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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
FOR QUARTER ENDED SEPTEMBER 30, 1995
COMMISSION FILE NUMBER 2-92352
HOUSING PROGRAMS LIMITED
(FORMERLY SHEARSON LEHMAN/COAST SAVINGS HOUSING PARTNERS, 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
Securities Registered Pursuant to
Section 12(b) or 12(g) of the Act
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed with the Commission 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 SEPTEMBER 30, 1995
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, September 30, 1995 and December 31, 1994 ................. 1
Statements of Operations,
Nine and Three Months Ended September 30, 1995 and 1994............. 2
Statement of Partners' Equity,
Nine Months Ended September 30, 1995 ............................... 3
Statements of Cash Flow,
Nine Months Ended September 30, 1995 and 1994....................... 4
Notes to Financial Statements ............................................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation................................. 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................... 10
Item 6. Exhibits and Reports on Form 8-K...................................... 11
Signatures..................................................................... 12
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
ASSETS
1995 1994
(Unaudited) (Audited)
----------- ---------
INVESTMENTS IN AND ADVANCES TO
LIMITED PARTNERSHIPS $14,375,960 $14,533,940
CASH AND CASH EQUIVALENTS 617,266 624,935
SHORT TERM INVESTMENTS 125,000 533,409
----------- -----------
TOTAL ASSETS $15,118,226 $15,692,284
=========== ===========
LIABILITIES AND PARTNERS' DEFICIENCY
LIABILITIES:
Notes and capital contributions payable $10,177,433 $10,177,433
Accrued fees and expenses due general partners 919,298 1,092,620
Accrued interest payable 9,578,010 8,917,531
Accounts payable and other liabilities 26,732 21,922
----------- -----------
20,701,473 20,209,506
PARTNERS' DEFICIENCY (5,583,247) (4,517,222)
----------- -----------
TOTAL LIABILITIES AND PARTNERS' DEFICIENCY $15,118,226 $15,692,284
=========== ===========
The accompanying notes are an integral part of these financial statements.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
Nine months Three months Nine months Three months
ended ended ended ended
Sept. 30, 1995 Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1994
-------------- -------------- -------------- --------------
INTEREST INCOME $ 36,910 $ 10,295 $ 17,785 $ 9,667
----------- ----------- ----------- -----------
OPERATING EXPENSES
Management fees-general partners 426,672 142,224 426,672 142,224
General and administrative 62,943 23,099 67,190 18,627
Legal and accounting 101,057 10,785 63,805 6,924
Interest 724,593 241,531 724,593 241,531
----------- ----------- ----------- -----------
Total operating expenses 1,315,265 417,639 1,282,260 409,306
----------- ----------- ----------- -----------
LOSS FROM PARTNERSHIP
OPERATIONS (1,278,355) (407,344) (1,264,475) (399,639)
DISTRIBUTIONS RECOGNIZED
AS INCOME 156,470 13,051 501,612 73,461
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS AND
AMORTIZATION OF
ACQUISITION COSTS 55,860 18,620 462,000 154,000
----------- ----------- ----------- -----------
NET LOSS $(1,066,025) $ (375,673) $ (300,863) $ (172,178)
=========== =========== =========== ===========
NET LOSS PER LIMITED
PARTNERSHIP INTEREST $ (86) $ (30) $ (24) $ (14)
=========== =========== =========== ===========
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
NINE MONTHS ENDED SEPTEMBER 30, 1995
(Unaudited)
General Limited
Partners Partners Total
-------- -------- -----
PARTNERSHIP INTERESTS
September 30, 1995 12,368
===========
PARTNERS' DEFICIENCY,
at January 1, 1995 $ (295,918) $(4,221,304) $(4,517,222)
Net loss for the nine months
ended September 30, 1995 (10,660) (1,055,365) (1,066,025)
----------- ----------- -----------
PARTNERS' DEFICIENCY,
at September 30, 1995 $ (306,578) $(5,276,669) $(5,583,247)
=========== =========== ===========
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
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
1995 1994
----------- -----------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss $(1,066,025) $ (300,863)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Equity in income of limited partnerships (85,860) (492,000)
Amortization of acquisition costs 30,000 30,000
Increase in advances to limited partnerships (31,331) --
Increase (decrease) in -
Accrued interest payable 660,479 577,607
Accrued fees due general partners (173,322) 281,882
Accounts payable 4,810 44,518
----------- -----------
Net cash (used in) provided by operating activities (661,249) 141,144
----------- -----------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Distributions from limited partnerships
recognized as a return of capital 245,171 383,962
Decrease in short term investment 408,409 --
----------- -----------
Net cash provided by investing activities 653,580 383,962
----------- -----------
NET (DECREASE)INCREASE IN CASH AND
CASH EQUIVALENTS (7,669) 525,106
CASH AND CASH EQUIVALENTS, beginning of period 624,935 673,835
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 617,266 $ 1,198,941
=========== ===========
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
SEPTEMBER 30, 1995
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 (formerly known as
Shearson Lehman/Coast Savings Housing Partners, Limited, and hereinafter
referred to as the "Partnership") annual report for the year ended December
31, 1994. National Partnership Investments Corp. ("NAPICO") is the
corporate general partner for 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
September 30, 1995 and the results of operations for the three and nine
months then ended and changes in cash flow for the nine months then ended.
ORGANIZATION
The Partnership is a limited partnership which was formed under the laws of
the State of California on May 15, 1984. On September 12, 1984, the
Partnership offered 3,000 units consisting of 6,000 limited partnership
interests and warrants to purchase a maximum of 6,000 additional limited
partnership interests through a public offering.
The general partners of the Partnership are Housing Programs Corporation
II, NAPICO, and Coast Housing Investment Associates ("CHIA"). CHIA is a
limited partnership formed under the California Limited Partnership Act and
consists of Messrs. Nicholas G. Ciriello, general partner and Charles H.
Boxenbaum, limited partner (Mr. Boxenbaum is currently the chief executive
officer of NAPICO). The business of the Partnership is conducted primarily
by its general partners as the Partnership has no employees of its own.
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
accounts.
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)
SEPTEMBER 30, 1995
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.
SHORT TERM INVESTMENTS
Short term investments consist of bank certificates of deposit and other
securities with original maturities ranging from more than three months to
twelve months. The fair value of these securities, which have been
classified as held for sale, approximates their carrying value.
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.
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS
The Partnership now holds limited partnership interests in 18 limited
partnerships (as a result of the loss of the Montecito Hotel on July 18,
1995 through foreclosure proceedings, the number of limited partnership
interests now held by the Partnership has been reduced from 19 to 18). The
18 lower-tier limited partnerships own residential rental projects
consisting of a total of 2,686 apartment units. The mortgage loans of these
projects are insured by various governmental agencies.
The Partnership, as a limited partner, is entitled to 99 percent of the
income and losses of the lowe-tier limited partnerships.
The Partnership's allocated portion of equity in losses from the lower-tier
limited partnerships is recognized in the financial statements of the
Partnership until the Partnership's investment account in the applicable
lower-tier limited partnership is reduced to a zero balance. Losses
incurred after the investment account is reduced to zero are not
recognized.
Distributions from the limited partnerships are treated as a reduction of
capital until the Partnership's investment account balance in the
applicable lower-tier limited partnership has been reduced to the lesser of
zero or a negative amount equal to future capital contributions required to
be made by the Partnership to the applicable lower-tier limited
partnership. Subsequent distributions are treated as income.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)
The following is a summary of the Partnership's investment in lower-tier
limited partnerships as of September 30, 1995:
Balance, beginning of period $ 14,533,940
Advances to limited partnerships 31,331
Distributions recognized as return of capital (245,171)
Amortization of acquisition costs (30,000)
Equity in income of limited partnerships 85,860
------------
Balance, end of period $ 14,375,960
============
The following are unaudited combined estimated statements of operations for
the limited partnerships in which the Partnership has investments:
Nine months Three months Nine months Three months
ended ended ended ended
Sept.30, 1995 Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1994
------------- -------------- -------------- --------------
INCOME
Rental and Other $ 12,612,000 $ 4,204,000 $ 13,974,000 $ 4,658,000
EXPENSES
Depreciation 2,631,000 877,000 2,859,000 953,000
Interest 2,829,000 943,000 3,477,000 1,159,000
Operating 8,370,000 2,790,000 8,829,000 2,943,000
------------ ------------ ------------ ------------
Total expenses 13,830,000 4,610,000 15,165,000 5,055,000
------------ ------------ ------------ ------------
NET LOSS $ (1,218,000) $ (406,000) $ (1,191,000) $ (397,000)
============ ============ ============ ============
The lower-tier partnership which previously owned the Montecito Hotel
(the "Montecito Local Partnership") had been operating at a deficit and
the general partner of the Montecito Local Partnership was unsuccessful
in its attempts to negotiate a mortgage modification with the lender to
improve the situation. No mortgage payments were made since September 6,
1994 and the mortgage was thus in default. On July 18, 1995, the property
was foreclosed upon by the lender. The Partnership's original investment
in the Montecito Local Partnership represented approximately 5% of the
Partnership's total capital raised. The Partnership's financial
statements reflect no investment in the Montecito Local Partnership at
September 30, 1995.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
NOTE 3 - NOTES AND CAPITAL CONTRIBUTIONS PAYABLE
Certain of the Partnership's investments involved purchases of
partnership interests in the lower-tier partnerships from partners who
subsequently withdrew from the applicable lower-tier partnership. The
Partnership is obligated for non-recourse notes payable in the aggregate
outstanding principal amount as of September 30, 1995 of $10,177,433,
bearing interest at 9.5 percent, to such sellers of the partnership
interests. The notes have principal maturity dates ranging from October
1996 to December 1999 or upon the sale or refinancing of the underlying
partnership properties. The notes are collateralized by the Partnership's
investment in the applicable investee limited partnerships and are
payable only out of cash distributions from the applicable investee
partnerships, as defined in the notes. Unpaid and accrued interest in the
amount of $9,578,011 at September 30, 1995, is due at maturity of the
notes.
NOTE 4 - ACCRUED FEES AND EXPENSES DUE TO GENERAL PARTNERS
Under the terms of the Partnership's Restated Certificate and Agreement
of Limited Partnership, the Partnership is obligated to the general
partners for an annual management fee equal to 0.5 percent of the
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 partnerships. The fees accrued and
expensed for the nine months ended September 30, 1995 and 1994 were
approximately $426,000, a portion of which was paid during the period as
discussed below.
As of September 30, 1995, the fees and expenses due the general partners
exceeded the Partnership's cash, and cash equivalents. For the nine
months ended September 30, 1995, the partnership paid NAPICO $375,000 and
Housing Programs Corporation II was paid $225,000. The Partnership also
reimburses NAPICO for certain expenses. As of September 30, 1995, the
reimbursement to NAPICO of $22,384 has been paid and included in the
Partnership's operating expenses.
An affiliate of NAPICO is the general partner in 10 of the limited
partnership, and another affiliate receives property management fees of
approximately 5 to 6 percent of revenues from five of thes partnerships.
For the nine months ended September 30, 1995 and 1994, approximate
$176,500 and $183,200, respectively, was paid to the affiliate for
properyt management fees.
NOTE 5 - CONTINGENCIES
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 management and 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)
SEPTEMBER 30, 1995
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 earned
from investing available cash 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 limited
partners in any material amount.
RESULTS OF OPERATIONS
Partnership revenues consist primarily of interest income earned on
certificates of deposit and other temporary investment of funds. The
Partnership may also receive distributions from the lower-tier limited
partnerships in which it has invested, however, such amounts are not
expected to be material.
Operating expenses of the Partnership consist of recurring general and
administrative expenses, professional fees for services rendered to the
Partnership and accrued interest on the notes payable. In addition, an
annual Partnership management fee in an amount equal to .5 percent of
invested assets is payable to the general partners.
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.
Distributions received from limited partnerships are treated 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 treated 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.
The Montecito Local Partnership had been operating at a deficit, and the
general partner of the Montecito Local Partnership was unsuccessful in
its attempts to negotiate a mortgage modification with the lender to
improve the situation. No mortgage payments were made since June 6, 1994
and the mortgage was in default. On July 18, 1995, the property was
foreclosed upon by the lender. The Partnership's original investment in
the Montecito Local Partnership represented approximately 5% of the
Partnership's total capital raised. The Partnership's financial
statements reflect no investment in the Montecito Local Partnership at
September 30, 1995.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of September 30, 1995, the Partnership's corporate general partners were
plaintiffs or defendants in several suits including the following:
The Montecito Local Partnership had been operating at a deficit, and the general
partner of the Montecito Local Partnership was unsuccessful in its attempt to
negotiate a mortgage modification with the lender to improve the situation. No
mortgage payments were made since June 6, 1994 and the mortgage was in default.
On July 18, 1995, the property was foreclosed upon, by the lender.
Housing Programs Corporation II, a General Partner of the Partnership and
certain of its affiliates, on their own behalf and on behalf of the Partnership
and certain other partnerships with which they are associated (collectively, the
"Plaintiff Partnerships"), and NAPICO and certain of its affiliates, have
entered into a Memorandum of Understanding dated August 11, 1995. In addition to
establishing certain Partnership controls, the Memorandum of Understanding
resolves and settles various management and control issues which were under
discussion for some time and various claims which were raised in a lawsuit filed
in the Los Angeles Superior Court on June 9, 1995 by Housing Programs
Corporation II, the Partnership, and others against your Managing General
Partner, among others ("the Lawsuit"). All parties entered into the Memorandum
of Understanding without any admission of wrongdoing or liability by any
defendant as to any claim in the Lawsuit, in a desire to avoid continued
litigation that would be expensive, time consuming and complex.
By virtue of the Memorandum of Understanding, the parties thereto have agreed,
among other things, that:
1. NAPICO has agreed to allow the accounting firm of Price Waterhouse to
complete its analysis of the books and records of the Partnership
including an analysis of the books and records of the master
disbursement account maintained by an affiliate of NAPICO. NAPICO has
also agreed that it and its affiliates will pay to the Partnership
any amounts (with interest thereon) properly determined to be owed to
the Partnership as a result of the Price Waterhouse analysis.
2. HAPI Management, Inc., ("HAPI"), an affiliate of NAPICO shall
continue to manage the five Partnership properties it currently
manages, subject to various agreed-upon modifications to the existing
Management Agreements, and HAPI will not currently manage the other
properties of the Partnership. All future management arrangements
with HAPI will be subject to Housing Programs Corporation II's
reasonable approval.
3. The Partnership will continue to retain Deloitte & Touche as the
Partnership's auditors for 1995, but will solicit competitive bids
from at least three Big Six accounting firms for the Partnership's
audit work beginning with fiscal year 1996 and at least every three
(3) years thereafter.
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
4. The Partnership will employ an independent Cash Manager, designated
by Housing Programs Corporation II, and approved by NAPICO, to
perform cash management services, including maintenance of the
Partnership's bank accounts and reserves, payment of property
management fees and other accounts payable, payments to affiliates of
NAPICO, and payment of cash distributions, if any, to the Limited
Partners. NAPICO has agreed to prepare detailed annual budgets to be
approved by Housing Programs Corporation II and thereafter used by
the Cash Manager as a guide and control over Partnership operations.
5. The parties to the Memorandum of Understanding have agreed to enter
into a formal Settlement Agreement and, concurrently therewith, (a)
the plaintiffs in the Lawsuit will execute a special release of the
defendants with respect to the allegations contained in the Lawsuit,
(b) the defendants in the Lawsuit will execute a special release of
each plaintiff in the Lawsuit that is a general partner of a
Plaintiff Partnership with respect to all claims which would have
been compulsory counterclaims thereunder, and (c) the defendants will
execute a special release of any claims, other than those regarding
specifically scheduled contractual relations, which any defendant may
have against this Partnership or any of the other Plaintiff
Partnerships.
6. Upon the uncured breach of certain provisions of the Memorandum of
Understanding, or upon a future breach of NAPICO's fiduciary duties,
Housing Programs Corporation II may cause NAPICO to resign as a
general partner of the Partnership and become a limited partner
thereof.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)
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HOUSING PROGRAMS LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
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
Date:_______________________
By: _______________________
Bruce Nelson
President
Date: ______________________
By: _______________________
Shawn Horwitz
Executive Vice President and
Chief Financial Officer
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