Attached files
Exhibit
99.2
FINANCIAL AND
COMPLIANCE REPORTS AND
INDEPENDENT
AUDITOR'S REPORT
CRESTVIEW HOUSING,
LTD.
RHS PROJECT NO.
31-015-387826946
DECEMBER 31, 2014
AND 2013
CRESTVIEW HOUSING,
LTD.
RHS PROJECT NO.
31-015-387826946
TABLE OF
CONTENTS
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PAGE
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INDEPENDENT
AUDITORS' REPORT
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3
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FINANCIAL
STATEMENTS:
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BALANCE SHEETS
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5
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STATEMENTS OF
OPERATIONS
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7
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STATEMENTS OF
CHANGES IN PARTNERS' EQUITY
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8
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STATEMENTS OF CASH
FLOWS
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9
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NOTES TO FINANCIAL
STATEMENTS
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10
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SUPPLEMENTAL
INFORMATION:
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INDEPENDENT
AUDITOR'S REPORT ON INFORMATION ACCOMPANYING THE BASIC FINANCIAL
STATEMENTS
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22
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SUPPLEMENTAL
INFORMATION REQUIRED BY RD
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23
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PAILET,
MEUNIER and LeBLANC, L.L.P.
Management
Consultants
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners
Crestview Housing, Ltd.
Kalispell,
Montana
and
USDA Rural
Development Servicing Office Kalispell, Montana
We have audited the
accompanying financial statements of Crestview Housing, Ltd., RHS
Project No. 31-015- 387826946, which comprise the balance sheet as
of December 31, 2014 and 2013 and the related statements of
operations, changes in partners' equity, and cash flows for each of
the years then ended, and the related notes to the financial
statements.
Management's
Responsibility for the Financial Statements
Management is
responsible for the preparation and fair presentation of these
financial statements in accordance with accounting principles
generally accepted in the United States of America; this includes
the design, implementation, and maintenance of internal control
relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Auditor's
Responsibility
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 as established
by the Auditing Standards Board (United States) and in accordance
with auditing standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free from material
misstatement.
An audit involves
performing procedures to obtain audit evidence about the amounts
and disclosures in the financial statements. The
procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the
entity's preparation an fair presentation of the financial
statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal
control. The Crestview Housing, Ltd. is not
required to have, or were we engaged to perform, an audit of its
internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness
of significant accounting estimates made by management, as well as
evaluating the overall presentation of the financial
statements.
We believe that the
audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Opinion
In our opinion, the
financial statements referred to above present fairly,
in all material respects, the financial
position of Crestview Housing, Ltd. as of December 31, 2014 and
2013, and results of its operations and its cash flows for the
years then ended in accordance with accounting principles generally
accepted in the United States of America.
Metairie,
Louisiana
February 6,
2015
4
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
BALANCE
SHEETS
DECEMBER
31, 2014 AND 2013
ASSETS
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2014
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2013
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Current Assets
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Cash and
Equivalents
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$
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15,887
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$
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1,142
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Accounts
Receivable, Tenant
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261
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526
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Accounts
Receivable, Subsidy
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3,764
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9,206
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Prepaid
Expenses
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677
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738
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Total Current
Assets
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20,589
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11,612
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Restricted Cash
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Reserve
Funds
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78,564
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76,445
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Security
Deposits
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4,870
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4,669
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Total Restricted
Cash
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83,434
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81,114
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Rental
Property
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Buildings
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2,725,449
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2,725,449
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Furniture &
Fixtures
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16,000
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16,000
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Total Rental
Property
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2,741,449
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2,741,449
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Accumulated
Depreciation
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(468,914
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)
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(389,637
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)
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Land
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250,446
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250,446
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Rental Property,
Net
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2,522,981
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2,602,258
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Other
Assets
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Loan Fees,
Net
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11,067
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13,042
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Total
Assets
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$
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2,638,071
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$
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2,708
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See auditor's
report and accompanying notes to financial statements.
5
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
BALANCE
SHEETS
FOR
THE YEARS ENDED DECEMBER 31, 2014 AND 2013
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2014
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2013
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LIABILITIES
AND PARTNERS' EQUITY
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Current
Liabilities
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Accounts
Payable
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$
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16,190
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$
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8,582
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Accrued Interest
Payable
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602
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1,906
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Management Fees
Payable
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1,265
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1,150
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Prepaid
Rent
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-
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31
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Current Portion of
Long Term Debt
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10,277
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276,878
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Total Current
Liabilities
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28,334
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288,547
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Deposits &
Prepayment Liabilities
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Tenants' Security
Deposits
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4,850
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4,550
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Real Estate Taxes
Payable
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993
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5,238
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Total Deposits and
Prepayment Liabilities
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5,843
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9,788
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Long Term Liabilities
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Mortgage Payable -
Glacier Bank
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214,900
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218,671
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Mortgage Payable -
RHS
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469,784
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475,577
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Construction Note
Payable - Glacier Bank
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-
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267,553
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Less: Current
Portion
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(10,277
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)
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(276,878
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)
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Due to Related
Parties
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173,848
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173,814
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Total Long Term
Liabilities
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848,255
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858,737
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Total
Liabilities
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882,432
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1,157,072
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Partners'
Equity
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Partners'
Equity
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1,755,639
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1,550,954
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Total Liabilities
and Partners' Equity
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$
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2,638,071
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$
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2,708,026
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|
See auditor's
report and accompanying notes to financial statements.
6
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
STATEMENTS
OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2014 AND 2013
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2014
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2013
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Rental Income
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Apartments
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$
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73,424
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$
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72,762
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Tenant Assistance
Payments
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51,569
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54,150
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Potential Rental
Income
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124,993
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126,912
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Less: Vacancies
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3,806
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5,296
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Total Rental
Income
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121,187
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121,616
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Other Income
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Laundry &
Vending
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1,051
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996
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Interest
Income
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79
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97
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Tenant
Charges
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|
409
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1,262
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Affordable Housing
Preservation Grant
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270,939
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-
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Total Other
Income
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272,478
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2,355
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Total
Income
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393,665
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123,971
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Expenses
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Operating and
Maintenance
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21,259
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15,192
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Utilities
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15,680
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14,647
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Administrative
|
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30,444
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40,088
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Taxes and
Insurance
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10,145
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20,053
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Interest on
Mortgage Payable
|
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29,006
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|
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23,183
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|
Total
Expenses
|
|
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106,534
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|
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113,163
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|
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Income (Loss) from
Rental Operations
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287,131
|
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10,808
|
|
Non-Operating
Income and (Expenses) Interest Subsidy Income
|
|
|
42,687
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|
|
|
41,617
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Interest Subsidy
Expense
|
|
|
(42,687
|
)
|
|
|
(41,617
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)
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Asset Management
Fees
|
|
|
(1,194
|
)
|
|
|
(1,159
|
)
|
Depreciation and
Amortization
|
|
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(81,252
|
)
|
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|
(76,514
|
)
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Total
Non-Operating Income and (Expenses)
|
|
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(82,446
|
)
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(77,673
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)
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Net Income
(Loss)
|
|
$
|
204,685
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|
|
$
|
(66,865
|
)
|
See auditor's
report and accompanying notes to financial statements.
7
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
STATEMENTS
OF CHANGES IN PARTNERS' EQUITY
FOR
THE YEARS ENDED DECEMBER 31, 2014 AND 2013
|
|
|
|
2013
|
|
|||
Partners' Equity -
January 1,
|
|
$
|
1,550,954
|
|
|
$
|
1,617,819
|
|
Contributions by
Partners
|
|
|
-
|
|
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|
-
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|
Net Income
(Loss)
|
|
|
204,685
|
|
|
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(66,865
|
)
|
Distributions to
Partners
|
|
|
-
|
|
|
|
-
|
|
Partners' Equity -
December 31,
|
|
$
|
1,755,639
|
|
|
$
|
1,550,954
|
|
See auditor's
report and accompanying notes to financial statements.
8
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
STATEMENTS
OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2014 AND 2013
|
|
2014
|
|
|
2013
|
|
||
Cash flows from
operating activities:
|
|
|
|
|
|
|
||
Net
Income
|
|
$
|
204,685
|
|
|
$
|
(66,865
|
)
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
Depreciation and
amortization
|
|
|
81,252
|
|
|
|
76,514
|
|
(Increase) decrease
in accounts receivable
|
|
|
5,707
|
|
|
|
(4,591
|
)
|
(Increase) decrease
in prepaid expenses
|
|
|
61
|
|
|
|
169
|
|
Increase (decrease)
in accounts payable
|
|
|
7,608
|
|
|
|
6,584
|
|
Increase (decrease)
in accrued interest
|
|
|
(1,304
|
)
|
|
|
(360
|
)
|
Increase (decrease)
in accrued liabilities
|
|
|
115
|
|
|
|
(50
|
)
|
Increase (decrease)
in accrued prepaid rents
|
|
|
(31
|
)
|
|
|
(64
|
)
|
Increase (decrease)
in security deposits
|
|
|
300
|
|
|
|
(30
|
)
|
Increase (decrease)
in real estate tax payable
|
|
|
(4,245
|
)
|
|
|
74
|
|
Total
adjustments
|
|
|
89,463
|
|
|
|
78,246
|
|
Net cash provided
(used) by operating activities
|
|
|
294,148
|
|
|
|
11,381
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
(Deposits)
withdrawals in reserve funds
|
|
|
(2,119
|
)
|
|
|
5,807
|
|
(Deposits)
withdrawals in security deposit account
|
|
|
(201
|
)
|
|
|
(66
|
)
|
Purchase of fixed
assets
|
|
|
-
|
|
|
|
(267,390
|
)
|
Grant support for
capital purchases
|
|
|
(270,939
|
)
|
|
|
-
|
|
Net cash provided
(used) by investing activities
|
|
|
(273,259
|
)
|
|
|
(261,649
|
)
|
|
|
|
|
|
|
|
||
Cash flows from
financing activities:
|
|
|
|
|
|
|
||
Principal payments
on long-term debt
|
|
|
(9,564
|
)
|
|
|
(2,439
|
)
|
Principal payments
on land loan
|
|
|
(267,553
|
)
|
|
|
(5,212
|
)
|
Proceeds from
long-term debt
|
|
|
-
|
|
|
|
(267,553
|
)
|
Amortizable loan
fees
|
|
|
-
|
|
|
|
(6,875
|
)
|
Proceeds from
Grant
|
|
|
270,939
|
|
|
|
-
|
|
Proceeds (payments)
in related party payable
|
|
|
34
|
|
|
|
(4,340
|
)
|
Net cash provided
(used) by financing activities
|
|
|
(6,144
|
)
|
|
|
248,687
|
|
|
|
|
|
|
|
|
|
|
Net increase
(decrease) in cash and equivalents
|
|
|
14,745
|
|
|
|
(1,581
|
)
|
Cash and
equivalents, beginning of year
|
|
|
1,142
|
|
|
|
2,723
|
|
Cash and
equivalents, end of year
|
|
$
|
15,887
|
|
|
$
|
1,142
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information: Cash paid during the year
for:
|
|
|
|
|
|
|||
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
$
|
65,654
|
|
|
$
|
71,582
|
|
See auditor's report and accompanying notes to financial
statements.
9
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
A - NATURE OF OPERATIONS
Crestview Housing,
Ltd. (the "Partnership") was formed June 30, 2006, as a limited
partnership under the laws of the State of Montana, for
the purpose of constructing and operating a 24-unit apartment
project, located in Bigfork, Montana.
As incentive for
investment equity, the Partnership applied for and received an
allocation certificate for low-income housing tax credits
established by the Tax Reform Act of 1986. Tenant eligibility and
rental charges are restricted in accordance with Internal Revenue
Code Section 42. The low-income housing tax credits are provided
for the purchase and rehabilitation of the project.
The Project also
receives rental assistance for a portion of the units under a
rental assistance contract with the U.S. Department of Agriculture,
Rural Development. This agreement provides a significant portion of
the Project's rental income. During 2014 and 2013, rental
assistance payments received under this contract were $51,569 and
$54,150, respectively.
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the
significant accounting policies consistently applied in the
preparation of the accompanying financial statements
follows.
Basis of
Accounting
The financial
statements of the partnership are prepared on the accrual basis of
accounting, whereby income is recognized as earned and expenses are
recognized as obligations are incurred, in accordance with
generally accepted accounting principles.
Cash and Cash
Equivalents
The Statement of
Cash Flows considers all highly liquid instruments purchased with a
maturity of three months or less to be cash equivalents. These
amounts are available for current operations and development and
exclude amounts restricted for repayment of tenant security
deposits and restricted reserves.
Cash and Other
Deposits
The Partnership
maintains its cash in financial institutions insured by the Federal
Deposit Insurance Corporation (FDIC). Deposit accounts, at times,
may exceed federally insured limits. Interest
bearing and non-interest bearing deposits are insured by
the FDIC up to $250,000 per bank. The Partnership has
not experienced any losses in such accounts and believes it is not
exposed to any significant credit risk on cash and cash
equivalents.
10
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Tenant Receivable and Bad Debt
Policy
Tenant rent charges
for the current month are due on the first of the month. Tenants
who are evicted or move out are charged with damages or cleaning
fees, if applicable. Tenant receivable consists of amounts due for
rental income, security deposit or the charges for damages and
cleaning fees. The Partnership does not accrue interest on the
tenant receivable balances.
The Partnership has
not established an allowance for doubtful accounts and does not use
the reserve method for recognizing bad debts. Bad debts are treated
as direct write-offs in the period management determines that
collection is not probable. Included in expenses are bad
debts of $0 and $0 for the years ending December 31,
2014 and 2013, respectively.
Capitalization and
Depreciation
Land, buildings and
improvements are recorded at cost. Depreciation is provided
for in amounts sufficient to relate the cost
of depreciable assets to operations over their estimated service
lives using the straight-line method. Improvements are
capitalized, while expenditures for maintenance and repairs are
charged to expense as incurred. Upon disposal of depreciable
property, the appropriate property accounts are reduced by the
related costs and accumulated depreciation. The
resulting gains and losses are reflected in the
statement of operations. The rental property is depreciated over
estimated service lives as follows:
Buildings &
Improvements
|
27.5
years
|
Straight-Line
|
Furnishings & Equipment
|
7 years
|
Straight-Line
|
Impairment or Disposal of Long-Lived Assets
The Partnership
reviews its investment in real estate for impairment whenever
events or changes in circumstances indicate that the carrying value
of such property may not be
recoverable. Recoverability is measured by a
comparison of the carrying amount of the real estate to the future
net undiscounted cash flow expected to be generated by the rental
property including the low income housing tax credits and any
estimated proceeds from the eventual disposition of the real
estate. If the real estate is considered to be impaired, the
impairment to be recognized is measured at the amount by which the
carrying amount of the real estate exceeds the fair value of such
property. There were no impairment losses recognized in 2014 or
2013.
Other Assets - Loan
Fees
Other assets
consist of capitalized costs related to the arrangement of the
permanent financing for the Project. These costs will be amortized
over the life of the related debt.
11
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Tenants' Security
Deposits
Tenants'
security deposits are held in
a
separate bank account in the name of
the project. At December 31, 2014, this account was funded in an
amount greater than the security deposit liability.
Income Taxes
No provision or
benefit for income taxes has been included in these financial
statements since taxable income or loss passes through to, and is
reportable by, the partners individually.
The Partnership's
tax filings are subject to audit by various taxing authorities, and
the open audit periods are 2011 through 2013.
Rental Income
Rental income is
recognized as rentals become due. Rental payments received in
advance are deferred until earned. All leases between
the partnership and the tenants of the property are operating
leases.
Accounting Standards
Codification
The Financial
Accounting Standards Board ("FASB ASC") became the sole
authoritative source of generally accepted accounting principles in
the United States of America for periods ending after September 15,
2009. The FASB ASC incorporates all authoritative literature
previously issued by a standard setter. Adoption of the FASB ASC
has no effect on the Partnership's financial position, results from
operations, partners' equity (deficit) or cash flows. References to
the authoritative accounting literature in the notes to the
financial statements are the FASB ASC references.
Tax and Insurance
Account
Under the loan
terms of the Rural Development loan, the Partnership must make
escrow deposits for property taxes and insurance monthly. As of
December 31, 2014 and 2013, monthly deposits
for property taxes and insurance had not been
segregated.
Special Operating
Reserve
Under the terms of
the Partnership agreement, a special operating reserve was to be
established at $50,000 upon the
capital contribution of the Limited Partner and was to be
maintained to the end of the compliance period for operating
deficits. As of December 31, 2014 and 2013 the special operating
reserve had a balance of $0 due to construction cost
overruns.
12
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
C - ESTIMATES
The preparation of
financial statements in conformity with accounting principles
generally accepted in the United States of America requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could
differ from those estimates.
NOTE
D - PARTNERS' CAPITAL CONTRIBUTIONS
The Partnership has
one general partner, American Covenant Senior Housing Foundation,
Inc., one limited partner, WNC Housing Tax Credit Fund VI Series
13, L.P., and one special limited partner, WNC Housing, L.P. As of
December 31, 2014, the limited partners have contributed
$1,874,820. The partnership agreement requires the Limited Partners
to make capital contribution installments totaling
$1,973,484 subject
to any low-income housing tax credit adjustments. The remaining
balance of $98,664 shall be payable upon satisfaction of the
criteria described in Section 7 of the partnership
agreement.
NOTE
E - INTANGIBLE ASSETS
Intangible assets
at December 31, 2014 and 2013 was $11,067 and $13,042,
respectively, consisted of the following amounts:
Amortization
expense for the years ended December 31, 2014 and 2013 was $1,975
and $6,000, respectively. Estimated aggregated amortization expense
for each of the next five years is:
2015
|
|
$
|
500
|
|
2016
|
|
|
500
|
|
2017
|
|
|
500
|
|
2018
|
|
|
500
|
|
2019
|
|
|
500
|
|
13
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
F - LONG-TERM DEBT
Note Payable - USDA Rural
Development
The project is
financed by a 50-year mortgage payable to RHS in the original
amount of $522,500. The 10.625% mortgage is payable in monthly
installments of $4,671 through November 2035. The partnership has
entered into an interest subsidy agreement with RHS which
effectively reduces the interest rate to approximately 1% over the
term of the loan. As of December 31, 2014 and 2013, the balance of
the note payable was 469,784 and $475,577,
respectively.
The liability of
the partnership under the mortgage note is limited to the
underlying value of the real estate collateral plus
other amounts deposited with the lender.
In accordance with
the loan agreement with RHS, a reserve for replacements is to be
funded $6,000 annually until the account reaches a balance of
$60,000. The amount on hand at December 31, 2014, was $78,564 which
was funded.
The apartment
project is pledged as collateral for the mortgage. The mortgage
loan is nonrecourse debt secured by deeds of trust on the related
real estate.
Note Payable - Glacier
Bank
The project is also
financed by a 30-year loan note payable to Glacier Bank in the
original amount of $230,466. On April
26, 2013, the parties agreed to a change in the agreement regarding
the terms of the loan. The 8.5% mortgage was reduced to an interest
rate of 6.875% and remains payable in monthly installments of
$1,541 through June 2038. As of December 31, 2014 and 2013, the
balance of the note payable was $214,900 and $218,671,
respectively.
Construction Loan - Glacier
Bank
On April 26, 2013,
the parties also entered into a short-term construction loan with
an original amount not to exceed $270,939. The 6.0% loan was
payable in one payment of all outstanding principle and unpaid
accrued interest on February 26, 2014. In April 2014, the loan was
aid off with proceeds from an Affordable Housing Preservation Grant
in the amount of $270,939.
14
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
F - LONG-TERM DEBT (CONTINUED)
Aggregate
maturities of long-term debt for the next five years are as
follows:
December 31,
2015
|
|
$
|
10,277
|
|
2016
|
|
|
11,269
|
|
2017
|
|
|
12,359
|
|
2018
|
|
|
13,559
|
|
2019
|
|
|
14,881
|
|
and
Thereafter
|
|
|
622,339
|
|
Totals
|
|
$
|
684,684
|
|
The fair value of
the mortgage note payable is estimated based on the current rates
offered to the project for debt of the same remaining maturities.
At December 31, 2014, the fair value of the mortgage approximates
the amount recorded in the financial statements.
NOTE
G - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Deferred Developers'
Fee
The Project was
developed by a previous Limited Partner pursuant to a development
agreement which provides for a development fee of up to $291,329.
The unpaid balance is repayable out of remaining available
development proceeds, if any, and then out of distributable cash
flow, as defined. The unpaid portion of the developers fee upon the
Completion of Construction, as defined in the partnership
agreement, shall be converted to a non-interest bearing note
payable. The development fee is required to be paid by
December 31, 2021. As of December 31, 2014 and 2013, development
fees payable were
$161,845 and
$161,845, respectively.
Asset Management
Fee
The Partnership
shall pay to an affiliate of the limited partner a cumulative
annual asset management fee in the amount of
$1,000, increasing 3% per year, for its services in assisting in
monitoring Partnership activities commencing with the year 2008.
Asset management fees expensed during 2014 and 2013 totaled $1,194
and $1,159, respectively. At December 31 2014 and 2013, asset
management fees payable amounted to $6,503 and $6,468,
respectively.
Due to Limited
Partner
In 2010, the
Limited Partner secured and paid for auditing services
for the Partnership. At December
31, 2014, $5,500 remained payable to the Limited Partner bearing no
interest and is payable from net operating losses.
15
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
G - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
(CONTINUED)
Incentive Management
Fees
Provided certain
other payments are made and there is cash flow remaining, as
defined in the Partnership Agreement, the Partnership shall pay
non-cumulative incentive management fees to the general partner
commencing in 2008. There were no incentive management fees paid
during the years ended December 31, 2014 and 2013.
Tax Credit Compliance
Fees
Provided certain
other payments are made and there is cash flow remaining, as
defined in the Partnership Agreement, the Partnership shall pay
non-cumulative tax credit compliance fees to the general partner
commencing in 2008. No such fees were paid during 2014
or 2013.
Operating Deficit
Guaranty
The Partnership
Agreement provides for an operating deficit guaranty, whereby the
managing general partner shall be obligated to provide sufficient
funds to discharge certain Project expenses incurred over a defined
period. Such funding, in the form of a subordinate loan, would be
included in due to affiliates and would be repaid as cash flow
permits.
NOTE
H - OWNERS' RETURN
Owners' cash was
not paid in 2014 or 2013.
NOTE
I - PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS
Except as otherwise
provided and subject to the requirements of RD regarding
partnership distributions, Net Operating Income for each fiscal
year shall be distributed within 75 days following each
calendar year and shall be applied in the following
order of priority:
(a)
to pay the Deferred
Management Fee, if any;
(b)
to pay the current
Asset Management Fee and then to pay any accrued Asset Management
Fees which have not been paid in full from previous
years;
16
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
I - PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS
(c)
to pay any amount
owed to the Limited Partner pursuant to Section 14.2(b) that is
above the amount RD allows paid as a Cash
Expense;
(d)
to pay any unpaid
Development Fee;
(e)
to pay the
Operating Loans, if any, as referenced in Section 6.3 of this
Agreement; and
(f)
of the balance,
9.99% shall be paid to the Limited Partner, 0.01% shall be paid to
the Special Limited Partner, and 90% shall be paid as follows:
88.89% to pay the Incentive Management Fee and the Tax
Credit Compliance Fee, and the balance following payment of such
fees shall be paid to the General Partner.
NOTE
J - ADVERTISING
The partnership
incurred advertising costs of $634 in 2014 and $973 in
2013.
NOTE
K - PROPERTY PURCHASE OPTION
The Partnership has
granted its General Partner an option to purchase the Limited
Partner's interest in the Partnership at the end of the low income
housing tax compliance period in an amount equal to the principal
balance of outstanding debt secured by the Apartment Complex
(excluding any debt incurred five years prior to the sale date) and
all federal, state, and local taxes attributable to the sale.
Such option is based on the project General Partner or
sponsor maintaining the low income occupancy of the project for the
extended use period of 15 additional years.
NOTE
L - EXEMPTION FROM REAL ESTATE TAXES
The residential
portion of the Partnership property was qualified for exemption
from property taxes in 2014 by the Montana Department of Revenue in
accordance with Montana Code Annotated Part 2, Chapter 6, Title 15.
The exempt status continues so long as stature and the
circumstances referenced in the application remain
unchanged.
17
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
M - RECONCILIATION OF FINANCIAL TO TAXABLE INCOME
(LOSS)
A reconciliation of
financial statement net (loss) to ordinary (loss) of the
Partnership, as reported on the Partnership's information return,
for the years ended December 31, are as follows:
|
|
2014
|
|
|
2013
|
|
||
Financial statement
net income (loss)
|
|
$
|
204,685
|
|
|
$
|
(66,865
|
)
|
Non-Taxable
Affordable Housing Grant
|
|
|
(270,939
|
)
|
|
|
-
|
|
Financial statement
depreciation and amortization
|
|
|
81,252
|
|
|
|
76,514
|
|
Tax return
depreciation and amortization
|
|
|
(109,213
|
)
|
|
|
(104,372
|
)
|
Partnership tax
return ordinary income (loss)
|
|
$
|
(94,216
|
)
|
|
$
|
(94,723
|
)
|
NOTE
N - CONTINGENCY
Housing Tax Credits (Unaudited)
As incentive for
investment equity, the Partnership applied for and received an
allocation certificate for housing tax credits established by the
Tax Reform Act of 1986. To qualify for the tax credits, the
Partnership must meet certain requirements, including attaining a
qualified basis sufficient to support the credit
allocation. In addition, tenant eligibility and rental
charges are restricted in accordance with Internal
Revenue Code Section 42. Management has certified that each tax
credit unit has met these qualifications to allow the credits
allocated to each unit to be claimed.
Compliance with
these regulations must be maintained in each of the fifteen
consecutive years of the compliance period. Failure to maintain
compliance with occupant eligibility, unit gross rent, or to
correct noncompliance within a reasonable time period could result
in recapture of previously claimed tax credits plus
interest.
18
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
N - CONTINGENCY (CONTINUED)
The remaining
anticipated tax credits are as follows:
Year
|
|
Amount
|
|
|
2015
|
|
$
|
220,452
|
|
2016
|
|
|
220,452
|
|
2017
|
|
|
220,452
|
|
2018
|
|
|
133,935
|
|
2019
|
|
|
12,816
|
|
2020
|
|
|
12,816
|
|
2021
|
|
|
12,816
|
|
2022
|
|
|
12,816
|
|
|
|
$
|
846,555
|
|
In 2014, the
Partnership received an Affordable Housing Preservation Grant from
the Federal Home Loan Bank of Seattle that was used to
pay for rehabilitation costs incurred the prior year. The Grant's
regulatory agreement requires that the rental units be occupied by
persons at or below 30 to 50 percent of the area median income for
a period of 15 years and certain reporting requirements. Should
sale or refinancing of the project occur prior to the 15-year
compliance period, grant funds in the amount of $270,939 must be
repaid unless the project continues to be subject to recorded deed
restriction or other legally enforceable retention
agreement.
NOTE
O - CURRENT VULNERABILITY DUE TO CERTAIN
CONCENTRATIONS
The Partnership's
sole asset is the apartment complex. The Partnership's
operations are concentrated in the affordable housing
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, state and local regulatory agencies, including, but not
limited to, RD and the State Housing Agency. Such
administrative directives, rules and regulations are subject to
change by an act of Congress or an administrative change
mandated by RD or the State Housing Agency. 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.
19
CRESTVIEW
HOUSING, LTD. RHS PROJECT NO. 31-015-387826946
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2014 AND 2013
NOTE
P - TAX CREDIT GUARANTY
The Partnership has
been allocated Federal Low Income Housing Tax Credits under
Internal Revenue Code Section 42. The tax credits are not reflected
in the accompanying financial statements of the Partnership and,
therefore, have not been audited. According to the terms of the
Partnership agreement, if the anticipated amount of projected tax
credits to be allocated to the Limited Partner are less than the
projected tax credit amount, then the capital contributions of the
Limited Partner will be reduced by an amount equal to the permanent
credit reduction.
NOTE
Q - SUBSEQUENT EVENTS
FASB Accounting
Standards Codification Topic 855, Subsequent Events, addresses events
which occur after the balance sheet date but before the issuance of
financial statements. An entity must record the effects of
subsequent events that provide evidence about conditions that
existed at the balance sheet date and must disclose but not record
the effects of subsequent events which provide evidence about
conditions that existed after the balance sheet date. Additionally,
Topic 855 requires disclosure relative to the date
through which subsequent events have been evaluated and whether
that is the date on which the financial statements were issued or
were available to be issued. Management evaluated the activity of
Crestview Housing, Ltd. through February 6, 2015, the date the
financial statements were issued, and concluded that no additional
subsequent events aside from the aforementioned ongoing litigation
have occurred that would require recognition in the Financial
Statements or disclosure in the Notes to the Financial
Statements.
20