Attached files
Partners
Blessed Rock of El Monte
Costa Mesa, California
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying balance sheet of Blessed Rock of El Monte,
a California Limited Partnership as of December 31, 2005 and 2006, and the
related statements of operations and changes in partners' equity, and operating
cash flows for the years then ended. These financial statements are the
responsibility of the partnership's management. My responsibility is to express
an opinion on these financial statements based on my audits.
I conducted my audits in accordance with auditing standards generally
accepted in the United States. Those standards require that I 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. I believe that my audits provide a reasonable basis for
my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Blessed Rock of El Monte as
of December 31, 2005 and 2006 and the results of its operations and its
operating cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.
My audit was conducted for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplementary
information shown on page 12 and 13 is presented for the purpose of additional
analysis and is not a required part of the basic financial statements of Blessed
Rock of El Monte. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in my opinion, is
fairly stated in all material respects in relation to the financial statements
taken as a whole.
/s/ Jack Gilk
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March 7, 2007 33-0724657
BLESSED ROCK OF EL MONTE
(A California Limited Partnership)
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BALANCE SHEETS, DECEMBER 31, 2005 AND 2006
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A S S E T S
2006 2005
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Current Assets:
Operating cash and equivalents $ 584,149 $ 459,783
Security deposit cash 25,522 25,801
Tenant accounts receivable 1,625 370
Other accounts receivable 6,281 6,281
Prepaid expenses 51,682 61,945
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Total current assets 669,259 554,180
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Property, Building, and Equipment, At Cost:
Land 1,271,162 1,271,162
Building and improvements 8,030,159 7,992,586
Equipment 54,657 54,657
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9,355,978 9,318,405
Accumulated depreciation ( 1,933,378 ) ( 1,728,013 )
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Property, building, and equipment - net 7,422,600 7,590,392
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Other Assets:
Replacement reserve 134,830 156,909
Tax and insurance restricted accounts 33,152 22,073
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Total other assets 167,982 178,982
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$ 8,259,841 $ 8,323,554
============= =============
See the accompanying notes to financial statements.
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2
Blessed Rock of El Monte
Balance Sheets, December 31, 2005 and 2006
Page 2
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LIABILITIES AND PARTNERS' EQUITY
2006 2005
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Current Liabilities:
Current portion of long-term debt $ 49,737 $ 46,361
Accounts payable 11,556 6,667
Security trust liability 23,635 23,635
Accrued interest 14,175 14,175
Accrued asset management fees 17,810 32,880
Other accruals 37,712 6,025
Unearned rental income 696 1,054
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Total current liabilities 155,321 130,797
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Long-term Debt:
Mortgage payable, less current portion
included above 2,363,046 2,412,783
Notes payable 681,525 681,525
Accrued interest payable 230,335 199,995
Grant loan payable 400,000 400,000
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Total long-term debt 3,674,906 3,694,303
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Partners' equity 4,429,614 4,498,454
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$ 8,259,841 $ 8,323,554
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See the accompanying notes to financial statements.
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3
BLESSED ROCK OF EL MONTE
(A California Limited Partnership)
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STATEMENTS OF OPERATIONS AND CHANGES
IN PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2006
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2006 2005
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Revenue:
Gross potential rents $ 723,570 $ 745,260
Excess rents 149,429 117,337
Less vacancies ( 918 ) ( 1,442 )
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Net rental income 872,081 861,155
Laundry and vending 9,684 13,410
Tenant charges 2,040 1,482
Interest income 3,488 2,490
Other income - 886
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Total revenues 887,293 879,423
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Expenses:
Administrative 211,138 200,758
Utilities 80,904 74,145
Operating and maintenance 106,694 128,436
Taxes and insurance 53,138 56,579
Interest 202,230 204,853
Depreciation and amortization 205,365 204,844
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Total expenses 859,469 869,615
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Net income (loss) 27,824 9,808
Partners' equity - beginning 4,498,454 4,510,646
Partners' distributions ( 96,664 ) ( 22,000 )
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Partners' equity - ending $ 4,429,614 $ 4,498,454
============= =============
See the accompanying notes to financial statements.
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4
BLESSED ROCK OF EL MONTE
(A California Limited Partnership)
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STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2006
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2006 2005
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Cash flows from operating activities:
Rental receipts $ 858,180 $ 848,544
Operating interest receipts 2,261 1,704
Other operating receipts 11,724 90,578
Payments to suppliers and employees:
Administrative expenses ( 91,469 ) ( 47,918 )
Management fees ( 37,407 ) ( 99,011 )
Utilities ( 79,498 ) ( 71,596 )
Salaries and wages ( 35,402 ) ( 43,358 )
Operating and maintenance ( 94,059 ) ( 115,758 )
Real estate taxes ( 7,371 ) ( 7,643 )
Payroll taxes ( 5,371 ) ( 5,062 )
Property insurance ( 36,328 ) ( 45,120 )
Miscellaneous taxes and insurance ( 17,257 ) ( 17,907 )
Interest on mortgage ( 175,545 ) ( 171,384 )
Funding security deposit account 279 33
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Net cash provided by operating activities 292,737 316,102
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Cash flows from investing activities:
Net tax and insurance impounds ( 11,079 ) 1,843
Net reserve activity, including interest 22,079 ( 21,330 )
Reserve interest 1,227 786
Capital expenditures ( 37,573 ) -
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Net cash used in investing activities ( 25,346 ) ( 18,701 )
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Cash flows from financing activities:
Mortgage principal payments ( 46,361 ) ( 43,214 )
Partner distributions ( 96,664 ) ( 22,000 )
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Net cash used in financing activities ( 143,025 ) ( 65,214 )
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Net increase (decrease) in cash 124,366 232,187
Cash at beginning of year 459,783 227,596
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Cash at end of year $ 584,149 $ 459,783
============= =============
See the accompanying notes to financial statements.
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5
Blessed Rock of El Monte
Statements of Cash Flows, December 31, 2005 and 2006
Page 2
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Reconciliation of Net Income (Loss)
to Net Cash Provided by Operating Activities
2006 2005
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Net income (loss) $ 27,824 $ 9,808
Adjustments to reconcile net income (loss) to net cash
Provided by operating activities:
Depreciation and amortization 205,365 204,844
Decrease (increase) in:
Security deposit cash 279 168
Receivables ( 1,255 ) 74,430
Prepaids 10,263 ( 10,048 )
Increase (decrease) in:
Payables 8,543 ( 1,522 )
Security deposit liability - ( 135 )
Accrued expenses 43,303 39,296
Unearned rental income ( 358 ) 47
Reserve interest earned ( 1,227 ) ( 786 )
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Net cash provided by operating activities $ 292,737 $ 316,102
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See the accompanying notes to financial statements.
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6
BLESSED ROCK OF EL MONTE
(A California Limited Partnership)
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NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006
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1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION: Blessed Rock of El Monte, a California limited partnership,
was formed on November 22, 1995 by and between Everland, Inc., a
California Corporation, as the general partner and Tom Y. Lee as the
limited partner. The Partnership Agreement was amended and restated on
December 29, 2000 defining the various partners of the partnership as the
General Partner, the Managing General Partner, the Limited Partners and
the Special Limited Partner.
The Partnership was formed to acquire, construct, own and operate a
137-unit elderly facility apartment complex for low income residents in El
Monte, California. The Partnership also generates tax credits to the
partners in accordance with the provisions of the code and applicable
Treasury regulations. The Partnership has qualified for low income housing
tax credits as currently allowable under Section 42 of the Internal
Revenue Code.
The Partnership received HOME funds from the City of El Monte and
redevelopment funds from the El Monte Community Redevelopment Agency as
part of a public program to ensure affordable housing for senior citizen
tenants. In addition, the El Monte Community Redevelopment Agency paid
various project impact fees to the City of El Monte associated with the
construction and development of the Project on behalf of the Partnership.
CAPITALIZATION AND DEPRECIATION: Assets are recorded at cost and
depreciated for financial accounting purposes using the straight-line
method over their estimated useful lives. The principal estimated useful
lives used in computing the depreciation provisions are 10 to 40 years for
building and improvements, and 3 to 10 years for equipment The policy of
the project is to charge amounts expended for maintenance, repairs, and
minor replacements to expense, and to capitalize expenditures for major
replacements and betterments.
CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows, cash
includes unrestricted cash in bank, cash on hand, savings accounts, and
all certificates of deposit with original maturities of three months or
less.
The Partnership maintains its cash in bank deposit accounts, which at
times may exceed federally insured limits. The Partnership has not
experienced any losses in such accounts. The Partnership believes it is
not exposed to any significant credit risk on cash and cash equivalents.
DEFERRED COSTS: Deferred costs, comprised of tax credit fees and
organization costs are being amortized over five years.
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7
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2006
Page 2
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ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect: (1) the reported amounts of assets
and liabilities and disclosure of contingencies at the date of the
financial statements, and (2) the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
RENTAL INCOME AND UNEARNED RENTS: The Partnership rents apartment units on
a month to month basis and recognizes revenues when earned. Advance
receipts of rents are classified as liabilities until earned.
INCOME TAXES: No provision is made for income taxes since such taxes, if
any, are the liability of the individual partners.
2. RESTRICTED FUNDS
The Partnership is required to make monthly impound deposits to cover
insurance premiums, property taxes and to maintain a reserve for
replacements. These restricted funds are held by, and expenditures are
subject to supervision and approval by, GMAC Commercial Mortgage.
3. MORTGAGE PAYABLE
Mortgage payable consists of a 7.05% real estate
mortgage, payable to GMAC Commercial Mortgage,
collateralized by a deed of trust on the real property.
The obligation is payable in aggregate monthly principal
and interest installments of $18,188 beginning July 1,
1998 with a balloon payment in the amount of $2,017,000
payable June 1, 2013. $ 2,412,783
Less current portion ( 49,737 )
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$ 2,363,046
=============
The amounts maturing for the next five years are:
2007 $49,737
2008 53,360
2009 57,245
2010 61,414
2011 65,887
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8
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2006
Page 3
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4. NOTES PAYABLE
Notes payable at December 31, 2005 consist of the following:
4% note payable with a term of 15 years, payable to El
Monte Community Redevelopment Agency (RDA), secured by
deed of trust and rents from Project. Note subject to
prepayment in whole or in part based on events
constituting default under terms of promissory note
agreement. Payments of interest and principal made
annually beginning on April 1, 2003, and thereafter on
April 1 until outstanding principal balance of note and
all accrued interest paid in full. Payments paid from
50% of the residual rental income, as defined in the
promissory note agreement. Payments, if any, applied
first to accrued interest and second to principal of
note. At December 31, 2006, accrued interest on note was
$41,105. $ 250,878
1% note payable with a term of 30 years beginning April
3, 1996, payable to RDA for various development fees,
secured by a deed of trust and rents from the Project.
Commencing April 3, 1997, and thereafter on April 3 for
the following 6 succeeding years, payment of $4,239 due
each year. Payment increases to $8,478 April 3, 2004 and
continues the next 7 succeeding years. April 3, 2012,
payment increases to $32,534 and continues the next 14
succeeding years, or until paid in full. Payments to be
paid from 50% of residual rental income, as defined in
promissory note agreement. Payments first applied to
interest. At December 31, 2006, accrued interest on note
was $17,230. 430,647
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$ 681,525
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9
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2006
Page 4
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5. GRANT LOAN PAYABLE
The Partnership received a loan of $400,000 on April 3, 1996 from the City
of El Monte as part of a public program to ensure affordable housing for
senior citizen tenants. Interest accrues on the principal amount at 4%,
with a term of 55 years. Loan is secured by a deed of trust and rents from
the Project. At maturity, the principal amount of the loan and all accrued
interest shall be deemed discharged and waived by the City unless there is
an occurrence of an event of default, as specified under the loan
agreement. If default occurs, the City of El Monte is entitled to exercise
its rights and the entire principal amount outstanding and any accrued
interest could become due and payable at the option of the City of El
Monte. Accrued interest at December 31, 2006 was $172,000.
6. RELATED PARTY TRANSACTIONS
PROJECT OR LOSS ALLOCATIONS: All items included in the calculation of
income or loss not arising from a sale or refinancing, and all tax
credits, shall be allocated 98.99% equally to the limited partners, .01%
to the special limited partner, .99% to the general partner, and .01% to
the managing general partner.
MANAGEMENT FEE: A monthly property management fee in an amount computed at
5% of the collected gross revenue is payable to the management agent.
Property management services to the Partnership are provided by an
affiliate of the limited partners. Property management fees were $43,206
and $43,333 for the years 2005 and 2006, respectively.
INCENTIVE MANAGEMENT AND OTHER FEES: Under the terms of the Limited
Partnership Agreement, incentive management fees shall be paid to the
general partner for services incidental to the administration of the
business and affairs of the Partnership. Reporting fees shall be paid to
the limited partners for services performed in monitoring the operations
of the Partnership, services in connection with the Partnership's
accounting matters and assisting with the preparation of tax returns. The
limited partners earned $46,889 in reporting fees for 2005 and $68,279 for
2006.
The managing general partner earned $16,440 annually for an operational
asset management fee for the years 2001 through 2006. Balance of accrued
operational asset management fee at December 31, 2006 is $17,810.
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10
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2006
Page 5
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7. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
The Partnership's sole asset is a 137-unit apartment complex. The
Partnership's operations are concentrated in the multifamily real estate
market. In addition, the Partnership operates in a heavily regulated
environment. The operations of the project are subject to the
administrative directives, rules and regulations of local regulatory
agencies. Such administrative directives, rules and regulations are
subject to change. Such changes may occur with little notice or inadequate
funding to pay for related costs, including the additional administrative
burden, to comply with a change.
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11
BLESSED ROCK OF EL MONTE
(A California Limited Partnership)
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SUPPLEMENTAL SCHEDULE OF EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2005 and 2006
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2006 2005
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Site management payroll $ 34,027 $ 30,830
Manager's rent-free apartment 12,288 12,288
Management fee 43,333 43,206
Reporting/asset management fee 68,823 63,329
Audit fee 6,700 6,000
Legal fees - 424
Telephone and answering service 5,675 4,731
Office supplies 4,050 4,528
Educational and social programs 8,640 11,520
Health insurance and other employee benefits 4,226 4,349
Payroll taxes 5,371 5,062
Workers' compensation 8,029 8,536
Other administration 9,976 5,955
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Subtotal administrative expenses 211,138 200,758
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Electricity 30,475 22,412
Water and sewer 23,862 23,294
Fuel 20,816 24,196
Garbage and trash removal 5,751 4,243
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Subtotal utilities 80,904 74,145
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Maintenance and repairs payroll 12,785 12,528
Maintenance and repairs supply 8,715 7,472
Maintenance and repairs contract 29,582 19,337
Painting and decorating 17,753 25,216
Grounds 8,693 10,519
Services 1,430 2,195
Furniture and furnishings replacement 27,736 51,169
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Subtotal maintenance expenses 106,694 128,436
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Property taxes 7,371 7,644
Other taxes and licenses 3,930 3,995
Property and liability insurance 40,765 43,913
Other insurance 1,072 1,027
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Subtotal tax and insurance 53,138 56,579
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Interest 202,230 204,853
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Depreciation and amortization 205,365 204,844
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Total expenses $ 859,469 $ 869,615
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12
CONTENTS
Page
----
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS:
Balance Sheets 2-3
Statements of Operations and Changes in Partners' Equity 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-11
SUPPLEMENTARY INFORMATION:
Supplemental Schedule of Expenses 12
Supplemental Schedule of Changes in Partners' Equity 13
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13
BLESSED ROCK OF EL MONTE
(A California Limited Partnership)
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SUPPLEMENTAL SCEHDULE OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2006
WNC Housing WNC Housing
Tax Credit Tax Credit WNC Comm
Fund V, L.P. Fund V. L.P. Housing Everland Housing
Series 3 Series 4 L.P. Inc. Assist. Prog. Total
---------- ---------- ---------- ---------- ---------- ----------
Balance - December 31, 2004 $2,263,832 $2,263,832 $ (49) $ (16,977) $ 8 $4,510,646
Net Income - 2005 4,854 4,854 1 98 1 9,808
Partner's Distribution - 2005 (11,000) (11,000) -- -- -- (22,000)
---------- ---------- ---------- ---------- ---------- ----------
Balance - December 31, 2005 2,257,686 2,257,686 (48) (16,879) 9 4,498,454
Net Income - 2006 13,771 13,771 3 276 3 27,824
Partner's Distribution - 2006 (14,697) (14,697) (850) (64,433) (1,987) (96,664)
---------- ---------- ---------- ---------- ---------- ----------
Balance - December 31, 2006 $2,256,760 $2,256,760 $ (895) $ (81,036) $ (1,975) $4,429,614
========== ========== ========== ========== ========== ==========
Profit and loss percentage
at December 31, 2006 49.495% 49.495% 0.010% 0.990% 0.010% 100.000%
========== ========== ========== ========== ========== ==========
