SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________________________________________
Form 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934.
_______________________________________________
For the Nine Months Ended September 30, 1998 commission file number 2-84474
APT Housing Partners Limited Partnership
(Exact name of registrant as specified in its charter)
Massachusetts 04-2791736
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 West Cummings Park, Suite 6050, Woburn, Massachusetts 01801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 935-4200
N/A
Former name, former address and former fiscal year, if change since last
report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities and Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No______________
PART I
ITEM 1. FINANCIAL STATEMENTS
APT HOUSING PARTNERS LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
ASSETS
September 30, December 31,
1998 1997
Investment in Local Limited Partnership $ -0- $ -0-
Cash and Cash Equivalents 162,856 108,175
Total Assets $ 162,856 $ 108,175
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Liabilities:
Accrued Expenses -
Affiliate $ 9,350 $ 8,857
Professional Fees 0 8,500
Total Liabilities 9,350 17,357
Commitments and Contingencies
Partner's Capital (Deficit):
General Partners ( 36,255) (37,509)
Limited partners, 3,700 partnership units
authorized, issued and outstanding 189,761 128,327
Total Partners' Capital (Deficit) 153,506 90,818
Total Liabilities and Partners'
Capital Deficiency $162,856 $108,175
See accompanying notes to financial statements
PART I
ITEM 1. FINANCIAL STATEMENTS (Continued)
APT HOUSING PARTNERS LIMITED PARTNERSHIP
STATEMENT OF INCOME
(Unaudited)
Nine Months Ended Three Months Ended
September 30, September 30,
1998 1997 1998 1997
Interest Income $ 3,148 $ 1,797 $ 1,669 $ 885
Operating Expenses:
Management fees - affiliate 28,050 28,050 9,350 9,350
Administrative 313 557 ( 250) -
Total Operating Expenses 28,363 28,607 9,100 9,350
Loss Before Share of Losses of
and Distributions from Local
Limited Partnerships (25,215) ( 26,810) ( 7,431) (8,465)
Distribution from Local Limited
Partnership 87,903 87,903 - -
Share of Losses of Local Limited
Partnerships - - - -
Net Income (Loss) $62,688 $61,093 ($ 7,431) ($8,465)
Limited Partners' Interest in
Net Income (Loss) $61,434 $59,871 ($ 7,282) ($8,296)
Weighted Average Number of Outstanding
Limited Partnership Units 3,700 3,700 3,700 3,700
Net Income (Loss) Per
Limited Partnership Unit $ 16.60 $ 16.18 ($ 1.97) ($ 2.24)
See accompanying notes to financial statements
PART I
ITEM 1. FINANCIAL STATEMENTS (Continued)
APT HOUSING PARTNERS LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL (DEFICIENCY)
General Limited
Partner Partner Total
Balance, January 1, 1998 ($ 37,509) $128,327 $ 90,818
Net Income: 1/1/98- 9/30/98 1,254 61,434 62,688
Balance, September 30, 1998 ($ 36,255) $189,761 $153,506
See accompanying notes to financial statements
PART I
ITEM 1. FINANCIAL STATEMENTS (Continued)
APT HOUSING PARTNERS LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1998 1997
Cash Flows From Operating Activities:
Net Income (Loss) $ 62,688 $ 61,093
Adjustments to reconcile net income
to net cash provided by operating activities:
Change in operating assets and liabilities:
Increase (decrease) in accrued expenses ( 8,007) ( 8,241)
Net Cash provided by (used by) operating activities:54,681 52,852
Cash Flows From Financing Activities:
Distributions to limited partners - -
Distributions to general partner - -
Net cash used in financing activities - -
Net Increase (Decrease) in cash and cash equivalents 54,681 52,852
Cash and Cash Equivalents, Beginning of Period 108,175 64,360
Cash and Cash Equivalents, End of Period $162,856 $117,212
See accompanying notes to financial statements
APT HOUSING PARTNERS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
APT Housing Partners Limited Partnership (the Partnership), organized as a
Massachusetts Limited Partnership on June 8, 1983 was formed to invest in
other Local Limited Partnerships ("the Local Limited Partnerships") which
own and operate existing residential rental housing developments that are
financed or operated with assistance from Federal, State and/or local
governmental agencies. The Partnership has limited partnership interests in
two Local Limited Partnerships, with a total of 156 residential apartment
units, located within the Commonwealth of Massachusetts.
The general partner of the Partnership is APT Asset Management, Inc. The
Partnership Agreement, as amended, authorized the issuance of 3,700
limited partnership units, all of which were issued and are outstanding.
Interim Statements:
The interim financial statements furnished are unaudited and reflect all
adjustments which are in the opinion of management, necessary to a fair
statement of the results for the interim periods presented. All
adjustments are of a normal recurring nature.
Use of estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Investment in Local Limited Partnerships:
The Partnership accounts for its investments in the Local Limited
Partnerships by the equity method. Accordingly, the investments are carried
at cost, adjusted for the Partnership's proportionate share of earnings or
losses. The Partnership's share of losses on an investment is recognized
only to the extent of the investment. Distributions received are reflected
as reductions of the investments. Once an investment balance has been
reduced to zero, subsequent distributions received by the Partnership are
recognized as income.
APT HOUSING PARTNERS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDING SEPTEMBER 30, 1998 AND COMPARABLE PERIODS
Income taxes:
Federal and state income taxes are not included in the accompanying
financial statements because these taxes, if any, are the responsibility of
the individual Partners.
Statement of cash flows:
For purposes of the statement of cash flows, the Partnership considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents. Cash equivalents consist of money market
funds at September 30, 1998 and September 30, 1997.
Net income per limited partnership unit:
Net income per limited partnership unit is computed by dividing net income
available to limited partnership units by the weighted average number of
outstanding limited partnership units during the year.
2. ALLOCATION OF BENEFITS
In accordance with Partnership Agreement, income, losses, credits and
distributions are allocated 2% to the General Partner and 98% to the Limited
Partners.
3. INVESTMENT IN LOCAL LIMITED PARTNERSHIPS
The Partnership has investments in two Local Limited Partnerships, Ashland
Commons Associates ("Ashland") and Rockledge Apartments Associates
("Rockledge"). The Partnership's investments consist of $1,143,695 for
a 95.5% limited partnership interest in Ashland which owns an apartment
complex of 96 units located in Ashland, Massachusetts and $543,900 for a
97% limited partnership interest in Rockledge which owns an apartment
complex of 60 units located in Wakefield, Massachusetts.
The Local Limited Partnerships receive governmental assistance under
programs which restrict the payment of annual cash distributions to the
owners to specified maximum distributable amounts and to available surplus
cash, as defined in the applicable Regulatory Agreement between the
governmental agency and the Local Limited Partnership. Undistributed
amounts are cumulative and may be distributed in subsequent years if there
is available surplus cash. Based upon the Partnership's ownership
Local Limited Partnerships, the maximum annual distributable amounts that
can be made to the Partnership from Ashland and Rockledge are $87,903 and
$9,552, respectively.
APT HOUSING PARTNERS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDING SEPTEMBER 30, 1998 AND COMPARABLE PERIODS
For the quarter ended September 30, 1998, the aggregate share of losses of
the Local Limited Partnerships attributable to the Partnership amounted to
$41,983. The Partnership's cumulative share of losses of the Local Limited
Partnerships exceeded its investments by $565,710 at September 30, 1998.
Accordingly, the investments have been reduced to zero and have not been
reflected in the accompanying financial statements, and the Partnership has
discontinued the application of the equity method. The Partnership will
resume applying the equity method only after its allocable share of the net
income of the Local Limited Partnerships equals the share of net losses not
previously recognized during the period the equity method was suspended.
Summarized unaudited balance sheet information on a combined basis for the
Local Limited Partnerships as of September 30, 1998 and December 31, 1997
as follows:
September 30, 1998 December 31, 1997
Rental property $7,597,934 $7,597,934
Accumulated depreciation ( 4,239,387) ( 4,039,745)
Cash and cash equivalents 442,926 463,361
Restricted assets and deposits 668,418 678,790
Other assets 133,444 114,273
Total assets 4,603,335 4,814,613
Mortgage loans payable 5,903,262 5,942,838
Other liabilities 211,742 206,975
Total liabilities 6,115,004 6,149,813
Partners' capital (deficiency) ($1,511,669) ($1,335,200)
Composition of partners' capital (deficiency)
General partners ($ 112,570) ($ 104,890)
Limited partners ( 1,399,099) ( 1,230,310)
Partners' capital (deficiency) ($1,511,669) ($1,335,200)
APT HOUSING PARTNERS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTER ENDING SEPTEMBER 30, 1998 AND COMPARABLE PERIODS
Summarized unaudited income statement information on a combined basis for
the Local Limited Partnerships for the quarter ended September 30, 1998
and comparable periods was as follows:
September 30, 1998 September 30,1997
Revenues $1,303,654 $1,286,095
Net income (loss) ($ 84,424) ($ 59,374)
4. CASH AND CASH EQUIVALENTS
The partnership maintains cash and cash equivalent balances in an financial
institution located in the Commonwealth of Massachusetts. Accounts in the
institution are insured by the Federal Deposit Insurance Corporation (FDIC)
up to $100,000. The Partnership's uninsured cash and cash equivalent
balances totaled $19,273 and $10,612 as of September 30, 1998 and December
31, 1997 respectively.
5. TRANSACTIONS WITH RELATED PARTIES
American Securities Team, Inc., an affiliate of the General Partner of the
Partnership, receives an annual program management fee. This fee is for
managing the affairs of the Partnership and for providing investor services
to the Limited Partners. The fee is equal to .5% of invested assets plus
the Local Limited Partnerships' annualized outstanding nonrecourse mortgage
debt. Program management fees charged to operations for the quarters ending
September 30, 1998 and 1997 amounted to $9,350 and $9,350, respectively. Of
this amount $9,350 and $8,857 remained unpaid at September 30, 1998 and
December 31, 1997 respectively.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
Commencing with the year ended December 31, 1995, the Partnership is required
to disclose the fair value of its financial instruments in accordance with
Statements of Financial Accounting Standards No. 107.
The fair values of the Partnership's financial instruments have been
determined at a specific point in time, based on relevant market
information and information about the financial instrument. Estimates of
fair value are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could affect the estimates.
The carrying amounts of cash and cash equivalents and accrued expenses at
September 30, 1998 approximate their fair values because of the short-term
maturity of these instruments.
PART II
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
Liquidity and Capital Resources
The partnership's primary source of funds were the proceeds of its public
offering. Other sources of liquidity include interest earned on funds and
cash distributions from operations of the Local Limited Partnerships in which
the Partnership has invested. These sources of liquidity are available to
meet obligations of the partnership.
The Partnership received $3,700,000 in gross proceeds from the sale of
partnership interests pursuant to the public offering, resulting in net
proceeds available for investment, after volume discounts, establishment of
working capital reserves, payment of sales commissions, acquisition fees and
offering expenses, of $3,071,000.
As of September 30, 1998 the Partnership has invested all of the net
proceeds available for investment.
The Partnership's commitment to investments requiring initial capital
contributions has been paid. The Partnership has no other significant
capital commitments.
HUD recently released the American Community Partnerships Act (the "ACPA").
The ACPA is HUD's blueprint for providing for the nation's housing needs in
an era of static or decreasing budget authority. Two key proposals in the
ACPA that could affect the Local Limited Partnerships are: A discontinuation
of project based Section 8 Subsidy payments and an attendant reduction in
debt on properties that were supported by the Section 8 payments. The ACPA
calls for a transition during which the project based Section 8 would be
converted to a tenant based voucher system. Any FHA insured debt would then
be "marked-to-market", that is revalued in light of the reduced income
stream, if any. The impact of ACPA, if enacted in its present form, is not
presently determinable.
Several industry sources have already commented to HUD and Congress that in
the event the ACPA were fully enacted in its present form, the reduction in
mortgage indebtedness would be considered taxable income to limited partners
in the Partnership. Legislative relief has been proposed to exempt
"mark-to-market" debt from cancellation of indebtedness income treatment.
Cash distributions received from a Local Limited Partnership amounted to
$87,903 and $87,903 during the period ended September 30, 1998 and
September 30, 1997. These distributions were used to meet the Partnership's
obligations and, in 1995, to make distributions to its partners. The
Partnership has invested in Local Limited Partnerships owning housing
developments which receive governmental assistance under programs which
restrict the cash return available to the housing development owners. The
Partnership believes that it will continue to receive cash distributions
from a Local Limited Partnership in an amount sufficient to meet its
operating expenses. However, there can be no assurance that cash
distributions received will be adequate to allow the Partnership to make any
further cash distributions to its partners.
PART II
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued):
Management is not aware of any trends or events, commitments or uncertainties
that will impact liquidity in a material way. Management believes the only
impact would be for laws that have not yet been adopted.
Results of Operations
The partnership was formed to provide various benefits to its limited
partners as discussed in Part I, Item 1 of this Report. It is anticipated
that the Local Limited Partnerships in which the Partnership has invested
will primarily produce tax losses of approximately $17,000 per $5,000
investment in approximately 14 to 17 full years of Partnership operations,
with approximately $11,000 of such tax losses occurring during the first 5
years of Partnership operations (assuming the applicability of current laws,
regulations and court decisions). The benefits received in the form of tax
savings may be reduced due to the enactment of the Tax Reform Act of 1986,
depending on the individual circumstances of each Limited Partner. There
can be no assurance that the Partnership will be able to attain its
investment objectives. The Partnership will not seek to sell its interest
in any housing development or Local Limited Partnership until proceeds of
such sale would supply sufficient cash to enable its Limited Partners to
to pay applicable taxes. Proceeds of such sales will not be reinvested. 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 Limited Partners in any material amount.
Except for the operating balance of cash, the Partnership's assets consist
primarily of limited partnership interest in Local Limited Partnerships
owning government-assisted housing developments. The Partnership accounts
for its investments in the Local Limited Partnerships using the equity
method of accounting. Under the equity method of accounting, the investment
cost is subsequently adjusted for the Partnership's share of each Local
Limited Partnership's results of operations and cash distributions. The
partnership's share in the loss of each Local Limited Partnership is not
recognized to the extent that the investment balance would become negative.
For the quarter ended September 30, 1998, the aggregate share of losses of
the Local Limited Partnerships attributable to the Partnership and not
included in the statements of income amounted to $41,983. At September 30,
1998, the Partnership's cumulative share of losses of the Local Limited
Partnerships exceeded its investments by $565,710, and, accordingly, have
not been reflected in the Partnership's financial statements in accordance
with the equity method of accounting because the investment balances have
been reduced to zero.
The partnership's net income for the period January 1, 1998 - September 30,
1998 was due primarily to the receipt of a cash distribution from its
investment in a Local Limited Partnership.
PART II
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued):
The partnership incurs an annual program management fee payable to American
Investment Team, Inc. ("AIT"), an affiliate of the General Partner, for
managing the affairs of the Partnership and for providing investor services
to the limited partners. The fee to AIT is equal to .5% of invested asset
plus the Local Limited Partnerships' annualized outstanding nonrecourse debt.
The fee amounted to $9,350 for the quarter ended September 30, 1998.
Other
The Partnership's investment as a Limited Partner in the Local Limited
Partnerships is subject to the risks incident to the potential losses
arising from management and ownership of improved real estate. The
Partnership's investments also could be adversely affected by poor economic
conditions, generally, which could increase vacancy levels, increase rental
payments defaults, or increase operating expenses. Any or all of these
circumstances could threaten the financial viability of one or both of the
local Limited Partnerships.
There are also substantial risks associated with the operations of Apartment
Complexes receiving governmental assistance. These include: governmental
regulations concerning tenant eligibility which may make it more difficult
to rent apartments in the complexes; difficulties in obtaining government
approval for rent increases; limitations on the percentage of income which
low and moderate income tenants may pay as rent; the possibility that
Congress may not appropriate funds to enable the U.S. Department of Housing
and Development to make the rental assistance payments it has contracted to
make; and that when the rental assistance contracts expire, there may not
be market demand for apartments at full market rents in a Local Limited
Partnership's Apartment Complex.
The Local Limited Partnerships are impacted by inflation in several ways.
Inflation allows for increases in rental rates generally to reflect the
impact of higher operating and replacement costs. Inflation also affects
the Local Limited Partnerships adversely by increasing operating costs, such
as fuel, utilities and labor.
The Partnership has evaluated the potential impact of the situation commonly
referred to as the "Year 2000 Problem". The Year 2000 Problem, which is
common to most companies, concerns the inability of information systems,
primarily computer software programs, to properly recognize the process date
sensitive information related to the year 2000. Management does not expect
the Partnership to incur any significant expenses related to this issue.
PART II
OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
a. Purchase and Sale Agreement, dated as of March 30, 1984, relating to
Ashland Commons to Registrant's Form 8-K dated March 30, 1984.
Purchase and Sale Agreement, dated as of April 30, 1984, relating to
Historic Cohoes, II to Registrant's Form 8-K dated April 30, 1984.
Purchase and Sale Agreement, dated as of June 22, 1984, relating to
Rockledge Apartments Associated to Registrant's Form 8-K dated
June 22, 1984.
Withdrawal of APT Housing Partners Limited Partnership as a Limited
Partner in a Local Limited Partnership, dated as of December 18, 1986,
relating to Historic Cohoes II, to Registrant's Form 8-K dated March 30,
1987.
Change in registrant's certifying accountants under Item 4 to
Registrant's Form 8-K dated December 1, 1995
b. No reports on Form 8-K have been filed for the quarter ended
September 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
APT HOUSING PARTNERS LIMITED PARTNERSHIP
By: APT Asset Management, Inc.
General Partner
Date:_____________________ [SIGNATURE]
Jeff Ewing, President