are cumulative and may be distributed in subsequent years if future operations provide "surplus cash" in excess of current requirements. The projects must deposit all "surplus cash" in excess of the cumulative allowable distributions into a residual receipts reserve. This reserve is under the control of the mortgagee and disbursements must be approved by HUD or the state agency. As a limited partner, the Partnership is entitled to the percentage of profits, losses, and low-income housing tax credits specified above and varying lessor percentages of the proceeds from the sale or refinancing of the projects of each limited partnership in which it has invested. The balance of such items is generally allocated to the affiliated general partners of the operating partnerships. Germano - The project owned by Germano was purchased on December 30, 1988 ------- from a partnership whose general partner is related to the general partner of Germano. During 1992, the original general partner of Germano (an affiliate of the general partners) withdrew as general partner and a new, unaffiliated general partner, Chicago Community Development Corporation ("CCDC"), was admitted as a substitute general partner. The former general partner had its interest in Germano reduced so that CCDC could be admitted as a partner. A request for TPA approval and an application for a Flex Loan were prepared and submitted by CCDC. In September, 1992, HUD ceased making the Section 8 rental assistance payments due to Germano under its Housing Assistance Payments Contract ("HAP Contract") with HUD. As a result of this loss of revenue, Germano defaulted on its payments under the Germano property mortgage. The mortgage lender then assigned the mortgage to HUD, a preliminary action in the process of foreclosing a HUD-insured mortgage. In January, 1993, CCDC, Germano, the Germano-Millgate Tenants' Associa tion, and a resident of the Germano Property initiated an action against certain HUD officials in the United States District Court for the Northern District of Illinois. F-9 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED] On February 12, 1993, the District Court ordered that the Secretary of Housing and Urban Development and all of HUD's agents and officials (a) are restrained from refusing to make the Section 8 payments due to the Germano Partnership under the HAP Contract; (b) are restrained from fur ther implementing the assignment of the mortgage or initiating or continuing any foreclosure action; and (c) were ordered to make all neces sary preparations to be in a position to close on the TPA and Flex Loan applications of CCDC. The Germano Partnership was ordered to make its reg ular monthly mortgage payments as they become due, but only to the extent of any payments received from HUD under the HAP Contract. On March 18, 1993, the court dismissed the action in anticipation of timely HUD action to reinstate the HAP Contract and to process the TPA and Flex Loan applications filed by CCDC. On May 25, 1993 the FOURTH REVISED SIXTH AMENDMENT OF THE CERTIFICATE AND AGREEMENT OF THE LIMITED PARTNERSHIP of United-Germano-Millgate Limited Partnership, transferred all of the Partnership's rights, title, and its 96% interest in the Germano partnership for a 99% limited partnership interest in a newly-formed partnership, Germano Investment Limited Partnership [Germano LP]. The general partner of Germano LP is CCDC. The sole asset of Germano LP is a 14.2% interest in the original Germano Partnership. The ownership of the Germano partnership after the transfer of interest was as follows: CCDC, a 1% general partner; Germano Investment LP, a 14.2% limited partner; and CCDC, an 84.8% limited partner. HUD gave preliminary approval to a Management Improvement and Operating (MIO) Plan in conjunction with the transfer of ownership application which provided for the admission of CCDC. The MIO Plan provided for a complete rehabilitation of the project at a total cost of approximately $8.6 million to be financed with $4,613,112 in borrowings from HUD's Flexible Subsidy Program, $500,000 in borrowings from the Illinois Housing Development Authority (IHDA), and the balance in owner contributions. On October 15, 1993, a new limited partner, Independence Tax Credit Plus II, L.P. [Independence], was admitted to the Germano Partnership and received the 84.8% limited partnership interest held by CCDC for $4,588,600. The rehabilitation of the project was completed during 1995. Stinson - The Partnership became a partner in Stinson on November 1, 1988. ------- Coliseo - The Partnership became a partner in Coliseo on August 31, 1989. ------- The project is located on approximately 2.5 acres of land owned by and leased from the Community Redevelopment Agency of the City of Los Angeles (CRA). The Partnership has entered into a long-term lease agreement with CRA, expiring May, 2040, with an option to extend the lease for an additional 49 years. The lease provides for annual lease payments equal to 10% of "residual receipts" (defined as gross rental income less reasonable operating costs and reserves and service on debt) increasing to 30% of "residual receipts" after the loan from CRA has been paid in full. Lease payments commence one year after the completion of construction. As of December 31, 1997, total payments due to the CRA under the long-term lease agreement totaled $32,612. F-10 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED] The Partnership has entered into a Disposition and Development Agreement (DDA) with the CRA which imposes substantial restrictions on the development, use, and operation of the property, and entitles the Partnership to permanent subordinated loan financing from CRA. The DDA provides that in the event the Partnership fails to meet its material obligations, including its obligations to make scheduled lease and loan payments, and to rent to qualified tenants, the CRA may terminate the lease and take possession of the property. In the event the project is sold or refinanced, the CRA is additionally entitled to 50% of net sale or refinancing proceeds. It was originally intended for the Partnership to have a 97% interest in Coliseo. However, due to insufficient funds available to the Partnership, in 1990, the general partners located another affiliated limited partnership to acquire a 29.1% interest in Coliseo. As of December 31, 1997, Coliseo was in default of its loan agreement with SAMCO, the mortgage holder, due to non-payment of the required replacement reserve deposits totalling approximately $75,000. Management for Coliseo obtained a waiver from SAMCO with respect to the default. In addition, during 1996, the CRA performed a review to determine compliance with the terms of the DDA. As a result of its review, management was changed from TBG Management, a division of the Bedford Group, a general partner of Coliseo, to an unrelated management agent. The CRA disagreed with the way management had been calculating residual receipts payments relating to the pay-down of the accrued interest on the second mortgage and whether an amount was due for the long-term ground lease. The principal difference between the CRA's calculation and management's calculation related to whether interest on the partner loan was an allowable expense. The CRA position was that the partner loan interest was not an allowable expense, and, during 1996, it issued a Notice of Default and Election to Sell Under Deed of Trust. On December 6, 1996, the CRA rescinded the Notice of Default and Election to Sell Under the Deed of Trust; however, it did not waive the requirement for payment due under the DDA. The CRA and management are in the process of resolving the issue relating to the payment of approximately $32,000 due under the long-term ground lease and approximately $163,000 due relating to accrued interest. F-11 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED] The following is a summary of the investments in limited partnerships in which the Partnership has an equity interest:
1 9 9 7 1 9 9 6 1 9 9 5 --------- --------- --------- Balances, beginning of year $ 2,220,889 $ 3,064,807 $ 4,161,253 Partnership distributions received -0- [ 25,000] [ 38,100] Equity in net losses of limited partnerships: Net losses [ 922,003] [ 818,918] [1,058,346] --------- --------- --------- Balances, end of year $ 1,298,886 $ 2,220,889 $ 3,064,807 ========= ========= ==========
Summarized balance sheets and statements of operations for the operating limited partnerships in which the Partnership has an equity interest are presented hereafter. F-12 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED]
ASSETS - ------ December 31, 1997 ----------------------------------------------------- Coliseo Stinson Germano Total ----------- ----------- ----------- ----------- Property and equipment, at cost: Buildings, equipment, and furnishings $16,220,858 $ 6,654,021 $17,962,717 $40,837,596 Less accumulated depreciation 3,905,362 2,644,860 4,541,851 11,092,073 ---------- --------- ---------- ---------- 12,315,496 4,009,161 13,420,866 29,745,523 Land -0- 600,000 580,000 1,180,000 ---------- --------- ---------- ---------- 12,315,496 4,609,161 14,000,866 30,925,523 Cash 2,171 166,922 192,031 361,124 Restricted assets 95,612 698,059 262,496 1,056,167 Other assets 1,698,036 61,672 66,880 1,826,588 ---------- --------- ---------- ---------- TOTAL $14,111,315 $ 5,535,814 $14,522,273 $34,169,402 ========== ========= ========== ========== LIABILITIES AND PARTNERS' EQUITY [DEFICIT] - ----------------------------------------- LIABILITIES: Mortgages payable $ 8,980,912 $ 5,288,548 $10,457,980 $24,727,440 Other liabilities 3,211,849 1,281,567 1,828,394 6,321,810 ---------- --------- ---------- ---------- Total liabilities 12,192,761 6,570,115 12,286,374 31,049,250 ---------- --------- ---------- ---------- PARTNERS' EQUITY [DEFICIT]: General partners and limited partners 1,918,554 [1,034,301] 2,235,899 3,120,152 ---------- --------- ---------- ---------- Total partners' equity [deficit] 1,918,554 [1,034,301] 2,235,899 3,120,152 ---------- --------- ---------- ---------- TOTAL $14,111,315 $ 5,535,814 $14,522,273 $34,169,402 ========== ========= ========== ==========
F-13 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED]
ASSETS ------ December 31, 1996 ----------------------------------------------------- Coliseo Stinson Germano Total ----------- ----------- ----------- ----------- Property and equipment, at cost: Buildings, equipment, and furnishings $16,219,298 $ 6,516,654 $17,773,241 $40,509,193 Less accumulated depreciation 3,325,549 2,337,389 3,789,481 9,452,419 ---------- --------- ---------- ---------- 12,893,749 4,179,265 13,983,760 31,056,774 Land -0- 600,000 580,000 1,180,000 ---------- --------- ---------- ---------- 12,893,749 4,779,265 14,563,760 32,236,774 Cash 39,675 54,157 151,785 245,617 Restricted assets 78,166 754,915 244,367 1,077,448 Other assets 1,763,864 56,378 70,972 1,891,214 ---------- --------- ---------- ---------- TOTAL $14,775,454 $ 5,644,715 $15,030,884 $35,451,053 ========== ========= ========== ========== LIABILITIES AND PARTNERS' EQUITY [DEFICIT] ----------------------------------------- LIABILITIES: Mortgages payable $ 9,022,768 $ 5,366,838 $10,618,998 $25,008,604 Other liabilities 2,649,517 1,076,367 1,439,104 5,164,988 ---------- --------- ---------- ---------- Total liabilities 11,672,285 6,443,205 12,058,102 30,173,592 ---------- --------- ---------- ---------- PARTNERS' EQUITY [DEFICIT]: General partners and limited partners 3,103,169 [ 798,490] 2,972,782 5,277,461 ---------- --------- ---------- ---------- Total partners' equity [deficit] 3,103,169 [ 798,490] 2,972,782 5,277,461 ---------- --------- ---------- ---------- TOTAL $14,775,454 $ 5,644,715 $15,030,884 $35,451,053 ========== ========= ========== ==========
F-14 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED] Also, for financial statement purposes, when the carrying value of the investment has been reduced to zero, the Partnership discontinues recognizing its share of the limited partnership's losses. The following is a schedule, by years, of the future maturities of the mortgages payable of the operating limited partnerships:
Years Ending December 31, ------------ 1998 $ 303,711 1999 326,922 2000 351,918 2001 378,835 2002 407,822 Thereafter 22,958,232 ---------- $24,727,440 ==========
COMBINED STATEMENTS OF OPERATIONS ---------------------------------
December 31, 1997 --------------------------------------------------------- Coliseo Stinson Germano Total ------------ ------------ ------------ ------------ REVENUES: Rental $ 788,964 $ 1,488,586 $ 2,105,742 $ 4,383,292 Other 1,904 58,352 23,914 84,170 --------- --------- --------- --------- 790,868 1,546,938 2,129,656 4,467,462 --------- --------- --------- --------- EXPENSES: Operating 592,727 939,058 1,749,503 3,281,288 Depreciation 579,813 307,471 752,370 1,639,654 Interest 802,943 536,220 464,666 1,803,829 --------- --------- --------- --------- 1,975,483 1,782,749 2,966,539 6,724,771 --------- --------- --------- --------- NET LOSSES $[1,184,615] $[ 235,811] $[ 836,883] $[2,257,309] ========= ========= ========= =========
F-15 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED] COMBINED STATEMENTS OF OPERATIONS [CONTINUED] ---------------------------------
December 31, 1996 --------------------------------------------------------- Coliseo Stinson Germano Total ------------ ------------ ------------ ------------ REVENUES: Rental $ 869,172 $ 1,507,090 $ 1,965,730 $ 4,341,992 Other 1,387 64,062 10,156 75,605 --------- --------- --------- --------- 870,559 1,571,152 1,975,886 4,417,597 --------- --------- --------- --------- EXPENSES: Operating 539,627 968,327 1,463,774 2,971,728 Depreciation 580,958 332,238 741,128 1,654,324 Interest 814,069 740,499 456,699 2,011,267 --------- --------- --------- --------- 1,934,654 2,041,064 2,661,601 6,637,319 --------- --------- --------- --------- NET LOSSES $[1,064,095] $[ 469,912] $[ 685,715] $[2,219,722] ========= ========= ========= ========= December 31, 1995 --------------------------------------------------------- Coliseo Stinson Germano Total ------------ ------------ ------------ ------------ REVENUES: Rental $ 817,927 $ 1,482,388 $ 1,941,590 $ 4,241,905 Other 1,924 56,417 7,356 65,697 --------- --------- --------- --------- 819,851 1,538,805 1,948,946 4,307,602 --------- --------- --------- --------- EXPENSES: Operating 613,880 913,366 1,481,588 3,008,834 Depreciation 579,733 322,858 725,296 1,627,887 Interest 1,003,808 452,058 502,765 1,958,631 --------- --------- --------- --------- 2,197,421 1,688,282 2,709,649 6,595,352 --------- --------- --------- --------- NET LOSSES $[1,377,570] $[ 149,477] $[ 760,703] $[2,287,750] ========= ========= ========= =========
F-16 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED] COMBINED STATEMENTS OF OPERATIONS [CONTINUED] ---------------------------------
1 9 9 7 1 9 9 6 1 9 9 5 ----------- ----------- ----------- Allocation of net losses: General partners and other limited partners $[1,111,286] $[ 954,387] $[1,103,437] Limited partners (Partnership) [1,146,023] [1,265,335] [1,184,313] --------- --------- --------- $[2,257,309] $[2,219,722] $[2,287,750] ========= ========= ========= Partnership's share of net losses $[1,146,023] $[1,265,335] $[1,184,313] Losses in excess of basis for Stinson 224,020 446,417 125,967 --------- --------- --------- Equity in net losses of limited partnerships recognized $[ 922,003] $[ 818,918] $[1,058,346] ========= ========= =========
3. RELATED PARTY TRANSACTIONS Reimbursement of Offering, Selling, and Organizational Expenses - The --------------------------------------------------------------- general partners and their affiliates were paid for their actual expenses incurred in connection with the public offering and organization of the operating partnerships. The general partners reimbursed the Partnership to the extent that the combination of these expenses and dealer allowances (which is paid to unaffiliated dealers) exceeded 15% of the gross proceeds. The amount reimbursable to the Partnership and included in due from general partner at December 31, 1997 and 1996, is $68,584 and $68,584, respectively. Due from Coliseo Housing Partnership: ------------------------------------ During the year ended December 31, 1997, the Partnership advanced Coliseo $3,000 to cover operating costs. As of December 31, 1997 and 1996, $20,100 and $17,100, respectively, is receivable from Coliseo and is to be repaid when funds are available. F-17 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 3. RELATED PARTY TRANSACTIONS [CONTINUED] Acquisition Fees, Development Fees and Real Estate Commissions - During the -------------------------------------------------------------- year ended December 31, 1997, 1996 and 1995, Germano paid fees to an unaffiliated general partner totaling $182,178, $25,000 and $882,209, respectively, for development, construction management and professional services relating to the Project's rehabilitation. In addition, the unaffiliated general partner was paid $19,939 in 1995 for professional, administration and processing fees relating to a property tax refund collected by the Project in 1995. The amount of the fees equaled 25% of the refund amount and was incurred pursuant to a 1992 contract with the general partner executed prior to the date it became general partner. Asset Management Fee - For services to be rendered to the operating -------------------- partnerships, the affiliate general partners of the operating partnership will generally receive an annual asset management fee equal to one-half of one percent of the invested assets. This will be paid by the operating partnerships solely from capital contributions or "surplus cash," as defined in the regulatory agreement. No amounts were paid in 1997, 1996 or 1995. General Contractor and Development Incentive Fees - During 1989 ------------------------------------------------- unaffiliated general partner of Coliseo earned approximately $958,000 for serving as the general contractor for the project. This amount represented the difference between the fixed contract price of $11,395,000 and the amount of the actual cost of construction. Additionally, during 1989 another unaffiliated general partner of Coliseo received a general contractor fee of $405,000 from Coliseo. Other Project Fees - To the extent that annual project needs are satisfied, ------------------ the general partner of the operating partnerships is entitled to receive additional annual fees, payable solely from capital contributions or "surplus cash," in an amount determined by the general partner. To date, no such fees have been charged to the limited partnerships. Disposition Fees - The general partners and their affiliates are entitled ---------------- to disposition fees equal to the lesser of one-half of the competitive rate or 3% of the gross sales proceeds of the projects or interests in the operating partnerships. Payments of such fees will be made only after the limited partners have been returned their capital contributions plus a preferred return. Disposition fees and all other commissions payable to unaffiliated and affiliated parties shall not, in the aggregate, exceed the lesser of the competitive rate or 6% of the sales price. To date, no such fees have been incurred. F-18 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 3. RELATED PARTY TRANSACTIONS [CONTINUED] Management Fees - An unaffiliated general partner of Coliseo received --------------- project management fees of approximately $31,000 and $53,000 for 1996 and 1995, respectively. During 1996, Stinson paid management fees of $25,000 to the general partner of the Partnership. 4. INCOME TAXES The following is a reconciliation between the net loss per the financial statements and the net loss for federal income tax purposes:
1 9 9 7 1 9 9 6 1 9 9 5 --------- --------- --------- Net loss, financial statement basis $[ 938,503] $[ 833,693] $[1,037,274] Share of equity in losses of limited partnerships for tax purposes not recognized for financial statement purposes [ 302,857] [ 42,003] [ 186,461] Share of equity in losses of limited partnerships not recognized for financial statement purposes (Stinson) [ 224,020] [ 446,417] [ 125,967] Other 7,501 [ 60] [ 48,796] --------- --------- --------- Net loss, federal income tax basis $[1,457,879] $[1,322,173] $[1,398,498] ========= ========= ========= Allocation of tax basis net loss, based on percentage interests: General partners $[ 14,579] $[ 13,222] $[ 13,985] Limited partners [1,443,300] [1,308,951] [1,384,513] --------- --------- --------- $[1,457,879] $[1,322,173] $[1,398,498] ========= ========= =========
F-19 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 4. INCOME TAXES [CONTINUED] The following is a reconciliation between the partners' equity per the financial statements and the partners' equity [deficit] for federal income tax purposes:
1 9 9 7 1 9 9 6 1 9 9 5 --------- --------- --------- Partners' equity, financial statement basis $ 1,365,796 $ 2,304,299 $ 3,137,992 Cumulative public offering expenses recognized as a direct reduction to the capital accounts of the limited partners for finan- cial statement purposes and capitalized for tax purposes 1,804,888 1,804,888 1,804,888 Cumulative share of equity in losses of limited partner- ship not recognized for financial statement purposes [Stinson] [ 796,403] [ 572,383] [ 125,967] Cumulative share of equity in gains [losses] of limited partnerships for tax purposes not recognized for financial statement purposes [ 585,784] [ 282,927] [ 240,923] Other 24,868 17,367 17,427 --------- --------- --------- Partners' equity, federal income tax basis $ 1,813,365 $ 3,271,244 $ 4,593,417 ========= ========= ========= Allocation of tax basis partners' equity [deficit]: General Partners $[ 97,243] $[ 82,664] $[ 69,443] Limited partners 1,910,608 3,353,908 4,662,860 --------- --------- --------- $ 1,813,365 $ 3,271,244 $ 4,593,417 ========= ========= =========
F-20 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - -------------------------------- NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1997 - ----------------------------------------------------------------- 5. CONTINGENCIES On May 8, 1997, the United States filed an action against A. Bruce Rozet, Associated Financial Corporation, certain members of the AFC Group, in the United States District Court for the Northern District of California charging that the defendants were wrongfully participating in the fees earned by the management agent for several properties (not including any of the properties invested in by the Partnership) and had not disclosed this arrangement and, thus, were violating provisions of the applicable regulatory agreements and other agreements governing the subject properties. The Complaint did, however, allege that the defendants made certain false claims regarding the condition of the Stinson Towers. Defendants filed an answer on August 11, 1997, denying the material allegations of the Complaint, and asserting various separate and additional defenses. The government filed an amended complaint on March 2, 1998, adding additional defendants none of whom are part of the AFC Group and added a claim that the defendants, including the new defendants, made false claims in connection with the obtaining of insurance for various HUD-insured properties. The defendants have filed answers to the First Amended Complaint, again denying the material allegations of the Complaint and asserting various separate and additional defenses. Both the government and the AFC Group have recently filed motions for partial summary judgment. While substantial document discovery has been completed, the defendants intend to move to compel significant delivery from the government of substantial additional documentation. Deposition discovery is in the early stages. Given the defendants need to obtain significant additional discovery, counsel can offer no opinion as to the outcome of the litigation at this time. At this time, the general partner does not believe that there will be any material adverse affect to the Partnership and the operation of its investments, much like the previous litigation with HUD described above. F-21 [LETTERHEAD OF HABIF, AROGETI & WYNNE, P.C.] INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION To the Partners AFC-Low Income Housing Credit Partners - I Investment in Affordable Housing In connection with our audits of the financial statements of AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING referred to in our report dated January 30, 1998, which is included in Part II of this Form 10-K, we did not audit the financial statements of certain limited partnerships in which the Partnership has an investment, the statements of which reflect total assets of 42% as of December 31, 1997 and 1996, and total losses of 37%, 52%, and 40% for the years ended December 31, 1997, 1996 and 1995, respectively, of the combined totals of the limited partnerships. Such statements were audited by other auditors, whose reports thereon have been furnished to us. Insofar as the information presented on pages S-2 through S-6 as of December 31, 1997, 1996, and 1995, relates to these limited partnerships, our opinion is based solely upon the reports of other auditors. In our opinion, based on our audits and the reports of other auditors, the supplementary information present fairly, in all material respects, the information required to be set forth therein. /S/ Habif, Arogeti & Wynne, P.C. Atlanta, Georgia January 30, 1998, except for Note 5 as to which the date is March 2, 1998 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION OF LIMITED PARTNERSHIPS IN WHICH THE PARTNERSHIP HAS AN INVESTMENT YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
Costs Capitalized Initial Cost To Subsequent Operating Partnership To Acquisition --------------------- --------------------------- Buildings, Type of Equipment, Carrying Description/Location Property Encumbrances Land Furnishings Improvements Costs - -------------------------- ---------- ------------ ---------- ----------- --------------------------- Year Ended December 31, 1997 - ---------------------------- United-Germano-Millgate, L.P., Chicago, Illinois Apartments $10,457,980 $ 580,000 $ 7,671,072 $10,291,645 $ -0- United-Stinson, L.P., Chester, Pennsylvania Apartments 5,288,548 600,000 5,643,571 1,010,450 -0- Coliseo Housing Partnership Los Angeles, California Apartments 8,980,912 -0- -0- 16,220,858 170,524 ----------- ---------- ----------- ----------- -------- $24,727,440 $1,180,000 $13,314,643 $27,522,953 $170,524 =========== ========== =========== =========== ======== Year Ended December 31, 1996 - ---------------------------- United-Germano-Millgate, L.P., Chicago, Illinois Apartments $10,618,998 $ 580,000 $ 7,671,072 $10,102,169 $ -0- United-Stinson, L.P., Chester, Pennsylvania Apartments 5,366,838 600,000 5,643,571 873,083 -0- Coliseo Housing Partnership Los Angeles, California Apartments 9,022,768 -0- -0- 16,219,298 170,524 ----------- ---------- ----------- ----------- -------- $25,008,604 $1,180,000 $13,314,643 $27,194,550 $170,524 =========== ========== =========== =========== ======== Year Ended December 31, 1995 - ---------------------------- United-Germano-Millgate, L.P., Chicago, Illinois Apartments $10,939,539 $ 580,000 $ 7,671,072 $ 9,981,536 $ -0- United-Stinson, L.P., Chester, Pennsylvania Apartments 5,439,437 600,000 5,643,571 737,482 -0- Coliseo Housing Partnership Los Angeles, California Apartments 9,061,224 -0- -0- 16,214,087 170,524 ----------- ---------- ----------- ----------- -------- $25,440,200 $1,180,000 $13,314,643 $26,933,105 $170,524 =========== ========== =========== =========== ======== Gross Amount At Which Carried At Close of Year ------------------------------------- Life Upon Which Depreciation In Latest Buildings Income Equipment, Statement is Furnishings, Accumulated Date of Date Computed Description/Location Land Construction Total Depreciation Construction Acquired [Years] - -------------------------- ---------- ------------ ----------- ------------ ------------ -------- ------------ Year Ended December 31, 1997 - ---------------------------- United-Germano-Millgate, L.P., Chicago, Illinois $ 580,000 $17,962,717 $18,542,717 $ 4,541,851 1972 12/88 5 - 25 United-Stinson, L.P., Chester, Pennsylvania 600,000 6,654,021 7,254,021 2,644,860 1978 11/88 7 - 27.5 Coliseo Housing Partnership Los Angeles, California -0- 16,220,858 16,220,858 3,905,362 1991 12/88 5 - 25 ---------- ----------- ----------- ----------- $1,180,000 $40,837,596 $42,017,596 $11,092,073 ========== =========== =========== =========== Year Ended December 31, 1996 - ---------------------------- United-Germano-Millgate, L.P., Chicago, Illinois $ 580,000 $17,773,241 $18,353,241 $ 3,789,481 1972 12/88 5 - 25 United-Stinson, L.P., Chester, Pennsylvania 600,000 6,516,654 7,116,654 2,337,389 1978 11/88 7 - 27.5 Coliseo Housing Partnership Los Angeles, California -0- 16,219,298 16,219,298 3,325,549 1991 12/88 5 - 25 ---------- ----------- ----------- ----------- $1,180,000 $40,509,193 $41,689,193 $ 9,452,419 ========== =========== =========== =========== Year Ended December 31, 1995 - ---------------------------- United-Germano-Millgate, L.P., Chicago, Illinois $ 580,000 $17,652,608 $18,232,608 $ 3,048,353 1972 12/88 5 - 25 United-Stinson, L.P., Chester, Pennsylvania 600,000 6,381,053 6,981,053 2,005,151 1978 11/88 7 - 27.5 Coliseo Housing Partnership Los Angeles, California -0- 16,214,087 16,214,087 2,744,591 1991 12/88 5 - 40 ---------- ----------- ----------- ----------- $1,180,000 $40,247,748 $41,427,748 $ 7,798,095 ========== =========== =========== ===========
See Auditors' Report on Supplementary Information and Accompanying Notes S-2 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP NOTES TO REAL ESTATE AND ACCUMULATED DEPRECIATION OF LIMITED PARTNERSHIPS IN WHICH THE PARTNERSHIP HAS AN INVESTMENT YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 1. Each limited partnership owns and operates a multi-family, HUD, or state regulated residential housing project. 2. The aggregate cost of the land for federal income tax purposes at December 31, 1997, 1996, and 1995 is $1,100,000, $1,100,000, and $1,100,000, respectively, and the aggregate cost of buildings and improvements and construction in progress for federal income tax purposes at December 31, 1997, 1996, and 1995 is $41,634,826, $41,306,425, and $41,230,677, respectively. The total of the above mentioned items at December 31, 1997, 1996, and 1995 is $42,734,826, $42,406,425, and $42,330,677, respectively. 3. Investments in property and equipment: Balance, December 31, 1994 $40,659,542 Additions during year: Improvements 768,206 ----------- Balance, December 31, 1995 41,427,748 Additions during year: Improvements 261,445 ----------- Balance, December 31, 1996 41,689,193 Additions during year: Improvements 328,403 ----------- Balance, December 31, 1997 $42,017,596 ===========
4. Accumulated depreciation: Balance, December 31, 1994 $ 6,170,208 Depreciation charged to expense during the year 1,627,887 ----------- Balance, December 31, 1995 7,798,095 Depreciation charged to expense during the year 1,654,324 ----------- Balance, December 31, 1996 9,452,419 Depreciation charged to expense during the year 1,639,654 ----------- Balance, December 31, 1997 $11,092,073 ===========
See Auditors' Report on Supplementary Information S-3 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP MORTGAGE LOANS ON REAL ESTATE OWNED BY LIMITED PARTNERSHIPS IN WHICH THE PARTNERSHIP HAS AN INVESTMENT YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
Final Interest Maturity Description Rate % Date - ---------------------------- --------- ------------- Year Ended December 31, 1997 - ---------------------------- Mortgages assumed: United - Germano - Millgate, L.P. Chicago, Illinois 7.00% October, 2014 United Stinson, L.P. Chester, Pennsylvania 7.84 July, 2018 New mortgages: United Stinson, L.P. Chester, Pennsylvania 9.45 October, 2003 Coliseo Housing Partnership Los Angeles, California 8.50 July, 2021 Coliseo Housing Partnership Los Angeles, California 9.45 April, 2032 Coliseo Housing Partnership Los Angeles, California 8.50 July, 2021 United - Germano - Millgate, L.P. Chicago, Illinois 6.53 October, 2014 Year Ended December 31, 1996 - ---------------------------- Mortgages assumed: United - Germano - Millgate, L.P. Chicago, Illinois 7.00% October, 2014 United Stinson, L.P. Chester, Pennsylvania 7.84 July, 2018 New mortgages: United Stinson, L.P. Chester, Pennsylvania 9.45 October, 2003 Coliseo Housing Partnership Los Angeles, California 8.50 July, 2021 Coliseo Housing Partnership Los Angeles, California 9.45 April, 2032 Coliseo Housing Partnership Los Angeles, California 8.50 July, 2021 United - Germano - Millgate, L.P. Chicago, Illinois 6.53 October, 2014 Year Ended December 31, 1995 - ---------------------------- Mortgages assumed: United - Germano - Millgate, L.P. Chicago, Illinois 7.00% October, 2014 United Stinson, L.P. Chester, Pennsylvania 7.84 July, 2018 New mortgages: United Stinson, L.P. Chester, Pennsylvania 9.45 October, 2003 Coliseo Housing Partnership Los Angeles, California 8.50 July, 2021 Coliseo Housing Partnership Los Angeles, California 9.45 April, 2032 Coliseo Housing Partnership Los Angeles, California 8.50 July, 2021 United - Germano - Millgate, L.P. Chicago, Illinois 6.53 October, 2014 Payments Monthly Original Face Carrying Principal Amount of To Maturity Amount of Amount of Loans Subject to Description (Net of Subsidy) Mortgage Mortgage Delinquent Principal - ---------------------------- ---------------- ------------- ----------- -------------------- Year Ended December 31, 1997 - ---------------------------- Mortgages assumed: United - Germano - Millgate, L.P. Chicago, Illinois $16,226 $ 7,222,700 $ 5,344,868 $ -0- United Stinson, L.P. Chester, Pennsylvania 33,245 4,840,000 4,011,644 -0- ----------- -------- 9,356,512 -0- ----------- -------- New mortgages: United Stinson, L.P. Chester, Pennsylvania 3,227 1,276,904 1,276,904 -0- Coliseo Housing Partnership Los Angeles, California 26,914 3,500,000 3,283,912 -0- Coliseo Housing Partnership Los Angeles, California -0- 3,954,000 3,954,000 -0- Coliseo Housing Partnership Los Angeles, California 13,403 1,743,000 1,743,000 -0- United - Germano - Millgate, L.P. Chicago, Illinois -0- 5,113,112 5,113,112 -0- ------- ----------- ----------- -------- 15,370,928 -0- ----------- -------- $93,015 $27,649,716 $24,727,440 $ -0- ======= =========== =========== ======== Year Ended December 31, 1996 - ---------------------------- Mortgages assumed: United - Germano - Millgate, L.P. Chicago, Illinois $16,226 $ 7,222,700 $ 5,505,886 $ -0- United Stinson, L.P. Chester, Pennsylvania 33,245 4,840,000 4,089,934 -0- ----------- -------- 9,595,820 -0- ----------- -------- New mortgages: United Stinson, L.P. Chester, Pennsylvania 3,227 1,276,904 1,276,904 -0- Coliseo Housing Partnership Los Angeles, California 26,914 3,500,000 3,325,768 -0- Coliseo Housing Partnership Los Angeles, California -0- 3,954,000 3,954,000 -0- Coliseo Housing Partnership Los Angeles, California 13,403 1,743,000 1,743,000 -0- United - Germano - Millgate, L.P. Chicago, Illinois -0- 5,113,112 5,113,112 -0- ------- ----------- ----------- -------- 15,412,784 -0- ----------- -------- $93,015 $27,649,716 $25,008,604 $ -0- ======= =========== =========== ======== Year Ended December 31, 1995 - ---------------------------- Mortgages assumed: United - Germano - Millgate, L.P. Chicago, Illinois $16,226 $ 7,222,700 $ 5,826,427 $170,378 United Stinson, L.P. Chester, Pennsylvania 33,245 4,840,000 4,162,533 -0- ----------- -------- 9,988,960 170,378 ----------- -------- New mortgages: United Stinson, L.P. Chester, Pennsylvania 3,227 1,276,904 1,276,904 -0- Coliseo Housing Partnership Los Angeles, California 26,914 3,500,000 3,364,224 -0- Coliseo Housing Partnership Los Angeles, California -0- 3,954,000 3,954,000 -0- Coliseo Housing Partnership Los Angeles, California 13,403 1,743,000 1,743,000 -0- United - Germano - Millgate, L.P. Chicago, Illinois -0- 5,113,112 5,113,112 -0- ------- ----------- ----------- -------- 15,451,240 -0- ----------- -------- $93,015 $27,649,716 $25,440,200 $170,378 ======= =========== =========== ========
See Auditors' Report on Supplementary Information and Accompanying Notes S-4 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENTS IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP NOTES TO MORTGAGE LOANS ON REAL ESTATE OWNED BY LIMITED PARTNERSHIPS IN WHICH THE PARTNERSHIP HAS AN INVESTMENT YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 1. Each limited partnership in which the Partnership has an investment owns an apartment project financed with a mortgage held by a government agency. 2. The total Federal income tax basis is the same as the carrying amounts in Schedule IV. 3. Reconciliation of mortgages: Balance, December 31, 1994 $25,760,712 Payments of principal during year [320,512] ----------- Balance, December 31, 1995 25,440,200 Payments of principal during year [431,596] ----------- Balance, December 31, 1996 25,008,604 Payments of principal during year [281,164] ----------- Balance, December 31, 1997 $24,727,440 ===========
4. The Coliseo mortgage in the original face amount of $3,954,000 is payable to the Community Redevelopment Agency of the City of Los Angeles. It bears interest at 9.45%, payable over 40 years. It is payable only out of 50% of available "residual receipts." In the event there are not adequate "residual receipts" to make principal and interest payments on the loan, unpaid amounts will accrue for payment at maturity or upon a sale or refinancing of the project, whichever occurs first. As of December 31, 1997, $163,065 is currently due to the CRA for interest payments as defined. Accrued interest at December 31, 1997, 1996, and 1995, totaled $2,438,469, $2,064,816, and $1,690,140, respectively. 5. The Coliseo mortgage in the original face amount of $1,743,000 is payable to the general partner of Coliseo. As of December 31, 1997, 1996 and 1995, accrued interest totaled $524,345, $376,172 and $228,000, respectively. 6. The Stinson mortgage in the original face amount of $1,276,904 accrues interest at 9.45% per annum, compounded annually. Stinson is required to make interest payments on the note on an annual basis, equal to one-half of the allowable distributions to the owners (maximum of $38,720 for the years ended December 31, 1997, 1996, and 1995). The principal and unpaid interest is payable October 27, 2003, or upon sale of the property. Accrued interest at December 31, 1997, 1996, and 1995 totaled $1,217,170, $1,013,008 and $852,770, respectively. See Auditors' Report on Supplementary Information S-5 AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENTS IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE OWNED BY LIMITED PARTNERSHIPS IN WHICH THE PARTNERSHIP HAS AN INVESTMENT [CONTINUED] YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 7. The Germano mortgage payable of $5,113,112 includes proceeds from the HUD Flexible Subsidy loan totaling $4,613,112 and $500,000 from the IHDA. Both notes bear interest at an annual rate of 6.53% and specify that principal and interest payments are to be made from residual receipts of the project. The notes mature on the earlier of October 1, 2014 or the date the project is sold. No payments were made in 1997, 1996 and 1995, as there were no "residual receipts." Accrued interest at December 31, 1997, 1996 and 1995 totaled $1,498,329, $1,097,278, and $665,589, respectively. See Auditors' Report on Supplementary Information S-6 EX-22 2 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 22 SUBSIDIARIES OF THE REGISTRANT AS OF DECEMBER 31, 1997 United-Stinson Limited Partnership, a Pennsylvania limited partnership Germano Investment L.P., an Illinois limited partnership Coliseo Housing Partnership, a California limited partnership -----END PRIVACY-ENHANCED MESSAGE-----