Item 1. Business.
The Registrant, Oxford Residential Properties I Limited Partnership ("ORP") or the "Partnership"), was formed on January 19, 1984, under the Maryland Revised Uniform Limited Partnership Act to acquire, own and operate residential properties. The Partnership sold $25,714,000 of Assignee Units in a public offering that concluded on October 18, 1985. The net offering proceeds were used to acquire residential properties.
Item 2.
Item 2. Properties.
Information concerning the individual properties is discussed in the 1999 Annual Report in the section entitled "Community Descriptions," which section is incorporated herein by reference (pages 13 through 14 hereof).
Item 3.
Item 3. Legal Proceedings.
The Registrant is engaged from time to time in litigation incident to its business; however, there are no pending legal proceedings whose potential effects are considered to be material by the Managing General Partner.
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 Partnership Interests and Related Partnership Matters.
(a) Market Information.
The Partnership originally issued 25,714 Assignee Units and through December 31, 1999, had redeemed a total of 2,047 Assignee Units, ranging in price from $332 to $600 per Assignee Unit. As of December 31, 1999, there were 23,667 Assignee Units outstanding. There is currently no established public market in which the Assignee Units are traded, and it is not anticipated that a public market will develop.
(b) Number of Security Holders.
As of December 31, 1999 there were 1,431 Assignee Unit Holders.
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FORM 10-K
PART II (continued)
(c) Dividend History and Restrictions.
Information regarding the frequency and amount of cash distributions is included in the section entitled "Selected Consolidated Financial Data" of the 1999 Annual Report, which section is incorporated herein by reference (page 12 hereof). Information regarding management's future expectations as to distributions is also included in the 1999 Annual Report in the section entitled "Report of Management," which section is incorporated herein by reference (on pages 16 through 20 hereof).
Item 6.
Item 6. Selected Financial Data.
Reference is made to the section of the 1999 Annual Report entitled "Selected Consolidated Financial Data," which section is incorporated herein by reference (page 12 hereof).
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
For a detailed discussion of the Partnership's financial condition and results of operations for the years ended December 31, 1999, 1998, and 1997, see information set forth in the section entitled "Report of Management" of the Partnership's 1999 Annual Report, which section is incorporated herein by reference (pages 16 through 20 hereof).
Item 8.
Item 8. Financial Statements and Supplementary Data.
Reference is made to the 1999 Annual Report for the consolidated financial statements of the Partnership, which consolidated financial statements are incorporated herein by reference (pages 23 through 26 hereof). See Item 14 of this report for information concerning financial statements and schedules filed with this report.
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. (a), (b), (c) and (e).
The Partnership has no directors or officers. The Managing General Partner of the Partnership, as designated in the Partnership Agreement, is Oxford Residential Properties I Corporation. The director and executive officers of the Managing General Partner are as follows:
- ----------------------------------------------------------------- Name Age Position and Business Experience - ----------------------------------------------------------------- Leo E. Zickler 63 Chairman of the Board of Directors and Chief Executive Officer since inception. Since March 1982 he has been Chairman of the Board of Directors, and Chief Executive Officer of Oxford Development Corporation ("Oxford"), an affiliate of the Partnership and a national real estate firm which owns and operates apartment and senior living communities. Mr. Zickler served as President of Oxford until February 28, 1994. Mr. Zickler serves as a director and officer of certain entities affiliated with Oxford.
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OXFORD RESIDENTIAL PROPERTIES I LIMITED PARTNERSHIP
FORM 10-K
PART III (continued)
- ----------------------------------------------------------------- Name Age Position and Business Experience - ----------------------------------------------------------------- Francis P. Lavin 48 President since March 1, 1994. From October 1989 through January 1994, he was a Director and President of ML Oxford Finance Corporation, an affiliate of Merrill Lynch & Company, Inc. From 1979 to October 1989, Mr. Lavin held various positions at subsidiaries of Merrill Lynch & Company including Director of Merrill Lynch Capital Markets and Vice President of Merrill Lynch, Hubbard Inc. Since March 1, 1994, Mr. Lavin has served as President of Oxford, as well as a director and officer of certain entities affiliated with Oxford.
Richard R. 52 Senior Vice President since inception Singleton and Chief Financial Officer since 1995. Previously, he was Vice President of Oxford Mortgage & Investment Corporation since 1979 and was promoted to Senior Vice President in 1983, and he was Chief Operating Officer of ORP's Managing General Partner since 1990 and was promoted to Chief Financial Officer in 1995. Mr. Singleton also serves as an officer of certain entities affiliated with Oxford.
The director and executive officers of the Managing General Partner will serve in their respective positions until successors are chosen.
(d) Family Relationships. None.
(f) Involvement in Certain Legal Proceedings. None.
(g) Promoter and Controlling Persons. Not applicable.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires that the directors, executive officers, and persons who own more than 10% of a registered class of the equity securities of ORP ("reporting persons") file with the Securities and Exchange Commission initial reports of ownership, and reports of changes in ownership, of ORP Assignee Units. Reporting persons are required by Securities and Exchange Commission rules to furnish ORP with copies of all Section 16(a) reports they file.
Based solely upon a review of Section 16(a) reports furnished to ORP for the fiscal year ended December 31, 1999 (the "1999 fiscal year"), or representations by reporting persons that no other reports were required for the 1999 fiscal year, ORP believes that all reporting persons timely filed all reports required by Section 16(a) of the Exchange Act.
Item 11.
Item 11. Executive Compensation. (a), (b), (c) and (d)
Neither the director nor the executive officers of the Managing General Partner receives direct compensation for services rendered to the Partnership.
(e) Termination of Employment and Change of Control Arrangements. None.
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FORM 10-K
PART III (continued)
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners.
ORP Acquisition Partners Limited Partnership, located at 7200 Wisconsin Avenue, Suite 1100, Bethesda, MD 20814, owns 4,997 Assignee Units, representing approximately 21.1% of the Assignee Units outstanding as of December 31, 1999. No other person or group is known by the Partnership to own beneficially more than 5% of the outstanding limited partnership interests and Assignee Units.
(b) Security Ownership of Management.
The officers and directors of the General Partners of the Partnership do not directly own any Assignee Units, however, certain officers and directors own equity interests in ORP Acquisition Partners Limited Partnership, which owns 4,997 Assignee Units, representing approximately 21.1% of the Assignee Units outstanding as of December 31, 1999. An affiliate of the General Partner is the Assignor Limited Partner of the Partnership. The Assignor Limited Partner has assigned the ownership of its limited partnership units (including rights to a percentage of the income, gain, losses, deductions, and distributions of the Partnership) to the Assignee Unit Holders.
(c) Changes in Control. None.
Item 13.
Item 13. Certain Relationships and Related Transactions.
(a) Transactions with Management and Others.
The Partnership has no directors or officers. The Managing General Partner and its affiliates do not receive any direct compensation, but are reimbursed by ORP for any actual direct costs and expenses incurred in connection with the operation of the Partnership.
Expense reimbursements are for an affiliate's personnel costs, travel expenses and interest on interim working capital advances for activities directly related to the Partnership which were not covered separately by fees. Total reimbursements to this affiliate for the years ended December 31, 1999, 1998 and 1997 were $82,000, $116,000, and $65,000, respectively, for administrative and accounting related costs.
An affiliate of NHP Management Company, the property manager, has a separate services agreement with Oxford Realty Financial Group, Inc. ("ORFG"), an affiliate of the Managing General Partner, pursuant to which ORFG provides certain services to NHP in exchange for service fees in an amount equal to 25.41% of all fees collected by NHP from certain properties, including those owned by the Partnership.
(b) Certain Business Relationships.
The Partnership's response to Item 13(a) is incorporated herein by reference. The Partnership has no business relationship with entities of which the officers or director of the Managing General Partner of the Partnership are officers, directors or equity owners, other than as set forth in the Partnership's response to Item 13(a).
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FORM 10-K
PART III (continued)
(c) Indebtedness of Management. None
(d) Transactions with Promoters. None
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) List of documents filed as part of this Report:
1. Financial Statements.
The following financial statements are contained in the Partnership's 1999 Annual Report and are incorporated herein by reference into Part II, Item 8:
Page Numbers Description Herein --------------------------------------------------------- Report of Independent Accountants. 22 Consolidated Balance Sheets as of December 31, 1999 and 1998. 23 Consolidated Statements of Operations for the years ended December 31, 1999, 1998 and 1997. 24 Consolidated Statement of Partners' Capital for the years ended December 31, 1999, 1998 and 1997. 25 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997. 26 Notes to Consolidated Financial Statements. 27-34
2. Financial Statement Schedules.
All financial statement schedules have been omitted since they are not applicable, not required, or because the required information is included elsewhere in the financial statements or notes thereto.
3. Exhibits (listed according to the number assigned in the table in Item 601 of Regulations S-K).
Exhibit No. 4 - Items defining the rights of security holders including indentures.
a. Amended and Restated Agreement and Certificate of Limited Partnership (Incorporated by reference from Exhibit A of the Prospectus of the Partnership, dated May 24, 1985).
Exhibit No. 10 - Material contracts.
a. Permanent Mortgage Loan Documents in favor of Lexington Mortgage Company, encumbering Fairlane East.
b. Permanent Mortgage Loan Documents in favor of Lexington Mortgage Company, encumbering The Landings.
c. Permanent Mortgage Loan Documents in favor of Lexington Mortgage Company, encumbering Raven Hill.
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FORM 10-K
PART IV (continued)
d. Permanent Mortgage Loan Documents in favor of Lexington Mortgage Company, encumbering Shadow Oaks.
Exhibit No. 13 - Annual report to security holders, etc.
a. Annual Report for the year ended December 31, 1999 ("filed" only to the extent material therefrom is specifically incorporated by reference).
Exhibit No. 25 - Power of Attorney.
a. Leo E. Zickler Power of Attorney (Incorporated by reference from Exhibits to Post- effective Amendment No. 1 to Form S-11 Registration Statement, dated March 28, 1985).
Exhibit No. 28 - Additional Exhibits. None.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the registrant during the year ended December 31, 1999.
(c) The list of Exhibits required by Item 601 of Regulation S-K is included in Item 14(a)(3) above.
(d) Financial Statement Schedules.
See Item 14(a)(2) above.
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OXFORD RESIDENTIAL PROPERTIES I LIMITED PARTNERSHIP
FORM 10-K
CROSS REFERENCE SHEET
The item numbers and captions in Parts I, II, III, and IV hereof and the page and/or pages in the referenced materials where the corresponding information appears are as follows:
Sequentialy Numbered Item Reference Materials Page(s) - ----------------------------------------------------------------- 1. Business Annual Report 1999 pps 13-21
2. Properties Annual Report 1999 pps 13-14
5. Market for Registrant's Annual Report 1999 pps 12, 16-21, Partnership Interest 31-32 & 33-34 and Related Partnership Matters
6. Selected Financial Data Annual Report 1999 pp 12
7. Management's Discussion Annual Report 1999 pps 16-21 and Analysis of Financial Condition and Results of Operations
8. Financial Statements and Annual Report 1999 pps 22-34 Supplementary Data
11. Executive Compensation Annual Report 1999 pps 33-34
12. Certain Relationships Annual Report 1999 pps 33-34 and Related Transactions
14. Exhibits, Financial Annual Report 1999 pps 12-37 Statement Schedules, and Reports on Form 8-K
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OXFORD RESIDENTIAL PROPERTIES I LIMITED PARTNERSHIP
FORM 10-K
EXHIBIT INDEX
(Listed according to the number assigned in the Exhibit Table in Item 601 of Regulation S-K.)
(13) Annual Report 1998 to Security Holders.
Oxford Residential Properties I Limited Partnership's Report dated December 31, 1999, follows on sequentially numbered pages 11 through 37 of this report.
(27) Financial Data Schedule.
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OXFORD RESIDENTIAL PROPERTIES I LIMITED PARTNERSHIP
FORM 10-K
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.
Oxford Residential Properties I Limited Partnership
By: Oxford Residential Properties I Corporation Managing General Partner of the Registrant
Date: 3/1/00 By: /s/ Richard R. Singleton ------ ----------------------------------------- Richard R. Singleton Senior Vice President and Chief Financial Officer
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.
Date: 3/1/00 By: /s/ Leo E. Zickler ------ ----------------------------------------- Leo E. Zickler Chairman of the Board of Directors and Chief Executive Officer
Date: 3/1/00 By: /s/ Francis P. Lavin ------ ----------------------------------------- Francis P. Lavin President
No proxy material has been sent to the Registrant's security holders. The Partnership's Annual Report 1999 is expected to be mailed to Assignee Unit Holders before May 2000.
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Annual Report 1999
CONTENTS
Selected Consolidated Financial Data Community Descriptions Average Occupancy Summary of Project Data Report of Management Report of Independent Accountants Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statement of Partners' Capital Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Distribution Information General Partnership Information Instructions for Investors who wish to reregister or transfer ORP Assignee Units
- ----------------------------------------------------------------- The following paragraphs contain descriptions of each of the four properties comprising the Partnership's portfolio. Unless otherwise indicated, information provided herein is as of December 31, 1999.
Fairlane East, Dearborn, Michigan
Fairlane East is a 244-unit conventional property, located in Dearborn, Michigan. Fairlane East was built in 1973 and consists of 26 buildings, offering one to two bedroom apartments and two to three bedroom townhomes. The buildings are of wood frame construction with brick and wood trim. The property is located on Rotunda Drive. To the north is single-family residential, to the east is industrial, to the south is the Ford Land Development Maintenance Center, and to the west is a retirement center and the Ford World Headquarters. Fairlane East is convenient to shopping, restaurants, churches, and public transportation. Amenities include a washer and dryer in each unit, a swimming pool and a clubhouse. Average occupancy was 96% in 1999 and 94% in 1998.
Property improvements completed for the year ended December 31, 1999 primarily include fence and deck replacements, carpet, vinyl floor and appliance replacements, HVAC repairs and replacements, structural repairs, roof replacements of the clubhouse building and five carports, sidewalks and curb replacements, interior and exterior painting, cabinet and counter replacements, and landscaping improvements.
There are at least three competitive apartment communities containing an aggregate of approximately 1,100 apartment units located in the Dearborn area within a five-mile radius of the site. Average occupancy at these communities was approximately 95% as of December 31, 1999. Additionally, a new rental community is being built adjacent to Fairlane East, with leasing of the new units anticipated to begin in 2000.
The Landings, Indianapolis, Indiana
The Landings is a 150-unit property located in northeastern Indianapolis, Indiana. The property is approximately 15 minutes from the downtown business district. The Landings is located at 78th Street and Keystone Avenue between the popular areas of Keystone at the Crossing and Broad Ripple, and is convenient to shopping, entertainment, parks, major thoroughfares, and public transportation. The property was built in 1974 and consists of nine wood frame constructed buildings with brick and aluminum siding and wood trim. The property is located on 27.3 acres along the White River and surrounds a lake that opens to the White River. Amenities include a clubhouse with party and billiard room, boat launch ramp to the river, boat storage, a sand volleyball court, two lighted tennis courts, a basketball court area, and a swimming pool. Average occupancy was 93% in 1999 and 95% in 1998.
Project improvements completed for the year ended December 31, 1999 primarily include carpet, vinyl floor and appliance replacements, balcony replacements, asphalt/concrete repairs, HVAC repairs and replacements, and refurbishment of clubhouse.
Major competitors of The Landings include at least four comparable apartment communities, containing an aggregate of approximately 2000 units, located within five miles of the property. Average occupancy at these communities was approximately 84% as of December 31, 1999. An additional three properties with an aggregate total of approximately 900 apartment units are under construction in the Indianapolis area within a six-mile radius of the site. These properties are scheduled to be completed during 2000.
Raven Hill, Burnsville, Minnesota
Raven Hill is a 304-unit apartment community located in Burnsville, Minnesota, a suburb south of Minneapolis. It is convenient to the Minneapolis central business district, as well as the suburban employment centers of the Twin Cities of Minneapolis and St. Paul. The property was built in 1971 and consists of four three-story buildings with underground and surface parking. Amenities include two guest suites, indoor and outdoor swimming pools, a spa, tennis courts, an indoor racquetball court, and two entertainment centers. Average occupancy was 98% and 97% in 1999 and 1998, respectively.
- ----------------------------------------------------------------- Community Descriptions - -----------------------------------------------------------------
Property improvements completed for the year ended December 31, 1999 primarily include patio and balcony improvements, carpet and vinyl replacements, appliance replacements, interior painting, boiler repairs,landscaping improvements, air conditioner replacements, ventilator fans, and elevator improvements.
There are several comparable apartment communities located in the Burnsville area within close proximity of Raven Hill, with average occupancy of 96% at December 31, 1999. Built in the mid to late 1980s, these communities are newer and offer more contemporary features than Raven Hill. However, the exterior vinyl siding, window, and patio and balcony improvements at Raven Hill are now complete and will enhance the appearance and competitiveness of Raven Hill. There are no known rental communities under construction in this market area.
Shadow Oaks, Tampa, Florida
Shadow Oaks is a 200-unit apartment community built in 1984 and is located in a neighborhood consisting of middle- and upper-middle-class single-family homes close to various commercial centers. Shadow Oaks is located in northeast Tampa, between the University of South Florida and Carrollwood areas. Amenities include playground, pool, whirlpool, tennis court, picnic area, volleyball court, and laundry facilities. There has been significant building of apartments in Tampa and the surrounding area and, as a result, Shadow Oaks competes for residents with a considerable number of newer apartment communities located in nearby neighborhoods. Average occupancy was 94% in 1999 and 97% in 1998.
Property improvements completed for the year ended December 31, 1999 primarily include cedar wood siding and picket replacement performed in conjunction with a complete exterior paint job of the property, completion of third and final year of roof replacement, carpet, vinyl floor and appliance replacements, clubhouse upgrades, and landscaping improvements.
There are three comparable apartment communities containing an aggregate of approximately 1,200 apartment units located in the Tampa area within a three-mile radius of the site. Average occupancy at these communities was approximately 93% as of December 31, 1999. Although new construction is planned in the Tampa area, it is not expected to materially adversely affect Shadow Oaks due to its competitive market position in the area.
- ----------------------------------------------------------------- Report of Management - -----------------------------------------------------------------
The following report provides additional information about the consolidated financial condition of Oxford Residential Properties I Limited Partnership ("ORP" or the "Partnership") as of December 31, 1999, and its consolidated results of operations and cash flows for the three years ended December 31, 1999, 1998 and 1997. This report and analysis should be read together with the consolidated financial statements and related notes thereto and the selected consolidated financial data appearing elsewhere in this Annual Report.
Recent Developments
On February 28,2000, the Managing General Partner declared a distribution of $15 per Assignee Unit to its Partners and Assignee Unit Holders of record as of December 31, 1999. The distribution was the same as the last three semi-annual distributions but represents a $5 increase over the amount paid for the last semi-annual distribution for 1997.
On behalf of the Partnership,Oxford Residential Properties I Corporation ("Managing General Partner"), will consider offers made by Assignee Unitholders who wish to sell their Assignee Units at such prices as may be set by the Managing General Partner from time to time. The prices that will be paid will be established by reference to prevailing secondary market prices and will be determined solely by the Managing General Partner. This is neither an offer to purchase nor a solicitation of an offer to sell by the Partnership. During the period from July 1995 through December 31, 1999, ORP redeemed, in the aggregate, 2,047 Assignee Units for approximately $808,000. Since January 1, 2000, ORP has redeemed an additional 37 Assignee Units.
Liquidity and Capital Resources
Current Position. At December 31,1999, ORP held $1,344,000 in cash and cash equivalents and the working capital reserve, compared to $1,351,000 at December 31, 1998. The decrease of $7,000 is primarily attributable to increases in property net operating income offset by: (i) the distributions made on February 27, 1999 and August 28, 1999 to Partners of record as of December 31, 1998 and June 30, 1999 totaling $361,365 and $357,270, respectively, (ii) the purchase of 424 Assignee Units during the year ended December 31, 1999 totaling $236,000, and (iii) the payment of administrative costs for the year ended December 31, 1999 totaling $170,000.
Other Assets shown on the accompanying consolidated Balance Sheet increased by $28,000 to $1,009,000 at December 31, 1999 from $981,000 at December 31, 1998. The increase in Other Assets is primarily a result of increases in prepaid property taxes offset by decreases in escrow deposits. Other Assets include primarily a Liquidity Reserve Subaccount (for debt service), a Recurring Replacement Reserve Subaccount (for property improvements), a Property Insurance Escrow, and a Property Tax Escrow for each of the Operating Partnerships totaling $739,000 at December 31, 1999. These Subaccounts are funded and maintained monthly, as needed, from property income (except security deposits), in accordance with the requirements pursuant to each property's loan agreement and based on expenditures anticipated in the following months. Accounts Receivable and Prepaid Expenses, which are also included in Other Assets, totaled $56,000 and $214,000, respectively, at December 31, 1999.
Unamortized deferred costs related to organization and refinancing costs (discussed in prior reports) at December 31, 1999 were $260,000, compared to $326,000 at December 31, 1998. These costs are being amortized over the term of the mortgages.
Property Operations. ORP's future liquidity and level of cash distributions are dependent upon the net operating income after debt service, refurbishment expenses, and capitalized improvements generated by ORP's four investment properties and proceeds from any sale or refinancing of those properties. To the extent any individual property does not generate sufficient cash to cover its operating needs, including debt service, deficits would be funded by cash generated from the other investment properties, if any, working capital reserves, if any, or borrowings by ORP. Property improvements in the aggregate amount of $1,241,000 were made for the year ended December 31, 1999, compared to $1,322,000 for the same period in 1998. Of the $1,241,000 of property improvements, $737,000 was capitalized for financial statement purposes for the year ended December 31, 1999, compared to $919,000 of the $1,322,000 of property improvements for the same period in 1998.
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Other Sources. Since 1994, 40% of the property management fees owed to NHP Management Company ("NHP") have been subordinated to the receipt by the Assignee Unit Holders of certain returns. As of December 31, 1999 and December 31, 1998, deferred property management fees to NHP amounted to $871,000 and $712,000, respectively.
Results of Operations
The net operating income, before debt service, refurbishment expenses, and capitalized property improvements, reported by each of the four investment properties for the year ended December 31, 1999, as compared to the years ended December 31, 1998 and 1997, is as follows:
In the aggregate, the net operating income, before debt service, refurbishment expenses, and capitalized property improvements, reported by the Partnership in 1999 increased by 3.8% compared to 1998. Set forth below is a discussion of the properties which compares their respective operations for the years ended December 31, 1999, 1998 and 1997.
1999 versus 1998
Fairlane East
Fairlane East's net operating income for the year ended December 31, 1999 increased by 4.3% from the same period in 1998 due to a 6.1% increase in revenues offset by an 8.9% increase in apartment expenses. The increase in revenues was primarily attributable to the property's on-going ability to change its rent structure by adjusting rents on specific unit types. The property's apartment expense increase is primarily attributable to an increase in maintenance expenses, specifically snow removal, grounds, and decorating contract expenses, and administrative expenses. Average occupancy for the year ended December 31, 1999 increased to 96%, compared to 94% for the same period in 1998. During the year ended December 31, 1999, the Partnership expended $381,000 on property improvements, including $282,000 capitalized for accounting purposes. Of the $282,000 capitalized costs, approximately $149,000 was paid for major cabinet, and countertop replacement and carpet replacement in many of the units. The Managing General Partner anticipates approximately the same spending levels on property improvements for 2000.
The Landings
The Landings' net operating income for the year ended December 31, 1999 decreased by 12.1% from the same period in 1998 due to a less than 1% decrease in revenues and a 10.8% increase in apartment expenses. As previously reported, in March 1998, the property received a $38,000 property tax refund which was applied directly against property tax expense, and thus significantly reduced the overall apartment expenses for the year ended 1998. The Landings did not receive any property tax refunds during the year ended December 31, 1999. Excluding the impact of the refund from both periods, total apartment expenses and net operating income for the year ended December 31, 1999 would have increased/(decreased) by 3.6% and (5.5%), respectively, from the same period last year. Average occupancy for the year ended December 31, 1999 decreased to 93%, compared to 95% for the same period in 1998. During the year ended December 31, 1999, the Partnership expended $163,000 on property improvements, including $97,000 capitalized for accounting purposes. The Managing General Partner anticipates slightly higher spending levels on property improvements for 2000.
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Raven Hill
Raven Hill's net operating income for the year ended December 31, 1999 increased by approximately 10.5% from the same period in 1998 due to a 5.8% increase in revenues offset by a 1.2% increase in apartment expenses. The increase in revenues is attributable to a 5.3% increase in rental income due to a stronger rental market. The increase in apartment expenses is primarily attributable to increases in operating and administrative expenses. Average occupancy for the year ended December 31, 1999 increased to 98% compared to 97% for the same period in 1998. During the year ended December 31, 1999, the Partnership expended $516,000 for property improvements of which $290,000 was capitalized for accounting purposes. Of the $290,000 of capitalized costs, approximately $196,000 was paid for major interior painting and carpeting of two of Raven Hills' four apartment buildings and $58,000 for asphalt. The Managing General Partner anticipates slightly lower spending levels on property improvements for 2000.
Shadow Oaks
Shadow Oaks' net operating income for the year ended December 31, 1999 increased by 2.0% from the same period in 1998 due to a 1.8% increase in revenues offset by a 1.6% increase in apartment expenses. The increase in revenues was primarily attributable to a 2.5% increase in rental income. The increase in apartment expenses is primarily attributable to increases in maintenance and operating expenses. Average occupancy for the year ended December 31, 1999 decreased to 94%, compared to 97% for the same period in 1998. During the year ended December 31, 1999, the Partnership expended $181,000 on property improvements, including $68,000 capitalized for accounting purposes. The Managing General Partner anticipates slightly higher spending levels on property improvements for 2000.
1998 versus 1997
Fairlane East
Fairlane East's net operating income for the year ended December 31, 1998 increased by less than 1% from the same period in 1997 due to a 2.4% increase in revenues offset by a 5.8% increase in apartment expenses. The increase in revenues was primarily attributable to the property's ability to change its rent structure, adjusting rents on specific unit types, which resulted in higher gross rental revenue throughout 1998. The increase in apartment expenses is primarily attributable to increases in marketing expenses in response to lower than expected occupancy rates during the first half of 1998, and maintenance expenses associated with higher than expected unit turnover. Average occupancy in 1998 decreased to 95% from 96% in 1997. During 1998, the Partnership expended $348,000 on property improvements, including $218,000 of capitalizable expenditures. The Managing General Partner believes that apartment upgrades will be the focus for 1998 property improvements, including cabinetry replacements, to assist the property in competing in the local marketplace.
The Landings
The Landings' net operating income for the year ended December 31, 1998 increased by 7.6% from the same period in 1997 due to a 4% increase in revenues and a less than 1% increase in apartment expenses. Total apartment expenses were mostly lower throughout 1998 primarily because of reductions in property taxes. In March 1998, the Partnership received a refund of real estate taxes in the amount of $38,000 due to tax overpayments in prior years. The refund, in turn, reduced the amount of property tax expenses and resulted in a significantly higher overall net operating income for the year ended. Average occupancy in 1998 increased to 95% from 91% in 1997. The increase in occupancy is primarily due to a slight decline in new home purchases which, in turn, led to an increase in overall occupancy levels. During 1998, the Partnership expended $213,000 on property improvements, including $113,000 of capitalizable expenditures. The Managing General Partner anticipates slightly lower spending levels on property improvements in 1998, as compared to the year ended December 31, 1998.
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Raven Hill
Raven Hill's net operating income for the year ended December 31, 1998 increased by 18% from the same period in 1997 due to a 4.2% increase in revenues and a 6.4% decrease in apartment expenses. The increase in revenues is primarily attributable to steady increases in per-unit rents along with lower than forecasted vacancy levels. The decrease in apartment expenses is primarily attributable to: (i) savings in utility costs due to better than average weather conditions, (ii) decreases in maintenance expenses due to payroll savings from having fewer maintenance workers, and (iii) a decrease in property taxes due to lower 1998 property tax assessments. Average occupancy for 1998 and for 1997 was 97%, respectively. The Partnership expended $483,000 for property improvements during 1998, including $372,000 of capitalizable expenditures. The Managing General Partner anticipates higher spending levels on property improvements in 1998, as compared to the year ended December 31, 1998.
Shadow Oaks
Shadow Oaks' net operating income for the year ended December 31, 1998 increased by 3.5% from the same period in 1997 due to a 3.7% increase in revenues and a 3.8% increase in apartment expenses. The increase in revenue is due to increases in rent levels of certain units coupled with increased traffic caused by the completion of a road widening project near the property. The increase in apartment expenses is attributable to increases in administrative expenses and property taxes. The average occupancy in 1998 increased to 97%, compared to 95% in 1997. During 1998, the Partnership expended $278,000 on property improvements, including $216,000 of capitalizable expenditures. The Managing General Partner anticipates slightly lower spending levels on property improvements in 1998, as compared to the year ended December 31, 1998.
1997 versus 1996
Fairlane East
Fairlane East's net operating income for the year ended December 31, 1997 increased by 5.9% from the same period in 1996 due to a 3.3% increase in revenues and a less than 1% decrease in apartment expenses. The increase in revenues was attributed to a stronger economy in the Dearborn, Michigan area due to new commercial development. In the Detroit metropolitan area, population growth and unemployment rates improved during 1997. The competitive services and rental rates, along with impressive curb appeal, were contributing factors to the improvement in occupancy. Average occupancy in 1997 decreased to 96% from 98% in 1996. During 1997, the Partnership expended $328,000 on property improvements, including $248,000 capitalized for accounting purposes.
The Landings
The Landings' net operating income for the year ended December 31, 1997 decreased by less than 1% from the same period in 1996 due to a 1% increase in revenues and a 2.5% increase in apartment expenses. The increase in apartment expenses was primarily attributable to an increase in maintenance and operating expenses. Average occupancy in 1997 decreased to 91% from 94% in 1996. The Managing General Partner believes that this decrease in occupancy is due to the decline in interest rates during 1997 which, in turn, led to an increase in the purchase of new homes by tenants. During 1997, the Partnership expended $180,000 on property improvements, including $114,000 capitalized for accounting purposes.
Raven Hill
Raven Hill's net operating income for the year ended December 31, 1997 increased by 6.2% from the same period in 1996 due to a 4.6% increase in revenues and a 3.3% increase in apartment expenses. The increase in apartment expenses was primarily attributable to an increase in property taxes and operating and administrative expenses. Occupancy in 1997 increased to 97% from 93% in 1996. The Partnership expended $506,000 for property improvements during 1997, including $418,000 that was capitalized for accounting purposes.
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Shadow Oaks
Shadow Oaks' net operating income for the year ended December 31, 1997 increased by 10.7% from the same period in 1996 due to a 6.2% increase in revenues and a 2.5% increase in apartment expenses. The average occupancy in 1997 increased by 3 percentage points to 95%, compared to 92% in 1996. The increase in apartment expenses is attributable to an increase in maintenance and operating expenses, offset by decreases in administrative and marketing expenses and property taxes. During 1997, the Partnership expended $188,000 on property improvements, including $144,000 that was capitalized for accounting purposes.
Consolidated Statements of Operations-Other Income and Deductions
Other income was $318,000, $283,000, and $330,000, respectively, for the years ended December 31, 1999, 1998 and 1997.
The terms of the mortgage loans require the borrowers to make equal installment payments over the term of the loans. Each payment consists of interest on the unpaid balance of the loans and a reduction of loan principal. The interest paid on these loans decreases each period, while the portion applied to the loan principal increases each period. As a result, interest expense was $1,694,000, $1,727,000, and $1,758,000, respectively, and mortgage principal paid was $415,000, $385,000, and $356,000, respectively, for the years ended December 31, 1999, 1998 and 1997.
Depreciation expense for the years ended December 31, 1999, 1998 and 1997 was $1,281,000, $1,250,000, and $1,171,000, respectively. Amortization expense for the years ended December 31, 1999, 1998 and 1997 was $66,000, $98,000 and $98,000, respectively.
For the years ended December 31, 1999, 1998 and 1997, of the total property improvements in the aggregate amount of $1,241,000, $1,322,000, and $1,202,000, respectively, $504,000, $403,000, and $278,000, respectively, were classified as refurbishment expenses for financial statement purposes. The remaining balances of $737,000, $919,000, and $924,000, respectively, were capitalized for financial statement purposes.
Interest income for the years ended December 31, 1999, 1998 and 1997 was $93,000, $72,000, and $76,000, respectively. The increase was primarily due to a increase in cash and cash equivalents during 1999, as compared to 1998 and 1997.
ORP's administrative expenses for the years ended December 31, 1999, 1998 and 1997 were $170,000, $271,000, and $199,000, respectively. Administrative expenses in 1998 included legal fees associated with ORP,s securities filings and responses to a tender offer for assignee units made during 1998 by unaffiliated entities which legal fees did not occur in 1999.
In the aggregate, the net income, after debt service, refurbishment expenses, and other deductions, reported by ORP for the year ended December 31, 1999 of $624,000 reflects an increase of $227,000, or 55%, from net income of $414,000 at December 31, 1998. The increase is primarily attributed to improvement in property operations and reduced 1999 administrative expenses.
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THIS REPORT CONTAINS STATEMENTS THAT ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND IS SUBJECT TO THE SAFE HARBORS CREATED BY THOSE SECTIONS. THESE FORWARD-LOOKING STATEMENTS REFLECT MANAGEMENT'S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS, AND WILL BE AFFECTED BY A VARIETY OF RISKS AND FACTORS. THESE STATEMENTS ARE SUBJECT TO MANY UNCERTAINTIES AND RISKS, AND SHOULD NOT BE CONSIDERED GUARANTEES OF FINANCIAL PERFORMANCE. READERS SHOULD REVIEW CAREFULLY ORP's FINANCIAL STATEMENTS AND THE NOTES THERETO, AS WELL AS RISK FACTORS DESCRIBED IN THE SEC FILINGS. ORP DISCLAIMS ANY OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO THESE FORWARD- LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE FILING OF THE FORM 10 K WITH THE SEC OR OTHERWISE TO REVISE OR UPDATE ANY ORAL OR WRITTEN FORWARD-LOOKING STATEMENT THAT MAY BE MADE FROM TIME TO TIME BY OR ON BEHALF OF ORP.
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To the Partners and Assignee Unit Holders of Oxford Residential Properties I Limited Partnership:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, partners' capital and cash flows present fairly, in all material respects, the consolidated financial position of Oxford Residential Properties I Limited Partnership and Subsidiaries as of December 31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Partnership's Managing General Partner; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP - ------------------------------ PricewaterhouseCoopers LLP
Washington, D.C. January 28, 2000
- --------------------------------------------------------------------- Oxford Residential Properties I Limited Partnership and Subsidiaries - --------------------------------------------------------------------- Consolidated Statements of Operations (in thousands, except Net Income per Assignee Unit and Weighted average number of Assignee Units Outstanding) - ---------------------------------------------------------------------
- --------------------------------------------------------------------- Oxford Residential Properties I Limited Partnership and Subsidiaries - --------------------------------------------------------------------- Consolidated Statement of Partners' Capital (in thousands)
- --------------------------------------------------------------------- Oxford Residential Properties I Limited Partnership and Subsidiaries - --------------------------------------------------------------------- Consolidated Statements of Cash Flows (in thousands) - ---------------------------------------------------------------------
- ----------------------------------------------------------------- Notes to Consolidated Financial Statements - -----------------------------------------------------------------
Note 1. Partnership Organization
Oxford Residential Properties I Limited Partnership ("ORP") or the "Partnership") is a Maryland limited partnership formed on January 19, 1984, to acquire, own and operate residential properties. The Partnership began operations in September 1984 and will continue until December 31, 2027, unless terminated earlier under the provisions of the Partnership Agreement.
The General Partners of the Partnership are Oxford Residential Properties I Corporation and Oxford Fund I Limited Partnership. Oxford Residential Properties I Corporation serves as the Managing General Partner, and Oxford Fund I Limited Partnership serves as Associate General Partner. ORP I Assignor Corporation, the Assignor Limited Partner, has assigned the ownership of its limited partnership interests (including ORP I Assignor Corporation's rights to a percentage of the income, gains, losses, deductions, and distributions of the Partnership) to the purchasers of Assignee Units on the basis of one unit of limited partnership interest for one Assignee Unit. The General Partners and the Assignor Limited Partner are affiliated through common ownership. The Partnership's net profit or loss is allocated to the Assignee Unit Holders and partners in accordance with the Partnership Agreement.
The Partnership sold $25,714,000 in Assignee Unit interests in a public offering that concluded in October 1985. There is currently no established public market in which the Assignee Units are traded. During the period from July 1995 through December 31, 1999, ORP purchased, in the aggregate, 2,047 Assignee Units.
Effective January 12, 1994, the Partnership completed the refinancing of all debt collateralized by three of its properties, as well as the placement of a new loan collateralized by the fourth property. To use this financing program, the Partnership was required to modify its ownership structure in certain respects. Accordingly, the Partnership transferred its ownership interests in the properties to four new entities: (i) ORP One L.L.C. (Fairlane East), (ii) ORP Two L.L.C. (The Landings), (iii) ORP Three L.L.C. (Raven Hill), and (iv) ORP Four Limited Partnership (Shadow Oaks). In the case of Shadow Oaks, a limited partnership was used because, under applicable Florida law in effect at the time, limited liability companies were taxed as corporations rather than partnerships. The Partnership effectively holds all of the ownership interests of each of these entities. The Partnership holds a direct 99% interest in each new entity, and the remaining 1% interest is held by one of four new corporations: (i) ORP Corporation I; (ii) ORP Corporation II; (iii) ORP Corporation III; and (iv) ORP Corporation IV. The Partnership owns all of the stock of these new corporations.
Note 2. Significant Accounting Policies
Basis of presentation. The consolidated financial statements include the accounts of the Partnership and its subsidiaries. All significant intercompany balances and transactions have been eliminated.
Method of accounting. The Partnership's consolidated financial statements are prepared on the accrual basis in accordance with generally accepted accounting principles.
Investment Properties. Investment properties are carried at cost, net of accumulated depreciation. Investment properties are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For purposes of evaluating the recoverability, a recoverability test is performed using undiscounted net cash flows of the individual properties. If impairment is indicated, the carrying value of the investment property is adjusted based on the discounted future cash flows.
Revenue Recognition. Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the company and the tenants of the property are operating leases.
Depreciation and amortization. For financial reporting purposes, depreciation of buildings and improvements is calculated based upon cost less the estimated salvage value on a straight-line basis over the estimated useful life of the property of 25 years. Personal property is depreciated on a straight-line basis over five years. For income tax reporting purposes, depreciation of buildings, improvements, and personal property is calculated using the accelerated cost recovery methods, as provided in Section 168 of the Internal Revenue Code.
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Deferred costs. Deferred costs reflect financing fees, which are amortized on a straight-line basis over the life of the respective loan agreements for both financial and income tax reporting purposes.
Use of estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Income taxes. No provision has been made for federal, state, or local income taxes in the financial statements of the Partnership, since the partners and the Assignee Unit Holders are required to report on their individual tax returns their allocable share of income, gains, losses, deductions, and credits of the Partnership. The Partnership's tax return is prepared on the accrual basis.
Net income and distributions per Assignee Unit. Net income and distributions per Assignee Unit are based on the weighted average number of units outstanding during the year.
For financial reporting purposes, the net income per assignee unit of limited partnership of ORP ("Assignee Unit") has been calculated by dividing the portion of the Partnership's net income allocable to Assignee Unit Holders (98%) by the weighted average of Assignee Units outstanding. In all computations of earnings per Assignee Unit, the weighted average of Assignee Units outstanding during the period constitutes the basis for the net income amounts per Assignee Unit on the Consolidated Statements of Operations.
Statements of cash flows. Since the consolidated statements of cash flows are intended to reflect only cash receipts and cash payment activity, the statements do not reflect investing and financing activity that affect recognized assets or liabilities that do not result in cash receipts or cash payments. This noncash activity consists of distributions payable of $355,000, $361,000, and $243,000 at December 31, 1999, 1998 and 1997, respectively.
Interest on mortgage loans paid in 1999, 1998 and 1997 was $1,694,000, $1,727,000, and $1,758,000, respectively.
Cash and cash equivalents. Cash and cash equivalents consist of all demand deposits and government money market funds stated at cost, which approximates market value, with original maturities of three months or less at the date of purchase.
Note 3. Working Capital Reserve
Working Capital Reserve. The Partnership established an initial working capital reserve in the amount of $1,286,000 in 1985 from net offering proceeds received in excess of investment properties acquired. Funds in the reserve, which are invested in United States Treasury Bills, are stated at cost, which approximates market value. The Partnership Agreement permits additions to the reserve of such amounts derived from the operations of residential properties as deemed advisable by the Managing General Partner. All funds held in the working capital reserve are available to fund renovations and repairs, operating deficits, and other contingencies of the residential properties. Funds held in the working capital reserve also can be used to supplement distributions to the Assignee Unit Holders. The balance of the working capital reserve at December 31, 1999 was $22,000.
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Note 4. Investment Properties
Information regarding the four investment properties is listed below.
- ---------------------------------------------------------------- Notes to Consolidated Financial Statements - ----------------------------------------------------------------
Note 4. Investment Properties (continued)
For the Year Ended December 31, 1999 (in thousands)
- ----------------------------------------------------------------- Notes to Consolidated Financial Statements - -----------------------------------------------------------------
Note 5. Net Profits, Losses and Cash Distributions
Cash flow, as defined in the Partnership Agreement, will be distributed within 60 days after June 30 and December 31, 90% to the Assignee Unit Holders and 10% to the General Partners and the Assignor Limited Partner. The Assignee Unit Holders are entitled to a noncumulative, preferred 6% return. To the extent that these preferences are not achieved from current operations, 40% of the property management fees and the General Partners' and the Assignor Limited Partner's 10% share in cash flow will be deferred. Deferred property management fees are to be paid without interest in the next year in which excess cash flow is available after distribution to the Assignee Unit Holders of their preferred 6% return or out of sale or refinancing proceeds.
Profits and losses for financial statement and tax purposes arising from Partnership operations are allocated 98% to the Assignee Unit Holders and 2% to the General Partners and the Assignor Limited Partner.
All sale or refinancing proceeds, as defined in the Partnership Agreement, will be distributed as follows:
(1) to the Assignee Unit Holders to repay their adjusted capital contributions;
(2) to the General Partners and Assignor Limited Partner to repay their adjusted capital contributions;
(3) to the Assignee Unit Holders until payment of the preferred return on disposition (that is, an amount equal to 10% of the adjusted capital contributions multiplied by the number of calendar years from and including 1986) is achieved;
(4) to the General Partners and Assignor Limited Partner in an amount equal to any portion of their cash flow from operations which was previously deferred and not paid in subsequent years;
(5) to pay property disposition fees to Oxford National Properties Corporation; and
(6) to pay any remaining amount 85% to the Assignee Unit Holders and 15% to the General Partners and Assignor Limited Partner.
Sale or refinance proceeds have been defined to be all cash receipts arising from such transaction less expenses of the transaction, the repayment of all related debt, including the mortgage loan, the payments of any previously subordinated property management fees, and the payments to fund reserves.
All liquidation proceeds shall be first distributed to each Assignee Unit Holder and Partner, in an amount equal to the positive balance in his capital account and, thereafter, in the amounts and order of priority established above for sale or refinancing proceeds.
The profits for tax purposes resulting from the sale of an investment property which does not constitute the sale of substantially all of the Partnership's assets will be allocated among the Assignee Unit Holders, General Partners, and the Assignor Limited Partner in a proportion equal to the distributions received from the proceeds of such sale. Any profits in excess of the cash distribution will be allocated 98% to the Assignee Unit Holders and 2% to the General Partners and the Assignor Limited Partner. A loss from such a sale will be allocated 98% to the Assignee Unit Holders and 2% to the General Partners and Assignor Limited Partner.
The profits for tax purposes from the sale or liquidation of all or substantially all of the Partnership's assets will be allocated as follows:
(1) the portion of the profits attributable to the excess of the indebtedness of the investment property prior to its sale over the Partnership's adjusted basis in such property will be allocated to each Assignee Unit Holder having a negative capital account balance, to the extent of such negative balance, in the proportion that the negative balance of each Assignee Unit Holder's capital account bears to the aggregate negative balances of all the Assignee Unit Holders; and
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(2) the remainder will be allocated among the Partners and Assignee Unit Holders in proportion to the amount of sale or refinancing proceeds which was distributed to them in connection with the sale of the investment property or liquidation of the Partnership.
Losses for tax purposes from the sale of all or substantially all of the assets of the Partnership or the liquidation of the Partnership will be allocated as follows:
(1) losses equal to the amount by which the capital accounts of the Assignee Unit Holders and Partners exceed the total adjusted capital contributions will be allocated based on the ratio of each Assignee Unit Holder's and Partner's capital account excess balance to the total excess balance;
(2) losses will be allocated among the Assignee Unit Holders and Partners with positive capital accounts equal to the ratio of each Assignee Unit Holder's and Partner's positive capital account to the total positive capital accounts; and
(3) any remaining losses will be allocated 98% to Assignee Unit Holders and 2% to the General Partners and the Assignor Limited Partner.
Note 6. Mortgage Notes Payable
Effective January 12, 1994, separate mortgage loans were made to each of the four new ownership entities in the aggregate original principal amount of $22,362,000. These mortgage loans are not cross-collateralized, nor are they cross-defaulted. Each note bears interest at a fixed rate of 8.25% per annum and matures on February 11, 2004. The total monthly principal and interest payment is $176,000. As of December 31, 1999, the total outstanding balance of the four mortgage notes payable was $20,341,000. The properties are in compliance with their respective loan agreements as of December 31, 1999.
The individual outstanding mortgage notes payable as of December 31, 1999 and monthly debt service are as follows:
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The mortgage notes require the establishment and maintenance of escrow subaccounts for each property. These subaccounts are the Basic Carrying Costs Subaccount, the Debt Service Payment Subaccount, the Recurring Replacement Reserve Subaccount, the Operations and Maintenance Expense Subaccount, the Liquidity Reserve Subaccount, and the Curtailment Reserve Subaccount. The Basic Carrying Costs Subaccount and Liquidity Reserve Subaccount were initially funded in full out of loan proceeds for all properties at the mortgage closing. A temporary Engineering/Capital Replacement Reserve Subaccount was also established at closing for all properties, except Shadow Oaks, to pay for necessary capital improvements identified during the lender's due diligence review of the properties. The permanent subaccounts, except the Operations and Maintenance Expense Subaccount and the Curtailment Reserve Subaccount, will hereafter be directly funded and maintained monthly, as needed, from property income (except security deposits), in accordance with formulas established in the loan agreement and based on expenditures required in the following month. The Operations and Maintenance Expense Subaccount and the Curtailment Reserve Subaccount would be established if the borrowers have not provided a written commitment for the refinancing of the existing loans on or before six months prior to the maturity dates of the existing loans. The subaccounts will be funded monthly in the order listed above, except for certain changes that may occur in the year prior to maturity of the respective loans. Excess income from each property is distributed to the applicable borrower after all subaccounts that must be funded at that time have been fully funded in the given month, according to the terms of the Loan Agreement. As of December 31, 1999, the escrow subaccounts total $722,000 and are included in Other Assets in the accompanying Consolidated Balance Sheets.
The mortgage notes prohibit secondary financing unless specifically approved by the lender or specified in the loan documents. In addition, the mortgage notes prohibit prepayment before five years and impose a prepayment penalty equal to the greater of 1% or the Yield Maintenance Premium (as defined in the Loan Agreement) for prepayments during the sixth and seventh years. After the seventh year, prepayment is allowed with no prepayment penalty.
In general, the loans are nonrecourse. ORP One L.L.C. and ORP Corporation I, ORP Two L.L.C. and ORP Corporation II, ORP Three L.L.C. and ORP Corporation III, and ORP Four Limited Partnership and ORP Corporation IV have guaranteed payment of all clean-up costs if environmental contamination is subsequently discovered on their respective properties.
Note 7. Transactions with Affiliates
The Partnership has no directors or officers. The Managing General Partner and its affiliates do not receive any direct compensation, but are reimbursed by ORP for any actual direct costs and expenses incurred in connection with the operation of the Partnership.
Expense reimbursements are for an affiliate's personnel costs, travel expenses and interest on interim working capital advances for activities directly related to the Partnership which were not covered separately by fees. Total reimbursements to this affiliate for the years ended December 31, 1999, 1998 and 1997 were $82,000, $116,000, and $65,000, respectively, for administrative and accounting related costs.
An affiliate of NHP Management Company, the property manager, has a separate services agreement with Oxford Realty Financial Group, Inc. ("ORFG"), an affiliate of the Managing General Partner, pursuant to which ORFG provides certain services to NHP in exchange for service fees in an amount equal to 25.41% of all fees collected by NHP from certain properties, including those owned by the Partnership.
An affiliate of ORP and its managing general partner, Oxford Residential Properties I Corporation ("Managing General Partner") owns approximately 21.1% of the outstanding Assignee Units.
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Note 8. Other Liabilities
Other Liabilities. Under the Property Management Agreements with NHP Management Company, the management fee is equal to 5% of gross collections for all properties; however, 40% of this fee is subordinated until certain distribution preference levels to the Limited Partners or Assignee Unit Holders are achieved. Property management fees of $159,000, $153,000, and $149,000 for the years ended December 31, 1999, 1998 and 1997, respectively, have been deferred and the total amount deferred at December 31, 1999 was $871,000.
Note 9. Taxable Loss
A reconciliation of the major differences between net income for the consolidated financial statements and net loss for tax purposes is as follows:
Note 10. Commitments and Contingencies
The Partnership, through its subsidiaries, owns real estate and, as such, is subject to various environmental laws of Federal and local governments. Compliance by the Partnership with existing laws has not had a material adverse effect on its financial condition, results of operations, or liquidity, and based on reports from independent third parties, management does not believe it will have such an effect in the future. However, the Partnership cannot predict the impact of new or changed laws or regulations on its current properties.
Note 11. Subsequent Events
On February 28, 2000, ORP made a semi-annual cash distribution of approximately $355,005 or $15.00 per Assignee Unit to Assignee Unit Holders of record as of December 31, 1999.
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The following table sets forth, on a semiannual basis, all distributions declared since inception of the Partnership.
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Advisor Merrill Lynch, Hubbard Inc. New York, New York
Selling Agent Merrill Lynch, Pierce, Fenner & Smith, Incorporated New York, New York
Legal Counsel Shaw, Pittman, Potts & Trowbridge Washington, D.C.
Independent Accountants PricewaterhouseCoopers LLP Washington, D.C.
Transfer Agent and Registrar MMS Escrow & Transfer Agency, Inc. P.O. Box 7090 Troy, Michigan 48007-9921 Managing General Partner Oxford Residential Properties I Corporation 7200 Wisconsin Avenue, 11th Floor Bethesda, Maryland 20814
The Annual Report on Form 10-K for the Year Ended December 31, 1999, filed with Securities and Exchange Commission,is available to Assignee Unit Holders and may be obtained by writing:
Investor Services Oxford Residential Properties I Limited Partnership P.O. Box 7090 Troy, Michigan 48007-9921 (248) 614-4550
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Instructions for Investors who wish to reregister or transfer ORP Assignee Units
Please follow the instructions below if you wish to reregister or transfer ownership of your Oxford Residential Properties I Limited Partnership ("ORP" or the "Partnership") Assignee Units. No transfers or sales can be effected without the consent of the Managing General Partner and the completion of the proper documents.
To cover the costs associated with processing transfers, MMS Escrow & Transfer Agency, Inc. ("MMS"), the transfer agent for ORP, charges $25 for each transfer of ORP Assignee Units between related parties, and $50 per seller for each transfer for consideration (sale). The only exception is a transfer to a surviving joint holder of Assignee Units when the other joint holder dies, in which case no fee is charged. MMS charges $150 for the conversion of Assignee Units into a limited partner interest.
To transfer ownership of Assignee Units held in a Merrill Lynch account, please have your Merrill Lynch financial consultant contact Merrill Lynch Partnership Operations in New Jersey at (201) 557-1619 to request the necessary transfer documents. Merrill Lynch Partnership Operations will only accept calls from your financial consultant. YOU MUST HAVE THE PROPER TRANSFER DOCUMENTS FROM MERRILL LYNCH TO EFFECT A TRANSFER. Your financial consultant must contact Partnership Operations, as ORP Investor Services does not send out transfer papers for Assignee Units held in a Merrill Lynch account.
Investors who no longer hold their Assignee Units in a Merrill Lynch account should contact ORP Investor Services at (248) 614-4550 or P.O. Box 7090, Troy, Michigan 48007-9921, to obtain transfer documents. YOU MUST OBTAIN THE PROPER TRANSFER DOCUMENTS FROM ORP INVESTOR SERVICES TO EFFECT A TRANSFER OF ASSIGNEE UNITS WHICH YOU HOLD PERSONALLY.
To redeposit your ORP units into a Merrill Lynch account, please notify ORP Investor Services in writing after the Merrill Lynch account has been opened. ORP Investor Services will then instruct Merrill Lynch to deposit the Assignee Units into the account.
Please remember to notify ORP Investor Services in writing at the address below or by calling (248) 614-4550 in the event you change your mailing address or your financial consultant. We can then continue to provide you and your representative with timely information about your investment in Oxford Residential Properties I Limited Partnership.
The Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities and Exchange Commission, is available to Assignee Unit Holders and may be obtained by writing:
Investor Services Oxford Residential Properties I Limited Partnership P.O. Box 7090 Troy, Michigan 48007-9921
(248) 614-4550 - -----------------------------------------------------------------