Item 1 Business
General Development of Business
Registrant (also referred to as the "Partnership") is a limited partnership which was formed under the Delaware Revised Uniform Limited Partnership Act on October 10, 1986. The general partners of the Partnership (the "General Partners") are Wilder Richman Resources Corporation, a Delaware corporation, Real Estate Equity Partners L.P., a Delaware limited partnership and WRC-87A Corporation, a Delaware corporation.
The Partnership was organized to invest in multi-family residential housing complexes (the "Complexes") by acquiring approximately 99% of the limited partnership interest (the "Operating Partnership Interest") in limited partnerships that own and operate such Complexes (the "Operating Partnerships"). WRC-87A Corporation is a special limited partner of each Operating Partnership and has certain rights in connection therewith. Pursuant to Rule 12b-23 of the Securities and Exchange Commission's General Rules and Regulations promulgated under the Securities Exchange Act of 1934, as amended, the description of Registrant's business set forth under the heading "Investment Objectives and Policies" at pages 20 through 30 of the prospectus, dated March 5, 1987, (the "Prospectus") is incorporated herein by reference.
Pursuant to Registrant's Prospectus, as supplemented on October 2, 1987, December 15, 1987 and March 29, 1988, Registrant offered up to $50 million of units of limited partnership interest in Registrant (the "Units") at an offering price of $20 per Unit. The Units were registered under the Securities Act of 1933 pursuant to a Registration Statement on Form S-11 (Registration No. 33-9602).
Registrant terminated the offering of Units (the "Offering") on February 29, 1988 upon raising sufficient capital from the sale of Units to fund the acquisition of the two properties specified for investment by Registrant. The Offering raised $19,687,380 from the sale of 984,369 Units. After payment of $1,378,117 of selling commissions and $1,378,116 of organization and offering expenses and acquisition fees, the net proceeds available for investment were $16,931,147. Of such net proceeds, $16,734,273 was allocated to the acquisition of investments in the Operating Partnerships (the "Operating Partnership Interests") which included investments in guaranteed investment contracts. The remaining net proceeds of $196,874 was designated as working capital to be used for operating expenses of Registrant.
Competition
Information regarding competition, general risks, tax risks and partnership risks is set forth under the heading "Risk Factors" at pages 37 through 48 of the Prospectus, which is incorporated herein by reference.
Compliance with Environmental Protection Provisions
Registrant is not aware of any non-compliance by the Operating Partnerships with respect to federal, state and local provisions regulating the discharge of material into the environment or otherwise relating to the protection of the environment, and is not aware of any condition that would have a material effect on the capital expenditures or competitive position of Registrant.
Employees of Registrant
Registrant employs no personnel and incurs no payroll costs. An affiliate of Wilder Richman Resources Corporation employs individuals who perform accounting, secretarial, transfer and other services on behalf of Registrant as are necessary in the ordinary course of business. Such individuals also perform similar services for other affiliates of Wilder Richman Resources Corporation.
Tax Reform Act of 1986, Revenue Act of 1987, Technical and Miscellaneous Revenue Act of 1988, Omnibus Budget Reconciliation Act of 1989, Omnibus Budget Reconciliation Act of 1990, Tax Extension Act of 1991, Omnibus Budget Reconciliation Act of 1993, Uruguay Round Agreements Act, Tax and Trade Relief Extension Act of 1998, Tax and Trade Relief Extension Act of 1999, Community Renewal Tax Relief Act of 2000, Economic Growth and Tax Relief Reconciliation Act of 2001 and Job Creation and Worker Assistance Act of 2002 (collectively the "Tax Acts")
Registrant 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 Registrant who are subject to federal income tax may be affected by the Tax Acts. Registrant will consider the effect of certain aspects of the Tax Acts on the partners when making decisions regarding its investments. Registrant does not anticipate that the Tax Acts will currently have a material adverse impact on Registrant's business operations, capital resources and plans or liquidity.
Item 2
Item 2 Properties
The following table sets forth information regarding the Complexes owned by the Operating Partnerships as of December 31, 2001. Number of Property Location Dwelling Units -------- -------- -------------- Fieldpointe Apartments Frederick, MD 252 The Westmont New York, NY 163
Fieldpointe Apartments, which is owned by Carrollton X Associates Limited Partnership (the "Carrollton Partnership"), is comprised of 252 apartment units totaling approximately 235,000 square feet with approximately 500 parking spaces. On-site amenities include a clubhouse building with locker room and on-site management office, a swimming pool and two tennis courts. The apartments feature numerous amenities, including dishwashers, disposals and fireplaces.
Registrant acquired its interest as a limited partner in the Carrollton Partnership by making a capital contribution of $3,121,995. Of this amount, $1,373,039 was invested in guaranteed investment contracts and $1,748,956 was contributed upon the Partnership's acquisition of the Operating Partnership Interest, including the amount due upon the achievement of sustaining rental revenue.
The mortgage financing of the Carrollton Partnership was financed from the sale of tax-exempt bonds pursuant to the terms of Section 103(b)(4)(a) of the Internal Revenue Code. The mortgage in the original amount of $10,494,100, bearing fixed 6.09% interest and maturing in February 2028, is insured by the United States Department of Housing and Urban Development ("HUD") under Section 221(d)(4) of the National Housing Act, as amended. Under the terms of the financing, 80% of the units are permitted market rate rents and 20% of the units are to be rented to people earning no more than the low or moderate income levels within the meaning of Section 103(b)(4)(a) of the Internal Revenue Code. The Fieldpointe Apartments occupancy rate was approximately 97% as of December 31, 2001.
The Westmont, which is owned by Columbia Westmont Associates, L.P., formerly Columbia Associates (the "Columbia Partnership"), contains 163 apartment units, 9,415 square feet of commercial space, 46 garage parking spaces, and a penthouse with an exercise center and health club which offers exercise equipment, steam room, sauna, jacuzzi and a large terrace. The apartments feature numerous luxury amenities, including security systems, microwave ovens, dishwashers and hardwood floors.
Registrant acquired its interest as a limited partner in the Columbia Partnership by making a capital contribution of $12,571,634. Of this amount, $6,651,323 was invested in guaranteed investment contracts (which had a value of $5,610,679, including net accrued interest of $18,918, at the time of the acquisition as a result of principal amortization from the dates of purchase of such guaranteed investment contracts to the closing of the Columbia Partnership acquisition), $5,921,104 was contributed upon Registrant's acquisition of the Operating Partnership Interest in the Columbia Partnership and $1,039,851 was contributed to the Columbia Partnership upon the achievement of sustaining rental revenue.
The Columbia Partnership's mortgages were refinanced on June 7, 2000. The first mortgage, in the amount of $24.2 million, is subject to interest based on a variable low floater index with credit enhancement provided by the Federal Home Loan Mortgage Corporation ("Freddie Mac") and matures in July 2030. The second mortgage, in the amount of $8.55 million and payable to Freddie Mac, is subject to fixed interest at 8.07% and matures in July 2015. Under the terms of the refinancing, 20% of the residential units in The Westmont will be maintained for occupancy by low or moderate income tenants through July 2004. The Westmont's occupancy rate as of December 31, 2001 was approximately 98% as to residential dwelling units and 100% as to commercial space.
As of December 31, 2001, the market rental rates of the Complexes were approximately as follows:
Fieldpointe The Apartments Westmont ---------- --------
Monthly Rental Rates: Studio $1,889-$2,350 One-Bedroom $730-$755 $1,786-$3,579 Two-Bedroom $780-$880 $2,706-$4,647 Three-Bedroom $980-$1,030 $4,050-$4,971
The low and moderate income rental rates as of December 31, 2001 for Fieldpointe Apartments fall within the ranges noted above. Such rates for The Westmont range from $705 to $1,062.
Further information regarding the Complexes and Registrant's interest therein is set forth under the heading Specified Investments at pages 30 through 36 of the Prospectus, and in the supplements to the Prospectus dated October 2, 1987 and March 29, 1988.
Item 3
Item 3 Legal Proceedings
Registrant is not aware of any material legal proceedings.
Item 4
Item 4 Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5
Item 5 Market for Registrant's Common Equity and Related Unit Matters
Market
There is no developed public market for the purchase and sale of Units and Registrant does not anticipate that such a market will develop.
Holders
As of December 31, 2001, there were approximately 875 record holders of Units (the "Limited Partners") holding an aggregate of 984,369 Units in the Partnership.
Distributions
The Agreement of Limited Partnership of Registrant (the "Partnership Agreement") provides that all Cash Available for Distribution (as defined therein) be distributed quarterly to the partners in specified proportions. As part of the June 2000 restructuring of the Columbia Partnership's financing, the Columbia Partnership distributed approximately $9,104,000 to the Partnership. The Partnership made a distribution in July 2000 of approximately $8,219,000, representing $8.35 per Unit, to Unit holders of record as of June 30, 2000. During 2001, the Partnership made distributions to the Unit holders totaling $1,181,243. On March 15, 2002, the Partnership distributed an additional $396,748, representing the distribution for the fourth quarter of 2001. Accordingly, total limited partner distributions attributable to 2001 represent approximately $1.60 per Unit. Prior to the mortgage restructuring, the Columbia Partnership was prohibited from distributing cash flow from operations. See Item 7 herein, Management's Discussion and Analysis of Financial Condition and Results of Operations, for further discussion.
Item 6
Item 6 Selected Financial Data
The following table summarizes certain selected consolidated financial information concerning Registrant and should be read in conjunction with the consolidated financial statements and the related notes thereto:
* Includes extraordinary loss of $509,899 in connection with the write-off of unamortized mortgage costs. See Item 7
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
The Partnership's primary sources of funds are rents generated by the Operating Partnerships and interest derived from investments and deposits, certain of which are restricted in accordance with the terms of the mortgages of the Operating Partnerships. The Partnership's investments are highly illiquid.
The Partnership is not expected to have access to additional sources of financing. Accordingly, if unforeseen contingencies arise that cause an Operating Partnership to require capital in addition to that contributed by the Partnership and any equity of the Operating General Partners, potential sources from which such capital needs will be able to be satisfied (other than reserves) would be additional equity contributions of the Operating General Partners or other equity reserves, if any, which could adversely affect the distribution from the Operating Partnerships to the Partnership of operating cash flow and any sale or refinancing proceeds.
During 2001, as a result of the cash flows generated by the operations of the Complexes and after distributions to Unit holders (see below), cash and cash equivalents increased by approximately $511,000. Mortgages payable decreased as a result of regular principal amortization of approximately $488,000. Due to general partners and affiliates decreased by approximately $293,000 primarily as a result of the Partnership's payment of accrued investor services fees and the repayment of certain operating advances owed by the Carrollton Partnership. As of December 31, 2001, the Partnership owes approximately $264,000 to an affiliate of certain General Partners for accrued investor services fees.
Property and equipment decreased by approximately $1,481,000 due to depreciation of approximately $1,528,000, partially offset by capitalized improvements of aproximately $47,000. Intangible assets decreased by approximately $118,000 due to amortization. Property and equipment and intangible assets are expected to decrease annually as the cost of these assets is allocated to future periods over their remaining lives.
The Partnership made quarterly distributions in May, August and November 2001 and in March 2002 totaling $1,577,991, resulting primarily from operating cash flow generated by the Operating Partnerships. Such distribution represents an annualized return to the limited partners of approximately 8% for the year ended December 31, 2001. The Partnership intends to make quarterly distributions on an ongoing basis, dependent upon the operating results of the Operating Partnerships, which is highly contigent upon interest rates of the Columbia Partnership's low-floater mortgages. There can be no assurance that the Operating Partnerships will continue to generate cash flow sufficient to make quarterly distributions or that future distributions will be in any specific amounts. The recent events of September 11, 2001 have increased the risk that the operations of the Properties may be adversely impacted as a result of the effect of these events on the economy in general and because the Properties are located in New York City and near Washington, D.C.
Results of Operations
Year Ended December 31, 2001
During 2001, the Columbia Partnership and the Carrollton Partnership generated income from operating activities, before financial expenses, of approximately $3,730,000 and approximately $1,203,000, respectively. Mortgage principal payments during 2001 for the Columbia Partnership and the Carrollton Partnership were approximately $344,000 and approximately $144,000, respectively. After considering the respective mandatory mortgage principal payments and required deposits to restricted reserves, among other things, the Complexes generated combined cash flow of approximately $2,144,000 during 2001. However, there can be no assurance that the level of cash flow generated by the Complexes in 2001 will continue in future years.
Results of operations improved in 2001 as compared to 2000. Financial expenses decreased primarily as a result of a decrease in the weighted average interest rate on the Columbia Partnership's first mortgage from approximately 3.95% in 2000 to approximately 2.67% in 2001. The write-off of unamortized financing costs of $509,899 in connection with the refinancing of the Columbia Partnership's mortgages (the "Refinancing") occurred in 2000.
As of December 31, 2001, the occupancy of Fieldpointe Apartments was approximately 97% and the occupancy of The Westmont was approximately 98% as to residential units and 100% as to commercial space. The future operating results of the Complexes will be extremely dependent on market conditions and therefore may be subject to significant volatility. The Complexes are generally in good physical condition and are being managed by experienced management companies.
Year Ended December 31, 2000
During 2000, the Columbia Partnership and the Carrollton Partnership generated income from operating activities, before financial expenses, of approximately $3,560,000 and approximately $1,049,000, respectively. Mortgage principal payments during 2000 for the Columbia Partnership and the Carrollton Partnership were approximately $271,000 and approximately $136,000, respectively. Deposits to the Pledged Cap Account and the Bond Retirement Escrow during 2000, prior to the Refinancing, were approximately $167,000 and approximately $331,000, respectively. Pursuant to the terms of the Columbia Partnership's prior mortgages, the prior lender was entitled to a credit enhancement fee of 2.5% per annum based on the outstanding loan balance. During 2000, the Columbia Partnership incurred $270,242 in connection with such fee prior to the Refinancing. After considering the respective mandatory mortgage principal payments, required deposits to mortgage escrows and payments for the credit enhancement fee, among other things, the Complexes generated combined cash flow of approximately $995,000 during 2000.
Results of operations improved in 2000 as compared to 1999, with the exception of the write-off of unamortized financing costs of $509,899 in connection with the Refinancing, which charge had no impact on Registrant's cash flow. Financial expenses increased primarily as a result of an increase in the weighted average interest rate on the Columbia Partnership's first mortgage from approximately 3.04% in 1999 to approximately 3.95% in 2000 and the increase in mortgages payable resulting from the Refinancing. Operating and maintenance expenses were higher during the year ended December 31, 2000 primarily due to scheduled maintenance. As of December 31, 2000, the occupancy of Fieldpointe Apartments was approximately 96% and the occupancy of The Westmont was approximately 99% as to residential units and 100% as to commercial space.
Year Ended December 31, 1999
During 1999, the Columbia Partnership and the Carrollton Partnership generated income from operating activities, before financial expenses, of approximately $3,265,000 and approximately $1,001,000, respectively. Mortgage principal payments during 1999 for the Columbia Partnership and the Carrollton Partnership were approximately $366,000 and approximately $128,000, respectively. Deposits to the Pledged Cap Account and the Bond Retirement Escrow during 1999 were approximately $674,000 and approximately $35,000, respectively. During 1999, the Columbia Partnership incurred $624,293 in connection with the lender credit enhancement fee. After considering the respective mandatory mortgage principal payments, required deposits to mortgage escrows and payments for the credit enhancement fee, among other things, the Complexes generated combined cash flow of approximately $763,000 during 1999.
Results of operations improved in 1999 as compared to 1998. Financial expenses decreased as a result of savings realized from the decrease in the weighted average interest rate on the Columbia Partnership's mortgages from approximately 3.23% in 1998 to approximately 3.04% in 1999. Operating and maintenance expenses were higher during the year ended December 31, 1998 primarily due to scheduled maintenance. Interest revenue for the year ended December 31, 1999 was comparable to the year ended December 31, 1998 and was generated primarily from Partnership deposits and escrows established in connection with the Columbia Partnership's mortgages. As of December 31, 1999, the occupancy of Fieldpointe Apartments was approximately 97% and the occupancy of The Westmont was approximately 99% as to residential units and 100% as to commercial space.
Recent Accounting Pronouncement Not Yet Adopted
In October 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which is effective January 1, 2002. SFAS No. 144 supersedes and provides additional clarification under the guidelines established by SFAS No. 121. The Partnership does not anticipate that the adoption of SFAS No. 144 will have a material impact on its financial statements.
Item 7A
Item 7A Quantitative and Qualitative Disclosures about Market Risk
The Partnership has market risk sensitivity with regard to financial instruments concerning potential interest rate fluctuations in connection with the low floater rates associated with the Columbia Partnership's first mortgage. Accordingly, a fluctuation in the low-floater interest rates of .25% would have a $60,500 annualized impact on the Partnership's results of operations.
Item 8
Item 8 Financial Statements and Supplementary Data
Set forth in the financial statements listed on page is the financial information required in response to Item 8. Such financial statements and schedules appear on pages to and are incorporated herein by reference.
Item 9
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10
Item 10 Directors and Executive Officers of the Registrant
The Partnership has no directors or executive officers.
The General Partners are Wilder Richman Resources Corporation, a Delaware corporation (the "WRC General Partner"), Real Estate Equity Partners L.P., a Delaware limited partnership and an affiliate of Apartment Investment and Management Company (the "AIMCO General Partner") and WRC-87A Corporation, a Delaware corporation (the "A/WRC General Partner"). The A/WRC General Partner is currently one-half owned by Real Estate Equity Partners Inc., the corporate general partner of the AIMCO General Partner, and one-half owned by the shareholders of the WRC General Partner.
The WRC General Partner -----------------------
The directors and certain officers of the WRC General Partner are set forth below:
Name Age Office ---- --- ------
Richard Paul Richman 54 President and Director
Robert H. Wilder, Jr. 56 Executive Vice President and Director
Each of such directors and officers has served in such capacity since the company's formation.
Richard Paul Richman is President and Director of the WRC General Partner. Mr. Richman graduated from the Columbia University Law School with a Juris Doctor degree, the Columbia University Graduate School of Business Administration with a Master of Business Administration degree and Syracuse University with a Bachelor of Arts degree in Political Science. Mr. Richman has over ten years of extensive experience in both the development and management of residential properties. From 1973 until 1979, Mr. Richman practiced corporate law in New York City with the law firm of Greenbaum, Wolff & Ernst and then as a partner of Shipley, Richman & Nierenberg. For over six years, Mr. Richman acted as a lawyer in connection with the development, syndication and tax issues relating to real estate. Since 1988, Mr. Richman has been the President and majority stockholder of The Richman Group, Inc. In recent years, Mr. Richman has devoted full time to the syndication and development of real estate. Mr. Richman was a vice president and shareholder of Related Housing Companies Incorporated, New York, New York from 1978 until mid-1979 with responsibility for that company's project acquisition and syndication activities. Mr. Richman has been a member of the National Advisory Board of the Housing and Development Reporter, a bi-weekly publication of the Bureau of National Affairs, Inc., a frequent speaker on real estate syndication, has been a member of the New York State Historic Credit Task Force, the National Leased Housing Association, the Coalition to Preserve the Low-Income Tax Credit and the Minority Developer Assistance Corporation (which was established by the New York State Battery Park Commission).
Robert H. Wilder, Jr. is Executive Vice President and Director of the WRC General Partner. Mr. Wilder graduated from the University of Michigan with a Bachelor of Arts degree in Economics and from the Columbia University Graduate School of Business with a Master of Business Administration degree. After graduation in 1968, Mr. Wilder joined James D. Landauer Associates, Inc., a national real estate consulting firm, where his responsibilities included feasibility studies, market analyses, land use studies, portfolio valuations and appraisals of industrial, office, commercial and multi-family properties. From 1973 until mid-1979, Mr. Wilder was executive vice president and shareholder of Related Housing Companies Incorporated, New York, New York, and was responsible for mortgage financing and construction loan placement and the supervision of the development of the company's projects. Since 1988, Mr. Wilder has been the President and sole shareholder of Wilder Property Companies Inc. Mr. Wilder is also a licensed real estate broker in New York and Connecticut.
The AIMCO General Partner -------------------------
Certain officers of Real Estate Equity Partners Inc. are set forth below.
Name Age Office ---- --- ------
Terry Considine 54 Chairman of the Board of Directors & Chief Executive Officer
Peter K. Kompaniez 57 Vice Chairman of the Board of Directors & President
Terry Considine has been Chairman of the Board of Directors and Chief Executive Officer of AIMCO since July 1994. Mr. Considine graduated with a Juris Doctor degree from Harvard University in 1971 and with a Bachelor of Arts degree, also from Harvard University, in 1968. Mr. Considine serves as Chairman and director of American Land Lease, Inc. (formerly Asset Investors Corporation and Commercial Assets, Inc.), a public real estate investment trust. Mr. Considine has been and remains involved as a principal in a variety of other business activities.
Peter K. Kompaniez has been Vice Chairman of the Board of Directors of AIMCO since July 1994 and was appointed President in July 1997. Mr. Kompaniez graduated from Yale University with a Bachelor of Arts degree in 1966 and from the University of California with a Juris Doctor degree in 1969. Mr. Kompaniez has also served as Chief Operating Officer of NHP Incorporated, which was acquired by AIMCO in December 1997. From 1986 to 1993, he served as President and Chief Executive Officer of Heron Financial Corporation ("HFC"), a United States holding company for Heron International N.V.'s real estate and related assets. While at HFC, Mr. Kompaniez administered the acquisition, development and disposition of approximately 8,150 apartment units (including 6,217 units that have been acquired by AIMCO) and 3.1 million square feet of commercial real estate.
The A/WRC General Partner -------------------------
The directors and officers of the A/WRC General Partner are as follows:
Name Office ---- ------
Terry Considine President and Director
Richard Paul Richman Executive Vice President, Secretary, Treasurer and Director
Mr. Considine's biography is included above under the AIMCO General Partner. Mr. Richman's biography is included above under the WRC General Partner.
Item 11
Item 11 Executive Compensation
The Partnership is not required to pay the officers, directors or partners of the General Partners any direct compensation and no such compensation was paid during the fiscal year ended December 31, 2001.
Item 12
Item 12 Security Ownership of Certain Beneficial Owners and Management
a) As of December 31, 2001, no person or entity, other than the General Partners discussed below, was known by the Partnership to be the beneficial owner of more than five percent of the Units.
b) Security ownership by the General Partners is as follows:
* General Partners as a class have a 1% interest in all profits, losses and distributions of the Partnership.
West Putnam Housing Partners II LLC, an affiliate of Wilder Richman Resources Corporation, WRC 87-A Corporation and certain of the Carrollton and Columbia Operating General Partners, owns 186,217 Units, representing approximately 18.9% of the outstanding Units of limited partnership interest. In addition, West Putnam Housing Partners LLC, the sole managing member of West Putnam Housing Partners II LLC, owns 41,711 Units, or approximately 4.2% of the outstanding Units.
Affiliates of Real Estate Equity Partners L.P. own 162,564 Units, representing approximately 16.5% of the outstanding Units.
c) Registrant knows of no arrangements that may, at a subsequent date, result in a change of control of Registrant. Article VI of the Partnership Agreement describes the circumstances under which changes in General Partners can occur.
d) There is no family relationship between any of the foregoing directors and executive officers.
e) Involvement in certain legal proceedings with respect to the foregoing directors and executive officers: None.
Item 13
Item 13 Certain Relationships and Related Transactions with Management
The General Partners and their affiliates are entitled to receive certain compensation, fees and reimbursements of expenses. The Partnership incurred investor services fees in the amount of $98,437, of which $85,403 is payable to an affiliate of the General Partners for the year ended December 31, 2001. Information regarding such compensation is set forth under the heading "Compensation And Fees To General Partners And Affiliates" at pages 13 through 19 of the Prospectus, which is incorporated herein by reference.
The financial interests in Registrant of the General Partners and Special Limited Partner are set forth under the heading "Profits, Losses and Distributions" at pages 64 through 67 of the Prospectus, which is incorporated herein by reference.
The taxable income generated by Registrant during the year ended December 31, 2001 allocated to each of the General Partners was approximately $4,000.
Transactions with Affiliates of Management
Wilder Richman Management Corp. ("Wilder Richman"), an affiliate of certain General Partners, was the managing agent of Fieldpointe Apartments in 2001. In connection with these services, Wilder Richman earned management and reporting fees of $106,309 in 2001.
Indebtedness of Management
No officer or director of the General Partners or any affiliate of the foregoing was indebted to Registrant at any time during the fiscal year ended December 31, 2001.
PART IV
Item 14
Item 14 Exhibits, Financial Statement Schedules, and Reports on form 8-K
(a) 1 Financial Statements - The list of Financial Statements appears on page.
2 Schedules - All schedules are omitted because the required information is inapplicable or it is presented in the consolidated financial statements or the notes thereto.
3 Exhibits:
3(A) Form of Amended and Restated Agreement of Limited Partnership of Secured Income L.P., incorporated by reference to Exhibit A to the Prospectus contained in the Partnership's Registration Statement on Form S-11 (No. 33-9602) (the "Form S-11").
3(B) Certificate of Limited Partnership of Secured Income L.P., incorporated by reference to Exhibit 3(B) of Form S-11.
10(A) Escrow Agreement between Registrant and FirsTier Bank N.A., incorporated by reference to Exhibit 10(A) of Form S-11.
10(B) Carrollton Partnership Interest Acquisition Agreement, incorporated by reference to Exhibit 10(B) of Form S-11.
10(C) Carrollton Partnership Agreement, as amended, and guarantees to certain obligations by Carrollton Developer General Partner, incorporated by reference to Exhibit 10(C) of Form S-11.
10(D) Carrollton Property Management Agreement, as amended, incorporated by reference to Exhibit 10(D) of Form S-11.
10(E) Fieldpointe Complex Financing Documents, incorporated by reference to Exhibit 10(B) of Form S-11.
10(F) Form of Guaranteed Investment Contract Escrow Agreement, incorporated by reference to Exhibit 10(F) of Form S-11.
10(G) Columbia Partnership Interest Acquisition Agreement, incorporated by reference to Exhibit 10(G) of Form S-11.
10(H) Columbia Partnership Agreement and guarantee of certain obligations of Columbia Developer General Partner, incorporated by reference to Exhibit 10(H) of Form S-11.
10(I) Columbia Property Management Agreement, incorporated by reference to Exhibit 10(I) of Form S-11.
10(J) Columbia Construction and Development Agreement, incorporated by reference to Exhibit 10(J) of Form S-11.
10(K) Westmont Complex Financing Documents, incorporated by reference to Exhibit 10(K) of Form S-11.
10(L) Westmont Complex Financing Restructuring Agreement, incorporated by reference to Form 10-K for fiscal year ended December 31, 1992.
10(M) Columbia Partnership Cost-Sharing and Indemnity Agreement in connection with the mortgage modification dated May 27, 1993, incorporated by reference to Form 10-K for fiscal year ended December 31, 1993.
10(N) Amendment of Partnership Agreement of Columbia Partnership dated May 27, 1993, incorporated by reference to form 10-K for fiscal year ended December 31, 1993.
10(O) Amendment of Guaranty Agreement of Columbia Partnership dated May 27, 1993, incorporated by reference to form 10-K for fiscal year ended December 31, 1993.
10(P) Columbia Partnership Financing Agreement dated May 27, 1993, incorporated by reference to form 10-K for fiscal year ended December 31, 1993.
10(Q) Carrollton Partnership Assignment and Modification of Deed of Trust dated August 30, 1993, incorporated by reference to Form 10-K for fiscal year ended December 31, 1993.
10(R) Columbia Partnership Assignment and Interdreditor Agreement dated as of June 1, 2000.
10(S) Columbia Partnership Mortgage Note dated as of June 1, 2000.
10(T) Columbia Partnership Multifamily Note (Multistate) dated as of June 1, 2000.
(24) Power of Attorney, incorporated by reference to Exhibit 25 of Form S-11.
(27) Financial Data Schedule.
(28) Market Analysis dated February 1, 1985 of REDE Associates, incorporated by reference to Exhibit 28 of Form S-11.
Other Exhibits
(b) Reports on form 8-K -------------------
Registrant filed a Form 8-K on April 30, 2001 concerning a distribution of approximately $0.30 per Unit expected to be made on or about May 15, 2001 to Unit holders of record as of March 31, 2001.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized on the 1st day of April 2002.
SECURED INCOME L.P.
By: Wilder Richman Resources Corporation, General Partner
By: /s/Richard Paul Richman --------------------------------------- Richard Paul Richman - President
By: WRC-87A Corporation, General Partner
By: /s/Richard Paul Richman --------------------------------------- Richard Paul Richman - Executive Vice President
CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORT
SECURED INCOME L.P. AND SUBSIDIARIES
DECEMBER 31, 2001, 2000 AND 1999
SECURED INCOME L.P. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents Page
Independent Auditors' Report
Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Partners' Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Partners Secured Income L.P. and Subsidiaries
We have audited the consolidated balance sheets of Secured Income L.P. and Subsidiaries as of December 31, 2001 and 2000 and the related consolidated statements of operations, partners' deficit and cash flows for each of the three years in the period ended December 31, 2001. These consolidated financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Secured Income L.P. and Subsidiaries as of December 31, 2001 and 2000 and the results of their operations, changes in their partners' deficit and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America.
By: /s/ Reznick Fedder & Silverman -------------------------------------
Bethesda, Maryland March 28, 2002
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2001 AND 2000
See notes to consolidated financial statements.
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
See notes to consolidated financial statements.
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
See notes to consolidated financial statements.
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
See notes to consolidated financial statements.
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2001, 2000 AND 1999
Note 1 - Organization and Summary of Significant Accounting Policies
Secured Income L.P. (the "Partnership"), was formed on October 10, 1986 under the Revised Uniform Limited Partnership Act of the State of Delaware for the purpose of acquiring real estate limited partnership interests. The Partnership filed a Form S-11 registration statement with the Securities and Exchange Commission effective March 5, 1987 covering an offering of up to 2,500,000 limited partnership units at $20 per unit. The admission of limited partners occurred on October 9, 1987 (at which time operations commenced), December 18, 1987 and April 12, 1988.
Carrollton X Associates Limited Partnership ("Carrollton") was organized under the laws of the District of Columbia on December 18, 1985 for the purpose of constructing and operating a residential rental apartment complex and related facilities under Section 221(d)4 of the National Housing Act. The Partnership acquired a 98.9% limited partner interest in Carrollton in October 1987. The complex consists of 252 units located in Frederick, Maryland and operates under the name of Fieldpointe Apartments.
Columbia Westmont Associates, L.P., formerly Columbia Associates ("Columbia") was formed as a limited partnership on February 6, 1985 to acquire an interest in real property located in New York, New York and to construct and operate thereon a 163 unit apartment complex which also includes a parking garage and approximately 9,400 square feet of commercial space. The Partnership acquired a 98.9% limited partner interest in Columbia in December 1988. The complex operates under the name of The Westmont.
Columbia and Carrollton have underlying mortgages which qualify for tax-exempt financing as a result of restricting at least 20% of their apartment units for low to moderate income tenants as defined in applicable guidelines.
Principles of Consolidation
The consolidated financial statements include the assets, liabilities and results of operations, which relate to the business of the Partnership, Carrollton and Columbia. All significant inter-partnership balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.
Property, Equipment and Depreciation
Land, buildings and improvements are carried at the lower of cost or net realizable value. Net realizable value represents the net cash flow necessary to recover costs exclusive of debt service. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives by use of the straight-line method over a 25-year life. Personal property is carried at cost and is depreciated over its estimated service life of 5-7 years using the straight-line method. Improvements are capitalized, while expenditures for maintenance and repairs are charged to expense as incurred. Upon disposal of depreciable property, the appropriate property accounts are reduced by the related costs and accumulated depreciation and the resulting gains or losses are reflected in the consolidated statements of operations.
Other Assets and Amortization
Mortgage costs are amortized over the terms of the respective loans using the effective interest method. Acquisition fees are amortized over the useful lives of the respective property and equipment using the straight-line method. Leasing costs are amortized over the period of the applicable leases, which range from 5 to 12 years, using the straight-line method.
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2001, 2000 AND 1999
Note 1 - Organization and Summary of Significant Accounting Policies (continued)
Deferred Revenue
Deferred revenue consists of a fee received by Columbia for the extension of a parking garage lease that expires September 30, 2011. Such fee is being accreted to revenue over the lease term.
Leases
Tenant leases are treated as operating leases. Rental revenue is reported when earned and expenses are charged to operations as incurred.
Income Taxes
No provision or benefit for income taxes has been included in these financial statements since taxable income or loss passes through to, and is reportable by, the partners individually.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents.
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 outstanding, 984,369 for each of the years 2001, 2000 and 1999. Losses are allocated to limited partners until such time as the limited partners' equity reaches zero.
Recent Accounting Pronouncement Not Yet Adopted
In October 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which is effective January 1, 2002. SFAS No. 144 supersedes and provides additional clarification under the guidelines established by SFAS No. 121. The Partnership does not anticipate that the adoption of SFAS No. 144 will have a material impact on its financial statements.
Note 2 - Property and Equipment
Property and equipment as of December 31, 2001 and 2000 are summarized as follows:
2001 2000 ------------- -------------
Land $ 6,057,940 $ 6,057,940 Buildings and improvements 37,055,070 37,008,053 Furniture and equipment 1,620,827 1,620,827 ------------- -------------
44,733,837 44,686,820 Less accumulated depreciation 20,598,397 19,070,644 ------------- ------------
$ 24,135,440 $ 25,616,176 ============ ============
Depreciation for the years 2001, 2000 and 1999 was $1,527,753, $1,533,878 and $1,522,040, respectively.
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2001, 2000 AND 1999
Note 3 - Intangible Assets
Intangible assets as of December 31, 2001 and 2000 are summarized as follows:
2001 2000 ------------ ------------
Acquisition fees $ 787,495 $ 787,495 Mortgage costs 2,159,285 2,159,285 Leasing costs 269,265 269,265 ------------ ------------
3,216,045 3,216,045 Less accumulated amortization 984,798 866,553 ------------ ------------
$ 2,231,247 $ 2,349,492 =========== ===========
Amortization for the years 2001, 2000 and 1999 was $118,245, $178,680 and $250,859, respectively. In addition, unamortized mortgage costs in the amount of $509,899 were expensed during 2000 in connection with the refinancing of Columbia's mortgages (see Note 5).
Note 4 - Restricted Assets and Funded Reserves
Restricted assets and funded reserves (see Note 5) as of December 31, 2001 and 2000 are summarized as follows:
2001 2000 ----------- -----------
Escrows held by mortgage lenders $ 455,741 $ 501,155 Interest rate cap account 63,228 30,451 ----------- -----------
$ 518,969 $ 531,606 =========== ===========
Note 5 - Mortgages Payable
Carrollton
Carrollton is obligated under the terms of a note in the original amount of $10,494,100, which note was financed through tax exempt revenue bonds issued by the City of Frederick, Maryland ("Frederick") and is insured by the United States Department of Housing and Urban Development ("HUD"). The note bears interest at 6.09% with monthly payments of principal and interest of $60,900 due through maturity in February 2028. The note is collateralized by the underlying value of the real estate plus other amounts on deposit with the lender. Pursuant to agreements, Carrollton is required to make monthly escrow deposits for taxes, insurance and replacement of project assets, and is subject to restrictions as to operating policies, rental charges, operating expenditures and distributions to partners. The balance of the mortgage payable at December 31, 2001 and 2000 is $9,551,847 and $9,696,082, respectively.
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2001, 2000 AND 1999
Note 5 - Mortgages Payable (continued)
Columbia
On June 7, 2000, the Columbia Partnership's mortgages were refinanced (the "Refinancing") with the Federal Home Loan Mortgage Corporation ("Freddie Mac") replacing Citibank, N.A. ("Citibank") as the credit enhancer. Credit enhancement was provided for $24.2 million in tax exempt bonds (the "First Mortgage") and an $8.55 million conventional mortgage (the "Second Mortgage") payable to Freddie Mac. The First Mortgage matures in July 2030 and requires monthly payments of interest only until the maturity of the Second Mortgage (see below). After such maturity, a monthly principal reserve fund deposit will be required in an amount to be determined at that time. The interest rate is based on a weekly variable low floater index, with a weighted average of approximately 2.67% in 2001 and approximately 4.13% in 2000 after the Refinancing. In connection with the First Mortgage, the Columbia Partnership purchased an interest rate cap (included in intangible assets - see Note 3), such that the rate cannot exceed 6.54% through June 1, 2005. In addition to the interest, monthly fees totaling approximately $24,000 are required, which fees include the credit enhancement fee and approximately $4,000 that is deposited to an escrow for the purchase of a future interest rate cap. The Second Mortgage bears interest at 8.07% and requires monthly principal and interest payments of $82,054 through maturity in July 2015. The balance of the First Mortgage as of December 31, 2001 and 2000 is $24,200,000. The balance of the Second Mortgage as of December 31, 2001 and 2000 is $8,081,808 and $8,425,561, respectively.
As a result of the Refinancing, the Columbia Partnership was able to utilize the mortgage escrows that had been restricted previously and the cash distribution restrictions no longer apply. After the payment of costs incurred in connection with the Refinancing and the establishment of certain reserves, the Columbia Partnership had a surplus of approximately $12.6 million, from which the Columbia Partnership made a distribution to the Partnership totaling approximately $9,104,000 and paid accrued investor service fees of approximately $177,000. The Partnership made a distribution to the Limited Partners in July 2000 of approximately $8,219,000, representing $8.35 per Unit, to Unit holders of record as of June 30, 2000. In addition, the Columbia Partnership satisfied outstanding operating loans made by its general partners (see Note 6).
The original financing of Columbia was provided by the New York City Housing Development Corporation ("HDC"), which issued $32,497,691 of bonds in February 1985. The funds provided by the bond issue were loaned to Columbia in the form of two mortgage loans (the "Original Columbia Mortgages"). In connection with the issuance of such bonds, Citibank issued a letter of credit in the amount of $33,018,629 to guarantee payment of principal and interest on the bonds. The Original Columbia Mortgages were modified during 1993 (the "Modified Columbia Mortgages"), at which time new tax-exempt bonds were issued (which bore a floating interest rate, adjusted weekly) with an initial note rate of 4.66%. In addition to monthly payments of interest, monthly principal amortization of $29,367 was to be required through February 2003, after which principal would be paid sufficient to fund the sinking requirements of the underlying bonds. Pursuant to agreements, any savings realized on the difference between the 4.66% initial note rate and the actual low floater rate (approximately 3.70% and 3.04% weighted average rate in 2000 prior to the Refinancing and 1999, respectively) were to be deposited in an account to be used to purchase an interest rate cap (the "Pledged Cap Account") by October 1996. During April 1998, the lender agreed to restructure the original terms concerning the Pledged Cap Account whereby the account could be utilized for potential debt service shortfalls (in the event the low floater rate was higher than the stated note rate of 4.66%), but not cause the Pledged Cap Account to decline below a balance of $1,000,000. An interest rate cap could be purchased upon the Pledged Cap Account reaching such minimum threshold or in the event the low floater rate rose above 7% for 90 consecutive days or 7.5% for 30 consecutive days.
The Modified Columbia Mortgages further provided that any cash flow generated by Columbia above the note rate, servicing fees and principal amortization would be applied first to fund and maintain an interest-bearing operating deficit reserve account (the "Operating Deficit Reserve") until it accumulated to $500,000. Thereafter, such cash flow would be deposited into the Operating Deficit Reserve to the extent necessary to maintain a balance of $500,000 and then into a segregated account to be used to retire the underlying bonds (the "Bond Retirement Escrow") at the earliest possible dates in minimum denominations of $100,000 in excess of the scheduled principal amortization of approximately $352,000 per annum. Amounts deposited in the Operating Deficit Reserve would generally be utilized to fund operating deficits, pay for maintenance, repairs and replacements and to pay debt service and other amounts due under the loan documents.
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2001, 2000 AND 1999
Note 5 - Mortgages Payable (continued)
As part of the modification of the Original Columbia Mortgages, Citibank agreed to extend its letter of credit from February 1997 to February 2003. Citibank was entitled to a letter of credit fee for providing credit support for the new bonds in the amount of 2.5% per annum of the outstanding principal balance of the new bonds, payable on a current or deferred basis at Columbia's option. Except as described above, the obligation to pay the letter of credit fee was with full recourse as to the assets of Columbia, but without recourse to any of the partners, including the Partnership. If the letter of credit fee was not fully paid from available proceeds from the sale or refinancing of Columbia or the Columbia general partners' guaranty of payment, any such unpaid balance would be deemed fully discharged and neither Columbia nor its partners would have any further obligation with respect thereto. For the period in 2000 prior to the Refinancing and for the year ended December 31, 1999, Columbia incurred a fee in connection with the Citibank letter of credit in the amount of $270,242 and $624,293, respectively, which fee was paid currently on a monthly basis.
Aggregate annual mandatory maturities on the Carrollton and Columbia Mortgages as of December 31, 2001 are as follows:
2002 $ 468,533 2003 534,359 2004 575,672 2005 620,228 2006 668,288 Thereafter 38,966,575 ------------
$ 41,833,655 ============
The carrying amount of the mortgages approximates fair value.
Note 6 - Related Party Transactions
Due to general partners and affiliates as of December 31, 2001 and 2000 consists of cash advances and other payables as follows:
The management agent for Fieldpointe Apartments for each of the three years ended December 31, 2001 was Wilder Richman Management Corporation ("Wilder Richman"), an affiliate of two of the general partners and one of the Carrollton general partners. During each of the three years ended December 31, 2001, Wilder Richman was entitled to property management fees equal to 4% of residential income collected. In addition, Wilder Richman was entitled to a reporting fee of $5 per unit per month for bookkeeping and reporting services. The maximum annual management and reporting fees may not exceed 5% of gross collections. Such fees of $91,189, $97,471 and $92,468 were charged to operations during 2001, 2000 and 1999, respectively. Accrued management and reporting fees as of December 31, 2001 and 2000 are $30,313.
Effective January 1, 2002, WRMC, Inc., another affiliate of two of the general partners and one of the Carrollton general partners, became the management agent for the property.
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2001, 2000 AND 1999
Note 6 - Related Party Transactions (continued)
The management agent for The Westmont is an affiliate of one of the Columbia general partners and receives property management fees calculated at 3% of rental income for each of the three years ended December 31, 2001. The charges to operations amounted to $180,317, $169,723 and $156,343 during 2001, 2000 and 1999, respectively. As of December 31, 2000, $56,016 was due from the management agent, which amount was repaid during 2001.
An affiliate of two of the general partners provides investor services for which a fee is incurred by Columbia and Carrollton in the amounts of $80,072 and $18,365, respectively, and which is based on .5% of the gross proceeds from the offering of Partnership units allocable to each such investment. The fee is payable quarterly from cash flow and shall be adjusted annually by increases in the Consumer Price Index. The consolidated statements of operations include charges to operations for the investor services fee of $98,437 for each of the three years ended December 31, 2001. These amounts are paid or payable to the affiliate to the extent that such services are not provided by an independent third party. Amounts payable to the affiliate as of December 31, 2001 and 2000, representing the unpaid investor services fee for the year, were $85,403 and $84,349, respectively. The Partnership paid the affiliate $211,532, $186,401 and $100,000 during 2001, 2000 and 1999, respectively, for investor services fees incurred in prior years.
A shareholder of two of the general partners provided debt financing for the capitalization of LaMere Associates, Inc. ("LaMere"). In connection with such debt financing, the shareholder received 20% of the stock of LaMere. LaMere was paid premiums in connection with property, workers compensation, liability and umbrella insurance coverage provided to Carrollton. In connection with such insurance coverage, Carrollton incurred $38,452, $37,408 and $40,654 in premiums for the years ended December 31, 2001, 2000 and 1999, respectively.
Carrollton owes its general partners and affiliates $64,638 as of December 31, 2001 and 2000 for various advances. In addition, Carrollton owed Wilder Richman $166,000 as of December 31, 2000 for prior years' operating advances, which amount was repaid during 2001. All such advances are unsecured, non-interest bearing and payable from Carrollton cash flow.
Pursuant to an operating deficit guarantee agreement dated December 21, 1988, the Columbia general partners guaranteed to loan to Columbia any funds required in order to satisfy its operating deficits up to $2,000,000. As of December 31, 1999, loans of $1,700,680 remained payable by Columbia. All outstanding loans and accrued interest thereon were repaid during 2000 in connection with the Refinancing (see Note 5). The loans bore interest at PNC Bank's prime rate plus 2% in accordance with the terms of the Columbia partnership agreement. The amount of interest charged to operations during 2000 was $81,210. In addition, Columbia had been obligated in the amount of $30,000 to certain of its partners for development advances. The non-interest bearing advances were repaid in connection with the Refinancing.
Management believes it is not practicable to estimate the fair value of the loans and advances from related parties because loans and advances with similar characteristics are not currently available to the Partnership, Columbia and Carrollton.
Note 7 - Partners' Deficit
Partnership Allocation
Profits and losses of the Partnership are allocated 1% and 99% to the general partners and limited partners, respectively, until such time as the limited partners' capital reaches zero, after which all losses are allocated to the general partners.
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2001, 2000 AND 1999
Note 7 - Partners' Deficit (continued)
Partnership Distributions
In accordance with the respective partnership agreements, to the extent that Carrollton and Columbia generate net operating cash flow in any year at a level sufficient, when distributed to the Partnership, to enable the Partnership to satisfy the allocable portion of the limited partners' 8% preferred return for such year without utilizing amounts generated from guaranteed investment contracts (the last of which matured in January 1998), the excess amounts generated from the guaranteed investment contracts would be paid or distributed to the general partners of Carrollton and/or Columbia, whichever generate(s) such level(s) of operating cash flow. No such excess distributions were generated during the term of the guaranteed investment contract periods. During 2001, the Partnership made distributions to the Unit holders totaling $1,181,243. On March 15, 2002, the Partnership distributed an additional $396,748, representing the distribution for the fourth quarter of 2001. Accordingly, total limited partner distributions attributable to 2001 represent approximately $1.60 per Unit. As part of the Refinancing, the Columbia Partnership distributed approximately $9,104,000 to the Partnership. The Partnership made a distribution in July 2000 of approximately $8,219,000, representing $8.35 per Unit, to Unit holders of record as of June 30, 2000. Due to restrictions concerning distributions from operating cash flow of Columbia prior to the Refinancing (see Note 5), there were no cash distributions from Columbia in 1999.
Note 8 - Commitments and Contingencies
Lender Restrictions and Requirements
Carrollton and Columbia are subject to various financing requirements and restrictions, including (i) the rental of not less than 20% of the dwelling units to individuals or families who qualify as low or moderate income tenants; (ii) restrictions on the sale of the apartment complexes; and (iii) restrictions on the amount of cash flow which may be distributed to the partners.
Concentration of Credit Risk
As of December 31, 2001, the Partnership has $2,329,131 in cash and cash equivalents which are deposited in interest-bearing accounts with an institution which is not insured by the Federal Deposit Insurance Corporation ("FDIC"). As of December 31, 2001, Carrollton has $535,789 in excess of FDIC insurance limits at two banks.
Long-term Leases
The commercial space and parking garage at Columbia are leased to tenants under the terms of noncancellable operating leases expiring on various dates through 2011. Future minimum rental payments as of December 31, 2001 are as follows:
2002 $ 786,000 2003 801,000 2004 814,000 2005 705,000 2006 698,000 Thereafter 3,392,000 -----------
$ 7,196,000 ===========
Income recognized under the garage and commercial space for the years 2001, 2000 and 1999 was $798,699, $752,001 and $744,075, respectively.
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2001, 2000 AND 1999
Note 9 - Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." The estimated fair value of amounts has been determined using available market information, assumptions, estimates and valuation methodologies.
Cash and Cash Equivalents and Restricted Assets and Funded Reserves
The carrying amount approximates fair value.
Accounts Receivable
The carrying amount approximates fair value due to the short-term nature of the receivable.
The estimated fair values of the Partnership's financial instruments as of December 31, 2001 and 2000 are disclosed elsewhere in the financial statements.
Note 10 - Reconciliation of Taxable Income (Loss) and Bases of Assets
A reconciliation of the financial statement net earnings (loss) to the income tax income (loss) of the Partnership for each of the years ended December 31, 2001, 2000 and 1999 is as follows:
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED DECEMBER 31, 2001, 2000 AND 1999
Note 10 - Reconciliation of Taxable Income (Loss) and Bases of Assets (continued)
A reconciliation of the financial statement carrying amount of total assets to the tax basis as of December 31, 2001 and 2000 is as follows:
Note 11 - Quarterly Financial Information (unaudited)
The following is a summary of results of operations for each of the four quarters for the years indicated: