UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2003
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
Commission File Number 0-24650
INDEPENDENCE TAX CREDIT PLUS L.P. III
-------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3746339
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- ---------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests and Beneficial Assignment Certificates
(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
----- -----
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 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 in Rule 12b-2 of the Act). Yes No X
----- -----
The approximate aggregate book value of the voting and non-voting common
equity held by non-affiliates of the Registrant as of September 30, 2002 was
$20,392,000, based on Limited Partner equity as of such date.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
Item 1. Business.
General
- -------
Independence Tax Credit Plus L.P. III (the "Partnership") is a limited
partnership which was formed under the laws of the State of Delaware on December
23, 1993. The general partner of the Partnership is Related Independence
Associates III L.P., a Delaware limited partnership (the "General Partner"). The
general partner of the General Partner is Related Independence Associates III
Inc., a Delaware corporation ("RIAI III") and is an affiliate of Related Capital
Company ("RCC").
On June 7, 1994, the Partnership commenced a public offering (the "Offering") of
Beneficial Assignment Certificates ("BACs") representing assignments of limited
partnership interests in the Partnership ("Limited Partnership Interests"),
managed by Related Equities Corporation (the "Dealer Manager"), pursuant to a
prospectus dated June 7, 1994 (the "Prospectus").
As of the termination of the offering on May 9, 1995, the Partnership had
received $43,440,000 of gross proceeds of the Offering (the "Gross Proceeds")
from 2,810 investors ("BACs holders"). (See Item 8, "Financial Statements and
Supplementary Data," Note 1).
The Partnership's business is primarily to invest as a limited partner in other
partnerships ("Local Partnerships") owning apartment complexes ("Apartment
Complexes" or "Properties") that are eligible for the low-income housing tax
credit ("Housing Tax Credit") enacted in the Tax Reform Act of 1986, some of
which may also be eligible for the historic rehabilitation tax credit ("Historic
Tax Credit"; together with Housing Tax Credits, "Tax Credits"). The
Partnership's investment in each Local Partnership represents from 98.99% to
99.98% other than one Local Partnership in which the Partnership's investment is
41.86%. As of March 31, 2003, the Partnership had acquired interests in twenty
Local Partnerships. As of March 31, 2003, approximately $35,051,000 (including
approximately $3,142,000 classified as a loan repayable from sale/refinancing
proceeds in accordance with the contribution agreement with one Local
Partnership and including acquisition fees of approximately $2,510,000) of net
proceeds has been invested in Local Partnerships of which approximately $491,000
remains to be contributed to the Local Partnerships for payment by them to the
original sellers of the Properties (including approximately $297,000 being held
in escrow), as certain benchmarks such as occupancy levels must be attained
prior to the release of such funds. The Partnership does not intend to acquire
interests in additional Local Partnerships.
Investment Objectives/General Incentives
- ----------------------------------------
The Partnership has been formed to invest in low-income Apartment Complexes that
are eligible for the Housing Tax Credit enacted in the Tax Reform Act of 1986.
Some Apartment Complexes may also be eligible for Historic Rehabilitation Tax
Credits ("Historic Complexes"). The investment objectives of the Partnership are
described below.
1. Entitle qualified BACs holders to Tax Credits over the period of the
Partnership's entitlement to claim Tax Credits (for each Property, generally ten
years from the date of investment or, if later, the date the Property is leased
to qualified tenants; referred to herein as the "Credit Period") with respect to
each Apartment Complex.
2. Preserve and protect the Partnership's capital.
2
3. Participate in any capital appreciation in the value of the Properties and
provide distributions of Sale or Refinancing Proceeds upon the disposition of
the Properties.
4. Allocate passive losses to individual BACs holders to offset passive income
that they may realize from rental real estate investments and other passive
activities, and allocate passive losses to corporate BACs holders to offset
business income.
One of the Partnership's objectives is to entitle qualified BACs holders to Tax
Credits over the Credit Period. Each of the Local Partnerships in which the
Partnership has acquired an interest has been allocated by the relevant state
credit agencies the authority to recognize Tax Credits during the Credit Period
provided that the Local Partnership satisfies the rent restriction, minimum
set-aside and other requirements for recognition of the Tax Credits at all times
during such period. Once a Local Partnership has become eligible to recognize
Tax Credits, it may lose such eligibility and suffer an event of "recapture" if
its Property fails to remain in compliance with the Tax Credit requirements.
None of the Local Partnerships in which the Partnership has acquired an interest
has suffered an event of recapture.
There can be no assurance that the Partnership will achieve its investment
objectives as described above.
Segments
- --------
The Partnership operates in one segment, which is the investment in multi-family
residential property.
Competition
- -----------
The real estate business is highly competitive and substantially all of the
properties acquired by the Partnership are expected to have active competition
from similar properties in their respective vicinities. In addition, various
other limited partnerships have, in the past, and may, in the future, be formed
by the General Partner and/or its affiliates to engage in businesses which may
be competitive with the Partnership.
Employees
- ---------
The Partnership does not have any direct employees. All services are performed
for the Partnership by the General Partner and its affiliates. The General
Partner receives compensation in connection with such activities as set forth in
Items 11 and 13. In addition, the Partnership reimburses the General Partner and
certain of its affiliates for expenses incurred in connection with the
performance by their employees of services for the Partnership in accordance
with the Partnership's Amended and Restated Agreement of Limited Partnership
(the "Partnership Agreement").
Item 2. Properties.
As of March 31, 2003, the Partnership had acquired an interest in twenty Local
Partnerships, all of which have been consolidated for accounting purposes.
Except for the interest in New Zion Apartments, L.P. ("New Zion"), the
Partnership's investment in each Local Partnership represents 98.99% or 99.89%
of the partnership interests in the Local Partnership. The Partnership's
investment in New Zion represents 42.39% of the partnership interest in the
Local Partnership (the other 58.12% limited partnership interest is owned by
affiliates of the Partnership, with the same management). Set forth below is a
schedule of the Local Partnerships including certain information concerning
their respective Apartment Complexes (the "Local Partnership Schedule"). Further
information concerning these Local Partnerships and their properties, including
3
any encumbrances affecting the properties, may be found in Schedule III to the
financial statements which are included herein.
Local Partnership Schedule
--------------------------
% of Units Occupied at May 1,
Name and Location -------------------------------
(Number of Units) Date Acquired 2003 2002 2001 2000 1999
- ----------------- ------------- ---- ---- ---- ---- ----
Edward Hotel Limited Partnership
Los Angeles, CA (47) November 1994 91% 91% 100% 100% 100%
Pacific-East L.P.
Brooklyn, NY (39) December 1994 98% 100% 100% 97% 100%
Overtown Development Group, Ltd.
Miami, FL (65) December 1994 82% 91% 89% 79% 83%
Sumpter Commons Associates, L.P. April 1995 100% 100% 100% 100% 95%
Brooklyn, NY (21)
Park Housing Limited Partnership May 1995 93% 100% 97% 97% 100%
Hartford, CT (30)
Livingston Manor Urban Renewal
Associates, L.P. June 1995 98% 100% 98% 98% 98%
New Brunswick, NJ (50)
Jefferis Square Housing
Partnership L.P. June 1995 100% 97% 100% 100% 97%
Chester, PA (36)
2301 First Avenue Limited
Partnership August 1995 99% 100% 98% 100% 99%
New York, NY (92)
Lewis Street L.P. October 1995 100% 91% 88% 91% 94%
Buffalo, NY (32)
Savannah Park Housing
Limited Partnership October 1995 75% 86% 84% 84% 95%
Washington, DC (64)
Brannon Group, L.C. December 1995 96% 98% 88% (a) 76%
Leisure City, FL (80)
Mansion Court Phase II Venture December 1995 95% 100% 95% 90% 95%
Philadelphia, PA (19)
Primm Place Partners, L.P. December 1995 96% 94% 98% 100% 97%
St. Louis, MI (128)
BK-9-A Partners L.P. December 1995 96% 91% 100% 100% 100%
Brooklyn, NY (23)
4
Local Partnership Schedule
--------------------------
(continued)
% of Units Occupied at May 1,
Name and Location -------------------------------
(Number of Units) Date Acquired 2003 2002 2001 2000 1999
- ----------------- ------------- ---- ---- ---- ---- ----
BK-10K Partners L.P. December 1995 95% 90% 96% 91% 95%
Brooklyn, NY (21)
Aspen-Olive Associates
Philadelphia, PA (22) October 1996 100% 100% 100% 100% 100%
West Mill Creek Associates III L.P.
Philadelphia, PA (72) January 1997 99% 99% 100% 100% 99%
Universal Court Associates
Philadelphia, PA (32) April 1997 97% 100% 100% 94% 100%
New Zion Apartments
Shreveport, LA (100) November 1997 95% 88% 100% 99% 98%
Dreitzer House
New York, NY (32) December 1997 100% 100% 97% 100% 0%*
(a) As a result of prior litigation related to the Local General Partner of
Brannon Group, LC occupancy rate was not provided for this year by the
management agent.
* Properties in construction phase.
All leases are generally for periods not greater than one to two years and no
tenant occupies more than 10% of the rentable square footage.
Commercial tenants (to which average rental per square foot applies) comprise
less than 5% of the rental revenues of the Partnership. Maximum rents for the
residential units are determined annually by HUD and reflect increases/decreases
in consumer price indices in various geographic areas. Market conditions,
however, determine the amount of rent actually charged.
Management continuously reviews the physical state of the properties and
suggests to the respective general partners of the Local Partnerships ("Local
General Partners") budget improvements which are generally funded from cash flow
from operations or release of replacement reserve escrows to the extent
available.
Management continuously reviews the insurance coverage of the properties and
believes such coverage is adequate.
See Item 1, Business, above for the general competitive conditions to which the
properties described above are subject.
Real estate taxes are calculated using rates and assessed valuations determined
by the township or city in which the property is located. Such taxes have
approximated 1% of the aggregate cost of the properties as shown in Schedule III
to the financial statements included herein.
In connection with investments in development-stage Apartment Complexes, the
General Partner generally required that the Local General Partners provide
completion guarantees and/or undertake to repurchase the Partnership's interest
in the Local Partnership if construction or rehabilitation was not completed
5
substantially on time or on budget ("Development Deficit Guarantees"). The
Development Deficit Guarantees generally also required the Local General Partner
to provide any funds necessary to cover net operating deficits of the Local
Partnership until such time as the Apartment Complex has achieved break-even
operations. The General Partner generally required that the Local General
Partners undertake an obligation to fund operating deficits of the Local
Partnership (up to a stated maximum amount) during a limited period of time
(typically three to five years) following the achievement of break-even
operations ("Operating Deficit Guarantees"). As of March 31, 2003, 2002 and
2001, the gross amounts of the Operating Deficit Guarantees aggregate
approximately $5,129,000, of which $2,935,000 has expired as of March 31, 2003.
Management does not expect that expiration to have a material impact on
liquidity, based on prior years' fundings. Amounts funded under such agreements
are treated as noninterest bearing loans, which will be paid only out of 50% of
available cash flow or out of available net sale or refinancing proceeds. In
some instances, the Local General Partners are required to undertake an
obligation to comply with a Rent-Up Guaranty Agreement, whereby the Local
General Partner agrees to pay liquidated damages if predetermined occupancy
rates are not achieved. These payments are made without right of repayment. In
cases where the General Partner deems it appropriate, the obligations of a Local
General Partner under the Development Deficit, Operating Deficit and/or Rent-Up
Guarantees are secured by letters of credit and/or cash escrow deposits.
Tax Credits with respect to a given Apartment Complex are available for a
ten-year period that commences when the property is leased to qualified tenants.
However, the annual Tax Credits available in the year in which the Apartment
Complex is leased, must be prorated based upon the number of months remaining in
the year. The amount of the annual Tax Credit not available in the first year
will be available in the eleventh year. In certain cases, the Partnership
acquired its interest in a Local Partnership after the Local Partnership had
placed its Apartment Complex in service. In these cases, the Partnership may be
allocated Tax Credits only beginning in the month following the month in which
it acquired its interest and Tax Credits allocated in any prior period are not
available to the Partnership.
Item 3. Legal Proceedings.
This information is incorporated by reference to the discussion of Lewis Street
L.P. in the Results of Operations of Certain Local Partnerships contained in
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Security Holder
Matters.
As of March 31, 2003, the Partnership had issued and outstanding 43,440 Limited
Partnership Interests, each representing a $1,000 capital contribution to the
Partnership, or an aggregate capital contribution of $43,440,000. All of the
issued and outstanding Limited Partnership Interests have been issued to
Independence Assignor Inc. (the "Assignor Limited Partner"), which has in turn
issued 43,440 BACs to the purchasers thereof for an aggregate purchase price of
$43,440,000. Each BAC represents all of the economic and virtually all of the
ownership rights attributable to a Limited Partnership Interest held by the
Assignor Limited Partner. BACs may be converted into Limited Partnership
Interests at no cost to the holder (other than the payment of transfer costs not
to exceed $100), but Limited Partnership Interests so acquired are not
thereafter convertible into BACs.
6
Neither the BACs nor the Limited Partnership Interests are traded on any
established trading market. The Partnership does not intend to include the BACs
for quotation on NASDAQ or for listing on any national or regional stock
exchange or any other established securities market. The Revenue Act of 1987
contained provisions which have an adverse impact on investors in "publicly
traded partnerships." Accordingly, the General Partner has imposed limited
restrictions on the transferability of the BACs and the Limited Partnership
Interests in secondary market transactions. Implementation of the restrictions
should prevent a public trading market from developing and may adversely affect
the ability of an investor to liquidate his or her investment quickly. It is
expected that these procedures will remain in effect until such time, if ever,
as further revision of the Revenue Act of 1987 may permit the Partnership to
lessen the scope of the restrictions.
As of May 13, 2003, the Partnership has approximately 2,519 registered holders
of an aggregate of 43,440 BACs.
All of the Partnership's general partnership interests, representing an
aggregate capital contribution of $1,000, are held by the General Partner.
There are no material legal restrictions in the Partnership Agreement on the
ability of the Partnership to make distributions. However, the Partnership has
made no distributions to the BACs holders as of March 31, 2003. The Partnership
does not anticipate providing cash distributions to its BACs holders other than
from net refinancing or sales proceeds.
7
Item 6. Selected Financial Data.
The information set forth below presents selected financial data of the
Partnership. Additional financial information is set forth in the audited
financial statements in Item 8 hereof.
Year Ended March 31,
----------------------------------------------------------------------------
OPERATIONS 2003 2002 2001 2000 1999
- ---------- ------------ ------------ ------------ ------------ ------------
Revenues $ 6,408,871 $ 6,452,014 $ 6,332,726 $ 5,873,889 $ 5,457,954
Operating expenses (9,886,082) (10,465,208) (9,597,628) (9,357,207) (8,521,362)
------------ ------------ ------------ ------------ ------------
Net loss before minority (3,477,211) (4,013,194) (3,264,902) (3,483,318) (3,063,408)
interest
Minority interest in loss
(income) of subsidiary
partnerships 293,278 670,493 21,134 9,131 (23,590)
------------ ------------ ------------ ------------ ------------
Net loss $ (3,183,933) $ (3,342,701) $ (3,243,768) $ (3,474,187) $ (3,086,998)
============ ============ ============ ============ ============
Net loss per weighted aver-
age BAC $ (72.56) $ (76.18) $ (73.93) $ (79.18) $ (70.35)
============ ============ ============ ============ ============
March 31,
----------------------------------------------------------------------------
FINANCIAL POSITION 2003 2002 2001 2000 1999
- ------------------ ------------ ------------ ------------ ------------ ------------
Total assets $ 76,223,243 $ 78,982,075 $ 82,660,313 $ 86,067,310 $ 90,312,704
============ ============ ============ ============ ============
Total liabilities $ 54,524,974 $ 53,786,549 $ 54,434,413 $ 54,433,977 $ 55,319,950
============ ============ ============ ============ ============
Minority interest $ 3,142,417 $ 3,455,741 $ 3,143,414 $ 3,307,079 $ 3,192,313
============ ============ ============ ============ ============
Total partners' capital $ 18,555,852 $ 21,739,785 $ 25,082,486 $ 28,326,254 $ 31,800,441
============ ============ ============ ============ ============
During the year ended March 31, 2003, 2002, 2001, 2000 and 1999, respectively,
total assets decreased primarily due to depreciation and a decrease in cash and
cash equivalents.
Cash Distributions
- ------------------
The Partnership has made no distributions to the BACs holders as of March 31,
2003.
8
Selected Quarterly Financial Data (Unaudited)
Quarter Ended
--------------------------------------------------------
OPERATIONS June 30, September 30, December 31, March 31,
2002 2002 2002 2003
- ---------- ----------- ------------- ----------- -----------
Revenues $ 1,558,925 $ 1,603,146 $ 1,594,588 $ 1,652,212
Operating ex-
penses (2,366,578) (2,352,230) (2,306,097) (2,861,177)
----------- ----------- ----------- -----------
Loss before
minority inter-
est (807,653) (749,084) (711,509) (1,208,965)
Minority interest
in loss (income)
of subsidiaries 7,664 17,075 (2,770) 271,309
----------- ----------- ----------- -----------
Net loss $ (799,989) $ (732,009) $ (714,279) $ (937,656)
=========== =========== =========== ===========
Net loss per
weighted
average BAC $ (18.23) $ (16.68) $ (16.28) $ (21.37)
=========== =========== =========== ===========
Quarter Ended
--------------------------------------------------------
OPERATIONS June 30, September 30, December 31, March 31,
2001 2001 2001 2002
- ---------- ----------- ------------- ----------- -----------
Revenues $ 1,660,714 $ 1,521,861 $ 1,554,151 $ 1,715,288
Operating ex-
penses (2,442,329) (2,318,288) (2,321,697) (3,382,894)
----------- ----------- ----------- -----------
Loss before
minority inter-
est (781,615) (796,427) (767,546) (1,667,606)
Minority interest
in loss of sub-
sidiaries 8,984 8,803 5,568 647,138
----------- ----------- ----------- -----------
Net loss $ (772,631) $ (787,624) $ (761,978) $(1,020,468)
=========== =========== =========== ===========
Net loss per
weighted
average BAC $ (17.61) $ (17.95) $ (17.36) $ (23.26)
=========== =========== =========== ===========
9
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
- -------------------------------
General
- -------
The Partnership's primary source of funds is rental revenues, which are fully
utilized at the property level.
The Partnership had received $43,440,000 in gross proceeds for BACs pursuant to
a public offering resulting in net proceeds available for investment of
approximately $35,000,000 after volume discounts, payment of sales commissions,
acquisition fees and expenses, organization and offering expenses and
establishment of a working capital reserve.
As of March 31, 2003, the Partnership has invested approximately $35,051,000
(including approximately $3,142,000 classified as loans repayable from
sale/refinancing proceeds in accordance with the contribution agreement with one
Local Partnership and not including acquisition fees of approximately
$2,510,000) of net proceeds in twenty Local Partnerships of which approximately
$491,000 remains to be contributed to the Local Partnerships for payment by them
to the original sellers of the Properties (not including approximately $297,000
being held in escrow) as certain benchmarks, such as occupancy level, must be
attained prior to the release of the funds. The Partnership does not intend to
acquire additional properties. During the year ended March 31, 2003, the
Partnership did not make any payments to Local Partnerships. Although the
Partnership will not be acquiring additional properties, the Partnership may be
required to fund potential purchase price adjustments based on tax credit
adjustor clauses.
During the year ended March 31, 2003, cash and cash equivalents decreased
approximately $154,000. This decrease is due to acquisition of property and
equipment ($41,000), a net decrease in due to local general partners and
affiliates relating to investing and financing activities ($292,000), an
increase in cash held in escrow relating to investing activities ($465,000),
principal payments of mortgage notes ($454,000) and an increase in
capitalization of consolidated subsidiaries attributable to minority interest
$(20,000) which exceeded cash provided by operating activities ($783,000) and
proceeds from disposal of property and equipment ($336,000). Included in the
adjustments to reconcile the net loss to cash provided by operating activities
is depreciation and amortization of approximately $2,758,000.
A working capital reserve had previously been established from the Partnership's
funds available for investment, which includes amounts which may be required for
potential purchase price adjustments based on tax credit adjustor clauses. At
March 31, 2003, all funds were used.
The Partnership has negotiated Operating Deficit Guaranty Agreements with all
Local Partnerships by which the Local General Partners of the Local Partnerships
have agreed to fund operating deficits for a specified period of time. The terms
of the Operating Deficit Guaranty Agreements vary for each Local Partnership,
with maximum dollar amounts to be funded for a specified period of time,
generally three years, commencing on the break-even date. As of March 31, 2003,
2002 and 2001, the gross amounts of the Operating Deficit Guarantees aggregate
approximately $5,129,000, of which $2,935,000 has expired as of March 31, 2003.
Management does not expect that expiration to have a material impact on
liquidity, based on prior years' fundings. Amounts funded under such agreements
are treated as noninterest bearing loans, which will be paid only out of 50% of
available cash flow or out of available net sale or refinancing proceeds.
10
The Operating Deficit Guaranty Agreements were negotiated to protect the
Partnership's interest in the Local Partnerships and to provide incentive to the
Local General Partners to generate positive cash flow.
Partnership management fees owed to the General Partner amounting to
approximately $1,892,000 and $1,561,000 were accrued and unpaid as of March 31,
2003 and 2002, respectively. Without the General Partner's continued accrual
without payment of certain fees and expense reimbursements, the Partnership will
not be in a position to meet its obligations. The General Partner has continued
allowing the accrual without payment of these amounts but is under no obligation
to continue to do so.
For discussion of contingencies affecting certain subsidiary partnerships, see
Results of Operations of Certain Local Partnerships, below. Since the maximum
loss the Partnership would be liable for is its net investment in the respective
subsidiary partnerships, the resolution of the existing contingencies is not
anticipated to impact future results of operations, liquidity or financial
condition in a material way. However, the Partnership's loss of its investment
in a Local Partnership will eliminate the ability to generate future Tax Credits
from such Local Partnership and may also result in recapture of tax credits if
the investment is lost before the expiration of the Credit Period.
Except as described above, management is not aware of any trends or events,
commitments or uncertainties, which have not otherwise been disclosed that will
or are likely to impact liquidity in a material way. Management believes the
only impact would be for laws that have not yet been adopted. The portfolio is
diversified by the location of the properties around the United States so that
if one area of the country is experiencing downturns in the economy, the
remaining properties in the portfolio may be experiencing upswings. However, the
geographic diversification of the portfolio may not protect against a general
downturn in the national economy. The Partnership has invested the proceeds of
its offering in twenty Local Partnerships, all of which fully have their Tax
Credits in place. The Tax Credits are attached to the property for a period of
ten years, and are transferable with the property during the remainder of the
ten-year period. If trends in the real estate market warranted the sale of a
property, the remaining Tax Credits would transfer to the new owner; thereby
adding significant value to the property on the market, which value is not
included in the financial statement carrying amount.
Critical Accounting Policies
- ----------------------------
In preparing the consolidated financial statements, management has made
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates. Set forth below is a summary of the accounting policies
that management believes are critical to the preparation of the consolidated
financial statements. The summary should be read in conjunction with the more
complete discussion of the Partnership's accounting policies included in Note 2
to the consolidated financial statements in this annual report on Form 10-K.
Property and Equipment
- ----------------------
Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, and any other costs incurred
in acquiring the properties. The cost of property and equipment is depreciated
over their estimated useful lives using accelerated and straight-line methods.
Expenditures for repairs and maintenance are charged to expense as incurred;
major renewals and betterments are capitalized. At the time property and
equipment are retired or otherwise disposed of, the cost and accumulated
11
depreciation are eliminated from the assets and accumulated depreciation
accounts and the profit or loss on such disposition is reflected in earnings.
The Partnership complies with Statement of Financial Accounting Standards (SFAS)
No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". A loss
on impairment of assets is recorded when management estimates amounts
recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time property investments
themselves are reduced to estimated fair value (generally using discounted cash
flows).
Through March 31, 2003, the Partnership has not recorded any loss on impairment
of assets or reduction to estimated fair value.
At the time management commits to a plan to dispose of assets, said assets are
adjusted to the lower of carrying amount or fair value less costs to sell. These
assets are classified as property and equipment-held for sale and are not
depreciated. Through March 31, 2003, the Partnership has not recorded or
classified any property and equipment as held for sale.
Income Taxes
- ------------
The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31.
New Accounting Pronouncements
- -----------------------------
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46").
FIN 46 is applicable immediately for variable interest entities created after
January 31, 2003. For variable interest entities created before February 1,
2003, the provisions of FIN 46 are applicable no later than July 1, 2003. The
Partnership has not identified any variable interest entities that were created
after January 31, 2003 and is currently evaluating the impact of the provisions
of FIN 46 on its consolidated financial statements.
Results of Operations
- ---------------------
The following is a summary of the results of operations of the Partnership for
the years ended March 31, 2003, 2002 and 2001 (the 2002, 2001 and 2000 Fiscal
Years).
The net loss for the 2002, 2001 and 2000 Fiscal Years aggregated $3,183,933,
$3,342,701 and $3,243,768, respectively.
The Partnership and BACs holders began recognizing Tax Credits with respect to a
Property when the Credit Period for such Property commenced. Because of the time
required for the acquisition, completion and rent-up of Properties, the amount
of Tax Credits per BAC gradually increased over the first three years of the
Partnership. Tax Credits not recognized in the first three years will be
recognized in the 11th through 13th years. The Partnership generated $5,683,279,
$5,683,279 and $5,682,911 Housing Tax Credits during the 2002, 2001 and 2000,
tax years, respectively.
2002 vs. 2001
- -------------
Rental income increased approximately 4% for the 2002 Fiscal Year as compared to
the 2001 Fiscal Year.
Other income decreased approximately $257,000 for the 2002 Fiscal Year as
compared to 2001 Fiscal Year. This decrease was primarily due to a decrease in
12
interest income earned in 2002 at the Partnership level and Local Partnerships
due to a decrease in interest rates, as well as lower cash and cash equivalent
balances earning interest.
General and administrative decreased approximately $457,000 for the 2002 Fiscal
Year as compared to 2001 Fiscal Year. This decrease was primarily due to the
settlement of legal action in 2001 at one Local Partnership as well as an
overaccrual of general and administrative expenses in the 2001 Fiscal Year at a
second Local Partnership.
Repairs and maintenance decreased approximately $134,000 for the 2002 Fiscal
Year as compared to 2001 Fiscal Year. This decrease was primarily due to an
overaccrual of repairs and maintenance in the 2001 Fiscal Year at one Local
Partnership.
Insurance expense increased approximately $57,000 for the 2002 Fiscal Year as
compared to 2001 Fiscal Year. This increase was primarily due to an increase in
insurance premiums at the Local Partnerships.
2001 vs. 2000
- -------------
Rental income increased approximately 1% for the 2001 Fiscal Year as compared to
the 2000 Fiscal Year.
Other income increased approximately $64,000 for the 2001 Fiscal Year as
compared to the 2000 Fiscal Year. This increase was primarily due to higher cash
and cash equivalent balances earning interest in 2001 at one Local Partnership.
Total expenses, excluding general and administrative, repairs and maintenance,
taxes and insurance, remained fairly consistent with a decrease of approximately
1% for the 2001 Fiscal Year as compared to the 2000 Fiscal year.
General and administrative increased approximately $516,000 for the 2001 Fiscal
Year as compared with the 2000 Fiscal Year. This increase was primarily due to
an increase in legal costs at one Local Partnership as well as small increases
at three other Local Partnerships.
Repairs and maintenance increased approximately $339,000 for the 2001 Fiscal
Year as compared with the 2000 Fiscal Year. This increase was primarily due to
carpet replacement at one Local Partnership, repairs due to a water heater
explosion at a second Local Partnership, painting and miscellaneous repairs at a
third Local Partnership and repairs to the building common area at a fourth
Local Partnership.
Taxes increased approximately $40,000 for the 2001 Fiscal Year as compared to
the 2000 Fiscal Year. This increase was primarily due to an underaccrual in 2000
at two Local Partnerships.
Insurance increased approximately $62,000 for the 2001 Fiscal Year as compared
to the 2000 Fiscal Year. This increase was primarily due to an underaccrual
during 2000 at one Local Partnership.
Results of Operations of Certain Local Partnerships
- ---------------------------------------------------
Lewis Street L.P.
- -----------------
In January of 1998, Lewis Street Limited Partnership ("Lewis Street") was
informed that it was a defendant in a cause of action for the alleged value of
work and services provided by Phase Three Paul, for interference with
contractual relations and for fraud that was brought by the project's original
developer. The complaint seeks damages for the alleged value of work and
services provided in the amount of $296,940 and damages to reputation in the
13
amount of at least $1,000,000 plus unspecified punitive damages. This litigation
will continue to be vigorously contested by the Local Partnership. Legal counsel
for the Local Partnership has indicated that the ultimate liability, if any,
with respect to this possible action cannot be determined at this time. The
Partnership's investment in Lewis Street at March 31, 2003 and 2002 was
approximately $590,000 and $700,000, respectively, and the minority interest
balance was zero at each date. Lewis Street's net loss after minority interest
amounted to approximately $111,000, $101,000 and $100,000 for the 2002, 2001,
and 2000 Fiscal Years, respectively.
Other
- -----
The Partnership's investment as a limited partner in the Local Partnerships is
subject to the risks of potential losses arising from management and ownership
of improved real estate. The Partnership's investments also could be adversely
affected by poor economic conditions generally, which could increase vacancy
levels and rental payment defaults and increase operating expenses, any or all
of which could threaten the financing viability of one or more of the Local
Partnerships.
There also are substantial risks associated with the operation of Apartment
Complexes receiving government assistance. These include governmental
regulations concerning tenant eligibility, which may make it more difficult to
rent apartments in the complexes; difficulties in obtaining government approval
for rent increases; limitations on the percentage of income which low and
moderate-income tenants may pay as rent; the possibility that Congress may not
appropriate funds to enable HUD to make the rental assistance payments it has
contracted to make; and that when the rental assistance contracts expire there
may not be market demand for apartments at full market rents in a Local
Partnership's Apartment Complex.
The Local Partnerships are impacted by inflation in several ways. Inflation
allows for increases in rental rates generally to reflect the impact of higher
operating and replacement costs. Inflation also affects the Local Partnerships
adversely by increasing operating costs, for example, for such items as fuel,
utilities and labor.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
14
Item 8. Financial Statements and Supplementary Data.
Sequential
Page
----------
(a) 1. Consolidated Financial Statements
Independent Auditors' Report 16
Consolidated Balance Sheets at March 31, 2003 and 2002 64
Consolidated Statements of Operations for the Years Ended March 31,
2003, 2002 and 2001 65
Consolidated Statements of Changes in Partners' Capital (Deficit) for
the Years Ended March 31, 2003, 2002 and 2001 66
Consolidated Statements of Cash Flows for the Years Ended March 31,
2003, 2002 and 2001 67
Notes to Consolidated Financial Statements 69
15
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Partners of
Independence Tax Credit Plus L.P. III and Subsidiaries
(A Delaware Limited Partnership)
We have audited the consolidated balance sheets of Independence Tax Credit Plus
L.P. III and Subsidiaries (A Delaware Limited Partnership) as of March 31, 2003
and 2002, and the related consolidated statements of operations, changes in
partners' capital (deficit), and cash flows for the years ended March 31, 2003,
2002 and 2001 (the 2002, 2001 and 2000 Fiscal Years, respectively). 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 for sixteen (2002 Fiscal
Year), fifteen (2001 Fiscal Year) and twenty (2000 Fiscal Year) subsidiary
partnerships whose losses aggregated $2,266,539, $2,428,205 and $2,566,254 for
the years ended March 31, 2003, 2002 and 2001, respectively, and whose assets
constituted 67% and 68% of the Partnership's assets at March 31, 2003 and 2002,
respectively, presented in the accompanying consolidated financial statements.
The financial statements for sixteen (2002 Fiscal Year), fifteen (2001 Fiscal
Year) and nineteen (2000 Fiscal Year) subsidiary partnerships were audited by
other auditors whose reports thereon have been furnished to us and our opinion
expressed herein, insofar as it relates to the amounts included for these
subsidiary partnerships, is based solely upon the reports of the other auditors.
The financial statements for one (2000 Fiscal Year) subsidiary partnership was
not audited.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, based upon our audits, and the reports of the other auditors
referred to above, the consolidated financial statements referred to in the
first paragraph present fairly, in all material respects, the financial position
of Independence Tax Credit Plus L.P. III and Subsidiaries at March 31, 2003 and
2002, and the results of their operations and their cash flows for the years
ended March 31, 2003, 2002 and 2001, in conformity with U.S. generally accepted
accounting principles.
TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI LLP
New York, New York
May 30, 2003
16
[HOLTHOUSE CARLIN & VAN TRIGT LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Partners of the
Edward Hotel Limited Partnership:
We have audited the accompanying balance sheets of Edward Hotel Limited
Partnership (a California limited partnership) as of December 31, 2002 and 2001,
and the related statements of operations, changes in partners' capital (deficit)
and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Edward Hotel Limited
Partnership as of December 31, 20021 and 2001, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The information included in the
accompanying Schedule I 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 basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
/s/ Holthouse Carlin & Van Trigt LLP
Santa Monica, California
January 31, 2003
17
[HOLTHOUSE CARLIN & VAN TRIGT LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of the
Edward Hotel Limited Partnership:
We have audited the accompanying balance sheets of Edward Hotel Limited
Partnership (a California limited partnership) as of December 31, 2001 and 2000,
and the related statements of operations, changes in partners' capital (deficit)
and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Edward Hotel Limited
Partnership as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The information included in the
accompanying Schedule I 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 basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
/s/ Holthouse Carlin & Van Trigt LLP
Los Angeles, California
February 21, 2002
18
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Pacific-East L.P.
We have audited the accompanying balance sheets of Pacific-East L.P. as of
December 31, 2002 and 2001, and the related statements of operations, changes in
partners' deficit and cash flows for the years 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 audits.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Pacific-East L.P. as of
December 31, 2002 and 2001, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Reznick Fedder & Silverman
Atlanta, Georgia
February 3, 2003
19
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Pacific-East L.P.
We have audited the accompanying balance sheet of Pacific-East L.P. as of
December 31, 2000, and the related statements of operations, 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.
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 Pacific-East L.P. as of
December 31, 2000, and the results of its operations, the changes in partners'
deficit and its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
/s/ Reznick Fedder & Silverman
Atlanta, Georgia
January 16, 2001
20
[SMITH, ORTIZ, GOMEZ AND BUZZI, P.A. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
- ----------------------------
The Partners
Overtown Development Group, Ltd.
(A Limited Partnership):
We have audited the accompanying balance sheets of Overtown Development Group,
Ltd. (A Limited Partnership) as of December 31, 2002 and 2001, and the related
statement of operations, changes in partners' capital, and cash flows for the
years then ended. These financial statements are the responsibility of Overtown
Development Group, Ltd. management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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, based on our audits, the financial statements referred to above
present fairly, in all material respects, the financial position of Overtown
Development Group, Ltd. as of December 31, 2002 and 2001, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ Smith, Ortiz, Gomez and Buzzi, P.A.
Miami, Florida
February 4, 2003
21
[SMITH, ORTIZ, GOMEZ AND BUZZI, P.A. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Partners
Overtown Development Group, Ltd.
(A Limited Partnership):
We have audited the accompanying balance sheets of Overtown Development Group,
Ltd. (A Limited Partnership) as of December 31, 2001 and 2000, and the related
statement of operations, changes in partners' capital, and cash flows for the
years then ended. These financial statements are the responsibility of Overtown
Development Group, Ltd. management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits 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, based on our audits, the financial statements referred to above
present fairly, in all material respects, the financial position of Overtown
Development Group, Ltd. as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Smith, Ortiz, Gomez and Buzzi, P.A.
Miami, Florida
January 29, 2002
22
[LAWLOR, O'BRIEN & CHERVENAK, LLC LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Sumpter Commons Associates, L.P.
We have audited the accompanying balance sheet of Sumpter Commons Associates,
L.P. as of December 31, 2002, and the related statements of operations, 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
in the United States of America 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 Sumpter Commons Associates,
L.P. as of December 31, 2002, 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 in the United States of America.
/s/ Lawlor, O'Brien & Chervenak, LLC
Totowa, New Jersey
February 15, 2003
23
[LAWLOR, O'BRIEN & CHERVENAK, LLC LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Sumpter Commons Associates, L.P.
We have audited the accompanying balance sheet of Sumpter Commons Associates,
L.P. as of December 31, 2001, and the related statements of operations, changes
in partners' capital (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
in the United States of America 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 Sumpter Commons Associates,
L.P. as of December 31, 2001, and the results of its operations, changes in
partners' capital (deficit), and cash flows for the year then ended in
conformity with generally accepted accounting principles in the United States of
America.
/s/ Lawlor, O'Brien & Chervenak, LLC
Totowa, New Jersey
February 25, 2002
24
[LAWLOR, O'BRIEN & CHERVENAK, LLC LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Sumpter Commons Associates, L.P.
We have audited the accompanying balance sheet of Sumpter Commons Associates,
L.P. as of December 31, 2000, and the related statements of operations, changes
in partners' capital (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 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 Sumpter Commons Associates,
L.P. as of December 31, 2000, and the results of its operations, changes in
partners' capital (deficit), and cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ Lawlor, O'Brien & Chervenak, LLC
Totowa, New Jersey
February 14, 2001
25
[KOSTIN, RUFFKESS & COMPANY, LLC LETTERHEAD]
To The Partners
Park Housing Limited Partnership
INDEPENDENT AUDITORS' REPORT
- ----------------------------
We have audited the accompanying balance sheet of Park Housing Limited
Partnership as of December 31, 2002, and the related statements of operations
and changes in partners' capital, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 Park Housing Limited
Partnership as of December 31, 2002, and the results of its operations and cash
flows for the year then ended, in accordance with accounting principles
generally accepted in the United States of America.
/s/ Kostin, Ruffkess & Company, LLC
Farmington, Connecticut
January 24, 2003
26
[KOSTIN, RUFFKESS & COMPANY, LLC LETTERHEAD]
To The Partners
Park Housing Limited Partnership
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Park Housing Limited
Partnership as of December 31, 2001, and the related statements of operations
and changes in partners' capital, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 Park Housing Limited
Partnership as of December 31, 2001, and the results of its operations and cash
flows for the year then ended, in accordance with accounting principles
generally accepted in the United States of America.
/s/ Kostin, Ruffkess & Company, LLC
Farmington, Connecticut
January 24, 2002
27
[KOSTIN, RUFFKESS & COMPANY, LLC LETTERHEAD]
To The Partners
Park Housing Limited Partnership
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Park Housing Limited
Partnership as of December 31, 2000, and the related statements of operations
and partners' capital, 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.
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 Park Housing Limited
Partnership as of December 31, 2000, and the results of its operations and cash
flows for the year then ended, in accordance with generally accepted accounting
principles.
/s/ Kostin, Ruffkess & Company, LLC
West Hartford, Connecticut
February 6, 2001
28
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Livingston Manor Urban Renewal Associates, L.P.
We have audited the accompanying balance sheets of Livingston Manor Urban
Renewal Associates, L.P. as of December 31, 2002 and 2001, and the related
statements of operations, changes in partners' equity (deficit) and cash flows
for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 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 Livingston Manor Urban Renewal
Associates, L.P. as of December 31, 2002 and 2001, and the results of its
operations, the changes in partners' equity (deficit) and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 17, 2003
29
[ZINER, KENNEDY & LEHAN LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Livingston Manor Urban Renewal Associates, L.P.
We have audited the accompanying balance sheets of Livingston Manor Urban
Renewal Associates, L.P. as of December 31, 2000 and 1999, and the related
statements of operations, changes in partners' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's general partner and contracted management agent. 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 the audits 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 the
Partnership's general partner and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Livingston Manor Urban Renewal
Associates, L.P. at December 31, 2000 and 1999, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Ziner, Kennedy & Lehan LLP
Boston, Massachusetts
January 16, 2001
30
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Jefferis Square Housing Partnership, L.P.
We have audited the accompanying balance sheets of Jefferis Square Housing
Partnership, L.P. (a Pennsylvania limited partnership) as of December 31, 2002
and 2001, and the related statements of operations, changes in partners' equity
(deficit) and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Jefferis Square Housing
Partnership, L.P. as of December 31, 2002 and 2001, and the results of its
operations, changes in partners' equity (deficit) and its cash flows for the
years then ended, in conformity with accounting principles generally accepted in
the United States of America.
/s/ Reznick Fedder & Silverman
Baltimore, Maryland
February 7, 2003
31
[ZINER, KENNEDY & LEHAN LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Jefferis Square Housing Partnership, L.P.
We have audited the accompanying balance sheets of Jefferis Square Housing
Partnership, L.P. (a Pennsylvania limited partnership) as of December 31, 2000
and 1999, and the related statements of operations, changes in partners' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's general partners and contracted management
agent. 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 the audits 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 the
Partnership's general partners and contracted management agent, 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 financial statements referred to above present fairly, in
all material respects, the financial position of Jefferis Square Housing
Partnership, L.P. at December 31, 2000 and 1999, and the results of its
operations, changes in partners' equity and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Ziner, Kennedy & Lehan, LLP
Boston, Massachusetts
January 15, 2001
32
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
2301 First Avenue Limited Partnership
We have audited the accompanying balance sheets of 2301 First Avenue Limited
Partnership, as of December 31, 2002 and 2001, and the related statements of
operations, changes in partners' equity (deficit), and cash flows for the years
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 audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 the 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 financial statements referred to above present fairly, in
all material respects, the financial position of 2301 First Avenue Limited
Partnership, as of December 31, 2002 and 2001, and the results of its operations
and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on page 17
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 basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ Reznick Fedder & Silverman
Atlanta, Georgia
February 8, 2003
33
[FRIEDMAN ALPREN & GREEN LLP LETTERHEAD]
Independent Auditors' Report
To the Partners of
2301 First Avenue Limited Partnership:
We have audited the accompanying balance sheet of 2301 First Avenue Limited
Partnership as of December 31, 2000, and the related statements of operations,
changes in partners' capital deficiency 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 2301 First Avenue Limited
Partnership as of December 31, 2000, and the results of its operations and its
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.
/s/ Friedman Alpren & Green LLP
New York, NY
February 8, 2001
34
[TOSKI, SCHAEFER & CO., P.C. LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
The Partners
Lewis Street Limited Partnership:
We have audited the accompanying balance sheets of Lewis Street Limited
Partnership as of December 31, 2002 and 2001 and the related statements of
operations, partners' equity and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America 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 audits provide 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 Lewis Street Limited
Partnership as of December 31, 2002 and 2001 and the results of its operations,
changes in partners' equity and cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
In accordance with Government Auditing Standards, we have also issued a report
dated January 23, 2003 on our consideration of the Partnership's internal
control and on its compliance with laws and regulations applicable to the
financial statements. That report is an integral part of an audit performed in
accordance with Government Auditing Standards and should be read in conjunction
with this report in considering the results of our audit.
/s/ Toski, Schaefer & Co., P.C.
Williamsville, New York
January 23, 2003
35
[TOSKI, SCHAEFER & CO., P.C. LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
The Partners
Lewis Street Limited Partnership:
We have audited the accompanying balance sheets of Lewis Street Limited
Partnership as of December 31, 2001 and 2000 and the related statements of
operations, partners' equity and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America 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 audits provide 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 Lewis Street Limited
Partnership as of December 31, 2001 and 2000 and the results of its operations,
changes in partners' equity and cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
In accordance with Government Auditing Standards, we have also issued a report
dated January 25, 2002 on our consideration of the Partnership's internal
control and on its compliance with laws and regulations applicable to the
financial statements. That report is an integral part of an audit performed in
accordance with Government Auditing Standards and should be read in conjunction
with this report in considering the results of our audit.
/s/ Toski, Schaefer & Co., P.C.
Williamsville, New York
January 25, 2002
36
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Savannah Park Housing
Limited Partnership
We have audited the accompanying balance sheet of Savannah Park Housing Limited
Partnership as of December 31, 2002, and the related statements of operations,
partners' capital 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 Savannah Park Housing Limited
Partnership as of December 31, 2002, and the results of its operations, the
changes in partners' capital and cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland
April 8, 2003
37
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Savannah Park Housing
Limited Partnership
We have audited the accompanying balance sheet of Savannah Park Housing Limited
Partnership as of December 31, 2001, and the related statements of operations,
partners' capital 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 Savannah Park Housing Limited
Partnership as of December 31, 2001, and the results of its operations, the
changes in partners' capital and cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland
March 11, 2002
38
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Savannah Park Housing
Limited Partnership
We have audited the accompanying balance sheet of Savannah Park Housing Limited
Partnership as of December 31, 2000, and the related statements of operations,
changes in partners' capital 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.
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 Savannah Park Housing Limited
Partnership as of December 31, 2000, and the results of its operations, the
changes in partners' capital and 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 note B to the
financial statements, the partnership's declining cash flow and defaults on its
land lease and a note payable 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 B. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland
March 2, 2001
39
[BDO Seidman, LLP LETTERHEAD]
Independent Auditors' Report
Brannon Group, L.C.
(A Limited Liability Company)
Coral Gables, Florida
We have audited the accompanying balance sheet of Brannon Group, L.C. (A Limited
Liability Company) as of December 31, 2002, and the related statements of profit
and loss, changes in members' capital, and cash flows for the year then ended.
These financial statements are the responsibility of the management of the
Company. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 Brannon Group, L.C. at December
31, 2002, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America
Our audit was made for the purpose of forming an opinion on the basic financial
statements for the year ended December 31, 2002 taken as whole. The supplemental
information presented on pages 16 to 17 is presented for purposes of additional
analysis and is not a required part of the basic financial statements. This
information has been subjected to the auditing procedures applied in our audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
February 22, 2003, except for Note 9,
which is as of March 7, 2003
40
[BDO Seidman, LLP LETTERHEAD]
Independent Auditors' Report
Brannon Group, L.C.
(A Limited Liability Company)
Coral Gables, Florida
We have audited the accompanying balance sheets of Brannon Group, L.C. (A
Limited Liability Company) as of December 31, 2001, and the related statements
of profit and loss, changes in members' capital accounts, and cash flows for the
years then ended. These financial statements are the responsibility of the
management of the company. 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
in the United States of America. 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 Brannon Group, L.C. at December
31, 2001, and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles in the
United States of America
Our audit was made for the purpose of forming an opinion on the basic combined
financial statements for the year ended December 31, 2001 taken as whole. The
supplemental material presented on pages 15 to 18 is presented for purposes of
additional analysis and is not a required part of the basic financial
statements. This information has been subjected to the auditing procedures
applied in our audit of the basic combined financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
February 22, 2002
41
[BDO Seidman, LLP LETTERHEAD]
Independent Auditors' Report
Brannon Group, L.C.
(A Limited Liability Company)
Coral Gables, Florida
We have audited the accompanying balance sheets of Brannon Group, L.C. (A
Limited Liability Company) as of December 31, 2000 and 1999, and the related
statements of profit and loss, changes in members' capital accounts, and cash
flows for the years then ended. These financial statements are the
responsibility of the management of the company. 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
in the United States of America. 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 provide 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 Brannon Group, L.C. at December
31, 2000 and 1999, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles in
the United States of America
/s/ BDO Seidman, LLP
Certified Public Accountants
Miami, Florida
July 12, 2001
42
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Mansion Court Phase II Venture
Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Mansion Court Phase II
Venture as of December 31, 2002 and 2001, and the related statements of
operations, changes in partners' equity (deficit) and cash flows for the years
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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 the Partnership's 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 financial statements referred to above present fairly, in
all material respects, the financial position of Mansion Court Phase II Venture
at December 31, 2002 and 2001, and the results of its operations, changes in
partners' equity (deficit) and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 24, 2003
43
[ZINER, KENNEDY & LEHAN LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Mansion Court Phase II Venture
Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Mansion Court Phase II
Venture (a Pennsylvania limited partnership) as of December 31, 2000 and 1999
and the related statements of operations, changes in partners' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership's general partners and contracted management
agent. 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 the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Mansion Court Phase II Venture
at December 31, 2000 and 1999, and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Ziner, Kennedy & Lehan LLP
Boston, Massachusetts
January 28, 2001
44
[RUBIN BROWN GORNSTEIN & CO. LLP]
[RBG & CO. LETTERHEAD]
Independent Auditors' Report
Partners
Primm Place Partners, L.P.
St. Louis, Missouri
We have audited the accompanying balance sheet of Primm Place Partners, L.P., a
Missouri limited partnership, as of December 31, 2002 and 2001, and the related
statements of income, partners' equity and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Primm Place Partners, L.P., as
of December 31, 2002 and 2001, and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
January 17, 2003
45
[ZINER, KENNEDY & LEHAN LLP]
[RBG & CO. LETTERHEAD]
Independent Auditors' Report
Partners
Primm Place Partners, L.P.
St. Louis, Missouri
We have audited the accompanying balance sheet of Primm Place Partners, L.P., a
Missouri limited partnership, as of December 31, 2000 and the related statements
of income, 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.
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 Primm Place Partners, L.P., as
of December 31, 2000, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
January 19, 2001
46
[RAINES AND FISCHER LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Partners of BK-9-A Partners, L.P.:
We have audited the accompanying balance sheet of BK-9-A Partners, L.P. (A New
York Limited Partnership) as of December 31, 2002 and the related statements of
operations, changes in partners' capital (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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 BK-9-A Partners, L.P. (A New
York Limited Partnership) as of December 31, 2002, and the results of its
operations, changes in its partners' capital and its cash flows for the year
then ended in conformity with accounting principles generally accepted in the
United States of America.
/s/ Raines & Fischer
New York, New York
February 7, 2003
47
[RAINES AND FISCHER LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of BK-9-A Partners, L.P.:
We have audited the accompanying balance sheet of BK-9-A Partners, L.P. (A New
York Limited Partnership) as of December 31, 2001 and the related statements of
operations, changes in partners' capital, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 BK-9-A Partners, L.P. (A New
York Limited Partnership) as of December 31, 2001, and the results of its
operations, changes in its partners' capital and its cash flows for the year
then ended in conformity with accounting principles generally accepted in the
United States of America.
/s/ Raines & Fischer
New York, New York
February 11, 2002
48
[RAINES AND FISCHER LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of BK-9-A Partners, L.P.:
We have audited the accompanying balance sheet of BK-9-A Partners, L.P. (A New
York Limited Partnership) as of December 31, 2000 and the related statements of
operations, changes in partners' capital, 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.
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 BK-9-A Partners, L.P. (A New
York Limited Partnership) as of December 31, 2000, and the results of its
operations, changes in its partners' capital and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
/s/ Raines & Fischer
New York, New York
January 24, 2001
49
[RAINES AND FISCHER LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Partners of BK-10K Partners, L.P.:
We have audited the accompanying balance sheet of BK-10K Partners, L.P. (A New
York Limited Partnership) as of December 31, 2002 and the related statements of
operations, changes in partners' capital (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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 BK-10K Partners, L.P. (A New
York Limited Partnership) as of December 31, 2002, and the results of its
operations, changes in its partners' capital and its cash flows for the year
then ended in conformity with accounting principles generally accepted in the
United States of America.
/s/ Raines & Fischer
New York, New York
February 5, 2003
50
[RAINES AND FISCHER LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of BK-10K Partners, L.P.:
We have audited the accompanying balance sheet of BK-10K Partners, L.P. (A New
York Limited Partnership) as of December 31, 2001 and the related statements of
operations, changes in partners' capital (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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 BK-10K Partners, L.P. (A New
York Limited Partnership) as of December 31, 2001, and the results of its
operations, changes in its partners' capital and its cash flows for the year
then ended in conformity with accounting principles generally accepted in the
United States of America.
/s/ Raines & Fischer
New York, New York
February 9, 2002
51
[RAINES AND FISCHER LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of BK-10K Partners, L.P.:
We have audited the accompanying balance sheet of BK-10K Partners, L.P. (A New
York Limited Partnership) as of December 31, 2000 and the related statements of
operations, changes in partners' capital (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.
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 BK-10K Partners, L.P. (A New
York Limited Partnership) as of December 31, 2000, and the results of its
operations, changes in its partners' capital and its cash flows for the year
then ended in conformity with generally accepted accounting principles.
/s/ Raines & Fischer
New York, New York
February 6, 2001
52
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Aspen-Olive Associates
We have audited the accompanying balance sheets of Aspen-Olive Associates as of
December 31, 2002 and 2001, and the related statements of operations, changes in
partners' equity (deficit) and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Aspen-Olive Associates as of
December 31, 2002 and 2001, and the results of its operations, the changes in
partners' equity (deficit) and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 17, 2003
53
[ZINER, KENNEDY & LEHAN LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Aspen-Olive Associates
Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Aspen-Olive Associates (a
Pennsylvania limited partnership) as of December 31, 2000 and 1999 and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. 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 the audits 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 the
Partnership's general partners and contracted management agent, 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 financial statements referred to above present fairly, in
all material respects, the financial position of Aspen-Olive Associates at
December 31, 2000 and 1999 and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Ziner, Kennedy & Lehan LLP
Boston, Massachusetts
January 13, 2001
54
[ASHER & COMPANY, LTD. LETTERHEAD]
Independent Auditors' Report
The Partners
West Mill Creek Associates III
T/A Jameson Court
Marlton, New Jersey
We have audited the accompanying balance sheets of West Mill Creek Associates
III T/A Jameson Court (A Limited Partnership), PHFA Project No. 0-0476, as of
December 31, 2002 and 2001 and the related statements of loss, Partners' capital
and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to 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 audits provide 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 West Mill Creek Associates III
T/A Jameson Court (A Limited Partnership), PHFA Project No. 0-0476, as of
December 31, 2002 and 2001, and the results of its operations, changes in its
Partners' capital and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information 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 audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued a report
dated January 15, 2003 on our consideration of West Mill Creek Associates III's
T/A Jameson Court (A Limited Partnership), PHFA Project No. 0-0476, internal
control over financial reporting and our tests of its compliance with certain
provisions of laws, regulations, contracts and grants. That report is an
integral part of an audit performed in accordance with Government Auditing
Standards and should be read in conjunction with this report in considering the
results of our audit.
/s/ ASHER & COMPANY, Ltd.
Philadelphia, Pennsylvania
January 15, 2003
55
[ASHER & COMPANY, LTD. LETTERHEAD]
Independent Auditors' Report
The Partners
West Mill Creek Associates III
T/A Jameson Court
Marlton, New Jersey
We have audited the accompanying balance sheets of West Mill Creek Associates
III T/A Jameson Court (A Limited Partnership), PHFA Project No. 0-0476, as of
December 31, 2001 and 2000 and the related statements of loss, Partners' capital
and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to 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 audits provide 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 West Mill Creek Associates III
T/A Jameson Court (A Limited Partnership), PHFA Project No. 0-0476, as of
December 31, 2001 and 2000, and the results of its operations, changes in its
Partners' capital and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information 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 audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards, we have also issued a report
dated January 23, 2002 on our consideration of West Mill Creek Associates III's
T/A Jameson Court (A Limited Partnership), PHFA Project No. 0-0476, internal
control over financial reporting and our tests of its compliance with certain
provisions of laws, regulations, contracts and grants. That report is an
integral part of an audit performed in accordance with Government Auditing
Standards and should be read in conjunction with this report in considering the
results of our audit.
/s/ ASHER & COMPANY, Ltd.
Philadelphia, Pennsylvania
January 23, 2002
56
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Universal Court Associates
We have audited the accompanying balance sheets of Universal Court Associates,
as of December 31, 2002 and 2001, and the related statements of operations,
changes in partners' equity (deficit) and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the 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 the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Universal Court Associates. as
of December 31, 2002 and 2001, and the results of its operations, the changes in
partners' equity (deficit) and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Reznick Fedder & Silverman
Baltimore, Maryland
February 7, 2003
57
[ZINER, KENNEDY & LEHAN LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of
Universal Court Associates
We have audited the accompanying balance sheets of Universal Court Associates (a
Pennsylvania limited partnership) as of December 31, 2000 and 1999 and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted agent. Our responsibility is to
express an opinion on these financial statements based on our audits.
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 the
Partnership's general partners and contracted management agent, 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 Universal Court Associates at
December 31, 2000 and 1999, and the results of its operations, changes in its
partners' equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Ziner, Kennedy & Lehan LLP
Boston, Massachusetts
January 17, 2001
58
[COLE, EVANS & PETERSON LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL
STATEMENTS AND SUPPLEMENTAL INFORMATION
To the Partners
New Zion Apartments Limited Partnership
Shreveport, Louisiana
We have audited the accompanying balance sheet of New Zion Apartments Limited
Partnership, HUD Project No. LA48E000011, at December 31, 2002, and the related
statements of income, partners' capital 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 U.S. 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 in the first paragraph
above present fairly, in all material respects, the financial position of New
Zion Apartments Limited Partnership, HUD Project No. LA48E000011, at December
31, 2002 and the results of its operations, changes in capital, and cash flows
for the year then ended in conformity with U.S. generally accepted accounting
principles.
Our audit was made primarily for the purpose of forming an opinion on the basic
financial statements for the year ended December 31, 2002 taken as a whole. The
supplementary Schedules 1, 2 and 3 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
In accordance with Government Auditing Standards, we have also issued reports
dated February 10, 2003 on our consideration of New Zion Apartments Limited
Partnership's internal control, and on our tests on its compliance with certain
provisions of laws, regulations, contracts, and grants. Those reports are an
integral part of an audit performed in accordance with Government Auditing
Standards and should be read in conjunction with this report in considering the
results of our audit.
/s/ Cole, Evans & Peterson
Lead Auditor: Steven W. Hedgepeth
Shreveport, Louisiana
Federal ID No. 72-0506596
February 10, 2003
59
[COLE, EVANS & PETERSON LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL
STATEMENTS AND SUPPLEMENTAL INFORMATION
To the Partners
New Zion Apartments Limited Partnership
Shreveport, Louisiana
We have audited the accompanying balance sheet of New Zion Apartments Limited
Partnership, HUD Project No. LA48E000011, at December 31, 2001, and the related
statements of income, partners' capital 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 U.S. 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 in the first paragraph
above present fairly, in all material respects, the financial position of New
Zion Apartments Limited Partnership, HUD Project No. LA48E000011, at December
31, 2001 and the results of its operations, changes in capital, and cash flows
for the year then ended in conformity with U.S. generally accepted accounting
principles.
Our audit was made primarily for the purpose of forming an opinion on the basic
financial statements for the year ended December 31, 2001 taken as a whole. The
supplementary Schedules 1, 2 and 3 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 8, 2002 on our
consideration of New Zion Apartments Limited Partnership's internal control, and
reports dated February 8, 2002, on its compliance with laws and regulations,
compliance with specific requirements applicable to Fair Housing and
Non-Discrimination, and compliance with specific requirements applicable to
major HUD-assisted programs. Those reports are an integral part of an audit
performed in accordance with Government Auditing Standards and should be read in
conjunction with this report in considering the results of our audit.
/s/ Cole, Evans & Peterson
Lead Auditor: Steven W. Hedgepeth
Shreveport, Louisiana
Federal ID No. 72-0506596
February 8, 2002
60
[COLE, EVANS & PETERSON LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL
STATEMENTS AND SUPPLEMENTAL INFORMATION
To the Partners
New Zion Apartments Limited Partnership
Shreveport, Louisiana
We have audited the accompanying balance sheet of New Zion Apartments Limited
Partnership, HUD Project No. LA48E000011, at December 31, 2000, and the related
statements of income, partners' capital 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 in the first paragraph
above present fairly, in all material respects, the financial position of New
Zion Apartments Limited Partnership, HUD Project No. LA48E000011, at December
31, 2000 and the results of its operations, changes in capital, and cash flows
for the year then ended in conformity with generally accepted accounting
principles.
Our audit was made primarily for the purpose of forming an opinion on the basic
financial statements for the year ended December 31, 2000 taken as a whole. The
supplementary Schedules 1, 2 and 3 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 16, 2001 on our
consideration of New Zion Apartments Limited Partnership's internal control, and
reports dated February 16, 2001, on its compliance with laws and regulations,
compliance with specific requirements applicable to Fair Housing and
Non-Discrimination, and compliance with specific requirements applicable to
major HUD-assisted programs. Those reports are an integral part of an audit
performed in accordance with Government Auditing Standards and should be read in
conjunction with this report in considering the results of our audit.
/s/ Cole, Evans & Peterson
Lead Auditor: Steven W. Hedgepeth
Shreveport, Louisiana
Federal ID No. 72-0506596
February 16, 2001
61
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Dreitzer Limited Partnership
We have audited the accompanying balance sheets of Dreitzer Limited Partnership
as of December 31, 2002 and 2001, and the related statements of operations,
changes in partners' equity (deficit), and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Dreitzer Limited Partnership as
of December 31, 2002 and 2001, and the results of its operations, and cash flows
for the years then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ Reznick Fedder & Silverman
Atlanta, Georgia
February 8, 2003
62
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners
Dreitzer Limited Partnership
We have audited the accompanying balance sheets of Dreitzer Limited Partnership
as of December 31, 2001 and 2000, and the related statements of operations,
partners' deficit and cash flows for the years 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 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 Dreitzer Limited Partnership as
of December 31, 2001 and 2000, and the results of its operations, changes in
partners' equity and cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Reznick Fedder & Silverman
Atlanta, Georgia
February 7, 2002
63
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31,
----------------------------
2003 2002
------------ ------------
Property and equipment - at cost, less accumulated depreciation
(Notes 2 and 4) $ 68,534,177 $ 71,576,597
Cash and cash equivalents (Notes 2 and 10) 556,259 709,852
Cash held in escrow (Note 5) 5,693,717 5,200,566
Deferred costs, less accumulated amortization (Notes 2 and 6) 784,581 842,339
Other assets 654,509 652,721
------------ ------------
Total assets $ 76,223,243 $ 78,982,075
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage notes payable (Note 7) $ 42,714,124 $ 43,168,559
Construction loan payable (Note 7) 600,000 600,000
Accounts payable and other liabilities 5,809,239 4,920,155
Due to local general partners and affiliates (Note 8) 1,931,043 2,249,134
Due to general partner and affiliates (Note 8) 3,470,568 2,848,701
------------ ------------
Total liabilities 54,524,974 53,786,549
------------ ------------
Minority interest (Note 2) 3,142,417 3,455,741
------------ ------------
Commitments and contingencies (Notes 7, 8 and 10)
Partners' capital (deficit):
Limited partners (43,440 BACs issued and outstanding)(Note 1) 18,756,421 21,908,515
General Partner (200,569) (168,730)
------------ ------------
Total partners' capital (deficit) 18,555,852 21,739,785
------------ ------------
Total liabilities and partners' capital (deficit) $ 76,223,243 $ 78,982,075
============ ============
See accompanying notes to consolidated financial statements.
64
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended March 31,
--------------------------------------------
2003 2002 2001
------------ ------------ ------------
Revenues
Rental income $ 6,156,602 $ 5,942,415 $ 5,886,882
Other income 252,269 509,599 445,844
------------ ------------ ------------
6,408,871 6,452,014 6,332,726
------------ ------------ ------------
Expenses
General and administrative 1,764,159 2,220,868 1,704,534
General and administrative-related parties
(Note 8) 788,862 830,348 810,324
Repairs and maintenance 1,188,564 1,322,086 982,688
Operating and other 870,006 930,104 865,683
Real estate taxes 358,973 388,868 348,716
Insurance 442,874 385,804 323,471
Financial, principally interest 1,714,331 1,659,965 1,752,292
Depreciation and amortization 2,758,313 2,727,165 2,809,920
------------ ------------ ------------
Total expenses 9,886,082 10,465,208 9,597,628
------------ ------------ ------------
Net loss before minority interest (3,477,211) (4,013,194) (3,264,902)
Minority interest in loss of subsidiary partnerships 293,278 670,493 21,134
------------ ------------ ------------
Net loss $ (3,183,933) $ (3,342,701) $ (3,243,768)
============ ============ ============
Net loss - Limited Partners $ (3,152,094) $ (3,309,274) $ (3,211,330)
============ ============ ============
Number of BACs outstanding 43,440 43,440 43,440
============ ============ ============
Net loss per BAC $ (72.56) $ (76.18) $ (73.93)
============ ============ ============
See accompanying notes to consolidated financial statements.
65
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
Limited General
Total Partners Partner
------------ ------------ ------------
Partners' capital (deficit) - April 1, 2000 $ 28,326,254 $ 28,429,119 $ (102,865)
Net loss (3,243,768) (3,211,330) (32,438)
------------ ------------ ------------
Partners' capital (deficit) - March 31, 2001 25,082,486 25,217,789 (135,303)
Net loss (3,342,701) (3,309,274) (33,427)
------------ ------------ ------------
Partners' capital (deficit) - March 31, 2002 21,739,785 21,908,515 (168,730)
Net loss (3,183,933) (3,152,094) (31,839)
------------ ------------ ------------
Partners' capital (deficit) - March 31, 2003 $ 18,555,852 $ 18,756,421 $ (200,569)
============ ============ ============
See accompanying notes to consolidated financial statements.
66
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year Ended March 31,
-----------------------------------------
2003 2002 2001
----------- ----------- -----------
Cash flows from operating activities:
Net loss $(3,183,933) $(3,342,701) $(3,243,768)
----------- ----------- -----------
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,758,313 2,727,165 2,809,920
Minority interest in loss of subsidiary
partnerships (293,278) (670,493) (21,134)
Loss on disposal of property and equipment 47,532 82,315 0
Write-off of deferred costs 0 13,928 0
(Increase) decrease in assets:
Cash held in escrow (28,552) (774,638) (1,158,629)
Other assets (1,788) (18,340) (26,050)
Increase (decrease) in liabilities:
Accounts payable and other liabilities 889,084 403,087 488,562
Due to local general partners
and affiliates 50,629 10,224 45,524
Due to local general partners
and affiliates (76,702) (105,347) (36,997)
Due to general partners and affiliates 621,867 738,694 561,691
----------- ----------- -----------
Total adjustments 3,967,105 2,406,595 2,662,887
----------- ----------- -----------
Net cash provided by (used in)
operating activities 783,172 (936,106) (580,881)
----------- ----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (41,219) (42,332) (155,939)
Proceeds from disposal of property and
equipment 335,552 0 0
Proceeds from investments available for sale 0 0 1,300,000
(Increase) decrease in cash held in escrow (464,599) (268,412) 95,980
Decrease in accounts payable and
other liabilities 0 0 (36,611)
Decrease in due to local general partners
and affiliates (325,647) (1,053,521) (1,014,008)
Increase in due to local general partners
and affiliates 8,056 146,487 0
----------- ----------- -----------
Net cash (used in) provided by investing
activities (487,857) (1,217,778) 189,422
----------- ----------- -----------
67
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(continued)
Year Ended March 31,
-----------------------------------------
2003 2002 2001
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from mortgage notes 0 278,584 365,303
Principal payments of mortgage notes (454,435) (388,958) (357,788)
Repayments of construction loans 0 (689,449) 0
Increase (decrease) in due to local general
partners and affiliates 25,573 12,335 (15,240)
Increase in deferred costs 0 0 (117,615)
(Decrease) increase in capitalization of
consolidated subsidiaries attributable to
minority interest (20,046) 982,820 (142,531)
----------- ----------- -----------
Net cash (used in) provided by financing
activities (448,908) 195,332 (267,871)
----------- ----------- -----------
Net decrease in cash and cash equivalents (153,593) (1,958,552) (659,330)
Cash and cash equivalents at beginning of year 709,852 2,668,404 3,327,734
----------- ----------- -----------
Cash and cash equivalents at end of year $ 556,259 $ 709,852 $ 2,668,404
=========== =========== ===========
Supplemental disclosure of cash flows information:
Cash paid during the year for interest $ 807,554 $ 807,370 $ 859,352
=========== =========== ===========
Supplemental disclosure of noncash investing
and financing activities:
Mortgage notes payable converted from
construction notes payable $ 0 $ 0 $ 6,745,630
See accompanying notes to consolidated financial statements.
68
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
NOTE 1 - General
Independence Tax Credit Plus L.P. III (a Delaware limited partnership) (the
"Partnership") was organized on December 23, 1993 and commenced the public
offering on June 7, 1994. The general partner of the Partnership is Related
Independence Associates III L.P., a Delaware limited partnership (the "General
Partner").
The Partnership's business is to invest as a limited partner in other
partnerships ("Local Partnerships," "subsidiaries" or "subsidiary partnerships")
owning apartment complexes that are eligible for the low-income housing tax
credit ("Housing Tax Credit") enacted in the Tax Reform Act of 1986, some of
which complexes may also be eligible for the historic rehabilitation tax credit
("Historic Tax Credit"; together with Housing Tax Credits, "Tax Credits").
As of March 31, 2003, the Partnership had acquired a limited partnership
interest in twenty subsidiary partnerships.
The Partnership was authorized to issue a total of 100,000 ($100,000,000)
Beneficial Assignment Certificates ("BACs") which were registered with the
Securities and Exchange Commission for sale to the public. Each BAC represents
all of the economic and virtually all of the ownership rights attributable to a
limited partnership interest in the Partnership. As of the termination of the
offering on May 9, 1995, the Partnership had received $43,440,000 of gross
proceeds of the Offering (the "Gross Proceeds") from 2,810 investors ("BACs
holders").
The terms of the Partnership's Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement") provide, among other things, that net
profits or losses and distributions of cash flow are, in general, allocated 99%
to the limited partners and BACs holders and 1% to the general partner.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Accounting
For financial reporting purposes the Partnership's fiscal year ends on March 31.
All subsidiaries have fiscal years ending December 31. Accounts of the
subsidiaries have been adjusted for intercompany transactions from January 1
through March 31. The Partnership's fiscal year ends March 31 in order to allow
adequate time for the subsidiaries' financial statements to be prepared and
consolidated. The books and records of the Partnership are maintained on the
accrual basis of accounting, in accordance with U.S. generally accepted
accounting principles ("GAAP").
b) Basis of Consolidation
The consolidated financial statements include the accounts of the Partnership
and twenty subsidiary partnerships in which the Partnership is a limited partner
for the years ended March 31, 2003, 2002 and 2001, respectively, (the 2002, 2001
and 2000 Fiscal Years). Through the rights of the Partnership and/or an
affiliate of the General Partner, which affiliate has a contractual obligation
to act on behalf of the Partnership, to remove the general partner of the
69
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
subsidiary local partnerships and to approve certain major operating and
financial decisions, the Partnership has a controlling financial interest in the
subsidiary partnerships. All intercompany accounts and transactions with the
subsidiary partnerships have been eliminated in consolidation.
Increases (decreases) in the capitalization of consolidated subsidiaries
attributable to minority interest arise from cash contributions and cash
distributions to the minority interest partners.
Losses attributable to minority interest which exceed the minority interests'
investment in a subsidiary have been charged to the Partnership. Such losses
aggregated approximately $18,000, $20,000 and $22,000 for the years ended March
31, 2003, 2002 and 2001, respectively. The Partnership's investment in each
subsidiary is equal to the respective subsidiary's partners' equity less
minority interest capital, if any. In consolidation, all subsidiary partnership
losses are included in the Partnership's capital account except for losses
allocated to minority interest capital.
c) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks, and investments
in short-term highly liquid investments purchased with original maturities of
three months or less.
d) Property and Equipment
Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period interest
and any other costs incurred in acquiring the properties. The cost of property
and equipment is depreciated over their estimated useful lives using accelerated
and straight-line methods. Expenditures for repairs and maintenance are charged
to expense as incurred; major renewals and betterments are capitalized. At the
time property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. A loss on impairment of assets is recorded when management estimates
amounts recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time, property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows).
Through March 31, 2003, the Partnership has not recorded any loss on impairment
of assets or reduction to estimated fair value.
At the time management commits to a plan to dispose of assets, said assets are
adjusted to the lower of carrying amount or fair value less costs to sell. These
assets are classified as property and equipment-held for sale and are not
depreciated. Through March 31, 2003, the Partnership has not recorded or
classified any property and equipment as held for sale.
e) Income Taxes
The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31 (Note 9).
70
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
f) Offering Costs
Costs incurred to sell BACs, including brokerage and the nonaccountable expense
allowance, are considered selling and offering expenses. These costs are charged
directly to limited partners' capital.
g) Loss Contingencies
The Partnership records loss contingencies as a charge to income when
information becomes available which indicates that it is probable that an asset
has been impaired or a liability has been incurred as of the date of the
financial statements and the amount of loss can be reasonably estimated.
h) Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
i) New Accounting Pronouncements
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46").
FIN 46 is applicable immediately for variable interest entities created after
January 31, 2003. For variable interest entities created before February 1,
2003, the provisions of FIN 46 are applicable no later than July 1, 2003. The
Partnership has not identified any variable interest entities that were created
after January 31, 2003 and is currently evaluating the impact of the provisions
of FIN 46 on its consolidated financial statements.
NOTE 3 - Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments (all of which are held for nontrading
purposes) for which it is practicable to estimate that value:
Cash and Cash Equivalents, Investments Available-for-Sale and Cash Held in
- --------------------------------------------------------------------------------
Escrow
- ------
The carrying amount approximates fair value.
Mortgage Notes Payable
- ----------------------
The fair value of mortgage notes payable and construction loans payable is
estimated, where practicable, based on the borrowing rate currently available
for similar loans.
71
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
The estimated fair values of the Partnership's mortgage notes payable and
construction loans payable are as follows:
March 31, 2003 March 31, 2002
------------------------- -------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------
Mortgage notes payable for
which it is:
Practicable to estimate fair value $13,386,179 $12,812,966 $16,004,664 $13,210,492
Not practicable 29,327,945 * 27,163,895 *
Construction loans payable for
which it is:
Practicable to estimate fair value $ 0 $ 0 $ 0 $ 0
Not Practicable 600,000 * 600,000 *
*Management believes it is not practical to estimate the fair value of the
mortgage notes payable because mortgage programs with similar characteristics
are not currently available to the Local Partnerships.
Management believes it is not practical to estimate the fair value of due to
local and general partners and affiliates because market information on such
unique loans are not currently available to the Local Partnerships.
The carrying amount of other financial instruments that require such disclosure
approximates fair value.
NOTE 4 - Property and Equipment
The components of property and equipment and their estimated useful lives are as
follows:
March 31, Estimated
---------------------------- Usefule Lives
2003 2002 (Years)
------------ ------------ -------------
Land $ 1,166,783 $ 1,166,783 -
Building and improvements 83,170,492 83,586,188 20-40
Furniture and fixtures 1,214,985 1,190,933 5-12
------------ ------------
85,552,260 85,943,904
Less: Accumulated depreciation (17,018,083) (14,367,307)
------------ ------------
$ 68,534,177 $ 71,576,597
============ ============
Included in property and equipment is $2,509,717 of acquisition fees paid to the
General Partner and $1,178,468 of acquisition expenses as of March 31, 2003 and
72
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
2002, respectively. In addition, as of March 31, 2003 and 2002, building and
improvements and construction in progress includes $1,106,837 of capitalized
interest.
In connection with the rehabilitation of the properties, the subsidiary
partnerships have incurred developer's fees of $8,980,181 to the local general
partners and affiliates as of March 31, 2003 and 2002. Such fees have been
included in the cost of property and equipment.
Depreciation expense for the years ended March 31, 2003, 2002 and 2001 amounted
to $2,700,555, $2,664,316 and $2,763,153, respectively.
During the year ended March 31, 2003, $49,779 of accumulated depreciation was
written off.
NOTE 5 - Cash Held in Escrow
Cash held in escrow consists of the following:
March 31,
--------------------------
2003 2002
---------- ----------
Purchase price payments* $ 297,142 $ 297,142
Construction 436 436
Real estate taxes, insurance and other 3,568,448 3,539,896
Reserve for replacements 1,827,691 1,363,092
---------- ----------
$5,693,717 $5,200,566
========== ==========
*Represents amounts to be paid to seller upon completion of properties under
construction and upon meeting specified rental achievement criteria.
NOTE 6 - Deferred Costs
The components of deferred costs and their periods of amortization are as
follows:
March 31,
--------------------------
2003 2002 Period
----------- ----------- -----------
Financing costs $ 1,227,761 $ 1,227,761 *
Less: Accumulated amortization (443,180) (385,422)
----------- -----------
$ 784,581 $ 842,339
=========== ===========
*Over the life of the related mortgages.
Amortization expense for the years ended March 31, 2003, 2002 and 2001 amounted
to $57,758, $62,849 and $46,767, respectively.
73
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
NOTE 7 - Mortgage and Construction Notes Payable
The mortgage and construction notes, which are collateralized by land and
buildings, are payable in aggregate monthly installments of approximately
$81,000 including principal and interest at rates varying from 0% to 10% per
annum, through the year 2046. Each subsidiary partnership's mortgage note
payable is collateralized by the land and buildings of the respective subsidiary
partnership, the assignment of certain subsidiary partnership's rents and
leases, and is without further recourse.
Annual principal payment requirements, as of March 31, 2003 for each of the next
five fiscal years and thereafter, are as follows:
Fiscal Year Ending Amount
- ------------------ -----------
2003 $ 560,625
2004 501,986
2005 541,628
2006 507,419
2007 552,695
Thereafter 40,049,771
-----------
$42,714,124
===========
The mortgage agreements require monthly deposits to replacement reserves of
approximately $21,000 and monthly deposits to escrow accounts for real estate
taxes, hazard and mortgage insurance and other (Note 5).
As of December 31, 2002, one subsidiary partnership had a construction loan
commitment totaling approximately $1,300,000. As of December 31, 2002, such loan
had an outstanding balance of approximately $600,000. On March 7, 2003, the
subsidiary partnership executed a commitment letter with its existing lender to
extend the maturity date of the loan to January 1, 2011.
NOTE 8 - Related Party Transactions
An affiliate of the General Partner has a .01% interest as a special limited
partner, in each of the Local Partnerships.
Pursuant to the Partnership Agreement and the Local Partnership Agreements, the
General Partner and affiliate receive their pro rata shares of profits, losses
and tax credits.
A) Guarantees
The Partnership has negotiated Operating Deficit Guaranty Agreements with all
Local Partnerships by which the general partners of the Local Partnerships have
agreed to fund operating deficits for a specified period of time. The terms of
the Operating Deficit Guaranty Agreements vary for each Local Partnership, with
maximum dollar amounts to be funded for a specified period of time, generally
three years, commencing on the break-even date. As of March 31, 2003, 2002 and
2001, the gross amounts of the Operating Deficit Guarantees aggregate
74
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
approximately $5,129,000, of which $3,073,000 has expired as of March 31, 2003.
Amounts funded under such agreements are treated as noninterest bearing loans,
which will be paid only out of 50% of available cash flow or out of available
net sale or refinancing proceeds. Management does not expect the expiration of
such guarantees to have a material impact on liquidity, based on prior years'
fundings.
The Operating Deficit Guaranty Agreements were negotiated to protect the
Partnership's interest in the Local Partnerships and to provide incentive to the
Local General Partners to generate positive cash flow.
In November 2002, FASB Interpretation No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FASB Interpretation No. 45"), was issued. The
accounting recognition provisions of FASB Interpretation No. 45 are effective
January 1, 2003 on a prospective basis. They require that a guarantor recognize,
at the inception of a guarantee, a liability for the fair value of the
obligation undertaken in issuing or modifying any guarantee after December 31,
2002. Under prior accounting principles, a guarantee would not have been
recognized as a liability until a loss was probable and reasonably estimated. At
March 31, 2003, the Partnership has not issued or modified any existing
guarantees and has not determined the impact, if any, that adoption of the
accounting recognition provision of FASB Interpretation No. 45 would have on the
Partnership's future financial position or results of operations.
B) Other Related Party Expenses
The General Partner and its affiliates perform services for the Partnership. The
costs incurred to the General Partner and other related parties for the years
ended March 31, 2003, 2002 and 2001 were as follows:
Year Ended March 31,
------------------------------
2003 2002 2001
-------- -------- --------
Partnership management fees (a) $331,132 $361,742 $341,497
Expense reimbursement (b) 149,036 120,820 178,621
Local administrative fees (d) 65,500 61,500 55,000
-------- -------- --------
Total general and administrative-General Partner 545,668 544,062 575,118
-------- -------- --------
Property management fees incurred to
affiliates of the subsidiary partnerships'
general partners (c) 243,194 286,286 235,206
-------- -------- --------
Total general and administrative-related parties $788,862 $830,348 $810,324
======== ======== ========
(a) The General Partner is entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the annual local
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. Subject to the foregoing limitation, the partnership
management fee will be determined by the General Partner in its sole discretion
based upon its review of the Partnership's investments. Unpaid partnership
75
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
management fees for any year will be accrued without interest and will be
payable only to the extent of available funds after the Partnership has made
distributions to the limited partners of sale or refinancing proceeds equal to
their original capital contributions plus a 10% priority return thereon (to the
extent not theretofore paid out of cash flow). Partnership management fees owed
to the General Partner amounting to approximately $1,892,000 and $1,561,000 were
accrued and unpaid as of March 31, 2003 and 2002, respectively. Without the
General Partner's continued accrual without payment the Partnership will not be
in a position to meet its obligations. The General Partner has continued
allowing the accrual without payment of these amounts but are under no
obligation to continue to do so.
(b) The Partnership reimburses the General Partner and its affiliates for actual
Partnership operating expenses incurred by the General Partner and its
affiliates on the Partnership's behalf. The amount of reimbursement from the
Partnership is limited by the provisions of the Partnership Agreement. Another
affiliate of the General Partner performs asset monitoring for the Partnership.
These services include site visits and evaluations of the subsidiary
partnerships' performance.
(c) Property management fees incurred by Local Partnerships amounted to
$438,586, $458,450 and $384,918 for the years ended March 31, 2003, 2002 and
2001, respectively. Of these fees, $243,194, $286,286 and $235,206 were incurred
to affiliates of the subsidiary partnerships' general partners.
(d) Independence SLP III L.P., a limited partner of the subsidiary partnerships,
is entitled to receive a local administrative fee of up to $5,000 per year from
each subsidiary partnership.
C) Due to Local General Partners and Affiliates
Due to local general partners and affiliates consists of the following:
March 31,
----------------------------
2003 2002
---------- ----------
Operating advances $ 39,654 $ 79,396
Development fee payable 1,545,668 1,871,315
Other capitalized costs 16,335 16,335
Construction costs payable 154,543 146,487
General Partner loan payable 149,220 123,647
Management and other operating fees 25,623 11,954
---------- ----------
$1,931,043 $2,249,134
========== ==========
76
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
NOTE 9 - Income Taxes
A reconciliation of the financial statement net loss to the income tax loss for
the Partnership and its consolidated subsidiaries follows:
For the Year Ended December 31,
-----------------------------------------
2002 2001 2000
----------- ----------- -----------
Financial statement net loss $(3,183,933) $(3,342,701) $(3,243,768)
Differences between depreciation and amortiza-
tion expense records for financial reporting
purposes and the accelerated costs recovery
system utilized for income tax purposes (302,859) (451,799) (415,735)
Differences resulting from parent company
having a different fiscal year for income tax and
financial reporting purposes (27,154) 26,399 26,092
Tax exempt interest income 0 (23,591) (69,856)
Other, including accruals for financial reporting
not deductible for tax purposes until paid 147,826 (690,941) 428,469
----------- ----------- -----------
Net loss as shown on the income tax return for
the calendar year ended $(3,366,120) $(4,482,633) $(3,274,798)
=========== =========== ===========
NOTE 10 - Commitments and Contingencies
a) Legal Proceedings
Lewis Street L.P.
- -----------------
In January of 1998, Lewis Street Limited Partnership ("Lewis Street") was
informed that it was a defendant in a cause of action for the alleged value of
work and services provided by Phase Three Paul for interference with contractual
relations and for fraud that was brought by the project's original developer.
The complaint seeks damages for the alleged value of work and services provided
in the amount of $296,940 and damages to reputation in the amount of at least
$1,000,000 plus unspecified punitive damages. This litigation will continue to
be vigorously contested by the Local Partnership. Legal counsel for the Local
Partnership has indicated that the ultimate liability, if any, with respect to
this possible action cannot be determined at this time. The Partnership's
investment in Lewis Street at March 31, 2003 and 2002 was approximately $590,000
and $700,000, respectively, and the minority interest balance was zero at each
date. Lewis Street's net loss after minority interest amounted to approximately
$111,000, $101,000 and $100,000 for the 2002, 2001, and 2000 Fiscal Years,
respectively.
77
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
b) Leases
One of the subsidiary partnerships is leasing the land on which its apartment
complex is located, for a term of 50 years, which commenced in August 1996, and
monthly rent payments of $1,449. Estimated future minimum payments due under the
terms of the lease are as follows:
2003 $ 36,587
2004 21,252
2005 21,252
2006 21,252
2007 21,252
Thereafter 828,828
----------
$ 950,423
==========
As of December 31, 2002, the subsidiary partnership was in default on the lease
agreement. For the year ended December 31, 2002, $12,823 has been paid under the
terms of the lease and $15,335 remains payable.
c) Uninsured Cash and Cash Equivalents
The Partnership maintains its cash and cash equivalents in various banks. The
accounts at each bank are guaranteed by the Federal Deposit Insurance
Corporation up to $100,000. Uninsured cash and cash equivalents approximated
$77,000 at March 31, 2003.
d) Other
The Partnership and BACs holders began to recognize Tax Credits with respect to
a Property when the Credit Period for such Property commenced. Because of the
time required for the acquisition, completion and rent-up of Properties, the
amount of Tax Credits per BAC have gradually increased over the first three
years of the Partnership. Tax Credits not recognized in the first three years
will be recognized in the 11th through 13th years. The Partnership generated
$5,683,279, $5,683,279 and $5,682,911 Tax Credits during the 2002, 2001 and 2000
tax years, respectively.
78
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.
The Partnership has no directors or executive officers. The Partnership's
affairs are managed and controlled by the General Partner.
In December 2002, Charter Mortgage Acceptance Company ("CharterMac"), which is
also managed by an affiliate of Related Capital Company, announced a proposed
acquisition of Related Capital Company, an affiliate of the General Partner.
Pursuant to the proposed acquisition, CharterMac will acquire controlling
interests in the general partner of the General Partner. This acquisition is not
anticipated to affect the Partnership or its day-to-day operations as management
of the General Partner will not change.
Certain information concerning the directors and executive officers of RIAI III,
the sole general partner of the General Partner, is set forth below.
Name Position
- ---- --------
Stephen M. Ross Director
Alan P. Hirmes President
Stuart J. Boesky Senior Vice President
Marc D. Schnitzer Vice President
Denise L. Kiley Vice President
Glenn F. Hopps Treasurer
Teresa Wicelinski Secretary
STEPHEN M. ROSS, 63, the President, a Director and a shareholder of The Related
Realty Group, Inc., the General Partner of The Related Companies, L.P ("TRCLP").
He graduated from the University of Michigan School of Business Administration
with a Bachelor of Science degree and from Wayne State University School of Law
with a Juris Doctor degree. Mr. Ross then received a Master of Laws degree in
taxation from New York University School of Law. He joined the accounting firm
of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York,
where he worked for two large Wall Street investment banking firms in their real
estate and corporate finance departments. Mr. Ross formed the predecessor of
TRCLP in 1972 to develop, manage, finance and acquire subsidized and
conventional apartment developments. Mr. Ross also serves on the Board of
Trustees of Charter Municipal Mortgage Acceptance Company.
ALAN P. HIRMES, 48, has been a Certified Public Accountant in New York since
1978. Prior to joining Related in October 1983, Mr. Hirmes was employed by
Weiner & Co., Certified Public Accountants. Mr. Hirmes is also a Vice President
of Capital. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts
79
degree. Mr. Hirmes also serves on the Board of Trustees of Charter Municipal
Mortgage Acceptance Company and American Mortgage Acceptance Company.
STUART J. BOESKY, 47, practiced real estate and tax law in New York City with
the law firm of Shipley & Rothstein from 1984 until February 1986 when he joined
Capital. From 1983 to 1984, Mr. Boesky practiced law with the Boston law firm of
Kaye Fialkow Richard & Rothstein (which subsequently merged with Strook & Strook
& Lavan LLP) and from 1978 to 1980 was a consultant specializing in real estate
at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from
Michigan State University with a Bachelor of Arts degree and from Wayne State
School of Law with a Juris Doctor degree. He then received a Master of Laws
degree in Taxation from Boston University School of Law. Mr. Boesky also serves
on the Board of Trustees of Charter Municipal Mortgage Acceptance Company and
American Mortgage Acceptance Company.
MARC D. SCHNITZER, 42, is responsible both for financial restructuring of real
estate properties and directing Related's acquisitions of properties generating
Housing Tax Credits. Mr. Schnitzer received a Masters of Business Administration
from The Wharton School of the University of Pennsylvania in December 1987
before joining Related in January 1988. From 1983 to January 1986, he was a
financial analyst for the First Boston Corporation in New York. Mr. Schnitzer
graduated summa cum laude with a Bachelor of Science in Business Administration
from the School of Management at Boston University in May 1983.
DENISE L. KILEY, 43, is responsible for overseeing the due diligence and asset
management of all multifamily residential properties invested in RCC sponsored
corporate, public and private equity and debt funds. Prior to joining Related in
1990, Ms. Kiley had experience acquiring, financing and asset managing
multifamily residential properties. From 1981 through 1985 she was an auditor
with Price Waterhouse. Ms. Kiley holds a Bachelor of Science in Accounting from
Boston College.
GLENN F. HOPPS, 40, joined Related in December 1990, and prior to that date was
employed by Marks Shron & Company and Weissbarth, Altman and Michaelson,
certified public accountants. Mr. Hopps graduated from New York State University
at Albany with a Bachelor of Science Degree in Accounting.
TERESA WICELINSKI, 37, joined Related in June 1992, and prior to that date was
employed by Friedman, Alpren & Green, certified public accountants. Ms.
Wicelinski graduated from Pace University with a Bachelor of Arts Degree in
Accounting.
Item 11. Executive Compensation.
The Partnership has no officers or directors. The Partnership does not pay or
accrue any fees, salaries or other forms of compensation to directors or
officers of the General Partner for their services. However, under the terms of
the Partnership Agreement, the Partnership has entered into certain arrangements
with the General Partner and its affiliates, which provide for compensation to
be paid to the General Partner and its affiliates. Such arrangements include
(but are not limited to) agreements to pay nonrecurring Acquisition Fees, a
nonaccountable Acquisition Expense allowance, an accountable expense
reimbursement and Subordinated Disposition Fees to the General Partner and/or
its affiliates. In addition, the General Partner is entitled to a subordinated
interest in Cash from Sales or Financings and a 1% interest in Net Income, Net
Loss, Distributions of Adjusted Cash from Operations and Cash from Sales or
Financings. Certain directors and officers of the General Partner receive
compensation from the General Partner and its affiliates for services performed
for various affiliated entities which may include services performed for the
Partnership. The maximum annual partnership management fee paid to the General
80
Partner is 0.5% of invested assets. See Note 8 to the Financial Statements in
Item 8 above, which is incorporated herein by reference.
Tabular information concerning salaries, bonuses and other types of compensation
payable to executive officers has not been included in this annual report. As
noted above, the Partnership has no executive officers. The levels of
compensation payable to the General Partner and/or its affiliates is limited by
the terms of the Partnership Agreement and may not be increased therefrom on a
discretionary basis.
Item 12. Security Ownership of Certain Beneficial Owners
and Management.
Name and Address of Amount and Nature of Percentage
Title of Class Beneficial Ownership Beneficial Ownership of Class
- -------------- -------------------- -------------------- ----------
General Partnership Related Independence $1,000 capital contribution 100%
Interest in the Associates III L.P. -directly owned
Partnership 625 Madison Avenue
New York, NY 10022
Independence SLP III L.P., a limited partnership whose general partner is the
general partner of the General Partner of the Partnership and which acts as the
special limited partner of each Local Partnership, holds a .01% limited
partnership interest in each Local Partnership. See Note 8 to the Financial
Statements in Item 8 above, which information is incorporated herein by
reference thereto. The following table sets forth the number of BACs
beneficially owned, as of June 2, 2003, by (i) each BACs holder known to the
Partnership to be a beneficial owner of more than 5% of the BACs, (ii) each
director and executive officer of the general partner of the General Partner and
(iii) the directors and executive officers of the general partner of the General
Partner as a group. Unless otherwise noted, all BACs are owned directly with
sole voting and dispositive powers.
Except as set forth below, no person is known by the Partnership to be the
beneficial owner of more than five percent of the Limited Partnership Interests
and/or BACs; and neither the General Partner nor any director or officer of the
General Partner beneficially owns any Limited Partnership Interests or BACs.
81
Amount and Nature of
Name of Beneficial Owner (1) Beneficial Ownership Percent of Class
- ------------------------ -------------------- ----------------
Lehigh Tax Credit Partners, Inc. 3,242.94 (2) (3) 7.5%
J. Michael Fried 3,242.94 (2) (3) 7.5%
Alan P. Hirmes 3,242.94 (2) (3) 7.5%
Stuart J. Boesky 3,242.94 (2) (3) 7.5%
Stephen M. Ross 3,242.94 (2) (3) 7.5%
Marc D. Schnitzer 3,242.94 (2) (3) 7.5%
Denise L. Kiley 3,242.94 (2) (3) 7.5%
Glenn F. Hopps - -
Teresa Wicelinski - -
All directors and executive officers 3,242.94 (2) (3) 7.5%
of the general partner of the
Related General Partner as a group
(nine persons)
(1) The address for each of the persons in the table is 625 Madison Avenue, New
York, New York 10022.
(2) As set forth in Schedule 13D filed by Lehigh Tax Credit Partners III L.L.C.
("Lehigh III") and Lehigh Tax Credit Partners, Inc., (the "Managing Member") on
January 25, 1999 with the Securities and Exchange Commission (the "Commission")
and pursuant to a letter agreement dated October 6, 1998 among the Partnership,
Lehigh III and the General Partner (the "Standstill Agreement"), Lehigh III
agreed that, prior to October 6, 2008 (the "Standstill Expiration Date"), it
will not and it will cause certain affiliates not to (i) seek to propose to
enter into, directly or indirectly, any merger, consolidation, business
combination, sale or acquisition of assets, liquidation, dissolution or other
similar transaction involving the Partnership, (ii) form, join or otherwise
participate in a "group" (within the meaning of Section 13 (d)(3) of the Act)
with respect to any voting securities of the Partnership, except that those
affiliates bound by the Standstill Agreement will not be deemed to have violated
it and formed a "group" solely by acting in accordance with the Standstill
Agreement, (iii) disclose in writing to any third party intention, plan or
arrangement inconsistent with the terms of the Standstill Agreement, or (iv)
loan money to, advise, assist or encourage any person in connection with any
action inconsistent with the terms of the Standstill Agreement, Lehigh III also
agreed to vote its BACs in the same manner as a majority of all voting BACs
holders; provided, however, Lehigh is entitled to vote its BACs as it determines
with regard to any proposal (i) to remove the General Partner as a general
partner of the Partnership or (ii) concerning the reduction of any fees,
profits, distributions or allocations for the benefit of the General Partner or
its affiliates. The addresses of each of the Partnership, Lehigh III and the
General Partner is 625 Madison Avenue, New York, New York 10022.
(3) Each such party serves as a director and executive officer of the Managing
Member and owns an equity interest therein except J. Michael Fried who owns only
an economic interest.
82
Item 13. Certain Relationships and Related Transactions.
The Partnership has and will continue to have certain relationships with the
General Partner and its affiliates, as discussed in Item 11 and also Note 8 to
the Financial Statements in Item 8 above, which are incorporated herein by
reference thereto. However, there have been no direct financial transactions
between the Partnership and the directors and officers of the General Partner.
Item 14. Controls and Procedures
The Principal Executive Officer and Principal Financial Officer of Related
Independence Associates III Inc., the general partner of Related Independence
Associates III L.P., which is the general partner of the Partnership, has
evaluated the Partnership's disclosure controls and procedures relating to the
Partnership's annual report on Form 10-K for the period ending March 31, 2003 as
filed with the Securities and Exchange Commission and has judged such controls
and procedures to be effective as of March 31, 2003 (the "Evaluation Date").
There have been no significant changes in the internal controls or in other
factors that could significantly affect internal controls relating to the
Partnership since the Evaluation Date.
83
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sequential
Page
----------
(a) 1. Consolidated Financial Statements
Independent Auditors' Report 16
Consolidated Balance Sheets at March 31, 2003 and 2002 64
Consolidated Statements of Operations for the Years Ended March 31,
2003, 2002 and 2001 65
Consolidated Statements of Changes in Partners' Capital (Deficit) for
the Years Ended March 31, 2003, 2002 and 2001 66
Consolidated Statements of Cash Flows for the Years Ended March 31,
2003, 2002 and 2001 67
Notes to Consolidated Financial Statements 69
(a) 2. Consolidated Financial Statement Schedules
------------------------------------------
Independent Auditors' Report 92
Schedule I - Condensed Financial Information of Registrant 93
Schedule III - Real Estate and Accumulated Depreciation 96
All other schedules have been omitted because they are not required
or because the required information is contained in the financial state-
ments or notes thereto.
(a) 3. Exhibits
--------
(3A) Agreement of Limited Partnership of Independence Tax Credit Plus
L.P. III as adopted on December 23, 1993*
(3B) Form of Amended and Restated Agreement of Limited Partnership of
Independence Tax Credit Plus L.P. III, attached to the Prospectus as
Exhibit A**
(3C) Certificate of Limited Partnership of Independence Tax Credit Plus
L.P. III as filed on December 23, 1993*
(10A) Form of Subscription Agreement attached to the Prospectus as Exhibit
B**
(10B) Escrow Agreement between Independence Tax Credit Plus L.P. III and
Bankers Trust Company*
(10C) Form of Purchase and Sales Agreement pertaining to the Partnership's
acquisition of Local Partnership Interests*
84
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Sequential
Page
----------
(10D) Form of Amended and Restated
Agreement of Limited Partnership of
Local Partnerships*
(21) Subsidiaries of the Registrant 86
*Incorporated herein as an exhibit by reference to exhibits filed with
Post-Effective Amendment No. 4 to the Registration Statement on
Form S-11 {Registration No. 33-37704}
**Incorporated herein as an exhibit by reference to exhibits filed with
Post-Effective Amendment No.8 to the Registration Statement on
Form S-11 {Registration No. 33-37704}
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002. 91
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter.
85
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continued)
Jurisdiction
(c) Subsidiaries of the Registrant (Exhibit 21) of Organization
------------------------------ ---------------
Edward Hotel Limited Partnership CA
Pacific-East L.P. NY
Overtown Development Group, Ltd. FL
Sumpter Commons Associates, L.P. NY
Park Housing Limited Partnership CT
Livingston Manor Urban Renewal Associates, L.P. NJ
Jefferis Square Housing Partnership, L.P. PA
2301 First Avenue Limited Partnership NY
Lewis Street Limited Partnership NY
Savannah Park Housing Limited Partnership DC
Brannon Group, L.C. FL
Mansion Court Phase II Venture PA
Primm Place Partners, L.P. MI
BK-9-A Partners L.P. NY
BK-10K Partners L.P. NY
Aspen-Olive Associates PA
West Mill Creek Associates, III L.P. PA
Universal Court Associates PA
New Zion Apartments LA
Dreitzer House NY
(d) Not applicable
86
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INDEPENDENCE TAX CREDIT PLUS L.P. III
-------------------------------------
(Registrant)
By: RELATED INDEPENDENCE ASSOCIATES III L.P.,
General Partner
By: RELATED INDEPENDENCE ASSOCIATES III INC.,
General Partner
Date: June 25, 2003 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
President
(principal executive and financial officer)
87
Pursuant to the requirements of the Securities 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:
Signature Title Date
- ------------------- ---------------------------------- -------------
President
/s/ Alan P. Hirmes (principal executive and
- ------------------ financial officer) of Related
Alan P. Hirmes Independence Associates III Inc. June 25, 2003
/s/ Glenn F. Hopps Treasurer (principal
- ------------------ accounting officer) of Related
Glenn F. Hopps Independence Associates III Inc. June 25, 2003
/s/ Stephen M. Ross
- ------------------- Director of Related
Stephen M. Ross Independence Associates III Inc. June 25, 2003
88
CERTIFICATION
I, Alan P. Hirmes, Principal Executive Officer and Principal Financial Officer
of Related Independence Associates III Inc. ("RIAI"), the general partner of
Related Independence Associates III L.P. (the "General Partner"), which is the
general partner of Independence Tax Credit Plus L.P. III (the "Partnership"),
hereby certify that:
1. I have reviewed this annual report on Form 10-K for the year ended
March 31, 2003 of the Partnership;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
in order 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 annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Partnership as of, and for, the periods presented in
this annual report;
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15-d-14)
for the Partnership and I have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the Partnership, including its
consolidated subsidiaries, is made known to me, by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the Partnership's disclosure controls
and procedures as of March 31, 2003 (the "Evaluation Date"); and
89
c) presented in this annual report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
Partnership's auditors and to the board of directors of RIAI:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Partnership's ability to
record, process, summarize and report financial data and have
identified for the Partnership's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Partnership's
internal controls; and
6. I have indicated in this annual 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.
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Principal Executive Officer and
Principal Financial Officer
June 25, 2003
90
Exhibit 99.1
CERTIFICATION PURSUANT TO
18.U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Independence Tax Credit Plus L.P. III
(the "Partnership") on Form 10-K for the year ended March 31, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Alan P. Hirmes, Principal Executive Officer and Principal Financial Officer of
Related Independence Associates III Inc. a general partner of Related
Independence Associates III L.P., the general partner of the Partnership,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Partnership.
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Principal Executive Officer and Principal Financial Officer
June 25, 2003
91
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Partners of
Independence Tax Credit Plus L.P. III and Subsidiaries
(A Delaware Limited Partnership)
In connection with our audits of the consolidated financial statements of
Independence Tax Credit Plus L.P. III and Subsidiaries (A Delaware Limited
Partnership) included in the Form 10-K as presented in our opinion dated May 30,
2003 on page 16, and based on the reports of other auditors, we have also
audited supporting Schedule I for the 2002, 2001 and 2000 Fiscal Years and
Schedule III as of March 31, 2003. In our opinion, and based on the reports of
the other auditors, these consolidated schedules present fairly, when read in
conjunction with the related consolidated financial statements, the financial
data required to be set forth therein.
TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI LLP
New York, New York
May 30, 2003
92
INDEPENDENCE TAX CREDIT PLUS L.P. III
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Not Including Consolidated Subsidiary Partnerships)
CONDENSED BALANCE SHEETS
ASSETS
March 31,
-------------------------
2003 2002
----------- -----------
Cash and cash equivalents $ 35,268 $ 28,295
Investment in subsidiary partnerships 21,998,761 24,334,698
Cash held in escrow 297,142 297,142
----------- -----------
Total assets $22,331,171 $24,660,135
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Due to general partner and affiliates $ 2,820,240 $ 2,246,663
Other liabilities 9,556 4,775
----------- -----------
Total liabilities 2,829,796 2,251,438
Partners' capital 19,501,375 22,408,697
----------- -----------
Total liabilities and partners' capital $22,331,171 $24,660,135
=========== ===========
Investment in subsidiary partnerships are recorded in accordance with the equity
method of accounting, wherein the investments are not reduced below zero.
Accordingly, partners' capital on the consolidated balance sheets will differ
from partners' capital shown above.
93
INDEPENDENCE TAX CREDIT PLUS L.P. III
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(Not Including Consolidated Subsidiary Partnerships)
CONDENSED STATEMENTS OF OPERATIONS
Year Ended March 31,
-----------------------------------------
2003 2002 2001
----------- ----------- -----------
Revenues
Interest income $ 0 $ 13,583 $ 65,441
Other 350 4,873 42,315
----------- ----------- -----------
Total revenues 350 18,456 107,756
----------- ----------- -----------
Expenses
Administrative and management 119,553 202,027 208,900
Administrative and management-
related parties 480,168 482,562 520,118
----------- ----------- -----------
Total expenses 599,721 684,589 729,018
----------- ----------- -----------
Loss from operations (599,371) (666,133) (621,262)
Equity in loss of subsidiary partnerships (2,307,951) (2,674,427) (2,188,646)
----------- ----------- -----------
Net loss $(2,907,322) $(3,340,560) $(2,809,908)
=========== =========== ===========
94
INDEPENDENCE TAX CREDIT PLUS L.P. III
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CONDENSED STATEMENTS OF CASH FLOWS
Year Ended March 31,
-----------------------------------------
2003 2002 2001
----------- ----------- -----------
Cash flows from operating activities:
Net loss $(2,907,322) $(3,340,560) $(2,809,908)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Equity in loss of subsidiary partnerships 2,307,951 2,674,427 2,188,646
(Increase) decrease in assets:
Other assets 0 0 23,518
Increase (decrease) in liabilities:
Due to general partners and affiliates 573,577 595,684 522,317
Other liabilities 4,781 (833) (759)
----------- ----------- -----------
Total adjustments 2,886,309 3,269,278 2,733,722
----------- ----------- -----------
Net cash used in operating
activities (21,013) (71,282) (76,186)
----------- ----------- -----------
Cash flows from investing activities:
Decrease in investments available-for-sale 0 0 1,300,000
Investment in subsidiary partnerships 0 (1,466,822) (1,322,065)
Distributions from subsidiary partnerships 27,986 27,710 40,312
Decrease in cash held in escrow 0 100,000 290,536
----------- ----------- -----------
Net cash provided by (used in) investing
activities 27,986 (1,339,112) 308,783
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 6,973 (1,410,394) 232,597
Cash and cash equivalents, beginning of year 28,295 1,438,689 1,206,092
----------- ----------- -----------
Cash and cash equivalents, end of year $ 35,268 $ 28,295 $ 1,438,689
=========== =========== ===========
95
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2003
Initial Cost to Partnership Cost Capitalized
---------------------------- Subsequent to
Buildings and Acquisition:
Description Encumbrances Land Improvements Improvements
- ------------------- ------------ ----------- ------------- ----------------
Apartment Complexes
Edward Hotel Limited Partnership $ 2,399,459 $ 275,000 $ 591,240 $ 2,574,454
Los Angeles, CA
Pacific East, L.P. 2,077,798 1,950 3,125,584 163,444
Brooklyn, NY
Overtown Development Group, Ltd. 1,249,808 52,284 2,627,099 162,091
Miami, FL
Sumpter Commons Associates, L.P. 1,220,380 500 1,862,916 46,663
Park Housing Limited Partnership 837,407 5,000 2,343,351 64,880
Livingston Manor Urban Renewal 3,080,000 119,988 7,047,532 610,173
Associates, L.P.
Jefferis Square Housing 1,900,000 55,158 0 4,606,784
Partnership, L.P.
2301 First Avenue Limited Partnership 5,240,161 64,350 5,818,269 159,285
Lewis Street Limited Partnership 1,600,000 7,000 0 2,766,263
Savannah Park Housing Limited 802,554 0 2,049,888 2,059,271
Partnership
Brannon Group, L.C. 4,496,557 380,000 2,598,402 5,468,040
Independence Tax Credit Fund L.P. 2,510,527 1,732 339,661 6,274,319
(Mansion Court Phase II Venture and
Aspen Olive Associates Consolidated)
Primm Place Partners, L.P. 3,965,000 168,258 0 6,397,283
BK-9-A Partners L.P. 964,326 0 1,517,313 56,847
BK-10K Partners L.P. 1,114,042 11,000 1,637,762 50,286
Westmill Creek Associates III L.P. 2,896,252 37,031 6,922,563 17,364
Universal Court Associates 1,650,000 31,024 279,220 4,660,538
New Zion Apartments 1,034,853 20,000 2,688,770 12,362
Dreitzer House 4,275,000 5 0 6,722,063
------------ ----------- ------------- ------------
$ 43,314,124 $ 1,230,280 $ 41,449,570 $ 42,872,410
============ =========== ============= ============
Gross Amount at which Carried At Close of Period
------------------------------------------------
Buildings and Accumulated
Description Land Improvements Total Depreciation
- ------------------- ----------- ------------- ------------ ------------
Apartment Complexes
Edward Hotel Limited Partnership $ 281,123 $ 3,159,571 $ 3,440,694 $ 828,692
Los Angeles, CA
Pacific East, L.P. 8,075 3,282,903 3,290,978 1,075,379
Brooklyn, NY
Overtown Development Group, Ltd. 58,408 2,783,066 2,841,474 602,900
Miami, FL
Sumpter Commons Associates, L.P. 3,673 1,906,406 1,910,079 509,466
Park Housing Limited Partnership 8,173 2,405,058 2,413,231 603,823
Livingston Manor Urban Renewal 123,161 7,654,532 7,777,693 1,389,239
Associates, L.P.
Jefferis Square Housing 39,347 4,622,595 4,661,942 816,200
Partnership, L.P.
2301 First Avenue Limited Partnership 67,523 5,974,381 6,041,904 1,780,389
Lewis Street Limited Partnership 10,173 2,763,090 2,773,263 725,948
Savannah Park Housing Limited 3,173 4,105,986 4,109,159 854,118
Partnership
Brannon Group, L.C. 383,173 8,063,269 8,446,442 1,098,748
Independence Tax Credit Fund L.P. 5,123 6,610,589 6,615,712 1,019,601
(Mansion Court Phase II Venture and
Aspen Olive Associates Consolidated)
Primm Place Partners, L.P. 67,777 6,497,764 6,565,541 1,045,260
BK-9-A Partners L.P. 3,173 1,570,987 1,574,160 303,346
BK-10K Partners L.P. 14,176 1,684,872 1,699,048 334,225
Westmill Creek Associates III L.P. 37,649 6,939,309 6,976,958 1,887,768
Universal Court Associates 31,642 4,939,140 4,970,782 572,174
New Zion Apartments 20,618 2,700,514 2,721,132 599,738
Dreitzer House 623 6,721,445 6,722,068 971,069
----------- ------------- ------------ ------------
$ 1,166,783 $ 84,385,477 $ 85,552,260 $ 17,018,083
=========== ============= ============ ============
Life on which
Depreciation in
Year of Latest Income
Construction/ Date Statements are
Description Renovation Acquired Computed (a)(b)
- ------------------- ------------- --------- ---------------
Apartment Complexes
Edward Hotel Limited Partnership 1994-95 Nov. 1994 27.5 years
Los Angeles, CA
Pacific East, L.P. 1994-95 Dec. 1994 27.5 years
Brooklyn, NY
Overtown Development Group, Ltd. 1994-95 Dec. 1994 40 years
Miami, FL
Sumpter Commons Associates, L.P. 1995-96 Apr. 1995 27.5 years
Park Housing Limited Partnership 1995-96 May 1995 27.5 years
Livingston Manor Urban Renewal 1995-96 June 1995 15-40 years
Associates, L.P.
Jefferis Square Housing 1995-96 June 1995 20 - 40 years
Partnership, L.P.
2301 First Avenue Limited Partnership 1995-96 Aug. 1995 27.5 years
Lewis Street Limited Partnership 1995-96 Oct. 1995 27.5 years
Savannah Park Housing Limited 1995-96 Oct. 1995 27.5 years
Partnership
Brannon Group, L.C. 1995-96 Dec. 1995 40 years
Independence Tax Credit Fund L.P. 1995-96 Dec. 1995 20 - 40 years
(Mansion Court Phase II Venture and
Aspen Olive Associates Consolidated)
Primm Place Partners, L.P. 1995-96 Dec. 1995 10 - 40 years
BK-9-A Partners L.P. 1995-96 Dec. 1995 40 years
BK-10K Partners L.P. 1995-96 Dec. 1995 40 years
Westmill Creek Associates III L.P. 1997-98 Dec. 1996 27.5 years
Universal Court Associates 1997-98 Apr. 1997 20-40 years
New Zion Apartments 1997-98 Nov. 1997 15 - 27.5 years
Dreitzer House 1997-99 Dec. 1997 27.5 years
(a) Depreciation is computed using primarily the straight-line method over the
estimated useful lives determined by the Partnership date of acquisition.
(b) Personal property is depreciated primarily by the straight-line method over
the estimated useful lives of 5 - 12 years.
96
INDEPENDENCE TAX CREDIT PLUS L.P. III
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2003
(continued)
Cost of Property and Equipment Accumulated Depreciation
-------------------------------------------- -------------------------------------------
Year Ended March 31,
------------------------------------------------------------------------------------------
2003 2002 2001 2003 2002 2001
------------ ------------ ------------ ------------ ------------ ------------
Balance at beginning of period $ 85,943,904 $ 85,983,887 $ 85,827,948 $ 14,367,307 $ 11,702,991 $ 8,939,838
Additions during period:
Improvements 41,219 42,332 155,939
Depreciation expense 2,700,555 2,664,316 2,763,153
Reductions during period:
Dispositions (432,863) (82,315) 0 (49,779) 0 0
------------ ------------ ------------ ------------ ------------ ------------
Balance at close of period $ 85,552,260 $ 85,943,904 $ 85,983,887 $ 17,018,083 $ 14,367,307 $ 11,702,991
============ ============ ============ ============ ============ ============
At the time the local partnerships were acquired by Independence Tax Credit Plus
III Limited Partnership, the entire purchase price paid by Independence Tax
Credit Plus III Limited Partnership was pushed down to the local partnerships as
property and equipment with an offsetting credit to capital. Since the projects
were in the construction phase at the time of acquisition, the capital accounts
were insignificant at the time of purchase. Therefore, there are no material
differences between the original cost basis for tax and GAAP.
97