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 March 31, 2004
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 a 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 such shorter period the registrant has
been required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act.). Yes No X
As of March 31, 2004, there were 8,673 units of limited partnership
interests in registrant outstanding, $1,000 per unit, and the aggregate
value of such units was $8,673,000. Of such units, 5,256 having an
aggregate value of $5,256,000, were held by limited partners deemed
by the registrant to be non-affiliates.
PART I
FINANCIAL INFORMATION
QUALIFIED HOUSING PARTNERS LIMITED PARTNERSHIP
Item 1: Financial Statements
- Unaudited Consolidated Balance Sheets
- Unaudited Consolidated Statements of Income and
Expenses
- Unaudited Consolidated Statements of Cash Flows
- Unaudited Notes to Consolidated Financial Statements
Item 2: Management's Discussion
- Liquidity and Capital Resources
- Results of Operations
- Tax Credits
Item 4: Controls and Procedures
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
as of March 31, 2004, pursuant to Securities Exchange Act
Rule 13a-15(e). 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 during the most recent
fiscal quarter.
QUALIFIED HOUSING PARTNERS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
March 31, 2004 and December 31, 2003
(Unaudited)
03/31/04 12/31/03
ASSETS
Rental Properties
Land $1,326,402 $1,326,402
Buildings 34,785,393 34,757,798
Furniture & Fixtures 2,330,562 2,352,006
38,442,357 38,436,206
Accumulated Depreciation (13,706,227) (13,484,052)
24,736,130 24,952,154
Cash 293,362 305,114
Other Assets 1,850,519 1,887,743
TOTAL ASSETS $26,880,011 $27,145,011
LIABILITIES AND PARTNERS' CAPITAL
Liabilities Applicable to Rental
Properties $24,045,024 $24,070,613
Other Liabilities 1,225,851 1,325,332
Total Liabilities 25,270,875 25,395,945
Minority Interests in Subsidiary
Operating Partnerships 1,696,763 1,698,076
Partners' Capital (87,627) 50,990
TOTAL LIABILITIES AND PARTNERS'
CAPITAL $26,880,011 $27,145,011
See accompanying notes.
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
Three Months Ended March 31, 2004 and 2003
(Unaudited)
01/01/04- 01/01/03-
03/31/04 03/31/03
Revenue
Rent $938,253 $1,008,307
Other 18,839 20,207
957,092 1,028,514
Rental Expense
Interest 139,129 149,428
Depreciation 222,176 221,225
Repairs and Maintenance 224,884 257,863
Utilities 89,388 92,401
Real Estate Taxes 91,155 94,467
Management Fees 113,897 115,172
Advertising 2,185 1,958
Other 194,034 160,057
1,076,848 1,092,571
Loss from Rental Activities (119,756) (64,057)
Other Income (Expenses)
Interest Income 2 14
Management Fees 0 (21,141)
Administrative Costs (20,071) (21,267)
Loss Before Deducting Minority
Interests in Subsidiary Operating
Partnerships (139,825) (106,451)
Minority Interests in Losses of
Subsidiary Operating Partnerships 1,208 647
Net Loss ($138,617) ($105,804)
Net Loss Allocated to General Partners ($1,386) ($1,058)
Net Loss Allocated to Limited Partners (137,231) (104,746)
Net Loss ($138,617) ($105,804)
Net Loss per Limited Partnership Unit ($15.82) ($12.08)
Average Number of Limited Partnership
Units Outstanding 8,673 8,673
See accompanying notes.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2004 and 2003
(Unaudited)
01/01/04- 01/01/03-
03/31/04 03/31/03
Cash Flows from Operating Activities
Net Loss ($138,617) ($105,804)
Adjustments to Reconcile Net Loss
To Net Cash Provided by Operating
Activities:
Depreciation 222,176 221,225
Minority Interest in Losses of
Subsidiary Operating Partnerships (1,208) (647)
Other (62,257) 41,295
Net Cash Provided by Operating Activities 20,094 156,069
Cash Flows from Investing Activities
Purchases of Buildings and Equipment (6,152) (33,634)
Net Cash Used by Investing Activities (6,152) (33,634)
Cash Flows from Financing Activities
Principal Payments on Borrowings (25,589) (121,241)
Return of Equity to Minority Investors (105) (53)
Net Cash Used by Financing Activities (25,694) (121,294)
Net Increase (Decrease) in Cash (11,752) 1,141
Cash Beginning 305,114 211,526
Cash Ending $293,362 $212,667
See accompanying notes.
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 consolidated financial statements, which do not
include all disclosures included in the annual
consolidated 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 three months ended
March 31, 2004 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 March 31,
2004 consist of $24,045,024 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
March 31, 2004.
QHP General Local General
Items Paid or Payable Partners Partners
Management Fees $0 $106,000
Reimbursable Operating Expenses $12,500 $0
Note E - New Accounting Pronouncements
In January 2003, the FASB issued FASB Interpretation No.
(FIN) 46, Consolidation of Variable Interest Entities.
This interpretation addresses the consolidation by business
enterprises of variable interest entities as defined in the
interpretation. In December 2003, the FASB issued a revision
to FIN 46 (FIN 46R) to clarify some of the provisions of FIN
46 and to exempt certain entities from its requirements.
Public entities, other than small business issuers, must apply
FIN 46R no later than the end of the first reporting period
ending after March 15, 2004. FIN 46 is effective for public
entities that have interests in structures that are commonly
referred to as special-purpose entities for periods ending
after December 15, 2003. Adoption of FIN 46R did not have
a material impact on the consolidated financial statements.
MANAGEMENT'S DISCUSSION
Liquidity and Capital Resources
Net of the Subsidiary Operating Partnerships, QHP held
approximately $2,300 in cash and liquid investments at
March 31, 2004. These assets will be held as working
capital.
At March 31, 2004, there were 404 holders of limited
partnership Units.
Results of Operations
The Partnership's loss from rental activities, including
depreciation, during the first quarter of 2004 is $119,756 as
compared with a loss of $64,057 for the same period in 2003.
The primary reason for the difference is the reduction in
rents at Litton Apartments, the largest property in QHP's
portfolio. Litton's rents are subsidized by way of a
Housing Assistance Payment ("HAP") contract with the
Department of Housing and Urban Development ("HUD"). The
HAP contract expired during the first quarter of 2004.
HUD renewed the contract at lower rents that they believed
were closer to market.
Occupancy at the 24-unit property located in Dimmitt, Texas
increased from 50% to 54% in the first quarter. As of
March 31, 2004, no payment had been made on the 2003
property taxes. Local management is in discussions
with the taxing authority regarding a payment schedule.
Divestiture
In November, 2003, the general partners offered an exit
Strategy whereby many investors could divest and receive
a one-time tax benefit. Investors electing that strategy
assign their interest to the general partner, and, by
doing so, will (a) receive a one-time Federal tax benefit
of ut to 34% of their investment plus any state tax savings,
(b) still receive cash distributions (if any) for fifteen
years, and (c) stop future reporting of QHP results in their
tax returns. As of the date of this report, 304 investors
owning 4,147 units had elected divestiture. Those investors
who divested in 2003, received their additional tax benefit
on their 2003 tax return and will receive no further mailings
from the Partnership unless there are cash distributions.
Those who are divesting in 2004 will continue to receive QHP
mailings through the remainder of the year and receive their
final K-1 in March 2005.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. 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.
31.1 Rule 13a-14(a)/15d-14(a) Certification
by Chief Executive Officer
31.2 Rule 13a-14(a)/15d-14(a) Certification
by Chief Financial Officer
32.1 Section 1350 Certification by Chief
Executive Officer
32.2 Section 1350 Certification by Chief
Financial Officer
(b) Reports
No reports on Form 8-K were filed for the
quarter ended March 31, 2004.
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: May 12, 2004 By: /s/ George F. Marshall
George F. Marshall, President
(Chief Executive Officer)
Date: May 12, 2004 By: /s/ Jenny C. Petri
Jenny C. Petri, Vice President
(Chief Financial Officer)
Date: May 12, 2004 By: /s/ George F. Marshall
George F. Marshall
A General Partner
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
Rule 13a-14(a)/15d-14(a) 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 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
report;
Based on my knowledge, the financial statements, and other
financial information included in this 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 report;
The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14(a) and
15d-14(e)) for the registrant and have:
designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, 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 report is being prepared;
evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over
financial reporting;
The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, 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 and material weaknesses in
the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and
report financial information; and
any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls over financial
reporting.
Date: May 12, 2004 By: /s/ George F. Marshall
George F. Marshall, General Partner
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
Rule 13a-14(a)/15d-14(a) 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 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
report;
Based on my knowledge, the financial statements, and other
financial information included in this 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 report;
The registrant's other certifying officer and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14(a) and
15d-14(a)) for the registrant and have:
designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under our supervision, 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 report is being prepared;
evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
disclosed in this report any change in the registrant's
internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over
financial reporting;
The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation of internal control over
financial reporting, 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 and material weaknesses in
the design or operation of internal controls over financial
reporting which are reasonably likely to adversely affect
the registrant's ability to record, process, summarize and
report financial information; and
any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant's internal controls over financial
reporting.
FREDERICK INVESTMENT CORPORATION
Date: May 12, 2004 By: /s/ Jenny C. Petri
Jenny C. Petri, Vice President
(Chief Financial Officer)
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002
(18 U.S.C.ss.1350)
Pursuant to Section 1350 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
March 31, 2004 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: May 12, 2004 By: /s/ George F. Marshall
George F. Marshall
General Partner
(Chief Executive Officer)
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002
(18 U.S.C.ss.1350)
Pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002
(18 U.S.C.ss.1350), the undersigned, Jenny C. Petri,
Chief Financial 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
March 31, 2004 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: May 12, 2004 By: /s/ Jenny C. Petri
Jenny C. Petri, Vice President
(Chief Financial Officer)