FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 2001
Commission file number 33-18756
ASSISTED HOUSING FUND L.P. I
(Exact name of registrant as specified in its charter)
Washington 91-1391150
(State of organization) (IRS Employer
Identification No.)
1191 Second Avenue, Suite 904, Seattle, WA 98101 (Address of
principal executive offices) (Zip code)
Registrant's telephone number, including area code: (206) 461-4782
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of class)
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 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
The Exhibit Index appears at page 14. There are 15 pages.
Part I. Financial Information
Item 1. Financial Statements
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
BALANCE SHEETS
June 30, December 31,
2001 2000
(Unaudited)
----------- ------------
ASSETS
Rental property and equipment, at cost:
Buildings and equipment $15,849,005 $15,836,260
Less accumulated depreciation (7,022,907) (6,769,459)
------------- -------------
8,826,098 9,066,801
Land 723,111 723,111
------------- -------------
9,549,209 9,789,912
Cash and cash equivalents:
Rental operation 175,001 214,415
AHF reserves 18,360 13,148
------- -------
193,361 227,563
Restricted deposits:
Tenant trust - security deposits 107,614 114,970
Reserve accounts 711,086 737,977
----------- ----------
818,700 852,947
Other assets:
Accounts receivable 99,139 54,039
Prepaid expenses 9,280 9,124
Organization and start-up costs 0 0
---------- -----------
108,419 63,163
----------- -----------
$10,669,689 $10,933,585
============= =============
Continued on page 2A
See notes to financial statements 2
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
BALANCE SHEETS - (CONTINUED)
June 30, December 31,
2001 2000
(Unaudited)
------------- -------------
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Mortgage notes payable $12,270,083 $12,287,154
Accounts payable 314,254 306,143
Due to affiliate 689,598 660,464
Accrued liabilities 128,565 114,238
Security deposits payable 114,019 111,116
------------- -------------
13,516,519 13,479,115
Minority interests in partnerships 428,088 441,445
Partners' equity (deficit):
Limited partners (3,210,962) (2,925,898)
General partner (63,956) (61,077)
------------- -------------
(3,274,918) (2,986,975)
------------- -------------
$10,669,689 $10,933,585
============= =============
See notes to Financial Statements 2A
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
Limited General
Partners Partner Total
----------- ------------ ------------
Balance - December 31, 1998 (1,964,910) (51,370) (2,016,280)
Net income (loss) for 1999 (508,090) (5,132) (513,222)
------------ ------------ ------------
Balance December 31, 1999 (2,473,000) (56,502) (2,529,502)
Net income (loss) 2000 (452,898) (4,575) (457,473)
------------ ------------ ------------
Balance - December 31, 2000 (2,925,898) (61,077) (2,986,975)
Net income (loss) June 30,
2001 (Unaudited (285,064) (2,879) (287,943)
------------ ------------ ------------
Balance - June 30, 2001
(Unaudited) (3,210,962) (63,956) (3,274,918)
============ ============ ============
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
Quarter Six Months Quarter Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2001 2001 2000 2000
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
Revenue:
Rental $398,073 $790,054 $403,154 $802,877
Miscellaneous 28,754 35,560 14,536 28,767
-------- -------- -------- --------
426,827 825,614 417,690 831,644
Expenses:
Operating & maintenance 72,575 155,464 61,291 115,835
Utilities 74,594 157,034 61,152 132,279
General & administrative 108,906 226,028 110,999 214,282
Taxes 67,802 134,650 63,894 125,669
Insurance 12,271 21,470 6,744 12,504
Interest on mortgage notes 69,309 142,063 72,464 145,104
Depreciation 107,468 253,456 143,103 284,621
Miscellaneous 6,700 6,897 522 1,250
---------- ---------- -------- --------
519,625 1,097,062 520,169 1,031,544
(92,798) (271,448) (102,479) (199,900)
Other income (expenses):
Interest earned on escrow
accounts & cash reserves 101 212 123 312
Minority Interest 6,214 13,290 6,326 12,575
General & administrative (27,259) (29,134) (25,375) (27,250)
Partnership management
fees (863) (863) (2,262) (2,262)
Amortization of organi-
zation & start-up costs 0 0 0 0
----------- --------- -------- --------
(21,807) (16,495) (21,188) (16,625)
----------- --------- -------- --------
Net income (loss) (114,605) (287,943) (123,667) (216,525)
=========== =========== ======== ========
Net income (loss) per unit of
limited partnership interest (161) (405) (174) (305)
=========== =========== ======== ========
See notes to Financial Statements 3
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
Six Months Six Months
Ended Ended
June 30, June 30,
2001 2000
(Unaudited) (Unaudited)
------------ ----------
Cash flows from operating activities:
Net Income (loss) (287,943) (216,525)
Adjustments to reconcile net (loss) to net
cash provided by operating activities:
Depreciation 253,448 284,620
Amortization of organization and
start-up costs 0 0
Minority interest in operations (13,290) (12,575)
Decrease (increase) in:
Accounts receivable (45,100) (28,596)
Prepaid expenses (156) 7,513
Increase (decrease) in:
Accounts payable 8,111 3,471
Accrued liabilities 14,327 38,457
Due to affiliates 29,134 3,751
----------- ----------
Net cash provided by operating activities (41,469) 80,116
Cash flows from investing activities:
Acquisition and construction of rental property (12,745) (1)
Decrease (increase) in restricted deposits 26,891 (46,236)
Security deposits payable 10,259 1,812
------------ ----------
Net cash provided (used) in investing activities 24,405 (44,425)
Financing activities:
Minority partners' capital contributions (67) (90)
Mortgage principal payments (17,071) (16,594)
------------ ----------
Net cash provided by financing activities (17,138) (16,684)
------------ ----------
Net increase (decrease) in cash and cash equivalents (34,202) 19,007
Cash and cash equivalents - beginning of year 227,563 215,400
------------ ----------
Cash and cash equivalents - end of period $193,361 $234,407
============ ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest
(net of amounts capitalized) $142,063 $145,104
============ ==========
See notes to Financial Statements 4
Unaudited
ASSISTED HOUSING FUND L.P. I AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended June 30, 2001
1. General
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by generally accepted accounting
principles. These statements should be read in conjunction with financial
statements and notes thereto included with the Partnership's Form 10-K for the
year ended December 31, 2000. In the opinion of management, these financial
statements include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Partnership's financial position
and results of operations. The results of operations for the periods may not be
indicative of the results to be expected for the year.
Assisted Housing Fund L.P. I (the Partnership) is a limited partnership which
was organized November 2, 1987 under the laws of the state of Washington to
acquire limited partnership interests in other partnerships (the Property
Partnerships), each of which has been organized to develop or purchase a low- or
moderate-income apartment complex. The Partnership's general partner is Murphey
Favre Properties, Inc. (MFP), a wholly-owned subsidiary of WM Financial, Inc.,
which is a wholly-owned subsidiary of Washington Mutual Bank (WMB).
The Partnership completed its public offering of limited partnership interests
and commenced operations on April 14, 1989. Prior to that date, the
Partnership's activities consisted solely of purchasing limited partnership
interests in Property Partnerships which were in the development process. As of
December 31, 2000, limited partners held the 703 units of limited partnership
interests outstanding.
The Partnership has invested as a limited partner in eleven Property
Partnerships. The developer of each apartment complex serves as the general
partner (DGP) of the respective Property Partnership. Additionally, a
wholly-owned subsidiary of MFP, Murphey Favre Housing Managers (MFHM), is a
special limited partner in each Property Partnership. MFHM has the right to
oversee the management of each Property Partnership and has certain approval
rights over the actions of each DGP. The Partnership Agreement for each Property
Partnership sets forth the allocations of profits, losses and distributions of
net cash flow from operations or from sale or refinancing of the rental
property.
The properties owned by the Property Partnerships were financed and constructed
under Section 515 of the National Housing Act, as amended (administered by
Farmer's Home Administration, now known as Rural Housing Services (RHS)). Under
this program, the Property Partnerships provide housing to low- and
moderate-income families. Lower rental charges to tenants are recovered by the
Property Partnerships through an interest reduction program which reduces the
effective interest rate over the lives of the mortgages to 1 percent and a
rental assistance program whereby RHS pays the Property Partnerships for a
portion of qualified tenant rents.
Construction of the rental properties began in June, 1988 and all were completed
by January 31, 1991. Rental operations began in April, 1989.
Unaudited
2. Summary of Significant Accounting Policies
a. The Partnership's financial statements are reported on a consolidated basis
with the Property Partnerships in which it has invested because the Partnership
(as a limited partner) holds approximately 99% profit and loss interests and
approximately 55% of the equity interests in each Property Partnership and
because of the aforementioned rights of MFHM to restrict the authority of each
DGP.
The consolidated financial statements, include the financial statements of the
Partnership and eleven Property Partnerships: Fairview Apartments Company
Limited Partnership (Fairview); Ionia Limited Dividend Housing Association
Limited Partnership (Ionia); Logan Apartments Company Limited Partnership
(Logan); Rolling Brook II Limited Dividend Housing Association Limited
Partnership (Rolling Brook); Wexford Manor Limited Dividend Housing Association
Limited Partnership (Wexford); Blue Heron Apartment Associates Limited
Partnership (Blue Heron); Glenwood Apartment Associates Limited Partnership
(Glenwood); Pacific Place Apartment Associates Limited Partnership (Pacific
Place); Cove Limited Dividend Housing Association Limited Partnership (Cove);
Washington Street Limited Dividend Housing Association Limited Partnership
(Washington); and, Fayette Hills Limited Partnership (Fayette).
All material interpartnership transactions and balances have been eliminated.
The minority partners' interests in the losses of the Property Partnerships,
which aggregate $55,327 and $52,753 as of June 30, 2001 and December 31, 2000,
respectively, are included in other income.
b. The accrual method of accounting is used for both financial statement and
income tax purposes.
c. Rental property and equipment is stated at cost including interest of
$387,000, capitalized during construction.
The partnership agreements for the Property Partnerships require the DGP's to
fund cost overruns on the development of the rental properties. As of June 30,
2001 and December 31, 2000, $589,462 of such cost overruns have been recorded as
capital contributions from DGP's and have been included in the cost basis of the
rental property. All depreciation related thereto has been specially allocated
to the respective DGP's.
d. Depreciation is computed for financial statement purposes using the
straight-line method over the estimated useful lives of the related assets as
follows:
Building shell and components.................... 27.5 years
Land improvements.................................. 15 years
Appliances......................................... 10 years
Carpets and draperies.............................. 10 years
Depreciation is computed for income tax purposes using the
modified-accelerated-cost-recovery-system (MACRS).
Unaudited
e. No income tax provision has been included in the financial statements since
income or loss of a Partnership is required to be reported by the respective
partners on their income tax returns.
f. For purposes of the statement of cash flows, all investment instruments
purchased with a maturity of three months or less are considered to be cash
equivalents.
g. The unaudited interim financial statements include all adjustments which are,
in the opinion of management, necessary to fairly state the results for the
interim periods presented. These adjustments are all of a normal recurring
nature.
3. Transactions with Affiliates
In connection with the offering of units of limited partnership interest, the
acquisition and development of rental property and the management of both the
rental property and the Partnership, the Partnership and Property Partnerships
have paid or accrued the following amounts to certain affiliates:
Quarter Ended Year Ended
June 30, 2001 Dec 31, 2000
Murphey Favre Properties, Inc.
Reimbursements, at cost $ 1,875 $ 7,500
Developer general partners and affiliates
Property management fees 34,834 137,289
The Partnership maintains deposits in certain of WMB's interest-bearing accounts
which aggregated $18,360 and $13,148 at June 30, 2001 and December 31, 2000,
respectively. Interest earned on such deposits totaled $101 and $504 during the
quarter ended June 30, 2001 and year ended December 31, 2000, respectively.
Terms of the RHS Loan Agreements require each DGP to provide interest-free
advances of stipulated amounts as initial operating capital to the Property
Partnerships. Due to affiliates includes $152,107 and $152,107 of such advances
at June 30, 2001 and December 31, 2000, respectively, which will be repaid in
two to five years upon approval of RHS, or from the proceeds of future sales of
the respective Properties. The balance includes DGP advances of $35,468 for land
improvements and $14,209 to fund operating deficits. The remaining balance due
to affiliates includes program management fees and reimbursements payable to
MFP.
Under the terms of management services agreements, affiliates of the DGP's
provide management services for the rental properties and receive compensation
for such services in amounts approximating 8% of gross rental revenue.
Unaudited
4. Cash in Reserve Accounts
The Loan Agreements between the Property Partnerships and RHS require the
Property Partnerships to deposit into separate reserve accounts (savings
accounts) $126,889 annually until the reserve accounts reach $1,268,211. With
the prior approval of RHS, these funds can be used for: (1) loan debt service,
if operating funds cannot meet these obligations: (2) repairs and replacements
caused by catastrophe or long-range depreciation; (3) improvements or extensions
to the buildings; and, (4) any other reason RHS determines will promote or be
beneficial to the purpose of the loans.
5. Mortgage Notes Payable
The mortgage notes are payable to RHS in monthly installments stated in the
table below. In accordance with provisions of Interest Credit Agreements, RHS
provides monthly interest credits which reduce the interest rates stated in the
mortgage notes to effective rates of 1 percent over the lives of the mortgages.
Amortization of principal is based on the stated rates of 8.75% to 10.75% under
RHS's Predetermined Amortization Schedule System (PASS). Substantially all of
the rental property and equipment is pledged as collateral on the mortgages. No
partner is personally liable on the mortgage notes.
Amendments enacted in 1979 and 1987 to Section 515 of the National Housing Act
contain restrictive provisions for prepayment of Section 515 loans. In summary,
RHS may refuse offers to prepay the mortgage notes and require that the projects
be used for the purpose of housing those eligible, as provided in Section 515,
for a period of 20 years.
The loan balances, net monthly payments, and due dates for each Property
Partnership are as follows:
Net Monthly Loan Balance
Payment June 30, 2000 Due Date
Fairview $ 2,744 $ 1,268,905 April, 2040
Ionia 1,532 709,912 October, 2040
Logan 2,142 991,748 March, 2041
Rolling Brook 1,614 744,587 June, 2040
Wexford 1,567 722,828 April, 2040
Blue Heron 3,173 1,463,768 June, 2040
Glenwood 3,111 1,433,253 May, 2039
Pacific Place 1,632 754,827 June, 2039
Cove 3,092 1,425,827 April, 2040
Washington 1,545 711,873 May, 2040
Fayette 4,398 2,042,555 December, 2039
Total $26,550 $12,270,083
Unaudited
Principal Payments on the mortgage notes for the next 5 years are as follows:
Year Amounts
2001 18,057
2002 38,422
2003 42,029
2004 46,303
2005 50,294
2006 and later years 12,074,978
$12,270,083
6. Limited Distributions to Partner
Limited distributions payable from funds provided by rental operations of the
Property Partnerships are limited by the Loan Agreements to eight percent per
year of the Property Partnerships' initial equity, as determined by the RHS.
Current RHS regulations limit the distribution payments in any year to a maximum
of the annual distribution for the current year and the prior year. Distribution
payments are also subject to approval by RHS. Prerequisites to limited
distributions being paid by each Property Partnership are: (a) funding of the
reserve account must be current and (b) the mortgage note must be current.
7. Contingency
The Partnership has ceased accrual of the annual partnership administration
fee, payable in part to the general partner. Management has determined that the
source of payment, a future sale or refinance of one or more of the Property
Partnerships, may not be sufficient to pay fees accrued in excess of the
$544,540 payable at December 31, 1996. Management has elected to treat fees for
years subsequent to 1996 as a contingent liability. At June 30, 2001 and
December 31, 2000 the contingent liability for partnership administration fees
totaled $335,327 and $298,068, respectively.
The DGP of Logan did not comply with RHS regulations regarding the handling of
project cash during 2000. These instances of non-compliance were reported to the
appropriate authorities during the first quarter of 2001. In addition, during
the first quarter 2001, the DGP made unauthorized withdrawals of project cash
totaling $20,511. Also, project bank accounts have been pledged in violation of
RHS regulations. MFP and the other general partners of Logan are considering
proceedings to remove and replace the DGP.
8. Guarantees
Each of the DGP's has made a guarantee to the respective Property Partnership
that they will compensate the Partnership in the event the actual low-income
housing tax credit is less than 85% to 90% of the available credit. Through
June 30, 2001, no payments have been made under the guarantee agreements.
Unaudited
Item 2. Management's Discussion and Analysis
Assisted Housing Fund L.P. I (the Partnership) is a limited partnership
organized under the laws of the state of Washington.
The Partnership has invested as a limited partner in eleven other limited
partnerships (Property Partnerships) which develop, own, and operate residential
apartment complexes which benefit from some form of federal assistance programs
and which qualify for low-income housing credits (Tax Credits) pursuant to the
Internal Revenue Code by the Tax Reform Act of 1986.
The Partnership's general partner is Murphey Favre Properties, Inc., (MFP), a
wholly-owned subsidiary of WM Financial, Inc. which is a wholly-owned subsidiary
of Washington Mutual Bank (WMB).
The Partnership completed its public offering of units of limited partnership on
April 14, 1989 with proceeds totaling $3,511,000 through the sale of 703 units.
There are 334 limited partners and one General Partner in the Partnership.
Each Property Partnership has, as its general partner, one or more individuals
or an entity not affiliated with the Partnership or MFP. In accordance with the
Partnership Agreements under which such entities are organized, the Partnership
depends on the DGP's for the management of each Property Partnership.
During the quarter, management's emphasis was on the continued operation of
eleven properties placed in service. At June 30, 2001, four properties were 100%
occupied, six properties were between 90% and 98% occupied, and one property was
83% occupied.
The DGP of Logan did not comply with RHS regulations regarding the handling of
project cash during 2000. These instances of non-compliance were reported to the
appropriate authorities during the first quarter of 2001. In addition, during
the first quarter 2001, the DGP made unauthorized withdrawals of project cash
totaling $20,511. Also, project bank accounts have been pledged in violation of
RHS regulations. MFP and the other general partners of Logan are considering
proceedings to remove and replace the DGP.
Results of Operations
On a consolidated basis, net income before depreciation and amortization for the
second quarter 2001 was $14,670 compared with net income before depreciation and
amortization in the second quarter of 2000 of $40,624. Rental revenues for the
second quarter of 2001 were down 1.3% from the second quarter 2000 while the
second quarter 2001 expenses including depreciation were down 0.1% from the
second quarter 2000.
Unaudited
Liquidity and Capital Resources
The Partnership completed its public offering of units of limited partnership on
April 14, 1989, with proceeds totaling $3,511,000 from 339 limited partners. The
Partnership invested $2,542,000 of offering proceeds in eleven Property
Partnerships.
Offering proceeds equal to $175,750 were reserved by the Partnership to fund its
operating expenses. As of June 30, 2001, the cash reserves of the Partnership
totaled $18,360. It is expected that the Partnership will draw on the reserves
in future quarters to fund accounting and other operating expenses of the
Partnership. Nominal cash distributions from the Property Partnerships will
supplement the cash reserves. It is expected that all cash distributions
received from the Property Partnerships will be used to defray the operating
expenses of the Partnership and thus it is not likely any distribution will be
made to the limited partners.
The Partnership is not required to fund additional amounts to the Property
Partnerships based on each Property Partnership agreement. Additionally, each
Property Partnership is operated as an individual project, and without any
contractual arrangements of any kind between the Property Partnerships. In the
second quarter 2001, five properties generated deficit cash flow and six
generated positive cash flow. The deficits were funded by cash reserves of the
Property Partnerships.
Included in cash deposits on the consolidated balance sheets were $18,360 and
$13,148, held as deposits by the Partnership in Washington Mutual Bank accounts
as of June 30, 2001 and December 31, 2000, respectively. Washington Mutual Bank
is affiliated with MFP, the general partner of the Partnership.
There are no additional acquisitions nor any dispositions planned.
PART II. OTHER INFORMATION
Except for the disclosures set forth below, all items under Part II are
inapplicable or have a negative response and are therefore omitted.
Item 6. Exhibits and Reports on Form 10-Q
a.) Listing of Exhibits.
Exhibit Incorporated by
No. Reference From
3 Certificate of Exhibit C to Form S-11
Limited Partnership Registration Statement
No. 91.1391150
10 Material Contracts Exhibit 10 to Form 10-K
filed for year ended
December 31, 1989
13 Annual Report to Exhibit 13 to Form 10-K
Security Holders filed for year ended
December 31, 2000
Pursuant to the requirements 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.
Dated this 15th day of August, 2001.
Assisted Housing Fund L.P. I
By: Murphey Favre Properties, Inc.
Its Managing General Partner
Herbert F. Fox, Vice President /s/
Herbert F. Fox, Vice President
and Principal Financial Officer