ITEM 1 BUSINESS 3
ITEM 2
ITEM 2. PROPERTIES ----------
As of March 31, 2001, CPTCHF-II had acquired equity interests in the Operating Partnerships set forth in the table below. Each of the Properties acquired by the Operating Partnerships receives benefits under government assistance programs provided by HUD. One of the Properties also receives benefits from the Illinois Housing Development Authority (IHDA). The table below summarizes the Operating Partnerships acquired and the government assistance programs benefiting each Property. Further information concerning these Properties may be found in Supplement No. 2 to the Prospectus, pages 4 through 66, which information is incorporated herein by reference and is summarized below.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS -----------------
As of June 20, 2001, there were no pending legal proceedings against CPTCHF-II or any Operating Partnership in which it has invested.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ---------------------------------------------------
As of March 31, 2001, there were no submissions of matters to a vote of security holders.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS -------------------------------------------------
There is at present no public market for the units of limited partnership interests (the Units), and it is unlikely that any public market for the Units will develop. See the Prospectus under "Transferability of Interests" on pages 24 and 52 of the Prospectus, which information is incorporated herein by reference. The number of owners of Units as of June 20, 2001 was approximately 519, holding 5,754 units.
As of June 20, 2001, there were no cash distributions.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA -----------------------
The following summary of selected financial date should be read in conjunction with ITEM 14, herein, which also includes a summary of CPTCHF-II's significant accounting policies.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND ---------------------------------------------------------------- RESULTS OF OPERATIONS ---------------------
Liquidity and Capital Resources - -------------------------------
The Partnership offered limited partnership interests to the public during calendar year 1989, pursuant to a Registration Statement filed under the Securities Act of 1933. The Partnership raised $5,754,000 in equity capital and, thereafter, invested in Operating Partnerships, which own multifamily Properties located in Illinois and Massachusetts representing approximately $25,000,000 of Property value. These properties under Section 42 of the Internal Revenue Code earn low-income housing tax credits which are passed through to the individual partners of the Partnership. Low-Income housing tax credits earned by the Partnership for calendar years 2000, 1999 and 1998 were $23,744, $384,429, and $870,477, respectively.
As of March 31, 2001, the Partnership portfolio consists of two Properties totalling 533 units. For a summary of the combined financial status of the Operating Partnerships and the Properties, see the financial information contained under ITEM 14.
Although the economy has been strong, the effects of the gradually improving market conditions on the Partnership's operating property investments, while positive, are limited by the government restrictions on rental rate increases. A substantial amount of the revenue generated by these properties comes from rental subsidy payments made by federal or state housing agecies. These features, which are characteristic of all low-income housing properties, limit the pool of potential buyers for these real estate assets. As a limited partner of the Operating Partnerships, the Partnership does not control property disposition decisions, and management is not aware of any plans or intentions of the general partners of these partnerships to sell any of the investment properties in the near future.
The Partnership is currently experiencing a liquidity problem. Under the Partnership Agreement, the Partnership is entitled to receive distributions of surplus cash from the Operating Partnerships which is to provide the funds necessary for the Partnership to meet its administrative expenses and pay the Partnerships management fee. At the present time, the Operating Partnerships have not generated sufficient cash distributions to fund the Partnership's expenses. As a result of the foregoing, the Partnership has been dependent upon its affiliates and the General Partners for continued financial support to meet its expenses. Though there can be no assurance, management believes that affiliates and/or the General Partners, though not required to do so, will continue to fund operations of the Partnership and defer receipt of payment of allocated overhead administrative expenses and partnership management fees. Allocated administrative expenses paid or accrued to affiliates and the General Partners represent reimbursement of the actual cost of goods and materials used for or by the Partnership, salaries, related payroll costs and other administrative items incurred or allocated, and direct expenses incurred in rendering legal, accounting/bookkeeping, computer, printing and public relations services. Items excluded from the overhead allocation include overhead expenses of the General Partners, including rent and salaries of employees not specifically performing the services described above. Unpaid allocated administrative expenses and partnership management fees, an annual amount up to .5% of invested assets, will accrue for payment in future operating years.
The Partnership is not expected to have access to any significant sources of financing. Accordingly, if unforeseen contingencies arise that cause an Operating Partnership to require additional capital to sustain operations, in addition to that previously contributed by the Partnership, the source of the required capital needs may be from (i) limited reserves from the Partnership (which may include distributions received from Operating Partnerships that would otherwise be available for distribution to partners), (ii) debt financing at the Operating partnership level (which may not be available), or (iii) additional equity contributions from the general partner of the Operating Partnerships (which may not be available). There can be no assurance that any of these sources would be readily available to provide for possible additional capital requirements which may be necessary to sustain the operations of the Operating Partnerships.
Tax Reform Act of 1986, Ominbus Budget Reconciliation Act of 1987, Technical - ---------------------------------------------------------------------------- and Miscellaneous Revenue Act of 1988, Ominbus Budget Reconciliation Act of - --------------------------------------------------------------------------- 1989 and Ominbus Budget Reconciliation Act of 1990 and all subsequent tax - ------------------------------------------------------------------------- acts. - -----
The Partnership is organized as a limited partnership and is a "pass through" tax entity which does not, itself, pay federal income tax. However, the partners of the Partnership, who are subject to federal income tax, may be affected by the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of 1987, the Technical and Miscellaneous Revenue Act of 1988, the Ominbus Budget Reconciliation Act of 1989 and the Ominbus Budget Reconciliation Act of 1990 and all subsequent tax acts (collectively the Tax Acts). The Partnership will consider the effect of certain aspects of the Tax Acts on the partners when making investment decisions. The Partnership does not anticipate that the Tax Acts will have a material adverse impact on the Partnership's business operations, capital resources, plans or liquidity.
Results of Operations - ---------------------
The fiscal year of the Partnership ends on March 31 of each year, however, the fiscal year of each Operating Partnership ends on December 31. Therefore, the earnings and losses of the Operating Partnerships reflected on the equity method in the Partnership's financial statements for its current fiscal year are for the calendar year ended December 31, 2000.
2001 Compared to 2000 - ---------------------
For the fiscal year ended March 31, 2001, the Partnership recorded a net loss of approximately $620,000, as compared to a net loss of approximately $443,000 for the prior fiscal year. The increase in net loss is the result of the increase in the Partnership's equity in net losses of the Operating Partnerships of approximately $179,000, offset by a small decrease in the expenses of approximately $3,000 for the current fiscal year.
In accordance with the equity method of accounting for limited partnership interests, the Partnership does not recognize losses from investment properties when losses exceed the Partnership's equity method basis in these properties. One of the two investments has had an equity method basis of zero since March 31, 1993. The Partnership's recorded share of the Operating Partnerships' losses in the current fiscal period consists of losses of approximately $430,000 from the Washington Courts Limited Partnership. The losses from Washington Courts Limited Partnership have reduced the Partnership's investment in the operating partnership to zero. In the prior fiscal year, losses of approximately $251,000 from the operations of Washington Courts was recorded. The carrying value of the Partnership's investment in Laurel-Clayton was reduced to zero during fiscal 1993.
In the aggregate, combined rental revenue of the Operating Partnerships decreased during the current calendar year. The average occupancy level for Laurel-Clayton remained constant at 99% in calendar year 2000, but Washington Court decreased to 85% occupancy level in the current year. The combined total expenses of the two operating properties increased by approximately $60,000 in the current year primarily due to an increase in utilities, other operating expenses, and interest, partially offset by lower depreciation expense.
2000 Compared To 1999 - ---------------------
For the fiscal year ended March 31, 2000, the Partnership recorded a net loss of approximately $443,000, as compared to a net loss of approximately $508,000 for the prior fiscal year. The decrease in net loss in the result of a decrease in the Partnership's equity in net losses of the Operating Partnerships of approximately $67,000 and an increase in the expenses of approximately $2,000 for the current fiscal year. General and administrative expenses, namely allocated administrative expenses and partnership management fees, continue each fiscal year to comprise an increasing portion of the Partnership's net loss.
In accordance with the equity method of accounting for limited partnership interests, the Partnership does not recognize losses from investment properties when losses exceed the partnership's equity method basis in these properties. One of the two investments has had an equity method basis of zero since March 31, 1993. The Partnership's recorded share of the Operating Partnership's losses in the current fiscal period consists of losses of approximately $251,000 from the Washington Courts Limited Partnership. In the prior fiscal year, losses of approximately $319,000 from the operations of Washington Courts were recorded. The carrying value of the Partnership's investment in Laurel-Clayton was reduced to zero during fiscal 1993.
In the aggregate, combined rental revenue of the Operating Partnerships increased during the current calendar year. The average occupancy level for Laurel-Clayton increased to 99% in calendar year 1999, but Washington Court remained at 92% occupancy level in the current year. The combined total expenses of the two operating properties decreased by approximately $485,000 in the current year primarily due to a decrease in interest expense and repairs and maintenance, partially offset by an increase in other operating expenses and depreciation.
1999 Compared To 1998 - ---------------------
For the fiscal year ended March 31, 1999, the Partnership recorded a net loss of approximately $508,000, as compared to a net loss of approximately $430,000 for the prior fiscal year. The increase in net loss is the result of an increase in the Partnership's equity in net losses of the Operating Partnerships of approximately $70,000 and an increase in the expenses of approximately $8,000 for the current fiscal year. General and administrative expenses, namely allocated administrative expenses and partnership management fees, continue each fiscal year to comprise an increasing portion of the Partnership's net loss.
In accordance with the equity method of accounting for limited partnership interests, the Partnership does not recognize losses from investment properties when losses exceed the Partnership's equity method basis in these properties. One of the two investments has had an equity method basis of zero since March 31, 1993. The Partnership's recorded share of the Operating Partnership's losses in the current fiscal period consists of losses of approximately $319,000 from the Washington Courts Limited Partnership. In the prior fiscal year, losses of approximately $248,000 from the operations of Washington Courts were recorded. The carrying value of the Partnership's investment in Laurel-Clayton was reduced to zero during fiscal 1993.
In the aggregate, combined rental revenue of the Operating partnerships increased during the current calendar year. The combined total rental revenue increased by approximately $40,000 in the current calendar year, with the largest increase occurring at Laurel-Clayton. The average occupancy levels for Laurel-Clayton remained at 98% in both calendar years, but Washington Court had a decrease to 92% occupancy level in the current year. The combined total expenses of the two operating properties increased by approximately $110,000 in the current year primarily due to an increase in repairs and maintenance and depreciation and a decrease in other operating expenses.
Inflation - ---------
Inflation is not expected to have a material adverse impact on the Partnership's operations during its period of ownership of the Properties.
Other - -----
The Partnership's operations are not subject to any significant seasonal fluctuations. The Partnership believes it is in compliance with environmental regulations and does not anticipate material effects of continued compliance.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ----------------------------------------------------------
Not applicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS --------------------
The financial statements together with the report of the independent auditors thereon are set forth on the pages indicated in ITEM 14.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE --------------------
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT --------------------------------------------------
The Partnership has no officers or directors. Management of the Partnership is vested in Irwin Jay Deutch and Century Pacific Capital II Corporation (CPII) (the General Partners). The General Partners will involve themselves in the day-to-day affairs of the Partnership as required to protect the Limited Partners' investment and advance the Partnership's investment objectives. Mr. Deutch, the Managing General Partner, has the overall responsibility for the preparation and transmittal of periodic reports to the Limited Partners, preparation and filing of the Partnership's tax returns with the IRS and the appropriate state tax authorities, and the preparation and filing of reports to HUD and other Government Agencies.
Following is biographical information on Mr. Deutch and the Executive Officers of CPII:
IRWIN JAY DEUTCH
Irwin Jay Deutch, age 60, is Chairman of the Board, President, and Chief Executive Officer of Century Pacific Realty Corporation (CPRC), a General Partner of the Operating Partnerships that own the Properties in which CPTCHF-II has invested, and its Affiliates. Mr. Deutch has been involved with low-income housing investments since 1968. He is the individual general partner in 62 private limited partnerships and two public limited partnerships investing in 209 properties, including 196 multifamily properties with 33,700 apartment units, 10 commercial projects, and 3 hotel properties. Fifty-eight of the 62 private limited partnerships have invested in affordable housing. In his capacity as general partner and officer of CPRC, he oversees the management of these partnerships and assumes overall responsibility for the development, direction, and operation of all affiliated CPRC companies. Mr. Deutch is recognized as an expert in the field of affordable housing and frequently addresses professional groups on topics of real estate investment, syndication, tax law, and the Low-Income Housing Tax Credit program.
Mr. Deutch received a B.B.A. with distinction from the University of Michigan School of Business Administration in 1962 and a Juris Doctor degree with honors from the University of Michigan Law School in 1965. He is a member of the Order of the Coif. Mr. Deutch served in the Honors Program in the Office of the Chief Counsel of the Internal Revenue Service from 1965 to 1967, where he was assigned to the Interpretative Division in Washington, D.C. He attended Georgetown Law Center and received his Master of Laws degree in taxation in 1967. Mr. Deutch is a member of the State Bars of Michigan and California, as well as the American, Federal, Los Angeles, and Beverly Hills Bar Associations.
KEY OFFICERS OF CPII AND AFFILIATES
ESSIE SAFAIE, age 51, is Chief Financial Officer and Chief Operating Officer of CPRC. Prior to joining CPRC in 1988, from 1985-88, he was Vice President and Chief Financial Officer of Sunrise Investments, Inc., a real estate syndication firm with $450 million of real estate under management. During this period, Mr. Safaie was also President of an affiliated property management firm, S&L Property Management, Inc., with over 12,000 residential units and 800,000 square feet of commercial office space under direct management. From 1982 to 1985, Mr. Safaie was assistant controller of Standard Management Company, builders and managers of luxury hotels, commercial offices and residential units. From 1980-1982, he served as financial officer of Diamond "M" Drilling Company. Mr. Safaie received a BA degree in Business Administration from California State University with a major in accounting.
CHARLES L. SCHWENNESEN, age 55, is Vice President of Acquisition Finance for CPRC and is responsible for financial analysis and "due diligence" reviews of all properties acquired by CPRC. Prior to joining CPRC in 1987, he was a consultant to companies which provided investment opportunities through private placements. From 1984 to 1985, Mr. Schwennesen was Vice President of Cranston Securities Company and was responsible for the structuring of more than $30 million of mortgage revenue bond financing for affordable housing projects. From 1977 to 1984, Mr. Schwennesen was a manager with the accounting firm of Price Waterhouse where he specialized in providing auditing and consulting services to publicly held California real estate development companies involved in the affordable housing industry. Mr. Schwennesen is a Certified Public Accountant and holds a Masters degree in Business Administration from the UCLA Graduate School of Management and a B.A. degree in Mathematics from UCLA.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION ----------------------
The Partnership has no officers or directors. However, in connection with the operations of the partnership and the Operating Partnerships, the General Partners and their Affiliates will or may receive certain fees, compensation, income and other payments which are described in the Prospectus under "Compensation, Fees and Reimbursements" on page 17, the terms of which are incorporated herein by reference.
During the fiscal years ended March 31, 2001, 2000 and 1999, CPII, a General Partner of the Partnership, earned $150,049, $146,244, and $144,440, respectively, of partnership management fees. During the fiscal years ended March 31, 2001, 2000 and 1999, the Partnership accrued $37,600, $37,600, and $37,600, respectively, for the reimbursement of overhead allocation from Century Pacific Investment Corporation (CPIC). During fiscal year 2001, the General Partners received no payments from the Operating Partnerships.
ITEM 12.
ITEM 12. PARTNERSHIP INTEREST OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND --------------------------------------------------------------- MANAGEMENT ----------
No partner in CPTCHF-II owns more than 5% of the total number of partnership interests outstanding. Irwin J. Deutch, the Managing General Partner, holds a one-half percent General Partnership Interest.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ----------------------------------------------
Irwin J. Deutch is the Managing General Partner of CPTCHF-II, and CPII is also a General Partner. Irwin J. Deutch is the sole Director and President of CPII, and the stock of CPII is solely owned by the Deutch Family Trust. Mr. Deutch is also the President, sole Director and the Deutch Family Trust is the sole stockholder of Century Pacific Realty Corporation (CPRC), a General Partner of the Operating Partnerships that own the Properties in which CPTCHF-II has invested. CPII received a partnership management fee for its services in managing and advising the Partnership and its business. CPEC, an affiliate, provides all the services and materials necessary for the operation of the Partnership and is reimbursed for actual costs. These transactions are more particularly set forth in the financial statements found under ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ---------------------------------------------------------------
(a) (1) Financial Statements:
Independent Auditors' Report Balance Sheet as of March 31, 2001 and 2000 Statement of Partners' Equity (Deficit) for the Years Ended March 31, 2001, 2000 and 1999 Statement of Operations for the Years Ended March 31, 2001, 2000 and 1999 Statement of Cash Flows for the Years Ended March 31, 2001, 2000 and 1999 Notes to Financial Statements
(2) Financial Statement Schedules:
Schedule III - Real Estate and Accumulated Depreciation of Operating Partnerships in which CPTCHF-II has Limited Partnership Interests Notes to Schedule III - Real Estate and Accumulated Depreciation of Operating Partnerships in which CPTCHF-II has Limited Partnership Interests Schedule IV - Mortgage Loans on Real Estate of Operating Partnerships in which CPTCHF-II has Limited Partnership Interests Notes to Schedule IV - Mortgage Loans on Real Estate of Operating Partnerships in which CPTCHF-II has Limited Partnership Interests
All other schedules are omitted because they are not applicable, or the required information is shown in the financial statements or notes thereto.
(3) Exhibits
Not applicable
(b) Reports on Form 8-K
Not applicable
(c) Exhibits
Not applicable
(d) Financial Statement Schedule
Financial Statements of Washington Courts Limited Partnership for the Years Ended December 31, 2000, 1999, and 1998
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized.
CENTURY PACIFIC TAX CREDIT HOUSING FUND
Date: June 29, 2001 /s/ Irwin Jay Deutch --------------------------------------- By: Irwin Jay Deutch, as Managing General Partner
and
Century Pacific Capital II Corporation, as Corporate General Partner and as attorney-in-fact for all Investor Limited Partners
Date: June 29, 2001 /s/ Irwin Jay Deutch --------------------------------------- By: Irwin Jay Deutch, President
INDEPENDENT AUDITORS' REPORT
Partners Century Pacific Tax Credit Housing Fund - II
We have audited the accompanying balance sheet of Century Pacific Tax Credit Housing Fund - II as of March 31, 2001 and, 2000, and the related statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended March 31, 2001. 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 Century Pacific Tax Credit Housing Fund - II as of March 31, 2001 and 2000 and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2001, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 6 to the financial statements, the Partnership has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management's plans regarding these matters also are described in Note 6. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We have also prepared, from information audited by us, the related financial statement schedules listed in Item 14(a)(2) as of December 31, 2000 and 1999. In our opinion the financial statement schedules present fairly, in all material respects, the information required to be set forth therein.
/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri June 20, 2001
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS MARCH 31, 2001, 2000 AND 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Partnership maintains its financial records on the tax basis. Memorandum entries, while not recorded in the records of the Partnership, have been made in order to prepare the financial statements in accordance with generally accepted accounting principles.
On August 7, 1991, management of the Partnership changed from a calendar year end to a fiscal year end of March 31 for financial reporting purposes. Accordingly, the Partnership's quarterly periods end June 30, September 30 and December 31. The Operating Partnerships, for financial reporting purposes, have a calendar year. The Partnership, as well as the Operating Partnerships, have a calendar year for income tax purposes.
ESTIMATES AND ASSUMPTIONS
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 reported period. Actual results could differ from those estimates.
INVESTMENTS IN OPERATING PARTNERSHIPS
The Partnership uses the equity method to account for its investments in the Operating Partnerships (Note 4). Under the equity method of accounting, the investments are carried at cost and adjusted for the Partnership's share of the Operating Partnerships' results of operations and by cash distributions received. Equity in the loss of each Operating Partnership allocated to the Partnership is not recognized to the extent that the investment balance would become negative.
SYNDICATION COSTS
Public offering costs have been recorded as a direct reduction to the capital accounts of the Limited Partners.
- ------------------------------------------------------------------------------
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
INCOME TAXES
No provision has been made for income taxes in the accompanying financial statements since such taxes and/or the recapture of the Low-Income Housing Tax Credit benefits received, if any, are the liability of the individual partners. The Partnership uses the accrual method of accounting for tax purposes.
NET LOSS PER UNIT OF LIMITED PARTNERSHIP INTEREST
Net loss per unit of limited partnership interest is calculated based upon the weighted average number of units of limited partnership interest (units) outstanding.
2. OPERATIONS
Century Pacific Tax Credit Housing Fund-II, a California limited partnership, (the Partnership or CPTCHF-II), was formed on September 2, 1988 for the purpose of raising capital by offering and selling limited partnership interests and then acquiring limited partnership interests in partnerships (the Operating Partnerships) owning and operating existing residential apartment rental properties (the Properties).
The general partners of the Partnership are Century Pacific Capital II Corporation, a California corporation (CPII), and Irwin Jay Deutch, an individual (collectively, the general partners). The general partners and affiliates of the general partners (the general partners and affiliates) have interests in the Partnership and receive compensation from the Partnership and the Operating Partnerships (Note 3).
The Properties qualify for the Low-Income Housing Tax Credit established by Section 42 of the Tax Reform Act of 1986 (the Low-Income Housing Tax Credit). These properties are leveraged low-income multifamily residential complexes and receive one or more forms of assistance from federal, state or local governments, or agencies (the Government Agencies).
In September 1988, the Partnership began raising capital from sales of limited partnership interests, at $1,000 per unit, to limited partners. The Partnership authorized the issuance of a maximum of 25,000 Partnership Units of which 5,754 were subscribed and issued. The limited partnership interest offering closed as of December 31, 1989.
As of March 31, 2001, the Partnership has acquired limited partnership interests of 90% in Washington Courts Limited Partnership and 60% in Laurel-Clayton Limited Partnership, two existing Operating Partnerships which own apartment rental properties.
- ------------------------------------------------------------------------------
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
The Partnership is currently experiencing a liquidity problem as the Partnership's Operating Partnerships have not achieved operating results required to provide the Partnership with sufficient cash distributions to fund the Partnership's administrative costs. As a result of the foregoing, the Partnership has been dependent upon its affiliates and the general partners for continued financial support to meet its expenses. Though there can be no assurance, management believes that affiliates and/or the general partners, though not required to do so, will continue to fund operations of the Partnership and defer receipt of payment on management fees and allocated overhead expenses. Unpaid management fees and allocated overhead expenses will accrue for payment in future operating years. Management believes that these factors do not permanently impair the net carrying value of the Partnership's investment in the Operating Partnerships.
3. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES OF THE GENERAL PARTNERS
Century Pacific Placement Corporation (CPPC), an affiliate of the general partners, served as the broker-dealer-manager for sales of the limited partnership interests in the Partnership. Century Pacific Realty Corporation (CPRC), an affiliate of CPII, is a general partner in each of the Operating Partnerships.
The general partners have an aggregate one percent interest in the Partnership. CPRC has a one-half percent interest in each of the Operating Partnerships.
The general partners and affiliates receive compensation and reimbursement of expenses from the Partnership, as set forth in the limited partnership agreement, for their services in managing the Partnership and its business. Pursuant to the partnership agreement, the Partnership is required to pay CPII an annual management fee for its services in connection with the management of the affairs of the Partnership. The annual management fee is equal to .5% of invested assets (as defined by the partnership agreement). The general partners and affiliates also receive compensation and reimbursement of expenses from the Operating Partnerships. This compensation and reimbursement includes services provided to the Partnership during its offering stage, acquisition stage and operational stage.
- ------------------------------------------------------------------------------
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
The general partners and affiliates earned the following fees for services provided to the Partnership and were entitled to reimbursement for costs incurred by the general partners and affiliates on behalf of the Partnership and the Operating Partnerships for the years ended March 31, 2001, 2000 and 1999 as follows:
At March 31, 2001 and 2000, non-interest bearing amounts due to affiliates consist of fees and certain general and administrative costs payable by the Partnership to the general partners and affiliates totaling $1,374,369 and $1,224,380 respectively.
At March 31, 2001 and 2000, CPII owed the Partnership for an unsecured, noninterest bearing advance of $871.
At March 31, 2001 and 2000, CPRC was owed $40,594 for a noninterest bearing, demand, cash advance to the Partnership.
As of March 31, 2001 and 2000, CPII was owed $480,523 and $440,132 respectively for a noninterest bearing, demand cash advance made during the current fiscal year to the Partnership.
The general partners may advance funds to the Partnership to fund operating deficits, but are not obligated to do so. Such advances shall be evidenced by a promissory note of a term no more than 12 months in length and at a rate of interest no lower than the prime rate. All such loans shall be repaid prior to any distributions of net cash. At March 31, 2001 and 2000, the Partnership had no outstanding advances due to the general partners.
4. INVESTMENTS IN OPERATING PARTNERSHIPS
At March 31, 2001 and 2000, the Partnership owned limited partnership interests in two Operating Partnerships, each of which has invested in a Property.
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CENTURY PACIFIC TAX CREDIT HOUSING FUND-II - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
Investments in Operating Partnerships consist of the following:
The names and locations of the Properties in which the Operating Partnerships hold beneficial interests are as follows:
NAME OF NAME AND OPERATING PARTNERSHIP LOCATION OF PROPERTY ---------------------------------------------------------------------
Washington Courts Limited Partnership Washington Courts Chicago, Illinois
Laurel-Clayton Limited Partnership Plumley Village Boston, Massachusetts
A summarized combined balance sheet as of December 31, 2000 and 1999 and statements of operations of the aforementioned Operating Partnerships for the years then ended follows:
- ------------------------------------------------------------------------------
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
5. COMMITMENTS AND CONTINGENCIES
The Federal Housing Administration (FHA) and the Department of Housing and Urban Development (HUD) exercise control over the projects through provisions of Regulatory Agreements (the Agreements). The Agreements restrict the Projects, without prior written approval from HUD, from encumbering, acquiring, altering or disposing of land, buildings and equipment; using the Properties for any purpose other than the use originally intended; engaging in any other business or activity; and paying distributions to partners, compensation to officers or directors, or for any purpose other than reasonable operating expenses. The Agreements also stipulate that FHA and HUD shall control the rental rates, rate of return on investment and method of operation.
- ------------------------------------------------------------------------------
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
In addition, the Agreements require the Properties to make cash deposits on a monthly basis into a reserve fund for replacements. The respective mortgagees are the designated custodians of the reserve funds and withdrawals can only be made with HUD approval.
6. GOING CONCERN
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Partnership as a going concern. However, the Partnership's Operating Partnerships have not achieved the operating results required to provide the Partnership with sufficient cash distributions to fund the Partnership's administrative costs. Additionally, the Partnership has incurred allocated losses from both of its Operating Partnerships to the extent of the Partnership's cash contributions. As a result of the foregoing, the Partnership is dependent upon the general partners and affiliates for continued financial support.
Management maintains that the general partners and affiliates, though not required to do so, will continue to fund operations by deferring payment to related parties of allocated overhead expenses, and by funding any Partnership operating costs. Unpaid allocated overhead expenses will accrue and become payable when the Operating Partnerships generate sufficient cash distributions to the Partnership to cover such expenses. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
- ------------------------------------------------------------------------------
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
7. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments:
CASH
The carrying amount approximates fair value because of the short maturity of those instruments.
RELATED PARTY RECEIVABLES
The carrying amount approximates fair value because of the short-term nature of the receivables.
ADVANCE FROM AFFILIATE
The carrying amount approximates fair value because of the short-term nature of the advance.
PAYABLE TO RELATED PARTIES
The carrying amount approximates fair value because the terms of the payable are similar to currently available terms and conditions for similar instruments.
- ------------------------------------------------------------------------------
See notes to schedule
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II - ------------------------------------------------------------------------------ NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF OPERATING PARTNERSHIPS IN WHICH CPTCHF-II HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 2000
NOTE 1 - DESCRIPTION OF PROPERTIES - ----------------------------------
The Properties held by the Operating Partnerships in which CPTCHF-II has invested are housing projects, primarily for families and elderly or handicapped individuals of low and moderate income.
NOTE 2 - SCHEDULE OF ENCUMBRANCES - ---------------------------------
NOTE 3 - RECONCILIATION OF REAL ESTATE AND ACCUMULATED DEPRECIATION - -------------------------------------------------------------------
See notes to schedule
CENTURY PACIFIC TAX CREDIT HOUSING FUND-II - ------------------------------------------------------------------------------ NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE OF OPERATING PARTNERSHIPS IN WHICH CPTCHF-II HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 2000
NOTE 1 - DESCRIPTION -----------
Each Operating Partnership has invested in a Property.
Laurel-Clayton Limited Partnership assumed a mortgage loan obligation from the seller of the Property. The mortgage loan obligation is insured by the United States Department of Housing and Urban Development and is secured by the land and buildings of the Property.
Washington Courts Limited Partnership has obtained permanent financing in the principal amount of $5,165,400 which is insured by the Federal Housing Administration. The loan bears interest at 9.25% per annum. The note will be amortized over a period of 40 years. Prepayment is prohibited during the construction period and for ten years from the date of completion of construction.
NOTE 2 - RECONCILIATION OF MORTGAGES ---------------------------
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S2100-020 INDEPENDENT AUDITORS' REPORT
To The Partners Washington Courts Limited Partnership
We have audited the accompanying balance sheet of Washington Courts Limited Partnership, Project No. 071-35593, a limited partnership, as of December 31, 2000 and 1999, and the related statements of profit and loss, partners' equity (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 and Government Auditing Standards, issued by the Comptroller General of the United States. 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 Washington Courts Limited Partnership as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
March 2, 2001
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WASHINGTON COURTS LIMITED PARTNERSHIP 071-35593 - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (S3100-010)
ORGANIZATION (S3100-010)
Washington Courts Limited Partnership (the Partnership) was organized as a limited partnership formed April 6, 1988 to acquire an interest in real property located in Chicago, Illinois and to construct and operate thereon an apartment complex (the Project) of 103 units under Section 221(d)(4) of the National Housing Act. Such projects are regulated by the U.S. Department of Housing and Urban Development (HUD) and the Illinois Housing Development Authority (IHDA) as to rent charges and operating methods. The regulatory agreements limit annual distributions of net operating receipts to surplus cash available at the end of each year. There was no available surplus cash at December 31, 2000 and 1999.
The following significant accounting policies have been followed in the preparation of the financial statements:
Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.
The Partnership provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of all receivables. The estimated losses are based on a review of the current status of the existing receivables. No allowance for doubtful accounts was provided for at December 31, 2000 or 1999 as none was deemed necessary by management.
Depreciation is provided using primarily the straight-line method over the estimated useful lives of the assets ranging from seven to twenty-seven and a half years.
The replacement reserve can only be used for improvements to buildings upon prior approval of HUD.
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WASHINGTON COURTS LIMITED PARTNERSHIP - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
Deferred loan costs consist of fees for obtaining the HUD insured mortgage loan and are being amortized using the straight-line method over the life of the mortgage loan.
Low-income housing credit fees are amortized over ten years.
In December 1999, a portion of the general partnership interest was converted to a special limited partner interest. Due to this, at December 31, 1999 income or loss of the Partnership will be allocated 1.005% to the general partners and 98.995% to the limited partners. No income tax provision has been included in the financial statements since income or loss of the Partnership is required to be reported by the partners on their respective income tax returns. No adjustment of financial statement loss to tax loss is required.
2. OTHER ASSETS (S3100-X3X) (S3100-240)
Other assets consist of:
3. MORTGAGE PAYABLE (S3100-050)
The 9.25% mortgage note payable is insured by HUD and is payable in monthly installments of $40,841 (including principal and interest) through February 2031. The note is secured by a first deed of trust on real estate.
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WASHINGTON COURTS LIMITED PARTNERSHIP - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
The scheduled maturities of the mortgage payable at December 31, 2000 are as follows: (S3100-x1x)
4. MISCELLANEOUS CURRENT LIABILITIES (S3100-X3X) (S3100-240)
Miscellaneous current liabilities consist of:
5. COMMITMENTS (S3100-X3X) (S3100-240)
The Partnership has entered into regulatory agreements with HUD and IHDA which regulate, among other things, the rents which may be charged for apartment units in the Project, prohibit the sale of the Project without HUD and IHDA consent, limit the annual distribution of cash flow to the partners and otherwise regulate the relationship between the Partnership, HUD and IHDA.
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WASHINGTON COURTS LIMITED PARTNERSHIP - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
Pursuant to an agreement with HUD, under Section 8 of the Housing Assistance Payment Program, the Partnership is entitled to receive housing assistance payments on behalf of qualified tenants. The term of the agreement is for a maximum of 15 years. The Partnership cannot sell of otherwise substantially liquidate its assets during such period that the agreement for housing assistance program with HUD is in existence without their approval.
6. RELATED PARTY TRANSACTIONS (S3100-200)
On December 10, 1999, a transaction occurred which converted Century Pacific Realty Corporation (CPRC) to a Special Limited Partner and Shorebank Development assumed CPRC's previous role of Supervising General Partner. Shorebank Development Corporation also remains the Managing General Partner.
INCENTIVE MANAGEMENT FEE
Commencing in 1990, the Managing General Partner will receive from Permissible Sources a non-cumulative incentive management fee equal to the lesser of (i) 10% of the gross income of the Partnership for such fiscal year less the management fee paid or payable in respect of such fiscal year or (ii) seventy percent (70%) of the amount of the Partnership's Available Cash remaining after payment of the Preferred Distribution, the Administration Fee, and repayment of any Operating Deficit Advances made to the Partnership.
For its services in administering the Local Affairs of the Partnership within the state, including, without limitation, coordinating the activities of the Partnership relating to HUD, the lender and the agency, and overseeing local compliance with applicable regulations, the Partnership shall be required to pay the local general partners from Permissible Sources an annual Administrative Fee of $19,772 beginning in 1990. A portion of the Administrative Fee equal to one percent (1%) of the gross income of the Partnership shall be payable each year from the Partnership's Available Cash (to the extent that such Available Cash constitutes Permissible Sources remaining after payment of the Preferred Distribution). The balance of the Administration Fee shall be payable from available cash (to the extent that such Available Cash constitutes a Permissible Source) remaining after full payment of the Preferred Distribution and repayment of any operating deficit advances. Such payment shall be made dollar-for-dollar with payments of the Preferred Distribution (plus unpaid amounts thereof accruing from prior taxable years) until one of such fees is paid in full, with any remainder of such Available Cash applied to any balance of the other such fee. The Partnership owes the Managing General Partner $68,269 at December 31, 2000 and 1999, respectively.
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WASHINGTON COURTS LIMITED PARTNERSHIP - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
The Investor Limited Partner will, beginning in 1989, receive from Permissible Sources an annual cumulative cash distribution (the Annual Preferred Distribution) of $39,545. Beginning in 1990, a portion of the Annual Preferred Distribution equal to one percent (1%) of the annual gross income of the Partnership (the Guaranteed Portion) shall be distributed to the Investor Limited Partner from Permissible Sources without regard to Partnership income. An amount of the Annual Preferred Distribution equal to $19,772 (the Priority Portion), reduced by the Guaranteed Portion payable for such year, shall be payable from the Partnership's Available Cash (to the Permissible Source) after payment of the Primary Portion of the Administration Fee and repayment of any outstanding Operating Deficit Advances. Such payment shall be made dollar-for-dollar with repayments of the Administration Fee (other than the Primary Portion thereof) until one of such items is paid in full, with any remainder of such Available Cash applied to any balance of the other such item. Any unpaid amount of the Priority Portion with respect to any year after 1989 shall accrue, without interest, and be distributable to the Investor Limited Partner from Available Cash (to the extent that such Available Cash constitutes a Permissible Source) after payment of the Primary Portion of the Administration Fee and repayment of any outstanding Operating Deficit Advances. Such payment shall be made dollar-for-dollar with payments of the Administration Fee (other than the Primary Portion thereof) until one of such items is paid in full, with any remainder of such Available Cash (to the extent that such Available Cash constitutes a Permissible Source) applied to any balance of the other such item. Any remaining amounts of the Annual Preferred Distribution after 1989, including any unpaid amount of the Priority Portion, shall be distributable to the Investor Limited Partner, without interest, from cash available for distribution from Capital Transactions. The remaining unpaid balance at December 31, 2000 and 1999 amounted to $268,329 and $248,557, respectively, and is not reflected in the accompanying balance sheet.
MANAGEMENT FEE (S3100-230)
The apartment project was managed by Century Pacific Management Corporation, an affiliate of the general partner until November 1999 and received a fee of 5.55% of rents collected. In November 1999, HJ Russell & Company began managing the Project. They have received a management fee of 5.65% of rents collected.
In December 2000, DSSA Management, Inc. took over management of the Project. They are receiving a fee of 5.65% of gross collections. At December 31, 2000 and 1999, the outstanding management fee payable was $14,644.
S3100-210 COMPANY NAME HJ Russell & Company S3100-220 AMOUNT RECEIVED $35,466
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S2300-020 INDEPENDENT AUDITORS' REPORT
To The Partners Washington Courts Limited Partnership Los Angeles, California
We have audited the accompanying balance sheet of Washington Courts Limited Partnership, Project No. 071-35593, a limited partnership, as of December 31, 1998 and 1997, and the related statements of profit and loss, partners' equity 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 and Government Auditing Standards, issued by the Comptroller General of the United States. 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 Washington Courts 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.
January 28, 1999
WASHINGTON COURTS LIMITED PARTNERSHIP HUD PROJECT NO: 071-35593 - ------------------------------------------------------------------------------ STATEMENT OF PARTNERS' EQUITY
WASHINGTON COURTS LIMITED PARTNERSHIP HUD PROJECT NO: 071-35593 - ------------------------------------------------------------------------------ NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 AND 1997
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (S3100-010)
ORGANIZATION (S3100-010)
The Partnership is organized as a limited partnership formed April 6, 1988 to acquire an interest in real property located in Chicago, Illinois and to construct and operate thereon an apartment complex of 103 units under Section 221(d)(4) of the National Housing Act. Such projects are regulated by the U.S. Department of Housing and Urban Development (HUD) and the Illinois Housing Development Authority (IDHA) as to rent charges and operating methods. The regulatory agreements limit annual distributions of net operating receipts to "surplus cash" available at the end of each year. There was no available "surplus cash" at December 31, 1998.
The following significant accounting policies have been followed in the preparation of the financial statements:
Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.
The Partnership provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of all receivables. The estimated losses are based on a review of the current status of the existing receivables. No allowance for doubtful accounts was provided for at December 31, 1998 or 1997 as none was deemed necessary by management.
Depreciation is provided using primarily the straight-line method over the estimated useful lives of the assets ranging from seven to twenty-seven and a half years.
The replacement reserve can only be used for improvements to buildings upon prior approval of HUD.
Deferred loan costs consist of fees for obtaining the HUD insured mortgage loan and are being amortized using the straight-line method over the life of the mortgage loan.
Low income housing credit fees are amortized over ten years.
Income or loss of the Partnership is allocated 1.005% to the general partners and 98.995%
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WASHINGTON COURTS LIMITED PARTNERSHIP - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
to the limited partners. No income tax provision has been included in the financial statements since income or loss of the Partnership is required to be reported by the partners on their respective income tax returns. No adjustment of financial statement loss to tax loss is required.
2. OTHER ASSETS (S3100-X3X) (S3100-240)
Other assets consist of:
3. MORTGAGE PAYABLE (S3100-050)
The 9.25% mortgage note payable is insured by HUD and is payable in monthly installments of $40,841 (including principal and interest) through February 2031. The note is secured by a first deed of trust on real estate.
The scheduled maturities of the mortgage payable at December 31, 1998 are as follows: (S3100-x1x)
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WASHINGTON COURTS LIMITED PARTNERSHIP - ------------------------------------------------------------------------------ Notes To Financial Statements (Continued)
4. COMMITMENTS (S3100-X3X) (S3100-240)
The partnership has entered into regulatory agreements with HUD and IHDA which regulate, among other things, the rents which may be charged for apartment units in the Project, prohibit the sale of the Project without HUD and IHDA consent, limit the annual distribution of cash flow to the partners and otherwise regulate the relationship between the Partnership, HUD and IHDA
Pursuant to an agreement with HUD, under Section 8 of the Housing Assistance Payment Program, the Partnership is entitled to receive housing assistance payments on behalf of qualified tenants. The term of the agreement is for a maximum of 15 years. The Partnership cannot sell of otherwise substantially liquidate its assets during each period that the agreement for housing assistance program with HUD is in existence without their approval.
5. RELATED PARTY TRANSACTIONS (S3100-200)
INCENTIVE MANAGEMENT FEE Commencing in 1990, the Managing General Partner will receive from Permissible Sources a non-cumulative incentive management fee equal to the lesser of (i) 10% of the gross income of the Partnership for such fiscal year less the management fee paid or payable in respect of such fiscal year or (ii) seventy percent (70%) of the amount of the Partnership's Available Cash remaining after payment of the Preferred Distribution, the Administration Fee, and repayment of any Operating Deficit Advances made to the Partnership.
For its services in administering the Local Affairs of the Partnership within the state, including, without limitation, coordinating the activities of the Partnership relating to HUD, the lender and the agency, and overseeing local compliance with applicable regulations, the Partnership shall be required to pay the local general partners from Permissible Sources an annual Administrative Fee of $19,772 beginning in 1990. A portion of the Administrative Fee equal to one percent (1%) of the gross income of the Partnership shall be payable each year from the Partnership's Available Cash (to the extent that such Available Cash constitutes Permissible Sources remaining after payment of the Preferred Distribution). The balance of the Administration Fee shall be payable from available cash (to the extent that such Available Cash constitutes a Permissible Source) remaining after full payment of the Preferred Distribution and repayment of any operating deficit advances, such payment to be made dollar-for-dollar with payments of the Preferred Distribution (plus unpaid amounts thereof accruing from prior taxable years) until one of such fees is paid in full, with any remainder of such Available Cash applied to any balance of the other such fee. The Partnership owes the Managing General Partner $68,269 and $69,876 at December 31, 1998 and 1997, respectively.
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The Investor Limited Partner will, beginning in 1989, receive from Permissible Sources an annual cumulative cash distribution (the "Annual Preferred Distribution") of $39,545. Beginning in 1990, a portion of the Annual Preferred Distribution equal to one percent (1%) of the annual gross income of the Partnership (the "Guaranteed Portion") shall be distributed to the Investor Limited Partner from Permissible Sources without regard to Partnership income. An amount of the Annual Preferred Distribution equal to $19,772 (the "Priority Portion"), reduced by the Guaranteed Portion payable for such year, shall be payable from the Partnership's Available Cash (to the Permissible Source) after payment of the Primary Portion of the Administration Fee and repayment of any outstanding Operating Deficit Advances, such payment to be made dollar-for-dollar with repayments of the Administration Fee (other than the Primary Portion thereof) until one of such items is paid in full, with any remainder of such Available Cash applied to any balance of the other such item. Any unpaid amount of the Priority Portion with respect to any year after 1989 shall accrue, without interest, and be distributable to the Investor Limited Partner from Available Cash (to the extent that such Available Cash constitutes a Permissible Source) after payment of the Primary Portion of the Administration Fee and repayment of any outstanding Operating Deficit Advances, such payment to be made dollar-for-dollar with payments of the Administration Fee (other than the Primary Portion thereof) until one of such items is paid in full, with any remainder of such Available Cash (to the extent that such Available Cash constitutes a Permissible Source) applied to any balance of the other such item. Any remaining amounts of the Annual Preferred Distribution after 1989, including any unpaid amount of the Priority Portion, shall be distributable to the Investor Limited Partner, without interest, from cash available for distribution from Capital Transactions. The remaining unpaid balance at December 31, 1998 amounted to $228,785.
MANAGEMENT FEE (S3100-230) The apartment project was managed by a corporation which is a general partner for the first four months of the year and received a fee of 5.55% of rents collected. Century Pacific Management Corporation, an affiliate of the general partner, took over management on May 1, 1998 and receives a fee of 5.55% of rents collected. The management fee was $47,068 in 1998 and $53,731 in 1997. Management fees payable at December 31, 1998 and 1997 are $20,744 and $5,612, respectively.
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