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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-18756
ASSISTED HOUSING FUND L.P. I
(Exact name of registrant as specified in its charter)
Washington 91-1391150
(State of organization) IRS Employer Identification No.)
1301 Fifth Avenue, Suite 2204, Seattle, WA 98101 (Address of
principal executive offices) (Zip code)
Registrant's telephone number, including area code: (206) 461-4782
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The Exhibit Index appears at page 18. There are 18 pages.
PART I
Item 1. Business
Assisted Housing Fund L.P. I (the Partnership) is a limited partnership formed
on November 2, 1987 and organized under the laws of the State of Washington.
The Partnership raised $3,511,000 from the sale of 703 units of limited
partnership through a public offering completed on April 14, 1989. The
Partnership has invested as a limited partner in eleven other limited
partnerships (Property Partnerships) which develop, own, and operate residential
apartment complexes located in small towns across the country. Each apartment
complex benefits from several forms of federal assistance programs and qualifies
for low-income housing credits (Tax Credits) pursuant to the Internal Revenue
Code by the Tax Reform Act of 1986. There are 334 partners in the Partnership.
The Partnership's general partner is Murphey Favre Properties, Inc., (MFP), a
wholly-owned subsidiary of WM Financial, Inc. which is a wholly-owned subsidiary
of Washington Mutual Bank (WMB), a wholly- owned subsidiary of Washington
Mutual, Inc.
Table A on page 4 lists the Property Partnerships in which the Partnership has
invested. Item 7 of this Report contains other significant information with
respect to such Property Partnerships.
Each Property Partnership has, as its general partner (developer), one or more
individuals or an entity not affiliated with the Partnership or MFP. In
accordance with the Partnership Agreements under which such entities are
organized, the Partnership depends on the developers for the management of each
Property Partnership. As of December 31, 2000, the Property Partnerships and
their developers were:
PROPERTY PARTNERSHIP DEVELOPER GENERAL PARTNER
1. Fairview Apartments Company Limited Rural Housing Corporation
Partnership (Fairview)
2. Ionia Limited Divided Housing Rural Housing Corporation
Association (LDHA) Limited
Partnership (Ionia)
3. Logan Apartments Company Limited Rural Housing Corporation and
Partnership (Logan) Arthur H. Winer
4. Rolling Brook II LDHA Limited Rural Housing Corporation
Partnership (Rolling Brook)
5. Wexford Manor LDHA Limited Rural Housing Corporation
Partnership (Wexford)
6. Blue Heron Apartment Associates Dujardin Development Co.
Limited Partnership (Blue Heron)
7. Glenwood Apartment Associates Limited Dujardin Development Co.
Partnership (Glenwood)
8. Pacific Place Apartment Associates Dujardin Development Co.
Limited Partnership (Pacific Place)
9. Cove LDHA Limited Partnership (Cove) Kenneth & Lowell Werth
10. Washington Street LDHA Limited Kenneth & Lowell Werth
Partnership (Washington)
11. Fayette Hills Limited Partnership LeRoy Eslinger and
(Fayette) Douglas E. Pauley
A wholly-owned subsidiary of MFP, Murphey Favre Housing Managers (MFHM), is a
special limited partner in each Property Partnership and has certain approval
rights over the actions by the developers of the Property Partnerships.
Table A
SELECTED PROPERTY
PARTNERSHIP DATA
Property Date Interest Number of
Partnerships Location Acquired Apt. Units
Fairview Plymouth, WI December 1, 1989 40
Ionia Ionia, MI December 1, 1989 24
Logan Logan, OH December 1, 1989 32
Rolling Brook Algonac, MI December 1, 1989 24
Wexford Onsted, MI December 1, 1989 24
Blue Heron Bainbridge Island, WA March 20, 1989 40
Glenwood Lake Stevens, WA June 1, 1988 46
Pacific Place South Bend, WA October 4, 1988 24
Cove Big Rapids, MI July 12, 1989 48
Washington Perry, MI July 12, 1989 24
Fayette Fayetteville, WV December 1, 1989 68
----
394
Item 2. Properties
Rental property consists of apartment projects renting to low- and
moderate-income tenants.
As of December 31, 2000, the Property Partnerships had placed rental properties
into operation in the following locations:
Date Placed
Location In Service
Plymouth, WI June 13, 1990
Ionia, MI August 8, 1990
Logan, OH January 11, 1991
Algonac, MI March 8, 1990
Onsted, MI February 21, 1990
Bainbridge Island, WA May 1, 1990
Lake Stevens, WA April 1, 1989
South Bend, WA May 1, 1989
Big Rapids, MI March 1, 1990
Perry, MI January 1, 1990
Fayetteville, WV December 1, 1989
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters
The Registrant's securities consist of 703 units of Limited Partnership
Interest, valued at $5,000 per unit, for which there is no market. Units may
only be sold, assigned, exchanged or otherwise transferred upon compliance with
the terms of the Limited Partnership Agreement.
As of the date of filing of this report, the Partnership has 334 limited
partners and one general partner.
The Partnership has not made any distributions in 1998, 1999 and 2000 and does
not anticipate making any significant distributions in the future.
Item 6. Selected Financial Data
Year Ended Year Ended Year Ended Year Ended Year Ended
12/31/00 12/31/99 12/31/98 12/31/97 12/31/96
Rental Revenue $ 1,586,293 $ 1,540,441 $ 1,505,575 $ 1,448,422 $ 1,415,977
Interest
Revenue 25,085 24,068 24,835 24,538 21,800
Income (Loss) (457,473) (513,222) (500,629) (535,351) (618,708)
Income (Loss)
per Limited
Partnership
Unit (644) (723) (705) (754) (871)
Total Assets 10,933,585 11,431,980 11,949,410 12,514,876 13,022,213
Mortgage Notes
Payable
$12,287,154 $12,319,268 12,348,628 $12,375,470 $12,399,750
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
During the year, management's emphasis was on the continued operation of eleven
properties. At December 31, 2000, five properties were 100% occupied, four were
between 91% and 98% occupied and two were between 73% and 75% occupied.
Several properties continue to have cash flow problems. Fayette, located in West
Virginia, continues to have high vacancy related to local rental market
conditions. Real estate taxes were delinquent at December 31, 2000.
Cove, located in Michigan, also had delinquent real estate taxes at December 31,
2000, although operations improved during 2000. Management expects operations to
improve sufficiently in 2001 to allow taxes to be paid timely.
During 2000, RHS advanced funds to Washington Street, located in Michigan, to
pay delinquent real estate taxes of $42,917. The advance will be added to the
mortgage note and reamortized in 2001. RHS has provided additional rental
assistance to the project, which should improve occupancy and support the
increased rents necessary to make the increased mortgage payments.
Fairview, located in Wisconsin, has experienced increased vacancies due to less
demand for low-income housing in its market area. Management continues to
aggressively market the project.
The developer general partner of Logan, located in Ohio, did not comply with RHS
regulations regarding the handling of project cash during 2000. These instances
of non-compliance were reported to the appropriate authorities subsequent to
December 31, 2000. In addition, subsequent to December 31, 2000, the DGP made
two unauthorized withdrawals of project cash totaling $20,511. MFP and the other
general partners of Logan are considering proceedings to remove and replace the
administrative general partner.
The properties are located in rural towns with populations of 14,000 or less.
Five properties are located in Michigan, three in Washington, and one each in
Ohio, West Virginia and Wisconsin. The properties range in size from 24 to 68
units for a total portfolio of 394 units.
Results of Operations
On a consolidated basis, net income (loss) before depreciation for 2000, 1999,
and 1998 was $147,092, $122,277, and $134,348, respectively. Rental revenues for
2000 were up 2.9% compared to increases of 2.3% from 1998 to 1999, and 3.9% from
1997 to 1998. Rental operation expenses for 2000, including depreciation, were
down 0.1% over 1999, while rental operation expenses, including depreciation,
for 1999 and 1998 were up 2.9% and 0.5% over 1998 and 1997, respectively.
The Partnership paid $23,500, $23,000 and $22,690, in accounting expenses for
the Partnership for 2000, 1999, and 1998, respectively.
Interest revenue for 2000 increased 4.2% from 1999 and decreased 3.1% from 1998
to 1999.
Liquidity and Capital Resources
The Partnership completed its public offering of units of limited partnership on
April 14, 1989, with proceeds totaling $3,511,000 from 339 limited partners. As
of December 31, 1999, the Partnership had invested $2,542,000 of offering
proceeds in eleven Property Partnerships.
Offering proceeds equal to $175,750 were reserved by the Partnership to fund its
operating expenses. As of December 31, 2000, the cash reserves of the
Partnership totaled $13,148. It is expected that the Partnership will draw on
the reserves in future years to fund accounting and other operating expenses of
the Partnership. Nominal cash distributions from the Property Partnerships will
supplement the cash reserves. In 2000, the Partnership received $13,255 in
distributions from the Property Partnerships. The expectation is that all cash
distributions received from the Property Partnerships will be used to defray the
operating expenses of the Partnership and thus it is not likely any distribution
will be made to the limited partners.
The Partnership is not required to fund additional amounts to the Property
Partnerships based on each Property Partnership agreement. Additionally, each
Property Partnership is operated as an individual project, and without any
contractual arrangements of any kind between the Property Partnerships. In 2000,
nine properties generated positive cash flow and two properties generated
deficit cash flow. The deficits were funded from rental operating cash and from
authorized withdrawals from the reserve accounts.
As of December 31, 2000, one developer general partner had advanced $14,209 to a
Property Partnership under the deficit funding agreement in place during the
guarantee period. The guarantee periods ended in 1991 and 1992. The developer
general partners are no longer obligated to fund operating deficits.
The Property Partnerships financed construction with a combination of bank
financing and funds from the Partnership. The permanent loans for the properties
were provided by the Farmers Home Administration, now known as Rural Housing
Service (RHS), under Section 515 of the National Housing Act of 1949, as
amended. RHS provides an interest credit to the Property Partnerships which
reduces the interest rates stated in the mortgage notes to an effective 1
percent rate over the lives of the mortgages. All property loans are current.
Capital expenditures on the properties are expected to increase over the initial
years' capital expenses due to the natural aging process of the newly
constructed (10 properties) or newly rehabilitated (1 property) projects at the
time of the formation of the Partnership. As part of RHS loan requirements, a
reserve account is funded at an annual rate of 1% of the original property loan
balance until the balance equals 10% of the original loan balance. Additions to
reserve accounts are funded from property operations and are established for
future capital expenditures.
Included in cash deposits on the consolidated balance sheets were $13,148 and
$25,101 held as deposits by the Partnership in WMB accounts as of December 31,
2000 and 1999, respectively. As discussed in Part I, Item 1, WMB is affiliated
with MFP.
There are no additional acquisitions nor any dispositions planned.
Regulatory Restrictions
Because the properties are operated under RHS loans and benefit from the federal
low-income housing tax credit program, the properties are restricted as to their
use and must comply with the requirements of the respective federal programs.
The tenants of all the properties must be tax credit and RHS eligible tenants.
It is management's goal to have all units, except for managers' units, occupied
by tax credit eligible tenants. In order to meet established income
requirements, tenants must not earn more than 60% of the median income for the
areas in which the properties are located. Seven of the eleven properties are
further restricted to renting apartment units only to senior citizens.
Additionally, the properties cannot be sold without prior approval of the RHS,
cannot make more than an 8% cash distribution annually to its owner (as
described in Note 6 to the Partnership's financial statements), and must remain
under the low-income housing tax credit program for 15 years to avoid any
recapture of the low-income housing tax credits. Furthermore, pursuant to RHS
loan agreements, RHS may refuse prepayment of the loans and require the
properties be used for the purpose of providing housing to eligible tenants for
a minimum period of 20 years.
Inflation
Operating expenses and rental revenues of each property are subject to
inflationary factors. Low rates of inflation could result in rental revenues
remaining constant or increasing at slower rates than in periods of high
inflation. High rates of inflation raise the operating expenses of the
properties, and to the extent the increased operating expenses are not passed on
to the tenants by rental increases, the properties' operation could be adversely
affected.
Tax Credit
As of December 31, 2000, 1999, and 1998, tax credits equal to 5.86%, 13.26% and
15.17%, respectively, of the limited partners' capital contributions have been
generated.
Item 8. Financial Statements and Supplementary Data
The financial statements of Assisted Housing Fund L.P. I as of December 31,
2000, 1999, and 1998, together with the independent auditors' reports thereon,
are filed herewith in Part IV, Item 14 of this Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Murphey Favre Properties, Inc. (MFP) is the managing general partner of the
Partnership. The Registrant has no employees.
Item 11. Executive Compensation
Name of Individual Capacities
or Number of in Which Cash
Persons in Group Served Compensation
Year Ended Year Ended Year Ended
12/31/00 12/31/99 12/31/98
None
Item 12. Security Ownership of Certain Beneficial Owners and Management
Name and Amount and
Address of Nature of
Title of Beneficial Beneficial Percent
Class Owner Owner of Class
General Murphey Favre (1) 100%
Partner's Properties, Inc.
Interest Suite 2204
1301 Fifth Avenue
Seattle, WA 98101
(1) The General Partner's interest is owned of record and beneficially by
Murphey Favre Properties, Inc. Its capital interest as of December 31, 2000 is
($61,077).
Item 13. Certain Relationships and Related Transactions
The Property Partnerships have entered into certain agreements with the
developer or its affiliates under which the developer or its affiliates receive
compensation, perform services, or make loans. Note 2 of the Notes to Financial
Statements, which are filed in Part IV, Item 14 of this Form 10-K, provides
additional information pertaining to the individual Property Partnerships.
PART IV
Item 14. Exhibits, Financial Statements, Schedules, and Reports on Form 8-K
(a) 1. The following financial statements of Assisted Housing Fund L.P.
I and subsidiaries are incorporated by reference in Part II and are
attached as pages 1 to 13 of Exhibit 13.
Page of Annual
Report
Independent Auditor's Report.......................... 1
Balance Sheets as of December 31, 2000 and 1999....... 2
Statements of Operations for each of the years ended
December 31, 2000, 1999 and 1998...................... 3
Statements of Partners' Equity (Deficit) for each of
the years ended December 31, 2000, 1999 and 1998...... 4
Statements of Cash Flows for each of the years ended
December 31, 2000, 1999 and 1998...................... 5
Notes to Financial Statements for each of the years
ended December 31, 2000, 1999 and 1998............... 6-12
2. Financial statement schedules Page of Form 10-K
Independent Auditor's Report on Schedules............. 13
Schedule III - Real Estate and Accumulated
Depreciation.......................................... 14-16
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission
are omitted because either they are not applicable or the required
information is shown in the financial statements or notes thereto.
3. Exhibits: All exhibits to this report are listed in the
Schedule Index at page 17.
(b) No reports on Form 8K were filed during 2000.
SIGNATURES
Pursuant to the requirements 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.
ASSISTED HOUSING FUND L.P. I
Registrant
By: Murphey Favre Properties, Inc.
Its Managing General Partner
By: Herbert F. Fox /s/ Date: 3/31/2001
Herbert F. Fox, Vice President
and Principal Financial Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
By: Murphey Favre Properties, Inc.
By: Kerry K. Killinger /s/ Date: 3/31/2001
Kerry K. Killinger
Its Director
By: David G. Murphy /s/ Date: 3/31/2001
David G. Murphy
Its Director
INDEPENDENT AUDITOR'S REPORT ON SCHEDULES
Partners
Assisted Housing Fund L.P. I
Seattle, Washington
We have audited the consolidated financial statements of Assisted Housing Fund
L.P. I and its subsidiaries, as of and for the years ended December 31, 2000,
1999 and 1998 listed under Item 14(a)1 hereof and have issued our report thereon
dated March 26, 2001 (which report is incorporated by reference elsewhere in
this Form 10-K). In the course of our audits of such financial statements, we
have also audited the schedules listed under Item 14(a)2 for the years ended
December 31, 2000, 1999 and 1998. These schedules are the responsibility of the
Partnership's management. Our responsibility is to express an opinion based on
our audits. In our opinion, these schedules present fairly, in all material
respects, when read in conjunction with the related financial statements, the
information therein set forth.
Blume Loveridge & Co., PLLC
Bellevue, Washington
March 26, 2001
ASSISTED HOUSING FUND LP I
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Year Ended December 31, 2000
COLUMN A COLUMN B COLUMN C COLUMN D
- --------------------------------------------------------------------------------------------------------
Costs Capitalized
Subsequent
Description Encumbrances Initial Cost to Partnership to Acquisition
- --------------------------------------------------------------------------------------------------------
Buildings & Personal
Land Improvements Property Improvements
-----------------------------------------------------------------
Fairview $ 1,270,643 $ 55,413 $ 1,580,336
Ionia 709,912 24,000 925,267
Logan 993,035 55,129 1,210,185
Rolling Brook 745,700 35,000 927,015
Wexford 723,916 22,000 949,507
Blue Heron 1,466,021 248,569 1,622,709
Glenwood 1,435,457 145,000 1,600,735
Pacific Place 755,827 30,000 898,768
Cove 1,428,290 47,000 1,735,328
Washington 713,450 8,000 880,536
Fayette 2,044,903 53,000 $1,779,270 $40,800 652,102
AHF 444,240
-----------------------------------------------------------------------------------
Total $12,287,154 $723,111 $2,223,510 $40,800 $12,982,488
===================================================================================
Construction in
Progress $0 $0
================== ====================
ASSISTED HOUSING FUND LP I
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Continued) Year Ended December 31, 2000
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
- ---------------------------------------------------------------------------------------------------------------------------------
Description Gross Amount at Which Carried at End of Period Accumulated Date of Date of Life on
Depreciation Construction Acquisition Which
Depreciation
in Latest
Income
Statement
is Computed
- ---------------------------------------------------------------------------------------------------------------------------------
Land Buildings Land Total
Improvements
and Personal
Property
------------------------------------------------------
Fairview $ 55,413 $ 1,418,319 $ 162,017 $ 1,635,749 $ 683,907 13-Jun-90 27.5/15/10
Ionia $ 24,000 812,947 112,320 949,267 397,443 08-Aug-90 27.5/15/10/7
Logan $ 55,129 1,022,974 187,211 1,265,314 521,153 11-Jan-91 27.5/15/10
Rolling Brook $ 35,000 794,263 132,752 962,015 415,765 08-Mar-90 27.5/15/10/7
Wexford $ 22,000 815,821 133,686 971,507 431,013 21-Feb-90 27.5/15/10
Blue Heron $248,569 1,890,967 90,217 2,229,753 813,460 01-May-90 27.5/10
Glenwood $145,000 1,701,975 52,678 1,899,653 772,634 01-Apr-89 27.5/10/7
Pacific Place $ 30,000 943,619 32,219 1,005,838 423,831 01-May-89 27.5/10/7
Cove $ 47,000 1,635,278 100,050 1,782,328 720,541 01-Mar-90 27.5/10/7
Washington $ 8,000 842,461 38,075 888,536 366,863 01-Jan-90 27.5/10
Fayette $ 53,000 2,344,141 128,031 2,525,172 1,046,330 01-Dec-89 27.5/15/10/7
AHF $ 0 444,240 444,240 176,519 Various
------------------------------------------------------------------
Total $723,111 $14,667,005 $1,169,256 $16,559,372 $6,769,459
====================================================================
Construction in
Progress 0
==============
ASSISTED HOUSING FUND LP I
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
(Continued) Year Ended December 31, 2000
Year Ended Year Ended Year Ended
REAL ESTATE December 31, 1998 December 31, 1999 December 31, 2000
- -----------------------------------------------------------------------------------------------------------------------
Balance at beginning of period $16,450,047 $16,492,085 $16,513,492
Additions during period:
Property acquisitions $ 0 $ 0 $ 0
Acquisitions through foreclosure 0 0 0
Other acquisitions 0 0 0
Improvements etc. (New Construction) 42,038 32,707 45,880
Other (Acquisition Cost) 0 0 0
---------------------------------------------------------------------------
$16,492,085 $16,524,792 $16,559,372
Deductions during period:
Cost of real estate sold $ 0 $ 0 $ 0
Other - retired fixed assets 0 11,300 0
---------------------------------------------------------------------------
Balance at close of period $16,492,085 $16,513,492 $16,559,372
=========== =========== ===========
Year Ended Year Ended Year Ended
ACCUMULATED DEPRECIATION December 31, 1998 December 31, 1999 December 31, 2000
- ----------------------------------------------------------------------------------------------------------------------
Balance at beginning of period $4,905,719 $5,540,696 $6,164,895
Existing property: 634,977 635,499 604,564
Depreciation on additions:
Property acquisitions $ 0 $0 $0
Acquisitions through foreclosure 0 0 0
Other acquisitions 0 0 0
Improvements etc. (New Construction) 0 0 0
Other (Acquisition Costs) 0 0 0
--------------------------------------------------------------------------
$5,540,696 $6,176,195 $6,769,459
Depreciation on deductions:
Cost of real estate sold $ 0 $0 $0
Other - retired fixed assets 0 0 11,300 0 0
--------------------------------------------------------------------------
Balance at close of period $5,540,696 $6,164,895 $6,769,459
========== ========== ==========
Exhibit Incorporated by
No. Reference From
3 Certificate of Limited Partnership Exhibit C to Form S-11
Registration Statement
No. 91-1391150
13 Annual Report to Security Holders Attached hereto
ASSISTED HOUSING FUND L.P. I
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR'S REPORT
FOR THE YEARS ENDED DECEMBER 31,
2000, 1999, AND 1998
CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT....................................... 1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets........................................ 2
Consolidated Statements of Operations.............................. 3
Consolidated Statements of Partners' Equity (Deficit).............. 4
Consolidated Statements of Cash Flows.............................. 5
Notes to Financial Statements....................................... 6-12
INDEPENDENT AUDITOR'S REPORT
Partners
Assisted Housing Fund L.P. I
Seattle, Washington
We have audited the accompanying consolidated balance sheets of Assisted Housing
Fund L.P. I and its subsidiaries, as of December 31, 2000 and 1999, and the
related consolidated statements of operations, partners' equity (deficit) and
cash flows for the years ended December 31, 2000, 1999, and 1998. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an 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 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 Assisted Housing
Fund L.P. I and its subsidiaries, as of December 31, 2000 and 1999, and the
results of their operations and cash flows for the years ended December 31,
2000, 1999, and 1998, in conformity with generally accepted accounting
principles.
Blume Loveridge & Co., PLLC
Bellevue, Washington
March 26, 2001
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
2000 1999
ASSETS
Rental property and equipment, at cost:
Buildings and equipment $15,836,260 $15,790,381
Accumulated depreciation (6,769,459) (6,164,895)
----------- -----------
9,066,801 9,625,486
Land 723,111 723,111
----------- -----------
9,789,912 10,348,597
Cash:
Rental operation 214,415 190,299
Partnership 13,148 25,101
----------- -----------
227,563 215,400
Restricted deposits:
Tenant trust - security deposits 114,970 116,122
Reserve accounts 737,977 699,706
----------- -----------
852,947 815,828
Other assets:
Accounts receivable 36,411 36,304
Accounts receivable - DGP's 17,628 1,072
Prepaid expenses 9,124 14,779
----------- -----------
63,163 52,155
----------- -----------
$10,933,585 $11,431,980
============ ============
Continued on page 2A.
Page 2
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (CONTINUED)
December 31,
2000 1999
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Mortgage notes payable $12,287,154 $12,319,268
Assessment payable - 41,141
Accounts payable 306,143 249,143
Due to affiliates 660,464 640,961
Accrued liabilities 114,238 129,615
Security deposits payable 111,116 113,902
----------- -----------
13,479,115 13,494,030
Minority interests in property
partnerships 441,445 467,452
Contingency
Partners' equity (deficit):
Limited partners (2,925,898) (2,473,000)
General partner (61,077) (56,502)
----------- -----------
(2,986,975) (2,529,502)
----------- -----------
$10,933,585 $11,431,980
=========== ===========
See accompanying notes to financial statements.
Page 2A
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31,
2000 1999 1998
Revenue:
Rent $1,586,293 $1,540,441 $1,505,575
Miscellaneous 89,741 79,864 73,344
---------- ----------- ----------
1,676,034 1,620,305 1,578,919
Expenses:
Operating and maintenance 254,907 274,252 235,793
Utilities 277,937 262,656 243,754
General and administrative 390,368 364,916 359,323
Taxes and insurance 279,440 268,517 270,871
Interest 317,916 318,595 319,192
Depreciation 604,564 635,499 634,977
----------- --------- ----------
2,125,132 2,124,435 2,063,910
----------- --------- ----------
(449,098) (504,130) (484,991)
Other revenues (expenses):
Interest earned on
partnership cash 504 414 92
Minority interest
in operations 25,642 26,206 26,022
Accounting and auditing (23,500) (23,000) (22,690)
General and administrative (8,030) (8,862) (13,685)
Incentive management fees (2,991) (870) (2,434)
Miscellaneous (2,980) (2,943)
---------- ---------- ----------
(8,375) (9,092) (15,638)
---------- ---------- ----------
Net income (loss) $ (457,473) $(513,222) $ (500,629)
=========== ========== ==========
Net income (loss) per
unit of limited
partnership interest $ (644) $ (723) $ (705)
========== ========= ==========
See accompanying notes to financial statements.
Page 3
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
Years Ended December 31, 2000, 1999, and 1998
Limited General
Partners Partner Total
Profit/loss percentage 99.0% 1.0% 100.0%
=========== ======== =========
Balance - January 1, 1998 (1,469,287) $(46,364) $(1,515,651)
Net income (loss) for 1998 (495,623) (5,006) (500,629)
----------- -------- -----------
Balance - December 31, 1998 (1,964,910) (51,370) (2,016,280)
Net income (loss) for 1999 (508,090) (5,132) (513,222)
----------- -------- -----------
Balance - December 31, 1999 $(2,473,000) (56,502) (2,529,502)
Net income (loss) for 2000 (452,898) (4,575) (457,473)
----------- -------- -----------
Balance - December 31, 2000 $(2,925,898) $(61,077) $(2,986,975)
=========== ======== ===========
See accompanying notes to financial statements.
Page 4
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
Years Ended December 31,
2000 1999 1998
Cash flows from operating activities:
Net income (loss) $(457,473) $(513,222) $(500,629)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation 604,564 635,499 634,977
Minority interests in
operations (25,642) (26,206) (26,022)
Changes in certain assets
and liabilities:
Accounts receivable (16,663) 2,010 2,436
Prepaid expenses 5,655 (7,012) 13,733
Accounts payable 57,000 (2,529) (8,989)
Accrued liabilities (15,377) 21,689 (27,926)
Due to affiliates 19,503 31,861 31,435
Security deposits (1,634) (777) (4,053)
--------- --------- ---------
Net cash provided by
operating activities 169,933 141,313 114,962
Cash flows from investing activities:
Purchase of depreciable
property (45,879) (32,707) (42,038)
Deposits to reserve accounts (160,236) (142,031) (158,018)
Withdrawals from
reserve accounts 121,965 121,098 124,020
-------- ------- ---------
Net cash provided (used) by
investing activities (84,150) (53,640) (76,036)
Continued on page 5A.
Page 5
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (CONTINUED)
Increase (Decrease) in Cash
Years Ended December 31,
2000 1999 1998
Cash flows from financing activities:
Minority partners' capital
contributions $ (365) $ (88) $ (84)
Mortgage principal payments (32,144) (29,360) (26,842)
Assessment principal payments (41,141) (6,857) (6,857)
-------- -------- -------
Net cash provided (used) by
financing activities (73,620) (36,305) (33,783)
-------- -------- --------
Net increase in cash 12,163 51,368 5,143
Cash - beginning of year 215,400 164,032 158,889
-------- -------- --------
Cash - end of year $227,563 $215,400 $164,032
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest $318,573 $318,806 $319,363
======== ======== ========
Fixed assets retired
(fully depreciated) $ - $ 11,300 $ -
======== ======== ========
See accompanying notes to financial statements.
Page 5A
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Business
Assisted Housing Fund L.P. I (the Partnership) is a limited partnership which
was organized November 2, 1987 under the laws of the state of Washington to
acquire limited partnership interests in other partnerships (the Property
Partnerships), each of which has been organized to develop or purchase a low- or
moderate-income apartment project. The Partnership's general partner is Murphey
Favre Properties, Inc. (MFP), a wholly-owned subsidiary of WM Financial, Inc.,
which is a wholly-owned subsidiary of Washington Mutual Bank (WMB), a
wholly-owned subsidiary of Washington Mutual, Inc. As of December 31, 2000, 334
limited partners held the 703 units of limited partnership interests
outstanding.
The Partnership has invested as a limited partner in eleven Property
Partnerships. The developer of each apartment project serves as the general
partner (DGP) of the respective Property Partnership.
The properties owned by the Property Partnerships are located in Michigan,
Wisconsin, Ohio, West Virginia and Washington. The apartment projects were
financed and constructed under Section 515 of the National Housing Act, as
amended (administered by the U.S. Department of Agriculture, Rural Housing
Service (RHS)). Under this program, the Property Partnerships provide housing to
low- and moderate-income tenants. Lower rental charges to tenants are recovered
by the Property Partnerships through an interest reduction program which reduces
the effective interest rate over the lives of the mortgages to 1 percent and a
rental assistance program whereby RHS pays the Property Partnerships for a
portion of qualified tenant rents. Construction of the apartment projects began
between June, 1988 and May, 1990 and rental operations began between April, 1989
and February, 1991.
Additionally, in exchange for an allocation of federal low-income housing tax
credits under Section 42 of the Internal Revenue Code, each Property Partnership
has entered into an agreement with an agency of the state in which the apartment
project is located, whereby the Property Partnership has agreed to maintain all
apartment units as both rent restricted and occupied by low-income tenants for a
minimum period of 15 years.
During the years ended December 31, 2000, 1999, and 1998, rental revenue from
RHS totaled $482,617, $462,125, and $451,730, representing 28.8 percent, 28.5
percent, and 28.6 percent of total revenue, respectively.
Page 6
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - (CONTINUED)
Principles of Consolidation
The financial statements include the financial statements of the Partnership and
the following eleven Property Partnerships in which it has invested as a limited
partner:
Fairview Apartments Company Limited Partnership (Fairview)
Ionia Limited Dividend Housing Association Limited Partnership (Ionia)
Logan Apartments Company Limited Partnership (Logan)
Rolling Brook II Limited Dividend Housing Association Limited Partnership
(Rolling Brook)
Wexford Manor Limited Dividend Housing Association Limited Partnership
(Wexford)
Blue Heron Apartment Associates Limited Partnership (Blue Heron)
Glenwood Apartment Associates Limited Partnership (Glenwood)
Pacific Place Apartment Associates Limited Partnership (Pacific Place)
Cove Limited Dividend Housing Association Limited Partnership (Cove)
Washington Street Limited Dividend Housing Association Limited
Partnership (Washington)
Fayette Hills Limited Partnership (Fayette)
The financial statements are presented on a consolidated basis because the
Partnership holds approximately 99 percent of the profit and loss interests and
approximately 55 percent of the equity interests in each Property Partnership.
Through an affiliate, who is a special limited partner in each of the 11
Property Partnerships, the Partnership controls certain fundamental decisions
affecting the operation of the Property Partnerships. These fundamental
decisions include significant purchases of assets, material borrowings or
creation of liens on the underlying properties, entering into material
contracts, making tax elections and any act that would cause termination of the
Property Partnership. All material interpartnership transactions and balances
have been eliminated. For the years ended December 31, 2000, 1999 and 1998, net
losses allocable to the minority partners were $25,642, $26,206, and $26,022,
respectively.
Method of Accounting
The accrual method of accounting is used for financial statement purposes.
Page 7
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - (CONTINUED)
Cost Overruns
The partnership agreements for the Property Partnerships required the DGP's to
fund cost overruns on the development of the apartment projects. Such cost
overruns, totaling $589,462, have been recorded as minority interests in
property partnerships and have been included in the cost basis of the rental
property. All depreciation related thereto has been specially allocated to the
respective DGP's.
Depreciation
Depreciation is computed for financial statement purposes using the
straight-line method over the estimated useful lives of the related assets as
follows:
Building shell and components.............. 27.5 years
Land improvements...... ..................... 15 years
Appliances............................... 5 - 10 years
Carpets and draperies.................... 5 - 10 years
Income Taxes
No income tax provision has been included in the financial statements since
income or loss of a Partnership is required to be reported by the respective
partners on their income tax returns.
Cash Equivalents
For purposes of the statement of cash flows, all investment instruments
purchased with a maturity of three months or less are considered to be cash
equivalents. At December 31, 2000 and 1999, there were no cash equivalents.
Concentration of Credit
The Property Partnerships maintain cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Property Partnerships have not
experienced any losses in such accounts. Management believes the Property
Partnerships are not exposed to any significant credit risk on cash in such bank
deposit accounts.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumption that
affect certain reported amounts and disclosures.
Page 8
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - (CONTINUED)
Reclassification
Certain amounts as previously presented have been reclassified to conform with
the current year presentation.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
In connection with the acquisition and development of rental property and the
management of both the rental property and the Partnership, the Partnership and
Property Partnerships have paid or accrued the following amounts to certain
affiliates:
Years Ended December 31,
2000 1999 1998
Murphey Favre Properties, Inc. -
partnership services fee $ 7,500 $ 7,500 $ 7,500
Developer general partners and
affiliates - property
management fees $ 95,609 $ 95,594 $124,027
As of December 31, 2000 and 1999, related party payables consisted of the
following:
2000 1999
Advances from DGP's $213,257 $201,784
Partnership management fees 326,726 326,726
Partnership services fees 45,000 37,500
Advances from general partner 75,481 74,951
$660,464 $640,961
During 2000 and 1999, the general partner advanced $530 and $24,361,
respectively, to the Partnership for administrative expenses.
The Partnership maintains deposits in certain of WMB's interest-bearing accounts
which aggregated $13,148 and $25,101 at December 31, 2000 and 1999,
respectively. Interest earned on such deposits totaled $504, $414, and $92
during the years ended December 31, 2000, 1999 and 1998, respectively.
Page 9
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - TRANSACTIONS WITH AFFILIATES - (CONTINUED)
Terms of the RHS Loan Agreements require each DGP to provide interest-free
advances of stipulated amounts as initial operating capital to the Property
Partnerships. Due to affiliates includes $152,107 of such advances at December
31, 2000 and 1999. In addition, these balances include DGP advances of $35,468
for land improvements and $14,209 to fund operating deficits. Advances made to
one of the DGP's during 2000 totaled $15,079, while funds advanced by the same
DGP to the Property Partnership totaled $11,473 (see Note 9). The remainder of
the balances include property management fees and reimbursements payable to MFP
for partnership services and administration.
Advances from the DGPs may only be repaid from the proceeds of future sales of
the respective properties. Property management fees are paid out of rental
operations. Partnership fees are payable from future sales of the properties, to
the extent they are not paid from distributions of rental operation cash (Note
6).
Under the terms of management services agreements, seven of the eleven Property
Partnerships have affiliates of the DGP's which provide management services for
the rental properties and receive compensation for such services in amounts
approximating 8.4% of rental receipts. Three of the eleven Property Partnerships
are co-managed by affiliates of the DGP's which provide management services for
the rental properties and receive compensation for such services in amounts
approximating 2.8% of rental receipts.
NOTE 3 - CASH IN RESERVE ACCOUNTS
The Loan Agreements between the Property Partnerships and RHS require the
Property Partnerships to deposit $126,889 annually into separate reserve
accounts until the reserve accounts reach $1,268,211. Subject to RHS approval,
these funds may be used for various purposes, as further described in the Loan
Agreements. Ten of the eleven Property Partnerships are in compliance with the
minimum annual funding requirements as set forth by RHS for the year ended
December 31, 2000. All of the Property Partnerships were in compliance for the
year ended December 31, 1999. Reserve withdrawals at ten of the eleven Property
Partnerships were made in compliance with RHS requirements (see Note 9).
Page 10
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - MORTGAGE NOTES PAYABLE
The mortgage notes are payable to RHS in monthly installments totaling $26,550.
In accordance with provisions of Interest Credit Agreements, RHS provides
monthly interest credits totaling $69,199 which reduce the interest rates stated
in the mortgage notes to effective rates of 1 percent over the lives of the
mortgages. Amortization of principal is based on the stated rates of 8.75% to
10.75% under RHS's Predetermined Amortization Schedule System (PASS). The
mortgage notes mature May, 2039 through January, 2040. Substantially all of the
rental property and equipment is pledged as collateral on the mortgages. No
partner is individually liable on the mortgage notes.
The mortgage notes are regulated by the U.S. Government and therefore, have no
market price. Accordingly, management has determined that users of the financial
statements would derive no benefit from any estimate of fair value and
performing such an analysis would not be practicable.
Principal payments on the mortgage notes for the next 5 years are as follows:
Year Amounts
2001 $ 35,128
2002 38,422
2003 42,029
2004 46,303
2005 50,294
2006 and later years 12,074,978
$12,287,154
NOTE 5 - ASSESSMENT PAYABLE
In September, 1995, the city of Bainbridge Island issued an assessment for Blue
Heron's share of street and utility improvements in the amount of $68,569. The
assessment was payable in 10 equal annual installments together with interest at
the rate of 5.6 percent. During 2000, funds were withdrawn from the reserve
account and the balance of the assessment was paid in full.
Page 11
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - RENTAL OPERATION CASH
RHS regulations limit the distribution of rental operation cash to a maximum of
$38,090 annually. Any distribution to the Partnership from rental operation cash
is to be made in accordance with the respective partnership agreements. Whether
or not a Property Partnership makes any limited distribution is based on the
results of its own operations and is at the discretion of the DGP.
NOTE 7 - GUARANTEES
Each of the DGP's has made a guarantee to the respective Property Partnership
that they will compensate the Partnership in the event the actual low-income
housing tax credit is less than 85% to 90% of the available credit. Through
December 31, 2000, no payments have been made under these guarantee agreements.
NOTE 8 - CONTINGENCY
The Partnership has ceased accrual of the annual partnership administration fee,
payable in part to the general partner. Management has determined that the
source of payment, a future sale or refinance of one or more of the Property
Partnerships, may not be sufficient to pay fees accrued in excess of the
$544,540 payable at December 31, 1996. Management has elected to treat fees for
years subsequent to 1996 as a contingent liability. At December 31, 2000 and
1999 the contingent liability for partnership administration fees totaled
$298,068 and $223,551, respectively.
NOTE 9 - SUBSEQUENT EVENTS
The DGP of Logan did not comply with RHS regulations regarding the handling of
project cash during 2000. These instances of non-compliance were reported to the
appropriate authorities subsequent to December 31, 2000. In addition, subsequent
to December 31, 2000, the DGP made multiple unauthorized withdrawals of project
cash totaling $20,511. Also, project bank accounts have been pledged in
violation of RHS regulations. MFP and the other general partners of Logan are
considering proceedings to remove and replace the DGP.
Page 12