ITEM 1. BUSINESS --------
Century Pacific Housing Fund-I (the Partnership) was formed on October 6, 1986 as a limited partnership under the laws of the State of California to invest in multi-family housing developments. The Partnership's business is to invest primarily in other limited partnerships (Operating Partnerships) that are organized for the purpose of either constructing or acquiring and operating existing affordable multi-family rental apartments that are eligible for the Low-Income Housing Tax Credit, or to a lesser extent, the Rehabilitation Tax Credit, both enacted by the Tax Reform Act of 1986 (sometimes referred to as Credits or Tax Credits). The Partnership invested in 21 properties (the properties). Each of the properties qualifies for the Low-Income Housing Tax Credit, and one property, a historic structure, qualifies for the Rehabilitation Tax Credit. All of these properties receive one or more forms of assistance from federal, state or local governments. A summary of the Partnership's objectives and a summary of the Tax Credits are provided in the Prospectus under "Investment Objectives and Policies" and "Federal Income Tax Aspects" on pages 45 and 79, respectively, and are incorporated herein by reference.
In order to stimulate private investment in low and moderate income housing of the types in which the Partnership has invested, the federal government has provided investors with significant ownership incentives intended to reduce the risks and provide investors/owners with certain tax benefits, limited cash distributions and the possibility of long-term capital gains. The ownership incentives include interest subsidies, rent subsidies, mortgage insurance and other measures. However, there remains significant risks inherent in this type of housing. Long-term investments in real estate limit the ability of the Partnership to vary its portfolio in response to changing economic, financial and investment conditions, and such investments are subject to changes in economic circumstances and housing patterns, rising operating costs and vacancies, rent controls and collection difficulties, costs and availability of energy, as well as other factors which normally affect real estate values. In addition, these properties usually are rent restricted and are subject to government agency programs which may or may not require prior consent to transfer ownership.
The Partnership acquired the properties by investing as the limited partner in Operating Partnerships which own the properties. As a limited partner, the Partnership's liability for obligations of the Operating Partnerships is limited to its investment. The Partnership made capital contributions to the Operating Partnerships in amounts sufficient to pay the Operating Partnerships' expenses and to reimburse the general partners for their costs incurred in forming the Operating Partnerships, if any, and acquiring the properties. For each acquisition, this typically included a cash down
payment (in one or more installments), acceptance of the property's mortgage indebtedness, and execution of a Purchase Money Note in favor of the seller of the property. For a summary of the acquisition financing activities for each property, see the financial information contained under Item 2.
ITEM 2. PROPERTIES ----------
As of March 31, 1997, the Partnership 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. The table set forth below summarizes the properties acquired, and the purchase price, original indebtedness assumed and the government assistance programs benefitting each property. Further information concerning these Properties may be found in Supplement No. 3 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 16, 1997, there were no pending legal proceedings against the Partnership or any Operating Partnership in which it has invested.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ---------------------------------------------------
There were no submissions of matters to a vote of security holders during the year ended March 31, 1997.
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 29 and 72 of the Prospectus, which information is incorporated herein by reference. The number of owners of Units as of June 16, 1997 was approximately 2,093, holding 22,315 units.
As of June 16, 1997, there were no cash distributions.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA -----------------------
The following summary of selected financial data should be read in conjunction with ITEM 14, herein, which also includes a summary of the Partnership's significant accounting policies.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS ------------------------------------------------------------ AND RESULTS OF OPERATIONS -------------------------
The Partnership raised $8,517,000 in equity capital during calendar year 1987 and raised an additional $13,798,000 through April 15, 1988. In late December 1987, the Partnership invested in eight Operating Partnerships, which own eight multi-family properties located in various states representing $45,507,000 of property value. During 1988, the Partnership invested in an additional 13 properties located in eight states representing $52,953,900 of property value.
As of March 31, 1997, the Partnership's portfolio consists of 21 properties. The properties are located in 13 states and contain 3,267 residential units. The average occupancy level for each property during calendar year 1996 was approximately 94% and most properties generated sufficient revenue to cover operating costs, debt service, and the funding of reserves. For a summary of the combined financial status of the Operating Partnerships and the properties, see the financial information contained under Item 14.
Liquidity and Capital Resources - -------------------------------
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 operating costs. To date, the Operating Partnerships have not provided sufficient cash distributions to enable the Partnership to meet its current obligations. The Partnership has also incurred allocated losses from all but one of its Operating Partnerships to the extent of the Partnership's cash contributions and has a negative working capital. As a result of the foregoing, the Partnership has been dependent upon its general partners and affiliates for continued financial support to meet its operating costs. Management maintains that the general partners and/or affiliates, though not required to do so, will continue to fund operations of the Partnership by continuing to fund operating costs and by deferring payment of allocated overhead expenses and repayment of operating cash advances.
Management believes the possibility exists that one or several Operating Partnerships may require additional capital, in addition to that previously contributed by the Partnership, to sustain operations. In such case, the source of the required capital needs may be from (i) limited reserves from the Partnership (which may include distributions received from the 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. However, the Partnership is under no obligation to fund operating deficits
of the Operating Partnerships in the form of additional contributions or loans.
Due to the uncertainty of the continuation of the Section 8 program, management has been forced to look at several options to prepare for the possible lack of subsidy income to the Operating Partnerships. The loss of subsidy income to the Operating Partnerships will make it more difficult for the Operating Partnerships to provide sufficient cash distributions the Partnership. Management has identified the courses of action they will take as a result of the potential changes to the Section 8 program.
The plan that the Operating Partnerships follow will depend on the federal government's decision to implement the decentralization or elimination of HUD. HUD's proposed Mark-to-Market approach would create an atmosphere where the Projects would have to complete for residents in the conventional market. The following alternatives are listed as plans of action that management plans to pursue in response the HUD's actions:
1) HUD may transfer project control to a local Housing Authority in the form of block grants. The Housing Authority would determine the market rents based on the area market. The projects will respond to the local Housing Authority and follow their procedures and guidelines.
2) The current tenants may receive a housing voucher administered by the local Housing Authority. The projects will accept vouchers and actively seek applicants who have vouchers. The projects will also accept non-voucher residents who will pay rent amounts not to exceed the maximum rents for persons at 60% of the median income level as in compliance with Section 42 of the Internal Revenue Code (IRC).
3) If no subsidies or vouchers are given to the projects or the tenants, all rents will be raised not to exceed the maximum rents for persons at 60% of the median income level and in compliance with Section 42 of the IRC. With rental rate increases, many of the current residents will be unable to pay the higher rents, thus forcing them to move from the projects and to seek housing elsewhere. An increase in the move out rate will cause a severe cash flow strain to the project. To compensate for the loss of income and increased vacancy turnover costs, the projects will require effective marketing, competitive rental rates and possible upgrading to units and/or common areas to attract qualified applicants and maintain a low vacancy rate.
4) HUD may restructure loans in order to minimize the monthly costs to the project and reduce the changes for default. Even with reduced or eliminated payments, the project will be forced to increase rents in order to operate.
5) The final option is to buy off the HUD insured loan making the complex free from HUD's or the local Housing Authority's regulations.
Tax Reform Act of 1986, Omnibus Budget Reconciliation Act of 1987, Technical - ---------------------------------------------------------------------------- and Miscellaneous Revenue Act of 1988, Omnibus Budget Reconciliation Act of - --------------------------------------------------------------------------- 1989 and Omnibus Budget Reconciliation Act of 1990 - --------------------------------------------------
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 Omnibus Budget Reconciliation Act of 1989 and the Omnibus Budget Reconciliation Act of 1990 (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 Partnership generated revenue of $2,100, $3,900 and $5,000, in the fiscal years ended March 31, 1997, 1996 and 1995 respectively, which principally represents transfer fees charged to limited partners to cover administrative costs incurred by the Partnership upon the private transfer of their interests. There were $2,875,495 in tax losses generated during the Partnership's calendar tax year ended December 31, 1996, arising primarily from Operating Partnership losses allocated to the Partnership and the Partnership's general and administrative costs. The Partnership received $3,343,231 in tax credits allocated directly from the Operating Partnerships for the calendar year ended December 31, 1996.
Inflation - ---------
Inflation is not expected to have a material adverse impact on the Partnership's operations during its period of ownership of the Properties.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -------------------------------------------
The financial statements at March 31, 1997 and 1996 together with the report of the independent auditors thereon are incorporated by reference from the Registrants Financial Statements on the pages indicated in ITEM 14.
ITEM 9.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON --------------------------------------------- ACCOUNTING AND FINANCIAL DISCLOSURE -----------------------------------
On October 28, 1996, the prior auditors, Reznick, Fedder & Silverman, were dismissed as auditors for the Partnership. The decision to change accountants was approved by the Partnership's Board of Directors. Reznick, Fedder & Silverman's report on the Partnership's financial statements for the years ended March 31, 1996 and 1995, contained a modification as to uncertainty of the Partnerships to continue as a going concern. Reznick, Fedder & Silverman's report on the above mentioned financial statements contained no adverse opinions or disclaimer of opinions, and was not qualified as to uncertainty, audit scope or accounting principles, other than those previously discussed.
Effective October 28, 1996, the Partnership engaged Rubin, Brown, Gornstein & Co., LLP to perform the audit of the Partnership's financial statements as of and for the year ending March 31, 1997.
There are no known disagreements on any matter of accounting principles or practices or financial statement disclosure with current or predecessor auditors.
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 Corporation (CPCC) (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 tax 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 CPCC:
IRWIN JAY DEUTCH
Irwin Jay Deutch, age 56, 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 CPHF-I 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 CPCC AND AFFILIATES
ESSIE SAFAIE, age 48, 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 51, 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, 1997, 1996, and 1995, CPCC, a general partner of the Partnership, and CPRC, an general partner of the Operating Partnerships, earned $507,804, $505,381 and $503,607, respectively, in compensation from the Operating Partnerships and $60,000 was accrued for each fiscal year for the reimbursement for overhead allocation from Century Pacific Investment Corporation (CPIC). During fiscal year 1997, 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 the Partnership 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 and C.P. Westwood Associates holds a one percent limited partnership interest.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ----------------------------------------------
Irwin J. Deutch is the managing general partner of the Partnership, and CPCC is also a general partner. Irwin J. Deutch is the sole Director and President of CPCC, and the stock of CPCC 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), the general partner of the Operating Partnerships that own the properties in which the Partnership has invested. The general partners were allocated their proportionate share of the Partnership's tax losses and allocated tax credits. CPCC and CPRC accrued certain fees for their services in managing and advising the Partnership and its business. Century Pacific Investment Corporation (CPIC), 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) Exhibits - See the Exhibit Index at page 18 of this report.
(b) Reports on Form 8-K
Registrant did file with the Securities and Exchange Commission a Current Report on Form 8-K during the year ending March 31, 1997.
EXHIBIT INDEX
These exhibits are numbered in accordance with the exhibit table of Item 601 of Regulation S-K.
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 report to be signed on its behalf by the undersigned, thereunto duly authorized.
CENTURY PACIFIC HOUSING FUND - I
By: Irwin Jay Deutch, as Managing General Partner
Date: June 27, 1997 /s/ Irwin Jay Deutch ----------------------------------------------
and
Century Pacific Capital I Corporation, as Corporate General Partner and as Attorney-in-Fact for all Investor Limited Partners
Date: June 27, 1997 /s/ Irwin Jay Deutch ---------------------------------------------- By: Irwin Jay Deutch, President
[letterhead of RBG & Co.]
INDEPENDENT AUDITORS' REPORT
Partners Century Pacific Housing Fund - I
We have audited the accompanying balance sheet of Century Pacific Housing Fund - I as of March 31, 1997 and the related statements of operations, partners' equity and cash flows for the year 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 audit. The financial statements of Century Pacific Housing Fund-I for the year ended March 31, 1996 and 1995 were audited by other auditors, whose report dated June 13, 1996, included an explanatory paragraph describing conditions that raised substantial doubt about the Company's ability to continue as a going concern.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Century Pacific Housing Fund - I as of March 31, 1997 and the results of its operations and its cash flows for the year then ended, 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 Notes 2, 3, 4 and 5 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 3. 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(b)(2) as of December 31, 1996. 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 16, 1997
[letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners Century Pacific Housing Fund-I
We have audited the accompanying balance sheets of Century Pacific Housing Fund-I as of March 31, 1996 and 1995, and the related statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended March 31, 1996. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements of certain operating limited partnerships for the years ended December 31, 1995 and 1994, in which the Partnership owns a limited partnership interest. The investment in such partnerships comprises 38% and 42% of the assets as of March 31, 1996 and 1995, respectively, and 40% and 42% of the Partnership's loss for the years ended March 31, 1996 and 1995, respectively. The financial statements of these operating partnerships were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to information relating to these partnerships, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Century Pacific Housing Fund-I as of March 31, 1996 and 1995, and the results of its operations, the changes in its partners' equity (deficit) and its cash flows for each of the three years in the period ended March 31, 1996, 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 2 to the financial statements, 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 all but one 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. The auditors' report on seven of the Operating Partnerships' financial statements contained an explanatory paragraph relating to a going concern issue concerning the expiration of the Housing Assistance Payment Contract. As discussed in Note 2 to the financial statements, these Operating Partnerships had Housing Assistance Payment Contracts with the U.S. Department of Housing and Urban Development which are due to expire during 1996. These factors raise substantial doubt about the Partnership's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. 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 and other auditors, the related financial statement schedules listed in Item 14 (a)(2) as of December 31, 1995. In our opinion, the financial statement schedules present fairly, in all material respects, the information required to be set forth therein.
/s/ Reznick Fedder & Silverman
Baltimore, Maryland June 13, 1996
[letterhead of Rhea & Ivy, P.L.C.]
Independent Auditor's Report
To the Partners of Century Pacific Housing Partnership I
We have audited the accompanying balance sheet of Century Pacific Housing Partnership I (a limited partnership), FHA Project No. 062-44024-LD, as of December 31, 1995 and the related statements of profit and loss (HUD Form 92410), changes in partners' deficit, and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards and the standards for financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Century Pacific Housing Partnership I (a limited partnership), FHA Project No. 062-44024-LD at December 31, 1995, and the results of its operations, changes in partners' deficit, and cash flow for the year then ended in conformity with generally accepted accounting principles.
/s/ Rhea & Ivy, P.L.C.
Memphis, Tennessee January 22, 1996
[letterhead of Maddox & Associates, APC]
REPORT OF INDEPENDENT AUDITORS
To the Partners Century Pacific Housing Partnership VII (Gulfway Terrace Apartments)
We have audited the accompanying balance sheet of Century Pacific Housing Partnership VII, (Gulfway Terrace Apartments), HUD Project No. 064-44112 as of December 31, 1995, and the related statements of profit and loss, partners' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We have conducted our audit 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Century Pacific Housing Partnership VII, (Gulfway Terrace Apartments), HUD Project No. 064-44112 as of December 31, 1995, and the results of its operations, changes in partners' deficit, and cash flows for the year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Century Pacific Housing Partnership VII (Gulfway Terrace Apartments) will continue as a going concern. As discussed in Note 7 to the financial statements, Century Pacific Housing Partnership VII's Section 8 Housing Assistance Payment (HAP) Contract for 86 units may not be renewed by HUD when it expires September 30, 1996 which raises substantial doubt about its ability to continue as a going concern. Management's plan in regard to this matter is also described in Note 7. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Maddox & Associates, APC
January 22, 1996
[letterhead of Isaac Goldstein & Company]
INDEPENDENT AUDITORS' REPORT ----------------------------
To the Partners Century Pacific Housing Partnership X
Gentlemen:
We have audited the accompanying balance sheet of Century Pacific Housing Partnership X, MHFA Project No. 71-083-N (a Massachusetts limited partnership), as of December 31, 1995, and the related statements of income, changes in partners' deficiency and cash flows for the year then ended. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Century Pacific Housing Partnership X as of December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
/s/ Isaac Goldstein
ISAAC GOLDSTEIN & COMPANY CERTIFIED PUBLIC ACCOUNTANTS
Brooklyn, NY March 20, 1996
[letterhead of Maddox & Associates, APC]
REPORT OF INDEPENDENT AUDITORS
To the Partners Century Pacific Housing Partnership XI (Continental Terrace)
We have audited the accompanying balance sheet of Century Pacific Housing Partnership XI, (Continental Terrace), HUD Project No. 113-44032-NP as of December 31, 1995, and the related statements of profit and loss, partners' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We have conducted our audit 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Century Pacific Housing Partnership XI, (Continental Terrace), HUD Project No. 113-44032-NP as of December 31, 1995, and the results of its operations, changes in partners' deficit, and cash flows for the year then ended in conformity with generally accepted accounting principles.
/s/ Maddox & Associates, APC
January 22, 1996
[letterhead of Maddox & Associates, APC]
REPORT OF INDEPENDENT AUDITORS
To the Partners Century Pacific Housing Partnership XII (Yale Village)
We have audited the accompanying balance sheet of Century Pacific Housing Partnership XII, (Yale Village), HUD Project No. 114-44007-NP-SUP as of December 31, 1995, and the related statements of profit and loss, partners' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We have conducted our audit 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Century Pacific Housing Partnership XII, (Yale Village), HUD Project No. 114-44007-NP-SUP as of December 31, 1995, and the results of its operations, changes in partners' deficit, and cash flows for the year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Century Pacific Housing Partnership XII (Yale Village) will continue as a going concern. As discussed in Note 9 to the financial statements, Century Pacific Housing Partnership XII's Section 8 Housing Assistance Payment (HAP) Contract may not be renewed by HUD when it expires August 31, 1996 which raises substantial doubt about its ability to continue as a going concern. Management's plan in regard to this matter is also described in Note 9. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Maddox & Associates, APC
January 22, 1996
[letterhead of Maddox & Associates, APC]
REPORT OF INDEPENDENT AUDITORS
To the Partners Century Pacific Housing Partnership XIV (Kings Row Apartments)
We have audited the accompanying balance sheet of Century Pacific Housing Partnership XIV, (Kings Row Apartments), HUD Project No. 114-35037-NP-SUP as of December 31, 1995 and the related statements of profit and loss, partners' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We have conducted our audit 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Century Pacific Housing Partnership XIV, (Kings Row Apartments), HUD Project No. 114-35037-NP-SUP as of December 31, 1995 and the results of its operations, changes in partners' deficit, and cash flows for the year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that Century Pacific Housing Partnership XIV (Kings Row Apartments) will continue as a going concern. As discussed in Note 6 to the financial statements, Century Pacific Housing Partnership XIV's Section 8 Housing Assistance Payment (HAP) Contract may not be renewed by HUD when it expires October 31, 1996 which raises substantial doubt about its ability to continue as a going concern. Management's plan in regard to this matter is also described in Note 6. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Maddox & Associates, APC
January 22, 1996
[letterhead of Maddox & Associates, APC]
REPORT OF INDEPENDENT AUDITORS
To the Partners Century Pacific Housing Partnership XV (Castle Gardens)
We have audited the accompanying balance sheet of Century Pacific Housing Partnership XV, (Castle Gardens), HUD Project No. 133-44007-NP as of December 31, 1995, and the related statements of profit and loss, partners' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We have conducted our audit 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Century Pacific Housing Partnership XV, (Castle Gardens), HUD Project No. 133-44007-NP as of December 31, 1995, and the results of its operations, changes in partners' deficit, and cash flows for the year then ended in conformity with generally accepted accounting principles.
/s/ Maddox & Associates, APC
January 22, 1996
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CENTURY PACIFIC HOUSING FUND-I - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997, 1996 AND 1995
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 reporting period. Actual results could differ from those estimates.
INVESTMENTS IN OPERATING PARTNERSHIPS
The Partnership uses the equity method to account for its investment in the Operating Partnerships in which it has invested (Note 5). Under the equity method of accounting, the investment is 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. Costs paid by the Partnership for organization of the Operating Partnership as well as direct costs of acquiring properties, including acquisition fees and reimbursable acquisition expenses paid to the general partner, have been capitalized as investments in Operating Partnerships.
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.
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CENTURY PACIFIC HOUSING FUND-I - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
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, which is 22,315 for the years ending March 31, 1997, 1996, and 1995.
2. OPERATIONS
Century Pacific Housing Fund-I, a California limited partnership, (the Partnership), was formed on October 6, 1986 for the purpose of raising capital by offering and selling limited partnership interests and then acquiring limited partnership interests and then acquiring limited partnership interests in 21 limited partnerships (the Operating Partnerships), which acquired and operate 21 multi-family residential apartment properties (the properties).
The general partners of the Partnership are Century Pacific Capital Corporation, a California corporation (CPCC), 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) and one property qualifies for Historic Rehabilitation Tax Credits (collectively the Tax Credits). These properties are leveraged low-income multi-family residential complexes and receive one or more forms of assistance from federal, state or local government agencies (the Government Agencies).
In July 1987, 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 50,000 partnership units of which 22,315 were subscribed and issued. The limited partnership interest offering closed in April 1988.
The Partnership has acquired limited partnership interests ranging from 97% to 99% in the Operating Partnerships, which have invested in rental property.
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CENTURY PACIFIC HOUSING FUND-I - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
3. REALIZATION OF ASSETS
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the Partnership as a going concern. 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 all but one 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.
The auditors' report on ten of the Operating Partnerships' financial statements contained an explanatory paragraph relating to a going concern issue concerning the expiration of the Housing Assistance Payment Contract. These Operating Partnerships have Housing Assistance Payment Contracts with the U.S. Department of Housing and Urban Development (HUD) that are due to expire during 1997. As of June 16, 1997, five of the Operating Partnerships have been granted one year extensions. Management has requested one year extensions for the remaining five Operating Partnerships, however, as of June 16, 1997, these extensions have not been granted.
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.
4. TRANSACTIONS WITH THE GENERAL PARTNERS AND AFFILIATES OF THE GENERAL PARTNERS
The general partners of the Partnership are CPCC and Irwin Jay Deutch. The original limited partner of the Partnership is Westwood Associates which partners are Irwin Jay Deutch and key employees of CPCC. 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 CPCC, is a general partner in each of the Operating Partnerships.
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CENTURY PACIFIC HOUSING FUND-I - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
The general partners have an aggregate one percent interest in the Partnership, as does the original limited partner. CPRC has a one percent interest in each of the Operating Partnerships, except for one Operating Partnership in which it has a one-half percent interest.
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. 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, operational stage, and termination of refinancing stage.
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, 1997, 1996 and 1995 as follows:
At March 31, 1997 and 1996, payable to related parties consists of fees and certain general and administrative costs accrued as payable by the Partnership to the general partners and affiliates relating to the above and prior year's amounts totalling $712,141 and $635,403, respectively. Such fees and allocated costs have been deferred until the Partnership has sufficient cash to pay them.
Receivable from related party of $15,549 at March 31, 1997 and 1996, represents cash advances to several of the Operating Partnerships, and the payment of state franchise taxes for CPHP III, IV, V, VIII, IX, XVIII, XX, and XXII.
At March 31, 1997 and 1996, CPRC owed $62,455 and $59,755, respectively, for non-interest bearing, demand cash advances to the Partnership.
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CENTURY PACIFIC HOUSING FUND-I - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
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 flow. At March 31, 1997 and 1996, the Partnership had no outstanding advances due to the general partners.
5. INVESTMENTS IN OPERATING PARTNERSHIPS
At March 31, 1997 and 1996, the Partnership owned limited partnership interests in 21 Operating Partnerships, each of which has invested in a multi-family rental property.
Investments in Operating Partnerships consist of the following:
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CENTURY PACIFIC HOUSING FUND-I - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
A summary of the combined balance sheet as of December 31, 1996 and 1995 and statements of operations of the aforementioned Operating Partnerships for the years then ended follows:
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CENTURY PACIFIC HOUSING FUND-I - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
6. COMMITMENTS AND CONTINGENCIES
The rents of the Operating Partnerships, all of which receive rental subsidy payments, including payments under Section 8 of Title II of the Housing and Community Development Act of 1974 ("Section 8") are subject to specific laws, regulations, and agreements with federal and state agencies. The subsidy agreements expire at various times during and after the 15-year compliance period of the Operating Partnerships. The United States Department of Housing and Urban Development ("HUD") has issued a notice implementing provisions to renew Section 8 contracts expiring during HUD's fiscal year 1997, where requested by an owner, for an additional one year term at current rent levels. As of June 16, 1997, ten of the Operating Partnerships' Section 8 contracts are due to expire during 1996, one year contract extensions have been granted for five of the Operating Partnerships. The remaining five Operating Partnerships have not yet received HUD's approval of their extension requests. At the present time, the Partnership cannot reasonably predict legislative initiatives and governmental budget negotiations, the outcome of which could result in a reduction in funds available for the various federal and state administered housing programs including the Section 8 program. Such changes could adversely affect the future net operating income and debt structure of any or all Operating Partnerships receiving such subsidy or similar subsidies.
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See notes to schedule
See notes to schedule
CENTURY PACIFIC HOUSING FUND-I - -------------------------------------------------------------------------------- NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 1996
NOTE 1 - DESCRIPTION OF PROPERTIES - ----------------------------------
The Properties held by the Operating Partnerships in which the Partnership has invested are housing projects, primarily for families and elderly or handicapped individuals of low and moderate income.
NOTE 2 - SCHEDULE OF ENCUMBRANCES - ---------------------------------
CENTURY PACIFIC HOUSING FUND-I - -------------------------------------------------------------------------------- NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS - CONTINUED DECEMBER 31, 1996
NOTE 3 - RECONCILIATION OF REAL ESTATE AND ACCUMULATED DEPRECIATION - -------------------------------------------------------------------
See notes to schedule
See notes to schedule
CENTURY PACIFIC HOUSING FUND-I NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE OF OPERATING PARTNERSHIPS IN WHICH CPHF-I HAS LIMITED PARTNERSHIP INTERESTS DECEMBER 31, 1996
NOTE 1 - DESCRIPTION -----------
Each Operating Partnership has invested in a Property. The Operating Partnerships assumed mortgage loan obligations from the sellers of the properties, and with the exception of two mortgages, all mortgage loan obligations are insured by the United States Department of Housing and Urban Development. All mortgages are secured by the land and buildings of the properties.
In addition, the Operating Partnerships issued residual notes to the sellers of the properties as partial consideration. The notes bear interest at the minimum long-term federal rate as announced from time-to-time pursuant to Section 1274 of the Internal Revenue Code, provided that such rate shall not be less than 7% nor greater than 15%. The notes are secured by the land and buildings of the properties. The notes are repayable out of future cash available for distribution and unpaid principal and interest are due at maturity.
NOTE 2 - RECONCILIATION OF MORTGAGES AND RESIDUAL NOTES ----------------------------------------------
[letterhead of RBG & Co.]
INDEPENDENT AUDITORS' REPORT
To The Partners Coleman Manor Associates Limited Partnership
We have audited the accompanying balance sheet of Coleman Manor Associates Limited Partnership, Project No. 052-35464, a limited partnership, as of December 31, 1996 and the related statements of profit and loss, partners' equity and cash flows for the year 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 audit.
We conducted our audit 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Coleman Manor Associates Limited Partnership of December 31, 1996 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report dated February 4, 1997 on our consideration of Coleman Manor Associates Limited Partnership's internal control structure and a report dated February 4, 1997 on its compliance with laws and regulations.
The accompanying supplementary information (shown on pages 13 to 19) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Rubin, Brown, Gornstein & Co. LLP
February 4, 1997
CERTIFICATION BY CPA
I, Lawrence E. Rubin, am a CPA and have responsibility for the audit services performed in the accompanying report and I certify that these services have been performed in compliance with state law and HUD requirements.
/s/ Lawrence E. Rubin CPA ------------------------------------------------------- Signature Date
Any questions related to this audit or report can be directed to:
Lawrence E. Rubin, CPA Rubin, Brown, Gornstein & Co. LLP 230 S. Bemiston Clayton, Missouri 63105 (314) 727-8150 Federal I.D. #43-0765316
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MISCELLANEOUS OR OTHER INCOME AND EXPENSE SUB-ACCOUNT GROUPS. If miscellaneous or other income and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6729, 6890 and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule describing or explaining the miscellaneous income or expense.
Page 2 of 2 form HUD-92410 (7/91)
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$3,000 of the above expense was paid with project funds and $1,766 with surplus cash (see page 8).
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COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP HUD PROJECT NO.: 052-35464 - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership was formed as a limited partnership under the laws of the State of Maryland on May 16, 1988, for the purpose of acquiring .723 acres of land in Baltimore City, Maryland, for the purpose of constructing and operating a rental housing project under Section 221(d)(4) of the National Housing Act. The project consists of 50 one-bedroom units designated for the elderly. Cash distributions are limited by agreements between the Partnership and HUD to the extent of "surplus cash" as defined by HUD. There was no "surplus cash" as of December 31, 1996.
The following significant accounting policies have been followed in the preparation of the financial statements:
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.
Rental property is carried at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives using accelerated methods.
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.
The low income credit application fee and the low income credit compliance fee are being amortized over 15 years, the term of the credit compliance period.
Income or loss of the Partnership is allocated 2% to the general partners and 98% 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.
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COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
2. MORTGAGES PAYABLE
Permanent financing of the project has been provided by three mortgages. The related notes are nonrecourse and are secured by the Partnership's real estate.
The first mortgage is insured by the Federal Housing Administration (FHA) and collateralized by a deed of trust on the rental property. The mortgage bears interest at the rate of 10%. Principal and interest are payable by the Partnership in monthly installments of $12,545 through maturity in July 2029.
Under agreements with the mortgage lender and FHA, the Partnership 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 liability of the Partnership under the mortgage note is limited to the underlying value of the real estate collateral plus other amounts deposited with the lender.
SUBORDINATED MORTGAGE PAYABLE
The second mortgage, a variable interest loan through Community Development Administration (CDA) of Maryland, is serviced by Bogman, Inc. The note matures on July 1, 2029 and is payable as follows:
1. Beginning August 1, 1990, fifteen annual payments of $8,500 are due, which includes interest at 1% per annum.
2. Beginning August 1, 2005, annual payments are due including interest at 10%, in an amount sufficient to amortize the principal balance over the remaining term of the loan.
SUBORDINATED PURCHASE MONEY MORTGAGE PAYABLE
This mortgage is with the Mayor and City Council of Baltimore and is non-interest bearing. The full balance is due on September 1, 2029.
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COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
Aggregate maturities of the mortgages payable for the five years following December 31, 1996 are as follows:
3. STATEMENT OF CASH FLOWS
Accounting policy: The Partnership considers all temporary cash investments as cash equivalents. These temporary cash investments are securities held for cash management purposes, having maturities of three months or less.
Noncash transactions: The Partnership purchased additional furnishings amounting to $25,580. Of this amount, $18,980 is included in accounts payable as of December 31, 1996.
4. RELATED PARTY TRANSACTIONS
ASSET AND SUPERVISORY MANAGEMENT FEE
The project has a management agreement with the supervising general partner which requires a fee of $19,750 annually. The first portion of the fee ($3,000) is to be paid out of operations. The second portion ($5,000) is to be paid out of surplus cash (as defined by HUD). The remaining balance and any unpaid portions of the above may be paid out of capital transactions. As of December 31, 1996, $136,404 of this fee remains unpaid.
INCENTIVE MANAGEMENT FEE
The project has an incentive management agreement with the managing general partner. The fee is to be equal to 60% of surplus cash (as defined by HUD) net of the second portion ($5,000) of the asset and supervisory management fee. There were no fees charged nor payments made related to this fee in 1996.
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COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP - -------------------------------------------------------------------------------- Notes To Financial Statements (Continued)
MANAGEMENT FEE
The property is managed by Mt. Washington Management Group, Inc., an affiliate of the general partner, pursuant to a management agreement approved by HUD. The current management agreement provides for a management fee of 6% of monthly rental collections. Management fees charged to operations amounted to $21,339.
BOOKKEEPING FEE
The property paid Mt. Washington Management Group, Inc. a bookkeeping fee which amounted to $5,700 in 1996.
5. COMMITMENTS
The Partnership has entered into regulatory agreements with HUD 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 consent, limit the annual distribution of cash flow to the partners and otherwise regulate the relationship between the Partnership and HUD.
Upon acquisition of the project, the Partnership assumed a Section 8 loan management set-aside (HAP) contract with the Department of Housing and Urban Development to make housing assistance payments on behalf of qualified tenants. The original date of the contract was December 1, 1982 and the original term was fifteen years. The Partnership cannot sell or otherwise substantially liquidate its assets during each period that the agreement for housing assistance program with HUD is in existence without their prior approval.
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COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP HUD PROJECT NO.: 052-35464 - -------------------------------------------------------------------------------- SUPPORTING DATA REQUIRED BY HUD DECEMBER 31, 1996
DELINQUENT TENANTS' ACCOUNTS RECEIVABLE
MORTGAGE ESCROW DEPOSITS
Estimated amount required for future payment of:
TENANTS' SECURITY DEPOSITS
Tenants' security deposits in the amount of $6,664 are held in a separate bank account in the name of the Project.
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COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP HUD PROJECT NO.: 052-35464 - -------------------------------------------------------------------------------- SUPPORTING DATA REQUIRED BY HUD (CONTINUED) DECEMBER 31, 1996
REPLACEMENT RESERVE
In accordance with the provisions of the regulatory agreement, restricted cash is held by Huntoon-Paige to be used for replacement of property with the approval of HUD as follows:
ACCOUNTS PAYABLE (OTHER THAN TRADE CREDITORS)
Detail of payable due in more than 60 days:
ACCRUED TAXES (ACCOUNT 2150)
LOANS AND NOTES PAYABLE (OTHER THAN THE INSURED MORTGAGE)
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COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP HUD PROJECT NO.: 052-35464 - -------------------------------------------------------------------------------- SUPPORTING DATA REQUIRED BY HUD (CONTINUED) DECEMBER 31, 1996
COMPENSATION OF PARTNERS
UNAUTHORIZED DISTRIBUTIONS OF PROJECT INCOME
NON-REVENUE PRODUCING UNITS
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COLEMAN MANOR ASSOCIATES LIMITED PARTNERSHIP HUD PROJECT NO.: 052-35464 - ------------------------------------------------------------------------------- SUPPORTING DATA REQUIRED BY HUD (CONTINUED)
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[letterhead of RBG & Co.]
INDEPENDENT AUDITORS' REPORT ON THE INTERNAL CONTROL STRUCTURE
To The Partners Coleman Manor Associates Limited Partnership
We have audited the financial statements of Coleman Manor Associates Limited Partnership as of and for the year ended December 31, 1996, and have issued our report thereon dated February 4, 1997. We have also audited Coleman Manor Associates Limited Partnership's compliance with requirements applicable to HUD-assisted programs and have issued our reports thereon dated February 4, 1997.
We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States and the Consolidated Audit Guide for Audits of HUD Programs (the "Guide") issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General in July 1993. Those standards and the Guide require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and about whether Coleman Manor Associates Limited Partnership complied with laws and regulations, noncompliance with which would be material to a major HUD-assisted program.
The management of Coleman Manor Associates Limited Partnership is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition and that transactions are executed in accordance with management authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles and that HUD-assisted programs are managed in compliance with applicable laws and regulations. Because of inherent limitations in any internal control structure, errors, irregularities or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate.
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To The Partners Coleman Manor Associates Limited Partnership - --------------------------------------------------------------------------------
In planning and performing our audits, we obtained an understanding of the design of relevant internal control structure policies and procedures and determined whether they had been placed in operation, and we assessed control risk in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements of Coleman Manor Associates Limited Partnership and on its compliance with specific requirements applicable to its major HUD-assisted programs and to report on the internal control structure in accordance with the provisions of the Guide and not to provide any assurance on the internal control structure.
For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories:
ACCOUNTING APPLICATIONS * Cash receipts/Revenue * Purchases/Cash disbursements * General ledger * External financial reporting
COMPLIANCE REQUIREMENTS * Federal financial reports * Affirmative fair housing * Mortgage status * Replacement reserve * Security deposits * Cash receipts * Cash disbursements * Tenant application, eligibility and recertification * Management functions
We performed tests of controls, as required by the Guide, to evaluate the effectiveness of the design and operation of internal control structure policies and procedures that we considered relevant to preventing or detecting material noncompliance with specific requirements applicable to Coleman Manor Associates Limited Partnership's major HUD-assisted programs. Our procedures were less in scope than would be necessary to render an opinion on such internal control structure policies and procedures. Accordingly, we do not express such an opinion.
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To The Partners Coleman Manor Associates Limited Partnership - --------------------------------------------------------------------------------
Our consideration of the internal control structure policies and procedures used in administering federal financial assistance would not necessarily disclose all matters in the internal control structure that might constitute material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more of the internal control structure elements does not reduce to a relatively low level the risk that noncompliance with laws and regulations that would be material to a HUD-assisted program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control structure and its operations that we consider to be material weaknesses as defined above.
This report is intended for the information of management and the Department of Housing and Urban Development. However, this report is a matter of public record and its distribution is not limited.
/s/ Rubin, Brown, Gornstein & Co. LLP
February 4, 1997
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[letterhead of RBG & Co.]
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS APPLICABLE TO THE BASIC FINANCIAL STATEMENTS
To The Partners Coleman Manor Associates Limited Partnership
We have audited the financial statements of Coleman Manor Associates Limited Partnership as of and for the year ended December 31, 1996, and have issued our report thereon dated February 4, 1997.
We conducted our audit 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
Compliance with laws, regulations, contracts and grants applicable to Coleman Manor Associates Limited Partnership is the responsibility of Coleman Manor Associates Limited Partnership's management. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of Coleman Manor Associates Limited Partnership's compliance with certain provisions of laws, regulations, and contracts. However, the objective of our audit of the financial statements was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance that are required to be reported herein under Government Auditing Standards.
This report is intended for the information of management and the Department of Housing and Urban Development. However, this report is a matter of public record and its distribution is not limited.
/s/ Rubin, Brown, Gornstein & Co. LLP
February 4, 1997
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[letterhead of RBG & Co.]
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR HUD PROGRAMS
To The Partners Coleman Manor Associates Limited Partnership
We have audited the financial statements of Coleman Manor Associates Limited Partnership as of and for the year ended December 31, 1996 and have issued our report thereon dated February 4, 1997. We have also audited Coleman Manor Associates Limited Partnership's compliance with the specific program requirements governing federal financial reports, mortgage status, replacement reserve, security deposits, cash receipts and disbursements, tenant application, eligibility and recertification and management functions that are applicable to each of its major HUD-assisted programs for the year ended December 31, 1996. The management of Coleman Manor Associates Limited Partnership is responsible for compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the "Guide") issued by the U.S. Department of Housing and Urban Development, Office of Inspector General in July 1993. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about Coleman Manor Associates Limited Partnership's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion.
The results of our audit procedures disclosed immaterial instances of noncompliance with the requirements referred to above, which are described in the accompanying Schedule of Findings and Questioned Costs. We considered these instances of noncompliance in forming our opinion on compliance, which is expressed in the following paragraph.
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To The Partners Coleman Manor Associates Limited Partnership - --------------------------------------------------------------------------------
In our opinion, Coleman Manor Associates Limited Partnership complied, in all material respects, with the requirements described above that are applicable to each of its HUD-assisted programs for the year ended December 31, 1996.
This report is intended for the information of management and the Department of Housing and Urban Development. However, this report is a matter of public record and its distribution is not limited.
/s/ Rubin, Brown, Gornstein & Co. LLP
February 4, 1997
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[letterhead of RBG & Co.]
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO AFFIRMATIVE FAIR HOUSING
To The Partners Coleman Manor Associates Limited Partnership
We have audited the financial statements of Coleman Manor Associates Limited Partnership as of and for the year ended December 31, 1996, and have issued our report thereon dated February 4, 1997.
We have applied procedures to test Coleman Manor Associates Limited Partnership's compliance with the Affirmative Fair Housing requirements applicable to its HUD-assisted programs, for the year ended December 31, 1996.
Our procedures were limited to the applicable compliance requirements described in the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of Inspector General in July 1993. Our procedures were substantially less in scope than an audit, the objective of which would be the expression of an opinion on Coleman Manor Associates Limited Partnership's compliance with the Affirmative Fair Housing requirements. Accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance that are required to be reported herein under the Guide. With respect to items not tested, nothing came to our attention that caused us to believe that Coleman Manor Associates Limited Partnership had not complied, in all material respects, with those requirements.
This report is intended for the information of management and the Department of Housing and Urban Development. However, this report is a matter of public record and its distribution is not limited.
/s/ Rubin, Brown, Gornstein & Co. LLP
February 4, 1997
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SCHEDULE OF FINDINGS AND QUESTIONED COSTS
1. MANAGEMENT FEES
STATEMENT OF CONDITION
Management was unable to provide a copy of the most current management agreement and/or "Identity of Interest Statement" stating the current management fees being charged.
CRITERIA
HUD requires an approved "Identity of Interest Statement" reflecting current management fees.
EFFECT
Management is not in compliance with HUD regulations.
RECOMMENDATION
It is our understanding that HUD cannot provide a copy of the management agreement. Furthermore, management has sent HUD a proposed new management agreement to which HUD has not yet responded. We recommend that management continue its efforts to obtain an executed management agreement with HUD.
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CERTIFICATE OF PARTNERS
We hereby certify that we have examined the accompanying financial statements and supplemental data of Coleman Manor Associates Limited Partnership and, to the best of our knowledge and belief, the same is complete and accurate.
General Partner Century Pacific Realty Corporation
/s/ Irwin Deutch ------------------------------------------- Signature Date
52-1565644 ------------------------------------------- Partnership Federal Identification Number
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MANAGEMENT AGENT'S CERTIFICATION
We hereby certify that we have examined the accompanying financial statements and supplemental data of Coleman Manor Associates Limited Partnership and, to the best of our knowledge and belief, the same is complete and accurate.
Managing Agent Mt. Washington Management Group, Inc.
/s/ Jim Ginsburg ----------------------------------------- Signature Date
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