-----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, S89jl2HDgO/gXlu0nnhXrxFXaqPYDxfauKpyNDi931PUmacSYptovxUNQvI8IK5R iA9P6cPpOjx3RF5tzuCFzA== 0000810663-99-000019.txt : 19990625 0000810663-99-000019.hdr.sgml : 19990625 ACCESSION NUMBER: 0000810663-99-000019 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990624 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON FINANCIAL TAX CREDIT FUND VIII LP CENTRAL INDEX KEY: 0000911568 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 043205879 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-26522 FILM NUMBER: 99651562 BUSINESS ADDRESS: STREET 1: 101 ARCH ST CITY: BOSTON STATE: MA ZIP: 02110 BUSINESS PHONE: 6174393911 FORMER COMPANY: FORMER CONFORMED NAME: BOSTON FINANCIAL TAX CREDIT FUND VIII DATE OF NAME CHANGE: 19930902 10-K 1 TC8 3/99 10-K June 24, 1999 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Boston Financial Tax Credit Fund VIII, A Limited Partnership Form 10-K Annual Report for the Year Ended March 31, 1999 Commission File Number 0-26522 Dear Sir/Madam: Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of 1934, there is filed herewith one copy of the subject report. Very truly yours, /s/Stephen Guilmette Stephen Guilmette Assistant Controller TC810K.98 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended Commission file number March 31, 1999 33-68088 BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Massachusetts 04-3205879 - -------------------------------------- --------------------------- (State of organization) (I.R.S. Employer Identification No.) 101 Arch Street, 16th Floor Boston, Massachusetts 02110-1106 - -------------------------------------- --------------------------- (Address of Principal (Zip Code) executive office) Registrant's telephone number, including area code 617/439-3911 Securities registered pursuant to Section 12(b) of the Act: Name on each exchange on Title of each class which registered - -------------------------------------- --------------------------------- None None Securities registered pursuant to Section 12(g) of the Act: UNITS OF LIMITED PARTNERSHIP INTEREST (Title of Class) 200,000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Subsection 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] State the aggregate sales price of partnership units held by non affiliates of the registrant. $28,801,000 as of March 31, 1999 DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS: (2) ANY PROXY OR INFORMATION STATEMENT: AND (3) ANY PROSPECTUS FILED PURSUANT TO RULE 424(b) OR (c) UNDER THE SECURITIES ACT OF 1933. Part of Report on Form 10-K into Which the Document is Incorporated Documents incorporated by reference Report on Form 8-K dated April 8, 1994 Part I, Item 1 Report on Form 8-K dated June 14, 1994 Part I, Item 1 Acquisition Reports Part I, Item 1 Prospectus - Sections Entitled: "Investment Objectives and Policies - Principal Investment Objectives" Part I, Item 1 "Investment Risks" Part I, Item 1 "Estimated Use of Proceeds" Part III, Item 13 "Management Compensation and Fees" Part III, Item 13 "Profits and Losses for Tax Purposes, Tax Credits and Cash Distributions" Part III, Item 13
BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH 31, 1999 TABLE OF CONTENTS Page No. PART I Item 1 Business K-3 Item 2 Properties K-5 Item 3 Legal Proceedings K-8 Item 4 Submission of Matters to a Vote of Security Holders K-8 PART II Item 5 Market for the Registrant's Units and Related Security Holder Matters K-9 Item 6 Selected Financial Data K-10 Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations K-11 Item 7A. Quantitative and Qualitative Disclosures about Market Risk K-13 Item 8 Financial Statements and Supplementary Data K-13 Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure K-13 PART III Item 10 Directors and Executive Officers of the Registrant K-14 Item 11 Management Remuneration K-15 Item 12 Security Ownership of Certain Beneficial Owners and Management K-15 Item 13 Certain Relationships and Related Transactions K-16 PART IV Item 14 Exhibits, Financial Statement Schedule and Reports on Form 8-K K-19 SIGNATURES K-20
PART I Item 1. Business Boston Financial Tax Credit Fund VIII, A Limited Partnership (the "Fund") is a Massachusetts limited partnership formed on August 25, 1993 under the laws of the Commonwealth of Massachusetts. The Fund's partnership agreement ("Partnership Agreement") authorizes the sale of up to 200,000 Units of limited partnership interest at $1,000 per Unit in series. The first series offered 50,000 Units. On July 29, 1994, the Fund held its final investor closing. In total the Fund had raised $36,497,000 ("Gross Proceeds") through the sale of 36,497 Units. Such amounts exclude a fractional unregistered Unit previously acquired for $100 by the Initial Limited Partner. The offering of Units terminated on March 29, 1995. The Fund is engaged solely in the business of real estate investment. A presentation of information about industry segments is not applicable and would not be material to an understanding of the Fund's business taken as a whole. The Fund has invested as a limited partner in other limited partnerships ("Local Limited Partnerships") which own and operate residential apartment complexes ("Properties"), some of which are expected to benefit from some form of federal, state or local assistance programs and all of which qualify for low-income housing tax credits ("Tax Credits") added to the Internal Revenue Code (the "Code") by the Tax Reform Act of 1986. The investment objectives of the Fund include the following: (i) to provide investors with annual tax credits which they may use to reduce their federal income taxes; (ii) to provide limited cash distributions from the operations of apartment complexes; and (iii) to preserve and protect the Fund's capital. There cannot be any assurance that the Fund will attain any or all of these investment objectives. A more detailed discussion of these investment objectives, along with the risks in achieving them is contained in the sections of the Prospectus entitled "Investment Objectives and Policies - Principal Investment Objectives" and "Investment Risks", which are herein incorporated by this reference. Table A on the following page lists the properties owned by the Local Limited Partnerships in which the Fund had invested as of March 31, 1999. Item 7 of this Report contains other significant information with respect to such Local Limited Partnerships. The terms of the acquisition of each Local Limited Partnership interest have been described in the Form 8-Ks and a supplement to the Prospectus listed in Part IV of this Report on Form 10-K; such descriptions are incorporated herein by this reference.
TABLE A SELECTED LOCAL LIMITED PARTNERSHIP DATA Property owned by Local Date Limited Partnerships* Interest Location Acquired - --------------------------- -------------------- ------------ Green Wood Gallatin, TN 03/02/94 Webster Court Kent, WA 05/13/94 Springwood Tallahassee, FL 12/15/94 Meadow Wood of Pella Pella, IA 06/03/94 Hemlock Ridge Livingston Manor, NY 04/29/94 Pike Place Fort Smith, AR 01/31/94 West End Place Springdale, AR 01/12/94 Oak Knoll Renaissance Gary, IN 11/01/94 Beaverdam Creek Mechanicsville, VA 11/16/94 Live Oaks Plantation West Palm Beach, FL 06/28/94
* The Fund's interest in profits and losses of each Local Limited Partnership arising from normal operations is 99%, except for Springwood which is 79.20%, Hemlock Ridge which is 77%, and Pike Place and West End Place which are 90%. Profits and losses arising from sale or refinancing transactions are allocated in accordance with the respective Local Limited Partnership Agreements. Although the Fund's investments in Local Limited Partnerships are not subject to seasonal fluctuations, the Fund's equity in losses of Local Limited Partnerships, to the extent it reflects the operations of individual Properties, may vary from quarter to quarter based upon changes in occupancy and operating expenses as a result of seasonal factors. Each Local Limited Partnership has, as its general partners ("Local General Partners"), one or more individuals or entities not affiliated with the Fund or its General Partner. In accordance with the partnership agreements under which such entities are organized ("Local Limited Partnership Agreements"), the Fund depends on the Local General Partners for the management of each Local Limited Partnership. As of March 31, 1999, the following Local Limited Partnerships have a common Local General Partner or affiliated group of Local General Partners accounting for the specified percentage of the total capital contributions in Local Limited Partnerships: (i) Green Wood and Springwood, representing 21.71%, have Flournoy Development Company as Local General Partner; (ii) Pike Place and West End Place, representing 12.90%, have Lindsey Management Company as Local General Partner. The Local General Partners of the remaining Local Limited Partnerships are identified in the Acquisition Reports which are herein incorporated by reference. The Properties owned by Local Limited Partnerships in which the Fund invests are, and will continue to be, subject to competition from existing and future apartment complexes in the same areas. The success of the Fund will depend on many outside factors, most of which are beyond the control of the Fund and which cannot be predicted at this time. Such factors include general economic and real estate market conditions, both on a national basis and in those areas where the Properties are located, the availability and cost of borrowed funds, real estate tax rates, operating expenses, energy costs and government regulations. In addition, other risks inherent in real estate investment may influence the ultimate success of the Fund, including: (i) possible reduction in rental income due to an inability to maintain high occupancy levels or adequate rental levels; (ii) possible adverse changes in general economic conditions and adverse local conditions, such as competitive overbuilding, a decrease in employment or adverse changes in real estate laws, including building codes; and (iii) the possible future adoption of rent control legislation which would not permit increased costs to be passed on to the tenants in the form of rent increases, or which suppress the ability of the Local Limited Partnerships to generate operating cash flow. Since most of the Properties benefit from some form of governmental assistance, the Fund is subject to the risks inherent in that area including decreased subsidies, difficulties in finding suitable tenants and obtaining permission for rent increases. In addition, any Tax Credits allocated to investors with respect to a Property are subject to recapture to the extent that the Property or any portion thereof ceases to qualify for the Tax Credits. Other future changes in federal and state income tax laws affecting real estate ownership or limited partnerships could have a material and adverse affect on the business of the Fund. The Fund is managed by Arch Street VIII Limited Partnership, the sole General Partner of the Fund. The Fund, which does not have any employees, reimburses The Boston Financial Group Limited Partnership, an affiliate of the General Partner, for certain expenses and overhead costs. A complete discussion of the management of the Fund is set forth in Item 10 of this Report. Item 2. Properties The Fund owns limited partnership interests in ten Local Limited Partnerships which own and operate Properties, some of which benefit from some form of federal, state, or local assistance programs and all of which qualify for the Tax Credits added to the Code by the Tax Reform Act of 1986. The Fund's ownership interest in the Local Limited Partnerships is 99%, with the exception of Springwood which is 79.20%, Hemlock Ridge which is 77%, and Pike Place and West End Place which are 90%. All of the Local Limited Partnerships have received an allocation of Tax Credits from the relevant state tax credit agency. In general, the Tax Credit runs for ten years from the date the Property is placed in service. The required holding period (the "Compliance Period") of the Properties is fifteen years. During these fifteen years, the Properties must satisfy rent restrictions, tenant income limitations and other requirements, as promulgated by the Internal Revenue Service, in order to maintain eligibility for the Tax Credit at all times during the Compliance Period. Once a Local Limited Partnership has become eligible for the Tax Credits, it may lose such eligibility and suffer an event of recapture if its Property fails to remain in compliance with the requirements. To date, none of the Local Limited Partnerships have suffered an event of recapture of Tax Credits. In addition, some of the Local Limited Partnerships have obtained one or a combination of different types of loans such as: i) below market rate interest loans; ii) loans provided by a redevelopment agency of the town or city in which the property is located at favorable terms; or iii) loans that have repayment terms that are based on a percentage of cash flow. The following schedule provides certain key information on the Local Limited Partnership interests acquired by the Fund.
Capital Contributions Mtge. loans Occupancy Local Limited Partnership Number Total Committed Paid Through payable at at Property Name of at March 31, March 31, December 31, Type of March 31, Property Location Apt. Units 1999 1999 1998 Subsidy* 1999 - --------------------------- -------------- -------------- --------------- --------------- ------------ --------------- Green Wood Apartments, a Limited Partnership Green Wood Apartments Gallatin, TN 164 $3,825,916 $3,825,916 $5,179,303 None 87% Webster Court Apartments a Limited Partnership Webster Court Apartments Kent, WA 92 2,318,078 2,318,078 2,835,486 None 96% Springwood Apartments a Limited Partnership (1) Springwood Apartments Tallahassee, FL 113 2,499,202 2,499,202 3,894,649 None 90% Meadow Wood Associates of Pella, a Limited Partnership Meadow Wood of Pella Pella, IA 30 893,808 893,808 1,110,733 Section 8 96% RMH Associates, a Limited Partnership (1) Hemlock Ridge Livingston Manor, NY 100 1,697,298 1,697,298 2,105,654 Section 8 83% Pike Place, a Limited Partnership (1) Pike Place Fort Smith, AR 144 1,915,328 1,915,328 3,303,163 None 99%
Capital Contributions Mtge. Loans Occupancy Local Limited Partnership Number Total Committed Paid Through payable at At Property Name of at March 31, March 31, December 31, Type of March 31, Property Location Apt. Units 1999 1999 1998 Subsidy* 1999 - -------------------------------- ---------- ------------------- ------------- --------------- ------------ --------------- West End Place, a Limited Partnership (1) West End Place Springdale, AR 120 1,843,010 1,843,010 2,914,729 None 100% Oak Knoll Renaissance, a Limited Partnership Oak Knoll Renaissance Gary, IN 256 4,922,412 4,922,412 5,320,816 Section 8 98% Beaverdam Creek Associates, a Limited Partnership (2) Beaverdam Creek Mechanicsville, VA 120 3,629,140 3,629,140 3,333,911 None 98% Schickedanz Brothers Palm Beach Limited Live Oaks Plantation West Palm Beach, FL 218 5,587,953 5,587,953 7,793,227 None 67% ------ ----------- ------------ ------------ 1,357 $29,132,145 $29,132,145 $37,791,671 ====== =========== =========== =========== (1) Boston Financial Tax Credits Fund VIII has a 79.20% interest in Springwood Apartments, L.P., a 77% interest in RMH Associates, L.P., and a 90% interest in Pike Place, L.P. and West End Place, L.P. The mortgage payable balances represent 100% of the outstanding balances. (2) The amount paid includes funds advanced under a promissory note agreement with Boston Financial Tax Credit Fund VIII, a Limited Partnership. *Section 8 This subsidy, which is authorized under Section 8 of Title II of the Housing and Community Development Act of 1974, allows qualified low-income tenants to pay 30% of their monthly income as rent with the balance paid by the federal government.
Four Local Limited Partnerships invested in by the Fund each represent more than 10% of the total capital contributions to be made to Local Limited Partnerships by the Fund. These Local Limited Partnerships are as follows: (i) Green Wood Apartments Limited Partnership, with Flournoy Development Company as Local General Partner; (ii) Oak Knoll Renaissance Limited Partnership, with Ronald M. Gatton Redevelopment Services as Local General Partner; (iii) Beaverdam Creek Associates Limited Partnership, with Castle Development Corporation as Local General Partner; and (iv) Schickedanz Brothers Palm Beach Limited Partnership, which owns Live Oaks Plantation and has Schickedanz Enterprise as its Local General Partner. Green Wood Apartments Limited Partnership, representing 13.13% of the Fund's total investment in the Local Limited Partnerships, has obtained a $5,322,000 mortgage loan payable at 8.860% per annum with monthly payments of principal and interest in the amount of $42,287 due through June 1, 2010. Oak Knoll Renaissance Limited Partnership, representing 16.90% of the total investment in the Local Limited Partnerships, has obtained a permanent mortgage loan payable at 10.125% per annum, with monthly payments of principal and interest in the amount of $52,205 due through June 1, 2018. The construction loan of $5,676,337 with the City of Gary, Indiana, was repaid in 1996 when permanent financing was obtained. Beaverdam Creek Associates Limited Partnership ("Beaverdam Creek LP"), representing 12.46% of the Fund's total investment in the Local Limited Partnerships, has obtained two mortgage loans in the original principal amounts of $2,420,000 and $1,000,000 from the Virginia Housing and Development Authority ("VHDA"). The VHDA mortgage notes bear interest at 10.62% and 5%, respectively, per annum. The mortgage notes are unsecured and are secured by a deed of trust on the rental property. The mortgage notes payable are due in monthly installments of principal and interest of $22,354 and $5,368, respectively, to the year 2025. Schickedanz Brothers Palm Beach Limited Partnership, representing 19.18% of the total investment in the Local Limited Partnerships, entered into two loan agreements. The first is with Newport Mortgage Company, L.P., in the original amount of $6,493,000. The loan bears interest at a rate of 8.94% per annum, with monthly payments of principal and interest in the amount of $51,964 due through July 7, 2026. As of December 31, 1998, $6,377,227 is outstanding on the mortgage. The second loan agreement is a Home loan with the Florida Housing Finance Agency, with a principal amount not to exceed $1,531,000. Interest on the unpaid principal balance shall be due at the Applicable Federal Rate ("AFR") for long term obligations as of the commencement date of the loan. Interest shall be payable at 3% per annum commencing on June 30, 1995. Deferred interest is compounded annually and is due together with the principal balance on February 28, 2025. As of December 31, 1998, total funds in the amount of $1,416,000 have been drawn on the loan. The duration of the leases for occupancy in the Properties described above will be six to twelve months. The General Partners believe the Properties described herein are adequately covered by insurance. Additional information required under this Item, as it pertains to the Fund, is contained in Items 1, 7 and 8 of this Report. Item 3. Legal Proceedings The Fund is not a party to any pending legal or administrative proceeding, and to the best of its knowledge, no legal or administrative proceeding is threatened or contemplated against it. Item 4. Submission of Matters to a Vote of Security Holders None. PART II Item 5. Market for the Registrant's Units and Related Security Holder Matters There is no public market for the Units, and it is not expected that a public market will develop. If a Limited Partner desires to sell Units, the buyer of those Units will be required to comply with the minimum purchase and retention requirements and investor suitability standards imposed by applicable federal or state securities laws and the minimum purchase and retention requirements imposed by the Fund. The price to be paid for the Units, as well as the commissions to be received by any participating broker-dealers, will be subject to negotiation by the Limited Partner seeking to sell his Units. Units will not be redeemed or repurchased by the Fund. The Partnership Agreement does not impose on the Fund or its General Partner any obligation to obtain periodic appraisals of assets or to provide Limited Partners with any estimates of the current value of Units. As of June 15, 1999, there were 1,234 record holders of Units of the Fund. Cash distributions, when made, are paid annually. For the years ended March 31, 1999, 1998 and 1997, no cash distributions were made. Item 6. Selected Financial Data The following table sets forth selected financial information regarding the Fund's financial position and operating results. This information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Financial Statements and Notes thereto, which are included in Items 7 and 8 of this Report.
March 31, March 31, March 31, March 31, March 31, 1999 1998 1997 1996 1995 Revenue $ 103,830 $ 98,132 $ 100,536 $ 511,713 $ 763,502 Equity in losses of Local Limited Partnerships (1,745,890) (2,083,625) (1,922,556) (881,551) (161,157) Net income (loss) (2,027,965) (2,408,077) (2,247,908) (782,504) 160,473 Per Limited Partnership Unit (A) (55.01) (65.32) (60.98) (21.23) 5.52 Cash and cash equivalents 180,030 213,966 273,412 71,715 10,495,010 Marketable Securities 1,455,618 1,486,223 1,442,676 3,709,881 1,575,592 Investment in Local Limited Partnerships 23,234,665 25,099,334 26,813,245 26,064,146 19,840,904 Total assets (B) 24,889,168 26,827,966 29,078,258 31,277,311 32,240,835 Long-term debt - - - - - Cash Distribution - - - - - Other data: Passive loss (C) (2,394,493) (2,836,009) (2,936,579) (1,638,463) (511,934) Per Limited Partnership Unit (C) (64.95) (76.93) (79.66) (44.44) (13.89) Portfolio income (C) 124,579 151,751 161,828 764,632 628,323 Per Limited Partnership Unit (C) 3.38 4.12 4.39 20.74 17.04 Low-Income Housing Tax Credit (C) 5,234,040 5,234,045 5,234,045 3,307,725 313,289 Per Limited Partnership Unit (C) 141.98 141.98 141.98 89.72 8.50 Local Limited Partnership interests owned at end of period 10 10 10 10 10
(A) Per Limited Partnership Unit data is based upon 36,497 units for the years ended March 31, 1999, 1998, 1997 and 1996, and a weighted average number of units outstanding of 28,774 for the year ended March 31, 1995. (B) Total assets include the net investment in Local Limited Partnerships. (C) Income Tax information is as of December 31, the year end of the Fund for income tax purposes. Per Limited Partnership Unit data is based upon the final investor closing held on July 29, 1994 for a total of 36,497 outstanding Units. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Certain matters discussed herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Fund intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements and is including this statement for purposes of complying with these safe harbor provisions. Although the Fund believes the forward-looking statements are based on reasonable assumptions, the Fund can give no assurance that their expectations will be attained. Actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation, general economic and real estate conditions, interest rates and unanticipated delays or expenses on the part of the Fund and their suppliers in achieving year 2000 compliance. Liquidity and Capital Resources At March 31, 1999, the Fund had cash and cash equivalents of $180,030 as compared to $213,966 at March 31, 1998. This decrease is attributable to purchases of marketable securities and cash used for operations. These decreases to cash and cash equivalents are offset partially by cash distributions received from Local Limited Partnerships and proceeds from sales and maturities of marketable securities. As of March 31, 1999, approximately $1,239,000 of marketable securities has been designated as Reserves. The Reserves are established to be used for working capital of the Fund and contingencies related to the ownership of Local Limited Partnership interests. Management believes that the interest income earned on Reserves, along with cash distributions received from Local Limited Partnerships, to the extent available, will be sufficient to fund the Fund's ongoing operations. Reserves may be used to fund operating deficits, if the General Partner deems funding appropriate. Since the Fund invests as a limited partner, the Fund has no contractual duty to provide additional funds to Local Limited Partnerships beyond its specified investment. Thus, as of March 31, 1999, the Fund had no contractual or other obligation to any Local Limited Partnership which had not been paid or provided for, except as disclosed above. In the event a Local Limited Partnership encounters operating difficulties requiring additional funds, the Fund might deem it in its best interests to voluntarily provide such funds, in order to protect its investment. No such event has occurred to date. Cash Distributions No cash distributions were made during the year ended March 31, 1999. It is expected that cash available for distribution, if any, will not be significant in fiscal year 2000. As funds from temporary investments are paid to Local Limited Partnerships, interest earnings on those funds decrease. In addition, some of the properties benefit from some type of federal or state subsidy and, as a consequence, are subject to restrictions on cash distributions. Results of Operations 1999 versus 1998 For the year ended March 31, 1999, the Fund's operations resulted in a net loss of $2,027,965, as compared to $2,408,077 for the year ended March 31, 1998. The decrease in net loss is primarily attributable to a decrease in equity in losses of Local Limited Partnerships. The decrease in equity in losses of Local Limited Partnerships for the year ended March 31, 1999 as compared to the same period in 1998, is primarily attributable to an increase in rental and other income. 1998 versus 1997 For the year ended March 31, 1998, the Fund's operations resulted in a net loss of $2,408,077, as compared to $2,247,908 for the year ended March 31, 1997. The increase in net loss is primarily attributable to an increase in equity in losses of Local Limited Partnerships. The increase in equity in losses of Local Limited Partnerships for the year ended March 31, 1998, as compared to the same period in 1997, is primarily attributable to an increase in operating expenses. Low-Income Housing Tax Credits The 1998, 1997 and 1996 tax credits were $141.98 per Unit. The 1995 tax credits were $89.72 per Unit. Tax Credits are not available for a property until the property is placed in service and its apartment units are occupied by qualified tenants. In the first year the Tax Credit is claimed, the allowable credit amount is determined using an averaging convention to reflect the number of months that units comprising the qualified basis were occupied by qualified tenants during the year. To the extent that the full amount of the annual credit is not allocated in the first year, an additional credit in such amount is available in the 11th taxable year. As of December 31, 1995, all of the properties had been placed in service and were generating Tax Credits. Some of the properties had less than a full year of operations in the period ended December 31, 1995. They were subject to the averaging convention mentioned above, therefore the Fund did not receive a full allocation of Tax Credits with respect to those properties in 1995. The Tax Credits per Limited Partnership Unit have stabilized at approximately $142 per unit, as properties have reached completion and have become fully leased. Since the Tax Credits have stabilized, the annual amount allocated to investors is expected to remain the same for about seven years. In years eight through ten, the credits are expected to decrease as properties reach the end of the ten year credit period. However, because the compliance periods extend significantly beyond the tax credit periods, the Partnership is expected to retain most of its interests in the Local Limited Partnerships for the foreseeable future. Property Discussions The Fund is invested in ten Local Limited Partnerships which own ten properties located in eight states. Two properties, representing 356 units, underwent rehabilitation, and eight properties, representing 1001 units, are new construction. All of the ten properties are complete and through initial lease-up. Most of the ten Local Limited Partnerships have stabilized operations. The majority of these stabilized properties are operating at break-even or generating positive operating cash flow. Live Oaks Plantation, located in West Palm Beach, Florida, has experienced a decrease in the occupancy. As of December 31, 1998, occupancy was 72%, down from 85% in September. The change in occupancy is primarily due to the majority of first-year leases expiring and management's decision not to renew all the leases due to tenant collection problems. Further compounding the problem is competition from new affordable housing complexes in the area. Accordingly, management is developing a more aggressive marketing strategy. The Managing General Partner will be working closely with the Local General Partner and management agent to monitor operations. In accordance with Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", the Fund has implemented policies and practices for assessing impairment of its real estate assets and investments in Local Limited Partnerships. Each asset is analyzed by real estate experts to determine if an impairment indicator exists. If so, the carrying value is compared to the undiscounted future cash flows expected to be derived from the asset and, if there is a significant impairment in value, a provision to write down the asset to fair value will be charged against income. Inflation and Other Economic Factors Inflation had no material impact on the operations or financial conditional of the Fund for the years ended March 31, 1999, 1998, and 1997. Since some of the properties are expected to benefit from some form of governmental assistance, the Fund is subject to the risks inherent in that area including decreased subsidies, difficulties in finding suitable tenants and obtaining permission for rent increases. In addition, any Tax Credits allocated to investors with respect to a property are subject to recapture to the extent that the property, or any portion thereof, ceases to qualify for the Tax Credits. Certain of the properties in which the Fund invests may be located in areas suffering from poor economic conditions. Such conditions could have an adverse effect on the rent or occupancy levels at such properties. Nevertheless, management believes that the generally high demand for below market rate housing will tend to negate such factors. However, no assurance can be given in this regard. Impact of Year 2000 The Managing General Partner's plan to resolve year 2000 issues involves the following four phases: assessment, remediation, testing and implementation. To date, the Managing General Partner has fully completed an assessment of all information systems that may not be operative subsequent to 1999 and has begun the remediation, testing and implementation phase on both hardware and software systems. Because the hardware and software systems of both the Fund and Local Limited Partnerships are generally the responsibility of obligated third parties, the plan primarily involves ongoing discussions with and obtaining written assurances from these third parties that pertinent systems will be 2000 compliant. In addition, neither the Fund nor the Local Limited Partnerships are incurring significant additional costs since such expenses are principally covered under the service contracts with vendors. As of June 1999, the General Partner is in the final stages of its Year 2000 remediation plan and believes all major systems are compliant; any systems still being updated are not considered significant to the Fund's operations. However, despite the likelihood that all significant year 2000 issues are expected to be resolved in a timely manner, the Managing General Partner has no means of ensuring that all systems of outside vendors or other entities that impact operations will be 2000 compliant. The Managing General Partner does not believe that the inability of third parties to address their year 2000 issues in a timely manner will have a material impact on the Fund. However, the effect of non-compliance by third parties is not readily determinable. Management has also evaluated a worst case scenario projection with respect to the year 2000 and expects any resulting disruption of either the Managing General Partner's activities or any Local Limited Partnership's operations to be short-term inconveniences. Such problems, however, are not likely to fully impede the ability to carry out necessary duties of the Fund. Moreover, because expected problems under a worst case scenario are not extensively detrimental, and because the likelihood that all systems affecting the Fund will be compliant before 2000, the Managing General Partner has determined that a formal contingency plan that responds to material system failures is not necessary. Item 7A. Quantitative and Qualitative Disclosures about Market Risk The Fund has invested in marketable securities with a fair value of $1,455,618 at March 31, 1999; these securities, with rates ranging from 4.91% to 6.03%, do not subject the Fund to significant market risk because of their short term maturities and high liquidity. The Fund has no other exposure to market risk associated with activities in derivative financial instruments, derivative commodity instruments, or other financial instruments. Item 8. Financial Statements and Supplementary Data Information required under this Item is submitted as a separate section of this Report. See Index on page F-1 hereof. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant The General Partner of the Fund is Arch Street VIII Limited Partnership, a Massachusetts limited partnership (the "General Partner"), an affiliate of The Boston Financial Group Limited Partnership ("Boston Financial"), a Massachusetts limited partnership. George Fantini, Jr., a Vice President of the General Partner, resigned his position effective June 30, 1995. Donna Gibson, a Vice President of the General Partner, resigned from her position on September 13, 1996. Georgia Murray resigned as Managing Director, Treasurer and Chief Financial Officer of the General Partner on May 25, 1997. Fred N. Pratt, Jr. resigned as Managing Director of the General Partner on May 28, 1997. William E. Haynsworth resigned as a Managing Director and Chief Operating Officer of the General Partner on March 23, 1998. Peter G. Fallon resigned as a Vice President of the General Partner on June 1, 1999. The General Partner was formed in August 1993. Randloph G. Hawthorne is the Chief Operating Officer of the General Partner and has the primary responsibility for evaluating, selecting and negotiating investments for the Fund. The Investment Committee of the General Partner approves all investments. The names and positions of the principal officers and the directors of the General Partner are set forth below. Name Position Jenny Netzer Managing Director and President Michael H. Gladstone Managing Director, Vice President and Clerk Randolph G. Hawthorne Managing Director, Vice President and Chief Operating Officer James D. Hart Chief Financial Officer and Treasurer Paul F. Coughlan Vice President William E. Haynsworth Vice President The General Partner provides day-to-day management of the Fund. Compensation is discussed in Item 11 of this report. Such day-to-day management does not include the management of the properties. The business experience of each of the persons listed above is described below. There is no family relationship between any of the persons listed in this section. Jenny Netzer, age 43, graduated from Harvard University (B.A., 1976) and received a Master's in Public Policy from Harvard's Kennedy School of Government in 1982. Ms. Netzer joined Boston Financial in 1987 and is a Senior Vice President leading the Institutional Tax Credit Team. She is also a member of the Senior Leadership Team, the firm's Executive Committee. Previously, Ms. Netzer led Boston Financial's new business initiatives and managed the firm's Asset Management division, which is responsible for the performance of 750 properties and providing service to 35,000 investors. Before joining Boston Financial, she was Deputy Budget Director for the Commonwealth of Massachusetts, where she was responsible for the Commonwealth's health care and public pension programs' budgets. Ms. Netzer was also Assistant Controller at Yale University and has been a member of the Watertown Zoning Board of Appeals. Michael H. Gladstone, age 42, graduated from Emory University (B.A., 1978) and Cornell University (J.D., M.B.A., 1982). Mr. Gladstone joined Boston Financial in 1985 and is Vice President and General Counsel. He is also a member of the Senior Leadership Team. Prior to joining Boston Financial, Mr. Gladstone was associated with the Boston law firm of Herrick & Smith. Mr. Gladstone is on the Advisory Board of the Housing and Development Reporter. He is also a member of the Investment Program Association, The National Realty Committee, Cornell Real Estate Council, National Housing Conference and the Massachusetts Bar. Randolph G. Hawthorne, age 49, is a graduate of Massachusetts Institute of Technology (S.B., 1971) and Harvard Graduate School of Business (M.B.A., 1973). Mr. Hawthorne joined Boston Financial in 1973 and is currently a Vice President responsible for structuring and acquiring real estate investments. Previously, Mr. Hawthorne served as Treasurer of Boston Financial. Mr. Hawthorne is Past Chairman of the Board of the National Multi Housing Council, having served on the board since 1989. He is a past president of the National Housing and Rehabilitation Association, a member of the Residential Development Council of the Urban Land Institute, as well as a member of the Advisory Board of the Berkeley Real Estate Center at the University of California. In addition to speaking at industry conferences, he is on the Editorial Advisory Boards of the Tax Credit Advisor and Multi-Housing News. James D. Hart, age 41, graduated from Trinity College (B.A.) and Amos Tuck School at Dartmouth College (M.B.A.). Mr. Hart joined Boston Financial in 1998 and serves as Chief Financial Officer and is a member of the Senior Leadership Team. Prior to joining Boston Financial, Mr. Hart was engaged in venture capital management on behalf of institutional investors, including the negotiation and structuring of private equity and mezzanine transactions, as a Vice President of Interfid Ltd. and later in the operational management of a venture-backed software company as Managing Director and Chief Financial Officer of Bitstream Inc. Mr. Hart has also served on the Board of Directors of several companies, including those that went on to complete initial public offerings. Paul F. Coughlan, age 55, is a graduate of Brown University (A.B., 1965). Mr. Coughlan joined Boston Financial in 1975 and is currently a Senior Vice President and a member of the Investment Management division with responsibility for marketing institutional investments. Previously, he was national sales manager for Boston Financial's retail tax credit funds. Prior to joining Boston Financial, Mr. Coughlan was an investment broker with Bache & Company and Reynolds Securities, Inc. William E. Haynsworth, age 59, is a graduate of Dartmouth College (A.B., 1961) and Harvard Law School (L.L.B., 1964; L.L.M., 1969). Mr. Haynsworth joined Boston Financial in 1977 and is a Senior Vice President responsible for the structuring of real estate investments and the acquisition of property interests. Prior to joining Boston Financial, Mr. Haynsworth was Acting Executive Director and General Counsel of the Massachusetts Housing Finance Agency. He was also the Director of Non-Residential Development of the Boston Redevelopment Authority and an associate of the law firm of Goodwin, Procter & Hoar. Mr. Haynsworth is a member of the Executive Committee and the Board of Directors of the Affordable Housing Tax Credit Coalition. He is a member of the Senior Leadership Team and the Board of Directors of Boston Financial. Mr. Haynsworth has over 25 years of real estate experience. Item 11. Management Remuneration Neither the partners of Arch Street VIII Limited Partnership nor any other individual with significant involvement in the business of the Fund receives any current or proposed remuneration from the Fund. Item 12. Security Ownership of Certain Beneficial Owners and Management As of March 31, 1999, the following entities are the only entities known to the Fund to be the beneficial owners of more than 5% of the Units outstanding: Amount Title of Class Name and Address of Beneficially Percent of Beneficial Owner Owned Class - --------------- ------------------------------- ------------ ------------- Limited Oldham Institutional Tax Credits LLC 2,476 Units 6.78% Partner 101 Arch Street Boston, MA
Amount Title of Class Name and Address of Beneficially Percent of Beneficial Owner Owned Class - --------------- ------------------------------- -------------- ------------- Limited Oldham Institutional Tax Credits 5,220 Units 14.30% Partner VI LLC 101 Arch Street Boston, MA Limited Liberty Corporation 2,079 Units 5.70% Partner PO Box 789 Greenville, SC
Oldham Institutional Tax Credits LLC and Oldham Institutional Tax Credits VI LLC are affiliates of Arch Street VIII Limited Partnership, the General Partner. The equity securities registered by the Fund under Section 12(g) of the Act consist of 200,000 Units, 36,497 of which have been sold to the public as of March 31, 1999. Holders of Units are permitted to vote on matters affecting the Fund only in certain unusual circumstances and do not generally have the right to vote on the operation or management of the Fund. As of March 31, 1999, Arch Street VIII, Inc. owns a fractional (unregistered) Unit not included in the Units sold to the public. Except as described in the preceding paragraphs, neither Arch Street VIII, Inc., Arch Street VIII Limited Partnership, Boston Financial nor any of their executive officers, directors, partners or affiliates is the beneficial owner of any Units. None of the foregoing persons possesses a right to acquire beneficial ownership of Units. The General Partner does not know of any existing arrangement that might at a later date result in a change in control of the Fund. Item 13. Certain Relationships and Related Transactions The Fund is required to pay certain fees to and reimburse certain expenses of the General Partner or its affiliates (including Boston Financial) in connection with the organization of the Fund and the offering of Units. The Fund is also required to pay certain fees to and reimburse certain expenses of the General Partner or its affiliates (including Boston Financial) in connection with the administration of the Fund and its acquisition and disposition of investments in Local Limited Partnerships. In addition, the General Partner is entitled to certain Fund distributions under the terms of the Partnership Agreement. Also, an affiliate of the General Partner will receive up to $10,000 from the sale or refinancing proceeds of each Local Limited Partnership, if it is still a limited partner at the time of such transaction. All such fees, expenses and distributions paid in the years ended March 31, 1999, 1998 and 1997 are described below and in the sections of the Prospectus entitled "Estimated Use of Proceeds", "Management Compensation and Fees" and "Profits and Losses for Tax Purposes, Tax Credits and Cash Distributions". Such sections are incorporated herein by reference. The Fund is permitted to enter into transactions involving affiliates of the General Partner, subject to certain limitations established in the Partnership Agreement. Information required under this Item is contained in Note 5 to the Financial Statements presented as a separate section of this Report. The affiliates of the Managing Partner which have received or will receive fee payments and expense reimbursements from the Fund are as follows: Organizational fees and expenses and selling expenses In accordance with the Partnership Agreement, the Fund is required to pay certain fees to and reimburse expenses of the General Partner and others in connection with the organization of the Fund and the offering of its Limited Partnership Units. Selling commissions, fees and accountable expenses related to the sale of the Units totaling $4,664,369 have been charged directly to Limited Partners' equity. In connection therewith, $2,828,918 of selling expenses and $1,835,451 of offering expenses incurred on behalf of the Fund have been paid to an affiliate of the General Partner. The Fund may be required to pay a non-accountable expense allowance for marketing expense equal to a maximum of 1% of Gross Proceeds. The Fund has capitalized an additional $50,000 which was reimbursed to an affiliate of the General Partner. Total organization and offering expenses exclusive of selling commissions and underwriting advisory fees did not exceed 5.5% of the Gross Proceeds and organizational and offering expenses, inclusive of selling commissions and underwriting advisory fees, did not exceed 15.0% of the Gross Proceeds. Acquisition fees and expenses In accordance with the Partnership Agreement, the Fund is required to pay acquisition fees to and reimburse acquisition expenses of the General Partner or its affiliates for selecting, evaluating, structuring, negotiating and closing the Partnership's investments in Local Limited Partnerships. Acquisition fees total 6% of the gross offering proceeds. Acquisition expenses, which include such expenses as legal fees and expenses, travel and communications expenses, costs of appraisals, accounting fees and expenses, are expected to total 1.5% of the gross offering proceeds. Acquisition fees totaling $2,189,820 for the closing of the Fund's Local Limited Partnership Investments were paid to an affiliate of the General Partner. Acquisition expenses totaling $335,196 were reimbursed to an affiliate of the General Partner. Payments made and expenses reimbursed in the years ended March 31, 1999, 1998 and 1997 are as follows: 1999 1998 1997 ------------ ----------- -------- Acquisition fees and expenses $ - $ - $ 888 Asset Management Fees An affiliate of the General Partner receives a base amount of 0.565% (as adjusted by the CPI factor) of Gross Proceeds annually as an Asset Management Fee for administering the affairs of the Fund. Asset Management Fees incurred in the years ended March 31, 1999, 1998 and 1997 are as follows: 1999 1998 1997 ------------ ----------- --------- Asset Management Fees $ 206,220 $ 199,592 $ 193,635 Salaries and benefits expense reimbursement An affiliate of the General Partner is reimbursed for the cost of certain salaries and benefits expenses which are incurred by an affiliate of the General Partner on behalf of the Fund. The reimbursements are based upon the size and complexity of the Fund's operations. Reimbursements made in the years ended March 31, 1999, 1998 amd 1997, are as follows: 1999 1998 1997 ------------ ----------- ----------- Salaries and benefits expense reimbursement $ 77,890 $ 93,551 $ 108,120 Property Management Fees BFPM, an affiliate of the Managing General Partner, currently manages Beaverdam Creek, a property in which the Fund has invested. The property management fee charged is equal to 4% of cash receipts. Fees earned by BFPM which have been included in operating expenses in the summarized income statements in Note 3 to the Financial Statements in Part II, Item 8 for the three years ended December 31, 1998, 1997 and 1996, are as follows: 1998 1997 1996 ------------ ----------- ------------ Property Management Fees $ 34,183 $ 29,440 $ 27,556 Cash distributions paid to the General Partners In accordance with the Partnership Agreement, the General Partner of the Fund, Arch Street VIII Limited Partnership, receives 1% of cash distributions made to partners. As of March 31, 1999, the Fund has not paid any cash distributions to partners. Additional information concerning cash distributions and other fees paid or payable to the Managing General Partner and its affiliates and the reimbursement of expenses paid or payable to Boston Financial and its affiliates during each of the three years ended March 31, 1999 is presented in Note 5 to the Financial Statements. PART IV Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K (a)(1) and (2) Documents filed as a part of this Report In response to this portion of Item 14, the financial statements, financial statement schedule and the auditors' report relating thereto are submitted as a separate section of this Report. See Index on page F-1 hereof. The reports of auditors of the Local Limited Partnerships relating to the audits of the financial statements of such Local Limited Partnerships appear in Exhibit (28)(1) of this Report. All other financial statement schedules and exhibits for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under related instructions or are inapplicable, and therefore have been omitted. (a)(3) See Exhibit Index contained herein. (a)(3)(b) Reports on Form 8-K: No reports on Form 8-K were filed year the year ended March 31, 1999. (a)(3)(c) Exhibits Number and Description in Accordance with Item 601 of Regulation S-K 27. Financial Data Schedule 28. Additional Exhibits (a) 28.1 Reports of Other Independent Auditors (b) Audited financial statements of Local Limited Partnerships Live Oaks (a)(3)(d) None. 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. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP By: Arch Street VIII, Limited Partnership its General Partner By: /s/ Randolph G. Hawthorne Date: June 24, 1999 ------------------------------ -------------------- Randolph G. Hawthorne, Managing Director and Chief Operating Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the General Partner of the Fund and in the capacities and on the dates indicated: By: /s/ Randolph G. Hawthorne Date: June 24, 1999 ------------------------------ ---------------------- Randolph G. Hawthorne, Managing Director and Chief Operating Officer By: /s/Michael H. Gladstone Date: June 24, 1999 ------------------------------ --------------------- Michael H. Gladstone, A Managing Director Item 8. Financial Statements and Supplementary Data BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED MARCH 31, 1999 INDEX Page No. Report of Independent Accountants For the years ended March 31, 1999, 1998 and 1997 F-2 Financial Statements Balance Sheets - March 31, 1999 and 1998 F-3 Statements of Operations - Years Ended March 31, 1999, 1998 and 1997 F-4 Statements of Changes in Partners' Equity (Deficiency) - Years Ended March 31, 1999, 1998 and 1997 F-5 Statements of Cash Flows - Years Ended March 31, 1999, 1998 and 1997 F-6 Notes to Financial Statements F-7 Financial Statement Schedule Schedule III - Real Estate and Accumulated Depreciation F-16 See also Index to Exhibits on Page K-19 for the financial statements of the Investor Local Limited Partnership included as a separate exhibit in this Annual Report of Form 10-K. Other schedules have been omitted as they are either not required or the information required to be presented therein is available elsewhere in the financial statements and the accompanying notes and schedules. F-22 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners Boston Financial Tax Credit Fund VIII, A Limited Partnership: In our opinion, based on our audits and the reports of other auditors, the combined financial statements listed in the accompanying index present fairly, in all material respects, the financial position Boston Financial Tax Credit Fund VIII, A Limited Partnership (the "Fund") at March 31, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 1999, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related combined financial statements. These financial statements and financial statement schedule are the responsibility of the Partnership's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We did not audit the financial statements of certain local limited partnerships for which total assets of $24,889,168 and $26,827,966, are included in these financial statements as of March 31, 1999 and 1998, respectively, and for which net losses of $1,745,890, 2,083,625, and $1,922,566 are included in the accompanying financial statements as of March 31, 1999, 1998, 1997, respectively. Those statements were audited by other auditors whose reports thereon have been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for the Local Limited Partnerships, is based solely on the reports of the other auditors. We conducted our audits of these statements in accordance with generally accepted auditing standard, which 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 examing, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the reports of other auditors provide a reasonable basis for the opinions expressed above. /s/PricewaterhouseCoopers LLP June 18, 1999 Boston, Massachusetts BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP F-23 BALANCE SHEETS March 31, 1999 and 1998
1999 1998 ------------- -------------- Assets Cash and cash equivalents $ 180,030 $ 213,966 Investments in Local Limited Partnerships (Note 3) 23,234,665 25,099,334 Marketable securities, at fair value (Note 4) 1,455,618 1,486,224 Organization costs, net of accumulated amortization of $50,000 in 1999 and $40,833 in 1998 - 9,167 Other assets 18,855 19,275 ------------- -------------- Total Assets $ 24,889,168 $ 26,827,966 ============= ============== Liabilities and Partners' Equity Accounts payable to affiliate (Note 5) $ 342,233 $ 268,817 Accrued expenses 54,346 39,747 ------------- -------------- Total Liabilities 396,579 308,564 ------------- -------------- General, Initial and Investor Limited Partners' Equity 24,491,536 26,519,501 Net unrealized gains (losses) on marketable securities 1,053 (99) ------------- -------------- Total Partners' Equity 24,492,589 26,519,402 ------------- -------------- Total Liabilities and Partners' Equity $ 24,889,168 $ 26,827,966 ============= ============== The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS For the Years Ended March 31, 1999, 1998 and 1997
1999 1998 1997 -------------- ------------- ------------- Revenue: Investment $ 96,265 $ 92,781 $ 81,930 Other 7,565 5,351 18,606 ------------- ------------- ------------- Total Revenue 103,830 98,132 100,536 ------------- ------------- ------------- Expenses: Asset management fees, related party (Note 5) 206,220 199,592 193,635 General and administrative (includes reimbursements to an affiliate in the amounts of $77,890, $93,551 and $108,120 in 1999, 1998 and 1997, respectively) (Note 5) 140,575 183,048 195,069 Amortization 39,110 39,944 37,184 ------------- ------------- ------------- Total Expenses 385,905 422,584 425,888 ------------- ------------- ------------- Loss before equity in losses of Local Limited Partnerships (282,075) (324,452) (325,352) Equity in losses of Local Limited Partnerships (Note 3) (1,745,890) (2,083,625) (1,922,556) ------------- ------------- ------------- Net Loss $ (2,027,965) $ (2,408,077) $ (2,247,908) ============= ============= ============= Net Loss allocated to: General Partner $ (20,280) $ (24,081) $ (22,479) Limited Partners (2,007,685) (2,383,996) (2,225,429) ------------- ------------- ------------- $ (2,027,965) $ (2,408,077) $ (2,247,908) ============= ============= ============= Net Loss per Limited Partnership Unit (36,497 Units) $ (55.01) $ (65.32) $ (60.98) ============= ============= =============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY) For the Years Ended March 31, 1999, 1998 and 1997
Net Initial Investor Unrealized General Limited Limited Gains Partner Partner Partners (Losses) Total Balance at March 31, 1996 $ (4,592) $ 100 $ 31,179,978 $ (534) $ 31,174,952 -------- -------- ------------- ----------- ------------- Comprehensive Loss: Net change in net unrealized losses on marketable securities available for sale - - - (16,306) (16,306) Net Loss (22,479) - (2,225,429) - (2,247,908) -------- -------- ------------- ----------- ------------- Comprehensive Loss (22,479) - (2,225,429) (16,306) (2,264,214) -------- -------- ------------- ----------- ------------- Balance at March 31, 1997 (27,071) 100 28,954,549 (16,840) 28,910,738 -------- -------- ------------- ----------- ------------- Comprehensive Income (Loss): Net change in net unrealized losses on marketable securities available for sale - - - 16,741 16,741 Net Loss (24,081) - (2,383,996) - (2,408,077) -------- -------- ------------- ----------- ------------- Comprehensive Income (Loss) (24,081) - (2,383,996) 16,741 (2,391,336) -------- -------- ------------- ----------- ------------- Balance at March 31, 1998 (51,152) 100 26,570,553 (99) 26,519,402 -------- -------- ------------- ----------- ------------- Comprehensive Income (Loss): Net change in net unrealized losses on marketable securities available for sale - - - 1,152 1,152 Net Loss (20,280) - (2,007,685) - (2,027,965) -------- --------- ------------- ----------- ------------- Comprehensive Income (Loss) (20,280) - (2,007,685) 1,152 (2,026,813) -------- --------- -------------- ----------- -------------- Balance at March 31, 1999 $ (71,432) $ 100 $ 24,562,868 $ 1,053 $ 24,492,589 ========= ========= ============= =========== =============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Years Ended March 31, 1999, 1998 and 1997
1999 1998 1997 ------------- ------------- ------------ Cash flows from operating activities: Net Loss $ (2,027,965) $ (2,408,077) $ (2,247,908) Adjustments to reconcile net loss to net cash used for operating activities: Equity in losses of Local Limited Partnerships 1,745,890 2,083,625 1,922,556 Amortization 39,110 39,944 37,184 (Gain) loss on sales and maturities of marketable securities (3,424) 9,053 1,618 Increase (decrease) in cash arising from changes in operating assets and liabilities: Other assets 420 7,452 6,311 Accounts payable to affiliate 73,416 189,923 (2,607) Accrued expenses 14,599 (48,879) 67,768 ------------- ------------- ------------ Net cash used for operating activities (157,954) (126,959) (215,078) ------------- ------------- ------------ Cash flows from investing activities: Investment in Local Limited Partnerships - (451,360) (2,716,626) Restricted cash - 503,031 866,333 Purchases of marketable securities (1,174,765) (1,347,016) (4,152,845) Proceeds from sales and maturities of marketable securities 1,209,947 1,311,156 6,402,126 Payment of acquisition expenses - - (888) Cash distributions received from Local Limited Partnerships 88,836 51,702 18,675 ------------- ------------- ------------ Net cash provided by investing activities 124,018 67,513 416,775 ------------- ------------- ------------ Net increase (decrease) in cash and cash equivalents (33,936) (59,446) 201,697 Cash and cash equivalents, beginning of period 213,966 273,412 71,715 ------------- ------------- ------------ Cash and cash equivalents, end of period $ 180,030 $ 213,966 $ 273,412 ============= ============= ============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS 1. Organization Boston Financial Tax Credit Fund VIII, A Limited Partnership (the "Fund") is a Massachusetts limited partnership organized to invest in other limited partnerships ("Local Limited Partnerships") which own and operate apartment complexes which are eligible for low income housing tax credits which may be applied against the federal income tax liability of an investor. Arch Street VIII Limited Partnership ("Arch Street L.P."), a Massachusetts limited partnership consisting of Arch Street VIII, Inc., a Massachusetts corporation ("Arch Street, Inc.") as the sole general partner and the Boston Financial Group Limited Partnership, a Massachusetts limited partnership as sole limited partner, is the sole General Partner of the Fund. Arch Street L.P. and Arch Street, Inc. are affiliates of The Boston Financial Group Limited Partnership, a Massachusetts limited partnership ("Boston Financial"). An affiliate of Arch Street, L.P. ("SLP Affiliate") is a special limited partner in each Local Limited Partnership in which the Fund invests, with the right to become a general partner under certain circumstances. The fiscal year of the Fund ends on March 31. The Partnership Agreement authorizes the sale of up to 200,000 Units of limited partnership interests ("Units") at $1,000 per Unit in series. The first series offered 50,000 Units. Boston Financial Securities, Inc., an affiliate of the General Partner, has received selling commissions and underwriting advisory fees in the amount of 6.5% and 1.25%, respectively, of Gross Proceeds for Units sold by the entity as a soliciting dealer. On July 29, 1994, the Fund held its final investor closing. In total, the Fund received $36,497,000 of capital contributions from investors admitted as Limited Partners for 36,497 Units. The Partnership Agreement provides that all cash available for distribution will be distributed 99% to the Limited Partners and 1% to the General Partner. Sale or refinancing proceeds generally will be distributed first to the Limited Partners in an amount equal to their adjusted capital contributions; second, to the General Partner in an amount equal to its capital contributions; third, to the General Partner (after payment of the 6% return as set forth in Section 4.2.3 of the Partnership Agreement and, of any accrued but unpaid Subordinated Disposition Fee, a fee equal to 1% of the sales price of a property owned by a Local Limited Partnership) in such amount as is necessary to cause the General Partner to have received 5% of all distributions to the Partners; and lastly, 95% to the Limited Partners and 5% to the General Partner. Profits and losses for tax purposes arising from general operations and tax credits generally will be allocated 99% to the Limited Partners and 1% to the General Partner. However, as set forth in the Partnership Agreement, profits and losses for tax purposes arising from a sale or refinancing generally will be allocated among the Partners in such manner as is necessary to cause their respective capital accounts to reflect the amount that would be distributable to them in accordance with the priorities set forth in the preceding paragraph, if all of the Fund's assets were sold for their federal adjusted basis and the Fund were then liquidated. Under the terms of the Partnership Agreement, the Fund initially designated 5% of the Gross Proceeds from the sale of Units as a reserve for working capital of the Fund and contingencies related to ownership of Local Limited Partnership interests. The General Partner may increase or decrease such amounts from time to time, as it deems appropriate. At March 31, 1999, the General Partner has designated approximately $1,239,000 of marketable securities as such Reserve. 2. Significant Accounting Policies Basis of Presentation The Fund accounts for its investments in Local Limited Partnerships using the equity method of accounting, because the Fund does not have a majority control over the major operating and financial policies of the Local Limited Partnerships in which it invests. Under the equity method, the investment is carried at cost, adjusted for the Fund's share of income or loss of the Local Limited Partnerships, additional investments and cash distributions from the Local Limited Partnerships. Equity in income or loss of the Local Limited Partnerships is included currently in the Fund's operations. The Fund has no obligation to fund liabilities of the Local Limited Partnerships beyond its BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) 2. Significant Accounting Policies (continued) Basis of Presentation (continued) investment, therefore, a Local Limited Partnership's investment will not be carried below zero. To the extent that equity losses are incurred or distributions received when a Local Limited Partnership's respective investment balance has been reduced to zero, the losses will be suspended to be used against future income. Excess investment costs over the underlying net assets acquired have arisen from acquisition fees paid and expenses reimbursed to an affiliate of the Fund. These fees and expenses are included in Investments in Local Limited Partnerships and are being amortized on a straight-line basis over 35 years. The Fund recognizes a decline in the carrying value of its investments in Local Limited Partnerships when there is evidence of a non-temporary decline in the recoverable amount of the investment. There is a possibility that the estimates relating to reserves for non-temporary declines in carrying value of investments in Local Limited Partnerships may be subject to material near term adjustments. The Fund, as a limited partner in the Local Limited Partnerships, is subject to risks inherent in the ownership of property which are beyond its control, such as fluctuations in occupancy rates and operating expenses, variations in rental schedules, proper maintenance and continued eligibility of tax credits. If the cost of operating a property exceeds the rental income earned thereon, the Fund may deem it in its best interest to voluntarily provide funds in order to protect its investment. The General Partners have decided to report results of the Local Limited Partnerships on a 90-day lag basis because the Local Limited Partnerships report their results on a calendar year basis. Accordingly, the financial information about the Local Limited Partnerships that is included in the accompanying financial statements is as of December 31, 1998, 1997 and 1996. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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. Cash Equivalents Cash and cash equivalents consists of short-term money market instruments with maturities of 90 days or less at acquisition and approximate fair value. Marketable Securities The Fund's investments in securities are classified as "Available for Sale" securities and reported at fair value as reported by the brokerage firm at which the securities are held. Realized gains and losses from the sales of securities are based on the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a separate component of partners' equity. Deferred Fees Costs incurred in connection with the organization of the Fund, amounting to $50,000, have been deferred and are completely amortized as of March 31, 1999. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) 2. Significant Accounting Policies (continued) Income Taxes No provision for income taxes has been made as the liability for such taxes is an obligation of the partners of the Fund. Effect of recently issued Accounting Standard The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. The standard requires that changes in comprehensive income be shown in a financial statement that is displayed with the same prominence as other financial statements. The standard is effective for fiscal years beginning after December 15, 1997. The Fund adopted the new standard effective April 1, 1998 and its adoption did not have a significant effect on the Fund's financial position or results of operations. The only component of the Fund's other accumulated comprehensive income is net unrealized gains and losses on marketable securities. In accordance with Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", the Fund has implemented policies and practices for assessing impairment of its real estate assets and investments in Local Limited Partnerships. Each asset is analyzed by real estate experts to determine if an impairment indicator exists. If so, the carrying value is compared to the undiscounted future cash flows expected to be derived from the asset and, if there is a significant impairment in value, a provision to write down the asset to fair value will be charged against income. 3. Investments in Local Limited Partnerships The Fund has acquired an interest in ten Local Limited Partnerships which own and operate multi-family housing complexes. The Fund, as Investor Limited Partner, pursuant to the Local Limited Partnership Agreements, has acquired a 99% interest in the profits, losses, tax credits and cash flows from operations of the Local Limited Partnerships, with the exception of Springwood, Hemlock Ridge, Pike Place and West End Place which are 79.20%, 77%, 90% and 90%, respectively. Another partnership sponsored by an affiliate of the General Partner owns the remaining 19.80% Limited Partnership interest in Springwood. Upon dissolution, proceeds will be distributed according to the partnership agreements. The following is a summary of Investments in Local Limited Partnerships at March 31:
1999 1998 1997 ------------- ------------ ------------ Capital Contributions paid to Local Limited Partnerships $ 29,264,859 $ 29,264,859 $ 28,813,499 Cumulative equity in losses of Local Limited Partnerships (6,794,779) (5,048,889) (2,965,264) Cumulative cash distributions received from Local Limited Partnerships (172,536) (83,700) (31,998) ------------- ------------- ------------ Investments in Local Limited Partnerships before adjustments 22,297,544 24,132,270 25,816,237 Excess of investment cost over the underlying net assets acquired: Acquisition fees and expenses 1,048,010 1,048,010 1,048,010 Accumulated amortization of acquisition fees and expenses (110,889) (80,946) (51,002) ------------- ------------ ------------ Investments in Local Limited Partnerships $ 23,234,665 $ 25,099,334 $ 26,813,245 ============= ============ ============
BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) 3. Investments in Local Limited Partnerships (continued) Summarized financial information as of December 31, 1998, 1997 and 1996 (due to the Fund's policy of reporting the financial information of its Local Limited Partnership interests on a 90 day lag basis) of the ten Local Limited Partnerships in which the Fund was invested in as of the that date is as follows:
Summarized Balance Sheets - as of December 31, 1998 1997 1996 ------------- ------------- ------------- Assets: Investment property, net $ 64,711,442 $ 67,138,525 $ 69,714,031 Current assets 880,542 809,218 975,295 Other assets 2,478,753 2,641,507 2,397,633 ------------- ------------- ------------- Total Assets $ 68,070,737 $ 70,589,250 $ 73,086,959 ============= ============= ============= Liabilities and Partners' Equity: Long-term debt $ 37,318,536 $ 37,840,199 $ 38,197,782 Current liabilities 1,956,075 1,933,699 1,768,369 Other liabilities 5,517,363 5,449,430 5,853,703 ------------- ------------- ------------- Total Liabilities 44,791,974 45,223,328 45,819,854 Fund's Equity 22,537,757 24,115,216 25,784,519 Other Partners' Equity 741,006 1,250,706 1,482,586 ------------- ------------- ------------- Total Liabilities and Partners' Equity $ 68,070,737 $ 70,589,250 $ 73,086,959 ============= ============= ============= Summarized Income Statements - for the year ended December 31, Rental and other income $ 7,809,919 $ 7,474,866 $ 7,594,918 ------------- ------------- ------------- Expenses: Operating 3,805,421 3,805,760 3,691,624 Depreciation and amortization 2,667,667 2,786,344 2,841,824 Interest 3,260,386 3,133,964 3,169,226 ------------- ------------- ------------- Total Expenses 9,733,474 9,726,068 9,702,674 ------------- ------------- ------------- Net Loss $ (1,923,555) $ (2,251,202) $ (2,107,756) ============= ============= ============= Fund's share of Net Loss $ (1,745,890) $ (2,083,625) $ (1,922,556) ============= ============= ============= Other partners' share of Net Loss $ (177,665) $ (167,577) $ (185,200) ============= ============= =============
BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) 3. Investments in Local Limited Partnerships (continued) The Fund's equity as reflected by the Local Limited Partnerships of $22,537,757 differs from the Fund's Investments in Local Limited Partnerships before adjustments of $22,297,544 principally because of differences in miscellaneous items. 4. Marketable Securities A summary of marketable securities is as follows:
Gross Gross Unrealized Unrealized Fair Cost Gains Losses Value Debt securities issued by the US Treasury and other US government corporations and agencies $ 1,149,468 $ 4,588 $ (3,318) $ 1,150,738 Mortgage backed securities 305,097 1,059 (1,276) 304,880 ------------ ----------- ----------- ----------- Marketable securities at March 31, 1999 $ 1,454,565 $ 5,647 $ (4,594) $ 1,455,618 =========== =========== =========== =========== Debt securities issued by the US Treasury and other US government corporations and agencies $1,303,088$ $ 1,575 $ (2,224) $ 1,302,439 Mortgage backed securities 183,235 550 - 183,785 ----------- ----------- ----------- ----------- Marketable securities at March 31, 1998 $ 1,486,323 $ 2,125 $ (2,224) $ 1,486,224 =========== =========== ============ ===========
The contractual maturities at March 31, 1999 are as follows: Fair Cost Value Due in less than one year $ 324,875 $ 326,055 Due in one to five years 824,593 824,683 Mortgage backed securities 305,097 304,880 ----------- ---------- $ 1,454,565 $1,455,618 =========== ========== Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations. Proceeds from the sales of marketable securities were approximately $176,000, $802,000 and $594,000 during the fiscal years ended March 31, 1999, 1998 and 1997, respectively. Proceeds from the maturities of marketable securities were approximately $1,034,000, $509,000 and $5,808,000 during the fiscal years ended March 31, 1999, 1998 and 1997, respectively. Included in investment income are gross gains of $4,411, $2,329 and $257 and gross losses of $987, $11,382 and $1,875 which were realized on the sales during the fiscal years ended March 31, 1999, 1998 and 1997, respectively. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) 5. Transactions with Affiliates In accordance with the Partnership Agreement, the Fund is required to pay certain fees to and reimburse expenses of the General Partner and others in connection with the organization of the Fund and the offering of its Limited Partnership Units. Selling commissions, fees and accountable expenses related to the sale of the Units totaling $4,664,369 have been charged directly to Limited Partners' equity. In connection therewith, $2,828,918 of selling expenses and $1,835,451 of offering expenses incurred on behalf of the Fund have been paid to an affiliate of the General Partner. The Fund may be required to pay a non-accountable expense allowance for marketing expense equal to a maximum of 1% of Gross Proceeds. The Fund has capitalized an additional $50,000 which was reimbursed to an affiliate of the General Partner. Total organization and offering expenses, exclusive of selling commissions and underwriting advisory fees, did not exceed 5.5% of the Gross Proceeds and organizational and offering expenses, inclusive of selling commissions and underwriting advisory fees, did not exceed 15.0% of the Gross Proceeds. In accordance with the Partnership Agreement, the Fund is required to pay acquisition fees to and reimburse acquisition expenses of the General Partner or its affiliates for selecting, evaluating, structuring, negotiating and closing the Fund's investments in Local Limited Partnerships. Acquisition fees total 6.0% of Gross Proceeds. Acquisition expenses, which include such expenses as legal fees and expenses, travel and communications expenses, costs of appraisals, accounting fees and expenses, were expected to total 1.5% of Gross Proceeds. Acquisition fees totaling $2,189,820 have been paid to an affiliate of the General Partner for the closing of the Fund's Local Limited Partnership Investments. Approximately $1,477,000 of these fees are classified as capital contributions to Local Limited Partnerships in Note 3 to the Financial Statements. Acquisition expenses totaling $335,196 at March 31, 1999 have been reimbursed to an affiliate of the General Partner. An affiliate of the General Partner receives the base amount of 0.565% (as adjusted by the CPI factor) of Gross Proceeds annually as an Asset Management Fee for administering the affairs of the Fund. Asset Management Fees of $206,220, $199,592 and $193,635 for the years ended March 31, 1999, 1998 and 1997, respectively, have been included in expenses. Included in accounts payable to affiliates at March 31, 1999 and 1998 is $327,111 and $255,527 of Asset Management Fees due to an affiliate of the General Partner. An affiliate of the General Partner is reimbursed for the actual cost of the Fund's operating expenses. Included in general and administrative expenses for the years ended March 31, 1999, 1998 and 1997, is $77,890, $93,551 and $108,120, respectively, that the Fund has paid as reimbursement for salaries and benefits. As of March 31, 1999 and 1998, $15,122 and $13,290, respectively, is payable to an affiliate of the General Partner for salaries and benefits. BFPM, an affiliate of the Managing General Partner, currently manages Beaverdam Creek, a property in which the Fund has invested. The property management fee charged is equal to 4% of cash receipts. Included in operating expenses in the summarized income statements in Note 3 to the Financial Statements is $34,183 and $29,440 of fees earned by BFPM for the years ended December 31, 1998 and 1997, respectively. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) 6. Federal Income Taxes A reconciliation of the loss reported in the Statements of Operations for the fiscal years ended March 31, 1999, 1998 and 1997 to the loss reported for federal income tax purposes for the years ended December 31, 1998, 1997 and 1996 is as follows:
1999 1998 1997 ------------- ------------- -------------- Net Loss per Statement of Operations $ (2,027,965) $ (2,408,077) $ (2,247,908) Adjustment for equity in losses of Local Limited Partnerships for financial reporting purposes under equity in losses for tax purposes (415,055) (782,833) (557,984) Adjustment to reflect March 31, fiscal year-end to December 31, tax year-end (21,788) 33,895 (7,036) Related party expenses not paid at December 31, not deductible for tax purposes 407,821 204,761 95,955 Related party expenses paid in current year but expensed for financial reporting purposes in prior year (204,761) (95,955) (46,853) Adjustment for amortization for financial reporting Purposes under amortization for tax purposes (8,166) (8,165) (10,925) ------------- ------------- -------------- Net Loss for federal income tax purposes $ (2,269,914) $ (3,056,374) $ (2,774,751) ============= ============= ==============
The differences in the assets and liabilities of the Fund for financial reporting purposes and tax reporting purposes for the year ended March 31, 1999 are as follows:
Financial Tax Reporting Reporting Purposes Purposes Differences Investments in Local Limited Partnerships $ 23,234,665 $ 21,103,905 $ 2,130,760 ============= ============== ============= Other assets $ 1,654,503 $ 6,584,853 $ (4,930,350) ============= ============= ============= Liabilities $ 396,579 $ 48,139 $ 348,440 ============= ============= =============
The differences in assets and liabilities of the Fund for financial reporting purposes are primarily attributable to: (i) the cumulative equity in losses from Local Limited Partnerships for tax reporting purposes is approximately $1,979,000 greater than for financial reporting purposes; (ii) the amortization of acquisition fees for tax return purposes exceeds financial reporting purposes by approximately $21,000; (iii) organizational and offering costs of approximately $4,664,000 that have been capitalized for tax reporting purposes are charged to Limited Partners' equity for financial reporting purposes; and (iv) related party expenses which are deductible for financial reporting purposes of approximately $327,000 but are not deductible for tax reporting purposes. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (continued) 6. Federal Income Taxes (continued) The differences in the assets and liabilities of the Fund for financial reporting purposes and tax purposes for the year ended March 31, 1998 are as follows:
Financial Tax Reporting Reporting Purposes Purposes Differences Investments in Local Limited Partnerships $ 25,099,334 $ 23,389,613 $ 1,709,721 ============= ============= ============= Other assets $ 1,728,632 $ 6,557,459 $ (4,828,827) ============= ============= ============= Liabilities $ 308,564 $ 36,539 $ 272,025 ============= ============= =============
The differences in assets and liabilities of the Fund for financial reporting purposes are primarily attributable to: (i) the cumulative equity in losses from Local Limited Partnerships for tax reporting purposes is approximately $1,564,000 greater than for financial reporting purposes; (ii) the amortization of acquisition fees for tax return purposes exceeds financial reporting purposes by approximately $13,000; (iii) organizational and offering costs of approximately $4,664,000 that have been capitalized for tax reporting purposes are charged to Limited Partners' equity for financial reporting purposes; and (iv) related party expenses which are deductible for financial reporting purposes of approximately $205,000 but are not deductible for tax reporting purposes. Boston Financial Tax Credit Fund VIII, A Limited Partnership Schedule III - Real Estate and Accumulated Depreciation of Property owned by Local Limited Partnerships In which Registrant has Invested at March 31, 1999 GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1998 COST OF INTEREST AT ACQUISITION DATE ---------------------------------------------------------------- NET IMPROVEMENTS NUMBER TOTAL BUILDINGS / CAPITALIZED OF ENCUM- IMPROVEMENTS SUBSEQUENT TO DESCRIPTION UNITS BRANCES * LAND & EQUIPMENT ACQUISITION LAND - ----------- ----- --------- ---- ----------- ----------- ---- Low and Moderate Income Apartment Complexes Green Wood Apartments 164 $5,179,303 $412,500 $7,774,612 $735,923 $412,500 Gallatin, TN Webster Court Apartments 92 2,835,486 296,423 5,003,633 10,461 296,423 Kent, WA Springwood Apartments (2) 113 3,894,649 296,280 2,937,028 4,257,987 296,280 Tallahassee, FL Meadowwood of Pella 30 1,110,733 101,910 1,135,077 790,234 88,909 Pella, IA Hemlock Ridge 100 2,105,654 42,368 6,327,906 1,762,698 42,368 Livingston Manor, NY Pike Place Apartments 144 3,303,163 312,000 5,336,336 8,164 312,000 Fort Smith, AR West End Place 120 2,914,729 250,000 4,681,280 0 250,000 Springdale, AR Oak Knoll Renaissance 256 5,320,816 1 1,346,557 9,263,385 222,591 Gary, IN Beaverdam Creek 120 3,333,911 360,000 499,907 6,680,217 1,256,840 Mechanicsville, VA Live Oak Plantation 218 7,793,227 1,767,000 1,998,509 10,200,852 1,792,680 West Palm Beach, FL ========================================================================================== $37,791,671 $3,838,482 $37,040,845 $33,709,921 $4,970,591 1,357 ==========================================================================================
(1) Total aggregate cost for Federal Income Tax purposes is approximately $74,765,000. (2) Boston Financial Tax Credit Fund VIII has an 80% ownership interest in Springwood Apartments, A Limited Partnership * Mortgage notes payable generally represent non-recourse financing of low-income housing projects payable with terms of up to 40 years with interest payable at rates ranging from 1.0% to 10.62%. The Partnership has not guaranteed any of these mortgage notes payable. Boston Financial Tax Credit Fund VIII, A Limited Partnership Schedule III - Real Estate and Accumulated Depreciation of Property owned by Local Limited Partnerships In which Registrant has Invested at March 31, 1999 GROSS AMOUNT AT WHICH CARRIED AT DECEMBER 31, 1998 ------------------------------------------------- LIFE ON WHICH BUILDINGS DEPRECIATION AND ACCUMULATED DATE IS COMPUTED DATE DESCRIPTION IMPROVEMENTS TOTAL DEPRECIATION BUILT (YEARS) ACQUIRED - ----------- ------------ ----- ------------ ----- ------- -------- Low and Moderate Income Apartment Complexes Green Wood Apartments $8,510,535 $8,923,035 $1,280,714 2/95 10 & 30 years 3/02/94 Gallatin, TN Webster Court Apartments 5,014,094 $5,310,517 554,610 8/94 40 & 12 years 5/13/94 Kent, WA Springwood Apartments (2) 7,195,015 $7,491,295 1,575,413 9/95 10 & 30 years 12/15/94 Tallahassee, FL Meadowwood of Pella 1,938,312 $2,027,221 196,464 8/95 Useful Lives 6/03/94 Pella, IA Hemlock Ridge 8,090,604 $8,132,972 1,263,109 5/95 Useful Lives 4/29/94 Livingston Manor, NY Pike Place Apartments 5,344,500 $5,656,500 839,428 12/94 7 & 27.5 years 1/31/94 Fort Smith, AR West End Place 4,681,280 $4,931,280 723,967 12/94 7 & 27.5 years 1/12/94 Springdale, AR Oak Knoll Renaissance 10,387,352 $10,609,943 1,389,623 11/95 Useful Lives 11/01/94 Gary, IN Beaverdam Creek 6,283,284 $7,540,124 806,651 9/95 Useful Lives 11/16/94 Mechanicsville, VA Live Oak Plantation 12,173,681 $13,966,361 1,247,827 11/95 Useful Lives 6/28/94 West Palm Beach, FL ================================================= $69,618,657 $74,589,248 $9,877,806 =================================================
Summary of property owned and accumulated depreciation: Real Estate Investments 1998 1997 1996 - ------------------------------- ---------------- -------------------- ------------------ Balance at beginning of period $ $ $ 74,470,985 74,361,818 74,142,268 Additions during period 118,263 109,167 219,550 Less retirements during period 0 0 0 ------------------ ================ ==================== Balance at close of period $ $ $ 74,589,248 74,470,985 74,361,818 ================ ==================== ================== Accumulated Depreciation 1998 1997 1996 - ------------------------------- ---------------- -------------------- ------------------ Balance at beginning of period $ $ $ 7,332,460 4,647,787 1,959,465 Depreciation 2,545,346 2,684,673 2,688,322 Less retirements 0 0 0 ================ ==================== ================== Balance at close of period $ $ $ 9,877,806 7,332,460 4,647,787 ================ ==================== ==================
BOSTON FINANCIAL TAX CREDIT FUND VIII (A Limited Partnership) Annual Report on form 10-K For The Year Ended March 31, 1999 Reports of Independent Auditors Beaverdam [Letterhead] [LOGO] L.P. Martin & Company A Professional Corporation Independent Auditor's Report To the Partners of Virginia Housing Development Authority Beaverdam Creek Associates, L.P. Richmond, VA We have audited the accompanying balance sheet of Beaverdam Creek Associates, L.P., a Virginia Limited Partnership (the "Partnership") as of December 31, 1998 and the related statements of profit and loss, changes in partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Beaverdam Creek Associates, L.P. as of December 31, 1998, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated January 31, 1999 on our consideration of Beaverdam Creek Associates' internal control over financial reporting, and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The additional information required by the Virginia Housing Authority included herein is presented for the purpose of additional analysis and is not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ L.P. Martin & Company, P.C. L.P. Martin & Company, P.C. January 31, 1999 Lead Auditor Name: W. Barclay Bradshaw [Letterhead] [LOGO] Keiter, Stevens, Hurst, Gary & Shreaves A Professional Corporation REPORT OF INDEPENDENT AUDITORS To the Partners of Beaverdam Creek Associates, L.P. We have audited the accompanying statement of assets, liabilities and partners' capital of Beaverdam Creek Associates, L.P., a Virginia Limited Partnership (the "Partnership") as of December 31, 1997 and the related statements of changes in partners' capital accounts, profit and loss, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities and partners' capital of Beaverdam Creek Associates, L.P. as of December 31, 1997, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated January 27, 1998 on our consideration of Beaverdam Creek Associates' internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The supporting data required by the Virginia Housing Authority included herein is presented for the purposes of additional analysis and is not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Keiter, Stevens, Hurst, Gary & Shreaves Keiter, Stevens, Hurst, Gary & Shreaves Richmond, Virginia January 27, 1998 [Letterhead] [LOGO] Keiter, Stevens, Hurst, Gary & Shreaves A Professional Corporation REPORT OF INDEPENDENT AUDITORS To the Partners of Beaverdam Creek Associates, L.P. We have audited the accompanying statement of assets, liabilities and partners' capital of Beaverdam Creek Associates, L.P., a Virginia Limited Partnership (the "Partnership") as of December 31, 1996 and the related statements of changes in partners' capital accounts, profit and loss, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities and partners' capital of Beaverdam Creek Associates, L.P. as of December 31, 1996, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The supporting data required by the Virginia Housing Authority included herein is presented for the purposes of additional analysis and is not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Keiter, Stevens, Hurst, Gary & Shreaves Keiter, Stevens, Hurst, Gary & Shreaves Richmond, Virginia January 29, 1997 Green Wood [Letterhead] [LOGO] KPMG Peat Marwick LLP Independent Auditors' Report The Partners Green Wood Apartments, A Limited Partnership: We have audited the accompanying balance sheets of Green Wood Apartments, A Limited Partnership as of December 31, 1998 and 1997, and the related statements of loss, partners' capital (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Green Wood Apartments, A Limited Partnership as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP Atlanta, GA February 26, 1999 [Letterhead] [LOGO] KPMG Peat Marwick LLP Independent Auditors' Report The Partners Green Wood Apartments, A Limited Partnership: We have audited the balance sheets of Green Wood Apartments, A Limited Partnership as of December 31, 1997 and 1996, and the related statements of loss, partners' capital (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Green Wood Apartments, A Limited Partnership as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP Atlanta, GA February 16, 1998 [Letterhead] [LOGO] KPMG Peat Marwick LLP Independent Auditors' Report The Partners Green Wood Apartments, A Limited Partnership: We have audited the balance sheets of Green Wood Apartments, A Limited Partnership as of December 31, 1996 and 1995, and the related statements of loss, partners' capital (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of Green Wood Apartments, A Limited Partnership as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP Atlanta, GA February 7, 1997 Webster [Letterhead] [LOGO] HASSON LAIBLE & CO., P.S. INDEPENDENT AUDITOR'S REPORT To the General Partners of Webster Court Apartments Limited Partnership: We have audited the accompanying balance sheet of Webster Court Apartments, Limited Partnership, a Washington Limited Partnership, as of December 31, 1998, and the related statements of income and partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Webster Court Apartments, Limited Partnership as of December 31, 1998 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Hasson Laible & Co. Seattle, Washington February 26, 1999 [Letterhead] [LOGO] HASSON LAIBLE & CO., P.S. INDEPENDENT AUDITOR'S REPORT To the General Partners of Webster Court Apartments Limited Partnership: We have audited the accompanying balance sheet of Webster Court Apartments, Limited Partnership, a Washington Limited Partnership, as of December 31, 1997, and the related statements of income and partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Webster Court Apartments, Limited Partnership as of December 31, 1997 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Hasson Laible & Co. Seattle, Washington February 9, 1998 [Letterhead] [LOGO] HASSON LAIBLE & CO., P.S. INDEPENDENT AUDITOR'S REPORT To the General Partners of Webster Court Apartments Limited Partnership: We have audited the accompanying balance sheet of Webster Court Apartments, Limited Partnership, a Washington Limited Partnership, as of December 31, 1996, and the related statements of income and partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Webster Court Apartments, Limited Partnership as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Hasson Laible & Co. Seattle, Washington March 31, 1997 Springwood [Letterhead] [LOGO] KPMG Peat Marwick LLP Independent Auditors' Report The Partners Springwood Apartments, A Limited Partnership: We have audited the accompanying balance sheets of Springwood Apartments, A Limited Partnership as of December 31, 1998 and 1997 and the related statements of loss, partners' capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Springwood Apartments, A Limited Partnership as of December 31, 1998 and 1997 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP Atlanta, GA February 26, 1999 [Letterhead] [LOGO] KPMG Peat Marwick LLP Independent Auditors' Report The Partners Springwood Apartments, A Limited Partnership: We have audited the accompanying balance sheets of Springwood Apartments, A Limited Partnership as of December 31, 1997 and 1996 and the related statements of loss, partners' capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Springwood Apartments, A Limited Partnership as of December 31, 1997 and 1996 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP Atlanta, GA February 16, 1998 [Letterhead] [LOGO] KPMG Peat Marwick LLP Independent Auditors' Report The Partners Springwood Apartments, A Limited Partnership: We have audited the accompanying balance sheets of Springwood Apartments, A Limited Partnership as of December 31, 1996 and 1995, and the related statements of loss, partners' capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Springwood Apartments, A Limited Partnership as of December 31, 1996 and 1995 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ KPMG Peat Marwick LLP Atlanta, GA February 7, 1997 RMH [Letterhead] [LOGO] Reznick Fedder & Silverman INDEPENDENT AUDITORS' REPORT To the Partners RMH Associates, L.P. We have audited the accompanying balance sheets of RMH Associates, L.P. as of December 31, 1998 and 1997, and the related statements of income and expense analysis of income sufficiency, partner's equity (deficit) and cash flows in the form prescribed by New York State Division of Housing and Community Renewal (DHCR) for the year ended December 31, 1998. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of RMH Associates, L.P. as of December 31, 1998 and 1997, and the results of its operations, changes in partner's equity (deficit) and its cash flows for the year ended December 31, 1998, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 26 through 39 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for the information marked "unaudited", on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated February 5, 1999 on our consideration of RMH Associates, L.P. internal control structure and on its compliance with specific requirements applicable to non major HUD programs and fair housing and non-discrimination.. /s/Reznick Fedder & Silverman Bethesda, Maryland Federal Employer February 5, 1999 Identification Number: 52-1088612 Audit Principal: Lester A. Kanis [Letterhead] [LOGO] Reznick Fedder & Silverman INDEPENDENT AUDITORS' REPORT To the Partners RMH Associates, L.P. We have audited the accompanying balance sheets of RMH Associates, L.P. as of December 31, 1997 and 1996, and the related statements of income and expense and cash flows in the form prescribed by New York State Division of Housing and Community Renewal (DHCR) for the year 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 conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of RMH Associates, L.P. as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the year ended December 31, 1997, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information on pages 27 through 40 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for the information marked "unaudited", on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated January 24, 1998 on our consideration of RMH Associates, L.P. internal control structure and on its compliance with specific requirements applicable to non major HUD programs, affirmative fair housing, and laws and regulations applicable to the financial statements. /s/Reznick Fedder & Silverman Bethesda, Maryland Federal Employer January 24, 1998 Identification Number: 52-1088612 Audit Principal: Lester A. Kanis [Letterhead] [LOGO] Reznick Fedder & Silverman INDEPENDENT AUDITORS' REPORT To the Partners RMH Associates, L.P. We have audited the accompanying balance sheets of RMH Associates, L.P. as of December 31, 1996 and 1995, and the related statements of income and expense and cash flows in the form prescribed by New York State Division of Housing and Community Renewal (DHCR) for the year ended December 31, 1996. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of RMH Associates, L.P. as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the year ended December 31, 1996, in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information on pages 27 through 40 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for the information marked "unaudited", on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated February 4, 1997 on our consideration of RMH Associates, L.P. internal control structure and on its compliance with specific requirements applicable to non major HUD programs, affirmative fair housing, and laws and regulations applicable to the financial statements. /s/Reznick Fedder & Silverman Bethesda, Maryland Federal Employer February 4, 1997 Identification Number: 52-1088612 Audit Principal: Lester A. Kanis meadow wood [Letterhead] [LOGO] VMcHC & S Vroman, McGowen, Hurst, Clark & Smith, P.C. INDEPENDENT AUDITOR'S REPORT To the Partners Meadow Wood Associates of Pella, L.P. Des Moines, Iowa We have audited the accompanying balance sheets of Meadow Wood Associates of Pella, L.P. (a limited partnership), as of December 31, 1998 and 1997, and the related statements of operations, partners' capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Meadow Wood Associates of Pella, L.P., as of December 31, 1998 and 1997, and the results of its operations, changes in its partners' capital, and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ Vroman, McGowen, Hurst, Clark & Smith, P.C. Des Moines, Iowa January 30, 1999 [Letterhead] [LOGO] VMcHC & S Vroman, McGowen, Hurst, Clark & Smith P.C. INDEPENDENT AUDITOR'S REPORT To the Partners Meadow Wood Associates of Pella, L.P. Des Moines, Iowa We have audited the accompanying balance sheets of Meadow Wood Associates of Pella, L.P. (a limited partnership), as of December 31, 1997 and 1996, and the related statements of operations, partners' capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Meadow Wood Associates of Pella, L.P., as of December 31, 1997 and 1996, and the results of its operations, changes in its partners' capital, and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ Vroman, McGowen, Hurst, Clark & Smith P.C. Des Moines, Iowa January 31, 1998 [Letterhead] [LOGO] VMcHC & S Vroman, McGowen, Hurst, Clark & Smith P.C. INDEPENDENT AUDITOR'S REPORT To the Partners Meadow Wood Associates of Pella, L.P. Des Moines, Iowa We have audited the accompanying balance sheets of Meadow Wood Associates of Pella, L.P. (a limited partnership), as of December 31, 1996 and 1995, and the related statements of operations, partners' capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Meadow Wood Associates of Pella, L.P., as of December 31, 1996 and 1995, and the results of its operations, changes in its partners' capital, and its cash flows for the years then ended, in conformity with generally accepted accounting principles. /s/ Vroman, McGowen, Hurst, Clark & Smith P.C. Des Moines, Iowa January 31, 1997 PIKE PLACE [Letterhead] [LOGO] Rick J. Tanneberger Certified Public Accountant Independent Auditor's Report The Partners Pike Place, A Limited Partnership We have audited the accompanying balance sheets of Pike Place, A Limited Partnership, as of December 31, 1998 and 1997, and the related statements of income, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pike Place, A Limited Partnership as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information presented on page 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/Rick J. Tanneberger Rick J. Tanneberger Certified Public Accountant Fayetteville, AR February 8, 1999 [Letterhead] [LOGO] Rick J. Tanneberger Certified Public Accountant Independent Auditor's Report The Partners Pike Place, A Limited Partnership We have audited the accompanying balance sheets of Pike Place, A Limited Partnership, as of December 31, 1997 and 1996, and the related statements of income, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pike Place, A Limited Partnership as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information presented on page 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/Rick J. Tanneberger Rick J. Tanneberger Certified Public Accountant Fayetteville, AR January 31, 1998 [Letterhead] [LOGO] Rick J. Tanneberger Certified Public Accountant Independent Auditor's Report The Partners Pike Place, A Limited Partnership We have audited the accompanying balance sheets of Pike Place, A Limited Partnership, as of December 31, 1996 and 1995, and the related statements of income, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pike Place, A Limited Partnership as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information presented on page 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/Rick J. Tanneberger Rick J. Tanneberger Certified Public Accountant Fayetteville, AR February 13, 1997 WEST END [LOGO] Rick J. Tanneberger Certified Public Accountant Independent Auditor's Report The Partners West End Place, A Limited Partnership We have audited the accompanying balance sheets of West End Place, A Limited Partnership, as of December 31, 1998 and 1997, and the related statements of income, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of West End Place, A Limited Partnership as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information presented on page 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/Rick J. Tanneberger Rick J. Tanneberger Certified Public Accountant Fayetteville, AR February 10, 1999 [LOGO] Rick J. Tanneberger Certified Public Accountant Independent Auditor's Report The Partners West End Place, A Limited Partnership We have audited the accompanying balance sheets of West End Place, A Limited Partnership, as of December 31, 1997 and 1996, and the related statements of income, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of West End Place, A Limited Partnership as of December 31, 1997 and 1996, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information presented on page 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/Rick J. Tanneberger Rick J. Tanneberger Certified Public Accountant Fayetteville, AR January 31, 1998 [Letterhead] [LOGO] Rick J. Tanneberger Certified Public Accountant Independent Auditor's Report The Partners West End Place, A Limited Partnership We have audited the accompanying balance sheets of West End Place, A Limited Partnership, as of December 31, 1996 and 1995, and the related statements of income, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of West End Place, A Limited Partnership as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information presented on page 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/Rick J. Tanneberger Rick J. Tanneberger Certified Public Accountant Fayetteville, AR February 12, 1997 OAK KNOLL [Letterhead] [LOGO] Haran & Associates Ltd Certified Public Accountants INDEPENDENT AUDITOR'S REPORT To the Partners HUD Field Office Director OAK KNOLL RENAISSANCE LIMITED PARTNERSHIP Indianapolis, Indiana Gary, Indiana We have audited the accompanying balance sheet of OAK KNOLL RENAISSANCE LIMITED PARTNERSHIP (a Limited Partnership) as of December 31, 1998, and the related statements of profit and loss, changes in partners' equity and statement of cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of OAK KNOLL RENAISSANCE LIMITED PARTNERSHIP as of December 31, 1998, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. The accompanying supplementary information shown on Page 13 through 17 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Haran & Associates Ltd Haran & Associates Ltd Certified Public Accountants Wilmette, Illinois Illinois Certificate No. 060-002892 Employer Identification No. 36-3097692 Audit Partner: W. Garrett Heinl (847) 853-2576 January 15, 1999 [Letterhead] [LOGO] Haran & Associates Ltd Certified Public Accountants INDEPENDENT AUDITOR'S REPORT To the Partners OAK KNOLL RENAISSANCE LIMITED PARTNERSHIP Gary, Indiana We have audited the accompanying balance sheet of OAK KNOLL RENAISSANCE LIMITED PARTNERSHIP (a Limited Partnership) as of December 31, 1997, and the related statements of profit and loss, changes in partners' equity and statement of cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of OAK KNOLL RENAISSANCE LIMITED PARTNERSHIP as of December 31, 1997, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. The accompanying supplementary information shown on Page 15 through 18 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Haran & Associates Ltd Haran & Associates Ltd Certified Public Accountant Wilmette, Illinois Illinois Certificate No. 060-002892 Employer Identification No. 36-3097692 January 16, 1998 [Letterhead] [LOGO] Haran & Associates Ltd Certified Public Accountants INDEPENDENT AUDITOR'S REPORT To the Partners OAK KNOLL RENAISSANCE LIMITED PARTNERSHIP Gary, Indiana We have audited the accompanying balance sheet of OAK KNOLL RENAISSANCE LIMITED PARTNERSHIP (a Limited Partnership) as of December 31, 1996, and the related statements of profit and loss, changes in partners' equity and statement of cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion the financial statements referred to above present fairly, in all material respects, the financial position of OAK KNOLL RENAISSANCE LIMITED PARTNERSHIP as of December 31, 1996, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. The accompanying supplementary information shown on Page 16 through 20 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Haran & Associates Ltd Haran & Associates Ltd Certified Public Accountant Wilmette, Illinois Illinois Certificate No. 060-002892 Employer Identification No. 36-3097692 January 18, 1997 PALM BEACH [Letterhead] [LOGO] Reznick Fedder & Silverman INDEPENDENT AUDITORS' REPORT To the Partners Schickendanz Bros. - Palm Beach Ltd. We have audited the accompanying balance sheet of Schickendanz Bros. - Palm Beach Ltd. as of December 31, 1998, and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Schickendanz Bros. - Palm Beach Ltd., as of December 31, 1998, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/Reznick Fedder & Silverman Atlanta, Georgia January 22, 1999 [Letterhead] [LOGO] Reznick Fedder & Silverman INDEPENDENT AUDITORS' REPORT To the Partners Schickendanz Bros. - Palm Beach Ltd. We have audited the accompanying balance sheet of Schickendanz Bros. - Palm Beach Ltd. as of December 31, 1997, and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Schickendanz Bros. - Palm Beach Ltd., as of December 31, 1997, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/Reznick Fedder & Silverman Atlanta, Georgia January 21, 1998 [Letterhead] [LOGO] Reznick Fedder & Silverman INDEPENDENT AUDITORS' REPORT To the Partners Schickendanz Bros. - Palm Beach Ltd. We have audited the accompanying balance sheet of Schickendanz Bros. - Palm Beach Ltd. as of December 31, 1996, and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Schickendanz Bros. - Palm Beach Ltd., as of December 31, 1996, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/Reznick Fedder & Silverman Atlanta, Georgia January 21, 1997 FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT SCHICKEDANZ BROS. - PALM BEACH LTD. DECEMBER 31, 1996 Schickedanz Bros. - Palm Beach Ltd. TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS' REPORT 3 FINANCIAL STATEMENTS BALANCE SHEET 4 STATEMENT OF OPERATIONS 6 STATEMENT OF PARTNERS' EQUITY 7 STATEMENT OF CASH FLOWS 8 NOTES TO FINANCIAL STATEMENTS 9 INDEPENDENT AUDITORS' REPORT To the Partners Schickedanz Bros. - Palm Beach Ltd. We have audited the accompanying balance sheet of Schickedanz Bros. - Palm Beach Ltd., as of December 31, 1996, and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Schickedanz Bros. - Palm Beach Ltd., as of December 31, 1996, and the results of its operations, and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/Reznick Fedder & Silverman Atlanta, Georgia January 21, 1997 Schickedanz Bros. - Palm Beach Ltd. BALANCE SHEET December 31, 1996 ASSETS
Current Assets Cash $ 59,637 Tenants accounts receivable 40,978 Prepaid insurance 17,646 Prepaid expenses - other 520 ----------------- ----------------- Total Current Assets 118,781 Reserves and Deposits Reserve for replacements 53,757 Tax and insurance escrow 65,895 Total Reserves and Deposits 119,652 Fixed Assets Land 1,792,680 Building 11,711,351 Furniture and equipment 460,689 Total Fixed Assets 13,964,720 Less accumulated depreciation (497,671) 13,467,049 Other Assets Organization costs, net of accumulated amortization of $3,919 13,712 Compliance monitoring fees, net of accumulated amortization of $919 17,471 Letter of credit fees, net of accumulated amortization of $1,665 1,665 Loan fees, net of accumulated amortization of $10,217 224,446 Total Other Assets 257,294 $ 13,962,776
(Continued) See notes to financial statements BALANCE SHEET (Continued) December 31, 1996 LIABILITIES AND PARTNERS' EQUITY
Current Liabilities Accounts payable $ 25,306 Tenant security deposits 73,402 Accrued interest payable 123,556 Accrued management fees 12,986 Total Current Liabilities 235,250 Long-Term Debt Note payable - Newport Mortgage 6,471,047 Note payable - HOME 1,416,000 Developer fee payable 939,704 Total Long-Term Liabilities 8,826,751 Partners' Equity 4,900,775 Total Liabilities and Partners' Equity $ 13,962,776 STATEMENT OF OPERATIONS Year ended December 31, 1996 Revenue Rental income $ 1,429,450 Other income 34,241 1,463,691 Expenses Administrative expenses Advertising 5,049 Office salaries 33,156 Management fees 74,074 Professional fees 32,566 Commissions 950 Office expenses 14,604 Tenant bad debts 55,043 General administrative 2,263 Tenant credit reports 497 Total administrative expenses 218,202 Operating and maintenance Repairs and maintenance 84,647 Utilities 89,689 Janitorial and cleaning 48,036 Trash removal 28,469 Exterminating 3,869 Total operating and maintenance 254,710 Taxes and insurance Real estate taxes 137,695 Payroll taxes 8,025 Property and liability insurance 60,843 Worker's compensation 4,458 Health insurance and other benefits 9,049 Other taxes and insurance 4,501 Total taxes and insurance 224,571 Interest on mortgage notes 750,959 Income from operations before depreciation and amortization 15,249 Depreciation expense 375,083 Amortization expense 84,159 Net loss $ (443,993)
STATEMENT OF PARTNERS' EQUITY Year ended December 31, 1996
General Partner Limited Partners Total Balance, December 31, 1995 $ (2,270) $ 3,762,210 $ 3,759,940 Capital contributions - 1,587,953 1,587,953 Distributions - (3,125) (3,125) Net loss (4,440) (439,553) (443,993) Balance, December 31, 1996 $ (6,710) $ 4,907,485 $ 4,900,775 Partnership percentage 1% 99% 100%
STATEMENT OF CASH FLOWS Year ended December 31, 1996
Cash flows from operating activities Net loss $ (443,993) Adjustments to reconcile net loss to net cash provided by operating activities Depreciation 375,083 Amortization 84,159 Decrease (increase) in assets Tenants accounts receivable 15,815 Prepaid insurance 10,509 Prepaid expenses - other (520) Tax and insurance escrow (65,895) Increase (decrease) in liabilities Accounts payable (965) Accrued management fees 12,986 Tenant security deposits 880 Real estate tax payable (14,871) Accrued interest payable 86,006 Net cash provided by operating activities 59,194 Cash flows from investing activities Compliance monitoring fees (18,390) Deposits to reserve for replacements (53,757) Net cash used in financing activities (72,147) Cash flows from financing activities Capital contributions received 1,587,953 Distributions paid (3,125) Payments of amounts due to affiliates (1,767,295) Developer fee paid (460,296) Decrease in accounts payable - development (105,784) Proceeds from note payable - Newport Mortgage 6,471,047 Increase in loan costs (174,926) Letter of credit fees (3,330) Proceeds from note payable - HOME 29,560 Payoff of note payable - First Housing (5,501,399) Net cash provided by financing activities 72,405 NET INCREASE IN CASH 59,452 Cash, beginning 185 Cash, end $ 59,637 Supplemental disclosure of cash flow information Cash paid during the year for interest $ 664,953
NOTES TO FINANCIAL STATEMENTS December 31, 1996 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The partnership was formed as a limited partnership on June 22, 1994 under the laws of the State of Florida, for the purpose of acquiring, constructing, developing and operating a low-income residential housing project. The project consists of 218 rental units located in West Palm Beach, Florida, and is currently operating under the name Live Oak Plantation Apartments. The project consists of 6 buildings which have each qualified for and been allocated low-income housing credits pursuant to Internal Revenue Code Section 42, ("Section 42"), which regulates the use of the project as to occupant eligibility and unit gross rent, among other requirements. Each building of the project must meet the provisions of these regulations during each of 15 consecutive years in order to remain qualified to receive the credits. In addition, Schickedanz Bros. - Palm Beach Ltd., has executed a Land Use Restriction Agreement which requires the utilization of the project pursuant to Section 42 for a minimum of 35 years, even after disposition of the project by the partnership. A summary of significant accounting policies follows. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Rental Property Rental property is carried at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets of operations over seven to forty years by use of the straight-line method for financial reporting purposes. Amortization Organization costs are amortized over 60 months using the straight-line method. Compliance monitoring fees are amortized over the 15 year compliance period. Letter of credit fees are amortized over the term of the letter of credit. Schickedanz Bros. - Palm Beach Ltd. NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 1996 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Loan fees are amortized over the term of the mortgage loan using the straight-line method. Rental Income Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the partnership and tenants of the property are operating leases. Income Taxes No provision or benefit for income taxes has been included in these financial statements since taxable income or loss passes through to, and is reportable by, the partners individually. NOTE B - PARTNERSHIP CONTRIBUTIONS The partnership has one general partner, Schickedanz Enterprises, Inc., which has a 1 percent partnership interest, and two investor limited partners, Boston Financial Tax Credit Fund VIII and SLP, Inc., which collectively have an aggregate 99 percent partnership interest. The partnership agreement requires Boston Financial Tax Credit Fund VIII to make five capital contribution installments totaling $5,615,000 subject to any low-income housing tax credit adjustments Due to the deferral of the start of the credit period until 1996, the final capital contribution was reduced by $27,047. Capital contributions totaling $1,587,953 were received during the year. As of December 31, 1996, all required limited partner capital contributions after credit adjustment have been received. NOTE C - LONG-TERM DEBT The partnership entered into a construction loan agreement on June 28, 1994, with the principal amount not to exceed $6,150,000 with First Housing Development Corporation of Florida. This loan was refinanced on June 28, 1996. The new loan is with Newport Mortgage company, L.P., in the original amount of $6,493,000. The loan bears interest at 8.94 percent and is payable in monthly interest and principal installments of $51,964 until maturity on July 7, 2026. As of December 31, 1996, $6,471,047 is outstanding on the mortgage. NOTE C - LONG-TERM DEBT The partnership has a second mortgage note in an amount not to exceed $1,531,000 with the Florida Housing Finance Agency. The note bears interest at the Applicable Federal Rate for long-term obligations in effect under Internal Revenue Code Section 1274 (d)(1). Interest is payable at the rate of 3 percent on June 30th of each year commencing in 1995. Deferred interest is compounded annually and is due together with the principal balance on February 28, 2025. As of December 31, 1996, $1,416,000 is outstanding under the loan. The liability of the partnership under the above loans are limited to the underlying value of the real estate collateral, improvements, easements or other interests, assignment of rents, assignment of leases, and personal property. Aggregate annual maturities of the mortgage payable over each of the next five years are as follows: December 31, 1997 $ 42,875 1998 50,944 1999 55,690 2000 60,878 2001 66,549 NOTE D - RELATED PARTY TRANSACTIONS Management Agreement The partnership has entered into a management agreement and an incentive management agreement under which the general partner has agreed to provide management, operational, supervisory, maintenance, consultive, bookkeeping, financial, and reporting services to the partnership. Under the agreement, the partnership is required to pay the general partner management fees equal to 5 percent of gross collections as defined. During 1996, management fees of $74,074 were charged to operations, of which $12,986 are payable at December 31, 1996. NOTE D - RELATED PARTY TRANSACTIONS (Continued) During the investor pay-in period, the managing general partner is entitled to receive an annual, noncumulative incentive management fee equal to 6 percent of gross revenues, as defined. The incentive management fee is payable only to the extent of cash flow available for distribution as defined in the partnership agreement. This fee will not be earned or paid until any outstanding Project expense loans have been repaid and until any outstanding recapture amount has been paid to the investor limited partner under the terms of the partnership agreement. No incentive management fees were paid during 1996. Development Fees On September 26, 1994, the partnership entered into a development agreement with Thirteen Development Corporation, an affiliate of the general partner, for services in connection with the development of the project. During 1996, an amendment to the development agreement was executed replacing the former developer, Thirteen Development corporation with the successor developer, Schickedanz Bros. - Pheasant Run Ltd., an affiliate of the general partner. This amendment discharged the former developer of all rights and responsibilities and bestowed these rights and responsibilities on the successor developer. The development agreement provides for a fee of up to $1,400,000. As of December 31, 1996, the partnership's liability under this agreement was $939,704. Operating Deficit Guaranty Pursuant to the partnership agreement, the general partner and its two of affiliates, Thirteen Development Corporation and Schickedanz Bros., Inc. are required to loan the partnership amounts to cover operating deficits of the project until repayment of the $1,531,000 Florida HOME loan. NOTE E - COMMITMENTS AND CONTINGENCIES The project's low-income housing credits are contingent on its ability to maintain compliance with applicable sections of Section 42. Failure to maintain compliance with occupant eligibility, and/or unit gross rent, or to correct noncompliance within a specified time period could result in recapture of previously taken tax credits plus interest. FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT SCHICKEDANZ BROS. - PALM BEACH, LTD. DECEMBER 31, 1997 Schickedanz Bros. - Palm Beach, Ltd. TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS' REPORT 3 FINANCIAL STATEMENTS BALANCE SHEET 4 STATEMENT OF OPERATIONS 6 STATEMENT OF PARTNERS' EQUITY 7 STATEMENT OF CASH FLOWS 8 NOTES TO FINANCIAL STATEMENTS 9 - 3 - INDEPENDENT AUDITORS' REPORT To the Partners Schickedanz Bros. - Palm Beach, Ltd. We have audited the accompanying balance sheet of Schickedanz Bros. - Palm Beach, Ltd., as of December 31, 1997, and the related statements of operations, partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Schickedanz Bros. Palm Beach, Ltd., as of December 31, 1997, and the results of its operations, and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/Reznick Fedder & Silverman Atlanta, Georgia January 21, 1998 Schickedanz Bros. - Palm Beach, Ltd. See notes to financial statements - 4 -
BALANCE SHEET December 31, 1997 - -------------------------------------------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Current Assets - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Cash $ 43,421 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Tenants accounts receivable 29,816 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Prepaid insurance 15,506 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- ----------------- ----------------- Total Current Assets 88,743 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Reserves and Deposits - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Reserve for replacements 75,441 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Tax and insurance escrow 243,950 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Total Reserves and Deposits 319,391 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Fixed Assets - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Land 1,792,680 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Building 11,711,351 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Furniture and equipment 460,689 - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Total Fixed Assets 13,964,720 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Less accumulated depreciation (872,749) - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ 13,091,971 - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Other Assets - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Organization costs, net of accumulated amortization of $9,798 9,798 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Compliance monitoring fees, net of accumulated amortization of $2,145 16,245 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Letter of credit fees, net of accumulated amortization of $4,671 1,341 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Loan fees, net of accumulated amortization of $25,400 208,830 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Total Other Assets 236,214 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- $ 13,736,319 - -------------------------------------------------------------------------------------------------------------------- See notes to financial statements - 8 - BALANCE SHEET (Continued) December 31, 1997 - -------------------------------------------------------------------------------------------------------------------- LIABILITIES AND PARTNERS' EQUITY - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- Current Liabilities - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Accounts payable $ 35,008 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Tenant security deposits 69,129 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Prepaid rents 5,422 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Due to affiliate 18,978 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Accrued management fees 11,394 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Accrued interest payable 241,546 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Accrued real estate taxes 173,734 - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Total Current Liabilities 555,211 - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Long-Term Debt - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Note payable - Newport Mortgage 6,428,231 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Note payable - HOME 1,416,000 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Developer fee payable 939,704 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Total Long-Term Liabilities 8,783,935 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Commitments and Contingencies - - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Partners' Equity 4,397,173 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- $ 13,736,319 - --------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS Year ended December 31, 1997 - -------------------------------------------------------------------------------------------------------------------- Revenue - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Rental income $ 1,390,102 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Other income 28,200 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- 1,418,302 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Operating Expenses - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Administrative expenses - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Advertising 2,162 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Office salaries 38,916 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Management fees 70,914 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Professional fees 12,751 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Office expenses 11,932 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Tenant bad debts 85,468 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- General administrative 2,071 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Tenant credit reports 895 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Total administrative expenses 225,109 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Repairs and maintenance - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Repairs and maintenance 196,142 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Utilities 102,970 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Janitorial and cleaning 52,941 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Trash removal 28,311 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Exterminating 2,508 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Total repairs and maintenance 382,872 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Taxes and insurance - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Real estate taxes 151,615 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Payroll taxes 8,152 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Property and liability insurance 49,536 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Workers' compensation 4,641 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Health insurance and other benefits 11,480 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Other taxes and insurance 623 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Total taxes and insurance 226,047 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Interest on mortgage notes 689,032 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Total operating expenses 1,523,060 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Loss from operations before depreciation and amortization (104,758) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Depreciation expense 375,078 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Amortization expense 23,766 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Net loss $ (503,602) - --------------------------------------------------------------------------------------------------------------------
STATEMENT OF PARTNERS' EQUITY Year ended December 31, 1997 - -------------------------------------------------------------------------------------------------------------------- General Partner Limited Partners Total - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1996 $ (6,710) $ 4,907,485 $ 4,900,775 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------ - ------------------------------------------------------------ Net loss (5,036) (498,566) (503,602) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1997 $ (11,746) $ 4,408,919 $ 4,397,173 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Partnership percentage 1% 99% 100% - --------------------------------------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS Year ended December 31, 1997
- -------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Net loss $ (503,602) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Adjustments to reconcile net loss to net cash provided by 375,078 operating activities Depreciation - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Amortization 23,766 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Decrease (increase) in assets - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Tenants accounts receivable 11,162 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Prepaid insurance 2,140 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Prepaid expenses - other 520 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Tax and insurance escrow (178,055) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Increase (decrease) in liabilities - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Accounts payable 40,074 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Accrued management fees (12,986) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Tenant security deposits (4,273) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Real estate tax payable 173,734 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Accrued interest payable 117,990 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Prepaid rents 5,422 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 50,970 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Deposits to reserve for replacements (29,975) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Withdrawals from reserve for replacement 8,291 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (21,684) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Loan repayments (42,816) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Letter of credit fees (2,686) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (45,502) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- NET DECREASE IN CASH (16,216) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Cash, beginning 59,637 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Cash, ending $ 43,421 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Supplemental disclosure of cash flow information 571,042 Cash paid during the year for interest $ - --------------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS December 31, 1997 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Schickedanz Bros. - Palm Beach, Ltd., (the "Partnership") was formed as a limited partnership on June 22, 1994 under the laws of the state of Florida, for the purpose of acquiring, constructing, developing, and operating a low-income residential housing project Live Oak Plantation Apartments (the "Project") consists of 218 rental units located in West Palm Beach, Florida. The Project consists of 6 buildings which have each qualified for and been allocated low-income housing tax credits pursuant to Internal Revenue Code Section 42 ("Section 42"), which regulates the use of the Project as to occupant eligibility and unit gross rent, among other requirements. Each building of the Project must meet the provisions of these regulations during each of 15 consecutive years in order to remain qualified to receive the credits. In addition, Schickedanz Bros. - Palm Beach, Ltd., has executed a Land Use Restriction Agreement which requires the utilization of the Project pursuant to Section 42 for a minimum of 35 years, even after disposition of the Project by the Partnership. A summary of significant accounting policies follows. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Rental Property Rental property is carried at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets of operations over seven to forty years by use of the straight-line method for financial reporting purposes. Schickedanz Bros. - Palm Beach, Ltd. NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 1997 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Amortization Organization costs are amortized over 60 months using the straight-line method. Compliance monitoring fees are amortized over the 15 year compliance period. Letter of credit fees are amortized over the term of the letter of credit. Loan fees are amortized over the term of the mortgage loan using the straight-line method. Rental Income Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Partnership and tenants of the property are operating leases. Income Taxes No provision or benefit for income taxes has been included in these financial statements since taxable income or loss passes through to, and is reportable by, the partners individually. NOTE B - LONG-TERM DEBT The Partnership has a first mortgage in the original amount of $6,493,000 with Newport Mortgage Company, L.P. The loan bears interest at 8.94 percent and is payable in monthly interest and principal installments of $51,964 until maturity on July 7, 2026. As of December 31, 1997, $6,428,231 is outstanding on the mortgage. The Partnership has a second mortgage note in an amount not to exceed $1,531,000 with the Florida Housing Finance Agency under the HOME Investment Partnership Program. The note bears interest at the Applicable Federal Rate for long-term obligations in effect under Internal Revenue Code Section 1274 (d)(1). Interest is payable at the rate of 3 percent on June 30th of each year commencing in 1995. Deferred interest is compounded annually and is due together with the principal balance on February 28, 2025. As of December 31, 1997, $1,416,000 is outstanding under the loan. NOTE B - LONG-TERM DEBT (Continued) The liability of the Partnership under the above loans is limited to the underlying value of the real estate collateral, improvements, easements or other interests, assignment of rents, assignment of leases, and personal property. Aggregate annual maturities of the mortgage payable over each of the next five years are as follows: - -------------------------------------------------------------------------------- HOME Loan Newport Mortgage Total - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- December 31, 1998 $ - $ 50,944 $ 50,944 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 1999 - 55,690 55,690 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2000 - 60,878 60,878 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2001 - 66,549 66,549 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2002 - 72,748 72,748 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Thereafter 1,416,000 6,121,422 7,537,422 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- $ 1,416,000 $ 6,428,231 $ 7,844,231 - -------------------------------------------------------------------------------- NOTE C - RELATED PARTY TRANSACTIONS Management Agreement The Partnership has entered into a management agreement and an incentive management agreement under which the general partner has agreed to provide management, operational, supervisory, maintenance, consultive, bookkeeping, financial, and reporting services to the Partnership. Under the agreement, the Partnership is required to pay the general partner management fees equal to 5 percent of gross collections as defined. During 1997, management fees of $70,914 were charged to operations. NOTE C - RELATED PARTY TRANSACTIONS (Continued) The managing general partner is entitled to receive an annual, noncumulative incentive management fee equal to 6 percent of gross revenues, as defined. The incentive management fee is payable only to the extent of cash flow available for distribution as defined in the partnership agreement. This fee will not be earned or paid until any outstanding project expense loans have been repaid and until any outstanding recapture amount has been paid to the investor limited partner under the terms of the partnership agreement. No incentive management fees were paid during 1997. Development Fees On September 26, 1994, the Partnership entered into a development agreement with Thirteen Development Corporation, an affiliate of the general partner, for services in connection with the development of the Project. During 1996, an amendment to the development agreement was executed replacing the former developer, Thirteen Development Corporation with the successor developer, Schickedanz Bros. - Pheasant Run Ltd., an affiliate of the general partner. This amendment discharged the former developer of all rights and responsibilities and bestowed these rights and responsibilities on the successor developer. As of December 31, 1997, the maximum developer fee has been incurred and the partnership's liability under this agreement was $939,704. This liability is expected to be repaid from future cash flow as set forth in the partnership agreement. NOTE D - COMMITMENTS AND CONTINGENCIES The Project's low-income housing tax credits are contingent on its ability to maintain compliance with applicable sections of Section 42. Failure to maintain compliance with occupant eligibility, and/or unit gross rent, or to correct noncompliance within a specified time period could result in recapture of previously taken tax credits plus interest. Pursuant to its mortgage agreement, the Partnership is required to deposit $2,725 monthly, or $32,700 annually to a reserve for replacements. All required deposits have been made. - 13 - NOTE D - COMMITMENTS AND CONTINGENCIES (Continued) Pursuant to the HOME loan, the Partnership is required to rent at least 32 units to tenants whose income does not exceed 50 percent of Palm Beach County median annual income. This requirement must be met for a period of 35 years. Pursuant to the partnership agreement, the general partner is required to loan the Partnership amounts to cover operating deficits of the Project. The liability is limited to $550,000 for the first four years after the development obligation date and then it is limited to $100,000 until dissolution of the Partnership. Operating deficit loans are non-interest bearing and are repayable in accordance with the terms of the partnership agreement. FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT SCHICKEDANZ BROS. - PALM BEACH, LTD. DECEMBER 31, 1998 Schickedanz Bros. - Palm Beach, Ltd. TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS' REPORT 3 FINANCIAL STATEMENTS BALANCE SHEET 4 STATEMENT OF OPERATIONS 6 STATEMENT OF PARTNERS' EQUITY 7 STATEMENT OF CASH FLOWS 8 NOTES TO FINANCIAL STATEMENTS 9 INDEPENDENT AUDITORS' REPORT To the Partners Schickedanz Bros. - Palm Beach, Ltd. We have audited the accompanying balance sheet of Schickedanz Bros. - Palm Beach, Ltd., as of December 31, 1998, and the related statements of operations, partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Schickedanz Bros. - Palm Beach, Ltd., as of December 31, 1998, and the results of its operations, and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/Reznick Fedder & Silverman Atlanta, Georgia January 22, 1999 Schickedanz Bros. - Palm Beach, Ltd. See notes to financial statements BALANCE SHEET December 31, 1998
- -------------------------------------------------------------------------------------------------------------------- ASSETS - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Current Assets - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Cash $ 3,693 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Tenants accounts receivable 15,963 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Prepaid insurance 16,638 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- ----------------- ----------------- Total Current Assets 36,294 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Reserves and Deposits - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Reserve for replacements 54,976 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Tax and insurance escrow 70,146 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Total Reserves and Deposits 125,122 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Fixed Assets - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Land 1,792,680 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Building 11,711,351 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Furniture and equipment 462,330 - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Total Fixed Assets 13,966,361 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Less accumulated depreciation (1,247,827) - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ 12,718,534 - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Other Assets - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Utility deposits 2,160 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Organization costs, net of accumulated amortization of $13,717 5,874 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Compliance monitoring fees, net of accumulated amortization of $3,371 15,019 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Letter of credit fees, net of accumulated amortization of $6,011 1,250 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Loan fees, net of accumulated amortization of $41,015 193,230 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Total Other Assets 217,533 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- $ 13,097,483 - --------------------------------------------------------------------------------------------------------------------
See notes to financial statements
Schickedanz Bros. - Palm Beach, Ltd. BALANCE SHEET (Continued) December 31, 1998 - -------------------------------------------------------------------------------------------------------------------- LIABILITIES AND PARTNERS' EQUITY - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- Current Liabilities - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Accounts payable $ 73,275 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Tenant security deposits 54,582 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Accrued management fees 5,634 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Accrued interest payable 310,945 - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Total Current Liabilities 444,436 - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ ----------------- - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Long-Term Debt - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Note payable - Newport Mortgage 6,377,227 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Note payable - HOME 1,416,000 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Developer fee payable 939,704 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Total Long-Term Liabilities 8,732,931 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Commitments and Contingencies - - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Partners' Equity 3,920,116 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- $ 13,097,483 - --------------------------------------------------------------------------------------------------------------------
Schickedanz Bros. - Palm Beach, Ltd. STATEMENT OF OPERATIONS Year ended December 31, 1998 - -------------------------------------------------------------------------------------------------------------------- Revenue - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Rental income $ 1,399,167 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Other income 40,936 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- 1,440,103 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Operating Expenses - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Administrative expenses - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Advertising 6,978 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Office salaries 41,876 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Management fees 72,098 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Professional fees 3,659 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Office expenses 6,578 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Tenant bad debts 117,095 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- General administrative 750 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Tenant credit reports 926 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Security 30,991 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Total administrative expenses 280,951 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Repairs and maintenance - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Repairs and maintenance 122,017 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Utilities 118,965 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Janitorial and cleaning 53,457 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Trash removal 26,239 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Exterminating 1,971 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Total repairs and maintenance 322,649 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Taxes and insurance - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Real estate taxes 153,163 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Payroll taxes 8,836 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Property and liability insurance 48,783 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Workers' compensation 5,036 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Health insurance and other benefits 14,293 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Other taxes and insurance 586 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Total taxes and insurance 230,697 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Interest on mortgage notes 684,444 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Total operating expenses 1,518,741 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Loss from operations before depreciation and amortization (78,638) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Depreciation expense 375,078 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Amortization expense 23,341 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Net loss $ (477,057) - --------------------------------------------------------------------------------------------------------------------
Schickedanz Bros. - Palm Beach, Ltd. STATEMENT OF PARTNERS' EQUITY Year ended December 31, 1998 - -------------------------------------------------------------------------------------------------------------------- General Partner Limited Partners Total - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1997 $ (11,746) $ 4,408,919 $ 4,397,173 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------ - ------------------------------------------------------------ Net loss (4,771) (472,286) (477,057) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Balance, December 31, 1998 $ (16,517) $ 3,936,633 $ 3,920,116 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Partnership percentage 1% 99% 100% - --------------------------------------------------------------------------------------------------------------------
Schickedanz Bros. - Palm Beach, Ltd. STATEMENT OF CASH FLOWS Year ended December 31, 1998 - -------------------------------------------------------------------------------------------------------------------- Cash flows from operating activities - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Net loss $ (477,057) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Adjustments to reconcile net loss to net cash provided by 375,078 operating activities Depreciation - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Amortization 23,341 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Decrease (increase) in assets - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Tenants accounts receivable 13,853 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Prepaid insurance (1,132) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Utility deposits (2,160) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Tax and insurance escrow 173,804 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Increase (decrease) in liabilities - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Accounts payable 38,267 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Accrued management fees (5,760) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Tenant security deposits (14,547) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Real estate tax payable (173,734) - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Accrued interest payable 69,399 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Prepaid rents (5,422) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 13,930 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Purchases of equipment (1,641) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Deposits to reserve for replacements (32,700) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Withdrawals from reserve for replacements 53,165 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Net cash provided by investing activities 18,824 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Loan repayments (51,004) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Letter of credit fees (2,500) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Payments to affiliates (18,978) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (72,482) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- NET DECREASE IN CASH (39,728) - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Cash, beginning 43,421 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Cash, ending $ 3,693 - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------
Schickedanz Bros. - Palm Beach, Ltd. NOTES TO FINANCIAL STATEMENTS December 31, 1998 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Schickedanz Bros.-Palm Beach,Ltd., (the "Partnership") was formed as a limited partnership on June 22, 1994 under the laws of the state of Florida, for the purpose of acquiring, constructing, developing, and operating a low-income residential housing project. Live Oak Plantation Apartments (the "Project") consists of 218 rental units located in West Palm Beach, Florida. The Project consists of 6 buildings which have each qualified for and been allocated low-income housing tax credits pursuant to Internal Revenue Code Section 42 ("Section 42"), which regulates the use of the Project as to occupant eligibility and unit gross rent, among other requirements. Each building of the Project must meet the provisions of these regulations during each of 15 consecutive years in order to remain qualified to receive the credits. In addition, Schickedanz Bros. - Palm Beach, Ltd., has executed a Land Use Restriction Agreement which requires the utilization of the Project pursuant to Section 42 for a minimum of 35 years, even after disposition of the Project by the Partnership. A summary of significant accounting policies follows. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Rental Property Rental property is carried at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets of operations over seven to forty years by use of the straight-line method for financial reporting purposes. Schickedanz Bros. - Palm Beach, Ltd. NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 1998 NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Amortization Organization costs are amortized over 60 months using the straight-line method. Compliance monitoring fees are amortized over the 15 year compliance period using the straight-line method. Letter of credit fees are amortized over the term of the letter of credit using the straight-line method. Loan fees are amortized over the term of the mortgage loan using the straight-line method. Rental Income Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Partnership and tenants of the property are operating leases. Income Taxes No provision or benefit for income taxes has been included in these financial statements since taxable income or loss passes through to, and is reportable by, the partners individually. NOTE B - LONG-TERM DEBT The Partnership has a first mortgage in the original amount of $6,493,000 with Newport Mortgage Company, L.P. The loan bears interest at 8.94 percent and is payable in monthly interest and principal installments of $51,964 until maturity on July 7, 2026. The Partnership has a second mortgage note in an amount not to exceed $1,531,000 with the Florida Housing Finance Agency under the HOME Investment Partnership Program. The note bears interest at the Applicable Federal Rate for long-term obligations in effect under Internal Revenue Code Section 1274 (d)(1). Interest is payable at the rate of 3 percent on June 30th of each year commencing in 1995. Deferred interest is compounded annually and is due together with the principal balance on February 28, 2025. As of December 31, 1998, $1,416,000 is outstanding under the loan. Schickedanz Bros. - Palm Beach, Ltd. NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 1998 NOTE B - LONG-TERM DEBT (Continued) The liability of the Partnership under the above loans is limited to the underlying value of the real estate collateral, improvements, easements or other interests, assignment of rents, assignment of leases, and personal property. Aggregate annual maturities of the mortgage payable over each of the next five years are as follows:
- ------------------------------------------------------------------------------------------------ Newport Mortgage HOME Loan Total - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ December 31, 1999 $ 55,690 $ - $ 55,690 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ 2000 60,878 - 60,878 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ 2001 66,549 - 66,549 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ 2002 72,748 - 72,748 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ 2003 79,525 - 79,525 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Thereafter 6,041,837 1,416,000 7,457,837 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ $ 6,377,227 $ 1,416,000 $ 7,793,227 - ------------------------------------------------------------------------------------------------
NOTE C - RELATED PARTY TRANSACTIONS Management Agreement The Partnership has entered into a management agreement and an incentive management agreement under which the general partner has agreed to provide management, operational, supervisory, maintenance, consultive, bookkeeping, financial, and reporting services to the Partnership. Under the agreement, the Partnership is required to pay the general partner management fees equal to 5 percent of gross collections as defined. The managing general partner is entitled to receive an annual, noncumulative incentive management fee equal to 6 percent of gross revenues, as defined. The incentive management fee is payable only to the extent of cash flow available for distribution as defined in the partnership agreement. This fee will not be earned or paid until any outstanding project expense loans have been repaid and until any outstanding recapture amount has been paid to the investor limited partner under the terms of the partnership agreement. No incentive management fees were paid during 1998. Schickedanz Bros. - Palm Beach, Ltd. NOTES TO FINANCIAL STATEMENTS (Continued) December 31, 1998 NOTE C - RELATED PARTY TRANSACTIONS (Continued) Development Fees On September 26, 1994, the Partnership entered into a development agreement with Thirteen Development Corporation, an affiliate of the general partner, for services in connection with the development of the Project. During 1996, an amendment to the development agreement was executed replacing the former developer, Thirteen Development Corporation with the successor developer, Schickedanz Bros. - Pheasant Run Ltd., an affiliate of the general partner. This amendment discharged the former developer of all rights and responsibilities and bestowed these rights and responsibilities on the successor developer. The remaining liability is to be repaid from future cash flow as set forth in the partnership agreement. NOTE D - COMMITMENTS AND CONTINGENCIES The Project's low-income housing tax credits are contingent on its ability to maintain compliance with applicable sections of Section 42. Failure to maintain compliance with occupant eligibility, and/or unit gross rent, or to correct noncompliance within a specified time period could result in recapture of previously taken tax credits plus interest. Pursuant to its mortgage agreement, the Partnership is required to deposit $2,725 monthly, or $32,700 annually to a reserve for replacements. All required deposits have been made. Pursuant to the HOME loan, the Partnership is required to rent at least 32 units to tenants whose income does not exceed 50 percent of Palm Beach County median annual income. This requirement must be met for a period of 35 years. Pursuant to the partnership agreement, the general partner is required to loan the Partnership amounts to cover operating deficits of the Project. The liability is limited to $550,000 for the first four years after the development obligation date and then it is limited to $100,000 until dissolution of the Partnership. Operating deficit loans are non-interest bearing and are repayable in accordance with the terms of the partnership agreement. EX-27 2 TCVIII FINANCIAL DATA SCHEDULE FOR FY 1999 10-K
5 12-MOS MAR-31-1999 MAR-31-1999 180,030 1,455,618 000 000 000 000 000 000 24,889,168 000 000 000 000 000 24,492,589 24,889,168 000 103,830 000 000 385,905 000 000 000 000 000 000 000 000 (2,027,965) (55.01) 000 Total assets includes: Investments in Local Limited Partnerships of $23,234,665, and Other assets of $18,855. Total liabilities and equity include: Accounts payable to affiliate of $342,233 and Accrued expenses of $54,346. Total revenue includes: Investment of $96,265 and Other of $7,565. Other expenses include: Asset management fees of $206,220, General and administrative of $140,575, and Amortization of $39,110. Net loss includes: Equity in losses of Local Limited Partnerships of $1,745,890.
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