Exhibit 99.1
HAMILTON ON MAIN LLC (a/k/a HAMILTON PLACE)
HAMILTON ON MAIN APARTMENTS LLC
HAMILTON 1025 LLC
Combined Financial Statements—Significant Joint Ventures
As of December 31, 2008 and 2007
and for the years ended December 31, 2008, 2007 and 2006
Together With Report of Independent
Registered Public Accounting Firm
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Joint Venture Participants
of Hamilton on Main LLC (a/k/a Hamilton Place), Hamilton on Main Apartments LLC and
Hamilton 1025 LLC
We have audited the accompanying combined balance sheets of Hamilton on Main LLC (a/k/a Hamilton Place), Hamilton on Main Apartments LLC and Hamilton 1025 LLC as of December 31, 2008 and 2007, and the related combined statements of income, changes in joint venture capital and cash flows for each of the years in the three-year period ended December 31, 2008. The combined financial statements are the responsibility of the Joint Ventures’ management. Our responsibility is to express an opinion on these combined financial statements based on our audits.
We conducted our audits 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 combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Hamilton on Main LLC, Hamilton on Main Apartments LLC and Hamilton 1025 LLC at December 31, 2008 and 2007 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.
/s/ MILLER WACHMAN LLP |
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Boston, Massachusetts |
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March 13, 2009 |
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2
HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC
COMBINED BALANCE SHEETS
|
| December 31, |
| ||||
|
| 2008 |
| 2007 |
| ||
ASSETS |
|
|
|
|
| ||
Rental Properties |
| $ | 31,840,886 |
| $ | 34,761,032 |
|
Cash and Cash Equivalents |
| 170,152 |
| 519,254 |
| ||
Rents Receivable |
| 1,430 |
| 9,550 |
| ||
Due from Joint Ventures |
| 320,000 |
| 1,699,927 |
| ||
Real Estate Tax Escrows |
| 136,016 |
| 463,787 |
| ||
Prepaid Expenses and Other Assets |
| 416,059 |
| 383,917 |
| ||
Financing and Leasing Fees |
| 83,001 |
| 99,791 |
| ||
Total Assets |
| $ | 32,967,544 |
| $ | 37,937,258 |
|
LIABILITIES AND JOINT VENTURE CAPITAL |
|
|
|
|
| ||
Mortgage Notes Payable |
| $ | 21,640,374 |
| $ | 21,825,000 |
|
Accounts Payable and Accrued Expenses |
| 179,610 |
| 145,394 |
| ||
Advance Rental Payments and Security Deposits |
| 248,745 |
| 217,169 |
| ||
Total Liabilities |
| 22,068,729 |
| 22,187,563 |
| ||
Commitments (Note 7) |
|
|
|
|
| ||
Joint Venture Capital |
| 10,898,815 |
| 15,749,695 |
| ||
Total Liabilities and Joint Venture Capital |
| $ | 32,967,544 |
| $ | 37,937,258 |
|
See notes to combined financial statements.
3
HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC
COMBINED STATEMENTS OF INCOME
|
| Year Ended December 31, |
| |||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
Revenues |
|
|
|
|
|
|
| |||
Rental income |
| $ | 3,151,466 |
| $ | 3,351,622 |
| $ | 3,819,267 |
|
Laundry and sundry income |
| 19,505 |
| 17,144 |
| 56,039 |
| |||
|
| 3,170,971 |
| 3,368,766 |
| 3,875,306 |
| |||
Expenses |
|
|
|
|
|
|
| |||
Administrative |
| 78,292 |
| 90,880 |
| 158,943 |
| |||
Depreciation and amortization |
| 1,920,588 |
| 2,162,532 |
| 2,337,808 |
| |||
Management fees |
| 129,445 |
| 138,566 |
| 157,214 |
| |||
Operating |
| 363,740 |
| 313,383 |
| 334,011 |
| |||
Renting |
| 36,210 |
| 18,177 |
| 48,955 |
| |||
Repairs and maintenance |
| 740,069 |
| 766,471 |
| 1,167,640 |
| |||
Taxes and insurance |
| 447,113 |
| 516,676 |
| 717,725 |
| |||
|
| 3,715,458 |
| 4,006,685 |
| 4,922,296 |
| |||
Operating Loss |
| (544,487 | ) | (637,919 | ) | (1,046,990 | ) | |||
Other Income (Loss) |
|
|
|
|
|
|
| |||
Interest expense |
| (1,177,265 | ) | (1,226,342 | ) | (1,780,049 | ) | |||
Interest income |
| 4,829 |
| 35,615 |
| 840 |
| |||
Gains on condominium sales |
| 521,042 |
| 1,958,516 |
| 2,986,238 |
| |||
Other Income (expenses) |
| — |
| (37,428 | ) | 50 |
| |||
|
| (651,394 | ) | 730,361 |
| 1,207,079 |
| |||
Net Income |
| $ | (1,195,881 | ) | $ | 92,442 |
| $ | 160,089 |
|
See notes to combined financial statements.
4
HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC
COMBINED STATEMENTS OF CHANGES IN JOINT VENTURE CAPITAL
|
| Hamilton 1025 |
| Hamilton on Main Apts |
| Hamilton Place Sales |
| Total |
| ||||
Balance, January 1, 2006 |
| $ | 4,125,866 |
| $ | 13,675,819 |
| $ | 2,995,480 |
| 20,797,165 |
| |
Transfer of equity |
| — |
| (2,550,594 | ) | 2,550,594 |
| — |
| ||||
Investment by owners |
| — |
| 600,000 |
| — |
| 600,000 |
| ||||
Distribution to owners |
| (100,000 | ) | — |
| — |
| (100,000 | ) | ||||
Net Income (loss) |
| 558,126 |
| (1,150,258 | ) | 752,220 |
| 160,088 |
| ||||
Balance, December 31, 2006 |
| 4,583,992 |
| 10,574,967 |
| 6,298,294 |
| 21,457,253 |
| ||||
Distribution to owners |
| (1,600,000 | ) | (600,000 | ) | (3,600,000 | ) | (5,800,000 | ) | ||||
Net Income (loss) |
| 399,551 |
| (1,209,113 | ) | 902,004 |
| 92,442 |
| ||||
Balance, December 31, 2007 |
| 3,383,543 |
| 8,765,854 |
| 3,600,298 |
| 15,749,695 |
| ||||
Transfer of equity |
| — |
| 1,797,991 |
| (1,797,991 | ) | — |
| ||||
Distribution to owners |
| (1,230,000 | ) | (305,000 | ) | (2,120,000 | ) | (3,655,000 | ) | ||||
Net income (loss) |
| (192,332 | ) | (1,321,242 | ) | 317,693 |
| (1,195,881 | ) | ||||
Balance, December 31, 2008 |
| $ | 1,961,211 |
| $ | 8,937,603 |
| $ | — |
| $ | 10,898,814 |
|
See notes to combined financial statements.
5
HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC
COMBINED STATEMENTS OF CASH FLOWS
|
| Year Ended December 31 |
| |||||||
|
| 2008 |
| 2007 |
| 2006 |
| |||
Cash Flows from Operating Activities |
|
|
|
|
|
|
| |||
Net income (loss) |
| $ | (1,195,881 | ) | $ | 92,442 |
| $ | 160,089 |
|
Adjustments to reconcile net income to net cash provided (used) by operating activities: |
|
|
|
|
|
|
| |||
Gain on sale of condominiums |
| (521,042 | ) | (1,958,516 | ) | (2,986,239 | ) | |||
Depreciation and amortization |
| 1,920,588 |
| 2,162,532 |
| 2,337,808 |
| |||
Rent Supplement |
| (3,245 | ) | (2,174 | ) | — |
| |||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
| |||
(Increase) Decrease in rents receivable |
| 8,121 |
| (2,572 | ) | 18,144 |
| |||
Decrease (increase) in accounts payable and accrued expense |
| 34,216 |
| (53,501 | ) | (52,696 | ) | |||
Increase (Decrease) in real estate tax escrow |
| 327,772 |
| (89,694 | ) | (183,008 | ) | |||
Increase (Decrease) in due from joint ventures |
| 1,176,283 |
| (1,699,927 | ) | — |
| |||
(Increase) Decrease in financing and leasing fees |
| 17,412 |
| 10,039 |
| (42,205 | ) | |||
(Increase) Decrease in prepaid expenses and other assets |
| (31,692 | ) | 72,359 |
| 114,695 |
| |||
(Decrease) Increase in advance rental payments and security deposits |
| 31,575 |
| (10,082 | ) | (24,217 | ) | |||
Total adjustments |
| 2,959,988 |
| (1,571,536 | ) | (817,718 | ) | |||
Net cash provided by (used in) operating activities |
| 1,764,107 |
| (1,479,094 | ) | (657,629 | ) | |||
Cash flows provided by (used in)investing activities |
|
|
|
|
|
|
| |||
Proceeds from sales of condominiums and properties |
| 2,084,500 |
| 10,593,794 |
| 11,530,646 |
| |||
Purchase and improvement of rental properties |
| (358,084 | ) | (739,430 | ) | (767,392 | ) | |||
Net cash provided by investing activities |
| 1,726,416 |
| 9,854,364 |
| 10,763,254 |
| |||
Cash flows used in Financing activities |
|
|
|
|
|
|
| |||
Proceeds of mortgage notes payable |
| — |
| — |
| 5,000,000 |
| |||
Principal payments of mortgage notes payable |
| (184,626 | ) | — |
| (4,818,886 | ) | |||
Principal payments from sales proceeds |
| — |
| (2,380,745 | ) | (10,907,643 | ) | |||
Distributions to/investment by investors |
| (3,655,000 | ) | (5,800,000 | ) | 500,000 |
| |||
Net cash used in financing activities |
| (3,839,626 | ) | (8,180,745 | ) | (10,226,529 | ) | |||
Net increase (decrease) in cash and cash equivalents |
| (349,102 | ) | 194,525 |
| (120,904 | ) | |||
Cash and cash equivalents, at beginning of year |
| 519,254 |
| 324,729 |
| 445,634 |
| |||
Cash and cash equivalents, at end of year |
| $ | 170,152 |
| $ | 519,254 |
| $ | 324,730 |
|
See notes to combined financial statements.
6
HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2008
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Principles of Combination: The combined financial statements include the accounts of Hamilton on Main LLC (a/k/a Hamilton Place), Hamilton on Main Apartments LLC, and Hamilton 1025 LLC (“The Joint Ventures”) or (“The Investment Properties”), each of which is owned 50% by New England Realty Associates, LP (“NERA”) and are “significant subsidiaries” under Rule 3-09 of Regulation S-X requiring separate financial statements. All significant intercompany accounts and transactions are eliminated in the combined statements between these three entities.
Accounting Estimates: The preparation of the financial statements, in conformity with accounting principles generally accepted in the United State of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Accordingly, actual results could differ from those estimates.
Revenue Recognition: Rental income is recognized over the term of the related lease. Amounts 60 days in arrears are charged against income. Certain leases of commercial properties provide for increasing stepped minimum rents, which are accounted for on a straight-line basis over the term of the lease. Gain on condominium sales are recognized upon the closing of transactions.
Rental Properties: Properties are stated at cost less accumulated depreciation. Maintenance and repairs are charged to expense as incurred; improvements and additions are capitalized. When assets are retired or otherwise disposed of, the cost of the asset and related accumulated depreciation is eliminated from the accounts, and any gain or loss on such disposition is included in other income. Fully depreciated assets are removed from the accounts. Properties are depreciated by both straight-line and accelerated methods over their estimated useful lives.
In the event that facts and circumstances indicate that the carrying value of a property may be impaired, an analysis of the value is prepared. The estimated future undiscounted cash flows are compared to the asset’s carrying value to determine if a write-down to fair value is required.
Financing and Leasing Fees: Financing fees are capitalized and amortized, using the interest method, over the life of the related mortgages. Leasing fees are capitalized and amortized on a straight-line basis over the life of the related lease. Unamortized balances are expensed when the corresponding fee is no longer applicable.
Income Taxes: The financial statements have been prepared on the basis that the joint ventures are entitled to tax treatment as partnerships. Accordingly, no provision for income taxes has been recorded.
Cash Equivalents: The Joint Ventures considers cash equivalents to be all highly liquid instruments purchased with a maturity of three months or less.
Segment Reporting: Operating segments are revenue-producing components of the joint venture for which separate financial information is produced internally for management. Under the definition, The Joint Ventures operated, for all periods presented, as one segment.
Concentration of Credit Risks and Financial Instruments: The Joint Venture’s properties are located in Greater Boston, and are subject to the general economic risks related thereto. No single tenant
7
accounted for more than 5% of the joint ventures revenues in 2008, 2007 or 2006. The joint ventures make its temporary cash investments with high-credit-quality financial institutions.
Advertising Expense: Advertising is expensed as incurred. Advertising expense was insignificant in 2008, 2007 and 2006.
NOTE 2. RENTAL PROPERTIES
Properties consist of the following:
|
| Year Ended December 31, |
|
|
| ||||
|
| 2008 |
| 2007 |
| Useful Life |
| ||
Land, improvements and parking lots |
| $ | 6,129,699 |
| $ | 6,213,549 |
| 10–40 years |
|
Buildings and improvements |
| 29,504,497 |
| 30,708,163 |
| 15–40 years |
| ||
Kitchen cabinets |
| 564,335 |
| 513,409 |
| 5–10 years |
| ||
Carpets |
| 257,769 |
| 239,962 |
| 5–10 years |
| ||
Air conditioning |
| 73,406 |
| 62,308 |
| 7–10 years |
| ||
Laundry equipment |
| 3,272 |
| 5,129 |
| 5–7 years |
| ||
Equipment |
| 113,117 |
| 108,027 |
| 5–7 years |
| ||
Motor vehicles |
| — |
| 28,588 |
| 5 years |
| ||
Fences |
| 990 |
| 990 |
| 5–10 years |
| ||
Furniture and fixtures |
| 2,782,627 |
| 2,757,046 |
| 5–7 years |
| ||
Smoke alarms |
| 2,943 |
| 2,943 |
| 5–7 years |
| ||
|
|
|
|
|
|
|
| ||
|
| 39,432,657 |
| 40,640,114 |
|
|
| ||
Less accumulated depreciation |
| (7,591,771 | ) | (5,879,082 | ) |
|
| ||
|
| $ | 31,840,886 |
| $ | 34,761,032 |
|
|
|
8
A reconciliation of rental properties and accumulated depreciation is as follows:
|
| Hamilton |
| Hamilton |
| Hamilton |
| Total |
| ||||
Rental Properties at Cost |
|
|
|
|
|
|
|
|
| ||||
Balance, January 1, 2006 |
| $ | 14,812,006 |
| $ | 30,084,047 |
| $ | 12,590,163 |
| $ | 57,486,216 |
|
Purchase of and addition to property |
| 284,603 |
| 223,090 |
| 259,699 |
| 767,392 |
| ||||
Transfers between affiliates |
| 107,833 |
| (107,833 | ) | — |
| — |
| ||||
Condominium sale |
| (5,965,515 | ) | — |
| (3,009,349 | ) | (8,974,864 | ) | ||||
Balance, December 31, 2006 |
| 9,238,927 |
| 30,199,304 |
| 9,840,513 |
| 49,278,744 |
| ||||
Purchase of and addition to property |
| 467,245 |
| 111,503 |
| 160,063 |
| 738,811 |
| ||||
Condominium sale |
| (7,427,329 | ) | — |
| (1,950,111 | ) | (9,377,440 | ) | ||||
Balance, December 31, 2007 |
| 2,278,843 |
| 30,310,807 |
| 8,050,465 |
| 40,640,114 |
| ||||
Purchases of and additions to property |
| (1,214,298 | ) | 1,348,889 |
| 65,781 |
| 200,372 |
| ||||
Condominium sales |
| (1,064,545 | ) | (28,588 | ) | (314,696 | ) | (1,407,829 | ) | ||||
Balance, December 31, 2008 |
| $ | — |
| $ | 31,631,108 |
| $ | 7,801,550 |
| $ | 39,432,657 |
|
Accumulated Depreciation |
|
|
|
|
|
|
|
|
| ||||
Balance, January 1, 2006 |
| $ | 479,336 |
| $ | 1,813,206 |
| $ | 357,312 |
| $ | 2,649,854 |
|
Depreciation for year |
| 407,286 |
| 1,428,340 |
| 430,450 |
| 2,266,076 |
| ||||
Depreciation of dispositions |
| (292,127 | ) | — |
| (138,330 | ) | (430,457 | ) | ||||
Balance, December 31, 2006 |
| 594,495 |
| $ | 3,241,546 |
| $ | 649,432 |
| $ | 4,485,473 |
| |
Depreciation for year |
| 207,116 |
| 1,571,145 |
| 360,554 |
| 2,138,815 |
| ||||
Depreciation of dispositions |
| (592,147 | ) | — |
| (153,059 | ) | (745,206 | ) | ||||
Balance, December 31, 2007 |
| 209,464 |
| 4,812,691 |
| 856,927 |
| 5,879,082 |
| ||||
Depreciation for year |
| — |
| 1,632,658 |
| 358,872 |
| 1,991,529 |
| ||||
Depreciation of dispositions |
| 209,464 |
| (26,513 | ) | (42,863 | ) | (278,840 | ) | ||||
Balance, December 31, 2008 |
| $ | — |
| $ | 6,418,836 |
| $ | 1,172,936 |
| $ | 7,591,772 |
|
Book Value |
| $ | — |
| $ | 25,212,272 |
| $ | 6,628,614 |
| $ | 31,840,885 |
|
9
NOTE 3. RELATED PARTY TRANSACTIONS
The Joint Ventures’ properties are managed by an entity that is owned by the majority shareholder of the General Partner. The management fee is equal to 4% of rental revenue and laundry income. Total fees paid were approximately $128,000, $113,000 and $157,000 in 2008, 2007 and 2006, respectively.
In 2008, the Management Company also received approximately $1,500 for construction costs, $10,000 for construction supervision and architectural fees, $28,000 for maintenance services and $14,000 for administrative services. The Hamilton Company legal department acts as closing attorney on certain condo sales receiving approximately $8,500 during the year ended December 31, 2008. An entity partially owned by the majority shareholder of the General Partner is the sales agent for certain condominium sales receiving approximately $43,000 of commissions in 2008.
In 2007, the Management Company also received approximately $300 for construction costs, $1,700 for construction supervision and architectural fees, $23,000 for maintenance services and $10,000 for administrative services. The Hamilton Company legal department acts as closing attorney on certain condo sales receiving approximately $45,000 during the year ended December 31, 2007. An entity partially owned by the majority shareholder of the General Partner is the sales agent for certain condominium sales receiving approximately $252,000 of commissions in 2007.
In 2006, the Management Company also received approximately $9,500 for construction costs, $9,500 for construction supervision and architectural fees, $103,000 for maintenance services and $8,000 for administrative services. The Hamilton Company legal department acts as closing attorney on certain condo sales receiving approximately $47,000 during the year ended December 31, 2006. An entity partially owned by the majority shareholder of the General Partner is the sales agent for certain condominium sales receiving approximately $213,000 of commissions in 2006.
Inter company balances with related joint ventures are as follows:
|
| Due From |
| Due To |
| Total |
| ||
Significant Combined Joint Ventures |
|
|
|
|
|
|
| ||
Hamilton on Main due from 345 Franklin |
| $ | 185,000 |
| — |
| $ | 185,000 |
|
Hamilton on Main due from Minuteman |
| 45,000 |
| — |
| 45,000 |
| ||
Hamilton 1025 due from 345 Franklin |
| 90,000 |
| — |
| 90,000 |
| ||
Total |
| $ | 320,000 |
| — |
| $ | 320,000 |
|
NOTE 4. OTHER ASSETS
Financing and leasing fees of approximately $83,000 and $100,000 are net of accumulated amortization of approximately $45,000 and $31,000 at December 31, 2008 and, 2007, respectively.
NOTE 5. MORTGAGE NOTES PAYABLE
At December 31, 2008 and 2007, the mortgages payable consisted of various loans, all of which were secured by first mortgages on properties referred to in Note 2. At December 31, 2008, the interest rates on these loans ranged from 5.18% to 5.67%, payable in monthly installments aggregating approximately $117,000, including interest, to various dates through 2016. The majority of the mortgages are subject to prepayment penalties. At December 31, 2008, the weighted average interest rate on the above mortgages was 5.29%.
The Joint Ventures have pledged tenant leases as additional collateral for certain of these loans.
10
Approximate annual maturities at December 31, 2008 are as follows:
|
| Hamilton |
| Hamilton |
| Hamilton |
| Total |
| ||||
2009—Current Maturities |
| $ | — |
| $ | 238,021 |
| $ | — |
| $ | 238,021 |
|
2010 |
| — |
| 250,827 |
| — |
| 250,827 |
| ||||
2011 |
| — |
| 261,897 |
| 4,513 |
| 266,410 |
| ||||
2012 |
| — |
| 278,413 |
| 60,747 |
| 339,160 |
| ||||
2013 |
| — |
| 293,392 |
| 65,157 |
| 358,550 |
| ||||
Thereafter |
| — |
| 15,317,823 |
| 4,869,583 |
| 20,187,406 |
| ||||
|
| $ | — |
| $ | 16,640,374 |
| $ | 5,000,000 |
| $ | 21,640,374 |
|
NOTE 6. ADVANCE RENTAL PAYMENTS AND SECURITY DEPOSITS
The Joint Ventures’ residential lease agreements may require tenants to maintain a one-month advance rental payment and/or a security deposit. At December 31, 2008, amounts received for prepaid rents of approximately $160,000 are included in cash and cash equivalents; security deposits of approximately $70,000 are included with other assets.
NOTE 7. COMMITMENTS AND CONTINGENCIES
From time to time, the Joint Ventures may be involved in various ordinary routine litigation incidental to their business. The Joint Ventures either have insurance coverage or have provided for any uninsured claims, which, in the aggregate, are not significant. The Joint Ventures are not involved in any material pending legal proceedings.
NOTE 8. RENTAL INCOME
Substantially all rental income was related to residential apartments and condominium units with leases of one year of less.
Rents receivable are net of allowances for doubtful accounts of approximately $21,000, $5,000 and $31,000 at December 31, 2008, 2007 and 2006, respectively.
11
NOTE 9. CASH FLOW INFORMATION
During the years ended December 31, 2008, 2007 and 2006, cash paid for interest was approximately $1,200,000, $1,200,000 and $1,800,000 respectively.
NOTE 10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Joint Ventures in estimating the fair value of their financial instruments:
· For cash and cash equivalents, other assets, investment in partnerships, accounts payable, advance rents and security deposits: fair value approximates the carrying value of such assets and liabilities.
· For mortgage notes payable: fair value is generally based on estimated future cash flows, which are discounted using the quoted market rate from an independent source for similar obligations. Refer to the table below for the carrying amount and estimated fair value of such instruments.
|
| Carrying Amount |
| Estimated Fair Value |
| ||
Mortgage Notes Payable |
|
|
|
|
| ||
At December 31, 2008 |
| $ | 21,640,374 |
| $ | 21,861,676 |
|
At December 31, 2007 |
| $ | 21,825,000 |
| $ | 21,213,414 |
|
Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 2008 and 2007. Although management is not aware of any factors that would significantly affect the fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31, 2008 and current estimates of fair value may differ significantly from the amounts presented herein.
NOTE 11. TAXABLE INCOME AND TAX BASIS
The Joint Ventures are not subject to income taxes as they file partnership tax returns whereby their income or loss is reportable by the owners.
Taxable income is different than financial statement income because of accelerated depreciation, different tax lives, and timing differences related to prepaid rents and allowances. Gains from sale of condominiums are taxable at ordinary rates. Taxable income is approximately $120,000 less than statement income for the year ended December 31, 2008. The cumulative tax basis of the Joint Ventures real estate at December 31, 2008 is approximately $200,000 less than the statement basis.
12
HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2008
NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES
|
| Hamilton |
| Hamilton on Main |
| Hamilton |
| Total |
| |||
2008 Balance Sheet |
|
|
|
|
|
|
|
|
| |||
ASSETS |
|
|
|
|
|
|
|
|
| |||
Rental Properties |
| $ | 6,628,614 |
| $ | 25,212,271 |
| — |
| $ | 31,840,886 |
|
Cash & Cash Equivalents |
| 164,181 |
| 5,972 |
| — |
| 170,152 |
| |||
Rent Receivable |
| (94 | ) | 1,524 |
| — |
| 1,430 |
| |||
Real Estate Tax Escrow |
| 41,079 |
| 94,937 |
| — |
| 136,016 |
| |||
Due From Joint Venture |
| 90,000 |
| 230,000 |
| — |
| 320,000 |
| |||
Prepaid Expenses & Other Assets |
| 63,631 |
| 352,429 |
| — |
| 416,059 |
| |||
Financing & Leasing Fees |
| 39,751 |
| 43,250 |
| — |
| 83,001 |
| |||
|
|
|
|
|
|
|
|
|
| |||
Total Assets |
| $ | 7,027,162 |
| $ | 25,940,382 |
| — |
| $ | 32,967,544 |
|
LIABILITIES AND PARTNERS’ CAPITAL |
|
|
|
|
|
|
|
|
| |||
Mortgage Notes Payable |
| $ | 5,000,000 |
| $ | 16,640,374 |
| — |
| $ | 21,640,374 |
|
Accounts Payable& Accrued Exp |
| 7,827 |
| 171,783 |
| — |
| 179,610 |
| |||
Advance Rental Payments & Security Deposits |
| 58,125 |
| 190,620 |
| — |
| 248,745 |
| |||
Total Liabilities |
| 5,065,952 |
| 17,002,777 |
| — |
| 22,068,729 |
| |||
Partners’ Capital |
| 1,961,209 |
| 8,937,605 |
| — |
| 10,898,815 |
| |||
Total Liabilities and Capital |
| 7,027,162 |
| 25,940,382 |
| — |
| 32,967,544 |
| |||
Partners’ Capital—NERA 50% |
| $ | 980,605 |
| $ | 4,468,803 |
| — |
| $ | 5,449,407 |
|
|
| Hamilton |
| Hamilton on Main |
| Hamilton |
| Total |
| ||||
2008 Income Statement |
|
|
|
|
|
|
|
|
| ||||
Revenues |
|
|
|
|
|
|
|
|
| ||||
Rental Income |
| $ | 795,927 |
| $ | 2,353,792 |
| $ | 1,747 |
| $ | 3,151,466 |
|
Laundry and Sundry Income |
| — |
| 19,505 |
| — |
| 19,505 |
| ||||
|
| 795,927 |
| 2,373,297 |
| 1,747 |
| 3,170,971 |
| ||||
Expenses |
|
|
|
|
|
|
|
|
| ||||
Administrative |
| 18,376 |
| 56,078 |
| 3,839 |
| 78,292 |
| ||||
Depreciation and Amortization |
| 363,898 |
| 1,549,671 |
| 7,019 |
| 1,920,588 |
| ||||
Management Fees |
| 31,868 |
| 97,527 |
| 51 |
| 129,445 |
| ||||
Operating |
| 1,461 |
| 362,065 |
| 214 |
| 363,740 |
| ||||
Renting |
| 5,416 |
| 30,794 |
| — |
| 36,210 |
| ||||
Repairs and Maintenance |
| 325,415 |
| 408,826 |
| 5,828 |
| 740,069 |
| ||||
Taxes and Insurance |
| 125,898 |
| 316,355 |
| 4,861 |
| 447,113 |
| ||||
|
| 872,332 |
| 2,821,316 |
| 21,811 |
| 3,715,458 |
| ||||
Income Before Other Income |
| (76,404 | ) | (448,019 | ) | (20,064 | ) | (544,487 | ) | ||||
Other Income (loss) |
|
|
|
|
|
|
|
|
| ||||
Interest Income |
| 705 |
| 1,484 |
| 2,640 |
| 4,829 |
| ||||
Interest Expense |
| (289,626 | ) | (887,633 | ) | (7 | ) | (1,177,265 | ) | ||||
Gain on Sale of Real Estate |
| 172,993 |
| 12,925 |
| 335,124 |
| 521,042 |
| ||||
|
| (115,928 | ) | (873,224 | ) | 337,757 |
| (651,394 | ) | ||||
Net Income (Loss) |
| (192,332 | ) | (1,321,242 | ) | 317,693 |
| (1,195,881 | ) | ||||
P&L—NERA 50% |
| (96,166 | ) | (660,621 | ) | 158,846 |
| (597,941 | ) | ||||
13
|
| Hamilton |
| Hamilton on Main |
| Hamilton |
| Total |
|
2008 Cash Flow Statement |
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
Net Income (loss) |
| (192,332 | ) | (1,321,242 | ) | 317,693 |
| (1,195,881 | ) |
Adjustments to reconcile net income to net cash provided (used) by operating activities: |
|
|
|
|
|
|
|
|
|
Gain on sale of condominiums |
| (172,993 | ) | (12,925 | ) | (335,124 | ) | (521,042 | ) |
Depreciation and amortization |
| 363,898 |
| 1,549,671 |
| 7,019 |
| 1,920,588 |
|
Rent Supplement |
| (3,245 | ) | — |
| — |
| (3,245 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
(Increase) Decrease in rents receivable |
| (405 | ) | 8,424 |
| 102 |
| 8,121 |
|
Decrease in accounts payable and accrued expenses |
| 68 |
| 45,962 |
| (11,814 | ) | 34,216 |
|
(Increase)in real estate tax escrow |
| 5,996 |
| 321,776 |
| — |
| 327,772 |
|
(Decrease) in due from joint venture |
| 707,704 |
| 164,298 |
| 304,281 |
| 1,176,283 |
|
Decrease in financing and leasing fees |
| 5,026 |
| 8,696 |
| 3,690 |
| 17,412 |
|
Decrease in prepaid expenses and other assets |
| 226 |
| (32,624 | ) | 706 |
| (31,692 | ) |
(Decrease) increase in advance rental payments and security deposits |
| (4,778 | ) | 37,671 |
| (1,318 | ) | 31,575 |
|
Total adjustments |
| 901,497 |
| 2,090,949 |
| (32,458 | ) | 2,959,988 |
|
Net cash provided by (used in)operating activities |
| 709,165 |
| 769,707 |
| 285,235 |
| 1,764,107 |
|
Cash flows provided by (used in) investing activities |
|
|
|
|
|
|
|
|
|
Proceeds from sales of condominiums |
| 480,500 |
| 15,000 |
| 1,589,000 |
| 2,084,500 |
|
Purchase and improvement of rental properties |
| (59,675 | ) | (134,590 | ) | (163,818 | ) | (358,084 | ) |
Net cash provided by (used in) investing activities |
| 420,825 |
| (119,590 | ) | 1,425,182 |
| 1,726,416 |
|
Cash flows provided by (used in) Financing activities |
|
|
|
|
|
|
|
|
|
Principal payments of mortgage & notes payable |
| — |
| (184,626 | ) | — |
| (184,626 | ) |
Distributions to investors |
| (1,230,000 | ) | (305,000 | ) | (2,120,000 | ) | (3,655,000 | ) |
Net cash used in financing activities |
| (1,230,000 | ) | (489,626 | ) | (2,120,000 | ) | (3,839,626 | ) |
Net increase (decrease) in cash and cash equivalents |
| (100,010 | ) | 160,491 |
| (409,583 | ) | (349,102 | ) |
Cash and cash equivalents, at beginning of year |
| 105,981 |
| 3,690 |
| 409,583 |
| 519,254 |
|
Cash and cash equivalents, at end of year |
| 5,971 |
| 164,181 |
| — |
| 170,152 |
|
14
HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2008
NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES (CONTINUED)
|
| Hamilton |
| Hamilton on Main |
| Hamilton |
| Total |
|
2007 Balance Sheet |
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
Rental Properties |
| 7,193,537 |
| 25,498,116 |
| 2,069,379 |
| 34,761,032 |
|
Cash & Cash Equivalents |
| 105,981 |
| 3,690 |
| 409,583 |
| 519,254 |
|
Rent Receivable |
| (499 | ) | 9,948 |
| 102 |
| 9,550 |
|
Real Estate Tax Escrow |
| 47,075 |
| 416,713 |
| — |
| 463,787 |
|
Due From Joint Venture |
| 999,927 |
| (430,591 | ) | 1,130,591 |
| 1,699,927 |
|
Prepaid Expenses & Other Assets |
| 63,405 |
| 319,805 |
| 706 |
| 383,917 |
|
Financing & Leasing Fees |
| 44,777 |
| 51,946 |
| 3,068 |
| 99,791 |
|
Total Assets |
| 8,454,203 |
| 25,869,625 |
| 3,613,430 |
| 37,937,258 |
|
LIABILITIES AND PARTNERS’ CAPITAL |
|
|
|
|
|
|
|
|
|
Mortgage Notes Payable |
| 5,000,000 |
| 16,825,000 |
| — |
| 21,825,000 |
|
Accounts Payable& Accrued Exp |
| 7,759 |
| 125,821 |
| 11,814 |
| 145,394 |
|
Advance Rental Payments & Security Deposits |
| 62,903 |
| 152,948 |
| 1,318 |
| 217,169 |
|
Total Liabilities |
| 5,070,662 |
| 17,103,769 |
| 13,132 |
| 22,187,563 |
|
Partners’ Capital |
| 3,383,543 |
| 8,765,854 |
| 3,600,298 |
| 15,749,695 |
|
Total Liabilities and Capital |
| 8,454,205 |
| 25,869,623 |
| 3,613,430 |
| 37,937,258 |
|
Partners’ Capital—NERA 50% |
| 1,691,772 |
| 4,382,927 |
| 1,800,149 |
| 7,874,848 |
|
15
|
| Hamilton |
| Hamilton on Main |
| Hamilton |
| Total |
|
2007 Income Statement |
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
Rental Income |
| 800,740 |
| 2,345,736 |
| 205,146 |
| 3,351,622 |
|
Laundry and Sundry Income |
| — |
| 17,144 |
| — |
| 17,144 |
|
|
| 800,740 |
| 2,362,880 |
| 205,146 |
| 3,368,766 |
|
Expenses |
|
|
|
|
|
|
|
|
|
Administrative |
| 22,818 |
| 51,461 |
| 16,601 |
| 90,880 |
|
Depreciation and Amortization |
| 365,576 |
| 1,579,843 |
| 217,113 |
| 2,162,532 |
|
Management Fees |
| 35,165 |
| 95,218 |
| 8,183 |
| 138,566 |
|
Operating |
| 3,387 |
| 305,128 |
| 4,869 |
| 313,383 |
|
Renting |
| 4,927 |
| 13,250 |
| — |
| 18,177 |
|
Repairs and Maintenance |
| 270,217 |
| 351,000 |
| 145,255 |
| 766,471 |
|
Taxes and Insurance |
| 151,350 |
| 288,929 |
| 76,397 |
| 516,676 |
|
|
| 853,440 |
| 2,684,828 |
| 468,418 |
| 4,006,686 |
|
Income Before Other Income |
| (52,700 | ) | (321,948 | ) | (263,272 | ) | (637,920 | ) |
Other Income (Loss) |
|
|
|
|
|
|
|
|
|
Interest Income |
| 13,437 |
| 720 |
| 21,458 |
| 35,615 |
|
Interest Expense |
| (288,307 | ) | (887,884 | ) | (50,151 | ) | (1,226,342 | ) |
Gain on Sale of Real Estate |
| 764,548 |
| — |
| 1,193,968 |
| 1,958,516 |
|
Other Income (Expenses) |
| (37,428 | ) | — |
| — |
| (37,428 | ) |
|
| 452,251 |
| (887,164 | ) | 1,165,275 |
| 730,362 |
|
Net Income (Loss) |
| 399,551 |
| (1,209,113 | ) | 902,004 |
| 92,442 |
|
P&L—NERA 50% |
| 199,776 |
| (604,556 | ) | 451,002 |
| 46,221 |
|
16
|
| Hamilton |
| Hamilton on Main |
| Hamilton |
| Total |
|
2007 Cash Flow Statement |
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
|
Net Income (loss) |
| 399,551 |
| (1,209,113 | ) | 902,004 |
| 92,442 |
|
Adjustments to reconcile net income to net cash provided (used) by operating activities: |
|
|
|
|
|
|
|
|
|
Gain on sale of condominiums |
| (764,548 | ) | — |
| (1,193,968 | ) | (1,958,516 | ) |
Depreciation and amortization |
| 365,576 |
| 1,579,843 |
| 217,113 |
| 2,162,532 |
|
Rent Supplement |
| (2,174 | ) | — |
| — |
| (2,174 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
(Increase) Decrease in rents receivable |
| 7,478 |
| (9,948 | ) | (102 | ) | (2,572 | ) |
Decrease in accounts payable and accrued expenses |
| (6,544 | ) | (23,369 | ) | (23,588 | ) | (53,501 | ) |
(Increase)in real estate tax escrow |
| (16,137 | ) | (73,557 | ) | — |
| (89,694 | ) |
(Increase) in due from joint venture |
| (999,927 | ) | 430,591 |
| (1,130,591 | ) | (1,699,927 | ) |
Decrease in financing and leasing fees |
| — |
| — |
| 10,039 |
| 10,039 |
|
Decrease in prepaid expenses and other assets |
| 37,493 |
| 3,145 |
| 31,721 |
| 72,359 |
|
(Decrease) increase in advance rental payments and security deposits |
| (3,270 | ) | 10,912 |
| (17,724 | ) | (10,082 | ) |
Total adjustments |
| (1,382,053 | ) | 1,917,617 |
| (2,107,100 | ) | (1,571,536 | ) |
Net cash provided by (used in)operating activities |
| (982,502 | ) | 708,504 |
| (1,205,096 | ) | (1,479,094 | ) |
Cash flows provided by (used in) investing activities |
|
|
|
|
|
|
|
|
|
Proceeds from sales of condominiums |
| 2,564,026 |
| — |
| 8,029,768 |
| 10,593,794 |
|
Purchase and improvement of rental properties |
| (160,063 | ) | (111,503 | ) | (467,864 | ) | (739,430 | ) |
Net cash provided by (used in) investing activities |
| 2,403,963 |
| (111,503 | ) | 7,561,904 |
| 9,854,364 |
|
Cash flows provided by (used in) Financing activities |
|
|
|
|
|
|
|
|
|
Principal payments from sales proceeds |
| — |
| — |
| (2,380,745 | ) | (2,380,745 | ) |
Distributions to investors |
| (1,600,000 | ) | (600,000 | ) | (3,600,000 | ) | (5,800,000 | ) |
Net cash used in financing activities |
| (1,600,000 | ) | (600,000 | ) | (5,980,745 | ) | (8,180,745 | ) |
Net increase (decrease) in cash and cash equivalents |
| (178,539 | ) | (2,999 | ) | 376,063 |
| 194,525 |
|
Cash and cash equivalents, at beginning of year |
| 284,520 |
| 6,689 |
| 33,520 |
| 324,729 |
|
Cash and cash equivalents, at end of year |
| 105,981 |
| 3,690 |
| 409,583 |
| 519,254 |
|
17
HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND HAMILTON
1025 LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2008
NOTE 12. COMBINING FINANCIAL STATEMENT SCHEDULES (CONTINUED)
2006 Balance Sheet |
| Hamilton 1025 |
| Hamilton on Main |
| Hamilton Place |
| Total |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
| ||||
Rental Properties |
| $ | 9,191,080 |
| $ | 26,957,758 |
| $ | 8,644,432 |
| $ | 44,793,270 |
|
Cash and Cash Equivalents |
| 284,520 |
| 6,689 |
| 33,520 |
| 324,729 |
| ||||
Rents Receivable |
| 6,979 |
| — |
| — |
| 6,979 |
| ||||
Real Estate Tax Escrows |
| 30,938 |
| 343,155 |
| — |
| 374,094 |
| ||||
Prepaid Expenses and Other Assets |
| 100,898 |
| 322,950 |
| 32,427 |
| 456,275 |
| ||||
Financing and Leasing Fees |
| 50,051 |
| 60,642 |
| 23,106 |
| 133,798 |
| ||||
Total Assets |
| $ | 9,664,467 |
| $ | 27,691,193 |
| $ | 8,733,484 |
| $ | 46,089,145 |
|
LIABILITIES AND JOINT VENTURES’ CAPITAL |
|
|
|
|
|
|
|
|
| ||||
Mortgage Notes Payable |
| $ | 5,000,000 |
| $ | 16,825,000 |
| $ | 2,380,745 |
| $ | 24,205,745 |
|
Accounts Payable and Accrued Expenses |
| 14,303 |
| 149,190 |
| 35,402 |
| 198,896 |
| ||||
Advance Rental Payments and Security Deposits |
| 66,173 |
| 142,036 |
| 19,042 |
| 227,251 |
| ||||
Total Liabilities |
| 5,080,476 |
| 17,116,226 |
| 2,435,190 |
| 24,631,892 |
| ||||
Joint Ventures’ Capital |
| 4,583,992 |
| 10,574,967 |
| 6,298,294 |
| 21,457,253 |
| ||||
Total Liabilities and Joint Ventures’ Capital |
| $ | 9,664,467 |
| $ | 27,691,193 |
| $ | 8,733,484 |
| $ | 46,089,145 |
|
Joint Ventures’ Capital—NERA 50% |
| $ | 2,291,996 |
| $ | 5,287,483 |
| $ | 3,149,147 |
| $ | 10,728,627 |
|
18
2006 Income Statement |
| Hamilton 1025 |
| Hamilton on Main |
| Hamilton Place |
| Total |
| ||||
Revenues |
|
|
|
|
|
|
|
|
| ||||
Rental Income |
| $ | 912,639 |
| $ | 2,323,773 |
| $ | 582,856 |
| $ | 3,819,267 |
|
Laundry and Sundry Income |
| 15,782 |
| 40,256 |
| — |
| 56,038 |
| ||||
|
| 928,421 |
| 2,364,029 |
| 582,856 |
| 3,875,306 |
| ||||
Expenses |
|
|
|
|
|
|
|
|
| ||||
Administrative |
| 85,710 |
| 64,496 |
| 8,736 |
| 158,943 |
| ||||
Depreciation and Amortization |
| 478,491 |
| 1,439,203 |
| 420,114 |
| 2,337,808 |
| ||||
Management Fees |
| 38,870 |
| 95,319 |
| 23,025 |
| 157,214 |
| ||||
Operating |
| 21,190 |
| 301,164 |
| 11,657 |
| 334,011 |
| ||||
Renting |
| 15,396 |
| 31,249 |
| 2,309 |
| 48,955 |
| ||||
Repairs and Maintenance |
| 442,363 |
| 353,424 |
| 371,852 |
| 1,167,640 |
| ||||
Taxes and Insurance |
| 209,530 |
| 340,074 |
| 168,121 |
| 717,725 |
| ||||
|
| 1,291,551 |
| 2,624,929 |
| 1,005,815 |
| 4,922,296 |
| ||||
(Loss) Before Other Income |
| (363,130 | ) | (260,900 | ) | (422,959 | ) | (1,046,990 | ) | ||||
Other Income (Loss) |
|
|
|
|
|
|
|
|
| ||||
Interest Income |
| 533 |
| (1,933 | ) | 2,240 |
| 840 |
| ||||
Gain on Sale of Real Estate |
| 1,394,028 |
| — |
| 1,592,211 |
| 2,986,239 |
| ||||
Other Income (Expenses) |
| 50 |
| — |
| — |
| 50 |
| ||||
Interest Expense |
| (473,355 | ) | (887,425 | ) | (419,270 | ) | (1,780,049 | ) | ||||
|
| 921,256 |
| (889,358 | ) | 1,175,181 |
| 1,207,079 |
| ||||
Net Income (Loss) |
| $ | 558,126 |
| $ | (1,150,259 | ) | $ | 752,222 |
| $ | 160,089 |
|
NERA 50% |
| $ | 279,063 |
| $ | (575,129 | ) | $ | 376,111 |
| $ | 80,045 |
|
19
2006 Cash Flow Statement |
| Hamilton 1025 |
| Hamilton on Main |
| Hamilton Place |
| Total |
| ||||
Cash Flows from Operating Activities |
|
|
|
|
|
|
|
|
| ||||
Net income (loss) |
| $ | 558,126 |
| $ | (1,150,259 | ) | $ | 752,222 |
| $ | 160,089 |
|
Adjustments to reconcile net income to net cash provided (used) by operating activities: |
|
|
|
|
|
|
|
|
| ||||
Gain on sale of condominiums |
| (1,394,028 | ) | — |
| (1,592,211 | ) | (2,986,239 | ) | ||||
Depreciation and amortization |
| 478,491 |
| 1,439,203 |
| 420,114 |
| 2,337,808 |
| ||||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| ||||
(Increase) Decrease in rents receivable |
| 6,933 |
| 11,185 |
| 26 |
| 18,144 |
| ||||
(Decrease) increase in accounts payable and accrued expense |
| (28,490 | ) | (18,169 | ) | (6,037 | ) | (52,696 | ) | ||||
(Increase) in real estate tax escrow |
| (30,938 | ) | (152,070 | ) | — |
| (183,008 | ) | ||||
(Increase) decrease in financing and leasing fees |
| (50,513 | ) | (2,167 | ) | 10,475 |
| (42,205 | ) | ||||
(Increase) Decrease in prepaid expenses and other assets |
| 107,796 |
| (148,940 | ) | 155,839 |
| 114,695 |
| ||||
(Decrease) Increase in advance rental payments and security deposits |
| (10,388 | ) | 7,948 |
| (21,777 | ) | (24,217 | ) | ||||
Total Adjustments |
| (921,138 | ) | 1,136,991 |
| (1,033,571 | ) | (817,718 | ) | ||||
Net cash provided by (used in) operating activities |
| (363,012 | ) | (13,268 | ) | (281,349 | ) | (657,629 | ) | ||||
Cash Flows Used in Investing Activities |
|
|
|
|
|
|
|
|
| ||||
Proceeds from sales of condominiums |
| 4,265,047 |
| — |
| 7,265,599 |
| 11,530,646 |
| ||||
Transfers between affiliates |
| — |
| 107,833 |
| (107,833 | ) | — |
| ||||
Purchase and improvement of rental properties |
| (259,699 | ) | (223,090 | ) | (284,603 | ) | (767,392 | ) | ||||
Net cash provided by (used in) investing activities |
| 4,005,348 |
| (115,257 | ) | 6,873,163 |
| 10,763,254 |
| ||||
Cash Flows Used in Financing Activities |
|
|
|
|
|
|
|
|
| ||||
Proceeds of mortgage notes payable |
| 5,000,000 |
| — |
| — |
| 5,000,000 |
| ||||
Principal payments of mortgage notes payable |
| (4,818,886 | ) | — |
| — |
| (4,818,886 | ) | ||||
Principal payments from sales proceeds |
| (4,432,114 | ) | — |
| (6,475,529 | ) | (10,907,643 | ) | ||||
Transfers between affiliates |
| — |
| 823,071 |
| (823,071 | ) | — |
| ||||
Distributions to/investment by investors |
| (100,000 | ) | 600,000 |
| — |
| 500,000 |
| ||||
Net cash provided by (used in) financing activities |
| (4,351,000 | ) | 1,423,071 |
| (7,298,600 | ) | (10,226,529 | ) | ||||
Net Increase (Decrease in) Cash and Cash Equivalents |
| (708,664 | ) | 1,294,546 |
| (706,786 | ) | (120,904 | ) | ||||
Cash and Cash Equivalents, at beginning of year |
| 993,185 |
| (1,287,856 | ) | 740,305 |
| 445,634 |
| ||||
Cash and Cash Equivalents, at end of year |
| $ | 284,521 |
| $ | 6,690 |
| $ | 33,518 |
| $ | 324,730 |
|
20
HAMILTON ON MAIN LLC, HAMILTON ON MAIN APARTMENTS LLC, AND
HAMILTON 1025 LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2008
NOTE 13. NEW ACCOUNTING PRONOUNCEMENT
In June 2005, the FASB ratified the consensus reached by the Emerging Issues Task Force (“EITF”) regarding EITF 04-05, “Investor’s Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights.” The conclusion provides a framework for addressing the question of when a sole general partner, as defined in EITF 04-05, should consolidate a limited partnership. The EITF has concluded that the general partner of a limited partnership should consolidate a limited partnership, unless the limited partners have either (a) the substantive ability to dissolve the limited partnership or otherwise remove the general partner without cause, or (b) substantive participating rights. In addition, the EITF concluded that the guidance should be expanded to include all limited partnerships, including those with multiple general partners. We adopted EITF 04-05 as of January 1, 2006. We have assessed our investments in unconsolidated real estate joint ventures and have determined that EITF 04-05 did not have an impact on our financial condition or results of operations.
Fair Value Measurements—SFAS 157 & The Fair Value Option for Financial Assets and Financial Liabilities—SFAS 159, and FASB Staff Position No. 157-2
Effective January 1, 2008, the Partnership adopted Statement of Financial Accounting Standards (SFAS) No. 157, “Fair Value Measurements” (SFAS 157) and SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). SFAS 157 defines fair value, establishes a framework for measuring fair value under accounting principles generally accepted in the United States (GAAP) and enhances disclosures about fair value measurements. Fair value is defined under SFAS 157 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. SFAS 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. The impact of adopting both SFAS 157 and SFAS 159 was immaterial to the Partnership.
In February 2008, the FASB issued FASB Staff Position 157-2, which deferred the effective date of SFAS 157 for one-year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value on a nonrecurring basis. SFAS 157 is now effective for those assets and liabilities for years beginning after November 15, 2008.
FASB Statement No. 141(R)—(revised 2007), (“FASB No. 141(R)”), Business Combinations
In December 2007, the FASB issued FASB No. 141(R) which establishes principles and requirements for how the acquirer shall recognize and measure in its financial statements the identifiable assets acquired, liabilities assumed, any noncontrolling interest in the acquiree and goodwill acquired in a business combination. This statement is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.
FASB Statement No. 160 (“FASB No. 160”), Noncontrolling Interests in Consolidated Financial Statements—an Amendment of ARB No. 51
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In December 2007, the FASB issued No. 160, which establishes and expands accounting and reporting standards for minority interests, which will be recharacterized as noncontrolling interests, in a subsidiary and the deconsolidation of a subsidiary. FASB 160 is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. This statement is effective for fiscal years beginning on or after December 15, 2008. The Partnership is currently assessing the potential impact that the adoption of FASB No. 160 will have on its financial position and results of operations.
FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets
The FASB Staff Position (FSP) No. 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible assets under FASB Statement No. 142, Goodwill and Other Intangible Assets. The intent of the FSP is to improve the consistency between the useful life of a recognized intangible asset under FASB No. 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141 (revised 2007), Business Combinations, and other U.S. generally accepted accounting principles. The FSP shall be effective be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The guidance for determining the useful life of a recognized intangible asset if this FSP shall be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. The Partnership does not believe that the adoption of this FSP will have a material effect on the financial position and results of operations.
FASB Staff Position No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active
In October 2008, the FASB issued Staff Position No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP 157-3”). FSP 157-3 clarified the application of SFAS 157 in cases where a market is not active. FSB 157-3 was effective upon issuance, including prior periods for which financial statements had not been issued. The Partnership has considered the guidance provided by FSP 157-3 in its determination of estimated fair values as of December 31, 2008, and the impact was not material.
FASB Statement No. 161 (“FASB No. 161”), Disclosures about Derivative Instruments and Hedging Activities—an Amendment of FASB Statement No. 133
In March 2008, the FASB issued FASB No. 161. FASB No. 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. FASB No. 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS 133 have been applied, and the impact that hedges have on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Partnership does not anticipate the adoption of SFAS 161 will have a material impact on the disclosures contained in its financial statements.
In May 2008, the FASB issued SFAS no. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. We do not expect any significant changes to our financial accounting and reporting as a result of the issuance of SFAS No. 162.
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