LAUREL CREEK APARTMENTS
(A California Limited Partnership)
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2004
LAUREL CREEK APARTMENTS
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2004
| TABLE OF CONTENTS | Page |
| Independent Auditors' Report | 1 |
| Balance Sheet | 2 |
| Statement of Income, Expenses and Changes in Partners' Capital | 3 |
| Statement of Cash Flows | 4 |
| Notes to Financial Statements | 5 |
| 430 Verbena Court | (925) 229-1950 |
| Pleasant Hill, CA 94523 | Fax (925) 229-1952 |
| wroweassoc@aol.com |
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Laurel Creek Apartments
San Luis Obispo, California
We have audited the accompanying balance sheets of Laurel Creek Apartments (A California Limited Partnership) as of December 31, 2004 and December 31, 2003 and the related statements of operations, and changes in partners' capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnerships' management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the fmancial position of Laurel Creek Apartments as of December 31, 2004 and December 31, 2003, and the results of its operations for the years then ended in conformity with accounting principles generally accepted in the United States of America.
/s/Wallace Rowe & Associates
February 8, 2004
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LAUREL CREEK APARTMENTS
BALANCE SHEET
DECEMBER 31, 2004 AND 2003
| 2004 | 2003 | |||||||
ASSETS CURRENT ASSETS Cash (Note 2) | $ | 66,297 | $ | 59,914 | ||||
| Accounts receivable | 1,249 | 215 | ||||||
| Prepaid expenses | 3,335 | 2,652 | ||||||
| TOTAL CURRENT ASSETS | 70,881 | 62,781 | ||||||
| Restricted reserves (Note 3) | 55,350 | 52,611 | ||||||
Land, structures and equipment, net of accumulated depreciation of $737,972 and $699,947 (Note 4) | 1,427,382 | 1,495,371 | ||||||
Organizational costs, net of accumulated amortization of $18,997 and $17,329 (Note 5) | 7,921 | 9,589 | ||||||
| TOTAL ASSETS | $ | 1,561,534 | $ | 1,620,352 | ||||
LIABILITIES AND PARTNERS' CAPITAL CURRENT LIABILITIES Accounts payable - other | $ | 10,468 | $ | 8,564 | ||||
| Accounts payable - related party (Note 7) | 3,462 | 2,007 | ||||||
| Security deposits payable | 8,892 | 8,592 | ||||||
| Current portion of long-term debt (Note 6) | 38,536 | 31,336 | ||||||
| TOTAL CURRENT LIABILITIES | 61,358 | 50,499 | ||||||
| Long-term debt (Note 6) | 502,631 | 544,925 | ||||||
| TOTAL LIABILITIES | 563,989 | 595,424 | ||||||
Partners' Capital: General partner | 177,086 | 215,383 | ||||||
| Limited partner | 820,459 | 809,545 | ||||||
| TOTAL PARTNERS' CAPITAL | 997,545 | 1,024,928 | ||||||
| TOTAL LIABILITIES AND PARTNERS' CAPITAL | $ | 1,561,534 | $ | 1,620,352 | ||||
| See accompanying notes. | ||||||||
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LAUREL CREEK APARTMENTS
STATEMENT OF INCOME, EXPENSES AND
CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
| 2004 | 2003 | |||||||
OPERATING INCOME Rental income | $ | 220,203 | $ | 205,982 | ||||
| Tenant charges | 3,111 | 1,043 | ||||||
| Other | 1,900 | 2,034 | ||||||
| TOTAL OPERATING INCOME | 225,214 | 209,059 | ||||||
OPERATING EXPENSES Administration | 22,732 | 20,953 | ||||||
| Insurance and taxes | 8,233 | 5,660 | ||||||
| Maintenance | 40,838 | 28,676 | ||||||
| Utilities | 20,289 | 22,674 | ||||||
| Depreciation and amortization | 69,657 | 69,704 | ||||||
| TOTAL EXPENSES | 161,749 | 147,667 | ||||||
| NET INCOME (LOSS) FROM OPERATIONS | 63,465 | 61,392 | ||||||
OTHER INCOME AND EXPENSES Interest income | 1,635 | 1,614 | ||||||
| Interest expense | (41,100 | ) | (43,596 | ) | ||||
| NET OTHER INCOME UNDER EXPENSES | (39,465 | ) | (41,982 | ) | ||||
| NET INCOME (LOSS) | 24,000 | 19,410 | ||||||
| BEGINNING PARTNERS' CAPITAL | 1,024,928 | 1,048,211 | ||||||
| Partner withdrawals | (51,383 | ) | (42,693 | ) | ||||
| ENDING PARTNERS' CAPITAL | $ | 997,545 | $ | 1,024,928 | ||||
See accompanying notes.
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LAUREL CREEK APARTMENTS
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2004 AND 2003
| 2004 | 2003 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: Rents received | $ | 219,169 | $ | 206,590 | ||||
| Other operating revenues | 5,011 | 3,077 | ||||||
| Cash payments for goods and services | (89,416 | ) | (74,188 | ) | ||||
Net cash provided (used) by operating activities | 134,764 | 135,479 | ||||||
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: Increases in security deposits | 300 | 154 | ||||||
| Withdrawal from replacement reserves | 2,061 | - | ||||||
| Additions to replacement reserves | (4,800 | ) | (4,800 | ) | ||||
Net cash provided (used) by capital and financing activities | �� | (2,439 | ) | (4,646 | ) | |||
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Capital withdrawals | (51,383 | ) | (42,693 | ) | ||||
| Payment of debt | (35,094 | ) | (32,931 | ) | ||||
Net cash provided (used) by capital and related financing activities | (86,477 | ) | (75,624 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: Interest income | 1,635 | 1,224 | ||||||
| Interest paid on notes | (41,100 | ) | (43,596 | ) | ||||
| Net cash provided (used) by investing activities | (39,465 | ) | (42,372 | ) | ||||
| NET INCREASE (DECREASE) IN CASH | 6,383 | 12,837 | ||||||
| CASH - BEGINNING OF YEAR | 59,914 | 47,077 | ||||||
| CASH - END OF YEAR | $ | 66,297, | $ | 59,914 | ||||
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income from operations | $ | 63,465 | $ | 61,392 | ||||
Adjustments to reconcile net loss to Net cash provided by operating activities Depreciation and amortization | 69,657 | 69,704 | ||||||
| Decrease (increase) in accounts receivable | (1,034 | ) | 608 | |||||
| Increase in prepaid expenses | (683 | ) | (892 | ) | ||||
| Increase in accounts payable - other | 1,904 | 5,411 | ||||||
Increase (decrease) in accounts payable -related parties | 1,455 | (744 | ) | |||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | $ | 134,764 | $ | 135,479 | ||||
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LAUREL CREEK APARTMENTS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
| Note 1 - DEFINITION OF REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The Laurel Creek Apartments is a California Limited Partnership which was farmed on May 17, 1994. The partnership was formed to construct, acquire, own, operate, maintain, manage, lease, sell, mortgage or otherwise dispose of a 24 unit apartment complex located in the City of San Luis Obispo, California.
As of the report date there are two partners in the partnership, consisting of one general and one limited partner.
Summary of Significant Accounting Policies
a. Basis of accounting
The partnership is accounted for on the accrual basis of accounting. Under this method revenues are recognized when they are earned and expenses are recognized when they are incurred.
b. Fixed assets and depreciation
Fixed assets are carried at cost. Expenditures for the fixed assets are capitalized. Maintenance and repairs are charged to operations. Depreciation is calculated using the straight-line basis over the estimated useful lives.
c. Income taxes
Taxable income or expenses and related tax credits are not reflected as expenses or credits ofthe partnership. These items are the responsibilities of the individual partners.
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LAUREL CREEK APARTMENTS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
(Continued)
Note 2 - CASH
Cash consists of $64,453 deposited into money market accounts, and $844 on deposit with the State of California Local Agency Investment Fund. At December 31, 2004 the amount deposited into the money market account and the Local Agency Investment Fund earned interest at rates from 2.02% to 2.19% respectively.
Note 3 - RESTRICTED CASH
Restricted cash consists of $55,350 maintained in a money market account earning 2.02%. This cash is reserved for the replacement of fixed assets and the repayment of tenants' security deposits.
Note 4 - LAND, STRUCTURES AND EQUIPMENT
Property and equipment and accumulated depreciation consist of the following:
| Cost | Accumulated Depreciation | |||||||
| Land | $ | 275,000 | $ | |||||
| Building | 1,868,634 | 716,252 | ||||||
| Equipment | 21,720 | 21,720 | ||||||
| $ | 2,165,354 | $ | 737,972, | |||||
Note 5 - ORGANIZATION COSTS
Organization costs and accumulated amortization consist of the following:
| Cost | Accumulated Depreciation | |||||||
| Organization costs | $ | 26,918 | $ | 18,997 | ||||
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LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 |
(Continued)
Note 6 - NOTE PAYABLE
The Agency has a mortgage note payable to the First Bank of San Luis Obispo. The note requires principal and interest payments totaling $6,385 each month until 5/18/2009. The note bears interest at 7.25% per annum. The following is a schedule of the debt payment requirements to maturity:
Year ending December 31
| 2005 | $ | 76,620 | ||
| 2006 | 76,620 | |||
| 2007 | 76,620 | |||
| 2008 | 76,620 | |||
| 2009 | 379,405 | |||
| Total | 685,885 | |||
| Less amounts representing interest | 144,718 | |||
| $ | 541,167 |
Note 7 - RELATED PARTIES
The accounting and administrative functions of the partnership are performed by employees of the Housing Authority of the City of San Luis Obispo (the Authority). Two members ofthe general partner's (San Luis Obispo Nonprofit Housing Corporation) board of directors are also members of the board of commissioner's of the Housing Authority of the City of San Luis Obispo.
At December 31, 2004 the partnership owed the Authority $3,462. During the year ended December 31, 2004, the partnership paid the Authority $31,386 in maintenance expenses and management fees.
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LAUREL CREEK APARTMENTS NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 |
(Continued)
Note 8 - LAND DONATION AND LEASE
The Iand upon which the Laurel Creek Apartments were built was originally leased from the City of San Luis Obispo (the City) by the Housing Authority of the City of San Luis Obispo (the Authority). This lease agreement was later assigned from the Authority to the San Luis Obispo Nonprofit Housing Corporation (the Corporation). The Iease was later assigned to the Laurel Creek Apartments Partnership. Each of the above mentioned agencies have common board members or in some other manner have oversight responsibilities over the other organizations; which would qualify them as related parties.
The lease expires on April 29, 2046. The provisions for extending or renewing the lease term are not specified and are contingent upon the continuation of the project being used to provide affordable housing to lower income families. The annual lease payments are $1 per year.
The land was recorded on the Agency's books of accounts at the appraised value on the date the land lease was assigned to the Agency. This appraised value was $275,000. The value of the land was also recorded as a capital contribution from the general partner on that date.
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| LAUREL CREEK APARTMENTS | ||||
| Calculation of Cash Distribution | ||||
| Net Profit @ 12-31-04 | 23,999.65 | |||
| Add back depreciation expense | 67,989.00 | |||
| Add back amortization expense | 1,668.00 | |||
| Deposits to replacement reserve account | (4,800.00 | ) | ||
| Debt service (mortgage loan) | (35,094.16 | ) | ||
| Adjusted cash available from operations through 12-31-04 | $ | 53,762.49 | ||
| Net cash available for disbursement | $ | 53.762.49 | ||
General Partner distribution = 75% = $40,321.87
Limited Partner distribution = 25% = $13,440.62
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LAUREL CREEK APARTMENTS
Replacement Reserve Summary
| Beginning balance as of: | 1/1/2004 | 44,019.14 | ||||
| Deposits to account for year | $400 per mo | 4,800.00 | ||||
| Withdrawals during year | (2,061.46 | ) | carpet in 2 units | |||
| Ending balance as of: | 12/31/2004 | 46,757.68 |
Note: Replacement Reserve is fully funded as of FYE 12-31-04.
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