EX-99 7 laurelc.txt EXHIBIT 99.23 SIGNIFICANT SUB LAUREL CREEK LAUREL CREEK APARTMENTS (A California Limited Partnership) AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2003 LAUREL CREEK APARTMENTS AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2003 TABLE OF CONTENTS ----------------- Page -------- Independent Auditors' Report 1 Balance Sheet 2 Statement of Income, Expenses and Changes in Partners' Capital 3 Statement of Cash Flows 4 Notes to Financial Statements 5 WALLACE ROWE & Associates Accounting Firm ================================================================================ 430 Verbena Court Pleasant Hill, CA 94523 (925) 229-1950 Fax (925) 229-1952 wroweassoc@ aol.com INDEPENDENT AUDITORS' REPORT To the Board of Directors Laurel Creek Apartments San Luis Obispo, California We have audited the accompanying balance sheet of Laurel Creek Apartments (A California Limited Partnership) as of December 31, 2003 and December 31, 2002 and the related statements of income, expenses, and changes in partners' capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnerships' 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 Laurel Creek Apartments as of December 31, 2003 and December 31, 2002, and the results of its operations for the years then ended in conformity with generally accepted accounting principles. /s/Wallace Rowe & Associates January 23, 2004 LAUREL CREEK APARTMENTS BALANCE SHEET DECEMBER 31, 2003 AND 2002
2003 2002 ------------------ ------------------ ASSETS CURRENT ASSETS Cash (Note 2) $ 57,316 $ 47,077 Accounts receivable 215 820 Prepaid expenses 2,652 1,760 ------------------ ------------------- TOTAL CURRENT ASSETS 60,183 49,657 Restricted reserves (Note 3) 55,209 50,022 Land, structures and equipment, net of accumulated depreciation of $669,9B3 and $601,947 (Note 4) 1,495,371 1,563,407 Organizational costs, net of accumulated amortization of $17,329 and $15,661 (Note 5) 9,589 11,257 ------------------ ------------------- TOTAL ASSETS $ 1,620,352 $ 1,674,343 ================== =================== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES Accounts payable - other $ 8,564 $ 6,836 Accounts payable - related party (Note 7) 2,007 1,666 Security deposits payable 8,592 8,438 Current portion of long-term debt (Note 6) 31,336 35,701 ------------------ ------------------- TOTAL CURRENT LIABILITIES 50,499 52,641 Long-term debt (Note 6) 544,925 573,491 ------------------ ------------------- TOTAL LIABILITIES 595,424 626,132 Partners' capital 1,024,928 1,048,211 ------------------ ------------------- TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,620,352 $ 1,674,343 ================== ===================
See accompanying notes. 2 LAUREL CREEK APARTMENTS STATEMENT OF INCOME, EXPENSES AND CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
2003 2002 ------------------ ------------------- OPERATING INCOME Rental income $ 205,982 $ 194,199 Tenant charges 1,043 1,769 Other 2,034 1,226 ------------------ ------------------- TOTAL OPERATING INCOME 209,059 197,194 ------------------ ------------------- OPERATING EXPENSES Administration 20,953 20,319 Insurance and taxes 5,660 5,307 Maintenance 28,676 54,090 Utilities 22,674 21,627 Depreciation and amortization 69,704 69,304 ------------------ ------------------- TOTAL EXPENSES 147,667 171,047 ------------------ ------------------- NET INCOME (LOSS) FROM OPERATIONS 61,392 26,147 ------------------ ------------------- OTHER INCOME AND EXPENSES Interest income 1,614 2,072 Interest expense (43,596) (47,020) ------------------ -------------------- NET OTHER INCOME UNDER EXPENSES (41,982) (44,948) ------------------ -------------------- 19,410 (18,801) NET INCOME (LOSS) BEGINNING PARTNERS' CAPITAL 1,048,211 1,095,824 Partner withdrawals (42,693) (28,812) ------------------ -------------------- ENDING PARTNERS' CAPITAL $ 1,024,928 $ 1,048,211 ================== ===================
See accompanying notes. 3 LAUREL CREEK APARTMENTS STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2003 AND 2002
2003 2002 ------------------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Rents received $ 206,590 $ 194,429 Other operating revenues 3,077 1,769 Cash payments for goods and services (76,786) (104,975) ------------------- -------------------- Net cash provided (used) by operating activities 132,881 91,223 ------------------- -------------------- CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Increases in security deposits 154 178 Additions (uses) of replacement reserves (4,800) (17,603) ------------------- -------------------- Net cash provided (used) by noncapital financing activities (4,646) (17,425) ------------------- -------------------- CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES; Capital withdrawals (42,693) (28,812) Payment of debt (32,931) (1,410) ------------------- -------------------- Net cash provided (used) by capital and related financing activities (75,624) (30,222) ------------------- -------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Interest received 1,224 2,072 Interest paid on notes (43,596) (47,020) ------------------- -------------------- Net cash provided (used) by investing activities (42,372) (44,948) ------------------- -------------------- NET INCREASE (DECREASE) IN CASH 10,239 (1,372) CASH - BEGINNING OF YEAR 47,077 48,449 ------------------- -------------------- CASH - END OF YEAR $ 57,316 $ 47,007 =================== ==================== RECONCILIATION OF OPERATING LOS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income from operations $ 61,392 $ 26,147 Adjustments to reconcile net loss to Net cash provided by operating activities: Depreciation and amortization 69,704 69,704 Decrease in accounts receivable 608 230 Increase in prepaid expenses (892) (587) Increase in accounts payable - other 2,813 (1,447) Decrease in accounts payable - related parties (744) (2,824) ------------------- -------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 132,881 $ 91,223 =================== ==================== See accompanying notes.
4 LAUREL CREEK APARTMENTS NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2003 Note 1 - DEFINITION OF REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Laurel Creek Apartments is a California Limited Partnership which was formed on May 17, 1994. The partnership was formed to construct, acquire, own, operate, maintain, manage, lease, sell, mortgage or otherwise dispose of a 24 unit apartment complex located in the City of San Luis Obispo,, California. As of the report date there are two partners in the partnership, consisting of one general and one limited partner. Summary of Significant Accounting Policies a. Basis of accounting The partnership is accounted for on the accrual basis of accounting. Under this method revenues are recognized when they are earned and expenses are recognized when they are incurred. b. Fixed assets and depreciation Fixed assets are carried at cost. Expenditures for the fixed assets are capitalized. Maintenance and repairs are charged to operations. Depreciation is calculated using the straight-line basis over the estimated useful lives. c. Income taxes Taxable income or expenses and related tax credits are not reflected as expenses or credits of the partnership. These items are the responsibilities of the individual partners. 5 LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 (Continued) Note 2- CASH Cash consists of $56,486 deposited into savings or checking accounts, and $830 is on deposit with the State of California Local Agency Investment Fund. At December 31, 2003 the amount deposited into the savings accounts and the Local Agency Investment Fund earned interest at rates from.5% to 1.56% respectively. Note 3- RESTRICTED CASH Restricted cash consists of $55,209 maintained in a money market account earning 2.02%. Reserves for replacement of structures and equipment totals $44,019 and $11,190 is reserved for repayment of tenant security deposits. Note 4- LAND, STRUCTURES AND EQUIPMENT Property and equipment and accumulated depreciation consist of the following: Accumulated Cost Depreciation ----------- ------------ Land $ 275,000 $ - Building 1,868,634 648,308 Equipment 21,720 21,675 ----------- ------------ $ 2,165,354 $ 669,983 =========== ============ Note 5- ORGANIZATION COSTS Organization costs and accumulated amortization consist of the following: Accumulated Cost Amortization ----------- ------------ Organization costs $ 26,918 $ 17,329 =========== ============ 6 LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 (Continued) Note 6 - NOTE PAYABLE The Agency has a mortgage note payable to the First Bank of San Luis Obispo. The note requires principal and interest payments totaling $6,385 each month until 5/18/2009. The note bears interest at 7.25% per annum. The following is a schedule of the debt payment requirements to maturity: Year ending December 31 2004 $ 76,620 2005 76,620 2006 76,620 2007 76,620 2008 76,620 Thereafter 378,436 ----------------- Total 761,536 Less amounts representing interest 185,275 ----------------- $ 576,261 ================= Note 7 - RELATED PARTIES The accounting and administrative functions of the partnership are performed by employees of the Housing Authority of the City of San Luis Obispo (the Authority). Two members of the general partner's (San Luis Obispo Nonprofit Housing Corporation) board of directors are also members of the board of commissioner's of the Housing Authority of the City of San Luis Obispo. At December 31, 2003 the partnership owed the Authority $2,007. During the year ended December 31, 2003, the partnership paid the Authority $24,302 in maintenance expenses and management fees. 7 LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 (Continued) Note 8 - LAND DONATION AND LEASE The land upon which the Laurel Creek Apartments were built was originally leased from the City of San Luis Obispo (the City) by the Housing Authority of the City of San Luis Obispo (the Authority). This lease agreement was later assigned from the Authority to the San Luis Obispo Nonprofit Housing Corporation (the Corporation). The lease was later assigned to the Laurel Creek Apartments Partnership. Each of the above mentioned agencies have common board members or in some other manner have oversight responsibilities over the other organizations; which would qualify them as related parties. The lease expires on April 29, 2046, The provisions for extending or renewing the lease term are not specified and are contingent upon the continuation of the project being used to provide affordable housing to lower income families. The annual lease payments are $1 per year. The land was recorded on the Agency's books of accounts at the appraised value on the date the land was assigned to the Agency. This appraised value was $275,000. The value of the land was also recorded as a capital contribution from the general partner on that date. 8