Item 1. Business.
General
Independence Tax Credit Plus L.P. II (the "Partnership") is a limited partnership which was formed under the laws of the State of Delaware on February 11, 1992. The general partner of the Partnership is Related Independence Associates L.P., a Delaware limited partnership (the "General Partner"). The general partner of the General Partner is Related Independence Associates Inc., a Delaware corporation.
On January 19, 1993, the Partnership commenced a public offering (the "Offering") of Beneficial Assignment Certificates ("BACs") representing assignments of limited partnership interests in the Partnership ("Limited Partnership Interests"). As of March 31, 1998 the Partnership has received $58,928,000 of Gross Proceeds of the Offering from 3,473 investors ("BACs holders"). The Offering was terminated on April 7, 1994.
The Partnership's business is primarily to invest in other partnerships ("Local Partnerships") owning apartment complexes ("Apartment Complexes" or "Properties") that are eligible for the low-income housing tax credit ("Housing Tax Credit") enacted in the Tax Reform Act of 1986, some of which may also be eligible for the historic rehabilitation tax credit ("Historic Tax Credit"; and together with Housing Tax Credits, "Tax Credits"). The Partnership's investment in each Local Partnership represents 98.99% of the partnership interests in the Local Partnership. As of March 31, 1998 the Partnership acquired interests in fifteen Local Partnerships and does not anticipate making any additional investments. As of March 31, 1998, approximately $47,000,000 (not including acquisition fees of approximately $3,502,000) of net proceeds has been invested in fifteen Local Partnerships of which approximately $1,916,000 remains to be paid to the Local Partnerships, as certain benchmarks such as occupancy levels must be attained prior to the release of such funds. The Partnership does not intend to acquire additional properties, however, the Partnership may be required to pay for potential purchase price adjustments based on tax credit adjustor clauses. See Item 2.
Item 2. Properties.
The Partnership holds a 98.99% limited partnership interest in fifteen Local Partnerships as of March 31, 1998. Set forth below is a schedule of the Local Partnerships including certain information concerning their respective Apartment Complexes (the "Local Partnership Schedule"). Further information concerning these Local Partnerships and their properties, including any encumbrances affecting the properties, may be found in Item 14. Schedule III.
Local Partnership Schedule
Local Partnership Schedule (continued)
*Properties still in construction phase
(1) Properties are in rent-up phase.
All leases are generally for periods not exceeding one to two years and no tenant occupies more than 10% of the rentable square footage.
Rents from commercial tenants (to which average rental per square foot applies) comprise less than 5% of the rental revenues of the Partnership. Maximum allowable rents for the residential units are determined annually by HUD.
Management continuously reviews the physical state of the properties and budgets improvements when required which are generally funded from cash flow from operations or release of replacement reserve escrows. No improvements are expected to require additional financing.
Management continuously reviews the insurance coverage of the properties and believes such coverage is adequate.
See Item 1, Business, above for the general competitive conditions to which the properties described above are subject.
Real estate taxes are calculated using rates and assessed valuations determined by the township or city in which the property is located. Such taxes have approximated 1% of the aggregate cost of the properties as shown in Schedule III to the financial statements included herein.
In connection with investments in development-stage Apartment Complexes, the General Partner generally required that the general partners of the Local Partnerships ("Local General Partners") provide completion guarantees and/or undertake to repurchase the Partnership's interest in the Local Partnership if construction or rehabilitation is not completed substantially on time or on budget ("Development Deficit Guarantees"). The Development Deficit Guarantees generally also required the Local General Partner to provide any funds necessary to cover net operating deficits of the Local Partnership until such time as the Apartment Complex had achieved break-even operations. The General Partner generally required that the Local General Partners undertake an obligation to fund operating deficits of the Local Partnership (up to a stated maximum amount) during a limited period of time (typically three to five years) following the achievement of break-even operations ("Operating Deficit Guarantees"). Under the terms of the Development and Operating Deficit Guarantees, amounts funded have been treated as Operating Loans which will not bear interest and which will be repaid only out of 50% of available cash flow or out of available net sale or refinancing proceeds. In some instances, the Local General Partners are required to undertake an obligation to comply with a Rent-Up Guaranty Agreement, whereby the Local General Partner agrees to pay liquidating damages if predetermined occupancy rates are not achieved. These payments are made without right of repayment. In cases where the General Partner deems it appropriate, the obligations of a Local General Partner under the Development Deficit (all of which have expired as of March 31, 1998), Operating Deficit (all current operating deficits expire within the next three years) and/or Rent-Up Guarantees (all rent-up deficit guarantees expire within the next two years) are secured by letters of credit and/or cash escrow deposits.
Housing Tax Credits with respect to a given Apartment Complex are available for a ten-year period that commences when the property is placed into service. However, the annual Tax Credits available in the year in which the Apartment Complex is placed in service, must be prorated based upon the months remaining in the year. The amount of the annual Tax Credit not available in the first year will be available in the eleventh year. In certain cases, the Partnership acquired its interest in a Local Partnership after the Local Partnership had placed its Apartment Complex in service. In these cases, the Partnership may be allocated Tax Credits only beginning in the month following the month in which it acquired its interest and Tax Credits allocated in any prior period are not available to the Partnership.
Item 3.
Item 3. Legal Proceedings.
This information is incorporated by reference to the discussion of Clear Horizons in the Results of Operations of Certain Local Partnerships contained in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5.
Item 5. Market for the Registrant's Common Equity and Related Security Holder Matters.
As of March 31, 1998, the Partnership had issued and outstanding 58,928 Limited Partnership Interests, each representing a $1,000 capital contribution to the Partnership, or an aggregate capital contribution of $58,928,000 before volume discounts of $2,000. All of the issued and outstanding Limited Partnership Interests have been issued to Independence Assignor Inc. (the "Assignor Limited Partner"), which has in turn issued 58,928 BACs to the purchasers thereof for an aggregate purchase price of $58,928,000 reduced by volume discounts of $2,000. Each BAC represents all of the economic and virtually all of the ownership rights attributable to a Limited Partnership Interest held by the Assignor Limited Partner. BACs may be converted into Limited Partnership Interests at no cost to the holder (other than the payment of transfer costs not to exceed $100), but Limited Partnership Interests so acquired are not thereafter convertible into BACs.
Neither the BACs nor the Limited Partnership Interests are traded on any established trading market. The Partnership does not intend to include the BACs for quotation on NASDAQ or for listing on any national or regional stock exchange or any other established securities market. The Revenue Act of 1987 contained provisions which have an adverse impact on investors in "publicly traded partnerships." Accordingly, the General Partner plans to impose limited restrictions on the transferability of the BACs and the Limited Partnership Interests in secondary market transactions. Implementation of the restrictions should prevent a public trading market from developing and may adversely affect the ability of an investor to liquidate his or her investment quickly. It is expected that such procedures will remain in effect until such time, if ever, as further revision of the Revenue Act of 1987 may permit the Partnership to lessen the scope of the restrictions.
As of March 31, 1998 the Partnership has approximately 3,473 registered holders of an aggregate of 58,928 BACs.
All of the Partnership's general partnership interests, representing an aggregate capital contribution of $1,000, are held by the General Partner.
There are no material legal restrictions in the Partnership Agreement on the ability of the Partnership to make distributions.
The Partnership has made no distributions to the BACs holders as of March 31, 1998. The Partnership does not anticipate providing cash distributions to its BACs holders other than from net refinancing or sales proceeds.
There has recently been an increasing number of requests for the list of BACs holders of limited partnerships such as the Partnership. Often these requests are made by a person who,
only a short time before making the request, acquired merely a small number of BACs in the partnership and seeks the list for an improper purpose, a purpose that is not in the best interest of the partnership or is harmful to the partnership. In order to best serve and protect the interests of the Partnership and all of its investors, the General Partner of the Partnership has adopted a policy with respect to requests for the Partnership's list of BACs holders. This policy is intended to protect investors from unsolicited and coercive offers to acquire BACs holders' interests and does not limit any other rights the General Partner may have under the Partnership Agreement or applicable law.
Item 6.
Item 6. Selected Financial Data.
The information set forth below presents selected financial data of the Partnership. Additional financial information is set forth in the audited consolidated financial statements in Item 8 hereof.
During the year ended March 31, 1998, total assets decreased primarily due to depreciation, loss on impairment of assets and the repayments of amounts due to local general partners and affiliates, partially offset by improvements to property and equipment. During the year ended March 31, 1997, total assets decreased primarily due to a decrease in cash and cash equivalents resulting from construction in progress and acquisitions of property and equipment in excess of net proceeds from mortgage and construction loans and also the repayments of amounts due to local general partners and affiliates. This decrease in cash and cash equivalents was partially offset by the increase in construction in progress and acquisitions of property and equipment net of depreciation. During the years ended March 31, 1996, 1995 and 1994, total assets and liabilities increased primarily due to the continued acquisition of Local Partnerships. Property and equipment increased approximately $37,000,000, $22,000,000 and $22,000,000 for the years ended March 31, 1996, 1995 and 1994, respectively. Construction in progress decreased approximately $19,000,000 and $4,000,000 for the years ended March 31, 1997 and 1996, respectively, and increased approximately $19,000,000 and $5,000,000 for the years ended March 31, 1995 and 1994, respectively. Construction notes increased approximately $18,000,000 and $1,000,000 for the years ended March 31, 1995 and 1994, respectively. Due to local general partner and affiliates increased approximately $6,000,000 and $1,000,000 for the years ended March 31, 1995 and 1994, respectively (Note 8). For the year ended March 31, 1996, the increase in property and equipment and construction in progress was partially funded by capital contributions made to the Local Partnerships resulting in a decrease in cash
and cash equivalents. For the years ended March 31, 1997 and 1996 minority interest decreased due to distributions received by the local general partners. Minority interest increased due to capital contributions from local general partners for the years ended March 13, 1995 and 1994.
Cash Distributions
The Partnership has made no distributions to the BACs holders as of March 31, 1998.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity and Capital Resources
General
The Partnership's primary source of funds include interest earned on proceeds from the offering which were invested in tax-exempt money market instruments pending final payments to Local Partnerships and a working capital reserve and interest thereon. All these sources of funds are available to meet obligations of the Partnership.
As of March 31, 1998, the Partnership has invested approximately $47,000,000 (not including acquisition fees of approximately $3,502,000) of net proceeds in fifteen Local Partnerships of which approximately $1,916,000 remains to be paid (including approximately $758,000 being held in escrow) as certain benchmarks, such as occupancy level, must be attained prior to the release of the funds. The Partnership does not intend to acquire additional properties. During the year ended March 31, 1998, approximately $2,355,000 was paid (of which approximately $520,000 was released from escrow). An additional $46,000 was placed into escrow for purchase price payments during the year ended March 31, 1998. Although the Partnership will not be acquiring additional properties, the Partnership may be required to fund potential purchase price adjustments based on tax credit adjustor clauses. Such adjustments resulted in a net increase in purchase price of approximately $15,000 during the year ended March 31, 1998.
For the Fiscal Year ended March 31, 1998, cash and cash equivalents for the Partnerships and its fifteen consolidated Local Partnerships decreased approximately $1,971,000. This decrease is primarily due to cash used in operating activities ($167,000), a net decrease in due to local general partners and affiliates relating to investing and financing activities ($710,000), improvements to property and equipment ($694,000), net principal payments from mortgage notes and construction loans ($582,000), a decrease in capitalization of consolidated subsidiaries attributable to minority interest ($11,000) and an increase in deferred costs ($35,000) which exceeded an increase in cash held in escrow from investing activities ($227,000). Included in the adjustments to reconcile the net loss to cash used in operating activities is depreciation and amortization ($3,519,000) and a loss on impairment of assets of approximately $3,926,000.
At March 31, 1998, there is a balance of approximately $337,000 in the working capital reserve. The General Partner believes that these reserves, plus cash distributions received from the operations of the Local Partnerships, will be sufficient to fund the Partnership's ongoing operations for the foreseeable future. During the years ended March 31, 1998, 1997 and 1996, respectively, amounts received from operations of the Local Partnerships were approximately $52,000, $0 and $16,000. Management anticipates receiving distributions in the future, although not to a level sufficient to permit providing cash distributions to BACs holders.
Partnership management fees owed to the General Partner amounting to approximately $163,000 and $113,000 were accrued and unpaid as of March 31, 1998 and 1997, respectively (see Note 8). Unpaid partnership management fees for any year will be accrued without interest and will be payable from working capital reserves or to the extent of available funds after the Partnership has made distributions to the limited partners of sale or refinancing proceeds equal to their original capital contributions plus a 10% priority return thereon (to the extent not theretofore paid out of cash flow).
The Partnership had negotiated development deficit guarantees with the Local Partnerships in which it has invested. The Local General Partners had agreed to fund development deficits through the breakeven dates of each of the Local Partnerships, most of which were unlimited or in an unspecified amount. As of March 31, 1998 and 1997, $0 and $59,035 had been funded under the Development Deficit Guaranty Agreements. Although all development deficit guarantees have expired as of March 31, 1998, management does not expect a material impact on liquidity, based on prior years' fundings.
The Partnership has negotiated Operating Deficit Guaranty Agreements with all Local Partnerships by which the general partners of the Local Partnerships have agreed to fund operating deficits for a specified period of time. The terms of the Operating Deficit Guaranty Agreements vary for each Local Partnership, with maximum dollar amounts to be funded for a specified period of time, generally three years, commencing on the break-even date. The gross amount of the Operating Deficit Guarantees aggregates approximately $5,670,000, none of which have expired as of March 31, 1998. As of March 31, 1998 and 1997, 278,908 and $193,032 has been funded under the Operating Deficit Guaranty agreements. All current operating deficit guarantees expire within the next three years. Management does not expect their expiration to have a material impact on liquidity, based on prior years' fundings.
In addition, several Local Partnerships have Rent-Up Guaranty Agreements, in which the Local General Partner agrees to pay liquidating damages if predetermined occupancy rates are not achieved. The terms of the Rent-Up Guaranty Agreements vary for each Local Partnership, with maximum dollar amounts to be funded for a specified period of time. The gross amount of unexpired Rent-Up Guarantees for the Local Partnerships is approximately $177,000 as of March 31, 1998. All rent-up deficit guarantees expire within the next two years. Management does not expect their expiration to have a material impact on liquidity, based on prior years' fundings.
The Operating Deficit Guaranty Agreements, Rent-Up Guaranty Agreements, and Development Deficit Guaranty Agreements are negotiated to protect the Partnership's interest in the Local Partnerships and to provide incentive to the Local General Partners to generate positive cash flow.
For discussion of contingencies affecting certain Local Partnerships, see Results of Operations of Certain Local Partnerships, below. Since the maximum loss the Partnership would be liable for is its net investment in the respective subsidiary partnerships, the resolution of the existing contingencies is not anticipated to impact future results of operations, liquidity or financial condition in a material way. However, the Partnership's loss of its investment in a Local Partnership will eliminate the ability to generate future tax credits from such Local Partnership and may also result in recapture of tax credits if the investment is lost before expiration of the credit period.
Except as described above, management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. Management believes the only impact would be for laws that have not yet been adopted. The portfolio is diversified by the location of the properties around the United States so that if one area of the country is experiencing downturns in the economy, the remaining properties in the portfolio may be experiencing upswings. However the geographic diversification of the portfolio may not protect against a general downturn in the national economy. The Partnership has invested the proceeds of its offering in 15 Local Partnerships, all of which fully have their tax credits in place. The tax credits are attached to the project for a period of ten years, and are transferable with the property during the remainder of the ten-year period. If trends in the real estate market warranted the sale of a property, the remaining
tax credits would transfer to the new owner; thereby adding significant value to the property on the market, which are not included in the financial statement carrying amount.
Results of Operations
Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, construction period interest and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis are below depreciated cost. At that time property investments themselves are reduced to estimated fair value (generally using discounted cash flows).
Through March 31, 1998, the Partnership has recorded approximately $3,926,000 as a loss on impairment of assets.
The following is a summary of the results of operations of the Partnership for the years ended March 31, 1998, 1997 and 1996 (the 1997, 1996 and 1995 Fiscal Years, respectively). The net loss for the 1997 Fiscal Year includes a loss on impairment of assets of approximately $3,926,000 (see Note 4 in Item 8.
Item 8. Financial Statements and Supplementary Data.
INDEPENDENT AUDITORS' REPORT
To the Partners of Independence Tax Credit Plus L.P. II and Subsidiaries (A Delaware Limited Partnership)
We have audited the consolidated balance sheets of Independence Tax Credit Plus L.P. II and Subsidiaries (a Delaware Limited Partnership) as of March 31, 1997 and 1996, the related consolidated statements of operations and changes in partners' capital and cash flows for the years ended March 31, 1998, 1997 and 1996 (the 1997, 1996 and 1995 Fiscal Years, respectively). The financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements for fifteen (Fiscal 1997, 1996 and 1995) subsidiary partnerships whose losses aggregated $8,886,716, $3,792,023 and $2,533,349 for the 1997, 1996 and 1995 Fiscal Years, respectively, and whose assets constituted 95% and 94% of the Partnership's assets at March 31, 1998 and 1997, respectively, presented in the accompanying consolidated financial statements. The financial statements of these subsidiary partnerships were audited by other auditors whose reports thereon have been furnished to us and our opinion expressed herein, insofar as it relates to the amounts included for these subsidiary partnerships, is based solely upon the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the reports of other auditors the accompanying consolidated financial statements referred to above present fairly, in all material respects, the financial position of Independence Tax Credit Plus L.P. II and Subsidiaries at March 31, 1998 and 1997, and the results of their operations and their cash flows for the years ended March 31, 1998, 1997 and 1996 in conformity with generally accepted accounting principles.
/s/ Trien Rosenberg Rosenberg Weinberg Ciullo & Fazzari L.L.P.
Trien Rosenberg Rosenberg Weinberg Ciullo & Fazzari L.L.P.
New York, New York June 22, 1998
[Letterhead of Ziner & Company, P.C.]
INDEPENDENT AUDITORS' REPORT
To the Partners of Lincoln Renaissance
We have audited the accompanying balance sheet of Lincoln Renaissance (a Pennsylvania Limited Partnership) as of December 31, 1997, and the related statements of operations, changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's general partners and contracted management agent. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Lincoln Renaissance as of December 31, 1996 were audited by other auditors whose report, dated February 16, 1997, expressed an unqualified opinion on those financial statements.
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 the Partnership's general partners and contracted management agent, 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 Lincoln Renaissance at December 31, 1997, and the results of its operations, changes in partners' equity and its cash flows for the year then ended in conformity with generally accepted accounting principles.
/s/ Ziner & Company, P.C.
January 17, 1998 Boston, Massachusetts
[J.H. WlLLlAMS & CO., LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ----------------------------
To the Partners of Lincoln Renaissance (a Limited Partnership) Reading, Pennsylvania
We have audited the accompanying balance sheets of Lincoln Renaissance (a Limited Partnership) as of December 31, 1996 and 1995 and the related statements of (loss), changes in partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's general partners and contracted management agent. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 the Partnership's general partners and contracted management agent, as well as evaluating the overall financial statements presentation. We believe that our audits provide 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 Lincoln Renaissance (a Limited Partnership) at December 31, 1996 and 1995, and the results of its operations, changes in partners' equity and its cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/ J. H. Williams & Co., LLP - - -----------------------------
Kingston, Pennsylvania February 16, 1997
[Letterhead of WIELAND & COMPANY, INC.]
INDEPENDENT AUDITOR'S REPORT
To the Partners United - Germano - Millgate Limited Partnership
We have audited the accompanying balance sheets of United - Germano - Millgate Limited Partnership (an Illinois limited partnership) as of December 31, 1997 and 1996, and the related statements of operations, partners' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards, Government Auditing Standards issued by the Comptroller General of the United States and the Illinois Housing Development Authority's Financial Reporting and Audits Guidelines for Mortgagors of Multifamily Housing Developments. 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 audits provide 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 United - Germano - Millgate Limited Partnership as of December 31, 1997 and 1996, and the results of its operations, changes in partners' equity, and cash flows for the years then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, the Illinois Housing Development Authority's Financial Reporting and Audit Guidelines for Mortgagors of Multifamily Housing Developments, and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 21, 1998, on our consideration of the internal control of United - Germano - Millgate Limited Partnership, and reports dated January 21, 1998 on its compliance with specific requirements applicable to major HUD and IHDA-assisted programs and specific requirements applicable to Fair Housing and Non-Discrimination.
/s/ Wieland & Company, Inc.
Batavia, Illinois January 21, 1998
Engagement Partner: Paul H. Wieland 1157 South Raddant Road Batavia, Illinois 60510 (630) 761-8199
[WIELAND & COMPANY, INC. LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Partners United - Germano - Millgate Limited Partnership
We have audited the accompanying balance sheet of United - Germano - Millgate Limited Partnership (an Illinois limited partnership) as of December 31, 1995, and the related statements of operations, partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's 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 and Government Auditing Standards issued by the Comptroller General of the United States. 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 United - Germano - Millgate Limited Partnership as of December 31, 1995, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated March 15, 1996, on our consideration of the internal control structure of United - Germano - Millgate Limited Partnership, and reports dated March 15, 1996 on its compliance with specific requirements applicable to major HUD programs and specific requirements applicable to Affirmative Fair Housing.
/s/ WIELAND & COMPANY, INC.
March 15, 1996
Employer Identification No.: 36-4025026
Engagement Partner: Paul H. Wieland 315 James Street Geneva, Illinois 60134
[Letterhead of Ziner & Company, P.C.]
INDEPENDENT AUDITORS' REPORT
To the Partners of Mansion Court Associates
We have audited the accompanying balance sheet of Mansion Court Associates (a Pennsylvania limited partnership) as of December 31, 1997 and the related statements of operations, changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's general partners and contracted management agent. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Mansion Court Associates as of December 31, 1996 were audited by other auditors whose report, dated February 17, 1997, expressed an unqualified opinion on those financial statements.
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 the Partnership's general partners and contracted management agent, 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 Mansion Court Associates at December 31, 1997, and the results of its operations, changes in partners' equity and its cash flows for the year then ended in conformity with generally accepted accounting principles.
/s/ Ziner & Company, P.C.
January 31, 1998 Boston, Massachusetts
[J. H. WILLIAMS & CO., LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ----------------------------
To the Partners of Mansion Court Associates (a Limited Partnership) Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Mansion Court Associates (a Limited Partnership) as of December 31, 1996 and 1995, and the related statements of (loss), changes in partners' equity and cash flow for the years then ended. These financial statements are the responsibility of the Partnership's general partner and contracted management agent. Our responsibility is to express an opinion on three financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 the Partnership's general partner and contracted management agent, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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 Mansion Court Associates (a Limited Partnership) at December 31, 1996 and 1995, and its results of operations, changes in partners' equity and cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/ J. H. Williams & Co., LLP - - -----------------------------
Kingston, Pennsylvania February 17, 1997
[Letterhead of Burrus Paul & Turnbull]
INDEPENDENT AUDITORS' REPORT
To the Partners Virginia Housing Development Authority Derby Run Associates, L.P. 601 S. Belvidere Street Virginia Beach, Virginia Richmond, Virginia 23220
We have audited the accompanying balance sheet of Derby Run Associates, L.P., Project No. 93-0625-C, as of December 31, 1997, and the related statement of profit and loss (HUD Form 92410), partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the project's 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 VHDA Project No. 93-0625-C as of December 31, 1997 and the results of its operations, changes in partner's equity and cash flows for the year then ended in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (page 10), is presented for purposes of additional analysis and is not a required part of the basic financial statements for VHDA Project No. 93-0625-C. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Burrus Paul & Turnbull
CERTIFIED PUBLIC ACCOUNTANTS
February 11, 1998 Norfolk, Virginia
[BURRUS PAUL & TURNBULL LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ----------------------------
To the Partners Virginia Housing Development Authority Derby Run Associates, L.P. 601 S. Belvidere Street Virginia Beach, Virginia Richmond, Virginia 23220
We have audited the accompanying balance sheet of Derby Run Associates, L.P., Project No. 93-0625-C, as of December 31, 1996, and the related statement of profit and loss (HUD Form 92410), partners' deficit and cash flows for the year then ended. These financial statements are the responsibility of the project's 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 VHDA Project No. 93-0625-C as of December 31, 1996 and the results of its operations, changes in partner's deficit and cash flows for the year then ended in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (page 10), is presented for purposes of additional analysis and is not a required part of the basic financial statements for VHDA Project No. 93-0625-C. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ Burrus, Paul & Turnbull ----------------------- CERTIFIED PUBLIC ACCOUNTANTS
Norfolk, Virginia January 27, 1997
[WALL, EINHORN & CHERNITZER, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Virginia Housing Development Authority Derby Run Associates, L.P. 601 South Belvidere Street Virginia Beach, Virginia Richmond, Virginia 23220
We have audited the accompanying balance sheets of Derby Run Associates, L.P., VHDA Project Number 93-0625-C, as of December 31, 1995 and 1994, and the related statements of operations, partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 audits provide 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 VHDA Project Number 93-0625-C as of December 31, 1995 and 1994, and the results of its operations, changes in partners' equity and cash flows for the years then ended in conformity with generally accepted accounting principles.
The accompanying supplementary information (shown on pages 10 to 12) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.
/s/ WALL, EINHORN & CHERNITZER, P.C.
Norfolk, Virginia February 14, 1996
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners Renaissance Plaza 93 Associates, L.P.
We have audited the accompanying balance sheet of Renaissance Plaza 93 Associates, L.P. as of December 31, 1997, and the related statements of profit and loss (on HUD Form No. 92410), changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's 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 and Government Auditing Standards, issued by the Comptroller General of the United States. 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 Renaissance Plaza 93 Associates, L.P. as of December 31, 1997, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 23 through 34 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for that portion marked "unaudited," on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated January 31, 1998 on our consideration of Renaissance Plaza 93 Associates, L.P.'s internal control and on its compliance with requirements applicable to CDA programs, fair housing and non-discrimination and laws and regulations applicable to the financial statements.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland January 31, 1998
Audit Principal: Lester A. Kanis
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Renaissance Plaza 93 Associates, L.P.
We have audited the accompanying balance sheet of Renaissance Plaza 93 Associates, L.P. as of December 31, 1996, and the related statements of profit and loss (on HUD Form No. 92410), changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's 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 and Government Auditing Standards, issued by the Comptroller General of the United States. 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 Renaissance Plaza 93 Associates, L.P. as of December 31, 1996, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 23 through 35 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for that portion marked "unaudited," on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
- 6 -
In accordance with Government Auditing Standards and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated January 30, 1997 on our consideration of Renaissance Plaza 93 Associates, L.P.'s internal control structure and on its compliance with requirements applicable to CDA programs, affirmative fair housing and laws and regulations applicable to the financial statements.
/s/ Reznick Fedder & Silverman ------------------------------
Bethesda, Maryland January 30, 1997
Audit Principal: Lester A. Kanis
- 7 -
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Renaissance Plaza 93 Associates, L.P.
We have audited the accompanying balance sheet of Renaissance Plaza 93 Associates, L.P. as of December 31, 1995, and the related statements of profit and loss (on HUD Form No. 92410), changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's 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 and Government Auditing Standards, issued by the Comptroller General of the United States. 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 Renaissance Plaza 93 Associates, L.P. as of December 31, 1995, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 21 through 28 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information, except for that portion marked "unaudited," on which we express no opinion, has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
In accordance with Government Auditing Standards we have also issued reports dated February 9, 1996 on our consideration of Renaissance Plaza 93 Associates, L.P.'s internal control structure and on its compliance with requirements applicable to CDA programs, affirmative fair housing and laws and regulations applicable to the financial statements.
/s/ REZNICK FEDDER & SILVERMAN
Bethesda, Maryland February 9, 1996
[Letterhead of Ziner & Company, P.C.]
INDEPENDENT AUDITORS' REPORT
To the Partners of Tasker Village Associates
We have audited the accompanying balance sheet of Tasker Village Associates (a Pennsylvania limited partnership) as of December 31, 1997 and the related statements of operations, changes in partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's general partners and contracted management agent. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Tasker Village Associates as of December 31, 1996 were audited by other auditors whose report, dated January 28, 1997, expressed an unqualified opinion on those financial statements.
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 the Partnership's general partners and contracted management agent, 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 Tasker Village Associates at December 31, 1997, and the results of its operations, changes in partners' equity, and its cash flows for the year then ended in conformity with generally accepted accounting principles.
/s/ Ziner & Company, P.C.
January 28, 1998 Boston, Massachusetts
[J. H. WILLIAMS & CO., LLP LETTERHEAD]
To the Partners of Tasker Village Associates (a Limited Partnership) Philadelphia, Pennsylvania
We have audited the accompanying balance sheets of Tasker Village Associates (a Limited Partnership) as of December 31, 1996 and 1995, and the related statements of (loss), changes in partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's general partner and contracted management agent. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits 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 the Partnership's general partner and contracted management agent, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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 Tasker Village Associates (a Limited Partnership) at December 31, 1996 and 1995, and the results of its operations, changes in partners' equity and its cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/ J. H. Williams & Co., LLP - - -----------------------------
Kingston, Pennsylvania February 1S, 1997
[Letterhead of Clifford R. Benn]
INDEPENDENT AUDITOR'S REPORT
General Partner Martha Bryant Manor, L.P. Los Angeles, California
I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31, 1997 and the related statements of income, changes in partners' capital, and cash flow for the year then ended. These financial statements are the responsibility of Martha Bryant Manor, L.P.'s management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Martha Bryant Manor, L.P. at December 31, 1997 and the results of its operations and its cash flow for the year then ended. In conformity with generally accepted accounting principles.
As more fully described in Note 6, subsequent to the issuance of the partnership's 1997 financial statements and my report thereon dated February 2, 1998, I became aware that those financial statements did not properly disclose deferred mortgage interest payable. In my original report I expressed an unqualified opinion on the 1997 financial statements, and my opinion on the revised statements, as expressed herein, remains unqualified.
/s/ Clifford R. Benn
Carson, California February 2, 1998, except as to the last paragraph above and Notes 5 and 6, which are as of March 13, 1998
[CLIFFORD R. BENN LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
General Partner Martha Bryant Manor, L.P. Los Angeles, California
I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31, 1996 and the related statements of income, changes in partners' capital, and cash flow for the year then ended. These financial statements are the responsibility of Martha Bryant Manor, L.P.'s management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Martha Bryant Manor, L.P. at December 31, 1996 and the results of its operations and its cash flow for the year then ended. In conformity with generally accepted accounting principles.
/s/ Clifford R. Benn --------------------
February 13, 1997 Carson, California
[CLIFFORD R. BENN LETTERHEAD] INDEPENDENT AUDITOR'S REPORT
General Partner Martha Bryant Manor, L.P. Los Angeles, California
I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31, 1995 and the related statements of income, changes in partners' capital, and cash flow for the year then ended. These financial statements are the responsibility of Martha Bryant Manor, L.P.'s management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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. I believe that my audit provides a reasonable basis for my opinion.
I was unable to obtain sufficient evidential matter in connection with the beginning balance of property investments.
In my opinion, except for the effects of any adjustments and additional disclosures that might have resulted had I been able to obtain sufficient evidence in connection with property investments, the financial statements referred to above present fairly, in all material respects, the financial position of Martha Bryant Manor, L.P. at December 31, 1995 and the results of its operations and its cash flow for the year then ended. In conformity with generally accepted accounting principles.
/s/ CLIFFORD BENN, CPA
January 24, 1996 Carson, California
[Letterhead of MARVIN D. MASON]
To the Partners of Colden Oaks, A California Limited Partnership Los Angeles, California
I have audited the accompanying balance sheet of Colden Oaks, a California Limited Partnership, as of December 31, 1997, and the related statements of operations, changes in partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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 the significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Colden Oaks Partnership as of December 31, 1997, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
/s/ Marvin Mason
Marvin Mason Encino, California February 28, 1998
[MARVIN D. MASON LETTERHEAD]
To the Partners of Colden Oaks, A California Limited Partnership Los Angeles, California
I have audited the accompanying balance sheet of Colden Oaks, a California Limited Partnership, as of December 31, 1996, and the related statements of operations, changes in partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Colden Oaks, a California Limited Partnership, at December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles
/s/ Marvin Mason - - ---------------- Marvin Mason Certified Public Accountant Encino, California February 25, 1997
[ROBERT J. PACHECO - PASADENA, CALIFORNIA LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Partners of Colden Oaks, A California Limited Partnership Los Angeles, California
I have audited the accompanying balance sheet of Colden Oaks, a California Limited Partnership, as of December 31, 1995, and the related statements of operations, changes in partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Colden Oaks, a California Limited Partnership, at December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
/s/ ROBERT PACHECO Robert J. Pacheco Certified Public Accountant
February 29, 1996
[Letterhead of Clifford R. Benn]
INDEPENDENT AUDITOR'S REPORT
General Partner Brynview Terrace, L.P. Los Angeles, California
I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 1997 and the related statements of income, changes in partners' capital, and cash flow for the year then ended. These financial statements are the responsibility of Brynview Terrace, L.P.'s management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also include assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brynview Terrace, L.P. at December 31, 1997 and the results of its operations and its cash flow for the year then ended. In conformity with generally accepted accounting principles.
/s/ Clifford R. Benn, C.P.A.
February 24, 1998 Carson, California
[CLIFFORD R. BENN LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
General Partner Brynview Terrace, L.P. Los Angeles, California
I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 1996 and the related statements of income, changes in partners' capital, and cash flow for the year then ended. These financial statements are the responsibility of Brynview Terrace, L.P.'s management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brynview Terrace, L.P. at December 31, 1996 and the results of its operations and its cash flow for the year then ended. In conformity with generally accepted accounting principles.
/s/ Clifford Benn, C.P.A. -------------------------
February 13, 1997 Carson, California
[CLIFFORD R. BENN LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
General Partner Brynview Terrace, L.P. Los Angeles, California
I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 1995 and the related statements of income, changes in partners' capital, and cash flow for the year then ended. These financial statements are the responsibility of Brynview Terrace, L.P.'s management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. 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. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Brynview Terrace, L.P. at December 31, 1995 and the results of its operations and its cash flow for the year then ended. In conformity with generally accepted accounting principles.
/s/ CLIFFORD BENN, CPA February 2, 1996 Carson, California
[Letterhead of Robert J. Pacheco, CPA]
Independent Auditor's Report
To the Partners of NLEDC, L.P., A California Limited Partnership:
I have audited the accompanying balance sheet of NLEDC, L.P., a California Limited Partnership, as of December 31, 1997, and the related statements of income, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that I 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 principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NLEDC, L.P., a California Limited Partnership, at December 31, 1997, and the results of its operations, changes in partners' capital and cash flows for the year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U. S. Department of Housing and Urban Development, I have also issued reports dated February 25, 1998, on my consideration of the Partnership's internal control, on its compliance with specific requirements applicable to non-major HUD programs and specific requirements applicable to Affirmative Fair Housing.
/s/ Robert Pacheco
Robert J. Pacheco, CPA Pasadena, California February 25, 1998
[ROBERT J. PACHECO, CPA LETTERHEAD]
Independent Auditor's Report
To the Partners of NLEDC, L.P., a California Limited Partnership:
I have audited the accompanying balance sheet of NLEDC, L.P., a California Limited Partnership, as of December 31, 1996, and the related statements of income, changes in partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that I 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 principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NLEDC, L.P., a California Limited Partnership, at December 31, 1996, and the results of its operations, changes in partners' capital and its cash flows for the year then ended in conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U. S. Department of Housing and Urban Development, I have also issued a report dated February 25, 1997, on my consideration of NLEDC, L.P.'s (a California Limited Partnership) internal control structure, and reports dated February 25, 1997 on its compliance with specific requirements applicable to Affirmative Fair Housing and specific requirements applicable to nonmajor HUD program transactions.
/s/ Robert Pacheco - - ------------------ Robert J. Pacheco Certified Public Accountant Pasadena, California February 25, 1997
[ROBERT J. PACHECO - PASADENA, CALIFORNIA LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Partners of NLEDC, L.P., A California Limited Partnership Los Angeles, California
I have audited the accompanying balance sheet of NLEDC, L.P., a California Limited Partnership, as of December 31, 1995, and the related statements of changes in partners' capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NLEDC, L.P., a California Limited Partnership, at December 31, 1995, and its cash flows for the year then ended in conformity with generally accepted accounting principles.
/s/ ROBERT PACHECO
Robert J. Pacheco Certified Public Accountant
February 21, 1996
[Letterhead of Reznick Fedder & Silverman]
INDEPENDENT AUDITORS' REPORT
To the Partners Creative Choice Homes VI, Ltd.
We have audited the accompanying balance sheet of Creative Choice Homes VI, Ltd. as of December 31, 1997, and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's 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 Creative Choice Homes VI, Ltd. as of December 31, 1997, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles.
/s/ Reznick Fedder & Silverman
Bethesda, Maryland February 6, 1998
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Creative Choice Homes VI, Ltd.
We have audited the accompanying balance sheet of Creative Choice Homes VI, Ltd. as of December 31, 1996, and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's 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 Creative Choice Homes VI, Ltd. as of December 31. 1996, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles.
/s/ Reznick Fedder & Silverman ------------------------------
Bethesda, Maryland February 7, 1997
[REZNICK FEDDER & SILVERMAN LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Creative Choice Homes VI, Ltd.
We have audited the accompanying balance sheet of Creative Choice Homes VI, Ltd. as of December 31, 1995, and the related statements of operations, partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the partnership's 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 Creative Choice Homes VI, Ltd. as of December 31, 1995, and the results of its operations, the changes in partners' equity and cash flows for the year then ended, in conformity with generally accepted accounting principles.
/s/ REZNICK FEDDER & SILVERMAN
Bethesda, Maryland March 22, 1996
[Letterhead of SUAREZ ACCOUNTANCY CORPORATION]
Independent Auditor's Report
To the Partners P & P Home for the Elderly, L.P. Los Angeles, California
I have audited the accompanying balance sheet of P & P Home for the Elderly, L.P. as of December 31, 1997, and the related statements of income, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of P & P Home for the Elderly, L.P. at December 31, 1997, and the results of its operations and cash flows for the year then ended, in conformity with generally accepted accounting principles.
/s/ Suarez Accountancy Corporation
January 30, 1998 San Pedro, California
[SUAREZ ACCOUNTANCY CORPORATION LETTERHEAD]
Independent Auditor's Report ----------------------------
To the Partners P & P Home for the Elderly, L.P. (A Development Stage Company) Los Angeles, California
I have audited the accompanying balance sheet of P & P Home for the Elderly, L.P. (A Development Stage Company) as of December 31, 1996, and the related statements of income, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of P & P Home for the Elderly, L.P. (A Development Stage Company) at December 31, 1996, and the results of its operations and cash flows for the year then ended, in conformity with generally accepted accounting principles.
/s/ Suarez Accountancy Corporation ----------------------------------
San Pedro, California April 1, 1997
[SUAREZ ACCOUNTANCY CORPORATION - SAN PEDRO, CALIFORNIA LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
To the Partners P & P Home for the Elderly, L.P. (A Development Stage Company) Los Angeles, California
I have audited the accompanying balance sheet of P & P Home for the Elderly, L.P. (A Development Stage Company) as of December 31, l995, and the related statements of income, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of P & P Home for the Elderly, L.P. (A Development Stage Company) at December 31, 1995, and the results of its operations and cash flows for the year then ended, in conformity with generally accepted accounting principles.
/s/ SUAREZ ACCOUNTANCY CORPORATION
January 31, 1996
[Letterhead of COLE, EVANS & PETERSON]
INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION
Clear Horizons Limited Partnership Shreveport, Louisiana
We have audited the accompanying balance sheet of Clear Horizons Limited Partnership, at December 31, 1997, and the related statements of profit and loss, capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's 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 and Government Auditing Standards, issued by the Comptroller General of the United States. 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 in the first paragraph above present fairly, in all material respects, the financial position of Clear Horizons Limited Partnership, at December 31, 1997 and the results of its operations, changes in capital, and cash flows for the year then ended in conformity with generally accepted accounting principles.
Our audit was made primarily for the purpose of forming an opinion on the basic financial statements for the year ended December 31, 1997 taken as a whole. The supplementary Schedules 1 through 5 are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Clear Horizons Apartments Page 2
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U. S. Department of Housing and Urban Development, we have also issued a report dated February 9, 1998 on our consideration of Clear Horizons Limited Partnership's internal control, and reports dated February 9, 1998, on its compliance with laws and regulations, compliance with specific requirements applicable to Affirmative Fair Housing, and compliance with specific requirements applicable to major HUD-assisted programs.
/s/ Cole, Evans & Peterson
Cole, Evans & Peterson Federal ID No. 72-0506596 Lead Auditor: Steven W. Hedgepeth Shreveport, Louisiana February 9, 1998
[COLE, EVANS & PETERSON LETTERHEAD]
February 10, 1997
INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION
Clear Horizons Limited Partnership Shreveport, Louisiana
We have audited the accompanying balance sheet of Clear Horizons Limited Partnership, at December 31, 1996, and the related statements of profit and loss, capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's 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 and Government Auditing Standards, issued by the Comptroller General of the United States. 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 in the first paragraph above present fairly, in all material respects, the financial position of Clear Horizons Limited Partnership, at December 31, 1996 and the results of its operations, changes in capital, and cash flows for the year then ended in conformity with generally accepted accounting principles.
Our audit was made primarily for the purpose of forming an opinion on the basic financial statements for the year ended December 31, 1996 taken as a whole. The supplementary Schedules 1 through 5 are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Clear Horizons Apartments February 10, 1997
In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated February 10, 1997 on our consideration of Clear Horizons Limited Partnership's internal control structure, and reports dated February 10, 1997, on its compliance with laws and regulations, compliance with specific requirements applicable to Affirmative Fair Housing, and compliance with specific requirements applicable to major HUD-assisted programs.
/s/ Cole, Evans & Peterson - - -------------------------- Cole, Evans & Peterson
Shreveport, Louisiana February 10, 1997
[COLE, EVANS & PETERSON - SHREVEPORT, LOUISIANA LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL STATEMENTS
Clear Horizons Limited Partnership Shreveport, Louisiana
We have audited the accompanying balance sheet of Clear Horizons Limited Partnership, at December 31, 1995, and the related statements of profit and loss, capital and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's 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 and Government Auditing Standards, issued by the Comptroller General of the United States. 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 in the first paragraph above present fairly, in all material respects, the financial position of Clear Horizons Limited Partnership, at December 31, 1995 and the results of its operations, changes in capital, and cash flows for the year then ended in conformity with generally accepted accounting principles.
Our audit was made primarily for the purpose of forming an opinion on the basic financial statements for the year ended December 31, 1995 taken as a whole. The supplementary Schedules 1 through 5 are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the audit procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Clear Horizons Apartments February 9, 1996 In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated February 9, 1996 on our consideration of Clear Horizons Limited Partnership's internal control structure, and reports dated February 9, 1996, on its compliance with laws and regulations, compliance with specific requirements applicable to Affirmative Fair Housing, and compliance with specific requirements applicable to major HUD-assisted programs.
/s/ COLE, EVANS & PETERSON Cole, Evans & Peterson Federal ID No. 72-0506596
Lead Auditor: Steven W. Hedgepeth
[Letterhead of Ziner & Company, P.C.]
INDEPENDENT AUDITORS' REPORT
To the Partners of Neptune Venture, L.P.
We have audited the accompanying balance sheet of Neptune Venture, L.P. (a New Jersey limited partnership) as of December 31, 1997, and the related statements of operations, changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's general partner and contracted management agent. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of Neptune Venture, L.P. as of December 31, 1996 were audited by other auditors whose report, dated February 15, 1997, expressed an unqualified opinion on those financial statements.
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 the Partnership's general partner and contracted management agent, 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 Neptune Venture, L.P. at December 31, 1997, and the results of its operations, changes in partners' equity and its cash flows for the year then ended in conformity with generally accepted accounting principles.
/s/ Ziner & Company, P.C.
January 26, 1998 Boston, Massachusetts
[J. H. WILLIAMS & CO., LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners of Neptune Venture , L.P. Neptune Township, New Jersey
We have audited the accompanying balance sheets of Neptune Venture, L.P. as of December 31, 1996 and 1995 and the related statements of income (loss), changes in partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's general partner and contracted management agent. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits 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 the Partnership's general partner and contracted management agent, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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 Neptune Venture, L.P. at December 31, 1996 and 1995, and its results of operations, changes in partners' equity and cash flows for the years then ended in conformity with generally accepted accounting principles.
/s/ J. H. Williams & Co., LLP - - -----------------------------
Kingston, Pennsylvania February 15, 1997
[Letterhead of Lawlor, O'Brien & Chervenak, LLC]
INDEPENDENT AUDITORS' REPORT
To the Partners Affordable Green Associates, L.P.
We have audited the accompanying balance sheet of Affordable Green Associates, L.P. as of December 31, 1997 and the related statements of operations, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's 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 and Government Auditing Standards, issued by the Comptroller General of the United States. 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 Affordable Green Associates, L.P. as of December 31, 1997 and the results of its operations, changes in partners' capital, and its cash flows for the year then ended in conformity with generally accepted accounting principles.
/s/ Lawlor, O'Brien & Chervenak, LLC
West Paterson, New Jersey March 3, 1998
[LAWLOR, O'BRIEN & CHERVENAK, LLC LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ----------------------------
To the Partners Affordable Green Associates, L.P.
We have audited the accompanying balance sheet of Affordable Green Associates, L.P. as of December 31, 1996 and the related statements of operations, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's 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 and Government Auditing Standards, issued by the Comptroller General of the United States. 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 Affordable Green Associates, L.P. as of December 31, 1996 and the results of its operations, changes in partners' capital, and its cash flows for the year then ended in conformity with generally accepted accounting principles.
Lawlor, O'Brien & Chervenak, L.L.C. -----------------------------------
West Paterson, New Jersey February 12, 1997
[LAWLOR, O'BRIEN & LESKOWICZ LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Partners Affordable Green Associates, L.P.
We have audited the accompanying balance sheet of Affordable Green Associates, L.P. as of December 31, 1995, and the related statements of operations for the period (from commencement of operations) August 15, 1995 through December 31, 1995, changes in partners' capital and cash flows for the year ended December 31, 1995. These financial statements are the responsibility of the Partnership's 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 and Government Auditing Standards, issued by the Comptroller General of the United States. 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 Affordable Green Associates, L.P. as of December 31, 1995, and the results of its operations for the period (from commencement of operations) August 15, 1995 through December 31, 1995, changes in partners' equity and its cash flows for the year ended December 31, 1995 in conformity with generally accepted accounting principles.
/s/ LAWLOR, O'BRIEN & LESKOWICZ West Paterson, New Jersey February 28, 1996
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS
*Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
See accompanying notes to consolidated financial statements.
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
See accompanying notes to consolidated financial statements.
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
*Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
See accompanying notes to consolidated financial statements.
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998
NOTE 1 - General
Independence Tax Credit Plus L.P. II (a Delaware limited partnership) (the "Partnership") was organized on February 11, 1992 and commenced the public offering on January 19, 1993. The general partner of the Partnership is Related Independence Associates L.P., a Delaware limited partnership (the "General Partner").
The Partnership's business is to invest in other partnerships ("Local Partnerships," "subsidiaries" or "subsidiary partnerships") owning leveraged apartment complexes that are eligible for the low-income housing tax credit ("Tax Credit") enacted in the Tax Reform Act of 1986, some of which complexes may also be eligible for the historic rehabilitation tax credit.
The Partnership has interests in fifteen subsidiary partnerships as of March 31, 1998.
The Partnership was authorized to issue a total of 100,000 ($100,000,000) Beneficial Assignment Certificates ("BACs") which have been registered with the Securities and Exchange Commission for sale to the public. Each BAC represents all of the economic and virtually all of the ownership rights attributable to a limited partnership interest. As of March 31, 1998, the Partnership has raised a total of $58,928,000 representing 58,928 BACs. The offering was terminated on April 7, 1994.
The terms of the Partnership's Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement") provide, among other things, that net profits or losses and distributions of cash flow are, in general, allocated 99% to the limited partners and BACs holders and 1% to the general partner.
NOTE 2 - Summary of Significant Accounting Policies
a) Basis of Consolidation
The consolidated financial statements include the accounts of the Partnership and fifteen subsidiary partnerships in which the Partnership is the principal limited partner, with an ownership interest of 98.99%. Through the rights of the Partnership and/or an affiliate of the General Partner, which affiliate has a contractual obligation to act on behalf of the Partnership, to remove the general partner of the subsidiary local partnerships and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary local partnerships. All intercompany accounts and transactions with the subsidiary partnerships have been eliminated in consolidation.
For financial reporting purposes, the Partnership's fiscal year ends on March 31. The Partnership's fiscal year ends March 31, in order to allow adequate time for the subsidiaries financial statements to be prepared and consolidated. The books and records of the Partnership are maintained on the accrual basis of accounting, in accordance with generally accepted accounting principles. All subsidiaries have fiscal years ending December 31. Accounts of the subsidiaries have been adjusted for intercompany transactions from January 1 through March 31.
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998
Increases (decreases) in the capitalization of consolidated subsidiaries attributable to minority interest arises from cash contributions and cash distributions to the minority interest partners.
The Partnership's investment in each subsidiary is equal to the respective subsidiary's partners' equity less minority interest capital, if any. Losses attributable to minority interest which exceed the minority interests' investment in a subsidiary partnership have been charged to the Partnership. Such losses aggregated approximately $80,000, $30,000 and $17,000 for the years ended March 31, 1998, 1997 and 1996 (the 1997, 1996 and 1995 Fiscal Years), respectively. In consolidation, all subsidiary partnership losses are included in the Partnership's capital account except for losses allocated to minority interest capital.
b) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, cash in banks, and investments in short-term highly liquid instruments purchased with original maturities of three months or less. Cash held in escrow has various use restrictions and is not considered a cash equivalent.
c) Property and Equipment
Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, construction period interest and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis are below depreciated cost. At that time, property investments themselves are reduced to estimated fair value (generally using discounted cash flows).
Through March 31, 1998, the Partnership has recorded a loss on impairment of assets of approximately $3,926,000.
d) Income Taxes
The Partnership is not required to provide for, or pay, any federal income taxes. Net income or loss generated by the Partnership is passed through to the partners and is required to be reported by them. The Partnership may be subject to state and local taxes in jurisdictions in which it operates. For income tax purposes, the Partnership has a fiscal year ending December 31 (Note 9).
e) Organization and Offering Costs
Costs incurred to organize the Partnership, including but not limited to legal, accounting and registration fees, are considered deferred organization expenses. These costs are capitalized and are being amortized over a 60-month period. Costs incurred to sell BACs, including bro-
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998
kerage and the nonaccountable expense allowance, are considered selling and offering expenses. These costs are charged directly to limited partners' capital (Note 8).
f) Loss Contingencies
The Partnership records loss contingencies as a charge to income when information becomes available which indicates that it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated.
g) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
NOTE 3 - Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instruments (all of which are held for nontrading purposes) for which it is practicable to estimate that value:
Cash and Cash Equivalents and Cash Held in Escrow
The carrying amount approximates fair value.
Mortgage Notes Payable
The fair value of mortgage notes payable is estimated, where practicable, based on the borrowing rate currently available for similar loans.
The estimated fair values of the Partnership's mortgage notes payable are as follows:
*Management believes it is not practical to estimate the fair value of the mortgage notes payable because mortgage programs with similar characteristics are not currently available to the partnerships.
The carrying amount of other financial instruments that require such disclosure approximates fair value.
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998
NOTE 4 - Property and Equipment
The components of property and equipment and their estimated useful lives are as follows:
Included in property and equipment is $3,501,977 of acquisition fees paid to the General Partner and $867,942 of acquisition expenses as of March 31, 1998 and 1997.
In connection with the rehabilitation of the properties, the subsidiary partnerships have incurred developer's fees of $9,282,042 to the local general partners and affiliates as of March 31, 1998 and 1997, respectively. Such fees have been included in the cost of property and equipment.
Depreciation expense for the years ended March 31, 1998, 1997 and 1996 amounted to $3,405,027, $2,969,828 and $2,101,923, respectively.
On December 31, 1997, the building owned by Colden Oaks Limited Partnership was deemed to be impaired and written down to estimated fair value. The impairment loss was determined to be $3,925,514 and has been charged to operations in the 1997 Fiscal Year. Management has determined that, due to the need to continue to provide low income rents to comply with Internal Revenue Service requirements to receive federal low income housing tax credits and the accumulation of significant construction costs, the value of the Colden Oaks apartment building is determined to be impaired. The amount of the asset write-down was measured as the amount by which the carrying amount of the apartment building exceeded its fair market value.
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998
NOTE 5 - Cash Held in Escrow
Cash held in escrow consists of the following:
*Represents amounts to be paid to seller upon completion of properties under construction and upon meeting specified rental achievement criteria.
NOTE 6 - Deferred Costs
The components of deferred costs and their periods of amortization are as follows:
*Over the life of the related mortgages.
Amortization expense for the years ended March 31, 1998, 1997 and 1996 amounted to $114,313, $90,803 and $59,298, respectively.
NOTE 7 - Mortgage Notes Payable
The mortgage notes are payable in aggregate monthly installments of approximately $146,000 including principal and interest at rates ranging from 0% to 9.65% per annum, from the year 2003 through the year 2052. Each subsidiary partnership's mortgage note payable is collateralized by the land and buildings of the respective subsidiary partnership, the assignment of each certain subsidiary partnership's rents and leases, and is without further recourse.
One mortgage note with a balance of $5,344,868 and $5,505,886 at December 31, 1997 and 1996, respectively, which bears interest at 7% per annum was eligible for an interest rate subsidy. Accordingly, the subsidiary partnership paid only that portion of the monthly payments
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998
that would be required if the interest rate was 1%. The balance was subsidized under Section 236 of the National Housing Act.
Annual principal payment requirements for mortgage notes payable for each of the next five fiscal years and thereafter are as follows:
The mortgage agreements require monthly deposits to replacement reserves of approximately $23,000 and monthly deposits to escrow accounts for real estate taxes, hazard insurance and mortgage insurance and other (Note 5).
NOTE 8 - Related Party Transactions
An affiliate of the General Partner has a .01% interest as a special limited partner in each of the subsidiary partnerships. An affiliate of the General Partner also has a minority interest in certain local limited partnerships.
The General Partner and its affiliates perform services for the Partnership. The costs incurred for the years ended March 31, 1998, 1997 and 1996 are as follows:
A) Acquisition Fees and Expenses
The General Partner was paid an acquisition fee equal to 6% of the gross proceeds of the offering paid upon investor closing, for its services in connection with the selection and evaluation of Local Partnerships. Such fees have been capitalized as a cost of the investments upon closing of subsidiary partnerships' acquisitions. As of March 31, 1998, 1997 and 1996, $3,535,680, of such costs have been incurred, respectively.
B) Guarantees
The Partnership had negotiated development deficit guarantees with the subsidiary partnerships in which it has invested. The Local General Partners had agreed to fund development deficits through the break-even dates of each of the subsidiary partnerships, most of which were unlimited or in an unspecified amount. Amounts received under development deficit guarantees from the developers of the properties purchased by the Partnership have been treated as a reduction of the asset. Although all development deficit guarantees have expired as of March 31, 1998, management does not expect their expiration to have a material impact on liquidity, based on prior years' fundings.
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998
The Partnership has negotiated Operating Deficit Guaranty Agreements with all subsidiary partnerships by which the Local General Partners have agreed to fund operating deficits for a specified period of time. The terms of the Operating Deficit Guaranty Agreements vary for each subsidiary partnership, with maximum dollar amounts to be funded for a specified period of time, generally three years, commencing on the break-even date. The gross amount of the Operating Deficit Guarantees aggregates approximately $5,670,000, none of which have expired as of March 31, 1998. As of March 31, 1998 and 1997, $278,908 and $193,032 has been funded under the Operating Deficit Guaranty agreements. Amounts funded under such agreements are treated as noninterest bearing loans, which will be repaid only out of 50% of available cash flow or out of available net sale or refinancing proceeds.
In addition, several subsidiary partnerships have Rent-Up Guaranty Agreements, in which the Local General Partner agrees to pay liquidating damages if predetermined occupancy rates are not achieved. The terms of the Rent-Up Guaranty Agreements vary for each subsidiary partnership, with maximum dollar amounts to be funded for a specified period of time. The gross amount of unexpired Rent-Up Guarantees for the subsidiary partnerships is approximately $177,000 as of March 31, 1998. There have not been any fundings under these guaranty agreements. Amounts received under rental guarantees from the sellers of the properties purchased by the Partnership are treated as a reduction of the asset.
The Operating Deficit Guaranty Agreements, Rent-Up Guaranty Agreements and Development Deficit Guaranty Agreements were negotiated to protect the Partnership's interest in the subsidiary partnerships and to provide incentive to the Local General Partners to generate positive cash flow.
C) Other Related Party Expenses
The costs incurred to related parties for the years ended March 31, 1998, 1997 and 1996 were as follows:
(a) The General Partner is entitled to receive a partnership management fee, after payment of all Partnership expenses, which together with the annual local administrative fees will not exceed a maximum of 0.5% per annum of invested assets (as defined in the Partnership Agreement), for administering the affairs of the Partnership. Subject to the foregoing limitation, the partnership management fee will be determined by the General Partner in its sole discretion based upon its review of the Partnership's investments. Unpaid partnership management fees for any year will be accrued without interest and will be payable from working capital reserves or to the extent of available funds after the Partnership has made distributions to the limited partners of sale or refinancing proceeds equal to their original capital contribu-
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998
tions plus a 10% priority return thereon (to the extent not theretofore paid out of cash flow). Partnership management fees owed to the General Partner amounting to approximately $164,000 and $115,000 were accrued and unpaid as of March 31, 1998 and March 31, 1997, respectively.
(b) The Partnership reimburses the General Partner and its affiliates for actual Partnership operating expenses incurred by the General Partner and its affiliates on the Partnership's behalf. The amount of reimbursement from the Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the General Partner performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnerships' performance.
(c) Property management fees incurred by subsidiary partnerships amounted to $547,120, $439,375 and $301,751 for the years ended March 31, 1998, 1997 and 1996, respectively. Of these fees $259,497, $212,977 and $133,924 were earned by affiliates of the subsidiary partnerships' general partners.
(d) Independence SLP L.P., a special limited partner of the subsidiary partnerships, is entitled to receive a local administrative fee of up to $5,000 per year from each subsidiary partnership.
D) Due to local general partners and affiliates
Due to local general partners and affiliates at March 31, 1998 and 1997 consists of the following:
(*) Includes loans from Local General Partners and affiliates totaling $185,071, bearing interest rates from 8% to 11% and due on demand at March 31, 1998.
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1998
NOTE 9 - Income Taxes
A reconciliation of the financial statement net loss to the income tax loss for the Partnership and its consolidated subsidiaries is as follows:
NOTE 10 - Commitments and Contingencies
a) Subsidiary Partnerships-Litigation
Clear Horizons Limited Partnership
Clear Horizons Limited Partnership ("Clear Horizons")is named as a defendant in a lawsuit involving the wrongful death of a person on the premises of the apartment project. Clear Horizons' defense is being handled by its liability insurer. Legal counsel believes that any settlement will be within insurance policy limits, $3,000,000, and there will be no loss to Clear Horizons. The maximum loss which the Partnership would be liable for is its net investment in Clear Horizons. The Partnership's investment in Clear Horizons at March 31, 1998 and 1997 was approximately $921,000 and $963,000, respectively, and the minority interest balance was $0. Clear Horizons' net loss after minority interest amounted to approximately $52,000, $63,000 and $27,000 for the 1997, 1996 and 1995 Fiscal Years, respectively.
b) Subsidiary Partnerships-Other
Clear Horizons Limited Partnership At December 31, 1997, Clear Horizons Limited Partnership ("Clear Horizons") current liabilities exceed its current assets by over $90,000. Although this condition could raise substantial doubt about Clear Horizons ability to continue as a going concern, such doubt is alleviated as follows:
1. Included in current liabilities at December 31, 1997 is $108,619 owed to related parties who do not intend to pursue collection beyond Clear Horizon's ability to pay.
2. The general partner of Clear Horizons has agreed to fund operating deficits up to $250,000.
Accordingly, management believes that Clear Horizons has the ability to continue as a going concern for at least one year from December 31, 1997.
c) Uninsured Cash and Cash Equivalents
The Partnership maintains its cash and cash equivalents in various banks. The accounts at each bank are guaranteed by the Federal Deposit Insurance Corporation up to $100,000. At March 31, 1998, uninsured cash and cash equivalents approximated $1,686,000.
d) Letters of Credit
As of December 31, 1997, the subsidiary partnerships were contingently liable on open letters of credit as follows:
Description Amount - - ----------- ------
Development contingency $ 22,400 Rent reduction escrow 100,000 -------
$122,400 ========
e) Other
The Partnership and BACs holders began to recognize Housing Tax Credits with respect to a Property when the Credit Period for such Property commenced. Because of the time required for the acquisition, completion and rent-up of Properties, the amount of Tax Credits per BAC has gradually increased over the first three years of the Partnership. Housing Tax Credits not recognized in the first three years will be recognized in the 11th through 13th years. For the 1997, 1996 and 1995 tax years, Housing Tax Credits of $8,454,368, $6,399,740 and $3,997,227 were generated and $0, $37,112 and $619,383 of Historic Tax Credits were generated, respectively.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no directors or executive officers. The Partnership's affairs are managed and controlled by Related Independence Associates L.P., the General Partner. Certain information concerning the directors and executive officers of Related Independence Associates Inc. ("RIAI"), the sole general partner of the General Partner, is set forth below.
Name Position - - ---- --------
Stephen M. Ross Director
J. Michael Fried President, Chief Executive Officer and Director
Alan P. Hirmes Senior Vice President
Stuart J. Boesky Vice President
Marc D. Schnitzer Vice President
Glenn F. Hopps Treasurer
Lynn A. McMahon Secretary
STEPHEN M. ROSS, 58, is also President, Director and shareholder of The Related Realty Group, Inc., the general partner of The Related Companies, L.P. He graduated from the University of Michigan School of Business Administration with a Bachelor of Science degree and from Wayne State University School of Law with a Juris Doctor degree. Mr. Ross then received a Master of Laws degree in taxation from New York University School of Law. He joined the accounting firm of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York, where he worked for two large Wall Street investment banking firms in their real estate and corporate finance departments. Mr. Ross formed the predecessor of The Related Companies, L.P. in 1972 to develop, manage, finance and acquire subsidized and conventional apartment developments.
J. MICHAEL FRIED, 54, is the sole shareholder of one of the general partners of Related Capital Company ("Capital"), a real estate finance and acquisition affiliate of the General Partner. In that capacity, he is responsible for all of Capital's syndication, finance, acquisition and investor reporting activities. Mr. Fried practiced corporate law in New York City with the law firm of Proskauer Rose Goetz & Mendelsohn from 1974 until he joined Capital in 1979. Mr. Fried graduated from Brooklyn Law School with a Juris Doctor degree, magna cum laude; from Long Island University Graduate School with a Master of Science degree in Psychology; and from Michigan State University with a Bachelor of Arts degree in History.
ALAN P. HIRMES, 43, has been a Certified Public Accountant in New York since 1978. Prior to joining Related in October 1983, Mr. Hirmes was employed by Weiner & Co., Certified
Public Accountants. Mr. Hirmes is also a Vice President of Capital. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts degree.
STUART J. BOESKY, 42, practiced real estate and tax law in New York City with the law firm of Shipley & Rothstein (which subsequently merged with Strook & Strook & Lavan) from 1984 until February 1986 when he joined Capital. From 1983 to 1984 Mr. Boesky practiced law with the Boston law firm of Kaye Fialkow Richard & Rothstein and from 1978 to 1980 was a consultant specializing in real estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan State University with a Bachelor of Arts degree and from Wayne State School of Law with a Juris Doctor degree. He then received a Master of Laws degree in Taxation from Boston University School of Law.
MARC D. SCHNITZER, 37, is responsible both for financial restructurings of real estate properties and directing Related's acquisitions of properties generating Housing Tax Credits. Mr. Schnitzer received a Masters of Business Administration from The Wharton School of the University of Pennsylvania in December 1987 before joining Related in January 1988. From 1983 to January 1986, he was a financial analyst for the First Boston Corporation in New York. Mr. Schnitzer graduated summa cum laude with a Bachelor of Science in Business Administration from the School of Management at Boston University in May 1983.
GLENN F. HOPPS, 35, was employed prior to joining Related in December, 1990 by Marks Shron & Company and Weissbarth, Altman and Michaelson, certified public accountants. Mr. Hopps graduated from New York State University at Albany with a Bachelor of Science Degree in Accounting.
LYNN A. McMAHON, 42 has since 1983, she has served as Assistant to the President of Capital. From 1978 to 1983 she was employed at Sony Corporation of America in the Government Relations Department.
Item 11.
Item 11. Executive Compensation.
The Partnership has no officers or directors. The Partnership does not pay or accrue any fees, salaries or other forms of compensation to directors or officers of the General Partner for their services. However, under the terms of the Partnership Agreement, the Partnership has entered into certain arrangements with the General Partner and its affiliates, which provide for compensation to be paid to the General Partner and its affiliates. Such arrangements include (but are not limited to) agreements to pay nonrecurring Acquisition Fees, a nonaccountable Acquisition Expense allowance and an accountable expense reimbursement. In addition, the General Partner is entitled to a subordinated interest in Cash from Sales or Financings and a 1% interest in Net Income, Net Loss, Distributions of Adjusted Cash from Operations and Cash from Sales or Financings. Certain directors and officers of the General Partner receive compensation from the General Partner and its affiliates for services performed for various affiliated entities which may include services performed for the Partnership. The maximum annual partnership management fee paid to the General Partner is 0.5% of invested assets. See Note 8 to the Financial Statements in Item 8 above, which is incorporated herein by reference.
Tabular information concerning salaries, bonuses and other types of compensation payable to executive officers has not been included in this annual report. As noted above, the Partnership has no executive officers. The levels of compensation payable to the General Partner and/or its affiliates is limited by the terms of the Partnership Agreement and may not be increased therefrom on a discretionary basis.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Independence SLP L.P., a limited partnership whose general partner is the general partner of the General Partner of the Partnership and which acts as the special limited partner of each Local Partnership, holds a .01% limited partnership interest in each Local Partnership. See Note 8 to the Financial Statements in Item 8 above, which information is incorporated herein by reference thereto.
No person is known by the Partnership to be the beneficial owner of more than 5% of the Limited Partnership Interests and neither the Related General Partner nor any director or executive officer of the Related General Partner owns any Limited Partnership Interests. The following table sets forth the number of BACs beneficially owned, as of June 23, 1998, by (i) each BACs holder known to the Partnership to be a beneficial owner of more than 5% of the BACs, (ii) each director and executive officer of the general partner of the Related General Partner and (iii) the directors and executive officers of the general partner of the Related General Partner as a group. Unless otherwise noted, all BACs are owned directly with sole voting and dispositive powers.
(1) The address for each of the persons in the table is 625 Madison Avenue, New York, New York 10022.
(2) As set forth in Schedule 13D filed by Lehigh Tax Credit Partners L.L.C. ("Lehigh I") and Lehigh Tax Credit Partners, Inc., (the "Managing Member") on June 10, 1997 with the Securities and Exchange Commission (the "Commission") and pursuant to a letter agreement dated November 7, 1997 among the Partnership, Lehigh I and the Related General Partner (the "Standstill Agreement"), Lehigh I agreed that, prior to November 7, 2007 (the "Standstill Expiration Date"), it will not and it will cause certain affiliates not to (i) acquire, attempt to acquire or make a proposal to acquire, directly or indirectly, more than 45% (including BACs acquired through all other means) of the outstanding BACs, (ii) seek to propose to enter into, directly or indirectly, any merger, consolidation, business combination, sale or acquisition of assets, liquidation, dissolution or other similar transaction involving the Partnership, (iii) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" or "consents" (as such terms are used in the proxy rules of the Commission) to vote any voting securities of the Partnership, (iv) form, join or otherwise participate in a "group" (within the meaning of Section 13(d)(3) of the Securities and Exchange Act of 1934) with respect to any voting securities of the Partnership, except those affiliates bound by the Standstill Agreement will not be deemed to have violated it and formed a "group" solely by acting in accordance with the Standstill Agreement, (v) disclose in writing to any third party any intention, plan or arrangement inconsistent with the terms of the Standstill Agreement, or (vi) loan money to, advise, assist or encourage any person in connection with any action inconsistent with the terms of the Standstill Agreement. In addition, Lehigh I agreed that until the Standstill Expiration Date it will not sell any BACs acquired by it unless the buyer of such BACs agrees to be bound by the Standstill Agreement; provided, however, Lehigh I may make transfers in the secondary market to any purchaser which represents that following such sale it will not own three (3%) percent or more of the BACs outstanding. By the terms of the Standstill Agreement, Lehigh I also agreed to vote its BACs in the same manner as a majority of all voting BACs holders; provided, however, Lehigh I is entitled to vote its BACs as it determines with regard to any proposal (i) to remove the Related General Partner as a general partner of the Partnership or (ii) concerning the reduction of any fees, profits, distributions or allocations for the benefit of the Related General Partner or its affiliates. The addresses of each of the Partnership, Lehigh I and the Related General Partner is 625 Madison Avenue, New York, New York 10022.
(3) All of such BACs represent BACs owned directly by Lehigh I and Lehigh Tax Credit Partners II, L.L.C. ("Lehigh II"), for which the Managing Member serves as managing member. As of June 23, 1998, Lehigh I held 2,213.60 BACs and Lehigh II held 2,239.60 BACs.
(4) Each such party serves as a director and executive officer of the Managing Member and owns Member and owns an equity interest therein.
Item 13.
Item 13. Certain Relationships and Related Transactions.
The Partnership has and will continue to have certain relationships with the General Partner and its affiliates, as discussed in Item 11 and also Note 8 to the Financial Statements in Item 8 above, which is incorporated herein by reference thereto. However, there have been no direct financial transactions between the Partnership and the directors and officers of the General Partner.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sequential Page ---------- (a) 1. Consolidated Financial Statements
Independent Auditors' Report 16
Consolidated Balance Sheets at March 31, 1998 and 1997 63
Consolidated Statements of Operations for the Years Ended March 31, 1998, 1997 and 1996 64
Consolidated Statements of Changes in Partners' Capital (Deficit) for the Years Ended March 31, 1998, 1997 and 1996 65
Consolidated Statements of Cash Flows for the Years Ended March 31, 1998, 1997 and 1996 66
Notes to Consolidated Financial Statements 68
(a) 2. Consolidated Financial Statement Schedules
Independent Auditors' Report 89
Schedule I - Condensed Financial Information of Registrant 90
Schedule III - Real Estate and Accumulated Depreciation 93
All other schedules have been omitted because they are not required or because the required information is contained in the financial statements or notes thereto.
(a) 3. Exhibits
(3A) Agreement of Limited Partnership of Independence Tax Credit Plus L.P. II as adopted on February 11, 1992*
(3B) Form of Amended and Restated Agreement of Limited Partnership of Independence Tax Credit Plus L.P. II, attached to the Prospectus as Exhibit A**
(3C) Certificate of Limited Partnership of Independence Tax Credit Plus L.P. II as filed on February 11, 1992*
(10A) Form of Subscription Agreement attached to the Prospectus as Exhibit B**
(10B) Escrow Agreement between Independence Tax Credit Plus L.P. II and Bankers Trust Company*
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (continued) Sequential Page ----------
(10C) Form of Purchase and Sales Agreement pertaining to the Partnership's acquisition of Local Partnership Interests*
(10D) Form of Amended and Restated Agreement of Limited Partnership of Local Partnerships*
(21) Subsidiaries of the Registrant 85
(27) Financial Data Schedule (filed herewith) 95
*Incorporated herein as an exhibit by reference to exhibits filed with Post-Effective Amendment No. 4 to the Registration Statement on Form S-11 (Registration No. 33-37704)
**Incorporated herein as an exhibit by reference to exhibits filed with Post-Effective Amendment No. 8 to the Registration Statement on Form S-11 (Registration No. 33-37704)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (continued)
Supplemental Information to be furnished with Reports Filed Pursuant to Section 15(d) of the Act by Registrants which have Not Registered Securities Pursuant to Section 12 of the Act.
No annual report to security holders covering the Registrant's last fiscal year nor any proxy statement, form of proxy or other proxy soliciting material with respect to any annual or other meeting of security holders has been sent to security holders.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
INDEPENDENT AUDITORS' REPORT
To the Partners of Independence Tax Credit Plus L.P. II and Subsidiaries (A Delaware Limited Partnership)
In connection with our audits of the consolidated financial statements of Independence Tax Credit Plus L.P. II and Subsidiaries included in the Form 10-K as presented in our opinion dated June 22, 1998 on page 16, and based on the reports of other auditors, we have also audited supporting Schedule I for the 1997, 1996 and 1995 Fiscal Years and Schedule III at March 31, 1998. In our opinion, and based upon the reports of the other auditors, these consolidated schedules present fairly, when read in conjunction with the related consolidated financial statements, the financial data required to be set forth therein.
/s/ Trien Rosenberg Rosenberg, Weinberg Ciullo & Fazzari L.L.P.
Trien Rosenberg Rosenberg, Weinberg Ciullo & Fazzari L.L.P.
June 22, 1998 New York, New York
INDEPENDENCE TAX CREDIT PLUS L.P. II SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)
CONDENSED BALANCE SHEETS
ASSETS
Investments in subsidiary partnerships are recorded in accordance with the equity method of accounting, wherein the investments are not reduced below zero. Accordingly, partners' capital on the consolidated balance sheet will differ from partners' capital shown above.
INDEPENDENCE TAX CREDIT PLUS L.P. II SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT (NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)
CONDENSED STATEMENTS OF OPERATIONS
INDEPENDENCE TAX CREDIT PLUS L.P. II SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT DECREASE IN CASH AND CASH EQUIVALENTS (NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)
CONDENSED STATEMENTS OF CASH FLOWS
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 31, 1998
(a) Depreciation is computed using primarily the straight-line method over the estimated useful lives determined by the Partnership date of acquisition. (b) Personal property is depreciated primarily by the straight-line method over the estimated useful lives ranging from 5 to 10 years.
INDEPENDENCE TAX CREDIT PLUS L.P. II AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 31, 1998
At the time the Local Partnerships were acquired by Independence Tax Credit Plus II Limited Partnership, the entire purchase price paid by Independence Tax Credit Plus II Limited Partnership was pushed down to the Local Partnerships as property and equipment with an offsetting credit to capital. Since the projects were in the construction phase at the time of acquisition, the capital accounts were insignificant at the time of purchase. Therefore, there are no material differences between the original cost basis for tax and GAAP.