Attached files
CONTENTS
Page | |||
INDEPENDENT AUDITOR’S REPORT | F-2 | ||
FINANCIAL STATEMENTS: | |||
Balance Sheets | F-3 | ||
Statements of Operations and Changes in Partners’ Equity | F-5 | ||
Statements of Cash Flows | F-6 | ||
Notes to Financial Statements | F-8 | ||
SUPPLEMENTARY INFORMATION: | F-13 | ||
Supplemental Schedule of Expenses | F-14 | ||
Supplemental Schedule of Changes in Partners’ Equity |
F-1 |
Partners
Blessed Rock of El Monte
Costa Mesa, California
I have audited the accompanying balance sheet of Blessed Rock of El Monte, a California Limited Partnership as of December 31, 2003 and 2004, 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, 2003 and 2004 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.
January 19, 2005 | 33-0724657 |
F-2 |
(A California Limited Partnership)
BALANCE SHEETS, DECEMBER 31, 2003 AND 2004
ASSETS
2004 | 2003 | |||||||
Current Assets: | ||||||||
Operating cash and equivalents | $ | 227,596 | $ | 71,300 | ||||
Security deposit cash | 25,969 | 24,223 | ||||||
Tenant accounts receivable | - | 109 | ||||||
Other accounts receivable | 81,081 | - | ||||||
Prepaid expenses | 51,897 | 64,397 | ||||||
Total current assets | 386,543 | 160,029 | ||||||
Property, Building, and Equipment, At Cost: | ||||||||
Land | 1,271,162 | 1,271,162 | ||||||
Building and improvements | 7,992,586 | 7,992,586 | ||||||
Equipment | 54,657 | 54,657 | ||||||
9,318,405 | 9,318,405 | |||||||
Accumulated depreciation | (1,523,169 | ) | (1,316,293 | ) | ||||
Property, building, and equipment - net | 7,795,236 | 8,002,112 | ||||||
Other Assets: | ||||||||
Replacement reserve | 135,579 | 114,561 | ||||||
Tax and insurance restricted accounts | 23,916 | 62,253 | ||||||
Total other assets | 159,495 | 176,814 | ||||||
$ | 8,341,274 | $ | 8,338,955 |
See the accompanying notes to financial statements.
F-3 |
Blessed Rock of El Monte
Balance Sheets, December 31, 2003 and 2004
Page 2
LIABILITIES AND PARTNERS’ EQUITY
2004 | 2003 | |||||||
Current Liabilities: | ||||||||
Current portion of long-term debt | $ | 43,214 | $ | 40,281 | ||||
Accounts payable | 4,535 | - | ||||||
Security trust liability | 23,770 | 23,985 | ||||||
Accrued interest | 14,701 | 14,938 | ||||||
Accrued asset management fees | 33,078 | 32,880 | ||||||
Unearned rental income | 1,007 | 632 | ||||||
Total current liabilities | 120,305 | 112,716 | ||||||
Long-term Debt: | ||||||||
Mortgage payable, less current portion included above | 2,459,144 | 2,502,358 | ||||||
Notes payable | 681,525 | 681,525 | ||||||
Accrued interest payable | 169,654 | 139,312 | ||||||
Grant loan payable | 400,000 | 400,000 | ||||||
Developer fee payable | - | 7,719 | ||||||
Total long-term debt | 3,710,323 | 3,730,914 | ||||||
Partners’ equity | 4,510,646 | 4,495,325 | ||||||
$ | 8,341,274 | $ | 8,338,955 |
See the accompanying notes to financial statements.
F-4 |
(A California Limited Partnership)
STATEMENTS OF OPERATIONS AND CHANGES
IN PARTNERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004
2004 | 2003 | |||||||
Revenue: | ||||||||
Gross potential rents | $ | 722,814 | $ | 742,761 | ||||
Excess rents | 129,960 | 101,670 | ||||||
Less vacancies | (5,344 | ) | (1,878 | ) | ||||
Net rental income | 847,430 | 842,553 | ||||||
Laundry and vending | 11,703 | 11,714 | ||||||
Tenant charges | 1,942 | 2,109 | ||||||
Interest income | 977 | 1,010 | ||||||
Other income | 35,276 | 20,260 | ||||||
Total revenues | 897,328 | 877,646 | ||||||
Expenses: | ||||||||
Administrative | 177,881 | 213,168 | ||||||
Utilities | 64,157 | 57,279 | ||||||
Operating and maintenance | 103,812 | 65,729 | ||||||
Taxes and insurance | 58,507 | 42,116 | ||||||
Interest | 210,744 | 208,077 | ||||||
Depreciation and amortization | 206,876 | 231,971 | ||||||
Total expenses | 819,310 | 821,007 | ||||||
Net income (loss) | 78,018 | 56,639 | ||||||
Partners’ equity - beginning | 4,495,325 | 4,438,686 | ||||||
Partners’ distributions | (62,697 | ) | - | |||||
Partners’ equity - ending | $ | 4,510,646 | $ | 4,495,325 |
See the accompanying notes to financial statements.
F-5 |
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2004
2004 | 2003 | |||||||
Cash flows from operating activities: | ||||||||
Rental receipts | $ | 835,626 | $ | 831,341 | ||||
Operating interest receipts | 402 | 349 | ||||||
Other operating receipts | 13,645 | 34,083 | ||||||
Payments to suppliers and employees: | ||||||||
Administrative expenses | (44,918 | ) | (56,718 | ) | ||||
Management fees | (41,569 | ) | (66,912 | ) | ||||
Utilities | (64,157 | ) | (60,562 | ) | ||||
Salaries and wages | (55,374 | ) | (59,077 | ) | ||||
Operating and maintenance | (87,221 | ) | (50,599 | ) | ||||
Real estate taxes | (9,675 | ) | - | |||||
Payroll taxes | (7,017 | ) | (5,515 | ) | ||||
Property insurance | (8,405 | ) | (37,701 | ) | ||||
Miscellaneous taxes and insurance | (21,224 | ) | (42,989 | ) | ||||
Interest on mortgage | (177,972 | ) | (180,704 | ) | ||||
Interest on other notes | - | (86,401 | ) | |||||
Funding security deposit account | (1,961 | ) | 25 | |||||
Net cash provided by operating activities | 330,180 | 218,620 | ||||||
Cash flows from investing activities: | ||||||||
Net tax and insurance impounds | (36,463 | ) | (8,712 | ) | ||||
Net reserve deposits, including interest | (21,018 | ) | (21,086 | ) | ||||
Reserve interest | 575 | 661 | ||||||
Capital expenditures | - | (10,050 | ) | |||||
Net cash used in investing activities | (56,906 | ) | (39,187 | ) | ||||
Cash flows from financing activities: | ||||||||
Mortgage principal payments | (40,281 | ) | (37,547 | ) | ||||
Developer fee payments | (7,719 | ) | (91,000 | ) | ||||
Advances to general partner | (6,281 | ) | - | |||||
Partner distributions | (62,697 | ) | - | |||||
Other note payments | - | (25,688 | ) | |||||
Net cash used in financing activities | (116,978 | ) | (154,235 | ) | ||||
Net increase (decrease) in cash | 156,296 | 25,198 | ||||||
Cash at beginning of year | 71,300 | 46,102 | ||||||
Cash at end of year | $ | 227,596 | $ | 71,300 |
See the accompanying notes to financial statements.
F-6 |
Blessed Rock of El Monte
Statements of Cash Flows, December 31, 2003 and 2004
Page 2
Reconciliation of Net Income (Loss)
to Net Cash Provided by Operating Activities
2004 | 2003 | |||||||
Net income (loss) | $ | 78,018 | $ | 56,639 | ||||
Adjustments to reconcile net income (loss) to net cash Provided by operating activities: | ||||||||
Depreciation and amortization | 206,876 | 231,971 | ||||||
Decrease (increase) in: | ||||||||
Security deposit cash | (1,746 | ) | 600 | |||||
Receivables | 109 | 1,633 | ||||||
Prepaids | 12,500 | (34,322 | ) | |||||
Increase (decrease) in: | ||||||||
Payables | 4,535 | (12,627 | ) | |||||
Security deposit liability | (215 | ) | (575 | ) | ||||
Accrued expenses | 30,303 | (23,481 | ) | |||||
Unearned rental income | 375 | (557 | ) | |||||
Reserve interest earned | (575 | ) | (661 | ) | ||||
Net cash provided by operating activities | $ | 330,180 | $ | 218,620 |
See the accompanying notes to financial statements.
F-7 |
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
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. |
F-8 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2004
Page 2
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. | $ | 2,502,358 | |||
Less current portion | (43,214 | ) | |||
$ | 2,459,144 |
The amounts maturing for the next five years are:
2005 | $ | 43,214 | ||||
2006 | 46,361 | |||||
2007 | 49,737 | |||||
2008 | 53,360 | |||||
2009 | 57,245 |
F-9 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2004
Page 3
4. | NOTES PAYABLE |
Notes payable at December 31, 2004 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. No events of default have occurred through December 31, 2004. 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, 2004, accrued interest on note was $21,035. | $ | 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, 2004, accrued interest on note was $8,618. | 430,647 | ||||
$ | 681,525 |
F-10 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2004
Page 4
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, 2004 was $140,000. | |
6. | RELATED PARTY TRANSACTIONS |
Capital Contributions: The limited partners, WNC Housing Tax Credit Fund V, L.P. Series III and IV, 49.495% limited partners, are required to make a capital contribution of $5,162,171, which shall be made equally between them, in amounts and at times as stated in the Limited Partnership Agreement. The limited partners’ cash contributions may be reduced to account for reduced tax benefits, if any. At December 31, 2004, the limited partners have contributed $5,021,578. | |
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. | |
Developer Fee Payable and Advance Payable to General Partner: Under the terms of the Partnership Agreement, Everland, Inc., the developer, is to receive a developer fee totaling $1,050,416. This developer fee bears no interest and is payable upon additional capital contributions by the limited partners. During the periods ended December 31, 2004 and 2003, $14,000 and $91,000 of payments of the developer fees were made, respectively. | |
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 $42,505 and $42,105 for the years 2004 and 2003, respectively. |
F-11 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2004
Page 5
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 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. $60,442 of fees for the years 1998, 1999 and 2000 were recorded for year ended December 31, 2001. $55,013 of the fees were paid in year 2001. None were paid in prior years. The limited partners earned $12,000 in reporting fees during 2002 and 2003 and were paid $29,647 each year, resulting in $29,865 in prepaid reporting fees at December 31, 2004. | |
The managing general partner earned $16,440 for 2001, 2002 and 2003 for an operational asset management fee which was accrued in 2003. $16,440 was paid in 2003 leaving an accrual balance of $32,880. | |
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. |
F-12 |
F-13 |
(A California Limited Partnership)
SUPPLEMENTAL SCHEDULE OF EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2003 and 2004
2004 | 2003 | |||||||
Site management payroll | $ | 38,783 | $ | 40,848 | ||||
Manager’s rent-free apartment | 12,288 | 12,288 | ||||||
Management fee | 42,505 | 42,105 | ||||||
Partnership asset management fees | 16,440 | 49,320 | ||||||
Reporting fee | 12,000 | 12,000 | ||||||
Audit fee | 5,800 | 5,500 | ||||||
Legal fees | 250 | - | ||||||
Advertising | - | 256 | ||||||
Telephone and answering service | 7,148 | 4,330 | ||||||
Office supplies | 5,052 | 5,076 | ||||||
Educational and social programs | 11,520 | 11,520 | ||||||
Health insurance and other employee benefits | 6,381 | 8,552 | ||||||
Payroll taxes | 7,017 | 5,515 | ||||||
Workers’ compensation | 10,331 | 9,559 | ||||||
Other administration | 2,366 | 6,299 | ||||||
Subtotal administrative expenses | 177,881 | 213,168 | ||||||
Electricity | 21,944 | 19,366 | ||||||
Water and sewer | 20,754 | 19,247 | ||||||
Fuel | 17,579 | 14,469 | ||||||
Garbage and trash removal | 3,880 | 4,197 | ||||||
Subtotal utilities | 64,157 | 57,279 | ||||||
Maintenance and repairs payroll | 16,591 | 15,678 | ||||||
Maintenance and repairs supply | 6,620 | 5,650 | ||||||
Maintenance and repairs contract | 11,062 | 17,360 | ||||||
Painting and decorating | 24,779 | 6,538 | ||||||
Grounds | 12,640 | 15,055 | ||||||
Services | 3,085 | 2,366 | ||||||
Furniture and furnishings replacement | 29,035 | 3,082 | ||||||
Subtotal maintenance expenses | 103,812 | 65,729 | ||||||
Property taxes | 9,675 | - | ||||||
Other taxes and licenses | 6,680 | 4,415 | ||||||
Property and liability insurance | 41,505 | 37,701 | ||||||
Other insurance | 647 | - | ||||||
Subtotal tax and insurance | 58,507 | 42,116 | ||||||
Interest | 208,077 | 210,744 | ||||||
Depreciation and amortization | 206,876 | 231,971 | ||||||
Total expenses | $ | 819,310 | $ | 821,007 |
F-14 |
CONTENTS
Page | |||
INDEPENDENT AUDITOR’S REPORT | F-2 | ||
FINANCIAL STATEMENTS: | |||
Balance Sheets | F-3 | ||
Statements of Operations and Changes in Partners’ Equity | F-5 | ||
Statements of Cash Flows | F-6 | ||
Notes to Financial Statements | F-8 | ||
SUPPLEMENTARY INFORMATION: | F-13 | ||
Supplemental Schedule of Expenses | F-14 | ||
Supplemental Schedule of Changes in Partners’ Equity |
F-1 |
Partners
Blessed Rock of El Monte
Costa Mesa, California
I have audited the accompanying balance sheet of Blessed Rock of El Monte, a California Limited Partnership as of December 31, 2004 and 2005, 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, 2004 and 2005 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.
February 8, 2006 | 33-0724657 |
F-2 |
(A California Limited Partnership)
BALANCE SHEETS, DECEMBER 31, 2004 AND 2005
ASSETS
2005 | 2004 | |||||||
Current Assets: | ||||||||
Operating cash and equivalents | $ | 459,783 | $ | 227,596 | ||||
Security deposit cash | 25,801 | 25,969 | ||||||
Tenant accounts receivable | 370 | - | ||||||
Other accounts receivable | 6,281 | 81,081 | ||||||
Prepaid expenses | 61,945 | 51,897 | ||||||
Total current assets | 554,180 | 386,543 | ||||||
Property, Building, and Equipment. At Cost: | ||||||||
Land | 1,271,162 | 1,271,162 | ||||||
Building and improvements | 7,992,586 | 7,992,586 | ||||||
Equipment | 54,657 | 54,657 | ||||||
9,318,405 | 9,318,405 | |||||||
Accumulated depreciation | (1,728,013 | ) | (1,523,169 | ) | ||||
Property, building, and equipment - net | 7,590,392 | 7,795,236 | ||||||
Other Assets: | ||||||||
Replacement reserve | 156,909 | 135,579 | ||||||
Tax and insurance restricted accounts | 22,073 | 23,916 | ||||||
Total other assets | 178,982 | 159,495 | ||||||
$ | 8,323,554 | $ | 8,341,274 |
See the accompanying notes to financial statements.
F-3 |
Blessed Rock of El Monte
Balance Sheets, December 31, 2004 and 2005
Page 2
LIABILITIES AND PARTNERS’ EQUITY
2005 | 2004 | |||||||
Current Liabilities: | ||||||||
Current portion of long-term debt | $ | 46,361 | $ | 43,214 | ||||
Accounts payable | 6,667 | 4,535 | ||||||
Security trust liability | 23,635 | 23,770 | ||||||
Accrued interest | 14,175 | 14,701 | ||||||
Accrued asset management fees | 32,880 | 32,880 | ||||||
Other accruals | 6,025 | 198 | ||||||
Unearned rental income | 1,054 | 1,007 | ||||||
Total current liabilities | 130,797 | 120,305 | ||||||
Long-term Debt: | ||||||||
Mortgage payable, less current portion included above | 2,412,783 | 2,459,144 | ||||||
Notes payable | 681,525 | 681,525 | ||||||
Accrued interest payable | 199,995 | 169,654 | ||||||
Grant loan payable | 400,000 | 400,000 | ||||||
Developer fee payable | - | - | ||||||
Total long-term debt | 3,694,303 | 3,710,323 | ||||||
Partners’ equity | 4,498,454 | 4,510,646 | ||||||
$ | 8,323,554 | $ | 8,341,274 |
See the accompanying notes to financial statements.
F-4 |
(A California Limited Partnership)
STATEMENTS OF OPERATIONS AND CHANGES
IN PARTNERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
2005 | 2004 | |||||||
Revenue: | ||||||||
Gross potential rents | $ | 745,260 | $ | 722,814 | ||||
Excess rents | 117,337 | 129,960 | ||||||
Less vacancies | (1,442 | ) | (5,344 | ) | ||||
Net rental income | 861,155 | 847,430 | ||||||
Laundry and vending | 13,410 | 11,703 | ||||||
Tenant charges | 1,482 | 1,942 | ||||||
Interest income | 2,490 | 977 | ||||||
Other income | 886 | 35,276 | ||||||
Total revenues | 879,423 | 897,328 | ||||||
Expenses: | ||||||||
Administrative | 200,758 | 177,881 | ||||||
Utilities | 74,145 | 64,157 | ||||||
Operating and maintenance | 128,436 | 103,812 | ||||||
Taxes and insurance | 56,579 | 58,507 | ||||||
Interest | 208,077 | 204,853 | ||||||
Depreciation and amortization | 204,844 | 206,876 | ||||||
Total expenses | 869,615 | 819,310 | ||||||
Net income (loss) | 9,808 | 78,018 | ||||||
Partners’ equity - beginning | 4,510,646 | 4,495,325 | ||||||
Partners’ distributions | (22,000 | ) | (62,697 | ) | ||||
Partners’ equity - ending | $ | 4,498,454 | $ | 4,510,646 |
See the accompanying notes to financial statements.
F-5 |
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2005
2005 | 2004 | |||||||
Cash flows from operating activities: | ||||||||
Rental receipts | $ | 848,544 | $ | 835,626 | ||||
Operating interest receipts | 1,704 | 402 | ||||||
Other operating receipts | 90,578 | 13,645 | ||||||
Payments to suppliers and employees: | ||||||||
Administrative expenses | (47,918 | ) | (44,918 | ) | ||||
Management fees | (99,011 | ) | (41,569 | ) | ||||
Utilities | (71,596 | ) | (64,157 | ) | ||||
Salaries and wages | (43,358 | ) | (55,374 | ) | ||||
Operating and maintenance | (115,758 | ) | (87,221 | ) | ||||
Real estate taxes | (7,643 | ) | (9,675 | ) | ||||
Payroll taxes | (5,062 | ) | (7,017 | ) | ||||
Property insurance | (45,120 | ) | (8,405 | ) | ||||
Miscellaneous taxes and insurance | (17,907 | ) | (21,224 | ) | ||||
Interest on mortgage | (171,384 | ) | (177,972 | ) | ||||
Funding security deposit account | 33 | (1,961 | ) | |||||
Net cash provided by operating activities | 316,102 | 330,180 | ||||||
Cash flows from investing activities: | ||||||||
Net tax and insurance impounds | 1,843 | (36,463 | ) | |||||
Net reserve deposits, including interest | (21,330 | ) | (21,018 | ) | ||||
Reserve interest | 786 | 575 | ||||||
Net cash used in investing activities | (18,701 | ) | (56,906 | ) | ||||
Cash flows from financing activities: | ||||||||
Mortgage principal payments | (43,214 | ) | (40,281 | ) | ||||
Developer fee payments | - | (7,719 | ) | |||||
Advances to general partner | - | (6,281 | ) | |||||
Partner distributions | (22,000 | ) | (62,697 | ) | ||||
Net cash used in financing activities | (65,214 | ) | (116,978 | ) | ||||
Net increase (decrease) in cash | 232,187 | 156,296 | ||||||
Cash at beginning of year | 227,596 | 71,300 | ||||||
Cash at end of year | $ | 459,783 | $ | 227,596 |
See the accompanying notes to financial statements.
F-6 |
Blessed Rock of El Monte
Statements of Cash Flows, December 31, 2004 and 2005
Page 2
Reconciliation of Net Income (Loss)
to Net Cash Provided by Operating Activities
2005 | 2004 | |||||||
Net income (loss) | $ | 9,808 | $ | 78,018 | ||||
Adjustments to reconcile net income (loss) to net cash Provided by operating activities: | ||||||||
Depreciation and amortization | 204,844 | 206,876 | ||||||
Decrease (increase) in: | ||||||||
Security deposit cash | 168 | (1,746 | ) | |||||
Receivables | 74,430 | 109 | ||||||
Prepaids | (10,048 | ) | 12,500 | |||||
Increase (decrease) in: | ||||||||
Payables | (1,522 | ) | 4,535 | |||||
Security deposit liability | (135 | ) | (215 | ) | ||||
Accrued expenses | 39,296 | 30,303 | ||||||
Unearned rental income | 47 | 375 | ||||||
Reserve interest earned | (786 | ) | (575 | ) | ||||
Net cash provided by operating activities | $ | 316,102 | $ | 330,180 |
See the accompanying notes to financial statements.
F-7 |
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
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. |
F-8 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2005
Page 2
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. | $ | 2,459,144 | |||
Less current portion | (46,361 | ) | |||
$ | 2,412,783 |
The amounts maturing for the next five years are:
2006 | $ | 46,361 | ||||
2007 | 49,737 | |||||
2008 | 53,360 | |||||
2009 | 57,245 | |||||
2010 | 61,414 |
F-9 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2005
Page 3
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. No events of default have occurred through December 31, 2005. 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, 2005, accrued interest on note was $31,070. | $ | 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, 2005, accrued interest on note was $12,924. | 430,647 | ||||
$ | 681,525 |
F-10 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2005
Page 4
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, 2005 was $156,000. | |
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. | |
Developer Fee Payable and Advance Payable to General Partner: Under the terms of the Partnership Agreement, Everland, Inc., the developer, is to receive a developer fee totaling $1,050,416. This developer fee bears no interest and is payable upon additional capital contributions by the limited partners. For 2004, $14,000 was paid. No payments were made in 2005. | |
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 $42,505 and $43,206 for the years 2004 and 2005, 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 $12,000 in reporting fees for 2004 and $46,889 for 2005. Payments of $12,000 and $11,000 were made for 2004 and 2005, respectively, leaving a balance in accrued reporting fees of $6,024. |
F-11 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2005
Page 5
The managing general partner earned $16,440 for an operational asset management fee for the years 2001 through 2005. Payments of $16,440 were made each of the years from 2003 through 2005, leaving an accrued balance of $32,880 at December 31, 2005. | |
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. |
F-12 |
F-13 |
(A California Limited Partnership)
SUPPLEMENTAL SCHEDULE OF EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2004 and 2005
2005 | 2004 | |||||||
Site management payroll | $ | 30,830 | $ | 38,783 | ||||
Manager’s rent-free apartment | 12,288 | 12,288 | ||||||
Management fee | 43,206 | 42,505 | ||||||
Partnership asset management fees | 16,440 | 16,440 | ||||||
Reporting fee | 46,889 | 12,000 | ||||||
Audit fee | 6,000 | 5,800 | ||||||
Legal fees | 424 | 250 | ||||||
Telephone and answering service | 4,731 | 7,148 | ||||||
Office supplies | 4,528 | 5,052 | ||||||
Educational and social programs | 11,520 | 11,520 | ||||||
Health insurance and other employee benefits | 4,349 | 6,381 | ||||||
Payroll taxes | 5,062 | 7,017 | ||||||
Workers’ compensation | 8,536 | 10,331 | ||||||
Other administration | 5,955 | 2,366 | ||||||
Subtotal administrative expenses | 200,758 | 177,881 | ||||||
Electricity | 22,412 | 21,944 | ||||||
Water and sewer | 23,294 | 20,754 | ||||||
Fuel | 24,196 | 17,579 | ||||||
Garbage and trash removal | 4,243 | 3,880 | ||||||
Subtotal utilities | 74,145 | 64,157 | ||||||
Maintenance and repairs payroll | 12,528 | 16,591 | ||||||
Maintenance and repairs supply | 7,472 | 6,620 | ||||||
Maintenance and repairs contract | 19,337 | 11,062 | ||||||
Painting and decorating | 25,216 | 24,779 | ||||||
Grounds | 10,519 | 12,640 | ||||||
Services | 2,195 | 3,085 | ||||||
Furniture and furnishings replacement | 51,169 | 29,035 | ||||||
Subtotal maintenance expenses | 128,436 | 103,812 | ||||||
Property taxes | 7,644 | 9,675 | ||||||
Other taxes and licenses | 3,995 | 6,680 | ||||||
Property and liability insurance | 43,913 | 41,505 | ||||||
Other insurance | 1,027 | 647 | ||||||
Subtotal tax and insurance | 56,579 | 58,507 | ||||||
Interest | 204,853 | 208,077 | ||||||
Depreciation and amortization | 204,844 | 206,876 | ||||||
Total expenses | $ | 869,615 | $ | 819,310 |
F-14 |
CONTENTS
Page | |||
INDEPENDENT AUDITOR’S REPORT | F-2 | ||
FINANCIAL STATEMENTS: | |||
Balance Sheets | F-3 | ||
Statements of Operations and Changes in Partners’ Equity | F-5 | ||
Statements of Cash Flows | F-6 | ||
Notes to Financial Statements | F-8 | ||
SUPPLEMENTARY INFORMATION: | F-13 | ||
Supplemental Schedule of Expenses | F-14 | ||
Supplemental Schedule of Changes in Partners’ Equity |
F-1 |
Partners
Blessed Rock of El Monte
Costa Mesa, California
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.
March 7, 2007 | 33-0724657 |
F-2 |
(A California Limited Partnership)
BALANCE SHEETS, DECEMBER 31, 2005 AND 2006
ASSETS
2006 | 2005 | |||||||
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 | ||||||
Total current assets | 669,259 | 554,180 | ||||||
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 | ||||||
9,355,978 | 9,318,405 | |||||||
Accumulated depreciation | (1,933,378 | ) | (1,728,013 | ) | ||||
Property, building, and equipment - net | 7,422,600 | 7,590,392 | ||||||
Other Assets: | ||||||||
Replacement reserve | 134,830 | 156,909 | ||||||
Tax and insurance restricted accounts | 33,152 | 22,073 | ||||||
Total other assets | 167,982 | 178,982 | ||||||
$ | 8,259,841 | $ | 8,323,554 |
See the accompanying notes to financial statements.
F-3 |
Blessed Rock of El Monte
Balance Sheets, December 31, 2005 and 2006
Page 2
LIABILITIES AND PARTNERS’ EQUITY
2006 | 2005 | |||||||
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 | ||||||
Total current liabilities | 155,321 | 130,797 | ||||||
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 | ||||||
Total long-term debt | 3,674,906 | 3,694,303 | ||||||
Partners’ equity | 4,429,614 | 4,498,454 | ||||||
$ | 8,259,841 | $ | 8,323,554 |
See the accompanying notes to financial statements.
F-4 |
(A California Limited Partnership)
STATEMENTS OF OPERATIONS AND CHANGES
IN PARTNERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2006
2006 | 2005 | |||||||
Revenue: | ||||||||
Gross potential rents | $ | 723,570 | $ | 745,260 | ||||
Excess rents | 149,429 | 117,337 | ||||||
Less vacancies | (918 | ) | (1,442 | ) | ||||
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 | ||||||
Total revenues | 887,293 | 879,423 | ||||||
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 | 204,853 | 202,230 | ||||||
Depreciation and amortization | 205,365 | 204,844 | ||||||
Total expenses | 859,469 | 869,615 | ||||||
Net income (loss) | 27,824 | 9,808 | ||||||
Partners’ equity - beginning | 4,498,454 | 4,510,646 | ||||||
Partners’ distributions | (96,664 | ) | (22,000 | ) | ||||
Partners’ equity - ending | $ | 4,429,614 | $ | 4,498,454 |
See the accompanying notes to financial statements.
F-5 |
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2006
2006 | 2005 | |||||||
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 | ||||||
Net cash provided by operating activities | 292,737 | 316,102 | ||||||
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 | ) | - | |||||
Net cash used in investing activities | (25,346 | ) | (18,701 | ) | ||||
Cash flows from financing activities: | ||||||||
Mortgage principal payments | (46,361 | ) | (43,214 | ) | ||||
Partner distributions | (96,664 | ) | (22,000 | ) | ||||
Net cash used in financing activities | (143,025 | ) | (65,214 | ) | ||||
Net increase (decrease) in cash | 124,366 | 232,187 | ||||||
Cash at beginning of year | 459,783 | 227,596 | ||||||
Cash at end of year | $ | 584,149 | $ | 459,783 |
See the accompanying notes to financial statements.
F-6 |
Blessed Rock of El Monte
Statements of Cash Flows, December 31, 2005 and 2006
Page 2
Reconciliation of Net Income (Loss)
to Net Cash Provided by Operating Activities
2006 | 2005 | |||||||
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 | ) | ||||
Net cash provided by operating activities | $ | 292,737 | $ | 316,102 |
See the accompanying notes to financial statements.
F-7 |
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2006
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. |
F-8 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2006
Page 2
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 | ) | |||
$ | 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 |
F-9 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2006
Page 3
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 | ||||
$ | 681,525 |
F-10 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2006
Page 4
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. |
F-11 |
Blessed Rock of El Monte
Notes to Financial Statements, December 31, 2006
Page 5
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. |
F-12 |
F-13 |
(A California Limited Partnership)
SUPPLEMENTAL SCHEDULE OF EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2005 and 2006
2006 | 2005 | |||||||
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 | ||||||
Subtotal administrative expenses | 211,138 | 200,758 | ||||||
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 | ||||||
Subtotal utilities | 80,904 | 74,145 | ||||||
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 | ||||||
Subtotal maintenance expenses | 106,694 | 128,436 | ||||||
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 | ||||||
Subtotal tax and insurance | 53,138 | 56,579 | ||||||
Interest | 202,230 | 204,853 | ||||||
Depreciation and amortization | 205,365 | 204,844 | ||||||
Total expenses | $ | 859,469 | $ | 869,615 |
F-14 |