UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-13808
HOUSING PROGRAMS LIMITED
(Exact name of registrant as specified in its charter)
California 95-3906167
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOUSING PROGRAMS LIMITED
(a California limited partnership)
BALANCE SHEET
(in thousands)
MARCH 31, 2004
(Unaudited)
ASSETS
Investments in local limited partnerships $ --
Cash and cash equivalents 77
Total assets $ 77
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Note payable in default (Note 3) $ 2,000
Accrued interest payable in default (Note 3) 3,559
Accounts payable 24
Advances due to affiliates (Note 4) 101
5,684
Partners' deficit:
General partners (306)
Limited partners (5,301)
(5,607)
Total liabilities and partners' deficit $ 77
The accompanying notes are an integral part of these financial statements.
HOUSING PROGRAMS LIMITED
(a California limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2004 2003
OPERATING EXPENSES:
Management fees - partners (Note 4) $ 37 $ 49
General and administrative (Note 4) 9 6
Legal and accounting 30 14
Interest 47 108
Total operating expenses 123 177
Net loss $ (123) $ (177)
Net loss to general partners (1%) $ (1) $ (2)
Net loss to limited partners (99%) (122) (175)
$ (123) $ (177)
Net loss per limited partnership interest
(Note 1) $ (9.95) $(14.15)
The accompanying notes are an integral part of these financial statements.
HOUSING PROGRAMS LIMITED
(a California limited partnership)
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
(in thousands, except interest data)
General Limited
Partners Partners Total
Partners' deficit,
December 31, 2003 $ (305) $(5,179) $(5,484)
Net loss for the three months
ended March 31, 2004 (1) (122) (123)
Partners' deficit,
March 31, 2004 $ (306) $(5,301) $(5,607)
Percentage interest at
March 31, 2004 1% 99% 100%
(A)
(A) Consists of 12,250 partnership interests at March 31, 2004 and 12,260
partnership interest at December 31, 2003. During the three months ended
March 31, 2004, 10 interests were abandoned (Note 5).
The accompanying notes are an integral part of these financial statements.
HOUSING PROGRAMS LIMITED
(a California limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (123) $ (177)
Adjustments to reconcile net loss to net cash used in
operating activities:
Accrued interest payable 47 108
Accounts payable and accrued expenses 14 12
Accrued fees due to affiliates (87) 54
Net cash used in operating activities (149) (3)
NET DECREASE IN CASH AND CASH EQUIVALENTS (149) (3)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 226 5
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 77 $ 2
The accompanying notes are an integral part of these financial statements.
HOUSING PROGRAMS LIMITED
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
MARCH 31, 2004
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The information contained in the following notes to the unaudited financial
statements is condensed from that which would appear in the annual audited
financial statements; accordingly, the financial statements included herein
should be reviewed in conjunction with the financial statements and related
notes thereto contained in the Partnership's annual report for the year ended
December 31, 2003. Accounting measurements at interim dates inherently involve
greater reliance on estimates than at year end. The results of operations for
the interim period presented are not necessarily indicative of the results for
the entire year.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting primarily of normal recurring
accruals) necessary to present fairly the financial position of the Partnership
at March 31, 2004 and the results of operations and changes in cash flows for
the three months ended March 31, 2004 and 2003.
Organization
The Partnership was organized under the California Uniform Limited Partnership
Act on May 15, 1984. The Partnership was formed to invest primarily in other
limited partnerships which own or lease and operate federal, state or local
government-assisted housing projects. The general partners of the Partnership
are National Partnership Investments Corp. ("NAPICO" or the "Corporate General
Partner"), Housing Programs Corporation II and National Partnership Investment
Associates (collectively, the "General Partners"). The Corporate General Partner
is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a
publicly traded real estate investment trust.
The general partners have a one percent interest in profits and losses of the
Partnership. The limited partners have the remaining 99 percent interest which
is allocated in proportion to their respective individual investments.
Basis of Presentation
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States.
Method of Accounting for Investment in Limited Partnerships
The investments in local limited partnerships are accounted for on the equity
method. Acquisition, selection fees and other costs related to the acquisition
of the projects have been capitalized to the investment account and were
amortized by the straight line method over the estimated lives of the underlying
assets, which was generally 30 years.
Net Loss Per Limited Partnership Interest
Net loss per limited partnership interest was computed by dividing the limited
partners' share of net loss by the number of limited partnership interests
outstanding at the beginning of the year. The number of limited partnership
interests was 12,260 at December 31, 2003 and 12,368 at December 31, 2002.
Recent Accounting Pronouncements
In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46 ("FIN 46"), Consolidation of Variable Interest Entities.
FIN 46 requires the consolidation of entities in which an enterprise absorbs a
majority of the entity's expected losses, receives a majority of the entity's
expected residual returns, or both, as a result of ownership, contractual or
other financial interests in the entity. Prior to the issuance of FIN 46,
entities were generally consolidated by an enterprise when it had a controlling
financial interest through ownership of a majority voting interest in the
entity. FIN 46 applied immediately to variable interest entities created after
January 31, 2003, and with respect to public entities with variable interest
entities held before February 1, 2003, FIN 46 will apply to financial statements
for periods ending after December 15, 2004.
The Partnership has not entered into any partnership investments subsequent to
January 31, 2003. The Partnership is in the process of evaluating its
investments in unconsolidated Local Limited Partnerships that may be deemed
variable interest entities under the provisions of FIN 46. The Partnership has
not yet determined the anticipated impact of adopting FIN 46 for its investments
in Local Limited Partnerships that existed as of January 31, 2003. However, FIN
46 may require the consolidation of the assets, liabilities and operations of
certain of the Partnership's unconsolidated investments in Local Limited
Partnerships. Although the Partnership does not believe the full adoption of FIN
46 will have an impact on its cash flow, the Partnership cannot make any
definitive conclusion on the impact, if any, on net earnings until it completes
its evaluation, including an evaluation of the Partnership's maximum exposure to
loss.
NOTE 2 - INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS
As of March 31, 2004, the Partnership holds limited partnership interests in
four local limited partnerships (the "Local Limited Partnerships"). The Local
Limited Partnerships own residential low income rental projects consisting of
736 apartment units. The mortgage loans of these projects are payable to or
insured by various governmental agencies.
The Partnership, as a limited partner, does not exercise control over the
activities and operations, including refinancing or selling decisions, of the
Local Limited Partnerships. Accordingly, the Partnership accounts for its
investments in the Local Limited Partnerships using the equity method. The
Partnership is allocated profits and losses of the Local Limited Partnerships
based upon its respective ownership percentage of 99%. Distributions of surplus
cash from operations from most of the Local Limited Partnerships are restricted
by the Local Limited Partnerships' Regulatory Agreements with the United States
Department of Housing and Urban Development ("HUD"). These restrictions limit
the distribution to a portion, generally less than 10%, of the initial invested
capital. The excess surplus cash is deposited into a residual receipts reserve,
of which the ultimate realization by the Partnership is uncertain as HUD
frequently retains it upon sale or dissolution of the Local Limited Partnership.
The Partnership is allocated profits and losses and receives distributions from
refinancings and sales in accordance with the Local Limited Partnerships'
partnership agreements. These agreements usually limit the Partnership's
distributions to an amount substantially less than its ownership percentage in
the Local Limited Partnership.
The individual investments are carried at cost plus the Partnership's share of
the Local Limited Partnership's profits less the Partnership's share of the
Local Limited Partnership's losses, distributions and impairment charges. The
Partnership is not legally liable for the obligations of the Local Limited
Partnerships and is not otherwise committed to provide additional support to
them. Therefore, it does not recognize losses once its investment in each of the
Local Limited Partnerships reaches zero. Distributions from the Local Limited
Partnerships are accounted for as a reduction of the investment balance until
the investment balance is reduced to zero. When the investment balance has been
reduced to zero, subsequent distributions received are recognized as income in
the accompanying statements of operations.
For those investments where the Partnership has determined that the carrying
value of its investments approximates the estimated fair value of those
investments, the Partnership's policy is to recognize equity in income of the
Local Limited Partnerships only to the extent of distributions received and
amortization of acquisition costs from those Local Limited Partnerships.
Therefore, the Partnership limits its recognition of equity earnings to the
amount it expects to ultimately realize.
The Partnership has no carrying value in investments in the Local Limited
Partnerships as of March 31, 2004.
The following are unaudited combined estimated statements of operations for the
three months ended March 31, 2004 and 2003 for the Local Limited Partnerships in
which the Partnership has investments (in thousands):
Three Months Ended
March 31,
2004 2003
(Restated)
Revenues
Rental and other $ 1,216 $ 1,260
Expenses
Operating 782 759
Interest 355 290
Depreciation 282 282
1,419 1,331
Loss from continuing operations (203) (71)
Loss from discontinued operations -- (69)
Net loss $ (203) $ (140)
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the combined results of operations for the three months ended March 31, 2003
have been restated to reflect the operations of Lancaster Heights, Cape LaCroix
and Cloverleaf as loss from discontinued operations as these properties were
sold in 2003.
NAPICO, or one of its affiliates, is the general partner and property manager
for one of the Local Limited Partnerships included above. During the three
months ended March 31, 2004 and 2003, affiliates of the Corporate General
Partner were paid approximately $6,000 and $25,000, respectively, for providing
property management services.
One of the Local Limited Partnerships, Cloverdale Heights Apartments, Ltd., has
outstanding purchase money notes and accrued interest that matured in December
2000. In addition, a second Local Limited Partnership, Jenny Lind Hall Second
Limited Partnership, has a subordinated note and accrued interest that matured
in December 1999. Each of these Local Limited Partnerships is in default on
these obligations. The Partnership risks losing its investments in these Local
Limited Partnerships through foreclosure. All of the investments in these Local
Limited Partnerships were zero at March 31, 2004.
Under recently adopted law and policy, the United States Department of Housing
and Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which may be the case under
existing HAP Contracts. The payments under the renewed HAP Contracts may not be
in an amount that would provide sufficient cash flow to permit owners of
properties subject to HAP Contracts to meet the debt service requirements of
existing loans insured by the Federal Housing Administration of HUD ("FHA")
unless such mortgage loans are restructured. In order to address the reduction
in payments under HAP Contracts as a result of this new policy, the Multi-family
Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA") provides for
the restructuring of mortgage loans insured by the FHA with respect to
properties subject to the Section 8 program. Under MAHRAA, an FHA-insured
mortgage loan can be restructured into a first mortgage loan which will be
amortized on a current basis and a low interest second mortgage loan payable to
FHA which will only be payable on maturity of the first mortgage loan. This
restructuring results in a reduction in annual debt service payable by the owner
of the FHA-insured mortgage loan and is expected to result in an insurance
payment from FHA to the holder of the FHA-insured loan due to the reduction in
the principal amount. MAHRAA also phases out project-based subsidies on selected
properties serving families not located in rental markets with limited supply,
converting such subsidies to a tenant-based subsidy.
When the HAP Contracts are subject to renewal, there can be no assurance that
the Local Limited Partnerships in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the economic impact on the Partnership of the combination of the reduced
payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.
NOTE 3 - NOTE PAYABLE
One of the Partnership's investments, Plaza Village, involved the purchase of
partnership interests in the Local Limited Partnership from partners who
subsequently withdrew from the Local Limited Partnership. The Partnership issued
a non-recourse note payable totaling $2,000,000 to the sellers of the
partnership interests, such note bearing interest at 9.5% per annum. The note
matured in 1999. This obligation and related interest is collateralized by the
Partnership's investment in the Local Limited Partnership. Unpaid interest was
due at maturity of the note.
At March 31, 2004, the obligation relating to the Plaza Village note was
$2,000,000 and accrued interest was approximately $3,559,000. AIMCO, which
indirectly owns the Corporate General Partner of the Partnership, has a 15%
interest in and is the trustee for the Plaza Village note payable.
The Partnership has not made any payments on the Plaza Village note and is in
default under the terms of the note. Management is attempting to negotiate
extensions of the maturity date on the note payable. If the negotiations are
unsuccessful, the Partnership could lose its investment in the Local Limited
Partnership, Plaza Village Group, to foreclosure. The investment in Plaza
Village was zero at March 31, 2004.
NOTE 4 - TRANSACTIONS WITH AFFILIATED PARTIES
Under the terms of the Restated Certificate and Agreement of the Limited
Partnership, the Partnership is obligated to pay to the general partners an
annual management fee equal to 0.5 percent of the original invested assets of
the Local Limited Partnerships. Invested assets is defined as the costs of
acquiring project interests including the proportionate amount of the mortgage
loans related to the Partnership's interests in the capital accounts of the
respective Local Limited Partnerships. For the three months ended March 31, 2004
and 2003, approximately $37,000 and $49,000, respectively, has been expensed.
The Partnership reimburses NAPICO for certain expenses. The reimbursement to
NAPICO was approximately $5,000 for the three months ended March 31, 2004 and is
included in general and administrative expenses. No reimbursements were made for
the same period in 2003.
In accordance with the Partnership Agreement, the Corporate General Partner has
advanced the Partnership funds to assist in paying for normal operating
expenses. These advances do not accrue interest. As of March 31, 2004, the
Corporate General Partner had advanced approximately $101,000 for such purposes.
AIMCO, which indirectly owns the Corporate General Partner of the Partnership,
has a 15% interest in, and is the trustee for, the Plaza Village note payable.
NOTE 5 - ABANDONMENT OF LIMITED PARTNERSHIP INTERESTS
During the three months ended March 31, 2004, the number of Limited Partnership
Interests decreased by 10 interests due to limited partners abandoning their
units. In abandoning his or her Limited Partnership Interest(s), a limited
partner relinquishes all right, title, and interest in the partnership as of the
date of abandonment. However, the limited partner is allocated his or her share
of net income or loss for that year. The income or loss per Limited Partnership
Interest in the accompanying statements of operations is calculated based on the
number of interests outstanding at the beginning of the year.
NOTE 6 - CONTINGENCIES
The Corporate General Partner is involved in various lawsuits arising from
transactions in the ordinary course of business. In the opinion of management
and the Corporate General Partner, the claims will not result in any material
liability to the Partnership.
Pursuant to a formal order of investigation received by AIMCO on March 29, 2004,
the Central Regional Office of the United States Securities and Exchange
Commission is conducting an investigation relating to certain matters. AIMCO
believes the areas of investigation include AIMCO's miscalculated monthly net
rental income figures in third quarter 2003, forecasted guidance, accounts
payable, rent concessions, vendor rebates, and capitalization of expenses and
payroll. AIMCO is cooperating fully. AIMCO does not believe that the ultimate
outcome will have a material adverse effect on its consolidated financial
condition or results of operations taken as a whole. Similarly, the Corporate
General Partner does not believe that the ultimate outcome will have a material
adverse effect on the Partnership's financial condition or results of operations
taken as a whole.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
The Corporate General Partner monitors developments in the area of legal and
regulatory compliance and is studying new federal laws, including the
Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 mandates or suggests
additional compliance measures with regard to governance, disclosure, audit and
other areas. In light of these changes, the Partnership expects that it will
incur higher expenses related to compliance, including increased legal and audit
fees.
Liquidity and Capital Resources
The properties in which the Partnership has invested, through its investments in
the Local Limited Partnerships, receive one or more forms of assistance from the
Federal Government. As a result, the Local Limited Partnerships' ability to
transfer funds either to the Partnership or among themselves in the form of cash
distributions, loans or advances is generally restricted by those government
assistance programs.
The Partnership's primary sources of funds include interest income earned from
investing available cash and distributions from Local Limited Partnerships in
which the Partnership has invested. It is not expected that any of the Local
Limited Partnerships in which the Partnership has invested will generate cash
flow sufficient to provide for distributions to the Partnership's limited
partners in any material amount.
At March 31, 2004, the Partnership had cash and cash equivalents of
approximately $77,000 which was invested in interest bearing accounts. The
amount of interest income varies with market rates available on deposits and
with the amount of funds available for investment. Interest earned was less than
$1,000 for the three months ended March 31, 2004 and 2003. The Partnership
intends to continue investing available funds in this manner.
One of the Partnership's investments, Plaza Village, involved the purchase of
partnership interests in the Local Limited Partnership from partners who
subsequently withdrew from the Local Limited Partnership. The Partnership issued
a non-recourse note payable totaling $2,000,000 to the sellers of the
partnership interests, such note bearing interest at 9.5% per annum. The note
matured in 1999. This obligation and related interest is collateralized by the
Partnership's investment in the Local Limited Partnership. Unpaid interest was
due at maturity of the note.
The Partnership has not made any payments on the Plaza Village note and is in
default under the terms of the note. Management is attempting to negotiate
extensions of the maturity date on the note payable. If the negotiations are
unsuccessful, the Partnership could lose its investment in the Local Limited
Partnership, Plaza Village Group, to foreclosure. The investment in Plaza
Village is zero at March 31, 2004.
One of the Local Limited Partnerships has outstanding purchase money notes and
accrued interest that matured in December 2000 and another Local Limited
Partnership has a subordinated note and accrued interest that matured in
December 1999. Each of these Local Limited Partnerships is in default on these
obligations. The Partnership risks losing its investments in these Local Limited
Partnerships through foreclosure. All of the investments in these Local Limited
Partnerships were zero at March 31, 2004.
Results of Operations
Except for investing cash in money market funds, the Partnership's investments
consist entirely of interests in Local Limited Partnerships owning
government-assisted housing projects. Available cash not invested in Local
Limited Partnerships is invested in these money market funds to provide interest
income. These funds can be converted to cash to meet obligations as they arise.
The Partnership intends to continue investing available funds in this manner.
An annual management fee is payable to the general partners of the Partnership
and is calculated at 0.5 percent of the Partnership's invested assets. The
management fee is paid to the general partners for their continuing management
of Partnership affairs. The fee is payable beginning with the month following
the Partnership's initial investment in a Local Limited Partnership. Management
fees were approximately $37,000 and $49,000 for the three months ended March 31,
2004 and 2003, respectively.
In accordance with the Partnership Agreement, the Corporate General Partner has
advanced the Partnership funds to assist in paying for normal operating
expenses. These advances do not accrue interest. As of March 31, 2004, the
Corporate General Partner had advanced approximately $101,000 for such purposes.
Operating expenses, other than management fees and interest expense, consist of
legal and accounting fees for services rendered to the Partnership and general
and administrative expenses. Legal and accounting fees were approximately
$30,000 and $14,000 for the three months ended March 31, 2004 and 2003,
respectively. The increase in legal fees is due to costs incurred in relation to
a solicitation of the limited partners. General and administrative expenses were
approximately $9,000 and $6,000 for the three months ended March 31, 2004 and
2003, respectively.
The Partnership, as a limited partner, does not exercise control over the
activities and operations, including refinancing or selling decisions of the
Local Limited Partnerships. Accordingly, the Partnership accounts for its
investment in the Local Limited Partnerships using the equity method. Thus the
individual investments are carried at cost plus the Partnership's share of the
Local Limited Partnership's profits less the Partnership's share of the Local
Limited Partnership's losses, distributions and impairment charges. However,
since the Partnership is not legally liable for the obligations of the Local
Limited Partnerships, or is not otherwise committed to provide additional
support to them, it does not recognize losses once its investment in each of the
Local Limited Partnerships reaches zero. Distributions from the Local Limited
Partnerships are accounted for as a reduction of the investment balance until
the investment balance is reduced to zero. Subsequent distributions received are
recognized as income in the accompanying statements of operations. The
Partnership received no distributions that were recognized as income during the
three months ended March 31, 2004 and 2003. For those investments where the
Partnership has determined that the carrying value of its investments
approximates the estimated fair value of those investments, the Partnership's
policy is to recognize equity in income of the Local Limited Partnerships only
to the extent of distributions received and amortization of acquisition costs
from those Local Limited Partnerships. During the three months ended March 31,
2004 and 2003, there was no equity in losses in Local Limited Partnerships. The
Partnership did not make any advances during the three months ended March 31,
2004 or 2003.
Under recently adopted law and policy, the United States Department of Housing
and Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment ("HAP") Contracts on a long term basis on the existing terms. In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental assistance payments under renewed HAP Contracts will be based
on market rentals instead of above market rentals, which may be the case under
existing HAP Contracts. The payments under the renewed HAP Contracts may not be
in an amount that would provide sufficient cash flow to permit owners of
properties subject to HAP Contracts to meet the debt service requirements of
existing loans insured by the Federal Housing Administration of HUD ("FHA")
unless such mortgage loans are restructured. In order to address the reduction
in payments under HAP Contracts as a result of this new policy, the Multi-family
Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA") provides for
the restructuring of mortgage loans insured by the FHA with respect to
properties subject to the Section 8 program. Under MAHRAA, an FHA-insured
mortgage loan can be restructured into a first mortgage loan which will be
amortized on a current basis and a low interest second mortgage loan payable to
FHA which will only be payable on maturity of the first mortgage loan. This
restructuring results in a reduction in annual debt service payable by the owner
of the FHA-insured mortgage loan and is expected to result in an insurance
payment from FHA to the holder of the FHA-insured loan due to the reduction in
the principal amount. MAHRAA also phases out project-based subsidies on selected
properties serving families not located in rental markets with limited supply,
converting such subsidies to a tenant-based subsidy.
When the HAP Contracts are subject to renewal, there can be no assurance that
the local limited partnerships in which the Partnership has an investment will
be permitted to restructure its mortgage indebtedness under MAHRAA. In addition,
the economic impact on the Partnership of the combination of the reduced
payments under the HAP Contracts and the restructuring of the existing
FHA-insured mortgage loans under MAHRAA is uncertain.
Other
AIMCO and its affiliates owned 580.5 limited partnership units (the "Units") or
1,161.0 limited partnership interests in the Partnership representing 9.48% of
the outstanding Units at March 31, 2004. A Unit consists of two limited
partnership interests. It is possible that AIMCO or its affiliates will acquire
additional Units in exchange for cash or a combination of cash and units in
AIMCO Properties, L.P., the operating partnership of AIMCO. Pursuant to the
Partnership Agreement, unitholders holding a majority of the Units are entitled
to take action with respect to a variety of matters that include, but are not
limited to, voting on certain amendments to the Partnership Agreement and voting
to remove the Corporate General Partner. Although the Corporate General Partner
owes fiduciary duties to the limited partners of the Partnership, the Corporate
General partner also owes fiduciary duties to AIMCO as its sole stockholder. As
a result, the duties of the Corporate General Partner, as corporate general
partner, to the Partnership and its limited partners may come into conflict with
the duties of the Corporate General Partner to AIMCO, as its sole stockholder.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Partnership to make
estimates and assumptions. The Partnership believes that of its significant
accounting policies, the following may involve a higher degree of judgment and
complexity.
Method of Accounting for Investments in Local Limited Partnerships
The Partnership, as a limited partner, does not exercise control over the
activities and operations, including refinancing or selling decisions, of the
Local Limited Partnerships. Accordingly, the Partnership accounts for its
investments in the Local Limited Partnerships using the equity method. The
Partnership is allocated profits and losses of the Local Limited Partnerships
based upon its respective ownership percentage of 99%. Distributions of surplus
cash from operations from most of the Local Limited Partnerships are restricted
by the Local Limited Partnerships' Regulatory Agreements with the United States
Department of Housing and Urban Development ("HUD"). These restrictions limit
the distribution to a portion, generally less than 10%, of the initial invested
capital. The excess surplus cash is deposited into a residual receipts reserve,
of which the ultimate realization by the Partnership is uncertain as HUD
frequently retains it upon sale or dissolution of the Local Limited Partnership.
The Partnership is allocated profits and losses and receives distributions from
refinancings and sales in accordance with the Local Limited Partnerships'
partnership agreements. These agreements usually limit the Partnership's
distributions to an amount substantially less than its ownership percentage in
the Local Limited Partnership.
The individual investments are carried at cost plus the Partnership's share of
the Local Limited Partnership's profits less the Partnership's share of the
Local Limited Partnership's losses, distributions and impairment charges. The
Partnership is not legally liable for the obligations of the Local Limited
Partnerships and is not otherwise committed to provide additional support to
them. Therefore, it does not recognize losses once its investment in each of the
Local Limited Partnerships reaches zero. Distributions from the Local Limited
Partnerships are accounted for as a reduction of the investment balance until
the investment balance is reduced to zero. When the investment balance has been
reduced to zero, subsequent distributions received are recognized as income in
the accompanying statements of operations.
For those investments where the Partnership has determined that the carrying
value of its investments approximates the estimated fair value of those
investments, the Partnership's policy is to recognize equity in income of the
Local Limited Partnerships only to the extent of distributions received and
amortization of acquisition costs from those Local Limited Partnerships.
Therefore, the Partnership limits its recognition of equity earnings to the
amount it expects to ultimately realize.
Recent Accounting Pronouncements
In January 2003, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 46 ("FIN 46"), Consolidation of Variable Interest Entities.
FIN 46 requires the consolidation of entities in which an enterprise absorbs a
majority of the entity's expected losses, receives a majority of the entity's
expected residual returns, or both, as a result of ownership, contractual or
other financial interests in the entity. Prior to the issuance of FIN 46,
entities were generally consolidated by an enterprise when it had a controlling
financial interest through ownership of a majority voting interest in the
entity. FIN 46 applied immediately to variable interest entities created after
January 31, 2003, and with respect to public entities with variable interest
entities held before February 1, 2003, FIN 46 will apply to financial statements
for periods ending after December 15, 2004.
The Partnership has not entered into any partnership investments subsequent to
January 31, 2003. The Partnership is in the process of evaluating its
investments in unconsolidated Local Limited Partnerships that may be deemed
variable interest entities under the provisions of FIN 46. The Partnership has
not yet determined the anticipated impact of adopting FIN 46 for its investments
in Local Limited Partnerships that existed as of January 31, 2003. However, FIN
46 may require the consolidation of the assets, liabilities and operations of
certain of the Partnership's unconsolidated investments in Local Limited
Partnerships. Although the Partnership does not believe the full adoption of FIN
46 will have an impact on its cash flow, the Partnership cannot make any
definitive conclusion on the impact, if any, on net earnings until it completes
its evaluation, including an evaluation of the Partnership's maximum exposure to
loss.
ITEM 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the Corporate General Partner, who are the equivalent of the Partnership's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the Corporate General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal financial officer, respectively, have concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 3, Restated Certificate and Agreement of Limited
Partnership dated May 15, 1984 filed with the Securities and
Exchange Commission Form S-11 No. 2-92352, which is hereby
incorporated by reference.
Exhibit 31.1, Certification of equivalent of Chief Executive
Officer pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2, Certification of equivalent of Chief Financial
Officer pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 32.1, Certification Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
b) Reports on Form 8-K filed during the quarter ended March 31,
2004:
Current Report dated December 31, 2003 and filed January 2,
2004 disclosing the Stipulation of Settlement between NAPICO
and the plaintiffs.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HOUSING PROGRAMS LIMITED
(a California limited partnership)
By: National Partnership Investments Corp.
Corporate General Partner
By: /s/David R. Robertson
David R. Robertson
President and Chief Executive
Officer
By: /s/Brian H. Shuman
Brian H. Shuman
Senior Vice President and Chief
Financial Officer
Date: May 13, 2004
Exhibit 31.1
CERTIFICATION
I, David R. Robertson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Housing Programs
Limited;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an quarterly report) that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 13, 2004
/s/David R. Robertson
David R. Robertson
President and Chief Executive Officer of
National Partnership Investments
Corporation, equivalent of the chief
executive officer of the Partnership
Exhibit 31.2
CERTIFICATION
I, Brian H. Shuman, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Housing Programs
Limited;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an quarterly report) that has
materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: May 13, 2004
/s/Brian H. Shuman
Brian H. Shuman
Senior Vice President and Chief
Financial Officer of National
Partnership Investments Corporation,
equivalent of the chief financial
officer of the Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of Housing Programs
Limited (the "Partnership"), for the quarterly period ended March 31, 2004 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), David R. Robertson, as the equivalent of the chief executive officer
of the Partnership, and Brian H. Shuman, as the equivalent of the chief
financial officer of the Partnership, each hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/David R. Robertson
Name: David R. Robertson
Date: May 13, 2004
/s/Brian H. Shuman
Name: Brian H. Shuman
Date: May 13, 2004
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.