ITEM 1. Business. - ------- --------
AFC-Low Income Housing Credit Partners-I Investment in Affordable Housing, a California limited partnership (the "Partnership"), was formed on July 28, 1987 to invest, through other limited partnerships ("Operating Partnerships"), in government assisted multi-family housing developments ("Government-Assisted Properties") expected to qualify for the Low Income Housing Tax Credit under Section 42 of the Internal Revenue Code. The general partners of the Partnership are AFC Capital Corporation, a Delaware corporation, and A. Bruce Rozet (the "General Partners").
The investment objectives of the Partnership are to: (i) provide current tax benefits to Limited Partners to the extent permitted by law, including, but not limited to, passive losses and Low Income Housing Tax Credits that Limited Partners may use to offset federal income taxes on certain types and amounts of income from other sources; (ii) provide capital appreciation through potential increases in value of the Partnership's investments; and (iii) provide potential cash distributions from sales or refinancings of the Partnership's investments and, to a lesser extent, if at all, from operations. See the information included on pages 49 through 58 of the Prospectus, which is incorporated herein by this reference.
As of January 15, 1990, the Partnership had offered and sold 24,065 limited partnership interests ("Interests"), resulting in total offering proceeds of $12,032,500. As of December 31, 1996, 24,065 Interests were issued and outstanding.
Prior to the termination of the Partnership's offering of Interests, the Partnership had provided capital to, and had become a limited partner in, six Operating Partnerships, each of which owned or was in the process of constructing a Government-Assisted Property. Partly as a result of the termination of the offering of Interests, the Partnership terminated its investments in two of the Operating Partnerships. Two of the remaining four Operating Partnerships encountered difficulties as a result of disputes with HUD and Kentucky Housing Corporation, which resulted in delays in the rehabilitation of one Property and the foreclosure of another Property. See "Properties-- Recent Developments" and "Legal Proceedings," below.
ITEM 2.
ITEM 2. Properties. - ------- ----------
Set forth below is a schedule of the Government-Assisted Properties currently owned by Operating Partnerships in which the Partnership is a limited partner, together with information as to the Partnership's investment in each Operating Partnership, percentage ownership in each operating Partnership, the occupancy rates at each Government-Assisted Property and the Low Income Housing Tax Credits generated by each Government-Assisted Property.
Information Concerning Operating Partnerships --------------------------------------------- and Government-Assisted Properties ---------------------------------- (As of December 31, 1996)
Recent Developments
Set forth below is a more detailed description of recent developments with respect to each of the Government-Assisted Properties in which the Partnership has a material investment through the Operating Partnerships.
Germano-Millgate Apartments ---------------------------
The Germano-Millgate Apartments (the "Germano Property") is owned by the United-Germano-Millgate Limited Partnership (the "Germano Partnership"), an Operating Partnership in which the Partnership had invested. The 1991 Report contained a description of certain disputes among the Germano Partnership, HUD
- ------------------ /1/ POZ Development Corporation is also a general partner.
/2/ Of these amounts, the amounts of Low Income Housing Tax Credits allocated to the Partnership for 1996 were $211,893, $344,557 and $950,029, respectively.
/3/ This figure represents the Partnership's 1996 Low Income Housing Tax Credit Allocation based on acquisition credits. In 1996, the Partnership was allocated rehabilitation credits of $1,148,52875 and acquisition credits of $199,509.
and certain other parties relating to the Germano Partnership, and a description of legal and administrative proceedings relating to the Germano Property. That information is contained on pages 4 through 10 of the 1991 Report and is incorporated herein by this reference. As described in greater detail therein, the Partnership currently is a partner in Germano Investment L.P., which was admitted as a limited partner in the Germano Partnership, with a 14.2% interest in profits and losses and a seventy percent (70%) share of the acquisition credits. The Germano Partnership's general partner, Chicago Community Development Corporation ("CCDC"), was temporarily allocated an 84.8% limited partnership interest in the Germano Partnership, until Independence Tax Credit Plus II, L.P. ("Independence") was admitted to the Germano Partnership on October 15, 1993.
In accordance with the agreements governing the admission of Independence to the Germano Partnership, Independence made a capital contribution to the Germano Partnership in the amount of $2,000,000 concurrently with its admission to that partnership. Independence has made additional required contributions totaling $2,427,581. An additional $200,000 which will be released upon the Germano Property's meeting certain occupancy and cash flow tests.
The Germano Partnership completed the rehabilitation of the Germano Property, using the proceeds of the $500,000 loan from the Illinois Housing Development Authority, capital contributions from Independence and disbursements under the HUD "Flex Loan" in the amount of $4,613,112.
The Germano Partnership obtained a new allocation of Low Income Housing Tax Credits relating to rehabilitation expenses in the amount of $1,011,546, per year for 10 years commencing 1995. As stated above, the Partnership's share of the rehabilitation tax credits will be approximately $142,000 per year, based on its 14.1% interest in the Germano Partnership. This is in addition to the acquisition credits of $280,998 per year, specially allocated to the Partnership.
Due primarily to vacancies resulting from the rehabilitation of the project. Germano fell behind in making mortgage payments during 1994. During 1996, the mortgage was brought current.
Villa Del Coliseo/Gilbert Lindsay Manor ---------------------------------------
The sources of financing for the construction of the Villa Del Coliseo Apartments, now doing business as Gilbert Lindsay Manor, is described on page 14 of the 1991 Report, which information is incorporated herein by this reference. The Property received its Certificate of Occupancy on April 4, 1991.
The Property is servicing its mortgage debt commitments on time, and is current on its insurance and tax payments. As of December 31, 1996, the amount of the Property's reserve for replacements was approximately $53,000.
The Property's management agent maintains a policy of stringent screening of all prospective tenants. While low and moderate income families have priority on the waiting list, home visits are required before any prospective tenant is accepted. Currently, the management agent conducts a number of tenant programs, including arts and crafts activities for tots, a variety of team sports for youths aged 7-15, and several seasonally-oriented social events intended for family participation.
Management's plan to raise occupancy includes implementation of an advertising campaign highlighting our efforts to create a clean wholesome environment for families to live within the inner city, increased security, rent rebates and incentives. Additionally, tenants will be offered financial counseling to assist them in budgeting their household income more efficiently which will enable them to pay the rent on time and decrease the number of evictions due to non-payment of rent.
During 1996 revenues increased by $51,245 from 1995 due primarily to increased occupancy on the Property. The Property had a nominal cash flow provided by operating activities of $77,619 in 1996. Trade accounts payable and accrued expenses decreased by $70,997.
Stinson Tower Apartments ------------------------
Stinson Tower Apartments, specifically designed to accommodate the elderly, blind and physically handicapped, currently reports 99% occupancy, with a substantial waiting list. All 150 units presently receive Section 8 Housing Rental Assistance (rental subsidies), administered by the Pennsylvania Housing Authority.
Stinson Tower Apartments functions within budget, with tenant receivables at an acceptable level, and payables discharged within normal time limits. Mortgage payments and other debt service commitments are current, and replacement reserves were reported at approximately $374,000 as of December 31, 1996.
ITEM 3.
ITEM 3. Legal Proceedings. - ------- -----------------
On May 8, 1997, the United States filed an action against Associated Financial Corporation, certain members of the AFC Group, including Messrs. Ross and Rozet, and others, in the United States District Court for the Northern District of California charging that the defendants were wrongfully participating in the fees earned by the management agent for several properties (not including any of the properties invested in by the Partnership) and had not disclosed this arrangement and, thus, were violating provisions of the applicable regulatory agreements and other agreements governing the subject properties. The Complaint did, however, allege that the defendants made certain false claims regarding the condition of the Stinson Tower Apartments. Defendants filed an answer on August 11, 1997, denying the material allegations of the Complaint, and asserting various separate and additional defenses.
The government filed an amended complaint on March 2, 1998, adding additional defendants none of whom are part of the AFC Group and added a claim that the defendants, including the new defendants made false claims in connection with the obtaining of insurance for various HUD-insured properties. The defendants have filed answers to the First Amended Complaint, again denying the material allegations of the Complaint and asserting various separate and additional defenses.
While substantial document discovery has been completed, the defendants intend to move to compel significant delivery from the government of substantial additional documentation. Deposition discovery is in its early stages. Given the defendants need to obtain significant additional discovery,
counsel can offer no opinion as to the outcome of the litigation at this time.
The General Partner believes that when all of the facts are presented to an impartial judge, the defendants will be exonerated. However, the complaint contains serious allegations against the defendants and every effort will be made to show that the government is wrong in bringing the lawsuit. At this time, the general partner does not believe that there will be any material adverse affect to the Partnership and the operation of its investments.
ITEM 4.
ITEM 4. Submission of Matters to a Vote of Security Hold - ------- ------------------------------------------------
During the year ended December 31, 1996, no matter was submitted to a vote of Interest holders.
PART II
ITEM 5.
ITEM 5. Market for the Registrant's Partnership Interests and Related Matters. - ------- ---------------------------------------------------------------------
(a) Market Information. The Partnership has no common stock. ------------------ Interests are not freely transferable, and no public trading market exists. Original sales of Interests were made at a price of $500 per Interest.
(b) Holders. As of December 31, 1996, 24,065 Interests were held by ------- 1156 Limited Partners. These figures are based upon the number of Limited Partners of record as reported by the General Partners.
(c) Dividends. The Partnership has made no distributions to Limited --------- Partners, and it is not currently expected that distributions will be made in the near future. Partnership allocations and distributions are described on pages 68 and 71 of the Prospectus, which are incorporated herein by reference.
ITEM 6.
ITEM 6. Selected Financial Data. - ------- -----------------------
The following summary of selected financial data should be read in conjunction with the financial statements filed in response to Item 14 herein, which also includes a summary of the Partnership's significant accounting policies.
Statements of Operation -----------------------
- --------------------- /1/ This figure represents the net loss per Limited Partner Interest based on the aggregate number of Interests outstanding as of December 31 of the respective year. Actual net loss per Interest for years prior to 1991 varied depending upon each Limited Partner's month of entry into the Partnership.
Balance Sheets as of December 31 --------------------------------
ITEM 7.
ITEM 7. Management's Discussion and Analysis of Financial Condition and - ------- --------------------------------------------------------------- Results of Operation. --------------------
Liquidity and Capital Resources -------------------------------
The Partnership's primary source of funds was the proceeds of its public offering of Interests. Other sources of liquidity have included (i) interest earned on capital contributions held pending investment, (ii) working capital reserves, and (iii) cash distributions, if any, from operations of the Operating Partnerships in which the Partnership has invested.
As of the end of 1988, the Partnership had received $2,481,000 in subscription for Interests, for a net of $2,170,875 after payment of brokerage fees and expenses. The Partnership received an additional $9,423,500 in subscriptions for Interests during 1989, or an additional $7,947,936 after payment of brokerage fees and expenses, and an additional $128,000 in subscriptions for Interests during 1990, or an additional $108,800 after payment of brokerage fees and expenses. As of December 31, 1989, the Partnership had committed to investments in Operating Partnerships requiring cash payments of approximately $10,200,000. During 1989, cash investments totaling approximately $5,520,000 were made in Operating Partnerships, and, at December 31, 1989, the Partnership held $1,497,863 in cash. During 1990, the Partnership received $2,313,000 as a return of its investment in two Operating Partnerships and invested an aggregate of approximately $3,545,000 in Operating Partnerships, leaving the Partnership with $43,917 in cash as of December 31, 1990. For 1991 contributions totaled $300 and cash as of December 31, 1991 was $3,505. No contributions were received in 1993, 1994 1995. Cash as of December 31, 1994 was $91 and on December 31, 1995 was $71 and on December 31, 1996 was $17,471. The Partnership's remaining cash may not be adequate to meet future obligations of the Partnership (primarily accounting costs and costs associated with the Partnership's periodic reporting obligations).
The Partnership's balance sheet reflects total assets of
$6,351,942 as of December 31, 1992, $5,259,930 as of December 31, 1993, $4,252,303 as of December 31, 1994, $3,155,237 as of December 31, 1995 and $2,324, 044 as of December 31, 1996 the diminutions in assets result from small operating losses of the Partnership and from the Partnership's recognition of its share of losses at the Operating Partnership level.
The Government-Assisted Properties owned by the Operating Partnerships are regulated either by HUD or by state or local agencies as to rent charges and operating methods. Regulatory agreements covering the properties require monthly payments to escrow funds to be used for replacement of major items, and limit annual distributions to the Partnership to "surplus cash" available at the end of each year. All cash in excess of cumulative allowable distributions must be held in a residual receipts reserve under the control of mortgage holders, and disbursements must be approved by HUD or the governing state agency. Because each of the Government-Assisted Properties is highly leveraged, because rent levels are regulated and because most excess cash must be placed in a reserve to meet contingencies, it is not expected that the Partnership will realize significant cash revenues by virtue of the operation of properties owned by the Operating Partnerships.
Results of Operations ---------------------
During the 1994, 1995 and 1996 fiscal years, the Partnership had no distributions of cash flow from the Operating Partnerships. No significant distributions of cash flow from the Operating Partnerships are anticipated in future years due to the restrictions on cash flow at the Operating Partnership level described above.
The Partnership expects that all of its income will be used to pay operating expenses, including fees, if funds sufficient for payment of such fees are available. The Partnership had no interest income in 1996 or 1995 and interest income of $15.
Income for the year ended December 31, 1995 of $40,042 was a result of a write off of accounts payable.
The Partnership does not expect to generate cash from operations or other sources to enable it to pay fees to the General Partners or others in the foreseeable future. In the event of any sale or refinancing of a Government- Assisted Property or a sale of an interest in an Operating Partnership, the General Partners may be entitled to a Disposition Fee, or a share of such sale or refinancing proceeds, but only after Limited Partners have received back cumulative cash distributions from sales or refinancings equal to their aggregate capital contributions to the Partnership plus a preferred return. See pages 22-25 of the Prospectus for a description of the compensation, fees and reimbursement payable to the General Partners and others.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data. - ------- -------------------------------------------
The financial statements together with the auditors' reports thereon are set forth at the pages indicated in Item 14(a)(1) and (2).
ITEM 9.
ITEM 9. Changes in and Disagreements With Accountants on Accounting and - ------- --------------------------------------------------------------- Financial Disclosure. - --------------------
No accountant of the Partnership has resigned or been dismissed during the three fiscal years of the Partnership ending December 31, 1996, or the subsequent period. There have been no known disagreements between the Partnership and its accountants on any accounting principles or policies.
PART III
ITEM 10.
ITEM 10. Directors and Executive Officers of the Registrant. - -------- --------------------------------------------------
(a), (b), (c) and (e)
The Partnership has no officers, directors or significant employees. A. Bruce Rozet is the individual General Partner, and AFC Capital Corporation is the corporate General Partner.
The names, ages, and business experience for Mr. Rozet and the executive officers and directors of AFC Capital Corporation and certain significant Affiliates are described on pages 41 to 49 of the Prospectus. Business experience of the General Partners and Affiliates is described on pages 38 to 41 of the Prospectus. These portions of the Prospectus are incorporated herein by reference.
Mr. Rozet and Deane Earl Ross are directors of NIDC Managers, Inc., a corporation that serves as general partner of American Housing Partners, a limited partnership that is subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended.
(d) Family relationships. -------------------- None.
(f) Involvement in certain legal proceedings. ---------------------------------------- See response to Item 3, above.
(g) Promoters and control persons. ----------------------------- Not applicable.
ITEM 11.
ITEM 11. Executive Compensation. - -------- ----------------------
(a), (c) and (d)
The Partnership has no executive officers. However, as described in the Prospectus at pages 22 to 25, which are incorporated herein by reference, various types of compensation and fees are payable to the General Partners, their Affiliates, and the Operating Partnership General Partners. See footnote 3 to the financial statements included in response to Item 14 of this Annual Report on Form 10-K for amounts accrued or paid to the General Partners and their Affiliates during the year ended December 31, 1996.
(b) and (e)
None.
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management. - -------- --------------------------------------------------------------
(a) Security ownership of certain beneficial owners. -----------------------------------------------
As of December 31, 1996, 24,065 Interests were issued and outstanding. No person is known to own beneficially in excess of 5% of the outstanding Interests.
(b) Security ownership of management. --------------------------------
With certain exceptions described at pages 70 and 71 of the Prospectus, which are incorporated herein by reference, the General Partners own in the aggregate a 1% interest in all profits, losses, tax credits and distributions of the Partnership.
(c) Changes in control. ------------------
The Partnership knows of no arrangement the operation of which may at a subsequent date result in a change of control of the Partnership.
ITEM 13.
ITEM 13. Certain Relationships and Related Transactions. - -------- ----------------------------------------------
(a) Transactions with management and others. ---------------------------------------
The General Partners of the Partnership are A. Bruce Rozet, the individual General Partner, and AFC Capital Corporation, a Delaware corporation, the corporate General Partner, which is a wholly-owned subsidiary of Associated Financial Corporation, a Delaware corporation. Associated Financial Corporation is beneficially owned and controlled by A. Bruce Rozet and Deane Earl Ross. United Housing Preservation Corporation, an affiliate of the General Partners, was a general partner of each of the Operating Partnerships, but is no longer a general partner of the Germano Partnership.
As described in the Prospectus, Supplement No. 1 to the Prospectus (pp. S- 15 to S-20), Supplement No. 3 to the Prospectus (pp. S-8 to S-11) and Supplement No. 6 to the Prospectus (pp. 1-5), as of the date of such Supplements affiliates of the General Partners controlled or participated in the management of each of the Operating Partnerships in which the Partnership has invested. For a description of the terms of the Partnership's acquisition of interests in Operating Partnerships, see the pages of the Prospectus and Supplements thereto cited above, which are incorporated herein by this reference. See the information included on pages 45 through 49 of the Prospectus, which is incorporated herein by this reference, for a description of the affiliates of the General Partners involved in the transactions described above.
For a description of the compensation, fees and reimbursement accrued or paid to the General Partners and their affiliates during 1995, see footnote 3 to the financial statements included in response to Item 14
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. - -------- ----------------------------------------------------------------
No reports on Form 8-K were filed by the Partnership during fiscal year 1996.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AFC-LOW INCOME HOUSING CREDIT PARTNERS-I INVESTMENT IN AFFORDABLE HOUSING, a California limited partnership
By: AFC Capital Corporation, its corporate general partner
Date: September 9, 1998 By: /s/ Dean Earl Ross -------------------------------------- Deane Earl Ross, President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Date: September 9, 1998 By: /s/ A. Bruce Rozet -------------------------------------- A. Bruce Rozet, Chairman of the Board and Chief Executive Officer of AFC Capital Corporation
Date: September 9, 1998 By: /s/ Deane Earl Ross -------------------------------------- Deane Earl Ross, Director, President and Treasurer (Chief Financial Officer) of AFC Capital Corporation
EXHIBIT INDEX -------------
- ----------------- /1/ Previously filed on June 3, 1988 as a part of the Partnership's Prospectus pursuant to Rule 424 (Registration Statement No. 33-17726).
/2/ Previously filed with Registration Statement No. 33-17726 on March 16, 1988.
/3/ Previously filed with Registration Statement No. 33-17726 on November 26, 1989.
/4/ Previously filed on August 11, 1993, with the Partnership's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, dated August 10, 1993.
- ----------------- /5/ Previously filed on July 30, 1992 with Amendment No. 1 dated July 28, 1992 to the Partnership's Current Report on Form 8-K dated July 2, 1992.
/6/ Filed as an exhibit to this Annual Report.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP
FINANCIAL STATEMENTS DECEMBER 31, 1994 THROUGH DECEMBER 31, 1996
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP
-----------------
[LETTERHEAD OF HABIF, AROGETI & WYNNE, P.C.]
INDEPENDENT AUDITORS' REPORT
To the Partners AFC-Low Income Housing Credit Partners - I Investment in Affordable Housing
We have audited the balance sheets of AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING [a California Limited Partnership] as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' equity [deficit], and cash flows for each of the three years in the period ended December 31, 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 did not audit the financial statements of certain limited partnerships in which the Partnership has an investment, which statements reflect total assets constituting 42% and 58% of total assets as of December 31, 1996 and 1995, and total losses constituting 52%, 40%, and 45% for the years ended December 31, 1996, 1995, and 1994, respectively, of the combined totals of the limited partnerships in all years presented. Such financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included in Note 2, is based solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the 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 and the report of other auditors provide a reasonable basis for our opinion.
INDEPENDENT AUDITORS' REPORT [CONTINUED]
In our opinion, based on our audits and the report of other auditors, the financial statements present fairly, in all material respects, the financial position of AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
/s/ Habif, Arogeti & Wynne, P.C. Atlanta, Georgia
January 30, 1998, except for Note 5 as to which the date is March 2, 1998
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
BALANCE SHEETS DECEMBER 31, 1996 AND 1995 - --------------------------------------------------------------------------------
See auditors' report and notes to financial statements.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
STATEMENTS OF OPERATIONS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
See auditors' report and notes to financial statements.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
STATEMENTS OF CHANGES IN PARTNERS' EQUITY [DEFICIT] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
See auditors' report and notes to financial statements.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
STATEMENTS OF CASH FLOWS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - ----------------------------------------------------------------- INCREASE (DECREASE) IN CASH
See auditors' report and notes to financial statements.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN ------------ AFFORDABLE HOUSING, A California Limited Partnership [the Partnership], was formed on July 28, 1987. The general partners are A. Bruce Rozet, an individual, and AFC Capital Corporation, a Delaware corporation, each having contributed $2,500 and owning 5 partnership interests. Through January 15, 1990, the Partnership offered partnership interests, at $500 per interest, to limited partners through public offering. As of December 31, 1996, 1995, and 1994, the Partnership had received subscriptions for 24,065, 24,065, and 24,065 partnership interests, respectively. The Partnership exceeded the minimum offering of 2,000 partnership interests in 1988, which resulted in the subscription proceeds being released from the escrow account to the Partnership. As a result of certain actions taken by HUD, the Partnership ceased offering partnership interests as of January 15, 1990.
In accordance with the Agreement of Limited Partnership, profits, losses, and low-income housing tax credits are allocated 99% to the limited partners and 1% to the general partners. Profits from the sale or refinancing of the projects are allocated 90% to the limited partners and 10% to the general partners, after the limited partners have received their capital contributions plus a preferred return.
The accompanying financial statements include only the assets, liabilities, and results of operations which relate to the Partnership, and not those attributable to the partners' individual activities.
Line of Business - The Partnership is primarily engaged in investing in ---------------- limited partnerships that own and operate government assisted multi-family residential rental projects. Each of the projects qualifies for the low- income housing tax credit under Section 42 of the Internal Revenue Code of 1986, as amended. Certain partners, including a general partner, of the limited partnerships in which the Partnership has invested are affiliates of the general partners of the Partnership.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONTINUED]
Investments in Limited Partnerships - The Partnership owns limited ----------------------------------- partnership interests in three operating limited partnerships with ownership interests, as of December 31, 1996, varying from 14.058% to 95%. The Partnership is using the equity method to account for its investments in those limited partnerships. The operating limited partnerships are not being consolidated because control of those limited partnerships is under the general partner. On May 25, 1993, the Partnership's investment in the Germano Partnership was diluted from a 96% interest to an effective 14.058% interest. The Company is using the equity method to account for its investment in the Germano Partnership due to its continued influence in the partnership.
Public Offering Expenses - These expenses have been recorded as a direct ------------------------ reduction to the capital accounts of the limited partners.
Income Taxes - No provision has been made for income taxes in the ------------ accompanying financial statements since such taxes, if any, are the liability of the individual partners.
Estimates: ---------
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership owns partnership interests in the following limited partnerships at December 31, 1996, each of which owns, and is operating a multi-family residential rental project.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED]
The projects owned by the limited partnerships are regulated by the United States Department of Housing and Urban Development (HUD) or a state agency as to rent charges and operating methods. The regulatory agreements require monthly payments to escrow funds to be used for replacement of major items, and limit annual distributions to the owners to "surplus cash" available at the end of each year. Undistributed amounts are cumulative and may be distributed in subsequent years if future operations provide "surplus cash" in excess of current requirements. The projects must deposit all "surplus cash" in excess of the cumulative allowable distributions into a residual receipts reserve. This reserve is under the control of the mortgagee and disbursements must be approved by HUD or the state agency.
As a limited partner, the Partnership is entitled to the percentage of profits, losses, and low-income housing tax credits specified above and varying lessor percentages of the proceeds from the sale or refinancing of the projects of each limited partnership in which it has invested. The balance of such items is generally allocated to the affiliated general partners of the operating partnerships.
Germano - The project owned by Germano was purchased on December 30, 1988 ------- from a partnership whose general partner is related to the general partner of Germano.
During 1992, the original general partner of Germano (an affiliate of the general partners) withdrew as general partner and a new, unaffiliated general partner, Chicago Community Development Corporation ("CCDC"), was admitted as a substitute general partner. The former general partner had its interest in Germano reduced so that CCDC could be admitted as a partner. A request for TPA approval and an application for a Flex Loan were prepared and submitted by CCDC.
In September, 1992, HUD ceased making the Section 8 rental assistance payments due to Germano under its Housing Assistance Payments Contract ("HAP Contract") with HUD. As a result of this loss of revenue, Germano defaulted on its payments under the Germano property mortgage. The mortgage lender then assigned the mortgage to HUD, a preliminary action in the process of foreclosing a HUD-insured mortgage.
In January, 1993, CCDC, Germano, the Germano-Millgate Tenants' Association, and a resident of the Germano Property initiated an action against certain HUD officials in the United States District Court for the Northern District of Illinois.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED]
On February 12, 1993, the District Court ordered that the Secretary of Housing and Urban Development and all of HUD's agents and officials (a) are restrained from refusing to make the Section 8 payments due to the Germano Partnership under the HAP Contract; (b) are restrained from further implementing the assignment of the mortgage or initiating or continuing any foreclosure action; and (c) were ordered to make all necessary preparations to be in a position to close on the TPA and Flex Loan applications of CCDC. The Germano Partnership was ordered to make its regular monthly mortgage payments as they become due, but only to the extent of any payments received from HUD under the HAP Contract.
On March 18, 1993, the court dismissed the action in anticipation of timely HUD action to reinstate the HAP Contract and to process the TPA and Flex Loan applications filed by CCDC.
On May 25, 1993 the FOURTH REVISED SIXTH AMENDMENT OF THE CERTIFICATE AND AGREEMENT OF THE LIMITED PARTNERSHIP of United-Germano-Millgate Limited Partnership, transferred all of the Partnership's rights, title, and its 96% interest in the Germano partnership for a 99% limited partnership interest in a newly-formed partnership, Germano Investment Limited Partnership [Germano LP]. The general partner of Germano LP is CCDC. The sole asset of Germano LP is a 14.2% interest in the original Germano Partnership. The ownership of the Germano partnership after the transfer of interest was as follows: CCDC, a 1% general partner; Germano Investment LP, a 14.2% limited partner; and CCDC, an 84.8% limited partner. HUD gave preliminary approval to a Management Improvement and Operating (MIO) Plan in conjunction with the transfer of ownership application which provided for the admission of CCDC. The MIO Plan provided for a complete rehabilitation of the project at a total cost of approximately $8.6 million to be financed with $4,613,112 in borrowings from HUD's Flexible Subsidy Program, $500,000 in borrowings from the Illinois Housing Development Authority (IHDA), and the balance in owner contributions. On October 15, 1993, a new limited partner, Independence Tax Credit Plus II, L.P. [Independence], was admitted to the Germano Partnership and received the 84.8% limited partnership interest held by CCDC for $4,588,600. The rehabilitation of the project was completed during 1995.
Stinson - The Partnership became a partner in Stinson on November 1, 1988. -------
Coliseo - The Partnership became a partner in Coliseo on August 31, 1989. ------- The project is located on approximately 2.5 acres of land owned by and leased from the Community Redevelopment Agency of the City of Los Angeles (CRA). The Partnership has entered into a long-term lease agreement with CRA, expiring May, 2040, with an option to extend the lease for an additional 49 years. The lease provides for annual lease payments equal to 10% of "residual receipts" (defined as gross rental income less reasonable operating costs and reserves and service on debt) increasing to 30% of "residual receipts" after the loan from CRA has been paid in full. Lease payments commence one year after the completion of construction. As of December 31, 1996 total payments due to the CRA under the long-term lease agreement totaled $25,950.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED]
The Partnership has entered into a Disposition and Development Agreement (DDA) with the CRA which imposes substantial restrictions on the development, use, and operation of the property, and entitles the Partnership to permanent subordinated loan financing from CRA. The DDA provides that in the event the Partnership fails to meet its material obligations, including its obligations to make scheduled lease and loan payments, and to rent to qualified tenants, the CRA may terminate the lease and take possession of the property. In the event the project is sold or refinanced, the CRA is additionally entitled to 50% of net sale or refinancing proceeds. It was originally intended for the Partnership to have a 97% interest in Coliseo. However, due to insufficient funds available to the Partnership, in 1990, the general partners located another affiliated limited partnership to acquire a 29.1% interest in Coliseo.
As of December 31, 1996, Coliseo was in default of its loan agreement with SAMCO, the mortgage holder, due to non-payment of the required replacement reserve deposits. Management for Coliseo obtained a waiver from SAMCO with respect to the default. In addition, during 1996, the CRA performed a review to determine compliance with the terms of the DDA. As a result of its review, management was changed from TBG Management, a division of the Bedford Group, a general partner of Coliseo, to an unrelated management agent. The CRA disagreed with the way management had been calculating residual receipts payments relating to the pay-down of the accrued interest on the second mortgage and whether an amount was due for the long-term ground lease. The principal difference between the CRA's calculation and management's calculation related to whether interest on the partner loan was an allowable expense. The CRA position was that the partner loan interest was not an allowable expense, and, during 1996, it issued a Notice of Default and Election to Sell Under Deed of Trust. On December 6, 1996, the CRA rescinded the Notice of Default and Election to Sell Under the Deed of Trust; however, it did not waive the requirement for payment due under the DDA. The CRA and management are in the process of resolving the issue relating to the payment of approximately $26,000 due under the long-term ground lease and approximately $130,000 due relating to accrued interest.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED]
The following is a summary of the investments in limited partnerships in which the Partnership has an equity interest:
Summarized balance sheets and statements of operations for the operating limited partnerships in which the Partnership has an equity interest are presented hereafter.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED]
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED]
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED]
Also, for financial statement purposes, when the carrying value of the investment has been reduced to zero, the Partnership discontinues recognizing its share of the limited partnership's losses.
The following is a schedule, by years, of the future maturities of the mortgages payable of the operating limited partnerships:
COMBINED STATEMENTS OF OPERATIONS ---------------------------------
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED]
COMBINED STATEMENTS OF OPERATIONS [CONTINUED] ---------------------------------
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
2. INVESTMENTS IN LIMITED PARTNERSHIPS [CONTINUED]
COMBINED STATEMENTS OF OPERATIONS [CONTINUED] ---------------------------------
3. RELATED PARTY TRANSACTIONS
Reimbursement of Offering, Selling, and Organizational Expenses - The --------------------------------------------------------------- general partners and their affiliates were paid for their actual expenses incurred in connection with the public offering and organization of the operating partnerships. The general partners reimbursed the Partnership to the extent that the combination of these expenses and dealer allowances (which is paid to unaffiliated dealers) exceeded 15% of the gross proceeds. The amount reimbursable to the Partnership and included in due from general partner at December 31, 1996 and 1995, is $68,584 and $73,259, respectively.
Due from Coliseo Housing Partnership: ------------------------------------
During the year ended December 31, 1995, the Partnership advanced Coliseo $17,100 to cover operating costs. As of December 31, 1996 and 1995, $17,100, is receivable from Coliseo and is to be repaid when funds are available.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
3. RELATED PARTY TRANSACTIONS [CONTINUED]
Acquisition Fees, Development Fees and Real Estate Commissions - During the -------------------------------------------------------------- year ended December 31, 1996, 1995 and 1994, Germano paid fees to an unaffiliated general partner totaling $25,000, $882,209 and $71,933, respectively, for development, construction management and professional services relating to the Project's rehabilitation. In addition, the unaffiliated general partner was paid $19,939 in 1995 for professional, administration and processing fees relating to a property tax refund collected by the Project in 1995. The amount of the fees equaled 25% of the refund amount and was incurred pursuant to a 1992 contract with the general partner executed prior to the date it became general partner.
Asset Management Fee - For services to be rendered to the operating -------------------- partnerships, the affiliate general partners of the operating partnership will generally receive an annual asset management fee equal to one-half of one percent of the invested assets. This will be paid by the operating partnerships solely from capital contributions or "surplus cash," as defined in the regulatory agreement. No amounts were paid in 1996, 1995 or 1994.
General Contractor and Development Incentive Fees - During 1989 ------------------------------------------------- unaffiliated general partner of Coliseo earned approximately $958,000 for serving as the general contractor for the project. This amount represented the difference between the fixed contract price of $11,395,000 and the amount of the actual cost of construction. Additionally, during 1989 another unaffiliated general partner of Coliseo received a general contractor fee of $405,000 from Coliseo.
Other Project Fees - To the extent that annual project needs are satisfied, ------------------ the general partner of the operating partnerships is entitled to receive additional annual fees, payable solely from capital contributions or "surplus cash," in an amount determined by the general partner. To date, no such fees have been charged to the limited partnerships.
Disposition Fees - The general partners and their affiliates are entitled ---------------- to disposition fees equal to the lesser of one-half of the competitive rate or 3% of the gross sales proceeds of the projects or interests in the operating partnerships. Payments of such fees will be made only after the limited partners have been returned their capital contributions plus a preferred return. Disposition fees and all other commissions payable to unaffiliated and affiliated parties shall not, in the aggregate, exceed the lesser of the competitive rate or 6% of the sales price. To date, no such fees have been incurred.
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
3. RELATED PARTY TRANSACTIONS [CONTINUED]
Management Fees - An unaffiliated general partner of Coliseo received --------------- project management fees of approximately $31,000, $53,000 and $53,000 for 1996, 1995 and 1994, respectively.
During 1996, Stinson paid management fees of $25,000 to the general partner of the Partnership.
4. INCOME TAXES
The following is a reconciliation between the net loss per the financial statements and the net loss for federal income tax purposes:
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
4. INCOME TAXES [CONTINUED]
The following is a reconciliation between the partners' equity per the financial statements and the partners' equity [deficit] for federal income tax purposes:
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP - --------------------------------
NOTES TO FINANCIAL STATEMENTS [CONTINUED] FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1996 - -----------------------------------------------------------------
5. CONTINGENCIES
On May 8, 1997, the United States filed an action against A. Bruce Rozet, Associated Financial Corporation, certain members of the AFC Group, in the United States District Court for the Northern District of California charging that the defendants were wrongfully participating in the fees earned by the management agent for several properties (not including any of the properties invested in by the Partnership) and had not disclosed this arrangement and, thus, were violating provisions of the applicable regulatory agreements and other agreements governing the subject properties. The Complaint did, however, allege that the defendants made certain false claims regarding the condition of the Stinson Towers. Defendants filed an answer on August 11, 1997, denying the material allegations of the Complaint, and asserting various separate and additional defenses.
The government filed an amended complaint on March 2, 1998, adding additional defendants none of whom are part of the AFC Group and added a claim that the defendants, including the new defendants, made false claims in connection with the obtaining of insurance for various HUD-insured properties. The defendants have filed answers to the First Amended Complaint, again denying the material allegations of the Complaint and asserting various separate and additional defenses. Both the government and the AFC Group have recently filed motions for partial summary judgment.
While substantial document discovery has been completed, the defendants intend to move to compel significant delivery from the government of substantial additional documentation. Deposition discovery is in the early stages. Given the defendants need to obtain significant additional discovery, counsel can offer no opinion as to the outcome of the litigation at this time.
At this time, the general partner does not believe that there will be any material adverse affect to the Partnership and the operation of its investments, much like the previous litigation with HUD described above.
[LETTERHEAD OF HABIF, AROGETI & WYNNE, P.C.]
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION
To the Partners AFC-Low Income Housing Credit Partners - I Investment in Affordable Housing
In connection with our audits of the financial statements of AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING referred to in our report dated January 30, 1998, which is included in Part II of this Form 10-K, we did not audit the financial statements of certain limited partnerships in which the Partnership has an investment, the statements of which reflect total assets of 42% and 58% as of December 31, 1996 and 1995, and total losses of 52%, 40%, and 45% for the years ended December 31, 1996, 1995 and 1994, respectively, of the combined totals of the limited partner ships. Such statements were audited by other auditors, whose reports thereon have been furnished to us. Insofar as the information presented on pages S-2 through S-6 as of December 31, 1996, 1995, and 1994, relates to these limited partnerships, our opinion is based solely upon the reports of other auditors. In our opinion, based on our audits and the reports of other auditors, the supplementary information present fairly, in all material respects, the information required to be set forth therein.
/s/ Habif, Arogeti & Wynne, P.C. Atlanta, Georgia
January 30, 1998, except for Note 5 as to which the date is March 2, 1998
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP REAL ESTATE AND ACCUMULATED DEPRECIATION OF LIMITED PARTNERSHIPS IN WHICH THE PARTNERSHIP HAS AN INVESTMENT YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
See Auditors' Report on Supplementary Information and Accompanying Notes
S-2
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP NOTES TO REAL ESTATE AND ACCUMULATED DEPRECIATION OF LIMITED PARTNERSHIPS IN WHICH THE PARTNERSHIP HAS AN INVESTMENT YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1. Each limited partnership owns and operates a multi-family, HUD, or state regulated residential housing project.
2. The aggregate cost of the land for federal income tax purposes at December 31, 1996, 1995, and 1994 is $1,100,000, $1,100,000, and $1,100,000, respectively, and the aggregate cost of buildings and improvements and construction in progress for federal income tax purposes at December 31, 1996, 1995, and 1994 is $41,306,425, $41,230,677, and $40,439,106, respectively. The total of the above mentioned items at December 31, 1996, 1995, and 1994 is $42,406,425, $42,330,677, and $41,539,106, respectively.
3. Investments in property and equipment:
4. Accumulated depreciation:
See Auditors' Report on Supplementary Information
S-3
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENT IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP MORTGAGE LOANS ON REAL ESTATE OWNED BY LIMITED PARTNERSHIPS IN WHICH THE PARTNERSHIP HAS AN INVESTMENT YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
See Auditors' Report on Supplementary Information and Accompanying Notes
S-4
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENTS IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP NOTES TO MORTGAGE LOANS ON REAL ESTATE OWNED BY LIMITED PARTNERSHIPS IN WHICH THE PARTNERSHIP HAS AN INVESTMENT YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1. Each limited partnership in which the Partnership has an investment owns an apartment project financed with a mortgage held by a government agency.
2. The total Federal income tax basis is the same as the carrying amounts in Schedule IV.
3. Reconciliation of mortgages:
4. The Coliseo mortgage in the original face amount of $3,954,000 is payable to the Community Redevelopment Agency of the City of Los Angeles. It bears interest at 9.45%, payable over 40 years. It is payable only out of 50% of available "residual receipts." In the event there are not adequate "residual receipts" to make principal and interest payments on the loan, unpaid amounts will accrue for payment at maturity or upon a sale or refinancing of the project, whichever occurs first. As of December 31, 1996, $163,065 is currently due to the CRA for interest payments as defined. Accrued interest at December 31, 1996, 1995, and 1994, totaled $2,064,816, $1,690,140, and $1,316,487, respectively.
5. The Coliseo mortgage in the original face amount of $1,743,000 is payable to the general partner of Coliseo. As of December 31, 1996, 1995 and 1994, accrued interest totaled $376,172, $228,000 and $120,000, respectively.
6. The Stinson mortgage in the original face amount of $1,276,904 accrues interest at 9.45% per annum, compounded annually. Stinson is required to make interest payments on the note on an annual basis, equal to one-half of the allowable distributions to the owners (maximum of $38,720 for the years ended December 31, 1996, 1995, and 1994). The principal and unpaid interest is payable October 27, 2003, or upon sale of the property. Accrued interest at December 31, 1996, 1995, and 1994 totaled $1,013,008, $852,770 and $555,397, respectively.
See Auditors' Report on Supplementary Information
S-5
AFC-LOW INCOME HOUSING CREDIT PARTNERS - I INVESTMENTS IN AFFORDABLE HOUSING, A CALIFORNIA LIMITED PARTNERSHIP NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE OWNED BY LIMITED PARTNERSHIPS IN WHICH THE PARTNERSHIP HAS AN INVESTMENT [CONTINUED] YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
7. The Germano mortgage payable of $5,113,112 includes proceeds from the HUD Flexible Subsidy loan totaling $4,613,112 and $500,000 from the IHDA. Both notes bear interest at an annual rate of 6.53% and specify that principal and interest payments are to be made from residual receipts of the project. The notes mature on the earlier of October 1, 2014 or the date the project is sold. No payments were made in 1996, 1995 and 1994, as there were no "residual receipts." Accrued interest at December 31, 1996, 1995 and 1994 totaled $1,097,278, $665,589, and $310,016, respectively.
See Auditors' Report on Supplementary Information
S-6