LAUREL CREEK APARTMENTS
(A California Limited Partnership)
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2002
LAUREL CREEK APARTMENTS
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 2002
TABLE OF CONTENTS
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Page
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Independent Auditors' Report 1
Balance Sheet 2
Statement of Income, Expenses and
Changes in Partners' Capital 3
Statement of Cash Flows 4
Notes to Financial Statements 5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Laurel Creek Apartments
San Luis Obispo, California
We have audited the accompanying balance sheet of Laurel Creek Apartments (A
California Limited Partnership) as of December 31, 2002 and December 31, 2001
and the related statements of income, expenses, and changes in partners'
capital, and cash flows for the years then ended. These financial statements are
the responsibility of the Partnerships' management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Laurel Creek Apartments as of
December 31, 2002 and December 31, 2001, and the results of its operations for
the years then ended in conformity with generally accepted accounting
principles.
/s/ Wallace E. Rowe, CPA
February 7, 2003
LAUREL CREEK APARTMENTS
BALANCE SHEET
DECEMBER 31, 2002 AND 2001
2002 2001
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ASSETS
CURRENT ASSETS
Cash (Note 2) $ 47,077 $ 48,449
Accounts receivable 820 1,050
Prepaid expenses 1,760 1,173
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TOTAL CURRENT ASSETS 49,657 50,672
Restricted reserves (Note 3) 50,022 32,419
Land, structures and equipment, net of
accumulated depreciation of $601,947
and $533,911 (Note 4) 1,563,407 1,631,443
Organizational costs, net of accumulated
amortization of $15,661 and
$13,993 (Note 5) 11,257 12,925
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TOTAL ASSETS $ 1,674,343 $ 1,727,459
================== ===============
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable - other $ 6,836 $ 8,614
Accounts payable - related party (Note 7) 1,666 4,159
Security deposits payable 8,438 8,260
Current portion of long-term debt (Note 6) 35,701 28,934
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TOTAL CURRENT LIABILITIES 52,641 49,967
Long-term debt (Note 6) 573,491 581,668
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TOTAL LIABILITIES 626,132 631,635
Partners' capital 1,048,211 1,095,824
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TOTAL LIABILITIES AND
PARTNERS' CAPITAL $ 1,674,343 $ 1,727,459
================== ===============
See accompanying notes.
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LAUREL CREEK APARTMENTS
STATEMENT OF INCOME, EXPENSES AND
CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
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OPERATING INCOME
Rental income $ 194,199 $ 180,345
Tenant charges 1,769 434
Other 1,226 169
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TOTAL OPERATING INCOME 197,194 180,948
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OPERATING EXPENSES
Administration 20,319 18,645
Insurance and taxes 5,307 3,709
Maintenance 54,090 22,867
Utilities 21,627 20,074
Depreciation and amortization 69,704 71,833
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TOTAL EXPENSES 171,047 137,128
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NET INCOME (LOSS) FROM OPERATIONS 26,147 43,830
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OTHER INCOME AND EXPENSES
Interest income 2,072 2,612
Interest expense (47,020) (50,490)
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NET OTHER INCOME UNDER EXPENSES (44,948) (47,878)
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NET LOSS (18,801) (4,058)
BEGINNING PARTNERS' CAPITAL 1,095,824 1,108,604
Partner withdrawals (28,812) (8,722)
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ENDING PARTNERS' CAPITAL $ 1,048,211 $ 1,095,824
================== =================
See accompanying notes.
3
LAUREL CREEK APARTMENTS
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2002 AND 2001
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Rents received $ 194,429 $ 180,158
Other operating revenues 1,769 603
Cash payments for goods and services (122,400) (77,477)
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Net cash provided (used) by operating activities 73,798 103,284
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CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:
Capital withdrawals (28,812) (8,722)
Payment of debt (1,410) (25,441)
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Net cash provided (used) by capital and
related financing activities (30,222) (34,163)
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CASH FLOWS FROM INVESTING ACTIVITI
Interest income 2,072 2,612
Interest paid on notes (47,020) (50,490)
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Net cash provided (used) by investing activities (44,948) (47,878)
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NET INCREASE (DECREASE) IN CASH (1,372) 21,243
CASH - BEGINNING OF YEAR 48,449 27,206
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CASH - END OF YEAR $ 47,077 $ 48,449
================ ===============
RECONCILIATION OF OPERATING LOSS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income from operations $ 26,147 $ 43,820
Adjustments to reconcile net loss to
Net cash provided by operating activities
Depreciation and amortization 69,704 71,833
(Increase) decrease in:
Accounts receivable 230 (187)
Prepaid expenses (587) (24)
Restricted reserves (17,603) (4,800)
Increase (decrease) in:
Accounts payable - other (1,447) (1,966)
Accounts payable - related parties (2,824) (6,166)
Security deposits payable 178 774
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NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 73,798 $ 103,284
=============== ===============
See accompanying notes.
4
LAUREL CREEK APARTMENTS
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2002
Note 1 - DEFINITION OF REPORTING ENTITY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The Laurel Creek Apartments is a California Limited Partnership which
was formed on May 17, 1994. The partnership was formed to construct,
acquire, own, operate, maintain, manage, lease, sell, mortgage or
otherwise dispose of a 24 unit apartment complex located in the City
of San Luis Obispo, California.
As of the report date there are two partners in the partnership,
consisting of one general and one limited partner.
Summary of Significant Accounting Policies
a. Basis of accounting
The partnership is accounted for on the accrual basis of
accounting. Under this method revenues are recognized when
they are earned and expenses are recognized when they are
incurred.
b. Fixed assets and depreciation
Fixed assets are carried at cost. Expenditures for the fixed
assets are capitalized. Maintenance and repairs are charged
to operations. Depreciation is calculated using the
straight-line basis over the estimated useful lives.
c. Income taxes
Taxable income or expenses and related tax credits are not
reflected as expenses or credits of the partnership. These
items are the responsibilities of the individual partners.
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LAUREL CREEK APARTMENTS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(Continued)
Note 2 - CASH
Cash consists of $46,262 deposited into savings or checking accounts,
and $815 is on deposit with the State of California Local Agency
Investment Fund. At December 31, 2002 the amount deposited into the
savings accounts and the Local Agency Investment Fund earned interest
at rates from 2.25% to 2.88% respectively.
Note 3 - RESTRICTED CASH
Restricted cash consists of $32,419 maintained in a money market
account earning 2.25%. This cash is reserved for the replacement of
structures and equipment.
Note 4 - LAND, STRUCTURES AND EQUIPMENT
Property and equipment and accumulated depreciation consist of the following:
Accumulated
Cost Depreciation
---- ------------
Land $ 275,000 $ -
Building 1,868,634 580,364
Equipment 21,720 21,583
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$ 2,165,354 $ 601,947
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Note 5 - ORGANIZATION COSTS
Organization costs and accumulated amortization consist of the following:
Accumulated
Cost Amortization
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Organization costs $ 26,918 $ 15,661
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LAUREL CREEK APARTMENTS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(Continued)
Note 6 - NOTE PAYABLE
The Agency has a mortgage note payable to the First Bank of San Luis
Obispo. The note requires principal and interest payments totaling
$6,385 each month until 10/3/2009. The note bears interest at 7.25%
per annum. The following is a schedule of the debt payment
requirements to maturity:
Year ending
December 31
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2003 $ 76,620
2004 76,620
2005 76,620
2006 76,620
2007 76,620
Thereafter 455,056
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Total 838,156
Less amounts representing
interest 228,964
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$ 609,192
Note 7 - RELATED PARTIES
The accounting and administrative functions of the partnership are
performed by employees of the Housing Authority of the City of San
Luis Obispo (the Authority). Two members of the general partner's (San
Luis Obispo Nonprofit Housing Corporation) board of directors are also
members of the board of commissioner's of the Housing Authority of the
City of San Luis Obispo.
At December 31, 2002 the partnership owed the Authority $1,666. During
the year ended December 31, 2002, the partnership paid the Authority
$26,377 in maintenance expenses and management fees.
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LAUREL CREEK APARTMENTS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002
(Continued)
Note 8 - LAND DONATION AND LEASE
The land upon which the Laurel Creek Apartments were built was
originally leased from the City of San Luis Obispo (the City) by the
Housing Authority of the City of San Luis Obispo (the Authority). This
lease agreement was later assigned from the Authority to the San Luis
Obispo Nonprofit Housing Corporation (the Corporation). The lease was
later assigned to the Laurel Creek Apartments Partnership. Each of the
above mentioned agencies have common board members or in some other
manner have oversight responsibilities over the other organizations;
which would qualify them as related parties.
The lease expires on April 29, 2046. The provisions for extending or
renewing the lease term are not specified and are contingent upon the
continuation of the project being used to provide affordable housing
to lower income families. The annual lease payments are $1 per year.
The land was recorded on the Agency's books of accounts at the
appraised value on the date the land lease was assigned to the Agency.
This appraised value was $275,000. The value of the land was also
recorded as a capital contribution from the general partner on that
date.
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