EX-99 6 laurelc04.txt EXHIBIT 99 LAUREL CREEK AUDIT LAUREL CREEK APARTMENTS (A California Limited Partnership) AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2004 LAUREL CREEK APARTMENTS AUDITED FINANCIAL STATEMENTS DECEMBER 31, 2004 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, 2004 and December 31, 2003 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, 2004 and December 31, 2003, and the results of its operations for the years then ended in conformity with generally accepted accounting principles. /s/Wallace Rowe & Associates ---------------------------- February 8, 2005 LAUREL CREEK APARTMENTS BALANCE SHEET DECEMBER 31, 2004 AND 2003
2004 2003 ------------------ ------------------ ASSETS CURRENT ASSETS Cash (Note 2) $ 66,297 $ 59,914 Accounts receivable 1,249 215 Prepaid expenses 3,335 2,652 ------------------ ------------------- TOTAL CURRENT ASSETS 70,881 62,781 Restricted reserves (Note 3) 55,350 52,611 Land, structures and equipment, net of accumulated depreciation of $737,972 and $699,947 (Note 4) 1,427,382 1,495,371 Organizational costs, net of accumulated amortization of $18,997 and $17,329 (Note 5) 7,921 9,589 ------------------ ------------------- TOTAL ASSETS $ 1,561,534 $ 1,620,352 ================== =================== LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES Accounts payable - other $ 10,468 $ 8,564 Accounts payable - related party (Note 7) 3,462 2,007 Security deposits payable 8,892 8,592 Current portion of long-term debt (Note 6) 38,536 31,336 ------------------ ------------------- TOTAL CURRENT LIABILITIES 61,358 50,499 Long-term debt (Note 6) 502,631 544,925 ------------------ ------------------- TOTAL LIABILITIES 563,989 595,424 Partners' capital 997,545 1,024,928 ------------------ ------------------- TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 1,561,534 $ 1,620,352 ================== ===================
See accompanying notes. 2 LAUREL CREEK APARTMENTS STATEMENT OF INCOME, EXPENSES AND CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
2004 2003 ------------------ ------------------- OPERATING INCOME Rental income $ 220,203 $ 205,982 Tenant charges 3,111 1,043 Other 1,900 2,034 ------------------ ------------------- TOTAL OPERATING INCOME 225,214 209,059 ------------------ ------------------- OPERATING EXPENSES Administration 22,732 20,953 Insurance and taxes 8,233 5,660 Maintenance 40,838 28,676 Utilities 20,289 22,674 Depreciation and amortization 69,657 69,704 ------------------ ------------------- TOTAL EXPENSES 161,749 147,667 ------------------ ------------------- NET INCOME (LOSS) FROM OPERATIONS 63,465 61,392 ------------------ ------------------- OTHER INCOME AND EXPENSES Interest income 1,635 1,614 Interest expense (41,100) (43,596) ------------------ -------------------- NET OTHER INCOME UNDER EXPENSES (39,465) (41,982) ------------------ -------------------- 24,000 19,410 NET INCOME (LOSS) BEGINNING PARTNERS' CAPITAL 1,024,928 1,048,211 Partner withdrawals (51,383) (42,693) ------------------ -------------------- ENDING PARTNERS' CAPITAL $ 997,545 $ 1,024,928 ================== ===================
See accompanying notes. 3 LAUREL CREEK APARTMENTS STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2004 AND 2003
2004 2003 ------------------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Rents received $ 219,169 $ 206,590 Other operating revenues 5,011 3,077 Cash payments for goods and services (89,416) (74,188) ------------------- -------------------- Net cash provided (used) by operating activities 134,764 135,479 ------------------- -------------------- CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Increases in security deposits 300 154 Withdrawal from replacement reserves 2,061 - Additions (uses) of replacement reserves (4,800) (4,800) ------------------- -------------------- Net cash provided (used) by noncapital financing activities (2,439) (4,646) ------------------- -------------------- CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Capital withdrawals (51,383) (42,693) Payment of debt (35,094) (32,931) ------------------- -------------------- Net cash provided (used) by capital and related financing activities (86,477) (75,624) ------------------- -------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Interest income 1,635 1,224 Interest paid on notes (41,100) (43,596) ------------------- -------------------- Net cash provided (used) by investing activities (39,465) (42,372) ------------------- -------------------- NET INCREASE (DECREASE) IN CASH 6,383 (12,837) CASH - BEGINNING OF YEAR 59,914 47,077 ------------------- -------------------- CASH - END OF YEAR $ 66,297 $ 59,914 =================== ==================== RECONCILIATION OF OPERATING LOS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income from operations $ 63,465 $ 61,392 Adjustments to reconcile net loss to Net cash provided by operating activities: Depreciation and amortization 69,657 69,704 Decrease (increase)in accounts receivable (1,034) 680 Increase in prepaid expenses (683) (892) Increase in accounts payable - other 1,904 5,411 Increase(decrease)in accounts payable - related parties 1,455 (744) ------------------- -------------------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 134,764 $ 135,479 =================== ==================== See accompanying notes.
4 LAUREL CREEK APARTMENTS NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2004 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, 2004 (Continued) Note 2- CASH Cash consists of $64,453 deposited into savings or checking accounts, and $844 is on deposit with the State of California Local Agency Investment Fund. At December 31, 2004 the amount deposited into the savings accounts and the Local Agency Investment Fund earned interest at rates from 2.02% to 2.19% respectively. Note 3- RESTRICTED CASH Restricted cash consists of $55,350 maintained in a money market account earning 2.02%. This cash is reserved for the replacement of fixed assets and the repayment of tenants' 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 1,868,634 716,252 Equipment 21,720 21,720 ----------- ------------ $ 2,165,354 $ 737,972 =========== ============ Note 5- ORGANIZATION COSTS Organization costs and accumulated amortization consist of the following: Accumulated Cost Amortization ----------- ------------ Organization costs $ 26,918 $ 18,997 =========== ============ 6 LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 (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 2005 $ 76,620 2006 76,620 2007 76,620 2008 76,620 2009 379,405 ----------------- Total 685,885 Less amounts representing interest 144,718 ----------------- $ 541,167 =================
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, 2004 the partnership owed the Authority $3,462. During the year ended December 31, 2004, the partnership paid the Authority $31,386 in maintenance expenses and management fees. 7 LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 (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 LAUREL CREEK APARTMENTS Calculation of Cash Distribution Net Profit @ 12-31-04 23,999.65 Add back depreciation expense 67,989.00 Add back amortization expense 1,668.00 Deposits to replacement reserve account (4,800.00) Debt service (mortgage loan) (35,094.16) ----------- Adjusted cash available from operations through 12-31-04 $ 53,762.49 Net cash available for disbursement $ 53,762.49 General Partner distribution=75%=$40,321.87 Limited Partner distribution=25%=$13,440.62 9 LAUREL CREEK APARTMENTS Replacement Reserve Summary Beginning Balance as of: 1/1/2004 44,019.14 Deposits to account for year $400 per mo 4,800.00 Withdrawals during year (20,061.46) carpet in 2 units ---------- Ending Balance as of: 12/31/04 46,7557.68 ========== Note: Replacement Reserve is fully funded as of FYE 12-31-04 10