SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 2002
Commission File Number 33-19316
Qualified Housing Partners Limited Partnership
(Exact name of registrant as specified in its charter)
North Carolina 56-1589469
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification Number)
Suite 220
4700 Homewood Court
Raleigh, North Carolina 27609
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:
(919)787-4243
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 ( )
PART I
FINANCIAL INFORMATION
QUALIFIED HOUSING PARTNERS LIMITED PARTNERSHIP
Item 1: Financial Statements
- Unaudited Consolidated Balance Sheets
- Unaudited Consolidated Statements of Income and
Expenses (Three Months)
- Unaudited Consolidated Statements of Income and
Expenses (Nine Months)
- Unaudited Consolidated Statements of Cash Flows
- Unaudited Cash Available for Distribution and
Reserves
- Unaudited Notes to Financial Statements
Item 2: Management's Discussion
- Liquidity and Capital Resources
- Results of Operations
- Tax Credits
QUALIFIED HOUSING PARTNERS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
September 30, 2002 and December 31, 2001
09/30/02
(Unaudited) 12/31/01
ASSETS
Rental Properties
Land $1,326,402 $1,326,402
Buildings 34,385,351 34,375,952
Furniture & Fixtures 2,078,045 2,054,878
Construction in Progress 209,471 209,471
37,999,269 37,966,703
Accumulated Depreciation (12,401,025) (11,740,067)
25,598,244 26,226,636
Cash 218,089 327,416
Other Assets 2,335,625 2,301,299
TOTAL ASSETS $28,151,958 $28,855,351
LIABILITIES AND PARTNERS' CAPITAL
Liabilities Applicable to Rental
Properties $24,696,153 $25,038,280
Other Liabilities 1,221,136 1,211,279
Total Liabilities 25,917,289 26,249,559
Minority Interests in Subsidiary
Operating Partnerships 1,702,636 1,705,615
Partners' Capital 532,033 900,177
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $28,151,958 $28,855,351
See accompanying notes.
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
Three Months Ended September 30, 2002 and 2001
(Unaudited)
07/01/02- 07/01/01-
09/30/02 09/30/01
Revenue
Rent $968,223 $962,011
Other 23,581 39,806
991,804 1,001,817
Rental Expense
Interest 155,100 163,753
Depreciation 220,210 229,089
Repairs and Maintenance 282,430 279,607
Utilities 89,694 86,708
Real Estate Taxes 96,902 44,404
Management Fees 117,667 117,664
Advertising 2,669 1,890
Other 97,129 95,024
1,061,801 1,018,139
Loss from Rental Activities (69,997) (16,322)
Other Income (Expenses)
Interest Income 56 93
Management Fees (21,141) (21,141)
Administrative Costs (4,888) (5,523)
Loss Before Deducting Minority
Interests in Subsidiary Operating
Partnerships (95,970) (42,893)
Minority Interests in Losses of
Subsidiary Operating Partnerships 707 165
Net Loss ($95,263) ($42,728)
Net Loss Allocated to General Partners ($953) ($427)
Net Loss Allocated to Limited Partners (94,310) (42,301)
Net Loss ($95,263) ($42,728)
Net Loss per Limited Partnership Unit ($10.87) ($4.88)
Average Number of Limited Partnership
Units Outstanding 8,673 8,673
See accompanying notes.
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
Nine Months Ended September 30, 2002 and 2001
(Unaudited)
01/01/02- 01/01/01-
09/30/02 09/30/01
Revenue
Rent $2,890,888 $2,845,398
Other 76,552 91,525
2,967,440 2,936,923
Rental Expense
Interest 471,022 495,875
Depreciation 660,956 678,231
Repairs and Maintenance 819,758 767,917
Utilities 263,875 266,474
Real Estate Taxes 276,727 147,907
Management Fees 341,126 344,250
Advertising 7,850 4,125
Other 404,027 390,859
3,245,341 3,095,638
Loss from Rental Activities (277,901) (158,715)
Other Income (Expenses)
Interest Income 245 452
Management Fees (63,422) (63,422)
Administrative Costs (29,873) (31,772)
Loss Before Deducting Minority
Interests in Subsidiary Operating
Partnerships (370,951) (253,457)
Minority Interests in Losses of
Subsidiary Operating Partnerships 2,807 1,603
Net Loss ($368,144) ($251,854)
Net Loss Allocated to General Partners ($3,681) ($2,519)
Net Loss Allocated to Limited Partners (364,463) (249,335)
Net Loss ($368,144) ($251,854)
Net Loss per Limited Partnership Unit ($42.02) ($28.75)
Average Number of Limited Partnership
Units Outstanding 8,673 8,673
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2002 and 2001
(Unaudited)
01/01/02- 01/01/01-
09/30/02 09/30/01
Cash Flows from Operating Activities
Net Loss ($368,144) ($251,854)
Adjustments to Reconcile Net Loss
To Net Cash Provided by Operating
Activities:
Depreciation 660,956 678,231
Minority Interest in Losses of
Subsidiary Operating Partnerships (2,807) (1,603)
Other (24,467) (110,748)
Net Cash Provided by Operating Activities 265,538 314,026
Cash Flows from Investing Activities
Purchases of Buildings and Equipment (32,566) (60,192)
Net Cash Used by Investing Activities (32,566) (60,192)
Cash Flows from Financing Activities
Principal Payments on Borrowings (342,127) (308,939)
Return of Equity to Minority Investors (172) (50,187)
Net Cash Used by Financing Activities (342,299) (359,126)
Net Decrease in Cash (109,327) (105,292)
Cash Beginning 327,416 360,620
Cash Ending $218,089 $255,328
See accompanying notes.
CASH AVAILABLE FOR DISTRIBUTION AND RESERVES
Quarter Ended September 30, 2002 (Unaudited)
Cash Receipts from Operating Partnerships $5,120
Cash Receipts (Disbursements) from Operations
Interest 56
Expenses (12,024)
Reserves Utilized for Operations ($6,848)
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Note A - Basis of Presentation
The unaudited consolidated financial statements included
herein have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission. In
the opinion of the Partnership, all adjustments which are
considered necessary for a fair statement of the results for
the interim periods have been made; all such adjustments are
of a normal recurring nature.
These financial statements, which do not include all
disclosures included in the annual financial statements,
should be read in conjunction with the consolidated
financial statements and notes thereto included in the
Partnership's latest annual report on Form 10-K.
The results of operations for the nine months ended
September 30, 2002 are not necessarily indicative of the
results to be achieved for the year.
Note B - Net Loss Per Limited Partnership Unit
Net loss per limited partnership Unit is based upon the net
loss allocated to the limited partners and is computed using
the number of Units outstanding of 8,673.
Note C - Liabilities Applicable to Rental Properties
Liabilities applicable to rental properties at September 30,
2002 consist of $24,696,153 of permanent mortgage loans to
Subsidiary Operating Partnerships.
Note D - Related Party Transactions
The accompanying consolidated financial statements reflect
transactions between Qualified Housing Partners Limited
Partnership ("QHP") and its general partners or affiliates
and between the various Subsidiary Operating Partnerships
and their general partners or affiliates.
Frederick Investment Corporation, the Managing General
Partner of QHP, is a general or special limited partner in
each of the Operating Partnerships. Each Operating
Partnership also has one or more other general partners (the
"Local General Partners"). Following is a summary of
related party transactions for the three months ended
September 30, 2002.
QHP General Local General
Items Paid or Payable Partners Partners
Management Fees $21,000 $109,000
Reimbursable Operating Expenses $4,400 $0
Following is a summary of related party transactions for the
nine months ended September 30, 2002.
QHP General Local General
Items Paid or Payable Partners Partners
Management Fees $63,000 $313,000
Reimbursable Operating Expenses $17,200 $0
MANAGEMENT'S DISCUSSION
Liquidity and Capital Resources
Net of the Subsidiary Operating Partnerships, QHP held
approximately $18,000 in cash and liquid investments at
September 30, 2002. These assets will be held as working
capital.
At September 30, 2002, there were 644 holders of limited
partnership Units.
Results of Operations
Occupancy averaged 90%, with 844 out of a total of 934
apartment units owned by the Subsidiary Operating
Partnerships occupied as of September 30, 2002. This is
down 1.1% over the same period in 2001.
The Partnership's loss from rental activities, including
depreciation, during the third quarter of 2002 is $69,997 as
compared with a loss of $16,322 for the same period in 2001.
Other Revenue was higher in 2001 because of proceeds received
from an insurance claim. In addition, property tax accruals
exceed accruals made the previous year. These accruals are not
expected to vary greatly at year-end.
Dimmitt Senior Citizen Housing in Texas continues to have
vacancy problems as a result of a diminishing market. Occupancy
averaged 67% for the first three quarters of 2002, which is a
slight increase over the 2001 year-end average. Rural Development
implemented a rent increase effective October 1, 2002. Although
the second quarter report discussed the possibility of insufficient
funds to cover property taxes and insurance, Dimmit is currently
on-schedule with its insurance payments. The rent increase
should help the property escrow funds towards a partial payment
of their January 2003 tax bill. The local General Partner will
attempt to develop a workout plan with the local municipality
for the remainder of the tax.
Tax Credits
One of the Partnership's primary investment objectives, the
generation of tax benefits through Low Income Housing Tax
Credits, has been substantially fulfilled. The majority of
the apartment units stopped producing tax credits in 1999.
The ten-year tax credit period for the final two properties
expired in the first quarter of 2000. A small number of
apartment units are generating tax credits over a
fifteen-year period rather than the ten years. This will
produce an insignificant amount of tax credits over the
next four or five years.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Controls and Procedures
Within the 90 days prior to the date of this report, the
Partnership carried out an evaluation under the supervision
and with the participation of the Partnership's management,
including the Partnership's Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and
operation of the Partnership's disclosure controls and procedures
pursuant to Securities Exchange Act Rule 13a-14. Based upon that
evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the Partnership's disclosure controls
and procedures are effective in timely alerting them to material
information relating to the Partnership required to be included
in the Partnership's periodic SEC Filings. There were no
significant changes in the Partnership's internal controls or
in other factors that could significantly affect these controls
subsequent to the date of their evaluation.
Item 5. Submission of Matters to a Vote of Security Holders
None
Item 6. Other Information
None
Item 7. Exhibits and Reports on Form 8-K
(a) Exhibits
4 The Partnership Agreement is Exhibit A
to the Prospectus that is part of the
Registration Statement on Form S-11,
Number 33-19316 and effective May 20,
1988, the final form of which was filed
on May 20, 1988 pursuant to Rule 424(b),
and is incorporated herein by reference.
(b) Reports
No reports on Form 8-K were filed for the
quarter ended September 30, 2002.
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934,
the Bank has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Frederick Investment Corporation
A General Partner
Date: November 13, 2002 By: /s/ George F. Marshall
George F. Marshall, President
(Chief Executive Officer)
Date: November 13, 2002 By: /s/ Jenny C. Petri
Jenny C. Petri, Vice President
(Chief Financial Officer)
Date: November 13, 2002 By: /s/ George F. Marshall
George F. Marshall
A General Partner
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C.ss.1350)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C.ss.1350), the undersigned, George F. Marshall,
Chief Executive Officer of Qualified Housing Partners
Limited Partnership, a North Carolina limited partnership,
does hereby certify, to his knowledge, that:
The Quarterly Report on Form 10-Q for the period ended
September 30, 2002 of the Partnership (the "Report")
fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, and
the information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.
Date: November 13, 2002 By: /s/ George F. Marshall
George F. Marshall
General Partner
(Chief Executive Officer)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C.ss.1350)
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(18 U.S.C.ss.1350), the undersigned, Jenny C. Petri,
Chief Executive Officer of Qualified Housing Partners
Limited Partnership, a North Carolina limited partnership,
does hereby certify, to her knowledge, that:
The Quarterly Report on Form 10-Q for the period ended
September 30, 2002 of the Partnership (the "Report")
fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, and
the information contained in the Report fairly presents,
in all material respects, the financial condition and
results of operations of the Partnership.
FREDERICK INVESTMENT CORPORATION
Date: November 13, 2002 By: /s/ Jenny C. Petri
Jenny C. Petri, Vice President
(Chief Executive Officer)
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Section 302 Certification
I, George F. Marshall, certify that:
I have reviewed this quarterly report on Form 10-Q of Qualified
Housing Partners Limited Partnership, a North Carolina limited
partnership (the "registrant");
Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:
designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, is made known to us by others within
those entities, particularly during the period in
which this quarterly report is being prepared;
evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
all significant deficiencies in the design or
operation of internal controls which could
adversely affect the registrant's ability to
record, process, summarize and report financial
data and have identified for the registrant's
auditors any material weaknesses in internal
controls; and
any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002 By: /s/ George F. Marshall
George F. Marshall, General Partner
Chief Executive Officer
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Section 302 Certification
I, Jenny C. Petri, certify that:
I have reviewed this quarterly report on Form 10-Q of Qualified
Housing Partners Limited Partnership, a North Carolina limited
partnership (the "registrant");
Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report;
The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:
designed such disclosure controls and procedures to
ensure that material information relating to the
registrant, is made known to us by others within
those entities, particularly during the period in
which this quarterly report is being prepared;
evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date
within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls
and procedures based on our evaluation as of the
Evaluation Date;
The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of the registrant's board of directors
(or persons performing the equivalent functions):
all significant deficiencies in the design or
operation of internal controls which could
adversely affect the registrant's ability to
record, process, summarize and report financial
data and have identified for the registrant's
auditors any material weaknesses in internal
controls; and
any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls; and
The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
FREDERICK INVESTMENT CORPORATION
Date: November 13, 2002 By: /s/ Jenny C. Petri
Jenny C. Petri, Vice President
(Chief Financial Officer)