UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended March 31, 2002
[ ] 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 0-13520
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2828131
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Second Avenue, Needham, MA 02494
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (781) 444-5251
Former address, if changed from last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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.
[X] Yes [ ] No
Page 1 of 20
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
INDEX
Page
Part I: Financial Information
Item 1. Financial Statements:
Statements of Net Assets in Liquidation, March 31, 2002 and
December 31, 2001 3
Statements of Changes of Net Assets in Liquidation for the
Three months ended March 31, 2002 and March 31, 2001 4
Notes to Financial Statements 5-12
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 13-18
Item 3. Quantitative and Qualitative Disclosure about Market Risk -
Disclosure not applicable
Part II: Other Information
Item 3. Defaults Upon Senior Securities 19
2
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF NET ASSETS IN LIQUIDATION
(Unaudited) (Audited)
March 31, December 31,
2002 2001
--------------------- ---------------------
Assets (Liquidation Basis):
Cash and cash equivalents $463,539 $ 462,849
Restricted cash 49,641 58,949
Investments in Local Limited Partnerships 1,300 265,250
--------------------- ---------------------
Total Assets $514,480 $ 787,048
===================== =====================
Liabilities (Liquidation Basis):
Purchase Money Notes and accrued interest liabilities $ 1,300 $ 265,250
Accounts payable to affiliates 339,271 339,271
Accounts payable 6,770 1,000
Accrued expenses 164,417 176,724
Interest payable 841 841
--------------------- ---------------------
Total liabilities 512,599 783,086
--------------------- ---------------------
Net Assets in Liquidation $ 1,881 $ 3,962
===================== =====================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
3
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CHANGES OF NET ASSETS IN LIQUIDATION
(Unaudited)
For the Three For the Three
Months Ended Months Ended
March 31, 2002 March 31, 2001
-------------- --------------
Net Assets in liquidation at December 31, 2001 and 2000 $ 3,962 $ 2,358
Operating Activities
Interest income 1,810 4,882
Purchase Money Note interest - (increase) decrease in
accrual 263,950 (319)
Other operating expenses:
Affiliates -- --
Other (3,891) (2,115)
-------------- --------------
Sub-total operating activities 261,869 2,448
Liquidating Activities
Increase in investment in Local Limited Partnerships -- 319
Change in estimated liquidation value
Estimated sales price (263,950) --
Actual sales price -- (15)
-------------- --------------
Sub-total liquidating activities (263,950) 304
-------------- --------------
Net Assets in liquidation at March 31, 2002 and 2001 $ 1,881 $ 5,110
============== ==============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
4
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Liquidation of the Partnership
Organization
Liberty Housing Partners Limited Partnership (the "Partnership") was
formed under the Massachusetts Uniform Limited Partnership Act on March 20, 1984
for the primary purpose of investing in other limited partnerships which own and
operate government assisted multi-family rental housing complexes (the "Local
Limited Partnerships").
Liquidation and Sale of Investments in Local Limited Partnerships
On March 22, 2002, the Properties owned by Brierwood and Meadowwood
Apartments were sold to purchasers affiliated with the local general partner in
these partnerships. These Partnerships were subsequently dissolved. The carrying
value of these properties had been adjusted at December 31, 2001 to reflect the
actual sales transactions.
On December 31, 2001, the Properties owned by Brierwood II and Pine
Forest were sold to purchasers affiliated with the local general partner in
these partnerships. These Partnerships were subsequently dissolved. The carrying
value of these properties had been adjusted at December 31, 2000 to reflect the
actual sales transactions.
On March 30, 2001, the Partnership sold its 98% limited partnership
interests in Fuquay-Varina, Oxford Homes and Williamston Homes to the general
partner of these partnerships or his affiliate for $148,485 plus the assumption
of the related Purchase Money Note obligations. The carrying value of these
properties had been adjusted at December 31, 2000 to reflect the actual sales
transactions.
In February 2000, the Partnership sold its interest in Osuna Apartments
Company and the holders of the Purchase Money Notes released the Partnership
from all liabilities in connection with the Notes. In July 1999, the Partnership
sold its interest in Linden Park Associates. Linden Park Associates refinanced
their existing debt and also paid in full the principal and accrued and unpaid
interest due the Partnership on their notes. In May 1999, the Partnership sold
its interest in Fiddlers Creek Apartments and the purchaser assumed the
Partnership's obligations under the related Purchase Money Notes.
The Linden GP was engaged in September, 1998 to assist the general
partner review the Partnership's portfolio, develop a strategy for maximizing
the value of the portfolio and implementing the strategy. The agreement provides
for fees based on the successful implementation of all or part of the strategy
developed which will be paid from funds segregated at the time of the sale of
the Partnership's investment in Linden Park. The remaining balance of the
segregated funds was $49,641 as of March 31, 2002. In the first quarter of 2002,
the Partnership paid $9,427 in consulting fees to the Linden GP in respect of
the Brierwood II and Pine Forest investments and accrued fees due the Linden GP
totaling $15,707 in respect of the Brierwood and Meadowwood investments. In
2001, the Partnership paid $71,723 in consulting fees to the Linden GP in
5
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Organization and Plan of Liquidation of the Partnership, continued
Liquidation and Sale of Investments in Local Limited Partnerships, continued
respect of the successful sales of its interests in Fuqua-Varina, Oxford Homes
and Williamston Homes and fees totaling $18,018 in respect of the Austintown
investment.
The Partnership entered into an agreement with the local general
partner of Austintown to sell the Partnership's 98% limited partnership
interest, subject, among other things, to the consent of the related Purchase
Money Note holders. The Partnership did not receive unanimous consent of the
Purchase Money Note holders and the agreement expired on April 1, 2000. On
September 15, 2000 certain of the Purchase Money Note holders commenced an
action in the Court of Common Pleas Mahoning County, Ohio seeking, among other
things, to foreclose upon the Partnership's pledge of its 98% limited
partnership interest in Austintown. The Partnership did not contest the
proceeding and, on February 26, 2001, the Court entered a default judgment and
order appointing a receiver to sell the Partnership's interest in Austintown to
satisfy the judgment. On November 28, 2001, Mr. Manchi, the local general
partner of Austintown, and his associate, Mr. Baker, were the highest bidders
for a portion of the limited partnership interest (representing the portion -
approximately 94% of the Partnership's 98% interest - securing certain of the
Purchase Money Notes) at public auction by the receiver at the Mahoning County
Courthouse. Their bids totaled $1,300. A 25% deposit was required and paid by
Messrs. Manchi and Baker. Their purchases will be finalized upon final approval
by the Department of Housing and Urban Development to the sale, Messrs. Manchi
and Baker furnishing a "sophisticated investor letter" and the payment of the
balance of the purchase price. The sale proceeds, after the costs of sale, will
be paid to the holders of the Purchase Money Note for which the collateral was
sold. Management understands that Mr. Manchi has been negotiating to purchase
the remaining Purchase Money Notes and expects that, if he acquires them, he
will exchange them for the balance of the limited partnership interest. The
Partnership will recognize the disposition of its limited partnership interest
as the sales are finalized. The estimated liquidation value has been adjusted to
reflect these latest estimated realizable values. All conditions necessary to
recognize the sale of the Partnership's interest have not been met as of March
31, 2002.
In April 2002, the Partnership entered into agreements with the holders
of the Purchase Money Notes relating to Surry and Glendale assigning to them the
Partnership's 98% investor limited partnership interests in the respective Local
Limited Partnership in exchange for cancellation of the notes.
The carrying values of the investments in the Local Limited
Partnerships and the Purchase Money Notes and related accrued interest were
adjusted to their estimated fair values and settlement amounts, respectively,
upon adopting the liquidation basis of accounting (See Note 2).
As discussed above, the disposition of the Partnership's interest in
the remaining Local Limited Partnership, Austintown, is in progress. If the
Partnership is successful in completely disposing of its remaining investment,
management presently intends to wind up the Partnership's operations in the
third quarter of 2002.
6
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Organization and Plan of Liquidation of the Partnership, continued
Liquidation and Sale of Investments in Local Limited Partnerships, continued
No assurance can be given that the Partnership will be able to
successfully conclude any of the above transactions. Consequently, the
completion of the liquidation of the Partnership may be different than currently
anticipated.
The net amount, if any, ultimately available for distribution from the
liquidation of the Partnership depends on many unpredictable factors, such as
the amounts realized on the disposition of the remaining Local Limited
Partnership investment, carrying costs of the assets prior to sale, settlement
of claims and commitments, the amount of revenue and expenses of the Partnership
until completely liquidated and other uncertainties.
2. Significant Accounting Policies
Basis of Presentation
In the opinion of the General Partner, the accompanying unaudited
financial statements contain all normal recurring adjustments necessary to
present fairly the financial statements of the Partnership for the periods
presented. Changes of net assets in liquidation in any interim period are not
necessarily indicative of the changes that may be expected for a full year. The
financial statements do not include all of the information and footnote
disclosures required by accounting principles generally accepted in the United
States of America. These financial statements should be read in conjunction with
the Partnership's audited financial statements and notes thereto included in the
Partnership's annual report on Form 10-K for the year ended December 31, 2001.
Basis of Accounting
Effective December 31, 2000, the Partnership adopted the liquidation
basis of accounting. Prior to that date, the Partnership recorded results of
operations using the going concern basis of accounting.
The accompanying statements of net assets in liquidation and statement
of changes of net assets in liquidation, reflect the transactions of the
Partnership utilizing liquidation accounting concepts as required by accounting
principles generally accepted in the United States of America. Under the
liquidation basis of accounting, assets are stated at their estimated net
realizable values and liabilities are stated at their anticipated payable
amounts.
The valuation of assets and liabilities necessarily requires estimates
and assumptions, and there are uncertainties in carrying out the dissolution of
the Partnership. The actual values upon dissolution and costs associated
therewith could be higher or lower than the amounts recorded.
7
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. Significant Accounting Policies, continued
Investment in Local Limited Partnerships
Investments in Local Limited Partnerships at March 31, 2002 consist of
investments in three Local Limited Partnerships which are stated at estimated
liquidation value.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
3. Contingencies
As of March 31, 2002 all three remaining series of the Purchase Money
Notes were in default. The Purchase Money Notes relating to Austintown
Associates, Glendale Manor and Surry Manor matured on October 30, 1999, August
29, 2000 and July 9, 2001, respectively. In April 2002, the Purchase Money Notes
relating to Surry and Glendale Manor were cancelled in exchange for the
Partnership's 98% investor limited partnership interests in these partnerships.
The sale or other disposition by the Partnership of its interests in
the Local Limited Partnerships, including in connection with a foreclosure of
the pledged security, is likely to result in recapture of previously claimed tax
losses to the Partnership and may have other adverse tax consequences to the
Partnership and to the Limited Partners. Such recapture may cause some or all of
the Limited Partners to have taxable income from the Partnership without cash
distributions from the Partnership with which to satisfy the tax liability
resulting therefrom.
As discussed in Note 1 above, the disposition of the Partnership's
interest in the remaining Local Limited Partnership is in progress. If the
Partnership is successful in completely disposing of its remaining investment,
management presently intends to wind up the Partnership's operations in the
third quarter of 2002.
No assurance can be given that the Partnership will be able to
successfully conclude any of the above transactions. Consequently, the
completion of the liquidation of the Partnership may be different than currently
anticipated.
8
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. Contingencies, continued
As a result of its investments in the Local Limited Partnerships, the
Partnership is affected by certain risks and uncertainties associated with the
operations of the Properties owned by the Local Limited Partnerships.
The rents of the Properties, many of which receive rental subsidy
payments, including payments under Section 8 of Title II of the Housing and
Community Development Act of 1974 ("Section 8"), are subject to specific laws,
regulations and agreements with federal and state agencies. The subsidy
agreement relating to the remaining investment expires in October 2004. Under
the Multifamily Assisted Housing and Reform and Affordability Act (MAHRAA) of
1997, as amended, Congress set forth the legislation for a permanent
"mark-to-market" program and provided for permanent authority for the renewal of
Section 8 Contracts. In February 2001, HUD issued a new Section 8 contract
renewal GuideBook, which replaced HUD notice 99-36.
The GuideBook provides project owners with several options for Section
8 contract renewals. The Local Limited Partnership which has Section 8 contracts
will not be affected by these guidelines until early 2004.
The Partnership cannot reasonably predict legislative initiatives and
governmental budget negotiations, the outcome of which could result in a
reduction in funds available for the various federal and state administered
housing programs including the Section 8 program. Such changes could adversely
affect the future net operating income and debt structure of certain Local
Limited Partnerships currently receiving such subsidy or similar subsidies.
4. Investments in Local Limited Partnerships
The Partnership acquired Local Limited Partnership interests in
thirteen Local Limited Partnerships which owned and operated government assisted
multi-family housing complexes. As discussed in Note 1 above, the Partnership
has sold or otherwise disposed of ten of its investments as of March 31, 2002
and two investments were subsequently disposed of in April 2002. The
Partnership, as Investor Limited Partner pursuant to Local Limited Partnership
Agreements, acquired interests ranging from 94% to 98% in the profit or losses
from operations and cash from operations of each of the Local Limited
Partnerships.
As discussed above, the Partnership is currently in the process of
liquidating the Partnership and disposing of its remaining investment in the
Local Limited Partnerships, a process presently estimated to continue through
the third quarter of 2002. No assurance can be given that management will be
able to complete its liquidation of Partnership's investments within this time
period.
9
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. Investments in Local Limited Partnerships, continued
The following is a summary of cumulative activity for investments in
Local Limited Partnerships since their dates of acquisition:
(Unaudited) (Audited)
March 31, December 31,
2002 2001
-------------- -------------
Total acquisition cost to the Partnership $ 9,356,379 $ 9,356,379
Additional capital contributed by the Partnership 11,425 11,425
Partnership's share of losses of Local Limited Partnerships (3,425,886) (3,456,795)
Cash distributions received from Local Limited Partnerships (4,249,583) (4,249,583)
Cash distributions received from Local Limited
Partnerships recognized as Investment Income 95,918 95,195
Sales of investments in Local Limited Partnerships (1,462,539) (1,462,539)
Adjustment to reduce investments in Local Limited Partnerships
to liquidation accounting basis (324,414) (29,555)
----------- -----------
Investments in Local Limited Partnerships $ 1,300 $ 265,250
=========== ===========
10
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. Investments in Local Limited Partnerships, continued
Summarized financial information from the combined financial statements
of the three and ten Local Limited Partnerships in which the Partnership held
investments during the three months ended March 31, 2002 and 2001, respectively,
are as follows:
Summarized Statement of Operations (Unaudited)
For the Three Months Ended
March 31,
------------------------------
2002 2001
---------- -----------
Rental and other income $ 409,592 $ 833,773
Expenses:
Operating expenses 282,286 523,887
Interest expense 37,200 143,579
Depreciation and amortization 70,077 144,749
--------- ---------
Total expenses 389,563 812,215
--------- ---------
Net income (loss) 20,029 21,558
--------- ---------
Partnership's share of net income (loss) 20,247 21,856
--------- ---------
Other partners' share
of net income (loss) (218) (298)
--------- ---------
11
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
5. Transactions with Affiliates
In connection with the adoption of the liquidation basis of accounting,
an adjustment to record estimated liabilities through the liquidation of
$100,000 was recorded at December 31, 2000. This amount included $50,000 of
partnership management fees and $50,000 of reimbursable administration expenses.
In 2001, estimated management fees to the General Partner through liquidation
were reduced by $45,000 and estimated administrative expenses through
liquidation were reduced by $2,000. In the first three months of 2002 and 2001,
there were no management fees or reimbursable expenses to the General Partner
recognized. At March 31, 2002 and December 31, 2001, accounts payable to
affiliates totaling $339,271 represents amounts owed for reimbursements of
Partnership administrative expenses and management fees of $192,000 and
$147,271, respectively.
6. Statement of Distributable Cash from Operations
Distributable Cash From Operations for the three months ended March 31,
2002 and 2001, as defined in Section 17 of the Partnership Agreement, is as
follows:
2002 2001
---- ----
Interest income $ 1,810 $ 4,882
Plus: 2000 cash distributions to be received from
Local Limited Partnerships, net of non-resident
State withholding taxes -- 39,333
Less: 2001 interest payments on Purchase Money
Notes to be paid out of 2000 cash
distributions from Local Limited Partnerships -- (39,333)
Less: General and administrative expenses (12,656) (40,231)
---------- ----------
Cash from Operations, as defined (10,846) (35,349)
---------- ----------
Distributable Cash from Operations, as defined $ 0 $ 0
========== ==========
12
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Because of the progress which had been made during 2000 in connection
with the Partnership's efforts to liquidate its portfolio of investments in
Local Limited Partnerships, effective December 31, 2000, the Partnership adopted
the liquidation basis of accounting. Prior to that date, the Partnership
recorded results of operations using the going concern basis of accounting.
Under the liquidation basis of accounting, assets are stated at their
estimated net realizable values and liabilities are stated at their anticipated
settlement amounts. The valuation of assets and liabilities necessarily requires
many estimates and assumptions, and there are substantial uncertainties in
carrying out the liquidation of the Partnership's assets. The actual values upon
liquidation and costs associated therewith could be higher or lower than the
amounts recorded. In connection with the liquidation, the Partnership has
recorded an accrual for additional expenses to reflect the Partnership's best
estimate of the costs associated with the liquidation.
Liquidity and Capital Resources
The Partnership
The Partnership is liable for the amount of the Purchase Money Notes
delivered to purchase its interests in the Local Limited Partnerships (as
hereinafter described), and for the Partnership's day-to-day administrative and
operating expenses.
The Partnership acquired its interests in two Local Limited
Partnerships for cash. The Partnership acquired its interests in eleven other
Local Limited Partnerships by delivery of cash, short-term promissory notes (all
of which have been paid in full) and purchase money promissory notes which bear
interest at the rate of 9% per annum (the "Purchase Money Notes"). The payment
of each Purchase Money Note is secured by a pledge of the Partnership's interest
in the Local Limited Partnership to which the note relates. Recourse on each
Purchase Money Note is limited to the pledged partnership interest. Each note
had an initial term of 15 to 17 years. The Partnership's interests in these
Local Limited Partnerships were pledged as security for the Partnership's
obligations under the respective Purchase Money Notes.
13
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources, continued
The Partnership, continued
The terms of each Purchase Money Note permit interest to accrue to the
extent cash distributions to the Partnership from the applicable Local Limited
Partnership are insufficient to enable the Partnership to pay the Purchase Money
Note on a current basis. Generally, the amount of such cash distributions have
not been sufficient in any year to pay the full amount of interest accrued for
that year on the Purchase Money Notes. The Purchase Money Notes do not require
payment of any portion of the principal amount of the note prior to maturity
(except that the Purchase Money Notes require immediate payment following a
default (as defined therein) by the Partnership thereunder). Accordingly, each
Purchase Money Note requires a substantial balloon payment at maturity. In
connection with the adoption of the liquidation basis of accounting, the value
shown for the Purchase Money Notes was adjusted to the anticipated settlement
amount.
The sale or other disposition by the Partnership of its interests in
the Local Limited Partnerships, including in connection with a foreclosure of
the pledged security, is likely to result in recapture of previously claimed tax
losses to the Partnership and may have other adverse tax consequences to the
Partnership and to the Unit holders. Such recapture may cause some or all of the
Unit holders to have taxable income from the Partnership without cash
distributions from the Partnership with which to satisfy the tax liability
resulting therefrom.
At March 31, 2002, all three remaining series of the Purchase Money
Notes, relating to Austintown Associates, Glendale Manor Apartments and Surry
Manor, Ltd., had matured and were in default. None of the series of Purchase
Money Notes is cross-defaulted to the others, nor are the series of Purchase
Money Notes cross-collateralized in any manner. In April 2002, the Purchase
Money Notes relating to Surry and Glendale Manor were canceled in exchange for
the Partnership's 98% investor limited partnership interests in the respective
partnership.
On March 22, 2002, the Properties owned by Brierwood and Meadowwood
Apartments were sold to purchasers affiliated with the local general partner in
these partnerships. These Partnerships were subsequently dissolved. The carrying
value of these properties had been adjusted at December 31, 2001 to reflect the
actual sales transactions.
On December 31, 2001, the Properties owned by Brierwood II and Pine
Forest were sold to purchasers affiliated with the local general partner in
these partnerships. These Partnerships were subsequently dissolved. The carrying
value of these properties had been adjusted at December 31, 2000 to reflect the
actual sales transactions.
14
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources, continued
The Partnership, continued
On March 30, 2001, the Partnership sold its 98% limited partnership
interests in Fuquay-Varina, Oxford Homes and Williamston Homes to the general
partner of these partnerships or his affiliate for $148,485 plus the assumption
of the related Purchase Money Note obligations. The carrying value of these
properties had been adjusted at December 31, 2000 to reflect the actual sales
transactions.
In May 1999, the Partnership sold its interest in Fiddlers Creek
Apartments and the purchaser assumed the Partnership's obligations under the
related Purchase Money Notes. In July 1999, the Partnership sold its interest in
Linden Park Associates. Linden Park Associates refinanced their existing debt
and also paid in full the principal and accrued and unpaid interest due the
Partnership on their notes. In February 2000, the Partnership sold its interest
in Osuna Apartments Company and the holders of the Purchase Money Notes released
the Partnership from all liabilities in connection with the Notes.
The Partnership entered into an agreement with the local general
partner of Austintown to sell the Partnership's 98% limited partnership
interest, subject, among other things, to the consent of the related Purchase
Money Note holders. The Partnership did not receive unanimous consent of the
Purchase Money Note holders and the agreement expired on April 1, 2000. On
September 15, 2000 certain of the Purchase Money Note holders commenced an
action in the Court of Common Pleas Mahoning County, Ohio seeking, among other
things, to foreclose upon the Partnership's pledge of its 98% limited
partnership interest in Austintown. The Partnership did not contest the
proceeding and, on February 26, 2001, the Court entered a default judgment and
order appointing a receiver to sell the Partnership's interest in Austintown to
satisfy the judgment. On November 28, 2001, Mr. Manchi, the local general
partner of Austintown, and his associate, Mr. Baker, were the highest bidders
for a portion of the limited partnership interest (representing the portion -
approximately 94% of the Partnership's 98% interest - securing certain of the
Purchase Money Notes) at public auction by the receiver at the Mahoning County
Courthouse. Their bids totaled $1,300. A 25% deposit was required and paid by
Messrs. Manchi and Baker. Their purchases will be finalized upon final approval
by the Department of Housing and Urban Development to the sale, Messrs. Manchi
and Baker furnishing a "sophisticated investor letter" and the payment of the
balance of the purchase price. The sale proceeds, after the costs of sale, will
be paid to the holders of the Purchase Money Note for which the collateral was
sold. Management understands that Mr. Manchi has been negotiating to purchase
the remaining Purchase Money Notes and expects that, if he acquires them, he
will exchange them for the balance of the limited partnership interest. The
Partnership will recognize the disposition of its limited partnership interest
as the sales are finalized. The estimated liquidation value has been adjusted to
reflect these latest estimated realizable values. All conditions necessary to
recognize the sale of the Partnership's interest have not been met as of March
31, 2002.
15
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources, continued
The Partnership, continued
In April 2002, the Partnership entered into agreements with the holders
of the Purchase Money Notes relating to Surry and Glendale assigning to them the
Partnership's 98% investor limited partnership interest in the respective Local
Limited Partnership in exchange for cancellation of the notes.
As discussed above, the disposition of the Partnership's interest in
the remaining Local Limited Partnership is in progress. If the Partnership is
successful in completely disposing of its remaining investment, management
presently intends to wind up the Partnership's operations in the third quarter
of 2002.
No assurance can be given that the Partnership will be able to
successfully conclude any of the above transactions. Consequently, the
completion of the liquidation of the Partnership may be different than currently
anticipated.
The net amount, if any, ultimately available for distribution from the
liquidation of the Partnership depends on many unpredictable factors, such as
the amounts realized on the disposition of the remaining Local Limited
Partnership investment, carrying costs of the assets prior to sale, settlement
of claims and commitments, the amount of revenue and expenses of the Partnership
until completely liquidated and other uncertainties.
In light of the Partnership's adoption of the liquidation basis of
accounting, the Partnership's net asset values as of March 31, 2002 and December
31, 2001 reflect the net realizable values for the Investments in Local Limited
Partnerships after giving effect to the estimated closing costs upon sale or
disposal of the investments. In addition, an estimated liability was recorded
for estimates of costs to be incurred in carrying out the dissolution and
liquidation of the Partnership. These costs include estimated legal fees,
accounting fees, tax return preparation and partnership administration. Actual
costs could vary significantly from these estimated costs due to uncertainties
related to the length of time required to complete the liquidation and
dissolution of the Partnership and unanticipated events which may arise in
disposing of the Partnership's remaining assets.
At March 31, 2002, the Partnership had total cash and cash equivalents
of $513,180 including cash reserves of $463,539 and restricted cash of $49,641
as compared to total cash at December 31, 2001 of $521,798, including cash
reserves of $462,849 and restricted cash of $58,949. Restricted cash decreased
as a result of costs paid relating to the sale of the Partnership's investments.
Accounts payable and accrued expenses decreased $6,537 to a total of
$171,187 at March 31, 2002 from $177,724 at December 31, 2001. The decrease was
the result of payment of consulting fees relating to the sale of the
Partnership's investments of $9,427 net of an increase in other operating costs
of $2,890.
16
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources, continued
The Local Limited Partnerships.
The rents of the Properties, many of which receive rental subsidy
payments, including payments under Section 8 of Title II of the Housing and
Community Development Act of 1974 ("Section 8"), are subject to specific laws,
regulations and agreements with federal and state agencies. The subsidy
agreement on the remaining investment expires in October 2004. Under the
Multifamily Assisted Housing and Reform and Affordability Act (MAHRAA) of 1997,
as amended, Congress set forth the legislation for a permanent "mark-to-market"
program and provided for permanent authority for the renewal of Section 8
Contracts. In February 2001, HUD issued a new Section 8 contract renewal
GuideBook, which replaced HUD notice 99-36.
The GuideBook provides project owners with several options for Section
8 contract renewals. The Local Limited Partnership which has Section 8 contracts
will not be affected by these guidelines until early 2004.
The Partnership cannot reasonably predict legislative initiatives and
governmental budget negotiations, the outcome of which could result in a
reduction in funds available for the various federal and state administered
housing programs including the Section 8 program. Such changes could adversely
affect the future net operating income and debt structure of certain Local
Limited Partnerships currently receiving such subsidy or similar subsidies.
The Local Limited Partnerships are impacted by inflation in several
ways. Inflation allows for increases in rental rates generally reflecting the
impact of higher operating and replacement costs. Inflation also affects the
Local Limited Partnerships adversely by increasing operating costs such as
utilities and salaries.
As discussed above, the disposition of it's the Partnership's remaining
Local Limited Partnership is in progress. If the Partnership is successful in
completely disposing of its remaining investment, management presently intends
to wind up the Partnership's operations in the third quarter of 2002.
Partnership Operations
Because the Partnership adopted the liquidation basis of accounting on
December 31, 2000, the results of operations for the three month period ended
March 31, 2002 are not presented. Instead, the Partnership's operating results
have been reflected on the statement of changes of net assets in liquidation and
reflect changes from the estimated net realizable values of assets and
anticipated payable amounts of liabilities previously recorded.
Net assets in liquidation decreased to $1,881 at March 31, 2002 from
$3,962 at December 31, 2001. The change was the result of operating activities,
an increase in accounts payable and accrued expenses totaling $3,891 net of
interest income earned of $1,810. Both the liquidation values and the related
Purchase Money Note Obligations for Surry and Glendale Manor were reduced from
$263,930 to zero.
17
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
(A Massachusetts Partnership)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources, continued
Partnership Operations, continued
Net assets in liquidation increased to $5,110 at March 31, 2001 from
$2,358 at December 31, 2000. The change was primarily the result of operating
activities, interest income earned of $4,882 net of an increase in accounts
payable and accrued expenses totaling $2,115.
18
PART II
Other Information
Item 3. Defaults Upon Senior Securities.
As of March 31, 2002 all three remaining series of the Purchase Money
Notes were in default. The Purchase Money Notes relating to Austintown
Associates, Glendale Manor and Surry Manor matured on October 30, 1999, August
29, 2000 and July 9, 2001, respectively. The amounts due at maturity under these
non-recourse obligations consisted of $2,410,000 in aggregate principal amount
and $2,645,708. in accrued and unpaid interest. In April 2002, the Purchase
Money Notes relating to Surry and Glendale Manor were canceled in exchange for
the Partnership's 98% investor limited partnership interests in these
partnerships. As of May 15, 2002, the aggregate arrearages under the Purchase
Money Notes relating to Austintown Associates amounted to $3,973,437.
19
SIGNATURES
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.
LIBERTY HOUSING PARTNERS LIMITED PARTNERSHIP
By: TNG Properties Inc.
Managing General Partner
By: /s/ Michael A. Stoller
Michael A. Stoller
President and CEO
By: TNG Properties Inc.
Managing General Partner
By: /s/ Wilma R. Brooks
Wilma R. Brooks
Chief Financial Officer
Date: May 13, 2002