Net loss per unit of limited partnership interest is calculated based upon the weighted average number of units of limited partnership interest (units) outstanding.
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Partnership as a going concern. The Partnership’s Operating Partnerships have not achieved the operating results required to provide the Partnership with sufficient cash distributions to fund the Partnership’s administrative costs. Additionally, as of September 30, 2005, the Partnership has incurred allocated losses from all of its Operating Partnerships to the extent of the Partnership’s cash contributions. As a result of the foregoing, the Partnership is dependent upon the general partners and affiliates for continued financial support.
The December 31, 2004 auditors’ reports on four of the Operating Partnerships’ financial statements contained an explanatory paragraph relating to a going concern issue, three of which concerned the maturity of purchase notes for which the Operating Partnerships will not be able to satisfy the obligations. The going concern issue on the fourth Operating Partnership related to substantial operating losses suffered by the Operating Partnership.
Management maintains that the general partners and affiliates, though not required to do so, will continue to fund currentoperations by deferring payment to related parties of allocated overhead expenses, and by funding any Partnership operating costs. Unpaid allocated overhead expenses will accrue and become payable when the Operating Partnerships either generate sufficient cash distributions to the Partnership to cover such expensesor when the Operating Partnerships are sold. At the present time, management is aware that the General Partners are making a conscious effort to sell these properties.The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The General Partners of the Partnership are CPCC and Irwin Jay Deutch. The original limited partner of the Partnership is Westwood Associates whose partners are Irwin Jay Deutch, key employees and former key employees of CPCC. Century Pacific Placement Corporation ( “CPPC”), an affiliate of the General Partners, served as the broker-dealer-manager for sales of limited partnership interests in the Partnership. Century Pacific Realty Corporation ( “CPRC”), an affiliate of CPCC, is a general partner in six of the Operating Partnerships.
The General Partners have an aggregate one percent interest in the Partnership, as does the original limited partner. CPRC has an ownership interest in six of the Operating Partnerships between .01% and 1%.
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CENTURY PACIFIC HOUSING FUND-I
A California Limited Partnership
SEPTEMBER 30, 2005
NOTES TO FINANCIAL STATEMENTS (Continued)
The General Partners and Affiliates receive compensation and reimbursement of expenses from the Partnership, as set forth in the limited partnership agreement, for their services in managing the Partnership and its business. The General Partners and Affiliates also receive compensation and reimbursement of expenses from the Operating Partnerships. This compensation and reimbursement includes services provided to the Partnership during its offering stage, acquisition stage, operational stage, and termination or refinancing stage.
At September 30, 2005 and March 31, 2005, amounts payable to related parties totaling $1,294,072 and $1,264,072, respectively, consist of fees and certain general and administrative costs accrued as an unsecured non-interest bearing payable by the Partnership to the general partners and affiliates. Such fees and allocated costs have been deferred until the Partnership has sufficient cash to pay them.
Receivable from related parties of $4,934 at September 30, 2005 and March 31, 2005 represents unsecured cash advances to several of the Operating Partnerships. In June 2005 an allowance for doubtful accounts was established for this amount.
At September 30, 2005 and March 31, 2005, CPRC was owed $62,455 for unsecured, non-interest bearing, demand cash advances to the Partnership.
The general partners may advance funds to the Partnership to fund operating deficits, but are not obligated to do so. All such loans shall be repaid prior to any distributions of net cash flow. At September 30, 2005 and March 31, 2005, the Partnership had no outstanding advances due to the general partners.
As of September 30, 2005, a third-party buyer has entered into a conditional contract to acquire CPEC, CPCC, CPRC, and their affiliated companies and partnerships from Deutch's family trust. The sale is anticipated to occur in 2007.
NOTE 5 – INVESTMENTS IN LIMITED PARTNERSHIPS:
At March 31, 2005, the Partnership owned limited partnership interests in 9 Operating Partnerships which had investments in 9 multi-family rental properties. In May 2005, one of these properties was sold.
The Partnership’s equity in net operating losses in Operating Partnerships has exceeded the investment balance. Consequently, the investment balances have been reduced to zero in accordance with the equity method of accounting.
The names and locations of the Properties in which the Operating Partnerships hold beneficial interests at September 30, 2005 are as follows:
| Name of Operating Partnership | Property Name | Location |
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| Century Pacific Housing | | |
| Partnership-I (CPHP-I) | Charter House | Dothan, Alabama |
| CPHP-V | Jaycee Towers | Dayton, Ohio |
| CPHP-VII | Gulfway Terrace | New Orleans, Louisiana |
| CPHP-IX | Windridge | Wichita, Kansas |
| CPHP-X | Bergen Circle | Springfield, MA |
| CPHP-XVIII | Ascension Towers | Memphis, Tennessee |
| CPHP-XIX | Coleman Manor | Baltimore, Maryland |
| CPHP-XX | Holiday Heights | Fort Worth, Texas |
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CENTURY PACIFIC HOUSING FUND-I
A California Limited Partnership
SEPTEMBER 30, 2005
NOTES TO FINANCIAL STATEMENTS (Continued)
The following combined statements of operations are prepared in accordance with accounting principles generally accepted in the United States of America and summarize the operations of the Operating Partnerships for the three months ended September 30, 2005 and September 30, 2004 and for the six months ended September 30, 2005 and September 30, 2004.
| | | Three Months Ended
September 30, | | | Six Months Ended
September 30, | |
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| | | | 2005 | | | 2004 | | | 2005 | | | 2004 | |
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| Revenues | | | | | | | | | | | | | |
| Rental Income | | $ | 1,649,175 | | $ | 2,439,951 | | $ | 3,284,762 | | $ | 5,256,528 | |
| Other | | | 55,247 | | | 29,820 | | | 107,072 | | | 51,754 | |
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| | | | 1,704,422 | | | 2,469,771 | | | 3,391,834 | | | 5,308,282 | |
| Expenses | | | | | | | | | | | | | |
| Oper, Gen.& Adm. | | | 1,271,056 | | | 2,032,840 | | | 2,739,063 | | | 4,549,102 | |
| Depreciation | | | 413,660 | | | 573,737 | | | 846,587 | | | 1,157,352 | |
| Interest | | | 942,685 | | | 1,240,751 | | | 1,896,936 | | | 2,409,415 | |
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| | | | 2,627,401 | | | 3,847,328 | | | 5,482,586 | | | 8,115,869 | |
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| Operating Loss | | | (922,979 | ) | | (1,377,557 | ) | | (2,090,752 | ) | | (2,807,587 | ) |
| | | | | | | | | | | | | | |
| Other Income | | | | | | | | | | | | | |
| Cancellation of Debt Income | | | 0 | | | 3,306,348 | | | 1,938,185 | | | 5,330,448 | |
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| Net gain on disposition of Assets | | | 0 | | | 3,998,295 | | | 4,232,477 | | | 7,795,964 | |
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| | | | 0 | | | 7,304,643 | | | 6,170,662 | | | 13,126,412 | |
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| Net Income/(Loss) | | | ($ 922,979 | ) | $ | 5,927,086 | | $ | 4,079,910 | | $ | 10,318,825 | |
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In May 2005, an Operating Partnership, Harriet Tubman Terrace, located in Berkeley, California, sold a property for $6,650,937 for a gain of $4,232,477. Cash proceeds of $3,008,942, net of a mortgage receivable of $2,471,882 provided by the Operating Partnership to the buyer, were used to satisfy obligations of the Operating Partnership.
In March 2005, an Operating Partnership, Ascension Towers, located in Memphis, Tennessee, defaulted on its HUD-insured non-recourse mortgage. In May 2005, this mortgage was assigned to HUD who foreclosed upon and subsequently sold the property in June 2006 for $3,015,000. Cash proceeds of $846,519 were used to satisfy obligations of the Operating Partnership.
In June 2004, an Operating Partnership, Atlantis Apartments, located in Virginia Beach, Virginia, was sold for a gain of $3,797,669. In August 2004, an Operating Partnership, Sunset Park, located in Denver, Colorado, was sold for a gain of $3,998,295. In December 2004, two Operating Partnerships, Rockwell Villa and London Square, both located in Oklahoma City, Oklahoma, were sold for $5,000,000 resulting in a combined gain of $1,079,642. There were no cash proceeds resulting from these sales.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations
Three months ended September 30, 2005 compared to three months ended September 30, 2004
For the three month periods ended September 30, 2005 and 2004, the Partnership recorded net losses of $15,000 and $15,000, respectively. The net losses are equal to the reimbursement paid to Century Pacific Equity Corporation (CPEC), an affiliate, for overhead allocations.
In accordance with the equity method of accounting for limited partnership interests, the Partnership does not recognize losses from investment properties when losses exceed the Partnership's equity method basis in these properties. All of the Partnership's investments have an equity method basis of zero at September 30, 2005.
The average occupancy level of the Operating Partnerships, in total, remained relatively constant for the three months ended September 30, 2005 and 2004.
The majority of the properties owned by the Operating Partnerships are in a position of functional obsolescence and need substantial rehabilitation. The Operating Partnerships do not have the funds to address the growing deferred maintenance. Infusion of capital is necessary to keep the projects viable and maintain them as decent, safe and quality housing. Refinancing is not an option in view of the indebtedness on the properties surpassing their fair market value.
Six months ended September 30, 2005 compared to six months ended September 30, 2004
For the six month periods ended September 30, 2005 and 2004, the Partnership recorded net losses of $34,934 and $30,000, respectively. The net losses are substantially equal to the reimbursement paid to Century Pacific Equity Corporation (CPEC), an affiliate, for overhead allocations.
In accordance with the equity method of accounting for limited partnership interests, the Partnership does not recognize losses from investment properties when losses exceed the Partnership's equity method basis in these properties. All of the Partnership's investments have an equity method basis of zero at September 30, 2005.
The average occupancy level of the Operating Partnerships, in total, remained relatively constant for the six months ended September 30, 2005 and 2004.
The majority of the properties owned by the Operating Partnerships are in a position of functional obsolescence and need substantial rehabilitation. The Operating Partnerships do not have the funds to address the growing deferred maintenance. Infusion of capital is necessary to keep the projects viable and maintain them as decent, safe and quality housing. Refinancing is not an option in view of the indebtedness on the properties surpassing their fair market value.
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Liquidity and Capital Resources
As of September 30, 2005, the Partnership’s portfolio consists of 8 properties. The properties are located in 8 states and contain 1,194 residential units. The average occupancy level for all properties during calendar year 2004 was approximately 92% and most properties generated sufficient revenue to cover operating costs, debt service, and the funding of reserves.
The government restricts rental rate increases. A substantial amount of the revenue generated by these properties comes from rental subsidy payments made by federal or state housing agencies. These features, which are characteristic of all low-income housing properties, limit the pool of potential buyers for these real estate assets. As a limited partner of the Operating Partnerships, the Partnership does not control property disposition decisions, and management is aware of the intention of the General Partners of the Partnership to sell the investment properties in the near future.
The partnership is currently experiencing a liquidity problem. Under the Partnership Agreement, the Partnership is entitled to receive distributions of surplus cash from the Operating Partnerships, which is to provide the funds necessary for the Partnership to meet its administrative expenses and pay the Partnerships management fees. At the present time, the Operating Partnerships have not generated sufficient cash distributions to fund the Partnership's expenses. As a result of the foregoing, the Partnership has been dependent upon its affiliates and the General Partners for continued financial support to meet its expenses. Though there can be no assurance, management believes that affiliates and/or the General Partners, though not required to do so, will continue to fund operations of the Partnership and defer receipt of payment of allocated overhead administrative expenses and partnership management fees. Allocated administrative expenses paid or accrued to affiliates and the General Partners represent reimbursement of the actual cost of goods and materials used for or by the Partnership, salaries, related payroll costs and other administrative items incurred or allocated, and direct expenses incurred in rendering legal, accounting/bookkeeping, computer, printing and public relations services. Items excluded from the overhead allocation include overhead expenses of the General Partners, including rent and salaries of employees not specifically performing the services described above. Unpaid allocated administrative expenses and partnership management fees, an annual amount up to .5% of invested assets, will accrue for payment in future operating years.
Management believes the possibility exists that one or several Operating Partnerships may require additional capital, in addition to that previously contributed by the Partnership, to sustain operations. In such case, the source of the required capital needs may be from (i) limited reserves from the Partnership (which may include distributions received from the Operating Partnerships that would otherwise be available for distribution to partners), (ii) debt financing at the Operating Partnership level (which may not be available), or (iii) additional equity contributions from the general partner of the Operating Partnerships (which may not be available). There can be no assurance that any of these sources would be readily available to provide for possible additional capital requirements which may be necessary to sustain the operations of the Operating Partnerships. However, the Partnership is under no obligation to fund operating deficits of the Operating Partnerships in the form of additional contributions or loans.
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Due to the uncertainty of the continuation of the Section 8 program, management has been forced to consider several options to prepare for the possible lack of subsidy income to the Operating Partnerships. The loss of subsidy income to the Operating Partnerships will make it more difficult for the Operating Partnerships to provide sufficient cash distributions to the Partnership. Management has identified the courses of action they will take as a result of the potential changes to the Section 8 program.
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of financial condition and results of operations are based upon our unaudited financial statements which have been prepared in accordance with accounting principles generally accepted in the United States. Such financial statement preparation requires management to make judgments and use estimates regarding significant accounting policies. We consider an accounting policy to be significant if it is important to our financial condition and results, and requires significant judgment and estimates on the part of management in its application. A summary of our significant accounting policies is included in Note 2 to our financial statements for the year ended March 31, 2005, which are included in the Form 10-K. Our significant accounting estimates and the related assumptions are evaluated periodically as conditions warrant, and changes to such estimates are recorded as new information or changed conditions require revision. Application of the critical accounting policies requires management’s significant judgments, often as the result of the need to make estimates for matters that are inherently uncertain. If actual results were todiffer materially from the estimates made, the reported results could be materially affected. There have been no significant changes in the application of the critical accounting policies, or in the assumptions or estimates relating thereto, since March 31, 2005.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Due to the nature of our operations, we have concluded that there is no material market risk exposure and, therefore, no quantitative tabular disclosures are required.
ITEM 4. CONTROLS AND PROCEDURES
| | (a) | Evaluation of Disclosure Controls and Procedures |
| | | |
| | | The Partnership's Chief Executive Officer and Chief Financial Officer have reviewed and evaluated the effectiveness of the Partnership's disclosure controls and procedures (as defined in Exchange Act Rules 240.13a-15(e)and 15d-15(e)) as of the end of the period covered by this report. Based on that evaluation, they have concluded that the Partnership's current disclosure controls and procedures are effective in timely providing them with material information relating to the Partnership required to be disclosed in the reports of the Partnership files or submits under the Exchange Act. |
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| | (b) | Changes in Internal Controls |
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| | | During the period covered by this report, there have not been any significant changes in the Partnership's internal controls or in other factors that could significantly affect these controls. There were no significant deficiencies or material weaknesses, and therefore no corrective actions were taken. |
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PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
| | Operating Partnerships – Ascension Towers |
| | In May 2005, HUD initiated foreclosure proceedings against an Operating Partnership, Ascension Towers, in which the Partnership has an equity investment. The proceedings resulted from the Operating Partnership defaulting on its HUD-insured non-recourse mortgage in March 2005. The property was foreclosed upon in April 2006 and subsequently sold in June 2006. |
| | There are no pending legal proceedings against the Partnership or any other Operating Partnership in which the Partnership has an investment as of the date of this report. |
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS – None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES – None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS – None
ITEM 5. OTHER INFORMATION – None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
| | (a) | Exhibits |
| | | |
| | | We have listed the exhibits by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K on the Exhibit list attached to this report. |
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* * * SIGNATURE * * *
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: September 26, 2006
| | | CENTURY PACIFIC HOUSING FUND-I |
| | | a California limited partnership |
| | | |
| | By: | Century Pacific Capital Corporation, |
| | | a California Corporation |
| | | General Partner |
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| | By | /s/ Irwin J. Deutch |
| | |
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| | | Irwin J. Deutch |
| | | President |
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EXHIBITS
| Exhibit | | | |
| Number | | Description | |
| | | | |
| 31.1 | | Certification Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
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| 31.2 | | Certification Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* | |
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| 32.1 | | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
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| 32.2 | | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
*Filed herewith
