1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended JUNE 30, 2001
Commission File Number 0-13808
HOUSING PROGRAMS LIMITED
(A California Limited Partnership)
I.R.S. Employer Identification No. 95-3906167
9090 WILSHIRE BLVD., SUITE 201
BEVERLY HILLS, CALIF. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve 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 [ ]
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2001
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, June 30, 2001 and December 31, 2000 ..............1
Statements of Operations,
Six and Three Months Ended June 30, 2001 and 2000........2
Statement of Partners' Deficiency,
Six Months Ended June 30, 2001 ..........................3
Statements of Cash Flow,
Six Months Ended June 30, 2001 and 2000..................4
Notes to Financial Statements ....................................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation.....................12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings...............................................16
Item 6. Exhibits and Reports on Form 8-K................................16
Signatures...............................................................17
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, 2001 AND DECEMBER 31, 2000
ASSETS
2001
(Unaudited) 2000
------------ ------------
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ - $ -
CASH AND CASH EQUIVALENTS 130,026 372,546
DUE FROM ESCROW - 15,000
------------ ------------
TOTAL ASSETS $ 130,026 $ 387,546
============ ============
LIABILITIES AND PARTNERS' DEFICIENCY
LIABILITIES:
Notes payable (Notes 3 and 6) $ 4,600,000 $ 4,600,000
Accrued fees and expenses due general
partners (Note 4) 1,020,289 1,097,089
Accrued interest payable (Notes 3 and 6) 6,670,361 6,451,861
Accounts payable 78,842 69,855
------------ ------------
12,369,492 12,218,805
------------ ------------
COMMITMENTS AND CONTINGENCIES
(Notes 4 and 5)
PARTNERS' DEFICIENCY:
General partners (373,142) (369,060)
Limited partners (11,866,324) (11,462,199)
------------ ------------
(12,239,466) (11,831,259)
------------ ------------
TOTAL LIABILITIES AND PARTNERS'
DEFICIENCY $ 130,026 $ 387,546
============ ============
The accompanying notes are an integral part of these financial statements.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
SIX AND THREE MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
Six months Three months Six months Three months
ended ended ended ended
June 30, 2001 June 30, 2001 June 30, 2000 June 30, 2000
------------- ------------- ------------- -------------
INTEREST INCOME $ 6,027 $ 1,736 $ 150 $ 50
--------- --------- --------- ---------
OPERATING EXPENSES:
Management fees - general partner (Note 4) 100,599 49,797 130,556 50,360
General and administrative (Note 4) 29,458 14,884 32,899 23,450
Legal and accounting 45,289 27,639 70,024 17,366
Interest (Notes 3) 218,500 109,250 218,500 109,250
--------- --------- --------- ---------
Total operating expenses 393,846 201,570 451,979 200,426
--------- --------- --------- ---------
LOSS FROM OPERATIONS (387,819) (199,834) (451,829) (200,376)
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS (Note 2) (96,589) (96,589)
GAIN ON SALE OF LIMITED
PARTNERSHIP INTEREST (Note 2) 65,000 - 323,759 75,582
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED
AS INCOME (Note 2) 11,201 11,201 102,607 102,607
--------- --------- --------- ---------
NET LOSS $(408,207) $(285,222) $ (25,463) $ (22,187)
========= ========= ========= =========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST $ (33) $ (23) $ (2) $ (2)
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' DEFICIENCY
SIX MONTHS ENDED JUNE 30, 2001
(Unaudited)
General Limited
Partners Partners Total
---------- ------------ ------------
PARTNERSHIP INTERESTS 12,368
============
DEFICIENCY, January 1, 2001 $(369,060) $(11,462,199) $(11,831,259)
Net loss for the six months
ended June 30, 2001 (4,082) (404,125) (408,207)
---------- ------------ ------------
DEFICIENCY, June 30, 2001 $ (373,142) $(11,866,324) $(12,239,466)
========== ============ ============
The accompanying notes are an integral part of these financial statements.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(Unaudited)
2001 2000
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(408,207) $ (25,463)
Adjustments to reconcile net loss to net cash used in
operating activities:
Gain on sale of partnership interests (65,000) (323,759)
Equity in income of Limited Partnership 96,589
Decrease in due from escrow 15,000 -
Increase in accrued interest payable 218,500 218,500
Decrease in accrued fees and expenses
due general partners (76,800) (100,444)
Increase in accounts payable 8,987 6,487
--------- ---------
Net cash used in operating activities (210,931) (224,679)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of partnership interests 65,000 323,759
Advance to properties (96,589) -
--------- ---------
Net cash (used in) provided by investing activities (31,589) 323,759
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (242,520) 99,080
--------- ---------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 372,546 817,796
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 130,026 $ 916,876
========= =========
The accompanying notes are an integral part of these financial statements.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the 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 Housing Programs
Limited (the "Partnership") annual report for the year ended December
31, 2000. National Partnership Investments Corp. (NAPICO) is the
managing general partner of the Partnership. 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 NAPICO, 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 June 30, 2001 and the results of operations and
changes in cash flows for the six and three months then ended.
ORGANIZATION
Housing Programs Limited (the "Partnership"), formed under the
California Uniform Limited Partnership Act, was organized 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 NAPICO, Coast Housing Investment Associates, a limited
partnership, and Housing Programs Corporation II.
The general partners have a 1 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. Casden Properties Inc. owns a 95.25% economic interest in
NAPICO, with the balance owned by Casden Investment Corporation ("CIC").
CIC, which is wholly owned by Alan I. Casden, owns 95% of the voting
common stock of NAPICO.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
On December 30, 1998, the Partnership sold its limited partnership
interests in 7 local limited partnerships for net proceeds of $202,714
to subsidiaries of Casden Properties Inc.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America.
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 reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
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 amortized on a straight line basis over the estimated lives
of the underlying assets, which is 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 during the year. The number of
limited partnership interests was 12,368 for all years presented.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and bank certificates of
deposit with an original maturity of three months or less. The
Partnership has its cash and cash equivalents on deposit with high
credit quality financial institutions. Such cash and cash equivalents
are in excess of the FDIC insurance limit.
INCOME TAXES
No provision has been made for income taxes in the accompanying
financial statements since such taxes, if any, are the liability of the
individual partners.
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership reviews long-lived assets to determine if there has
been any permanent impairment whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. If the sum of the expected future cash flows is less than
the carrying amount of the assets, the Partnership recognizes an
impairment loss.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
As of June 30, 2001, the Partnership holds limited partnership
interests in 10 limited partnerships, located in 5 different states. As
of June 30, 2001, the limited partnerships own residential low income
rental projects consisting of 1,685 apartment units. The mortgage loans
of these projects are payable to or insured by various governmental
agencies.
The Partnership, as a limited partner, is entitled to 99 percent of the
profits and losses of the limited partnerships.
Distributions from the limited partnerships are recognized as a
reduction of capital until the investment balance has been reduced to
zero or to a negative amount equal to further capital contributions
required. Subsequent distributions are recognized as income.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
The Partnership has no carrying value in investments in limited
partnerships as of June 30, 2001.
The following are unaudited combined estimated statements of operations
for the six and three months ended June 30, 2001 and 2000 for the
limited partnerships in which the Partnership has investments:
Six months Three months Six months Three months
ended ended ended ended
June 30, 2001 June 30, 2001 June 30, 2000 June 30, 2000
------------- ------------- ------------- -------------
INCOME
Rental and Other $3,784,000 $1,892,000 $5,160,000 $2,580,000
---------- ---------- ---------- ----------
EXPENSES
Depreciation 724,000 362,000 1,034,000 517,000
Interest 484,000 242,000 876,000 438,000
Operating 2,678,000 1,339,000 3,756,000 1,878,000
----------- ----------- ----------- -----------
Total expenses 3,886,000 1,943,000 5,666,000 2,833,000
----------- ----------- ----------- -----------
NET LOSS $ (102,000) $ (51,000) $ (506,000) $ (253,000)
=========== =========== ========== ==========
NAPICO, or one of its affiliates, is the general partner and property
management agent for certain of the limited partnerships included
above. The Local Partnerships pay the affiliate property management
fees in the amount of 5 percent of their gross rental revenues and data
processing fees. The amounts paid were approximately $29,261 for the
six months ended June 30, 2001.
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
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
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"), which was
adopted in October 1997, 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.
During the six months ended June 30, 2001, the Partnership surrendered
its interests in one limited partnership for a net payment of $65,000.
The Partnership recognized a gain of $65,000 from the sale because it
had no investment balance related to this partnership.
On December 30, 1998, the Partnership sold its limited partnership
interests in 7 local limited partnerships to the Operating Partnership.
The sale resulted in cash proceeds to the Partnership of $202,714 which
was collected in 1999. In March 1999, the Partnership made cash
distributions of $695,687 to the limited partners and $7,027 to the
general partners, which included using proceeds from the sale of the
partnership interests.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 3 - NOTES PAYABLE
Certain of the Partnership's investments involved purchases of
partnership interests from partners who subsequently withdrew from the
operating partnership. The Partnership is obligated for non-recourse
notes payable of $4,600,000 to the sellers of the partnership
interests, bearing interest at 9.5 percent per annum to the various
sellers of the partnership interests. These obligations and the related
interest are collateralized by the Partnership's investment in the
investee limited partnerships and are payable only out of cash
distributions from the investee partnerships, as defined in the notes.
The notes matured in December 1999, at which time all unpaid interest
became due.
Notes payable and related accrued interest payable aggregating
$11,270,361 as of June 30, 2001 matured on December 31, 1999. Due to
the Partnership's lack of cash and partners' deficiency, there is
substantial doubt about its ability to satisfy these obligations, which
would result in the possible foreclosure of the investments in the
local limited partnerships. As a result, there is substantial doubt
about the Partnerships' ability to continue as a going concern.
Management is in process of attempting to negotiate extensions of the
maturity dates on the notes payable.
NOTE 4 - FEES AND EXPENSES DUE TO GENERAL PARTNERS
Under the terms of the Restated Certificate and Agreement of the
Limited Partnership, the Partnership is obligated to the general
partners for an annual management fee equal to 0.5 percent of the
original invested assets of the 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 limited
partnerships.
The Partnership reimburses NAPICO for certain expenses. The expenses
incurred to NAPICO was approximately $10,997 and $10,000 for the period
ended June 30, 2001 and June 30, 2000, respectively.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 4 - FEES AND EXPENSES DUE TO GENERAL PARTNERS (CONTINUED)
As of June 30, 2001, the fees and expenses due the general partners
exceeded the Partnership's cash. The general partners, during the
forthcoming year, will not demand payment of amounts due in excess of
such cash or such that the Partnership would not have sufficient
operating cash; however, the Partnership will remain liable for all
such amounts.
NOTE 5 - CONTINGENCIES
On August 27, 1998, two investors holding an aggregate of eight units
of limited partnership interests in Real Estate Associates Limited III
(an affiliated partnership in which NAPICO is the managing general
partner) and two investors holding an aggregate of five units of
limited partnership interest in Real Estate Associates Limited VI
(another affiliated partnership in which NAPICO is the managing general
partner) commenced an action in the United States District Court for
the Central District of California against the Partnership, NAPICO and
certain other affiliated entities. The complaint alleges that the
defendants breached their fiduciary duty to the limited partners of
certain NAPICO managed partnerships and made materially false and
misleading statements in the consent solicitation statements sent to
the limited partners of such partnerships relating to approval of the
transfer of partnership interests in limited partnerships, owning
certain of the properties, to affiliates of Casden Properties Inc.,
organized by an affiliate of NAPICO. The plaintiffs seek equitable
relief, as well as compensatory damages and litigation related costs.
On August 4, 1999, one investor holding one unit of limited partnership
interest in the Partnership commenced a virtually identical action in
the United States District Court for the Central District of California
against the Partnership, NAPICO and certain other affiliated entities.
NAPICO, the managing general partner of such partnerships, and the
other defendants believe that the plaintiffs' claims are without merit
and are contesting the actions vigorously.
NAPICO is a plaintiff in various lawsuits and has also been named as
defendant in other lawsuits arising from transactions in the ordinary
course of business. In the opinion of NAPICO, the claims will not
result in any material liability to the Partnership.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2001
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments. The carrying amount of other
assets and liabilities reported on the balance sheets that require such
disclosure approximate fair value due to their short-term maturity.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary sources of funds include interest income on
money market accounts and certificates of deposit and distributions
from 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. The Partnership made a distribution to the investors in March
1999, which included using proceeds from disposition of its investments
in certain limited partnerships.
RESULTS OF OPERATIONS
Partnership revenues consist primarily of interest income earned on
certificates of deposit and other temporary investment of funds. The
Partnership also receives distributions from the lower-tier limited
partnerships in which it has invested.
Distributions received from limited partnerships are recognized as
return of capital until the investment balance has been reduced to zero
or to a negative amount equal to future capital contributions required.
Subsequent distributions received are recognized as income.
Except for certificates of deposit and money market funds, the
Partnership's investments consist entirely of interests in other
limited partnerships owning government assisted housing projects.
Available cash is invested to provide interest income as reflected in
the statements of operations. These funds can be converted to cash to
meet obligations as they arise. The Partnership intends to continue
investing available funds in this manner.
A recurring partnership expense is the annual management fee. The fee
is payable to the General Partners of the Partnership and is calculated
at .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 $100,599 and $130,556 for the six
months ended June 30, 2001 and 2000, respectively.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
The Partnership is obligated on non-recourse notes payable of
$4,600,000 at June 30, 2001 and December 31, 2000, which bear interest
at 9.5 percent per annum and matured on December 31, 1999. The notes
and related interest are payable from cash flow generated from
operations of the related rental properties as defined in the notes.
These obligations are collateralized by the Partnership's investments
in the limited partnerships. Unpaid interest was due at maturity of the
notes.
Operating expenses, other than management fees and interest expense,
consist of legal and accounting fees for services rendered to the
Partnership and administrative expenses, which were generally
consistent for periods presented. Legal and accounting fees were
$45,289 and $70,024 for the six months ended June 30, 2001 and 2000,
respectively. General and administrative expenses were $29,458 and
$32,899 for the six months ended June 30, 2001 and 2000, respectively.
The Partnership accounts for its investments in the local limited
partnerships on the equity method, thereby adjusting its investment
balance by its proportionate share of the income or loss of the local
limited partnerships. Losses incurred after the limited partnership
investment account is reduced to zero are not recognized.
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
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATION (CONTINUED)
("MAHRAA"), which was adopted in October 1997, 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.
During the six months ended June 30, 2001, the Partnership surrendered
its interests in one limited partnership for a net payment of $65,000.
The Partnership recognized a gain of $65,000 from the sale because it
had no investment balance related to this partnership.
On December 30, 1998, the Partnership sold its limited partnership
interests in 7 local limited partnerships to the subsidiaries of Casden
Properties Inc. The sale resulted in cash proceeds to the Partnership
of $202,714, which was collected in 1999. In March 1999, the
Partnership made cash distributions of $695,687 to the limited partners
and $7,027 to the general partners, primarily using proceeds from the
sale of the partnership interests.
Notes payable and related accrued interest payable aggregating
$11,270,361 as of June 30, 2001 matured on December 31, 1999. Due to
the Partnership's lack of cash and partners' deficiency, there is
substantial doubt about its ability to satisfy these obligations, which
would
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2001
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATION (CONTINUED)
result in the possible foreclosure of the investments in the local
limited partnerships. As a result, there is substantial doubt about the
Partnerships' ability to continue as a going concern.
Management is in process of attempting to negotiate extensions of the
maturity dates on the notes payable.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2001
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership interests in Real Estate Associates Limited III (an affiliated
partnership in which NAPICO is the managing general partner) and two investors
holding an aggregate of five units of limited partnership interest in Real
Estate Associates Limited VI (another affiliated partnership in which NAPICO is
the managing general partner) commenced an action in the United States District
Court for the Central District of California against the Partnership, NAPICO and
certain other affiliated entities. The complaint alleges that the defendants
breached their fiduciary duty to the limited partners of certain NAPICO managed
partnerships and made materially false and misleading statements in the consent
solicitation statements sent to the limited partners of such partnerships
relating to approval of the transfer of partnership interests in limited
partnerships, owning certain of the properties, to affiliates of Casden
Properties Inc., organized by an affiliate of NAPICO. The plaintiffs seek
equitable relief, as well as compensatory damages and litigation related costs.
On August 4, 1999, one investor holding one unit of limited partnership interest
in the Partnership commenced a virtually identical action in the United States
District Court for the Central District of California against the Partnership,
NAPICO and certain other affiliated entities. NAPICO, the managing general
partner of such partnerships, and the other defendants believe that the
plaintiffs' claims are without merit and are contesting the actions vigorously.
As of June 30, 2001, NAPICO was a plaintiff or defendant in several lawsuits.
None of these suits are related to the Partnership. In the opinion of NAPICO,
the claims will not result in any material liability to the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of Item 6 of regulation
S-K and no reports on Form 8-K were filed during the quarter ended
June 30, 2001.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 2001
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.
HOUSING PROGRAMS LIMITED
(a California limited partnership)
By: National Partnership Investments Corp.
General Partner
/s/ BRUCE NELSON
--------------------------------------
Bruce Nelson
President
Date: August 14, 2001
-------------------------------------
/s/ BRIAN H. SHUMAN
--------------------------------------
Brian H. Shuman
Chief Financial Officer
Date: August 14, 2001
------------------------------------
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