Attached files
file | filename |
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10-K - NAT 4-2 SUPER 10K - WNC HOUSING TAX CREDIT FUND IV L P SERIES 2 | nat42super10k.htm |
EX-31.2 - EXHIBIT312.HTM - WNC HOUSING TAX CREDIT FUND IV L P SERIES 2 | exhibit312.htm |
EX-32.2 - EXHIBIT322.HTM - WNC HOUSING TAX CREDIT FUND IV L P SERIES 2 | exhibit322.htm |
EX-32.1 - EXHIBIT321.HTM - WNC HOUSING TAX CREDIT FUND IV L P SERIES 2 | exhibit321.htm |
EX-31.1 - EXHIBIT311.HTM - WNC HOUSING TAX CREDIT FUND IV L P SERIES 2 | exhibit311.htm |
EX-99 - PIONEER 2005 AUDIT - WNC HOUSING TAX CREDIT FUND IV L P SERIES 2 | pioneer2005audit.htm |
EX-99 - PIONEER 2007 AUDIT - WNC HOUSING TAX CREDIT FUND IV L P SERIES 2 | pioneer2007audit.htm |
EX-99 - PIONEER 2006 AUDIT - WNC HOUSING TAX CREDIT FUND IV L P SERIES 2 | pioneer2006audit.htm |
EX-99 - APARTMENT HOUSING OF E. BREWTON 2007 AUDIT - WNC HOUSING TAX CREDIT FUND IV L P SERIES 2 | apthsgebrewton2007audit.htm |
EX-99 - APARTMENT HOUSING OF E. BREWTON 2005 AUDIT - WNC HOUSING TAX CREDIT FUND IV L P SERIES 2 | apthsgebrewton2005audit.htm |
APARTMENT HOUSING OF
EAST BREWTON, LTD.
FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
1
APARTMENT HOUSING OF EAST BREWTON, LTD.
TABLE OF CONTENTS
DECEMBER 31, 2006 AND 2005
Page
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Independent Auditors' Report
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1
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Financial Statements
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Balance Sheets
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2
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Statements of Operations and Comprehensive Income
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4
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Statements of Partners' Capital (Deficit)
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5
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Statements of Cash Flows
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6
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Notes to Financial Statements
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7
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Supplemental Information
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11
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GRANBERRY & ASSOCIATES, LLC
Certified Public Accountants
Michelle M. Granberry, CPA
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P.O. Box 3196
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Kellie B. Blackmon, CPA
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Auburn, AL 36831-3196
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MEMBER
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Phone: (334) 741-1050
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American Institute of CPAs
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Fax. (334) 741-1059
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Alabama Society of CPAs
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www.granberrycpa.com
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INDEPENDENT AUDITORS' REPORT
To the Partners of
Apartment Housing of East Brewton, Ltd.
We have audited the accompanying balance sheets of Apartment Housing of East Brewton, Ltd. (an Alabama limited partnership) as of December 31, 2006 and 2005, and the related statements of operations and comprehensive income, partners' capital (deficit), and cash flows for the years then ended. These financial statements are the responsibility of Apartment Housing of East Brewton, Ltd.'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 Apartment Housing of East Brewton, Ltd. as of December 31, 2006 and 2005, 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 audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on page 11 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/ Granberry & Associates, LLC
January 22, 2007
2
APARTMENT HOUSING OF EAST BREWTON, LTD.
BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
2006
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2005
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|||||||
ASSETS
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||||||||
Current Assets
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||||||||
Cash
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$ | 2,082 | $ | 2,350 | ||||
Accounts Receivable - Tenant
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2,220 | 1,073 | ||||||
Prepaid Insurance
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1,124 | 963 | ||||||
Total Current Assets
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5,426 | 4,386 | ||||||
Restricted Deposits and Funded Reserves
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||||||||
Taxes and Insurance
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2,975 | 3,271 | ||||||
Replacement Reserve
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60,515 | 50,237 | ||||||
Security Deposits
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12,218 | 9,654 | ||||||
Total Restricted Deposits and Funded Reserves
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75,708 | 63,162 | ||||||
Property and Equipment
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||||||||
Land
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69,000 | 69,000 | ||||||
Buildings and Improvements
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2,185,247 | 2,185,247 | ||||||
Furniture, Fixtures and Equipment
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99,454 | 99,454 | ||||||
2,353,701 | 2,353,701 | |||||||
Less Accumulated Depreciation
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(626,003 | ) | (559,908 | ) | ||||
Total Property and Equipment
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1,727,698 | 1,793,793 | ||||||
Other Assets
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||||||||
Deposits
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75 | 75 | ||||||
TOTAL ASSETS
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$ | 1,808,907 | $ | 1,861,416 |
The accompanying notes are an integral part of these financial statements.
3
APARTMENT HOUSING OF EAST BREWTON, LTD.
BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
2006
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2005
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|||||||
LIABILITIES AND PARTNERS' EQUITY
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||||||||
Current Liabilities
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||||||||
Accounts Payable
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$ | 6,838 | $ | 7,336 | ||||
Accrued Partners' Fee Payable
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1,250 | 1,000 | ||||||
Security Deposits Payable
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9,715 | 9,105 | ||||||
Tenant Overage Payable
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160 | 686 | ||||||
Payroll Taxes Payable
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670 | 534 | ||||||
Accrued Interest Payable
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36,895 | 32,185 | ||||||
Accrued Property Taxes Payable
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4,593 | 4,232 | ||||||
Current Maturities of Mortgage Payable
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9,018 | 8,373 | ||||||
Total Current Liabilities
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69,139 | 63,451 | ||||||
Long-Term Liabilities
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||||||||
Mortgage Payable, net of current maturities
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1,101,809 | 1,110,827 | ||||||
Obligation Under Interest Rate Swap
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15,297 | 18,866 | ||||||
Total Long-Term Liabilities
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1,117,106 | 1,129,693 | ||||||
Total Liabilities
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1,186,245 | 1,193,144 | ||||||
Partners' Equity
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||||||||
Partners' Capital
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637,959 | 687,138 | ||||||
Unrealized Loss on Cash Flow Hedge
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(15,297 | ) | (18,866 | ) | ||||
Total Partners' Equity
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622,662 | 668,272 | ||||||
TOTAL LIABILITIES AND PARTNERS' EQUITY
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$ | 1,808,907 | $ | 1,861,416 |
The accompanying notes are an integral part of these financial statements.
4
APARTMENT HOUSING OF EAST BREWTON, LTD.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2006 AND 2005
2006
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2005
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|||||||
Revenues
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||||||||
Rental
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$ | 138,115 | $ | 133,352 | ||||
Miscellaneous Charges
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3,507 | 2,417 | ||||||
Total Revenues
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141,622 | 135,769 | ||||||
Operating Expenses
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||||||||
Administrative
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17,210 | 18,105 | ||||||
Advertising
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134 | 103 | ||||||
Bad Debt
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4,610 | 8,708 | ||||||
Management Fees
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11,993 | 11,237 | ||||||
Repair and Maintenance
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25,194 | 24,528 | ||||||
Taxes and Insurance
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35,669 | 35,835 | ||||||
Utilities
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8,860 | 5,320 | ||||||
Total Operating Expenses
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103,670 | 103,836 | ||||||
Income from Operations
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37,952 | 31,933 | ||||||
Partnership and Financial Income (Expense)
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||||||||
Interest Income
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374 | 266 | ||||||
Interest Expense
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(21,160 | ) | (20,932 | ) | ||||
Partnership Management Fees
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(250 | ) | (250 | ) | ||||
Total Partnership and Financial Income (Expense)
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(21,036 | ) | (20,916 | ) | ||||
Income (Loss) from Operations before Depreciation
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16,916 | 11,017 | ||||||
Depreciation
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(66,095 | ) | (67,561 | ) | ||||
Net Loss
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(49,179 | ) | (56,544 | ) | ||||
Other Comprehensive Income (Loss)
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||||||||
Unrealized Gain (Loss) on cash flow hedge arising during the period
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3,569 | 5,100 | ||||||
Total Other Comprehensive Income (Loss)
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3,569 | 5,100 | ||||||
Total Comprehensive Loss
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$ | (45,610 | ) | $ | (51,444 | ) | ||
The accompanying notes are an integral part of these financial statements.
5
APARTMENT HOUSING OF EAST BREWTON, LTD.
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
YEARS ENDED DECEMBER 31, 2006 AND 2005
General
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Limited
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|||||||||||
Partners
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Partners
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Total
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||||||||||
Partners' Capital, December 31, 2004
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$ | 339 | $ | 743,343 | $ | 743,682 | ||||||
Net Loss
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(565 | ) | (55,979 | ) | (56,544 | ) | ||||||
Partners' Capital (Deficit), December 31, 2005
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(226 | ) | 687,364 | 687,138 | ||||||||
Net Loss
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(492 | ) | (48,687 | ) | (49,179 | ) | ||||||
Partners' Capital (Deficit), December 31, 2006
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$ | (718 | ) | $ | 638,677 | $ | 637,959 |
The accompanying notes are an integral part of these financial statements.
6
APARTMENT HOUSING OF EAST BREWTON, LTD.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2006 AND 2005
2006
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2005
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Cash flows from operating activities
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||||||||
Net Loss
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$ | (49,179 | ) | $ | (56,544 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities
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||||||||
Depreciation
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66,095 | 67,561 | ||||||
(Increase) Decrease in Accounts Receivable - Tenant
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(1,147 | ) | 148 | |||||
(Increase) Decrease in Prepaid Insurance
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(161 | ) | 359 | |||||
(Increase) Decrease in Security Deposit Cash
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(2,564 | ) | 1,928 | |||||
(Increase) Decrease in Other Receivables
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-- | 56,950 | ||||||
Increase (Decrease) in Accounts Payable
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(498 | ) | (845 | ) | ||||
Increase (Decrease) in Accrued Partners' Fees
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250 | 250 | ||||||
Increase (Decrease) in Security Deposits Payable
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610 | (965 | ) | |||||
Increase (Decrease) in Tenant Overage Payable
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(526 | ) | 527 | |||||
Increase (Decrease) in Payroll Taxes Payable
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136 | (14 | ) | |||||
Increase (Decrease) in Accrued Interest Payable
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4,710 | 4,882 | ||||||
Increase (Decrease) in Accrued Property Taxes
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361 | (13 | ) | |||||
Increase (Decrease) in Deferred Revenue
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-- | (65,350 | ) | |||||
Total Adjustments
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67,266 | 65,418 | ||||||
Net cash provided (used) by operating activities
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18,087 | 8,874 | ||||||
Cash flows from investing activities:
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||||||||
Deposits to Taxes and Insurance Escrow
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(34,328 | ) | (36,026 | ) | ||||
Deposits to Reserve Account
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(10,278 | ) | (10,206 | ) | ||||
Transfers from Taxes and Insurance
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34,624 | 33,514 | ||||||
Transfers from Reserve for Replacement
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-- | 4,498 | ||||||
Net cash provided (used) by investing activities
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(9,982 | ) | (8,220 | ) | ||||
Cash flows from financing activities:
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||||||||
Principal Payments on Mortgage Loan
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(8,373 | ) | (7,703 | ) | ||||
Net cash provided (used) by financing activities
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(8,373 | ) | (7,703 | ) | ||||
Net increase (decrease) in cash and cash equivalents
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(268 | ) | (7,049 | ) | ||||
Cash and cash equivalents, beginning of year
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2,350 | 9,399 | ||||||
Cash and cash equivalents, end of year
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$ | 2,082 | $ | 2,350 | ||||
Supplemental disclosures of cash flow information
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||||||||
Interest Paid
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$ | 16,295 | $ | 15,986 |
The accompanying notes are an integral part of these financial statements.
7
APARTMENT HOUSING OF EAST BREWTON, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY - Apartment Housing of East Brewton, Ltd., an Alabama limited partnership, formed during June 1998. The partnership owns and operates a forty (40) unit apartment complex in East Brewton, Alabama for low and moderate income persons. Such projects are regulated by the Alabama Housing Finance Authority as to rent charges and operating methods. The regulatory agreement limits annual distributions of net operating receipts. Construction was completed and the units were available for rental in February of 1999.
BASIS OF ACCOUNTING - The financial statements are prepared on the accrual basis of accounting whereby revenues are recognized when earned and expenses are recognized when the liability is incurred.
PROPERTY, EQUIPMENT AND RELATED DEPRECIATION - Property and equipment are stated at cost less accumulated depreciation as calculated under the straight-line and declining balance methods. The assets are being depreciated as follows:
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Buildings
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40 years, straight-line
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Furniture, fixtures, and equipment
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5-7 years, declining balance
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INCOME TAXES - Items of income and loss pass through to the individual partners for both Federal and State income tax purposes; therefore, the financial statements reflect no tax liability or benefit. Modified accelerated cost recovery system (MACRS) is used for income tax reporting purposes.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows, cash includes unrestricted cash investments with an initial maturity not in excess of ninety (90) days. Cash flows from interest rate swap hedging the company's mortgage payable are classified as interest paid in the statement of cash flows.
ESTIMATES - The preparation of financial statements in conformity with 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.
ADVERTISING - The partnership expenses the cost of advertising the first time the advertising activity takes place.
See independent auditors' report.
8
APARTMENT HOUSING OF EAST BREWTON, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
2. RESTRICTED DEPOSITS AND FUNDED RESERVES
Under the terms of the HOME Investment Partnership Program agreement the partnership is required to maintain these restricted accounts as follows:
REPLACEMENT RESERVE - The partnership is to transfer monthly the amount of $833 until the account reaches a balance of $70,000. Any disbursements from this account are subject to the approval of Alabama Housing Finance Authority. At December 31, 2006 and 2005, this account is not properly funded.
SECURITY DEPOSITS - A separate account is maintained for tenant security deposits as specified under Alabama law. At December 31, 2006 and 2005, this account is properly funded.
TAXES AND INSURANCE - The partnership is to transfer monthly an amount estimating one-twelfth of the annual cost of real estate taxes and insurance. These expenditures are then to be paid from this account. At December 31, 2006 and 2005, this account is properly funded.
3. LONG-TERM DEBT
Long-term debt is summarized as follows:
2006
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2005
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|||||||
Mortgage note payable in monthly installments (including principal and interest at a variable rate of 1.75% per annum over LIBOR) to Compass Bank, secured by land, building, cash, receivables and income, maturing May 2019 The interest rate at 12/31/06 is 7.10 %
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$ | 189,827 | $ | 198,200 | ||||
Mortgage note payable to Alabama's HOME Investment Partnership Program. No payment due until maturity in May 2019. Interest accrues annually at 1/2 of 1% until maturity
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921,000 | 921,000 | ||||||
1,110,827 | 1,119,200 | |||||||
Less principal due within one year
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(9,018 | ) | (8,373 | ) | ||||
Total long-term debt
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$ | 1,101,809 | $ | 1,110,827 |
See independent auditors' report.
9
APARTMENT HOUSING OF EAST BREWTON, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
3. LONG-TERM DEBT - continued
Principal payments due on long-term debt for the subsequent five years are as follows:
2007
|
$ | 9,018 | ||
2008
|
9,930 | |||
2009
|
10,748 | |||
2010
|
11,682 | |||
2011
|
12,698 | |||
Thereafter
|
1,056,751 | |||
Total
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$ | 1,110,827 |
4. INTEREST RATE SWAP -- On July 12, 2002, the partnership entered into an interest rate swap agreement with Compass Bank. The purpose of this agreement was to hedge cash flows against variable interest rates on their mortgage loan to Compass Bank. The terms include a notional amount equal to the outstanding mortgage loan whereby the partnership pays a fixed rate of interest, 8.25%, and receives a variable rate of interest equal to 1.75% over LIBOR not less than 5.25% and expires May 1, 2019. The net payments are calculated and paid on a monthly basis. The carrying amount of the swap has been adjusted to its fair value at the end of the year, which because of changes in forecasted levels of LIBOR resulted in reporting a liability for the fair value of the future net payments forecasted under the swap. The liability is classified as non-current since management does not intend to settle it during 2007. Since the critical terms of the swap and the note are the same, the swap is assumed to be completely effective as a hedge, and none of the change in its fair value is included in income. Accordingly, all of the adjustment of the swap's carrying amount is reported as other comprehensive loss. Estimated net payments of $5,590 are expected to be reclassified into earnings within the next twelve months.
5. RELATED PARTY TRANSACTIONS
MANAGEMENT CONTRACTS - Apartment Services and Management, Inc., an affiliate of the general partners, managed the project during 2006 and 2005 pursuant to a contract approved by Alabama Housing Finance Authority. Management fees are $11,993 and $11,237 in 2006 and 2005, respectively. Management fees included in accounts payable at December 31, 2006 and 2005 are $6,200 and $6,677, respectively.
See independent auditors' report.
10
APARTMENT HOUSING OF EAST BREWTON, LTD.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
5. RELATED PARTY TRANSACTIONS - CONTINUED
REPAIRS AND MAINTENANCE - Southeast Maintenance, Inc., a corporation wholly owned by the general partner's son, was paid $1,884 in 2006 and $68,286 in 2005 for repairs related to Hurricane Katrina and Ivan. The partnership received insurance monies to cover the cost of these repairs. (See Hurricane Damage footnote 9.) Also, during 2005 Southeast Maintenance, Inc. was paid $18,342 for repairs made to a fire-damaged unit and other various repairs. The partnership received insurance monies in the amount of $14,659 to cover the cost of the repairs to the fire-damaged unit.
6. CURRENT VULNERABILITY DUE TO CERTAIN CIRCUMSTANCES
The partnership's operations are concentrated in the low-income real estate market. In addition, the partnership operates in a heavily regulated environment. The operations of the partnership are subject to the administrative directives, rules and regulations of federal and state regulatory agencies, including, but not limited to, the state housing financing agency. Such administrative directives, rules and regulations are subject to change by federal and state agencies. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change.
7. RECONCILIATION OF FINANCIAL TO TAXABLE LOSS
A reconciliation of financial statement net loss to ordinary loss of the partnership, as reported on the partnership's information return, for the year ended December 31 is as follows:
2006
|
2005
|
|||||||
Financial statement net loss
|
$ | (49,179 | ) | $ | (56,544 | ) | ||
Reconciling items:
|
||||||||
Financial statement depreciation
|
66,095 | 67,561 | ||||||
Tax return depreciation
|
(86,840 | ) | (87,660 | ) | ||||
Partnership tax return ordinary loss
|
$ | (69,924 | ) | $ | (76,643 | ) |
8. COMMITMENTS AND CONTINGENCIES
On December 31, 2006, the partnership was contingently liable under a $37,412 standby letter of credit at Wachovia Bank expiring September 2009.
9. HURRICANE DAMAGE
During 2005 and 2004, the apartment complex sustained damage as a result of Hurricane Katrina and Ivan. The partnership received
insurance proceeds in the amount of $72,736 in 2005 to pay for the necessary repairs to the complex. At December 31, 2005, the repairs were completed and all insurance proceeds were disbursed.
See independent auditors' report.
11